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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, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number 000-22487
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GREAT GUARANTY BANCSHARES, INC.
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(Name of Small Business Issuer in its charter)
LOUISIANA 72-0919109
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
175 NEW ROADS STREET, NEW ROADS, LOUISIANA 70760
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (225) 638-8621
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
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N/A N/A
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Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK $7.50 PAR VALUE
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(Title of class)
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(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. YES X NO
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $3,561,551
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, 1999
Transitional Small Business Disclosure Format (check one): YES NO X
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
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<S> <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 - 47
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE......................................................................... 48
PART III
ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT.................................................. 48
ITEM 10 EXECUTIVE COMPENSATION............................................................. 49
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.............................................................. 49
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS....................................................................... 50
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K................................................... 51
EXHIBIT INDEX...................................................................... 52
</TABLE>
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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, 1999, Bancshares had total consolidated assets of approximately $40.1
million, and shareholders' equity of approximately $2.9 million while Guaranty
Bank had assets of approximately $40.1 million and shareholder's equity of
approximately $2.9 million. Bancshares' executive offices are located at 175 New
Roads Street, New Roads, Louisiana, 70760 and its telephone number is (225)
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 a full service
branch located in Livonia , 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, 1999,
Guaranty Bank had outstanding approximately $25.9 million in loans, of which 18%
were in commercial loans to borrowers engaged in various lines of business, 10%
were in consumer loans, 47% were in primarily residential real estate loans, and
25% 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, 1999,
Guaranty Bank had total deposits of approximately $36.1 million.
PROPERTY
The executive offices of Bancshares and Guaranty Bank are located at 175
New Roads Street, New Roads, Louisiana 70760 and are owned by Guaranty Bank.
Guaranty Bank also owns the buildings and land at Highway 78 in Livonia,
Louisiana where the Bank's branch is located, and Highway 413 in Jarreau
Louisiana, 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, 1999, Bancshares had no full-time employees. As of that
date, Guaranty Bank had 22 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.
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COMPETITION
The Bank's general market area consists principally of Pointe Coupee Parish
in the State of Louisiana. The market area has a population of approximately
23,000 and contains numerous banks and other financial institutions. Guaranty
Bank experiences substantial competition in attracting and retaining deposits
and making loans.
The primary competitive factors for deposits are interest rates, the
quality and range of financial services offered, convenience of office locations
and office hours. Competition for loan customers is generally a function of
interest rates, loan origination fees and other charges, restrictive covenants
and compensating balances and other services offered. The Bank competes with
numerous other commercial banks, savings associations and credit unions for
customer deposits, as well as with a broad range of financial institutions in
consumer and commercial lending activities. In addition to banks and savings
associations, other businesses in the financial services industry compete with
the Bank for retail and commercial deposit funds and for retail and commercial
loan business. Competition for loans and deposits is intense among the financial
institutions in the area and has increased due to recent acquisitions of
community banks by regional holding companies with greater resources than those
of Bancshares. The size of these institutions allows certain economics of scale
not available to Bancshares or the Bank.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Interstate Banking Act") authorized the acquisition of banks in any state
by bank holding companies, subject to compliance with federal and state
antitrust laws, the Community Reinvestment Act (the "CRA") and specific deposit
concentration limits. The Interstate Banking Act removes most state barriers to
interstate acquisitions of banks and ultimately will permit 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, 1999 these categories
accounted for approximately 18%, 10%, 47% and 25%, 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 fifty percent (50%) 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 attempts to reduce the risk of undue concentrations of loans
to multiple borrowers engaged in
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similar activities that would cause them to be similarly impacted by economic or
other conditions. At December 31, 1999, no such concentration exceeded 10% of
the Bank's loan portfolio.
Types of Loans
The following table sets forth Guaranty Bank's loan distribution as of the
indicated dates (in thousands of dollars):
<TABLE>
<CAPTION>
December 31,
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1999 1998
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<S> <C> <C>
Commercial, financial and agricultural $ 8,741 $ 5,062
Real estate 14,457 14,396
Installment 2,708 2,712
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Total $25,906 $22,170
======= =======
</TABLE>
Maturities
The following table shows the maturity or repricing frequency of loans
outstanding as of December 31, 1999 (in thousands of dollars).
<TABLE>
<S> <C>
Maturity of fixed rate Loans:
Within one year $ 2,265
After one but within five years 9,413
After five years 7,897
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Total fixed rate loans 19,575
Variable rate loans repricing at least quarterly 6,299
Nonaccrual loans 32
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Total loans $25,906
=======
</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,
----------------
1999 1998
----------------
<S> <C> <C>
Nonaccrual loans $ 32 $ 23
Accruing loans past due 90 days or more 5 25
Restructured loans not included above 0 0
</TABLE>
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Loan Loss Experience
The following table summarizes Guaranty Bank's loan loss experience for
each of the last two (2) years (in thousands of dollars):
<TABLE>
<CAPTION>
December 31,
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1999 1998
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<S> <C> <C>
Balance at beginning of period $ 273,524 $ 238,371
Charge-offs:
Commercial, financial and agricultural
Installment -- --
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Total Charge-offs 26,109 5,778
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Recoveries:
Commercial, financial and agricultural
Installment -- --
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Total Recoveries 4,249 14,643
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Net charge-offs (21,860) 8,865
Provision charged (credited) to operations 81,700 26,288
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Balance at end of period 333,364 273,524
========= =========
Ratio of net charge-offs to average loans outstanding .08% (.04)%
</TABLE>
DEPOSITS
The following table summarizes Guaranty Bank's outstanding deposits as of
the indicated dates (in thousands of dollars):
<TABLE>
<CAPTION>
December 31,
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1999 1998
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<S> <C> <C>
Noninterest-bearing demand deposits $ 5,922 $ 6,199
Interest-bearing demand deposits 6,289 6,401
Savings deposits 6,936 7,714
Time deposits 16,922 16,944
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Total $36,069 $37,258
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</TABLE>
Maturities of time deposits of $100,000 or more outstanding as of December
31, 1999 are summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Time Certificates of Deposit
----------------------------
<S> <C>
3 months or less $ 1,291
Over 3 through 12 months 1,214
Over 12 months 280
------------
Total $ 2,785
============
</TABLE>
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INVESTMENT SECURITIES
The investment policy of Guaranty Bank is an integral part of its overall
asset/liability management. The objective of the Bank's investment policy is a
portfolio which will provide liquidity necessary to facilitate making loans and
to cover deposit fluctuations while at the same time achieving a satisfactory
investment return on the funds invested. With the implementation of Statement of
Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities, the Bank is required to classify its
portfolio into three categories: "Held to Maturity", "Trading Securities", and
"Available for Sale".
"Held to Maturity" includes debt securities that the Bank has positive
intent and ability to hold to maturity; these securities are reported as
amortized cost. "Trading Securities" include debt and equity securities that are
purchased and held solely for the purpose of selling them in the short-term
future for trading profits; these securities are reported at fair market value
with unrealized gains and losses included in earnings. "Available for Sale"
securities include those acquired with the intention of disposal prior to
maturity, although these securities may be held to maturity; these securities
are reported at fair market value with unrealized gains and losses excluded from
the earnings and reported as a separate component of shareholders' equity. As of
December 31, 1999, 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,
-----------------
1999 1998
-----------------
<S> <C> <C>
U.S. Treasury securities and obligations of other
U.S. Government agencies and corporations $ 2,900 $ 3,026
Obligations of state and political subdivisions -- --
Mortgage-backed bonds and collateralized
mortgage obligations 5,931 9,714
Agency for International Development Guaranteed Notes 1.629 1,776
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Total $10,460 $14,516
======= =======
</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
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authority to regulate provisions of certain bank holding company debt, including
authority to impose interest ceilings and reserve requirements on such debt.
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 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
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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, 1999
Total Capital (to Risk Weighted Assets):
Guaranty Bank ........................... $3,353 16.7% $1,609 >8% $2,012 >10%
Tier I Capital (to Risk Weighted Assets):
Guaranty Bank ........................... $3,101 15.4% $ 805 >4% $1,207 >6%
Tier I Capital (to Average Assets)
Guaranty Bank ........................... $3,101 7.5% $1,650 >4% $2,062 >5%
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%
</TABLE>
Restrictions on Transfers of Funds to Bancshares by the Bank. Substantially
all of Bancshares' revenues, on an unconsolidated basis, including funds
available for the payment of dividends and other operating expenses, are the
result of dividends paid by the Bank. Bancshares is a legal entity separate and
distinct from the Bank. Bancshares' ability to pay cash dividends is limited by
Louisiana law. There also are statutory and regulatory limitations on the amount
of dividends which may be paid to Bancshares by the Bank. Louisiana law
restricts the amount available for cash dividends by state banks without
approval by the Commissioner.
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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, 1999 and 1998, the Bank was categorized as
"well capitalized."
In addition to measures taken under the prompt corrective action
provisions, commercial banking organizations may be subject to potential
enforcement actions by federal regulators for unsafe or unsound practices in
conducting their businesses or for violations of any law, rule, regulation or
any condition imposed in writing by the agency or any written agreement with the
agency. Enforcement actions may include the imposition of a conservator or
receiver, the issuance of a cease and desist order that can be judicially
enforced, the termination of insurance of deposits (in the case of a depository
institution), the imposition of civil money penalties, the issuance of
directives to increase capital, the issuance of formal and informal agreements,
the issuance of removal and prohibition orders against institution-affiliated
parties and the enforcement of such actions through injunctions or restraining
orders based upon a judicial determination that the agency would be harmed if
such equitable relief was not granted.
Safety and Soundness Standards. In July 1995, the federal banking agencies
adopted final guidelines establishing standards for safety and soundness, as
required by the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"). The guidelines set forth operational and managerial standards
relating to internal controls, information systems and internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset growth
and compensation, fees and benefits. Guidelines for asset quality and earnings
standards will be adopted in the future. The guidelines establish the safety and
soundness standards that the agencies will use to identify and address problems
at insured depository institutions before capital becomes impaired. If an
institution fails to comply with a safety and soundness standard, the
appropriate federal banking agency may require the institution to submit a
compliance plan. Failure to submit a compliance plan or to implement an accepted
plan may result in enforcement action.
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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 a
"satisfactory" 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 a full-service branch
located in Livonia, Louisiana. The Livonia branch is a 3,500 square foot
facility opened in 1980. The Bank owns this property 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 and 1,400
square foot facility in Jarreau, Louisiana.
-9-
<PAGE> 13
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.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Bancshares will hold its Annual Meeting of Shareholders on April 15, 2000.
Matters to be submitted to a vote of security holders through the solicitation
of proxies will be the election of the Board of Directors.
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. Sales or
exchanges of Bancshares Common Stock has been at a very minimum within the prior
two years. There were two separate transactions in 1998 in which 340 shares and
221 shares were purchased and sold for a price unknown to Bancshares. There were
five separate transactions in 1999 which totaled 111 shares, 86 shares, 200
shares, 115 shares, and 312 shares respectively. These shares were sold and
purchased at a price unknown to Bancshares. At December 31, 1999, the total
143,374 shares of Bancshares Common Stock were held of record by 537
shareholders. During the past three years, a cumulative total of $.75 per share
in dividends have been paid on the Bancshares Common Stock, in three separate
dividends of $.25 per share declared in the fourth quarter of 1997, 1998, and
1999 and paid in January, 1998, 1999, and 2000. 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.
1999 COMPARED WITH 1998
BALANCE SHEET
Total assets decreased to $40.1 million at December 31, 1999 from $41.9
million at December 31, 1998. Total loans increased by $3.7 million or 16.85%,
to $25.9 million from to $22.2 million at December 31, 1998, while securities
decreased $4.06 million to $10.5 million at December 31, 1999, primarily in
order to fund the increased loan volume.
Total deposits decreased by $1.1 million to $36.1 million at December 31,
1999, from $37.2 million at December 31, 1998. The majority of the decrease in
deposits was due to the loss of a substantial business savings account.
Non-interest bearing deposits decreased 3.89% compared to a 2.9% decrease in
interest
-10-
<PAGE> 14
bearing deposits. During 1999, shareholder's equity in Bancshares increased to
$2.9 million from $2.8 million at December 31, 1998.
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, 1999 increased to $652 thousand from $565 thousand during 1998.
Bancshares consolidated net income was $354 thousand for the year ended December
31, 1999 from $345 thousand at year end 1998.
Interest income increased $34 thousand or by 1.11%, to $3.1 million for
1999, principally as a result of an increase in loan volume. Non-interest income
totaled $324 thousand for the year ended December 31, 1999, a decrease of 3.86%
from $337 thousand for the year ended December 31, 1998, due primarily to a
decreased income from service charges and fees.
EXPENSES
Interest expense decreased $39 thousand from $1.2 million during 1998 to
$1.16 million for the year ended December 31, 1999 primarily because of
decreased time deposit expense. Non-interest expense for the year ended December
31, 1999 totaled $1.6 million, a decrease from the $1.7 million for the year
ended December 31, 1998, as a result of overall cost cutting measures.
PROVISIONS FOR POSSIBLE LOAN LOSSES
As a result of management's assessment of the adequacy of the allowance for
possible loan losses, and due to the growth in loan volume, the Guaranty Bank
loan loss allowance was increased at year-end 1999 to $333 thousand, or 1.29% of
total loans, from $274 thousand, or 1.25% of total loans, at December 31, 1998.
-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. The average balances and yields for
interest-bearing assets and interest-bearing liabilities of Guaranty Bank for
1999 and 1998 on a tax-equivalent basis are as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
-------------------------------- ------------------------------
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 $ 15,469 $ 1,334 8.62% $ 16,092 $ 1,390 8.64%
Installment loans 2,993 320 10.69% 2,798 315 11.26%
Commercial and Industrial loans 6,215 592 9.52% 3,531 347 9.83%
U.S. Treasury and government agency
securities 10,813 659 6.10% 11,202 712 6.36%
Municipal securities -- -- -- -- -- --
Other securities (AID & TCD) 3,355 177 5.28% 3,709 204 5.50%
Federal funds sold and securities sold
under agreements to repurchase 552 27 4.89% 1,941 107 5.51%
Total earning assets $ 39,397 $ 3,109 7.89% $ 39,273 $ 3,075 7.83%
======== ========
INTEREST-BEARING LIABILITIES:
Interest-bearing transaction accounts $ 6,994 $ 150 2.14% $ 5,881 $ 123 2.09%
Money market deposits 1,046 21 2.01% 1,278 25 1.96%
Savings deposits 6,504 145 2.23% 6,953 156 2.24%
Time deposits 16,852 765 4.54% 16,946 813 4.80%
Federal funds purchased and securities
purchased under agreements to resell 109 6 5.50% 38 1 3.84%
FHLB Borrowings 983 74 7.53% 1,106 83 7.50%
Total interest-bearing liabilities $ 32,488 $ 1,161 3.57% $ 32,202 $ 1,201 3.73%
======== -------- -------- ======== -------- --------
Net interest income, tax equivalent $ 1,948 $ 1,874
======== ========
Net interest margin, tax equivalent 4.32% 4.10%
======== ========
</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 1999 and
1998 are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1999 Compared to 1998 1998 Compared to 1997
------------------------ -------------------------
Volume Rate Net Volume Rate Net
------ ---- --- ------ ---- ---
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Real estate loans $ (54) (3) $ (57) $ 123 (56) $67
Installment loans 22 (17) 5 12 (2) 10
Commercial and Industrial loans 264 (19) 245 146 (188) (42)
U.S. Treasury and government agency
securities (25) (28) (53) (345) (26)
(371)
Municipal securities 0 0 0 0 0 0
Other securities (19) (7) (26) 72 1 73
Federal funds sold and securities sold
under agreements to repurchase (77) (3) (80) 65 7 72
Total earning assets 10 24 34 (19) (172) (191)
INTEREST-BEARING LIABILITIES:
Interest-bearing transaction accounts 23 4 27 6 10 16
Money market deposits (5) 1 (4) (7) 0 (7)
Savings deposits (10) (1) (11) (5) (1) (6)
Time deposits (4) (44) (48) 42 1 43
Federal funds purchased and securities
purchased under agreements to resell 3 2 5 (15) (1) (16)
FHLB Borrowings (9) 0 (9) (9) 0 (9)
Total interest-bearing liabilities 11 (51) (40) 5 16 21
Net interest income, tax equivalent (1) 75 74 (24) (188) (212)
</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, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ ------------------------
Guaranty Guaranty
Bank Bancshares Bank Bancshares
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Return on average assets .97% 12.12% .88% 12.4%
Return on average equity 14.10% 12.13% 13.07% 12.9%
Dividend payout ratio 31.58% 10.14% 63.38% 10.4%
Average equity to
average assets 6.91% 99.90% 6.76% 95.7%
</TABLE>
- -----------
-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 was 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.
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 $94,000 in its Y2K efforts.
The potential consequences of Year 2000 had no material effect on the Bank's
business, results of operations or financial condition as of January 2000, and
the Bank is ready for any potential problems that will arise with critical dates
in the year 2000.
-14-
<PAGE> 18
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
[P&N LOGO]
-15-
<PAGE> 19
C O N T E N T S
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT 17
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 1999 and 1998 18-19
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1999, 1998 and 1997 20-21
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 1999, 1998 and 1997 22-23
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1999, 1998 and 1997 24-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 26-47
</TABLE>
-16-
<PAGE> 20
[P&N LETTERHEAD]
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, 1999 and
1998, 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, 1999. 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, 1999 and 1998, and the
results of its operations and its cash flows for each of the years during the
three year period ended December 31, 1999 in conformity with generally accepted
accounting principles.
/s/ POSTLETHWAITE & NETTERVILLE
Baton Rouge, Louisiana
February 11, 2000
-17-
<PAGE> 21
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1999 AND 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash and due from banks $ 2,161,137 $ 2,194,636
Interest-bearing deposits with banks 792,408 2,175,631
Investment securities
available-for-sale 10,460,361 14,516,280
Investments in restricted equity securities 239,600 227,100
Loans receivable, net of allowance for loan losses
of $333,364 and $273,524, respectively 25,572,115 21,896,375
Accrued interest receivable 369,234 301,585
Premises and equipment, net 474,303 572,214
Other assets 35,035 87,042
----------- -----------
TOTAL ASSETS $40,104,193 $41,970,863
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-18-
<PAGE> 22
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
LIABILITIES
Demand deposits $ 5,922,179 $ 6,162,018
NOW deposits 6,288,966 6,400,995
Savings deposits 6,935,700 7,714,140
Time deposits, $100,000 and over 2,785,184 1,991,493
Other time deposits 14,136,991 14,953,003
------------ ------------
Total deposits 36,069,020 37,221,649
Notes payable 926,953 1,055,227
Accrued expenses and other liabilities 180,147 241,600
Federal funds purchased and securities sold
under agreements to repurchase -- 600,000
Dividends payable 35,843 35,843
------------ ------------
Total liabilities 37,211,963 39,154,319
------------ ------------
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 (384,838) (702,553)
Accumulated other comprehensive income (209,708) 32,321
------------ ------------
Total stockholders' equity 2,892,230 2,816,544
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 40,104,193 $ 41,970,863
============ ============
</TABLE>
-19-
<PAGE> 23
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
PAGE 1 OF 2
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 2,243,567 $ 2,048,586 $ 1,925,791
Interest on investment securities 756,025 824,878 1,185,028
Interest on federal funds sold 26,657 107,007 35,485
Interest on deposits with banks 79,995 91,473 29,856
----------- ----------- -----------
Total interest income 3,106,244 3,071,944 3,176,160
----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits 1,081,152 1,115,603 1,072,050
Interest on notes payable 73,978 97,513 266,465
Interest on federal funds purchased
and securities sold under agreements to repurchase 5,837 1,459 17,141
----------- ----------- -----------
Total interest expense 1,160,967 1,214,575 1,355,656
----------- ----------- -----------
NET INTEREST INCOME 1,945,277 1,857,369 1,820,504
Provision (credit) for loan losses 81,700 26,288 (14,500)
----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,863,577 1,831,081 1,835,004
----------- ----------- -----------
NON-INTEREST INCOME
Service charges on deposit accounts 297,973 316,317 305,781
Other service charges and fees 25,402 19,461 22,229
Other income 2,537 1,200 22,869
----------- ----------- -----------
Total non-interest income 325,912 336,978 350,879
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-20-
<PAGE> 24
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
PAGE 2 OF 2
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
NON-INTEREST EXPENSE
Salaries and employee benefits $ 855,473 $ 899,954 $ 914,462
Occupancy expense 205,143 219,859 234,281
Data processing fees 110,953 114,369 103,215
Legal fees 78,739 16,885 103,254
Other expense 379,408 388,812 383,487
---------- ---------- ----------
Total non-interest expense 1,629,716 1,639,879 1,738,699
---------- ---------- ----------
INCOME BEFORE TAXES AND EXTRAORDINARY
ITEM 559,773 528,180 447,184
Income tax expense 206,215 183,649 131,215
---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY ITEM 353,558 344,531 315,969
EXTRAORDINARY ITEM
Gain on forgiveness of debt (net of income tax of $294,953) -- -- 1,922,752
---------- ---------- ----------
NET INCOME 353,558 344,531 2,238,721
Premium paid on redemption of preferred stock -- -- 62,359
---------- ---------- ----------
NET INCOME AVAILABLE FOR COMMON
SHAREHOLDERS $ 353,558 $ 344,531 $2,176,362
========== ========== ==========
PER COMMON SHARE DATA:
Income before extraordinary item $ 2.47 $ 2.40 $ 1.77
Extraordinary item -- -- 13.41
---------- ---------- ----------
NET INCOME PER COMMON SHARE $ 2.47 $ 2.40 $ 15.18
========== ========== ==========
CASH DIVIDENDS PER SHARE $ 0.25 $ 0.25 $ --
========== ========== ==========
Average shares outstanding 143,374 143,374 143,374
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-21-
<PAGE> 25
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Preferred Stock
------------------------------------------------
Series A Series B
---------------------- ----------------------
Shares Amount Shares Amount
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
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 -- -- -- --
Comprehensive income:
Net income -- -- -- --
Net change in unrealized gain (loss) on securities
available-for-sale, net of taxes of ($124,681) -- -- -- --
Comprehensive income -- -- -- --
Dividends declared -- -- -- --
--------- --------- --------- ---------
BALANCE, DECEMBER 31, 1999 -- $ -- -- $ --
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-22-
<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 $(3,151,760) $ (1,072) $ 571,061
-----------
-- -- -- 2,238,721 -- 2,238,721
-- -- -- -- 38,563 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 -- 344,531
-- -- -- -- (5,170) 5,170
-----------
-- -- -- -- -- 339,361
-----------
-- -- -- (35,843) -- (35,843)
- ----------- ----------- ----------- ----------- ----------- -----------
143,374 1,075,305 2,411,471 (702,553) 32,321 2,816,544
-----------
-- -- -- 353,558 -- 353,558
-- -- -- -- (242,029) (242,029)
-----------
-- -- -- -- -- 111,529
-----------
-- -- -- (35,843) -- (35,843)
- ----------- ----------- ----------- ----------- ----------- -----------
143,374 $ 1,075,305 $ 2,411,471 $ (384,838) $ (209,708) $ 2,892,230
=========== =========== =========== =========== =========== ===========
</TABLE>
-23-
<PAGE> 27
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
PAGE 1 OF 2
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 353,558 $ 344,531 $ 2,238,721
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 110,633 118,517 121,111
Provision for loan losses 81,700 26,288 (14,500)
Deferred income tax expense 57,578 174,604 125,658
Extraordinary item -- -- (1,922,752)
Net amortization on investment premium\discounts 61,229 39,372 43,422
Stock dividends received (12,500) (12,900) (12,100)
Net gain on sale of other real estate (2,046) -- --
Net investment securities gains (491) -- (15,046)
(Increase) decrease in accrued income and other assets (91,174) 9,093 124,672
Decrease in accrued expenses and other liabilities (61,453) (46,421) (33,019)
----------- ----------- -----------
Net cash provided by operating activities 497,034 653,084 656,167
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales/maturities/principal
paydowns of investment securities:
Available-for-sale 5,753,152 5,806,803 9,937,654
Purchase of investment securities
Available-for-sale (2,000,000) (6,089,990) (4,497,700)
Net change in:
Interest-bearing deposits with banks 1,383,223 (1,977,631) 1,090,571
Federal funds sold -- 1,125,000 (1,125,000)
Loans (3,757,440) 520,404 (5,604,855)
Purchase of equipment and building improvements (12,722) (48,032) (136,376)
Proceeds from sale of real estate 20,000 37,420 --
----------- ----------- -----------
Net cash provided by (used in) investing activities 1,386,213 (626,026) (335,706)
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-24-
<PAGE> 28
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
PAGE 2 OF 2
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in non-interest-bearing
demand, savings, and NOW accounts $(1,130,308) $ (12,331) $ (236,777)
Net increase (decrease) in time deposits (22,321) 131,748 1,104,855
Payments on notes payable to banks -- (165,000) (2,935,000)
Payments on FHLB notes payable (128,274) (119,026) (110,453)
Net changes in federal funds purchased and
securities sold - repurchase agreement (600,000) 359,341 (459,431)
Redemption of preferred stock -- -- (299,476)
Dividends paid (35,843) (35,843) --
Settlement proceeds -- -- 2,217,705
----------- ----------- -----------
Net cash provided by (used in) financing activities (1,916,746) 158,889 (718,577)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (33,499) 185,947 (398,116)
Cash and cash equivalents - beginning of year 2,194,636 2,008,689 2,406,805
----------- ----------- -----------
Cash and cash equivalents - end of year $ 2,161,137 $ 2,194,636 $ 2,008,689
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 1,229,141 $ 1,221,664 $ 1,409,434
=========== =========== ===========
Income taxes $ 142,000 $ 12,320 $ --
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-25-
<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.
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 could change materially in the near
term. However, the amount of the change, if any, cannot be estimated.
-26-
<PAGE> 30
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
SIGNIFICANT GROUP CONCENTRATIONS
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 regional economic conditions and conditions in the agricultural
industry.
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 write-downs are included in
earnings as realized losses as they occur.
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
The Bank grants mortgage, commercial and consumer loans to customers.
A substantial portion of the loan portfolio is represented by mortgage
loans throughout Pointe Coupee Parish. The ability of the Bank's
debtors to honor their contracts is dependent upon the real estate,
agricultural production and general economic conditions in this
immediate area and the surrounding area.
Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-off generally are reported
at their outstanding unpaid principal balances adjusted for
charge-offs, the allowance for loan losses, and any deferred fees or
costs on originated loans. Interest income is accrued on the unpaid
principal balance.
The accrual of interest on mortgage and commercial loans is
discontinued at the time the loan is 90 days delinquent unless the
credit is well-secured and in process of collection. Credit card loans
and other personal loans are typically charged off no later than 180
days past due. In all cases, loans are placed on nonaccrual or
charged-off at an earlier date if collection of principal or interest
is considered doubtful.
-27-
<PAGE> 31
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
LOANS RECEIVABLE (continued)
All interest accrued but not collected for loans that are placed on
nonaccrual or charged off is reversed against interest income. The
interest on these loans is accounted for on the cash-basis or
cost-recovery method, until qualifying for return to accrual. Loans
are returned to accrual status when all the principal and interest
amounts contractually due are brought current and future payments are
reasonably assured.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established as losses are estimated
to have occurred through a provision for loan losses charged to
earnings. Loan losses are charged against the allowance when
management believes the uncollectibility of a loan balance is
confirmed. Subsequent recoveries, if any, are credited to the
allowance.
The allowance for loan losses is evaluated on a regular basis by
management and is based upon management's periodic review of the
collectibility of the loans in light of historical experience, the
nature and volume of the loan portfolio, adverse situations that may
affect the borrower's ability to repay, estimated value of any
underlying collateral and prevailing economic conditions. This
evaluation is inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes
available.
A loan is considered impaired when, based on current information and
events, it is probable that the Bank will be unable to collect the
scheduled payments of principal or interest when due according to the
contractual terms of the loan agreement. Factors considered by
management in determining impairment include payment status,
collateral value, and the probability of collecting scheduled
principal and interest payments when due. Loans that experience
insignificant payment delays and payment shortfalls generally are not
classified as impaired. Management determines the significance of
payment delays and payment shortfalls on a case-by-case basis, taking
into consideration all of the circumstances surrounding the loan and
the borrower, including the length of the delay, the reasons for the
delay, the borrower's prior payment record, and the amount of the
shortfall in relation to the principal and interest owed. Impairment
is measured on a loan by loan basis for commercial and construction
loans by either the present value of expected future cash flows
discounted at the loan's effective interest rate, the loan's
obtainable market price, or the fair value of the collateral if the
loan is collateral dependent.
-28-
<PAGE> 32
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
include cash and balances due from banks, federal funds sold and any
other instrument with an original maturity of ninety days or less.
-29-
<PAGE> 33
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.
-30-
<PAGE> 34
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.
RECLASSIFICATION
Certain amounts in the 1998 and 1997 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, 1999 was
$217,000. The Bank customarily fulfills this requirement through
maintenance of sufficient levels of vault cash.
-31-
<PAGE> 35
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, 1999
-----------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ------------ -----------
Available-for-Sale
<S> <C> <C> <C> <C>
U.S. Treasury & U. S. Agency $ 3,000,000 $ 155 $ (100,580) $ 2,899,575
Mortgage-backed securities 6,149,011 -- (217,314) 5,931,697
Agency for International
Development bonds 1,629,089 -- -- 1,629,089
----------- -------- ------------ -----------
$10,778,100 $ 155 $ (317,894) $10,460,361
=========== ======== ============ ===========
Investments in Restricted
Equity Securities
Stock in Federal Home
Loan Bank, at cost $ 239,600 $ -- $ -- $ 239,600
=========== ======== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
-----------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ------------ -----------
Available-for-Sale
<S> <C> <C> <C> <C>
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>
-32-
<PAGE> 36
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVESTMENT SECURITIES (continued)
Gross realized gains and losses on sales of securities were as follows:
<TABLE>
<CAPTION>
Gains Losses
------- ------
<S> <C> <C>
1999 $ 491 $ --
1998 -- --
1997 18,863 3,823
</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 stock 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 fair value of debt securities at December 31, 1999,
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 $ 500,000 $ 500,155
Due from one year to five years 3,819,528 3,711,398
Due from five years to ten years 1,698,990 1,629,470
Due after ten years 4,759,582 4,619,338
----------- -----------
$10,778,100 $10,460,361
=========== ===========
</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 $3,658,000 and $4,043,000
and an approximate fair value of $3,562,000 and $4,043,000 at December 31,
1999 and 1998, respectively, were pledged to secure public deposits and for
other purposes as required or permitted by law.
-33-
<PAGE> 37
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)
-------------------
1999 1998
------- -------
<S> <C> <C>
Commercial $ 2,218 $ 1,783
Commercial real estate 2,310 1,755
Residential real estate 12,146 12,641
Consumer 2,568 2,712
Agricultural 6,663 3,279
Less: Allowance for loan losses (333) (274)
------- -------
Loans, net $25,572 $21,896
======= =======
</TABLE>
An analysis of the change in the allowance for loan losses follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- --------- --------
<S> <C> <C> <C>
Balance, beginning of year $ 273,524 $ 238,371 $ 254,819
Loans charged off (26,109) (5,778) (3,613)
Recoveries 4,249 14,643 1,665
Provision (credit) for loan losses 81,700 26,288 (14,500)
---------- --------- --------
Balance, end of year $ 333,364 $ 273,524 $ 238,371
========== ========= =========
</TABLE>
Impairment of loans having recorded investments of $15,832 and $22,778 at
December 31, 1999 and 1998, 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 1999 and 1998 was
approximately $19,000 and $23,000, respectively. No allowance for loan loss
has been recognized on these loans due to collateral values exceeding the
loan values. The Bank is not committed to lend additional funds to debtors
whose loans have been modified.
Loans having aggregate carrying values of $15,830 and $17,954 were
transferred to foreclosed real estate as of December 31, 1999 and 1998,
respectively.
5. TIME DEPOSITS
At December 31, 1999, the scheduled maturities of time deposits are as
follows: (in thousands)
<TABLE>
<S> <C>
Within 3 months or less $ 7,002
Over 3 months through 12 months 9,110
Over 1 year through 5 years 810
--------
$ 16,922
========
</TABLE>
-34-
<PAGE> 38
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. PREMISES AND EQUIPMENT
Components of premises and equipment included in the statements of
condition at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cost:
Land $ 249,730 $ 249,730
Buildings 1,402,896 1,278,978
Furniture and equipment 541,498 692,884
----------- -----------
Total cost 2,194,124 2,221,592
Less: accumulated depreciation (1,719,821) (1,649,378)
----------- -----------
Net book value $ 474,303 $ 572,214
=========== ===========
</TABLE>
Depreciation expense amounted to $110,633, $118,517, and $121,111 for the
years ended December 31, 1999, 1998, and 1997, respectively.
7. NOTES PAYABLE
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 residential single family first
mortgage loans, Federal Home Loan Bank stock and deposits with the Federal
Home Loan Bank.
Although eligible for advances, the Bank is no longer drawing funds under
this agreement, and did not make any draws during the three year period
ended December 31, 1999.
Scheduled future principal payments of advances outstanding as of December
31, 1999 are as follows:
<TABLE>
<S> <C>
2000 $ 143,277
2001 148,052
2002 159,568
2003 171,985
2004 157,000
Thereafter 147,071
---------
$ 926,953
=========
</TABLE>
The weighted average interest rate of all advances outstanding as of
December 31, 1999 was 7.55%. Interest expense on these advances amounted to
$73,978, $83,227, and $91,786 for 1999, 1998, and 1997, respectively.
-35-
<PAGE> 39
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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>
1999 1998 1997
------------------- -------------------- ------------------
Amount % Amount % Amount %
-------- ------ -------- ------ ---------- ----
<S> <C> <C> <C> <C> <C> <C>
Tax based on statutory rate $190,323 34.0% $179,581 34.0% $ 152,043 34.0%
Other 15,892 2.8 4,068 .8 (20,828) (4.7)
-------- ------ -------- ------ --------- ----
Effective tax rates $206,215 36.8% $183,649 34.8% $ 131,215 29.3%
======== ====== ======== ====== ========= ====
</TABLE>
In accordance with Statement of Financial Accounting Standards No. 109,
deferred income taxes are provided on the tax effect of changes in
temporary differences. Deferred tax assets are subject to a valuation
allowance if their realization is less likely than not. Deferred tax assets
(liabilities) which are included in accrued expenses and other liabilities
on the accompanying statements of condition are comprised of the following
at December 31:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Unrealized investment gains - available-for-sale $ -- $ (16,650)
Stock dividends received on investments (21,624) (17,374)
Allowance for loan losses (168,238) (196,169)
--------- ---------
Gross deferred tax liability (189,862) (230,193)
--------- ---------
Unrealized investment losses - available-for-sale $ 108,031 $ --
Net operating loss carryforward -- 38,240
Depreciation on premises and equipment 3,400 6,920
Business credit carryforwards and other -- 39,499
--------- ---------
Gross deferred tax asset 111,431 84,659
--------- ---------
Net deferred tax liability $ (78,431) $(145,534)
========= =========
</TABLE>
The consolidated provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Taxes payable currently $148,637 $ 9,045 $ 5,557
Deferred tax expense 57,578 174,604 125,658
-------- -------- --------
$206,215 $183,649 $131,215
======== ======== ========
</TABLE>
-36-
<PAGE> 40
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. RELATED PARTIES
Certain officers, directors, and their affiliates were indebted to the
Bank in the aggregate amounts of $ 1,514,964 and $1,260,208 at December
31, 1999 and 1998, respectively. During 1999 and 1998, $2,761,744 and
$1,587,264 of new loans and advances were made, and loan repayments
totaled $2,506,988 and $1,706,874, respectively.
As of December 31, 1999, related party deposits were approximately
$1,450,000.
10. LEGAL CONTINGENCIES
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.
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.
-37-
<PAGE> 41
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could
have a direct material effect on the Bank's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of the Bank's assets, liabilities and
certain off-balance sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk
weightings, and other factors.
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, 1999, that the Bank meets all capital adequacy requirements
to which it is subject.
As of December 31, 1999, 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, 1999:
Total Capital
(to Risk Weighted Assets) $ 3,353 16.7% $ 1,609 > 8.0% $ 2,012 > 10.0%
- -
Tier I Capital
(to Risk Weighted Assets) 3,101 15.4% 805 > 4.0% 1,207 > 6.0%
- -
Tier I Capital
to Average Assets) 3,101 7.5% 1,650 > 4.0% 2,062 > 5.0%
- -
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%
- -
</TABLE>
-38-
<PAGE> 42
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. RESTRICTIONS ON DIVIDENDS
Federal and state banking regulations place certain restrictions on
dividends paid by the Bank. The total amount of dividends which may be
paid at any date is generally limited to current year's net profits plus
the prior year's retained net profits. The Bank can declare without the
approval of the Commissioner, dividends totaling $278,059 more than its
retained net earnings during the year ending December 31, 2000.
In addition, dividends paid by the Bank to the Company would be
prohibited if the effect thereof would cause the Bank's capital to be
reduced below applicable minimum capital requirements.
14. EMPLOYEE BENEFITS
The Bank maintains a 401(k) plan for its employees, which allows them to
make contributions to the plan with pre-tax salary reductions. The Bank
matches contributions dollar for dollar up to three percent of employees'
gross salary. Contributions to the plan were $23,346, $23,453 and $23,809
for 1999, 1998, and 1997, respectively.
15. OFF-BALANCE SHEET ACTIVITIES
Credit-Related Financial Statements. The Bank is a party to credit
related 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 commercial letters of credit. Such commitments
involve, to varying degrees, elements of credit and interest rate risk in
excess of the amount recognized in the consolidated balance sheets.
The Bank's exposure to credit loss is represented by the contractual
amount of these commitments. The Bank follows the same credit policies in
making commitments as it does for on-balance-sheet instruments.
At December 31, 1999, the following financial instruments were
outstanding whose contract amounts represent credit risk:
<TABLE>
<S> <C>
Unfunded commitments under lines of credit $ 3,484,245
Credit card arrangements 406,339
</TABLE>
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. The commitments for equity
lines of credit may expire without being drawn upon. Therefore, the total
commitment amounts do not necessarily represent future cash requirements.
The amount of collateral obtained, if it is deemed necessary by the Bank,
is based on management's credit evaluation of the customer.
-39-
<PAGE> 43
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. OFF-BALANCE SHEET ACTIVITIES (continued)
Unfunded commitments under commercial lines-of-credit, revolving credit
lines and overdraft protection agreements are commitments for possible
future extensions of credit to existing customers. These lines-of-credit
may or may not be drawn upon to the total extent to which the Bank is
committed. Future draws on lines of credit are subject to the same
collateral, terms and other conditions as draws which have been funded to
date.+
Commercial and standby letters-of-credit are conditional commitments
issued by the Bank to guarantee the performance of a customer to a third
party. Those letters-of-credit are primarily issued to support public and
private borrowing arrangements. Essentially all letters of credit issued
have expiration dates within one year. The credit risk involved in
issuing letters-of-credit is essentially the same as that involved in
extending loan facilities to customers. The Bank generally holds
collateral supporting those commitments if deemed necessary.
16. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values, and related carrying or notional amounts, of
the Bank's financial instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
------------------- -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------- -------- -------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks,
interest-bearing deposits with
banks, and federal funds sold $ 2,954 $ 2,954 $ 4,371 $ 4,371
Securities available-for-sale 10,460 10,460 14,516 14,516
Restricted equity securities 240 240 227 227
Loans receivable 25,572 25,598 21,896 22,427
Accrued interest receivable 369 369 302 302
Financial liabilities:
Deposit liabilities 36,069 36,079 37,259 37,396
Short-term borrowings -- -- 600 600
Long-term debt 927 972 1,055 1,190
</TABLE>
-40-
<PAGE> 44
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. BANK ONLY FINANCIAL STATEMENTS
PAGE 1 OF 2
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
----------- -----------
<S> <C> <C>
Cash and due from banks $ 2,161,137 $ 2,194,636
Interest-bearing deposits with banks 792,408 2,175,631
Federal funds sold -- --
Investment securities - available-for-sale 10,460,361 14,516,280
Restricted investments in equity securities 239,600 227,100
Loans, net of allowance for loan losses 25,572,115 21,896,375
Properties and equipment, net 474,303 572,214
Accrued interest receivable 369,234 301,585
Other assets 35,035 87,042
----------- -----------
TOTAL ASSETS $40,104,193 $41,970,863
=========== ===========
</TABLE>
-41-
<PAGE> 45
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. BANK ONLY FINANCIAL STATEMENTS (continued)
PAGE 2 OF 2
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1999 AND 1998
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
LIABILITIES
Demand deposits $ 5,958,992 $ 6,198,889
NOW deposits 6,288,966 6,400,995
Savings deposits 6,935,700 7,714,140
Time deposits, $100,000 and over 2,785,184 1,991,493
Other time deposits 14,136,991 14,953,003
------------ ------------
Total deposits 36,105,833 37,258,520
Notes payable 926,953 1,055,227
Accrued expenses and other liabilities 180,147 279,842
Federal funds purchased and securities sold
under agreements to repurchase -- 600,000
------------ ------------
Total liabilities 37,212,933 39,193,589
------------ ------------
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 5,201,524 5,123,569
Accumulated deficit (2,822,371) (3,100,431)
Accumulated other comprehensive income (209,708) 32,321
------------ ------------
Total stockholder's equity 2,891,260 2,777,274
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 40,104,193 $ 41,970,863
============ ============
</TABLE>
-42-
<PAGE> 46
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. BANK ONLY FINANCIAL STATEMENTS (continued)
PAGE 1 OF 2
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- -----------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $2,243,567 $2,048,586 $ 1,925,791
Interest on investment securities 756,025 824,878 1,185,028
Interest on federal funds sold 26,657 107,007 35,485
Interest on deposits with banks 79,995 91,473 29,856
---------- ---------- -----------
Total interest income 3,106,244 3,071,944 3,176,160
---------- ---------- -----------
INTEREST EXPENSE
Interest on deposits 1,081,152 1,115,603 1,072,050
Interest on notes payable 73,978 83,227 91,786
Interest on federal funds purchased and securities
sold under agreements to repurchase 5,837 1,459 17,141
---------- ---------- -----------
Total interest expense 1,160,967 1,200,289 1,180,977
---------- ---------- -----------
NET INTEREST INCOME 1,945,277 1,871,655 1,995,183
Provision (credit) for loan losses 81,700 26,288 (14,500)
---------- ---------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,863,577 1,845,367 2,009,683
---------- ---------- -----------
NON-INTEREST INCOME
Service charges on deposit accounts 297,973 316,317 305,781
Other service charges and fees 25,402 19,461 22,229
Other income 2,537 1,200 22,869
---------- ---------- -----------
Total non-interest income 325,912 336,978 350,879
---------- ---------- -----------
</TABLE>
-43-
<PAGE> 47
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, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
NON-INTEREST EXPENSES
Salaries and employee benefits $ 855,473 $ 899,954 $ 914,462
Occupancy expense 205,143 219,859 234,281
Data processing fees 110,953 114,369 103,215
Legal fees 6,451 8,624 20,534
Other expense 359,134 374,934 358,121
---------- ---------- ----------
Total non-interest expense 1,537,154 1,617,740 1,630,613
---------- ---------- ----------
INCOME BEFORE TAXES 652,335 564,605 729,949
Income tax expense 245,930 193,849 223,992
---------- ---------- ----------
NET INCOME $ 406,405 $ 370,756 $ 505,957
========== ========== ==========
</TABLE>
-44-
<PAGE> 48
GREAT GUARANTY BANCSHARES, INC.
NEW ROADS, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. PARENT ONLY FINANCIAL STATEMENTS
CONDENSED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
----------- -----------
<S> <C> <C>
Cash in subsidiary bank $ 36,813 $ 36,872
Investment in subsidiary 2,891,260 2,777,274
Deferred tax asset -- 38,241
----------- -----------
Total Assets $ 2,928,073 $ 2,852,387
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued dividends payable $ 35,843 $ 35,843
----------- -----------
Total Liabilities 35,843 35,843
----------- -----------
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 (384,838) (702,553)
Accumulated other comprehensive income (209,708) 32,321
----------- -----------
Total Stockholders' Equity 2,892,230 2,816,544
----------- -----------
Total Liabilities and Stockholders' Equity $ 2,928,073 $ 2,852,387
=========== ===========
</TABLE>
-45-
<PAGE> 49
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, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------
1999 1998 1997
--------- --------- -----------
<S> <C> <C> <C>
INCOME
Dividends received from Subsidiary Bank $ 128,343 $ 235,000 $ 1,521,865
--------- --------- -----------
EXPENSES
Interest expense -- 14,286 174,679
Legal fees 72,287 8,260 82,721
Other expenses 20,273 13,878 25,365
--------- --------- -----------
92,560 36,424 282,765
--------- --------- -----------
INCOME BEFORE EQUITY IN
UNDISTRIBUTED EARNINGS
OF SUBSIDIARY 35,783 198,576 1,239,100
Equity in undistributed earnings
of subsidiary 278,060 135,755 (1,015,908)
--------- --------- -----------
INCOME BEFORE TAXES AND
EXTRAORDINARY GAIN 313,843 334,331 223,192
Income tax expense (benefit) (39,715) (10,200) (92,777)
--------- --------- -----------
INCOME BEFORE EXTRAORDINARY
GAIN 353,558 344,531 315,969
EXTRAORDINARY GAIN
(Net of income tax) -- -- 1,922,752
--------- --------- -----------
NET INCOME $ 353,558 $ 344,531 $ 2,238,721
========= ========= ===========
</TABLE>
-46-
<PAGE> 50
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, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------
1999 1998 1997
--------- --------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 353,558 $ 344,531 $ 2,238,721
Adjustments to reconcile net income to
cash provided by operating activities:
Extraordinary item -- -- (1,922,752)
Equity in undistributed earnings
of subsidiary (278,060) (135,755) 1,015,908
Changes in operating assets and liabilities:
Accrued interest payable -- (3,267) (55,210)
Income tax benefit derived from tax
loss generated (39,714) (10,200) (92,777)
--------- --------- -----------
Cash provided by operating activities 35,784 195,309 1,183,890
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable -- (165,000) (2,935,000)
Redemption of preferred stock -- -- (299,476)
Dividends paid (35,843) (35,843) --
Settlements received -- -- 2,217,705
Payments on amounts due subsidiary -- -- (127,134)
--------- --------- -----------
Cash used in financing activities (35,843) (200,843) (1,143,905)
--------- --------- -----------
Net increase (decrease) in cash (59) (5,534) 39,985
Cash - beginning of year 36,872 42,406 2,421
--------- --------- -----------
Cash - end of year $ 36,813 $ 36,872 $ 42,406
========= ========= ===========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ -- $ 17,552 $ 229,889
========= ========= ===========
Income taxes $ -- $ -- $ --
========= ========= ===========
</TABLE>
-47-
<PAGE> 51
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 73, 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 43, was elected a director in 1998. Dr.
Doucet has been a practicing physician since 1985 specializing in Internal
Medicine.
Craig A. Major, age 52, 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 74, 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 71, 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 55, 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 48, 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.
Michael Chad Soprano, age 35, was nominated as a director in 1999. Mr.
Soprano owns and operates Soprano's Grocery in Livonia, Louisiana.
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 J. Wade O'Neal, III; see
discussion of "Executive Officers" below.
-48-
<PAGE> 52
EXECUTIVE OFFICERS
The executive officers of Guaranty Bank are as follows:
Beverly B. David, age 56 has served as Senior Vice-President since May
1999 and Head of Bank Operations since 1989. Mrs. David also serves as the
Bank's Cashier and Security Officer, and as Assistant Treasurer of Bancshares.
Mark Major, age 44, has been employed at Guaranty Bank since March 1998
when he was hired as an Agricultural Lender. He has served as Head of Lending
and Compliance Officer since 1999.
J. Wade O'Neal, III, age 43, has served as the Bank's President and
Chief Executive Officer and as a Director of Guaranty Bank since May 1999. He
has been employed by Guaranty Bank for nineteen years. Mr. O'Neal also serves as
Treasurer and Authorized Representative of Bancshares.
Mary Ann Pourciau, age 44, is Vice President and Marketing and Human
Resources Officer. She has been employed by Guaranty Bank for 23 years. She also
serves as Secretary to the Board of Guaranty Bank, and the Assistant Treasurer
of Bancshares.
EXECUTIVE COMPENSATION
Daniel R. Domingue, Jr. served as the authorized representative of
Bancshares and as President and Chief Executive Officer of Guaranty Bank until
his resignation in May 1999. He received aggregate cash compensation during the
three years ended December 31, 1999 as set forth in the cash compensation table
below. J. Wade O'Neal, III was promoted to President and Chief Executive Officer
of Guaranty Bank in May of 1999. He also serves as authorized representative of
Bancshares. His aggregate cash compensation for 1999 is also set forth below. No
executive officer or employee of Bancshares or Guaranty Bank earned aggregate
compensation during any of the three years ended December 31, 1999 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., 1997 $75,000 $15,000 $10,990(1)
Guaranty Bank President and CEO 1998 75,000 10,000 11,990(1)
1999 31,731 2,885 5,279(2)
J. Wade O'Neal, III 1999 67,315 4,702 3,662(2)
Guaranty Bank President and CEO
</TABLE>
- ------------------
(1) Includes living allowance, Bank's 401(k) matching contribution and incentive
and vacation pay.
(2) Includes 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, 1999, 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 B. Olinde & Sons (3,405
shares).
-49-
<PAGE> 53
SECURITY OWNERSHIP OF MANAGEMENT
The following table indicates the beneficial ownership as of December
31, 1999, 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 *
Michael Chad Soprano, Director 140 *
J. Wade O'Neal, III, Chief Executive Officer of 140 *
Guaranty Bank
Directors and Executive Officers as 14,944 10.42%
a group (12 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 1998, 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 $40,000 outstanding at December 31,
1998, with $30,000 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; and a total of
$228,370 outstanding at December 31, 1999 with $87,000 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) a total of
$445,488 outstanding at December 31, 1998, with $310,000.00 in available
commitments; and a total of $471,126 outstanding at December 31, 1999 with
$245,000 in available commitments.
(i) J. Wade O'Neal, III; (ii) president and CEO of Guaranty Bank,
authorized representative of Bancshares; (iii) loans commitments to Mr. O'Neal;
(iv) two loans of $200,000 and $121,326 respectively, both were originated and
paid out in 1999.
-50-
<PAGE> 54
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: February 28, 2000 By: /s/ J. Wade O'Neal, III
------------------------------------------
J. Wade O'Neal, III.
Authorized Representative
of Great Guaranty Bancshares, Inc. and
President and CEO of Guaranty Bank & Trust
Company
By: /s/ Beverly B. David
------------------------------------------
Beverly B. David
Assistant Treasurer of Great Guaranty
Bancshares, Inc. and Senior Vice President
of Guaranty Bank & Trust Co.
-51-
<PAGE> 55
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
Exhibit 21 Subsidiaries of Great Guaranty Bancshares, Inc.
Exhibit 27 Financial Data Schedule
</TABLE>
-52-
<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.
-53-
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,140,555
<INT-BEARING-DEPOSITS> 812,990
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,460,413
<INVESTMENTS-CARRYING> 10,460,413
<INVESTMENTS-MARKET> 10,460,413
<LOANS> 25,905,529
<ALLOWANCE> 333,364
<TOTAL-ASSETS> 40,122,763
<DEPOSITS> 36,127,777
<SHORT-TERM> 927,145
<LIABILITIES-OTHER> 213,424
<LONG-TERM> 0
0
0
<COMMON> 1,075,305
<OTHER-SE> 1,816,924
<TOTAL-LIABILITIES-AND-EQUITY> 40,122,763
<INTEREST-LOAN> 2,246,665
<INTEREST-INVEST> 752,973
<INTEREST-OTHER> 109,704
<INTEREST-TOTAL> 3,109,342
<INTEREST-DEPOSIT> 1,081,152
<INTEREST-EXPENSE> 1,160,967
<INTEREST-INCOME-NET> 1,948,374
<LOAN-LOSSES> 81,700
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,630,618
<INCOME-PRETAX> 559,992
<INCOME-PRE-EXTRAORDINARY> 559,992
<EXTRAORDINARY> 0
<CHANGES> 0
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</TABLE>
