<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, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
---------------------------------
Commission file number 000-22487
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GREAT GUARANTY BANCSHARES, INC.
(Name of Small Business Issuer in its charter)
LOUISIANA 72-0493576
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
- --------------------------- ----------------------------------------------
N/A N/A
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 [ ]
<PAGE> 2
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. $3,140,197
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, 1998
Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<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............................................ 15
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE...................................................... 16
PART III
ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT............................... 16
ITEM 10 EXECUTIVE COMPENSATION.......................................... 17
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT........................................... 17
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.................................................... 18
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K................................ 19
EXHIBIT INDEX................................................... 20
</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, 1998, Bancshares had total consolidated
assets of approximately $41.9 million, and shareholders' equity of approximately
$2.8 million while Guaranty Bank had assets of approximately $41.9 million and
shareholder's equity of approximately $2.7 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 individual borrowers in any line of business. At
December 31, 1998, Guaranty Bank had outstanding approximately $22.2 million in
loans, of which 8% were in commercial loans to borrowers engaged in various
lines of business, 12% were in consumer loans, 65% were in primarily residential
real estate loans, and 15% 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, 1998, Guaranty Bank had total deposits of approximately $37.2
million.
PROPERTY
The executive offices of Bancshares and Guaranty Bank are located at
175 New Roads Street, New Roads, Louisiana 70760 and are owned by Guaranty Bank.
Guaranty Bank also owns the buildings and land at Highway 78 in Livonia,
Louisiana and Highway 413 in Jarreau, Louisiana, where the Bank's branches are
located, and on Highway 1 in Morganza, Louisiana, which the Bank uses for record
storage. No premises occupied by the Bank are leased, and none of the properties
owned by the Bank is subject to a mortgage.
EMPLOYEES
At December 31, 1998, Bancshares had no full-time employees. As of
that date, Guaranty Bank had 27 full-time employees, including 4 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 multi state 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, 1998 these
categories accounted for approximately 8%, 12%, 65% and 15%, 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, 1998, 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,
-------------------
1998 1997
------- -------
<S> <C> <C>
Commercial, financial and agricultural $ 5,062 $ 3,374
Real estate 14,396 16,088
Installment 2,712 3,219
------- -------
Total $22,170 $22,681
======= =======
</TABLE>
Maturities
The following table shows the maturity or repricing frequency of
loans outstanding as of December 31, 1998 (in thousands of dollars).
<TABLE>
<S> <C>
Maturity of fixed rate Loans:
Within one year $ 2,792
After one but within five years 6,543
After five years 9,099
-------
Total fixed rate loans 18,434
Variable rate loans repricing at least quarterly 3,716
Nonaccrual loans 23
-------
Total loans $22,173
=======
</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,
-------------------
1998 1997
------- -------
<S> <C> <C>
Nonaccrual loans $ 23 $ 23
Accruing loans past due 90 days or more 25 7
Restructured loans not included above 0 0
</TABLE>
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<PAGE> 7
Loan Loss Experience
The following table summarizes Guaranty Bank's loan loss experience
for each of the last two (2) years (in thousands of dollars):
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1997
------- -------
<S> <C> <C>
Balance at beginning of period $238,371 $254,819
Charge-offs:
Commercial, financial and agricultural
Installment -- --
------- -------
Total Charge-offs 5,778 3,613
------- -------
Recoveries:
Commercial, financial and agricultural
Installment -- --
------- -------
Total Recoveries 14,643 1,665
------- -------
Net charge-offs (8,865) 1,948
Provision charged (credited) to operations 28,288 14,500
------- -------
Balance at end of period 273,524 238,371
======= =======
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,
-------------------
1998 1997
------- -------
<S> <C> <C>
Noninterest-bearing demand deposits $ 6,199 $ 6,778
Interest-bearing demand deposits 6,401 5,388
Savings deposits 7,714 8,166
Time deposits 16,944 16,813
------- -------
Total $37,258 $37,145
======= =======
</TABLE>
Maturities of time deposits of $100,000 or more outstanding as of
December 31, 1998 are summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Time Certificates of Deposit
----------------------------
<S> <C>
3 months or less $ 660
Over 3 through 12 months 1,131
Over 12 months 200
-------
Total $ 1,991
=======
</TABLE>
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<PAGE> 8
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, 1998, 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,
-------------------
1998 1997
------- -------
<S> <C> <C>
U.S. Treasury securities and obligations of other
U.S. Government agencies and corporations $ 3,026 $ 4,022
Obligations of state and political subdivisions _ __
Mortgage-backed bonds and collateralized
mortgage obligations 9,714 8,379
Agency for International Development Guaranteed Notes 1,776 1,877
------- -------
Total $14,516 $14,278
======= =======
</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 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
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<PAGE> 9
file written notice and obtain approval from the Federal Reserve Board prior to
purchasing or redeeming its equity securities. At December 31, 1998, Bancshares
was 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. Subsequent to year end December 31, 1998, Bancshares as a result of a
satisfactory examination by the Federal Reserve Bank was released entirely from
the specific written agreement mentioned above. With the easing of the
restriction, dividends that the Bank can declare without prior regulatory
approval is equal to any current year's earnings plus the prior year's
undistributed earnings.
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 doctrine under the BHC Act, the decision was reversed
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<PAGE> 10
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, 1998
Total Capital (to Risk Weighted Assets):
Guaranty Bank .............................. $2,983 15.6% $1,528 >8% $1,911 >10%
Tier I Capital (to Risk Weighted Assets):
Guaranty Bank .............................. $2,745 14.4% $ 764 >4% $1,146 >6%
Tier I Capital (to Average Assets)
Guaranty Bank .............................. $2,745 6.5% $1,665 >4% $2,081 >5%
AS OF DECEMBER 31, 1997
Total Capital (to Risk Weighted Assets):
Guaranty Bank .............................. $2,689 13.3% $1,617 >8% $2,021 >10%
Tier I Capital (to Risk Weighted Assets):
Guaranty Bank .............................. $2,451 12.1% $ 808 >4% $1,213 >6%
Tier I Capital (to Average Assets)
Guaranty Bank .............................. $2,451 5.8% $1,678 >4% $2,098 >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, 1998 and 1997, the Bank was categorized as
"well capitalized."
In addition to measures taken under the prompt corrective action
provisions, commercial banking organizations may be subject to potential
enforcement actions by federal regulators for unsafe or unsound practices in
conducting their businesses or for violations of any law, rule, regulation or
any condition imposed in writing by the agency or any written agreement with the
agency. Enforcement actions may include the imposition of a conservator or
receiver, the issuance of a cease and desist order that can be judicially
enforced, the termination of insurance of deposits (in the case of a depository
institution), the imposition of civil money penalties, the issuance of
directives to increase capital, the issuance of formal and informal agreements,
the issuance of removal and prohibition orders against institution-affiliated
parties and the enforcement of such actions through injunctions or restraining
orders based upon a judicial determination that the agency would be harmed if
such equitable relief was not granted.
Safety and Soundness Standards. In July 1995, the federal banking
agencies adopted final guidelines establishing standards for safety and
soundness, as required by the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA"). The guidelines set forth operational and managerial
standards relating to internal controls, information systems and internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset
growth and compensation, fees and benefits. Guidelines for asset
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<PAGE> 12
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 assess 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 (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
-9-
<PAGE> 13
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
Bancshares held its Annual Meeting of Shareholders on October 7,
1998. Matters submitted to a vote of security holders through the solicitation
of proxies was the election of the Board of Directors. All nominees, current and
new, were elected to serve until the 1999 Annual Meeting of Shareholders or
until each of their successors is duly elected and qualified. Seven directors
nominated and elected.
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. There were two separate transactions in 1998 in
which 340 shares and 221 shares were purchased and sold for a price known to
Bancshares. At December 31, 1998, the total 143,374 shares of Bancshares Common
Stock were held of record by 531 shareholders. During the past three years, a
cumulative total of $.50 per share in dividends have been paid on the Bancshares
Common Stock, in two separate dividends of $.25 per share declared in the fourth
quarter of 1997 and 1998 and paid in January, 1998 and 1999. 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.
1998 COMPARED WITH 1997
BALANCE SHEET
Total assets increased to $41.9 million at December 31, 1998 from
$41.3 million at December 31, 1997. Total loans decreased by $511 thousand or
2.25%, to $22.2 million from $22.7 million at December 31, 1997, while
securities increased $239 thousand to $14.5 million at December 31, 1998.
-10-
<PAGE> 14
Total deposits increased by $114 thousand to $37.2 million at December
31, 1998, from $37.1 million at December 31, 1997. Non-interest bearing deposits
decreased 8.54% compared to a 2.28% growth in interest bearing deposits. During
1998, shareholder's equity in Bancshares increased to $2.8 million from $2.5
million at December 31, 1997. Shareholder equity in Bancshares increased to $2.8
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, shareholder's 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, 1998 decreased to $371 thousand from $506
thousand during 1997. Bancshares consolidated net income was $345 thousand for
the year ended December 31, 1998 from $2.2 million during 1997. The 1997 net
income was a result of an extraordinary item of $1.9 million in forgiveness of
indebtedness income realized on resolution of legal proceedings. See "Legal
Proceedings."
Interest income declined $128 thousand or by 3.91%, to $3.1 million
for 1998, principally as a result a decline in market yields on loans and
investments stemming from large principal pay downs on mortgage back securities.
Non-interest income totaled $337 thousand for the year ended December 31, 1998,
a decrease of 3.98% from $351 thousand for the year ended December 31, 1997, due
primarily to a decrease in other income.
EXPENSES
Interest expense decreased from $1.4 million during 1997 to $1.2
million for the year ended December 31, 1998 primarily because of significant
repayments of Bancshares' debt in 1997. Non-interest expense for the year ended
December 31, 1998 totaled $1.7 million, resulting in no change from the $1.7
million for the year ended December 31, 1997.
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
increased at year-end 1998 to $274 thousand, or 1.25% of total loans, from $238
thousand, or 1.1% of total loans, at December 31, 1997.
-11-
<PAGE> 15
EARNING ASSET/INTEREST BEARING LIABILITIES YIELDS AND RATES
Bancshares has no earning assets independent of Guaranty Bank, and
no interest bearing liabilities. Bancshares only interest bearing liability was
a promissory note in the total principal amount of $165 thousand at December 31,
1997 which was paid in full in November 1998. The promissory note in the total
principal amount of $165 thousand at December 31, 1997 was reduced 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 bore 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 1998 and 1997 on a
tax-equivalent basis are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Year Ended December 31, 1998 Year Ended December 31, 1997
------------------------------ ------------------------------
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 $ 16,092 $ 1,390 8.64% $ 14,724 $ 1,323 8.99%
Installment loans 2,798 278 9.94% 2,695 305 11.32%
Commercial and Industrial loans 3,531 448 12.69% 2,568 389 15.15%
U.S. Treasury and government agency
securities 12,320 729 5.92% 16,441 1,084 6.59%
Municipal securities -- -- -- -- -- --
Other securities (AID & TCD) 2,614 188 7.19% 2,391 131 5.48%
Federal funds sold and securities sold
under agreements to repurchase 1,941 107 5.51% 682 35 5.13%
Total earning assets $ 39,296 $ 3,140 8.00% $ 39,501 $ 3,267 8.27%
========
INTEREST-BEARING LIABILITIES:
Interest-bearing transaction accounts $ 5,881 $ 123 2.09% $ 5,568 $ 107 1.92%
Money market deposits 1,278 25 1.96% 1,660 33 1.99%
Savings deposits 6,953 156 2.24% 7,192 162 2.25%
Time deposits 16,946 813 4.80% 16,065 770 4.79%
Federal funds purchased and securities
purchased under agreements to resell 7 4.29% 356 17 4.77%
FHLB Borrowings 1,106 84 7.59% 1,221 92 7.53%
Total interest-bearing liabilities $ 32,171 $ 1,201 3.73% $ 32,062 $ 1,181 3.68%
======== -------- ------ ======== ------- -----
Net interest income, tax equivalent (not including
interest bearing note payable by Bancshares) $ 1,939 $2,086
======== ======
Net interest margin, tax equivalent (not including
interest bearing note payable by Bancshares) 4.27% 4.59%
====== =====
</TABLE>
-12-
<PAGE> 16
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 1998 and
1997 are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1998 Compared to 1997 1997 Compared to 1996
--------------------------- -------------------------
Volume Rate Net Volume Rate Net
------ ----- ------ ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Real estate loans ........................... $ 118 (52) $ 66 $ 354 (55) $ 299
Installment loans ........................... 11 (37) (26) 36 (14) 22
Commercial and Industrial loans ............. 122 (63) 59 (22) 4 (18)
U.S. Treasury and government agency
securities ........................... (244) (111) 355 (21) (21)
Municipal securities ........................ 0 0 0 0 0 0
Other securities ................................. 16 41 57 (42) (60) (102)
Federal funds sold and securities sold
under agreements to repurchase ....... 70 3 73 (64) (6) (70)
Total earning assets ................. 93 (219) (126) 241 (131) 110
INTEREST-BEARING LIABILITIES:
Interest-bearing transaction accounts ....... 7 10 17 36 4 40
Money market deposits ....................... (8) (1) (9) (8) 0 (8)
Savings deposits ............................ (5) 0 (5) 2 (4) (2)
Time deposits ............................... 42 1 43 31 51 82
Federal funds purchased and securities
purchased under agreements to resell . (15) (2) (17) 17 0 17
FHLB Borrowings ............................. (9) 1 (8) 11 2 (9)
Total interest-bearing liabilities ... 12 9 21 67 53 120
Net interest income, tax equivalent .............. 81 (228) (147) 174 (184) (10)
</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, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------- ----------------------
Guaranty Guaranty
Bank Bancshares Bank Bancshares
------ ---------- --------- ----------
<S> <C> <C> <C> <C>
Return on average assets .88% 12.4% 1.2% 68.5%
Return on average equity 13.07% 12.9% 17.0% 145.2%
Dividend payout ratio 63.38% 10.4% 300.8%(1) 1.6%
Average equity to
average assets 6.76% 95.7% 7.16% 46.9%
</TABLE>
- ---------------
(1) Includes $1.3 million extraordinary dividend paid in September 1997 to
Bancshares by Guaranty Bank.
-13-
<PAGE> 17
YEAR 2000 READINESS DISCLOSURES
The Bank's Board of Directors and Senior Management is responsible
for the overall process and assurances that sufficient resources are available
to ensure the success of the Year 2000 effort and the business resumption
contingency plan. The bank established a Year 2000 Project Team to deal with the
issues of Y2K and delegated responsibilities to the team for coordinating Y2K
initiatives.
The objective of the bank is to be Y2K ready by December 31, 1999 within the
regulatory guidelines with minimal impact to the bank's customers and operation
of the bank. The bank has identified all mission critical components of Y2K
related directly and indirectly to its operations. In the process the bank has:
o Completed the Assessment Inventory and Renovation Phase
replacing and/or upgrading all Pcs, modems and hardware which
were not Y2K ready. This was completed March 1998.
o Performed and completed "baseline" and "future" date testing
to establish a model for later test comparisons to ensure that
the programs were computed correctly. There were no Y2K
problems found.
o Contacted third party vendors to follow their Y2K projects to
make sure there will be no disruption to services they provide
to the bank. The bank has worked with its vendors and has
completed testing to ensure progress toward Y2K readiness.
Testing with the banks' major vendor has determined there are
no related issues outstanding as of November 1998. Continued
testing will be to ensure this status.
o Conducted point to point and end to end testing with the
Federal Reserve. Testing was completed December 1998. There
were no Y2K errors found during testing.
o Developed a bank wide Y2K Business Resumption Contingency Plan
so there will be no disruption of banking services to its
customers or business partners. This plan will be tested by
the end of June 1999.
Examinations by the bank's principal regulator has indicated the bank is
progressing favorably in addressing its Y2K issues and has not detected any
major deficiencies or adverse conditions in the banks' Y2K efforts.
To date the bank has incurred costs of approximately $67,651 and anticipates no
more than $10,000 in additional costs for its Y2K efforts.
The bank has determined that the potential consequences of Year 2000 will not
have a material effect on its business, results of operations or financial
condition and the bank will be Y2K ready.
-14-
<PAGE> 18
===============================================================================
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
===============================================================================
-15-
<PAGE> 19
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 1998 and 1997 2 - 3
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1998, 1997 and 1996 4 - 5
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 1998, 1997 and 1996 6 - 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1998, 1997 and 1996 8 - 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10 - 32
</TABLE>
<PAGE> 20
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, 1998 and
1997, 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, 1998. 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, 1998 and 1997, and the
results of their operations and their cash flows for each of the years during
the three year period ended December 31, 1998 in conformity with generally
accepted accounting principles.
/s/ [ILLEGIBLE]
Baton Rouge, Louisiana
March 17, 1999
<PAGE> 21
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1998 AND 1997
ASSETS
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash and due from banks $ 2,194,636 $ 2,008,689
Interest-bearing deposits with banks 2,175,631 198,000
Federal funds sold -- 1,125,000
Investment securities available-for-sale 14,516,280 14,277,636
Investments in restricted equity securities 227,100 214,200
Loans receivable, net of allowance for loan losses
of $273,524 and $238,371, respectively 21,896,375 22,443,067
Accrued interest receivable 301,585 329,130
Premises and equipment, net 572,214 680,119
Other assets 87,042 90,739
----------- -----------
TOTAL ASSETS $41,970,863 $41,366,580
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-2-
<PAGE> 22
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
LIABILITIES
Demand deposits $ 6,162,018 $ 6,735,334
NOW deposits 6,400,995 5,388,446
Savings deposits 7,714,140 8,165,704
Time deposits, $100,000 and over 1,991,493 1,799,852
Other time deposits 14,953,003 15,012,896
----------- -----------
Total deposits 37,221,649 37,102,232
Notes payable 1,055,227 1,339,252
Accrued expenses and other liabilities 241,600 135,568
Federal funds purchased and securities sold
under agreements to repurchase 600,000 240,659
Dividends payable 35,843 35,843
----------- -----------
Total liabilities 39,154,319 38,853,554
----------- -----------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Preferred stock-Series A, no par; 500,000 shares authorized;
-0- shares issued and outstanding -- --
Preferred stock-Series B, no par; 2,000,000 shares authorized;
-0- shares issued and outstanding -- --
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 (702,553) (1,011,241)
Accumulated other comprehensive income 32,321 37,491
----------- -----------
Total stockholders' equity 2,816,544 2,513,026
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $41,970,863 $41,366,580
=========== ===========
</TABLE>
-3-
<PAGE> 23
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
Page 1 of 2
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 2,116,839 $ 2,017,513 $ 1,671,939
Interest on investment securities 824,878 1,185,028 1,210,354
Interest on federal funds sold 107,007 35,485 105,250
Interest on deposits with banks 91,473 29,856 61,860
----------- ----------- -----------
Total interest income 3,140,197 3,267,882 3,049,403
----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits 1,115,603 1,072,050 959,466
Interest on notes payable 97,513 266,465 396,691
Interest on federal funds purchased
and securities sold under agreements to repurchase 1,459 17,141 --
----------- ----------- -----------
Total interest expense 1,214,575 1,355,656 1,356,157
----------- ----------- -----------
NET INTEREST INCOME 1,925,622 1,912,226 1,693,246
Provision (credit) for loan losses 26,288 (14,500) (15,000)
----------- ----------- -----------
NET INTEREST INCOME AFTER
Provision for loan losses 1,899,334 1,926,726 1,708,246
----------- ----------- -----------
NON-INTEREST INCOME
Service charges on deposit accounts 316,317 305,781 342,481
Other service charges and fees 19,461 22,229 27,738
Other income 1,200 22,869 25,617
----------- ----------- -----------
Total non-interest income 336,978 350,879 395,836
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-4-
<PAGE> 24
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
PAGE 2 OF 2
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
NON-INTEREST EXPENSE
Salaries and employee benefits $ 899,954 $ 914,462 $ 887,540
Occupancy expense 219,859 234,281 227,632
Data processing fees 114,369 103,215 87,501
Loan processing fees 68,253 91,722 83,489
Legal fees 16,885 103,254 107,884
Other expense 388,812 383,487 379,773
---------- ---------- ----------
Total non-interest expense 1,708,132 1,830,421 1,773,819
---------- ---------- ----------
INCOME BEFORE TAXES AND EXTRAORDINARY ITEM 528,180 447,184 330,263
Income tax expense 183,649 131,215 113,192
---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY ITEM 344,531 315,969 217,071
EXTRAORDINARY ITEM
Gain on forgiveness of debt (net of income tax of $294,953) -- 1,922,752 --
---------- ---------- ----------
NET INCOME 344,531 2,238,721 217,071
Premium paid on redemption of preferred stock -- 62,359 --
---------- ---------- ----------
NET INCOME AVAILABLE FOR COMMON
SHAREHOLDERS $ 344,531 $2,176,362 $ 217,071
========== ========== ==========
PER COMMON SHARE DATA:
Income before extraordinary item $ 2.40 $ 1.77 $ 1.51
Extraordinary item -- 13.41 --
---------- ---------- ----------
NET INCOME PER COMMON SHARE $ 2.40 $ 15.18 $ 1.51
========== ========== ==========
Average shares outstanding 143,374 143,374 143,374
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-5-
<PAGE> 25
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Preferred Stock
------------------------------------------------------
Series A Series B
------------------------ ------------------------
Shares Amount Shares Amount
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 24,462 $ 126,037 21,559 $ 111,080
Comprehensive income:
Net income -- -- -- --
Net change in unrealized gain (loss) on securities
available-for-sale, net of taxes of ($46,789) -- -- -- --
Comprehensive income -- -- -- --
--------- --------- --------- ---------
BALANCE, DECEMBER 31, 1996 24,462 126,037 21,559 111,080
Comprehensive income:
Net income -- -- -- --
Net change in unrealized gain (loss) on securities
available-for-sale, net of taxes of $19,866 -- -- -- --
Comprehensive income -- -- -- --
Redemption of preferred stock
at premium (24,462) (126,037) (21,559) (111,080)
Dividends declared -- -- -- --
--------- --------- --------- ---------
BALANCE, DECEMBER 31, 1997 -- -- -- --
Comprehensive income:
Net income -- -- -- --
Net change in unrealized gain (loss) on securities
available-for-sale, net of taxes of ($2,663) -- -- -- --
Comprehensive income
Dividends declared -- -- -- --
--------- --------- --------- ---------
BALANCE, DECEMBER 31, 1998 -- $ -- -- $ --
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-6-
<PAGE> 26
<TABLE>
<CAPTION>
Common Stock Accumulated
- --------------------------- Additional Other Total
Paid-in Accumulated Comprehensive Stockholders'
Shares Amount Capital Deficit Income Equity
- ----------- ----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
143,374 $ 1,075,305 $ 2,411,471 $(3,368,831) $ 89,754 $ 444,816
-- -- -- 217,071 --
-- -- -- -- (90,826)
-- -- -- -- -- 126,245
- ----------- ----------- ----------- ----------- ----------- -----------
143,374 1,075,305 2,411,471 (3,151,760) (1,072) 571,061
-- -- -- 2,238,721 --
-- -- -- -- 38,563
-- -- -- -- -- 2,277,284
-- -- -- (62,359) -- (299,476)
-- -- -- (35,843) -- (35,843)
- ----------- ----------- ----------- ----------- ----------- -----------
143,374 1,075,305 2,411,471 (1,011,241) 37,491 2,513,026
-- -- -- 344,531 --
-- -- -- -- (5,170)
339,361
-- -- -- (35,843) -- (35,843)
- ----------- ----------- ----------- ----------- ----------- -----------
143,374 $ 1,075,305 $ 2,411,471 $ (702,553) $ 32,321 $ 2,816,544
=========== =========== =========== =========== =========== ===========
</TABLE>
-7-
<PAGE> 27
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
PAGE 1 OF 2
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 344,531 $2,238,721 $ 217,071
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation 118,517 121,111 119,589
Provision for loan losses 26,288 (14,500) (15,000)
Deferred income tax expense (benefit) 183,649 131,215 113,192
Extraordinary item -- (1,922,752) --
Net amortization on investment premium\discounts 39,372 43,422 (4,708)
Stock dividends received (12,900) (12,100) (11,500)
Net gain on sale of other real estate -- -- (24,204)
Net investment securities gains -- (15,046) (4,293)
(Increase) decrease in accrued income and other assets 48 119,115 (894)
Increase(decrease) in accrued expenses and other liabilities (46,421) (33,019) (56,150)
---------- ---------- ----------
Net cash provided by operating activities 653,084 656,167 333,103
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales/maturities/principal
paydowns of investment securities:
Available-for-sale 5,806,803 9,937,654 9,044,870
Purchase of investment securities
Available-for-sale (6,089,990) (4,497,700) (8,413,250)
Net change in:
Interest-bearing deposits with banks (1,977,631) 1,090,571 (1,288,571)
Federal funds sold 1,125,000 (1,125,000) 1,825,000
Loans 520,404 (5,604,855) (2,077,466)
Purchase of equipment and building improvements (48,032) (136,376) (79,595)
Proceeds from sale of real estate 37,420 -- 195,281
---------- ---------- ----------
Net cash used in investing activities (626,026) (335,706) (793,731)
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-8-
<PAGE> 28
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
PAGE 2 OF 2
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in non-interest-bearing
demand,savings, and NOW accounts $ (12,331) $ (236,777) $ 597,048
Net increase (decrease) in time deposits 131,748 1,104,855 647,849
Payments on notes payable to banks (165,000) (2,935,000) (700,524)
Payments on FHLB notes payable (119,026) (110,453) (102,490)
Net changes in federal funds purchased and
securities sold - repurchase agreement 359,341 (459,431) 700,000
Redemption of preferred stock -- (299,476) --
Dividends paid (35,843) -- --
Settlement proceeds -- 2,217,705 --
------------ ------------ ------------
Net cash provided by (used in) financing activities 158,889 (718,577) 1,141,883
------------ ------------ ------------
Net increase (decrease) in cash and due from banks 185,947 (398,116) 681,255
Cash and due from banks - beginning of year 2,008,689 2,406,805 1,725,550
------------ ------------ ------------
Cash and due from banks - end of year $ 2,194,636 $ 2,008,689 $ 2,406,805
============ ============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 1,221,664 $ 1,409,434 $ 1,361,830
============ ============ ============
Income taxes $ 12,320 $ -- $ --
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-9-
<PAGE> 29
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:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Guaranty Bank & Trust
Company. All significant intercompany accounts and transactions have
been eliminated in consolidation.
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. Actual results could differ
from these estimates.
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.
-10-
<PAGE> 30
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
All of the Bank's investments in debt securities are classified as
available-for-sale under Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Debt and Equity Securities."
Declines in the fair value of individual 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 are
reported as a net amount in other comprehensive income.
Realized gains and losses on the sale of securities are determined
using the specific-identification method.
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.
-11-
<PAGE> 31
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 twenty years.
INCOME TAXES
Provisions for income taxes are based on taxes payable or refundable
for the current year (after exclusion of non-taxable income such as
interest on state and municipal securities) and deferred taxes on
temporary differences between the amount of taxable income and pretax
financial income and between the tax bases of assets and liabilities
and their reported amounts in the financial statements. Deferred tax
assets and liabilities are included in the financial statements at
currently enacted income tax rates applicable to the period in which
the deferred tax assets and liabilities are expected to be realized or
settled as prescribed in FASB Statement No. 109, Accounting for Income
Taxes. As changes in tax laws or rates are enacted, deferred tax
assets and liabilities are adjusted through the provision for income
taxes.
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.
COMPREHENSIVE INCOME
Comprehensive income is the change in stockholders' equity during the
period from transactions and other events and circumstances from
non-owner sources. Comprehensive income includes the change in
unrealized gains (losses), net of taxes, on available-for-sale
securities.
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."
-12-
<PAGE> 32
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 Short-Term Instruments - 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.
Loans Receivable - For variable-rate loans that re-price
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.
-13-
<PAGE> 33
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)
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.
ADVERTISING
The Bank expenses advertising as incurred. Advertising expense was
$28,328, $16,158, and $37,857 for the years 1998, 1997 and 1996,
respectively.
RECLASSIFICATION
Certain amounts in the 1997 and 1996 financial statements have been
reclassified to conform with the current year presentation.
2. RESTRICTION ON CASH AND DUE FROM BANKS
The Bank is required to maintain reserve funds in cash or on deposit with
the Federal Reserve Bank. The required reserve at December 31, 1998 and
1997, was $300,000.
-14-
<PAGE> 34
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVESTMENT SECURITIES
Debt and equity securities consisted of the following:
<TABLE>
<CAPTION>
December 31, 1998
--------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ -------- -------- -----------
<S> <C> <C> <C> <C>
Available-for-Sale
U.S. Treasury & U. S. Agency $ 3,000,000 $ 26,522 $ - $ 3,026,522
Mortgage-backed securities 9,691,648 39,208 (16,759) 9,714,097
Agency for International
Development bonds 1,775,661 - - 1,775,661
------------ -------- -------- -----------
$ 14,467,309 $ 65,730 $(16,759) $14,516,280
============ ======== ======== ===========
Investments in Restricted
Equity Securities
Stock in Federal Home
Loan Bank, at cost $ 227,100 $ - $ - $ 227,100
============ ======== ======== ===========
</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 $ 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
============ ======== ======== ===========
Investments in Restricted
Equity Securities
Stock in Federal Home
Loan Bank, at cost $ 214,200 $ -- $ -- $ 214,200
============ ======== ======== ===========
</TABLE>
-15-
<PAGE> 35
3. INVESTMENT SECURITIES (continued)
Gross realized gains and losses on sales of securities were as follows:
<TABLE>
<CAPTION>
Gains Losses
-------- --------
<S> <C> <C>
1998 $ -- $ --
1997 18,863 3,823
1996 4,295 --
</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 7). These investments are pledged as collateral against borrowings from the
FHLB.
The amortized cost and estimated market value of debt securities at December 31,
1998, 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>
Amortized Fair
Cost Value
----------- -----------
<S> <C> <C>
Due in one year or less $ 632,513 $ 634,718
Due from one year to five years 3,476,842 3,505,260
Due from five years to ten years 3,978,743 3,960,552
Due after ten years 6,379,211 6,415,750
----------- -----------
$14,467,309 $14,516,280
=========== ===========
</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 $4,043,000 and $1,000,000 and
an approximate fair value of $4,043,000 and $1,000,000 at December 31, 1998 and
1997, respectively, were pledged to secure public deposits and for other
purposes as required or permitted by law.
-16-
<PAGE> 36
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. LOANS
The components of loans in the statements of condition at December 31,
were as follows:
<TABLE>
<CAPTION>
(In Thousands)
-------------------------
1998 1997
-------- --------
<S> <C> <C>
Commercial $ 1,783 $ 939
Commercial real estate 1,755 2,461
Residential real estate 12,641 13,627
Consumer 2,712 3,219
Agricultural 3,279 2,435
Less: Allowance for loan losses (274) (238)
-------- --------
Loans, net $ 21,896 $ 22,443
======== ========
</TABLE>
An analysis of the change in the allowance for loan losses follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Balance, beginning of year $ 238,371 $ 254,819 $ 261,601
Loans charged off (5,778) (3,613) --
Recoveries 14,643 1,665 8,218
Provision (credit) for loan losses 26,288 (14,500) (15,000)
--------- --------- ---------
Balance, end of year $ 273,524 $ 238,371 $ 254,819
========= ========= =========
</TABLE>
Impairment of loans having recorded investments of $22,778 and $23,437 at
December 31, 1998 and 1997, respectively, has been recognized in conformity with
FASB Statement No. 114, as amended by FASB Statement No. 118. The average
recorded investment in impaired loans for 1998 and 1997 was approximately
$23,000. No allowance for loan loss has been recognized on these loans due to
collateral values exceeding the loan values. No interest income was recognized
on impaired loans during 1998 or 1997. The Bank is not committed to lend
additional funds to debtors whose loans have been modified.
Loans having carrying values of $17,954 were transferred to foreclosed real
estate as of December 31, 1998. The Bank had no foreclosed real estate as of
December 31, 1997.
5. TIME DEPOSITS
At December 31, 1998, the scheduled maturities of time deposits are as
follows: (in thousands)
<TABLE>
<S> <C>
Within 3 months or less $ 5,287
Over 3 months through 12 months 9,282
Over 1 year through 5 years 2,375
--------
$ 16,944
========
</TABLE>
-17-
<PAGE> 37
6. PREMISES AND EQUIPMENT
Components of premises and equipment included in the statements of
condition at December 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Cost:
Land $ 249,730 $ 276,990
Buildings 1,278,978 1,278,978
Furniture and equipment 692,884 655,012
------------ ------------
Total cost 2,221,592 2,210,980
Less: accumulated depreciation (1,649,378) (1,530,861)
------------ ------------
Net book value $ 572,214 $ 680,119
============ ============
</TABLE>
Depreciation expense amounted to $118,517, $121,111 and $119,589 for the
years ended December 31, 1998, 1997, and 1996, respectively.
7. NOTES PAYABLE
LONG-TERM DEBT
The Bank is eligible to borrow funds from the Federal Home Loan Bank under
an Advances, Collateral Pledge and Security Agreement dated April 20, 1994.
Under this agreement, the Bank can 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, 1998
--------------------------
Carrying Assigned
Amount Value
----------- ----------
<S> <C> <C>
FHLB stock $ 227,100 $ 227,100
Deposits with FHLB 123,525 123,525
1-4 single family first mortgage loans 12,286,305 9,214,728
----------- ----------
$12,636,930 $9,565,353
=========== ==========
Maximum advances available (value divided by 110%) $8,695,775
Advances outstanding (1,055,227)
---------
Advances available and unused $7,640,548
==========
</TABLE>
-18-
<PAGE> 38
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. NOTES PAYABLE (continued)
LONG-TERM DEBT (continued)
Advances outstanding under this agreement totalled $1,174,252 at December
31, 1997.
Scheduled future principal payments of advances outstanding as of December
31, 1998 are as follows:
<TABLE>
<S> <C>
1999 $ 134,181
2000 137,370
2001 148,052
2002 159,568
2003 171,985
Thereafter 304,071
------------
$ 1,055,227
============
</TABLE>
The weighted average interest rate of all advances outstanding as of
December 31, 1998 was 7.5%. Interest expense on these advances amounted to
$83,227, $91,786 and $99,793 for 1998, 1997, and 1996, respectively.
8. 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 items are summarized as follows:
<TABLE>
<CAPTION>
1998 % 1997 % 1996 %
-------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Tax based on statutory rate $179,581 34.0% $ 152,043 34.0% $ 112,289 34.0%
Tax exempt interest -- -- -- - (485) (.1)
Other 4,068 .8 (20,828) (4.7) 1,388 .4
-------- ----- --------- ----- --------- -----
$183,649 34.8% $ 131,215 29.3% $ 113,192 34.3%
======== ===== ========= ===== ========= =====
</TABLE>
-19-
<PAGE> 39
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. INCOME TAXES (continued)
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:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Unrealized investment gains - available-for-sale $ (16,650) $ (19,314)
Stock dividends received on investments (17,374) (12,988)
Allowance for loan losses (196,169) (205,107)
---------- ----------
Gross deferred tax liability (230,193) (237,409)
---------- ----------
Net operating loss carryforward 38,240 228,487
Depreciation on premises and equipment 6,920 4,111
Business credit carryforwards and other 39,499 36,009
---------- ----------
Gross deferred tax asset 84,659 268,607
---------- ----------
Net deferred tax asset (liability) $ (145,534) $ 31,198
========== ==========
</TABLE>
The consolidated provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- ---------
<S> <C> <C> <C>
Taxes payable currently $ 9,045 $ 5,557 $ --
Deferred tax expense 174,604 125,658 113,192
-------- -------- ---------
$183,649 $131,215 $113,192
======== ======== =========
</TABLE>
At December 31, 1998, the Company had available net operating loss
carryforwards of approximately $112,000, which expire in 2010.
-20-
<PAGE> 40
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. 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 $1,260,208 and $1,379,818 at December 31, 1998 and 1997,
respectively. During 1998 and 1997, $1,587,264 and $1,709,609 of new loans
were made, and loan repayments totaled $1,706,874 and $1,093,441,
respectively.
10. 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 16 - 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.
11. EXTRAORDINARY GAIN
In years prior to 1998, the Company had been a plaintiff in an action
seeking declaration of the amount 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.
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.
-21-
<PAGE> 41
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. EXTRAORDINARY GAIN (continued)
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.
12. 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 4. 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.
13. 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.
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). Management believes, as of
December 31, 1998, that the Bank meets all capital adequacy requirements
to which it is subject.
-22-
<PAGE> 42
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. REGULATORY MATTERS (continued)
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's and the Louisiana
Office of Financial Institutions' permission for a dividend to the holding
company of $1,521,865 in 1997.
As of December 31, 1998, the most recent notification from the Louisiana
Office of Financial Institutions categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. Categorization
criteria are based on maintenance of minimum total risk-based, Tier I
risk-based and Tier I leverage ratios as set forth in the following table
(in thousands):
<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, 1998:
Total Capital
(to Risk Weighted Assets) $ 2,983 15.6% $ 1,528 > 8.0% $ 1,911 >10.0%
- -
Tier I Capital
(to Risk Weighted Assets) 2,745 14.4% 764 > 4.0% 1,146 > 6.0%
- -
Tier I Capital
(to Average Assets) 2,745 6.5% 1,665 > 4.0% 2,081 > 5.0%
- -
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%
-
</TABLE>
14. 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 could declare in 1998 and 1997 without such approval was equal
to one-half of those years' earnings, exclusive of non-recurring items.
This restriction was more stringent than those imposed under normal
conditions due to the special approval of the 1997 dividend of
$1,521,865. At December 31, 1998, there was no amount available for
dividends without prior regulatory approval.
-23-
<PAGE> 43
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. RESTRICTIONS ON DIVIDENDS (continued)
Subsequent to year end the Bank was released from the higher level
restriction. With the easing of the restriction, dividends that the Bank
can declare without prior regulatory approval is equal to any current
year's earnings plus the prior year's undistributed earnings.
15. 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 $23,453, $23,809 and $22,831
for 1998, 1997, and 1996, respectively.
16. 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 1998 or 1997.
-24-
<PAGE> 44
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. FINANCIAL INSTRUMENTS (continued)
The estimated fair values of the Bank's financial instruments were as
follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
------------------------ ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(in thousands) (in thousands)
Financial assets:
Cash and due from banks,
interest-bearing deposits with
banks, and federal funds sold $ 4,371 $ 4,371 $ 3,332 $ 3,332
Securities available-for-sale 14,516 14,516 14,278 14,278
Restricted equity securities 227 227 214 214
Loans receivable 21,896 22,427 22,443 22,791
Accrued interest receivable 302 302 329 329
Financial liabilities:
Deposit liabilities 37,259 37,396 37,102 37,165
Short-term borrowings 600 600 241 241
Long-term debt 1,055 1,190 1,174 1,281
</TABLE>
A summary of the Bank's commitments and contingent liabilities at December
31, 1998, is as follows:
<TABLE>
<CAPTION>
Notional
Amount
-----------
<S> <C>
Commitments to extend credit $ 2,685,646
Credit card arrangements 432,714
</TABLE>
-25-
<PAGE> 45
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE 1 OF 2
17. BANK ONLY FINANCIAL STATEMENTS
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS
1998 1997
---------------- ----------------
<S> <C> <C>
Cash and due from banks $ 2,194,636 $ 2,008,689
Interest-bearing deposits with banks 2,175,631 198,000
Federal funds sold - 1,125,000
Investment securities - available-for-sale 14,516,280 14,277,636
Restricted investments in equity securities 227,100 214,200
Loans, net of allowance for loan losses 21,896,375 22,443,067
Properties and equipment, net 572,214 680,119
Accrued interest receivable 301,585 329,130
Other assets 87,042 59,543
---------------- ----------------
TOTAL ASSETS $ 41,970,863 $ 41,335,384
================ ================
</TABLE>
-26-
<PAGE> 46
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE 2 OF 2
17. BANK ONLY FINANCIAL STATEMENTS (continued)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1998 AND 1997
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
LIABILITIES
Demand deposits $ 6,198,889 $ 6,777,740
NOW deposits 6,400,995 5,388,446
Savings deposits 7,714,140 8,165,704
Time deposits, $100,000 and over 1,991,493 1,799,852
Other time deposits 14,953,003 15,012,896
------------ ------------
Total deposits 37,258,520 37,144,638
Notes payable 1,055,227 1,174,252
Accrued expenses and other liabilities 279,842 287,365
Federal funds purchased and securities sold
under agreements to repurchase 600,000 240,659
------------ ------------
Total liabilities 39,193,589 38,846,914
------------ ------------
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 5,123,569 4,965,350
Accumulated deficit (3,100,431) (3,236,186)
Accumulated other comprehensive income 32,321 37,491
------------ ------------
Total stockholder's equity 2,777,274 2,488,470
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 41,970,863 $ 41,335,384
============ ============
</TABLE>
-27-
<PAGE> 47
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. BANK ONLY FINANCIAL STATEMENTS
Page 1 of 2
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 2,116,839 $ 2,017,513 $ 1,671,939
Interest on investment securities 824,878 1,185,028 1,210,354
Interest on federal funds sold 107,007 35,485 105,250
Interest on deposits with banks 91,473 29,856 61,860
----------- ----------- -----------
Total interest income 3,140,197 3,267,882 3,049,403
----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits 1,115,603 1,072,050 959,466
Interest on notes payable 83,227 91,786 99,793
Interest on federal funds purchased and securities
sold under agreements to repurchase 1,459 17,141 410
----------- ----------- -----------
Total interest expense 1,200,289 1,180,977 1,059,669
----------- ----------- -----------
NET INTEREST INCOME 1,939,908 2,086,905 1,989,734
Provision (credit) for loan losses 26,288 (14,500) (15,000)
----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,913,620 2,101,405 2,004,734
----------- ----------- -----------
NON-INTEREST INCOME
Service charges on deposit accounts 316,317 305,781 342,481
Other service charges and fees 19,461 22,229 23,443
Other income 1,200 22,869 29,913
----------- ----------- -----------
Total non-interest income 336,978 350,879 395,837
----------- ----------- -----------
</TABLE>
-28-
<PAGE> 48
GREAT GUARANTY BANCSHARES
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. BANK ONLY FINANCIAL STATEMENTS (continued)
PAGE 2 OF 2
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
NON-INTEREST EXPENSES
Salaries and employee benefits 899,954 914,462 887,540
Occupancy expense 219,859 234,281 227,632
Data processing fees 114,369 103,215 91,152
Loan processing fees 68,253 91,722 83,489
Legal fees 8,624 20,534 15,654
Other expense 374,934 358,121 375,551
---------- ---------- ----------
Total non-interest expense 1,685,993 1,722,335 1,681,018
---------- ---------- ----------
INCOME BEFORE TAXES 564,605 729,949 719,553
Income tax expense 193,849 223,992 245,551
---------- ---------- ----------
NET INCOME $ 370,756 $ 505,957 $ 474,002
========== ========== ==========
</TABLE>
-29-
<PAGE> 49
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. PARENT ONLY FINANCIAL STATEMENTS
CONDENSED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Cash in subsidiary bank $ 36,872 $ 42,406
Investment in subsidiary 2,777,274 2,488,470
Deferred tax asset 38,241 186,260
----------- -----------
Total Assets $ 2,852,387 $ 2,717,136
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued interest payable $ -- $ 3,267
Notes payable -- 165,000
Accrued dividends payable 35,843 35,843
----------- -----------
Total Liabilities 35,843 204,110
----------- -----------
Preferred stock - Series A, no par; 500,000 shares authorized;
-0- shares issued and outstanding -- --
Preferred stock - Series B, no par; 2,000,000 shares authorized;
-0- shares issued and outstanding -- --
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 (702,553) (1,011,241)
Accumulated other comprehensive income 32,321 37,491
----------- -----------
Total Stockholders' Equity 2,816,544 2,513,026
----------- -----------
Total Liabilities and Stockholders' Equity $ 2,852,387 $ 2,717,136
=========== ===========
</TABLE>
-30-
<PAGE> 50
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. PARENT ONLY FINANCIAL STATEMENTS (continued)
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
INCOME
Dividends received from Subsidiary Bank $ 235,000 $ 1,521,865 $ 990,694
----------- ----------- -----------
EXPENSES
Interest expense 14,286 174,679 296,488
Legal fees 8,260 82,721 92,230
Other expenses 13,878 25,365 572
----------- ----------- -----------
36,424 282,765 389,290
----------- ----------- -----------
INCOME BEFORE EQUITY IN
UNDISTRIBUTED EARNINGS
OF SUBSIDIARY 198,576 1,239,100 601,404
Equity in undistributed earnings
of subsidiary 135,755 (1,015,908) (516,692)
----------- ----------- -----------
INCOME BEFORE TAXES AND
EXTRAORDINARY GAIN 334,331 223,192 84,712
Income tax expense (benefit) (10,200) (92,777) (132,359)
----------- ----------- -----------
INCOME BEFORE EXTRAORDINARY
GAIN 344,531 315,969 217,071
EXTRAORDINARY GAIN
(Net of income tax) -- 1,922,752 --
----------- ----------- -----------
NET INCOME $ 344,531 $ 2,238,721 $ 217,071
=========== =========== ===========
</TABLE>
-31-
<PAGE> 51
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. PARENT ONLY FINANCIAL STATEMENTS (continued)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 344,531 $ 2,238,721 $ 217,071
Adjustments to reconcile net
income to cash (used in) provided
by operating activities:
Extraordinary item -- (1,922,752) --
Equity in undistributed earnings
of subsidiary (135,755) 1,015,908 516,692
Changes in operating assets and liabilities:
Dividends receivable -- -- 114,000
Accrued interest payable (3,267) (55,210) (21,220)
Income tax benefit derived from tax
loss generated (10,200) (92,777) (132,359)
----------- ----------- -----------
Cash provided by operating activities 195,309 1,183,890 694,184
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable (165,000) (2,935,000) (700,524)
Redemption of preferred stock -- (299,476) --
Dividends paid (35,843) -- --
Settlement received -- 2,217,705 --
Payments on amounts due subsidiary -- (127,134) --
----------- ----------- -----------
Cash used in financing activities (200,843) (1,143,905) (700,524)
----------- ----------- -----------
Net increase (decrease) in cash (5,534) 39,985 (6,340)
Cash - beginning of year 42,406 2,421 8,761
----------- ----------- -----------
Cash - end of year $ 36,872 $ 42,406 $ 2,421
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 17,552 $ 229,889 $ 317,707
=========== =========== ===========
Income taxes $ -- $ -- $ --
=========== =========== ===========
</TABLE>
-32-
<PAGE> 52
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.
Dr. Donald W. Doucet, age 41, was elected a director in 1998. Dr. Doucet
has been a practicing physician since 1985 specializing in Internal Medicine.
Craig A. Major, age 51, has been a director since 1993. Mr. Major has been
a cattle rancher for over twenty-five years. Mr. Major also oversees various
personal and family real-estate properties.
Sylvester Muckelroy, age 73, was elected a director in 1998. Mr. Muckelroy
retired from the Pointe Coupee Parish School Board in 1988. Mr. Muckelroy is the
Mayor of the City of New Roads and is currently serving his second term.
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 51, 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 47, 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.; 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.
- 16 -
<PAGE> 53
Daniel R. Domingue, Jr., age 54, 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-five years.
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 42, has been employed by Guaranty Bank for eighteen
years and serves as Senior Vice-President and Senior Loan Officer. Mr. O'Neal
also serves as the Bank's Compliance Officer and Head of Loan Administration.
Larry J. Roberts, age 58, served as Senior Vice-President and Chief
Financial Officer and was employed by Guaranty Bank for twenty-six years. Mr.
Roberts also served as Secretary to the Board of Guaranty Bank and as Treasurer
of Bancshares. Mr. Roberts resigned 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, 1998 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, 1998 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., 1996 $75,000 $ 15,000 $8,250(1)
Guaranty Bank President and CEO 1997 75,000 15,000 10,990(1)
1998 75,000 10,000 11,990(1)
</TABLE>
------------------
(1) Includes living allowance, 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 December 31, 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).
-17-
<PAGE> 54
SECURITY OWNERSHIP OF MANAGEMENT
The following table indicates the beneficial ownership as of December 31,
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 *
Dr. Donald W. Doucet, Director 340 *
Craig A. Major, Director 436 *
Sylvester Muckelroy, Director 221 *
H. T. Olinde, Jr., Director 12,488 8.71%
J. Layne Orillion, Director 150 *
F. Gregory Roy, Director 348 *
Daniel R. Domingue, Jr., Chief Executive Officer of 312 *
Guaranty Bank
Directors and Executive Officers as 14,985 10.45%
a group (10 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) J. Layne Orillion; (ii) director of Bancshares; (iii) loan and line of
credit commitment to affiliate companies; (iv) a total of $1,459 outstanding at
December 31, 1998 with $100,000 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.
- 18 -
<PAGE> 55
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, 1999 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/ J. Wade O,Neal
------------------------------
J. Wade O'Neal
Treasurer of Great Guaranty Bancshares, Inc.
and Secretary of Guaranty Bank & Trust Co.
- 19 -
<PAGE> 56
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit 21 Subsidiaries of Great Guaranty Bancshares, Inc.
Exhibit 27 Financial Data Schedule
</TABLE>
- 20 -
<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.
- 21 -
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,194,636
<INT-BEARING-DEPOSITS> 2,175,631
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14,516,280
<INVESTMENTS-CARRYING> 14,516,280
<INVESTMENTS-MARKET> 14,516,280
<LOANS> 21,896,375
<ALLOWANCE> 273,524
<TOTAL-ASSETS> 41,970,863
<DEPOSITS> 37,221,649
<SHORT-TERM> 1,055,227
<LIABILITIES-OTHER> 877,443
<LONG-TERM> 0
0
0
<COMMON> 1,075,305
<OTHER-SE> 1,741,239
<TOTAL-LIABILITIES-AND-EQUITY> 41,970,863
<INTEREST-LOAN> 2,116,839
<INTEREST-INVEST> 824,878
<INTEREST-OTHER> 198,480
<INTEREST-TOTAL> 3,140,197
<INTEREST-DEPOSIT> 1,115,603
<INTEREST-EXPENSE> 1,214,575
<INTEREST-INCOME-NET> 1,925,622
<LOAN-LOSSES> (26,288)
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,708,132
<INCOME-PRETAX> 528,180
<INCOME-PRE-EXTRAORDINARY> 344,531
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 344,531
<EPS-PRIMARY> 2.40
<EPS-DILUTED> 2.40
<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>
