SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the
Fiscal Year Ended December 31, 1995
Zachary Bancshares, Inc. 0-13397
(Exact name of registrant as specified in its charter) (Comm. File No.)
Louisiana 72-0981148
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
4700 Main Street
P. O. Box 497
Zachary, Louisiana 70791
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (504) 654-2701
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $10.00 Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Ex-
change Act of 1934, as amended, 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 .
Indicate by check mark whether disclosure of delinquent filers pursu-
ant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive proxy
or other information statements incorporated by reference in Part III of
this Form 10-KSB or any amendments to this Form 10-KSB.
Yes X No .
The registrant's revenues for the fiscal year ended December 31, 1995
were $5,226,794.
State the aggregate market value of the voting stock held by non-af-
filiates* of the registrant: $3,652,080 (182,604 Shares @ $20 per share).
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common stock $10 Par Value, 193,667 shares outstanding as of
March 1, 1996.
Documents Incorporated by Reference
Document Part of Form 10-KSB
Annual Report for Fiscal Year Part I and Part II
Ended December 31, 1995
Definitive Proxy Statement for 1996 Part I and Part III
Annual Meeting of Stockholders
*For purposes of the computation, shares owned by executive officers,
directors and 5% shareholders have been excluded.
10-KSB Index
Part I
Item 1 Description of Business................................. 1
Supplemental Financial Information:
Average Balance Sheets and Interest Yield Analysis.... 6
Interest Differential................................. 7
Securities Portfolio.................................. 8
Loan Portfolio........................................ 10
Non-Performing Loans.................................. 10
Summary of Loan Loss Experience....................... 11
Deposits.............................................. 13
Return on Equity and Assets........................... 13
Item 2 Description of Properties............................... 14
Item 3 Legal Proceedings....................................... 14
Item 4 Submission of Matters to a Vote of Security Holders..... 14
Part II
Item 5 Market for the Registrant's Common Stock
and Related Stockholder Matters....................... 15
Item 6 Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 15
Item 7 Financial Statements and Supplementary Data............. 15
Item 8 Disagreements on Accounting and Financial Disclosures... 16
Part III
Item 9 Directors and Executive Officers of the Registrant...... 17
Item 10 Executive Compensation.................................. 17
Item 11 Security Ownership of Certain Beneficial Owners
and Management........................................ 17
Item 12 Certain Relationships and Related Transactions.......... 17
Part IV
Item 13 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K........................................... 18
Management's Responsibility for Financial Reporting.... 19
Signatures.............................................. 20
Part I
Item 1. Description of Business
The Registrant
Zachary Bancshares, Inc., (the "Corporation") was incorporated in
Louisiana on October 10, 1983. At the annual shareholders meeting on
April 11, 1984, the shareholders of the Bank of Zachary (the "Bank")
approved a merger agreement pursuant to which Consolidated Bank of
Louisiana, a wholly-owned subsidiary of Zachary Bancshares, Inc., was
merged into the Bank. On May 17, 1984, the Bank was merged into Con-
solidated Bank of Louisiana and the surviving Bank, Bank of Zachary,
became a wholly-owned subsidiary of Zachary Bancshares, Inc., through a
one-for-one exchange for all of the outstanding common stock of the
Bank. The reorganization was accounted for as a pooling-of-interests.
Zachary Bancshares, Inc. is now engaged, through its subsidiary, in the
banking business. The Bank is the Corporation's principal asset and
primary source of revenue.
The Bank
The Bank of Zachary was incorporated under the laws of the State
of Louisiana on March 15, 1904, and was licensed by the Louisiana State
Banking Department and commenced operations as a Louisiana State char-
tered bank on July 2, 1904. The Bank's securities consist of one
class, common stock, of which there were 72,000 shares held 100%, by
its parent, Zachary Bancshares, Inc. as of May 17, 1984.
The Bank presently has a main office at 4700 Main street, Zachary,
East Baton Rouge Parish, Louisiana and two branch offices. One branch
is located at 2210 Highway 64, Zachary, East Baton Rouge Parish,
Louisiana and the second branch is located at 13444 Hooper Road, Baton
Rouge, East Baton Rouge Parish, Louisiana. These branches were appro-
ved on November 8, 1976 and November 3, 1975, respectively, by the
Commissioner of Financial Institutions of the State of Louisiana and on
November 12, 1976 and November 17, 1975, respectively, by the Federal
Deposit Insurance Corporation.
Bank of Zachary is engaged in primarily the same business opera-
tions as any independent commercial bank, with special emphasis in
retail banking, including the acceptance of checking and savings depos-
its, and the making of commercial, real estate, personal, home improve-
ment, automobile and other installment and term loans. It also offers,
among services, travelers' cheques, safe deposit boxes, note collec-
tion, and other customary bank services to its customers, with the
exception of trust services. In addition, the Bank offers drive-up
teller services and night depository facilities. Bank of Zachary is
insured under the Federal Deposit Insurance Act but is not a member of
the Federal Reserve System.
1
The three main areas in which the Bank has directed its lendable
assets are (1) real estate construction and mortgage loans; (2) loans
to individuals for household, family and other consumer expenditures;
and (3) commercial and industrial loans. As of December 31, 1995,
these three categories accounted for approximately 80%, 12%, and 8%,
respectively, of the Bank's loan portfolio. (See Note D to the finan-
cial statements for a detailed analysis of the loan portfolio.)
The majority of the Bank's deposits are attracted from individuals
and small business-related sources. The average deposit balance is
relatively small; however, this makes the Bank less subject to the
adverse effects from the loss of a substantial depositor who may be
seeking higher yields in other markets or have need of money otherwise
on deposit in the Bank. In addition to the deposits mentioned above,
the Bank is a depository for some local governments as well as other
governmental agencies. The time deposit balances of all public funds
were $2,370,183 and demand deposits of $4,738,874 as of December 31,
1995. These depositors are considered by management to be of impor-
tance to the Bank. Although no agreement or understanding exists
between these customers and the Bank, management has no reason to be-
lieve that these time deposit balances will substantially decrease or
increase. In connection with the deposits of these public funds, the
Bank is required to pledge securities to secure such deposits.
As of December 31, 1995, the Bank had a total of 3,013 accounts
representing non-interest bearing demand deposits and NOW accounts with
a total balance of $19,703,885; 226 accounts representing money market
accounts with a total balance of $5,390,808; 1,999 savings accounts
with a total balance of $7,105,549; and 1,131 other time deposit ac-
counts with a total balance of $27,156,283. There are no securities
held by the Bank that are subject to repurchase agreements.
The Bank holds no patents, registered trademarks, licenses (other
than licenses required to be obtained from appropriate bank regulatory
agencies), franchises or concessions. There has been no significant
change in the kinds of services offered by the Bank during the last
three fiscal years.
The Bank has not engaged in any research activities relating to
the development of new services or the improvement of existing services
except in the normal course of the business activities. The Bank pres-
ently has no plans for any new line of business requiring the invest-
ment of a material amount to total assets.
Most of the Bank's business originates from within East Baton
Rouge Parish, Louisiana; however, some business is obtained from the
parishes immediately surrounding East Baton Rouge Parish. There has
been no material effect upon the Bank's capital expenditures, earnings,
or competitive position as a result of federal, state, or local envi-
ronmental regulations.
2
Competition
The Bank's general market area which is East Baton Rouge Parish
and the Feliciana Parishes has a population approximating 400,000 peo-
ple. The primary market of the Bank is the City of Zachary with a
population of approximately 9,000 people. This is the location of the
main office and one of its two branches. The secondary marketing area
is the northern portion of East Baton Rouge Parish, where the Central
branch is located.
East Baton Rouge Parish, in which the City of Zachary is located,
contains a total of 110 banking offices. In the primary market area,
there are two major regional banks aggressively pursuing loans, depos-
its and other accounts.
Interest rates on loans made and deposits received were mostly de-
regulated by law in 1983, but are substantially the same among banks
operating in the area served. Competition among banks for loan cus-
tomers is generally governed by such factors as loan terms, interest
charges, restrictions on borrowers and compensating balances, and the
services offered by the Bank. Competition for deposits is governed
primarily by the services offered, including convenience of location.
Recently enacted federal legislation has broadened significantly
the powers of savings and loan institutions with the result that such
institutions may now engage in certain activities formerly permitted
only to banks. The Bank has experienced no major effects from this
legislation at this time.
Employees
The Bank has approximately 36 full time employees, and 4 part-time
employees. Management considers its relationship with the employees to
be good.
Supervision and Regulation
Zachary Bancshares, Inc., a bank holding company within the mean-
ing of the Bank Holding Company Act of 1956 (the "Act"), as amended, is
subject to the provisions of the Act and to regulation by the Board of
Governors of the Federal Reserve System (the "Board").
The Act requires Zachary Bancshares, Inc. to file with the Board
an annual report containing such information as the Board may require.
The Board is authorized by the Act to examine the Corporation and all
of its activities. The activities that may be engaged in by the Corpo-
ration and its subsidiaries are limited by the Act to those so closely
3
related to banking or managing or controlling banks as to be a proper
incident thereto. In determining whether a particular activity is a
proper incident to banking or managing or controlling banks, the Board
must consider whether its performance by an affiliate of a holding
company 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 con-
centration of resources, decreased or unfair competition, conflicts of
interest, or unsound banking practices.
The Board has adopted regulations implementing the provisions of
the Act with respect to the activities of bank holding companies. Such
regulations reflect a determination by the Board that the following
activities are permissible for bank holding companies: (1) making, for
its own account or for the account of others, loans such as would be
made, for example, by a mortgage, finance or factoring company; (2)
operating as an industrial bank; (3) servicing loans; (4) acting as a
fiduciary; (5) acting as an investment or financial advisor, including
acting in such capacity for a mortgage investment trust or real estate
investment trust; (6) leasing personal or real property, where the
lease is to serve as the functional equivalent of an extension of cred-
it to the lessee of the property; (7) investing in community welfare
corporations or projects; (8) providing bookkeeping and data processing
services for a bank holding company and its subsidiaries, or storing
and processing certain other banking, financial, or related economic
data; (9) acting as an insurance agent, principally insurance issued in
connection with extensions of credit by the holding company or any of
its subsidiaries; (10) underwriting credit life and credit accident and
health insurance related to extensions of credit; (11) providing couri-
er services for documents and papers related to banking transactions;
(12) providing management consulting advice to non-affiliated banks;
and (13) selling money orders, travelers cheques and U.S. Savings
Bonds. In each case, the Corporation must secure the approval of the
Board prior to engaging in any of these activities.
Whether or not a particular non-banking activity is permitted
under the Act, the Board is authorized to require a holding company to
terminate any activity or divest itself of any non-banking subsidiary
if in its judgment the activity or subsidiaries would be unsound.
Under the Act and the Board's regulations, a bank holding company
and its subsidiaries are prohibited from engaging in certain tie-in ar-
rangements in connection with any extension of credit or provision of
any property or services.
In addition to the limitations of Louisiana law with respect to
the ownership of banks, as described below, the ownership or control
of voting shares of a second bank by a bank holding company such as
Zachary Bancshares, Inc. is restricted by the Act unless the prior
approval of the Board is obtained. The Act prohibits the Board from
approving an application from a bank holding company to acquire shares
of a bank located outside the state in which the operations of the
holding company's subsidiaries are principally conducted, unless such
an acquisition is specifically authorized by statute of the state in
which the Bank whose shares are to be acquired is located.
4
Under the Louisiana Bank Holding Company Act of 1962, as amended
(the "Louisiana Act"), one-bank holding companies are authorized to
operate in Louisiana provided the activities of the nonbanking subsid-
iaries are limited to the ownership of real estate and improvements,
computer services, equipment leasing and other directly related banking
activities. The Louisiana Act, as amended in 1984, authorizes multi-
bank holding companies within the state. The State Commissioner of
Financial Institutions is authorized to administer the Louisiana Act by
the issuance of orders and regulations.
In addition, Louisiana banking laws were changed in 1985 and 1986
to allow interparish banking, limited statewide branching began Janu-
ary 1, 1987, and regional banking began July 1, 1987. These changes
have allowed Louisiana and the regional banks and other financial
institutions to engage in a wider range of activities than were previ-
ously allowed to such institutions. Also, effective January 1, 1989,
Louisiana's reciprocal interstate banking law allowed bank holding
companies domiciled in any state of the United States to acquire Loui-
siana banks and bank holding companies, if the state in which the bank
holding company is domiciled allows Louisiana banks and bank holding
companies the same opportunities.
The Bank is subject to regulation and regular examination by the
Federal Deposit Insurance Corporation. Applicable regulations relate
to reserves, investments, loans, issuance of securities, establishment
of branches and other aspects of its operations.
Statistical Information
The following data contains information concerning the business
and operations of Zachary Bancshares, Inc. and its subsidiary, Bank of
Zachary. This information should be read in conjunction with the
Financial Statements and Management's Discussion and Analysis of Finan-
cial Condition and Results of Operations.
5
Zachary Bancshares, Inc. and Subsidiary
AVERAGE BALANCE SHEETS AND INTEREST RATE ANALYSIS
for the years ended December 31, 1995 and 1994
1995
INTEREST AVERAGE
AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE
ASSETS
Interest Earning Deposits and
Reserve Funds Sold $ 3,941,000 $ 225,118 5.71
Securities:
Taxable 28,991,000 1,832,056 6.32
Loans-Net 30,284,000 2,626,956 8.67
Total Earning Assets $63,216,000 $4,684,130 7.41%
Allowance for Loan Losses (830,000)
Nonearning Assets 4,779,000
Total Assets $67,165,000
LIABILITIES AND STOCKHOLDERS' EQUITY
FHLB Borrowings $ 500,000 $ 31,406 6.28
Savings and NOW Accounts 15,355,000 421,797 2.75
Insured Money Market Accounts 6,493,000 134,794 2.08
Certificates of Deposit 25,692,000 1,238,862 4.82
Total Interest Bearing
Liabilities $48,040,000 $1,826,859 3.80
Demand Deposits 12,259,000
Other Liabilities 554,000
Stockholders' Equity 6,312,000
Total Liabilities and
Stockholders' Equity $67,165,000
Net Interest Income - Tax Equivalent Basis $2,857,271
Tax Equivalent Adjustment -
Net Interest Income $2,857,271
Net Interest Income - Spread 3.61
Net Interest Income as a % of Total Earning Assets 4.52
6
1994
INTEREST AVERAGE
AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE
ASSETS
Interest Earning Deposits and
Reserve Funds Sold $ 2,719,000 $ 105,328 3.87%
Securities:
Taxable 34,273,000 1,950,667 5.69
Loans-Net 23,877,000 2,132,999 8.93
Total Earning Assets $60,869,000 $4,188,994 6.88%
Allowance for Loan Losses (830,000)
Nonearning Assets 5,061,000
Total Assets $65,100,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Savings and NOW Accounts $15,364,000 $ 343,457 2.24%
Insured Money Market Accounts 6,723,000 132,424 1.97
Certificates of Deposit 24,713,000 880,184 3.56
Total Interest Bearing
Liabilities $46,800,000 $1,356,065 2.90%
Demand Deposits 11,866,000
Other Liabilities 485,000
Stockholders' Equity 5,949,000
Total Liabilities and
Stockholders' Equity $65,100,000
Net Interest Income - Tax Equivalent Basis $2,832,929
Tax Equivalent Adjustment -
Net Interest Income $2,832,929
Net Interest Income - Spread 3.98%
Net Interest Income as a % of Total Earning Assets 4.65%
<PAGE>
Zachary Bancshares, Inc. and Subsidiary
INTEREST DIFFERENTIAL
for the year ended December 31, 1995
1995 OVER 1994
CHANGE TOTAL
ATTRIBUTABLE TO INCREASE
VOLUME RATE (DECREASE)
Interest Earning Assets:
Reserve Funds Sold $ 58,526 $ 61,264 $ 119,790
Securities (317,538) 198,927 (118,611)
Loans 564,091 (70,134) 493,957
Total Interest Income $ 305,079 $ 190,057 $ 495,136
Interest Bearing Liabilities:
Bank Borrowings $ 31,406 $ - $ 31,406
Savings and NOW Accounts (109) 78,449 78,340
Insured Money Market Accounts (4,778) 7,148 2,370
Certificates of Deposit 41,073 317,605 358,678
Total Interest Expense $ 67,592 $ 403,202 $ 470,794
Increase in Interest Differential $ 237,487 $(213,145) $ 24,342
Note: The change in interest due to both volume and rate changes has
been allocated equally between volume and rate.
7<PAGE>
Securities Portfolio
Amortized cost and fair values of securities available for sale at
December 31, 1995 and 1994 are summarized as follows:
1995
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE YIELD*
U.S. Treasury
Securities:
Within 1 Year $ 1,000,383 $ - $ (8,663) $ 991,720
4.33%
Over 1 through
5 Years 2,998,784 20,464 (4,398) 3,014,850 5.61
$ 3,999,167 $ 20,464 $(13,061) $4,006,570
5.29%
Securities of Other
U.S. Government
Agencies:
Within 1 Year $ 7,026,960 $ 30,390 $ (2,789) $ 7,054,561
6.00%
Over 1 Through
5 Years 7,046,890 112,495 (96) 7,159,289 6.32
$14,073,850 $142,885 $ (2,885) $14,213,850
6.16%
Mortgage-Backed
Securities:
Over 10 Years $ 3,936,765 $ 71,047 $ - $ 4,007,812
7.03%
Collateralized
Mortgage
Obligations:
Over 10 Years $ 7,792,897 $ - $ 160,481 $ 7,632,416
5.64%
Equity Securities $ 214,000 $ - $ - $ 214,000
4.18%
*Weighted Average Yield.
8
1994
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE YIELD*
U.S. Treasury
Securities:
Over 1 through
5 Years $ 4,002,523 $ - $(192,853) $ 3,809,670
5.28%
Securities of Other
U.S. Government
Agencies:
Over 1 through
5 Years $12,116,107 $ - $(290,627) $11,825,480
6.31%
Over 5 through
10 Years 1,000,000 - (47,210) 952,790 7.20
$13,116,107 $ - $(337,837) $12,778,270
6.38%
Mortgage-Backed
Securities:
Over 10 Years $ 5,261,137 $ 32,777 $(234,178) $ 5,059,736
7.32%
Collateralized
Mortgage
Obligations:
Over 10 Years $ 8,783,102 $ - $(745,778) $ 8,037,324
5.24%
*Weighted Average Yield.
LOAN PORTFOLIO
An analysis of the loan portfolio at December 31, 1995 and 1994, is
as follows:
1995 1994
Real Estate Loans - Construction $ 2,380,561 $ 2,441,270
Real Estate Loans - Mortgage 22,117,255 20,492,858
Loans to Farmers 54,043 14,039
Commercial and Industrial Loans 2,298,901 2,430,331
Loans to Individuals 2,865,982 2,703,428
All Other Loans 710,309 159,503
Total Loans $30,427,051 $28,241,429
Unearned Income - (32)
Allowance for Loan Losses (820,000) (820,000)
$29,607,051 $27,421,397
9
The following is the detail of maturities and sensitivity of loans
to change in interest rates at December 31, 1995 and 1994:
INTEREST RATE MATURITY 1995 1994
Various 1 Year or Less $ 1,527,597 $ 1,917,104
Fixed 1 Year or Less 5,874,572 6,181,740
Fixed Over 1 Through 5 Years 18,775,965 15,452,002
Fixed Over 5 Years 4,034,722 4,511,876
Nonaccrual Various 214,195 178,707
$30,427,051 $28,241,429
Note: The information necessary for a breakdown of maturity of the var-
ious types of loans is not readily available. The Corporation has no
foreign loans.
NON-PERFORMING LOANS
The following table presents information on the amount of non-per-
forming loans at December 31, 1995 and 1994:
1995 1994
Loans accounted for on a non-accrual basis $ 214,195 $ 178,707
Loans contractually past due ninety days
or more as to principal or interest
payments - -
Loans whose terms have been renegotiated
to provide a reduction or deferral of
interest or principal due to a deteri-
oration in the financial position of
the borrower 69,572 144,090
Loans now current where there are serious
doubts as to the ability of the borrower
to comply with present loan repayment
terms - -
$ 283,767 $ 322,797
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes the allowance for loan losses:
Year Ended December 31
1995 1994
Amount of Loans Outstanding at End of
Period $30,427,051 $28,241,397
(CONTINUED)
10
Year Ended December 31
1995 1994
Daily Average Amount of Loans $30,284,000 $23,877,000
Balance of Allowance for Loan Losses
at Beginning of Period $ 820,000 $ 819,047
Loans Charged Off:
Real Estate $ 1,261 $ 456
Commercial, Industrial and Agricultural - 11,267
Individuals and Others 18,223 28,613
$ 19,484 $ 40,336
Recoveries of Loans previously charged off:
Real Estate $ 1,157 $ 32,156
Commercial, Industrial and Agricultural 87,904 38,759
Individuals and Others 7,797 12,712
Total Recoveries $ 96,858 $ 83,627
Net Loans Charged Off $ (77,374) $ (43,291)
Additions to Allowance Charged to Expense $ (77,374) $ (42,338)
Balance at End of Period $ 820,000 $ 820,000
Ratio of Net Charge-Offs to Total Loans
Outstanding (.26%) (.15%)
Ratio of Net Charge-Offs to Average Loans
Outstanding (.26%) (.18%)
The allowance for loan losses is an amount which in management's
judgment is adequate to absorb potential losses in the loan portfolio.
The allowance for loan losses is based upon management's review and
evaluation of the loan portfolio. Factors considered in the establish-
ment of the allowance for loan losses include management's evaluation
of specific loans; the level and composition of classified loans; his-
torical loss experience; results of examinations by regulatory agencies;
an internal asset review process; expectations of future economic condi-
tions and their impact on particular borrowers; and other judgmental
factors.
The allowance for loan losses is based on estimates of potential
future losses, and ultimate losses may vary from the current estimates.
These estimates are reviewed periodically and as adjustments become
necessary, the effect of the change in estimate is charged to operating
expenses in the period incurred. All losses are charged to the allow-
ance for loan losses when the loss actually occurs or when management
believes that the collectibility of the principal is unlikely. Recov-
eries are credited to the allowance at the time of recovery.
11
The allowance for loan losses has been allocated according to the
type of loan described:
December 31, 1995 December 31, 1994
PERCENT OF PERCENT OF
LOANS IN LOANS IN
EACH CATEGORY EACH CATEGORY
TO TOTAL TO TOTAL
ALLOWANCE LOANS ALLOWANCE LOANS
Real Estate $ 660,264 80.52% $ 665,840 81.20%
Commercial, Industrial
and Agricultural 63,386 7.73 70,602 8.61
Individuals and Others 96,350 11.75 83,558 10.19
$ 820,000 100.00% $ 820,000 100.00%
Management reviews the allowance for loan loss on a monthly basis.
As discussed above, we consider historical loss experience as well as
economic factors that effect our local economy. Specific risk factors
that are inherent with certain types of lending are also considered.
Past experience shows that our greatest exposures are in the area of
commercial and real estate mortgage loans. Real estate loans represent
approximately 80% of our loan portfolio and Commercial, Industrial and
Agricultural loans represent approximately 8% of the portfolio. After
reviewing these factors and reviewing the loan portfolio through internal
procedures, it is management's opinion that an allowance of $800,000 to
$850,000 is adequate.
Management's internal Watch List identifies loans requiring special
supervision because of unexpected changes in various risk conditions.
The Watch List may include both accruing and nonaccrual loans. The Watch
List categories resemble our regulators classification methods. Our
categories by type and the similar regulatory classification are: Type
One, Loss; Type Two, Doubtful; Type Three, Substandard; Type Four, OAEM
(Other Assets Especially Mentioned). OAEM loans require special obser-
vation to determine if current conditions warrant a reclassification.
WATCH LIST
(000 omitted)
TYPE ONE TYPE TWO TYPE THREE TYPE FOUR
12/31/95 - - $1,241 -
12/31/94 - - $ 831 -
12/31/93 - $40 $ 796 -
12/31/92 - $45 $1,104 -
The Watch List is routinely evaluated and may vary dramatically
based upon the borrower's status as well as industry and economic trends.
Deposits
The average daily balances and average rates paid on deposits for
the reported periods are listed below:
12
1995 1994
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE PAID BALANCE RATE PAID
Noninterest Bearing
Demand Deposits $12,259,000 - % $11,866,000 - %
Savings and Now
Accounts 15,355,000 2.75% 15,364,000 2.24%
Insured Money Market
Accounts 6,493,000 2.08% 6,723,000 1.97%
Certificates of
Deposit 25,692,000 4.82% 24,713,000 3.56%
Total Deposits $59,799,000 $58,666,000
Maturities of time deposits of $100,000 or more at December 31,
1995, are summarized below:
3 Months or Less $ 3,399,057
Over 3 through 12 Months 4,271,703
Over 12 Months 1,910,403
$ 9,581,163
RETURN ON EQUITY AND ASSETS
The table below summarizes significant financial ratios for the
years ended December 31, 1995 and 1994:
1995 1994
Average Total Assets $67,165,000 $65,100,000
Average Stockholders' Equity $ 6,312,000 $ 5,949,000
Net Income $ 765,783 $ 725,236
Earnings per Share-Common $ 3.95 $ 3.75
Cash Dividends Paid per Share-Common $ 1.50 $ 1.35
Return on Average Total Assets 1.14% 1.11%
Return on Average Stockholders' Equity 12.13% 12.19%
Dividend Payout Percentage 37.97% 36.00%
Average Equity to Average Assets 9.40% 9.14%
13
Item 2. Description of Properties
The Bank owns eight pieces of property described below: (a) The
land on which the Bank's main operating office is located at 4700 Main
Street, Zachary, Louisiana. The office building is approximately 11,500
square feet and includes the Executive Offices, Officers' platform, Note
Department, Paying and Receiving functions, and file room. Cost of the
property in 1956 was $17,500; construction costs to the building includ-
ing renovations total approximately $357,000. (b) Adjacent to the Bank
lot is a portion of the Bank's parking lot containing 45 parking places.
This lot was purchased in 1964 at a cost of $12,145. (c) In 1971 the
Bank purchased additional property to add to the employee lot. This lot
contains 26 spaces and was purchased at a cost of $30,600. (d) A parcel
of land located in East Baton Rouge Parish, Louisiana at 13444 Hooper
Road was purchased in 1976 for branch expansion. The lot is being car-
ried at a cost of $18,260 and construction and improvements have totaled
approximately $122,000. This branch is known as the Central Branch.
(e) Another parcel adjacent to this location was purchased in 1978 at a
cost of $55,000. This may be used for future expansion. (f) In 1977 a
parcel was purchased at 2210 Highway 64 for a branch site. The cost was
$10,000. The construction cost was approximately $79,000. This is known
as the Plaza Branch. (g) Another parcel adjacent to this was purchased
later in 1977 at a cost of $6,500 for parking area. (h) Included in land
is $300,903 that the Bank paid to purchase 2.1 acres of land in downtown
Zachary. This land will be used for future expansion. In the interim,
this location provides parking facilities. (i) In July 1982 the Bank
constructed a 4,000 square foot operational center located at 4680 Main
Street, Zachary. This facility houses Bookkeeping, General Ledger, Cen-
tral Information Files and other operational functions. The cost of this
facility including remodeling was approximately $128,000.
Item 3. Legal Proceedings
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which the Corporation
or a subsidiary is a party of which any of its property is the subject.
Item 4. Submission of Matters to a Vote of Security
Holders
No matters were submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 1995.
14
Part II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
The Corporation's stock is not listed on any security exchange. Due
to the lack of an active trading market, Zachary Bancshares, Inc. does
not have the available information to furnish the high and low sales
prices or the range of bid and ask quotations for its stock.
The Corporation is unaware of any stock trades in 1995 on 1994.
There can be no assurance that these limited inquiries adequately
reflect the actual high and low bids or prices for the stock of the Cor-
poration.
The Corporation has 571 stockholders of record as of March 1, 1996.
Cash dividends of $1.50 and $1.35 were paid for the years 1995 and
1994. Dividends are payable only out of retained earnings and current
earnings. The amount of dividends payable by the Bank may be restricted
by law and require regulatory approval.
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following information called for by Item 6 is included in the
Corporation's 1995 Annual Report in the Section titled "Management's
Discussion and Results of Operation".
Item 7. Financial Statements and Supplementary Data
The following financial statements of the Corporation in the Cor-
poration's 1995 Annual Report are hereby specifically incorporated by
reference:
Audited Financial Statements:
Independent Auditor's Report
Consolidated Balance Sheets
December 31, 1995 and 1994
Consolidated Statements of Income
for the years ended December 31, 1995 and 1994
Consolidated Statements of Changes in
Stockholders' Equity
for the years ended December 31, 1995 and 1994
(CONTINUED)
15
Consolidated Statements of Cash Flows
for the years ended December 31, 1995 and 1994
Notes to Consolidated Financial Statements
December 31, 1995 and 1994
Item 8. Disagreements with Accountants on Accounting and Financial
Disclosures
No disagreement with the Corporation's independent accountants on
accounting and financial disclosure has occurred during the past 24
months.
16
PART III
Items 9, 10, 11 and 12.
The information required by items 9, 10, 11 and 12 is included in
the Corporation's Proxy Statement, for the 1996 Annual Meeting of
Stockholders and is incorporated herein by reference.
17
PART IV
Item 13. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
(a) Financial Statements
1. The financial statements of Zachary Bancshares, Inc. in the
Corporation's 1995 Annual Report are incorporated by refer-
ence in Item 7.
2. Other financial statement schedules are either omitted
because they are inapplicable or included in the financial
statements or related notes.
(b) Reports on Form 8-K
1. Form 8-K filed November 15, 1995 concerning the retirement
of the Chairman of the Board of Directors.
None filed.
(c) Exhibits
3. Articles of Incorporation and by-laws of Zachary Banc-
shares, Inc. are incorporated by reference to the Cor-
poration's Registration Statement on Form S-14 filed on
February 17, 1986, with the Securities and Exchange Com-
mission.
13. 1995 Annual Report of Zachary Bancshares, Inc.
22. Subsidiary of the Registrant.
23. Definitive Proxy Statement for the 1996 Annual Meeting of
Stockholders' of Zachary Bancshares, Inc.
18
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Zachary Bancshares, Inc. is responsible for the
preparation of the financial statements, related financial data and other
information in this annual report. The financial statements are prepared
in accordance with generally accepted accounting principles and include
some amounts that are necessarily based on management's informed esti-
mates and judgments, with consideration given to materiality. All finan-
cial information contained in this annual report is consistent with that
in the financial statements.
Management fulfills its responsibility for the integrity, objectiv-
ity, consistency and fair presentation of the financial statements and
financial information through an accounting system and related internal
accounting controls that are designed to provide reasonable assurance
that assets are safeguarded and that transactions are authorized and
recorded in accordance with established policies and procedures. The
concept of reasonable assurance is based on the recognition that the cost
of a system of internal accounting controls should not exceed the related
benefits. As an integral part of the system of internal accounting con-
trols, Zachary Bancshares, Inc. has a professional staff who monitors
compliance with and assesses the effectiveness of the system of internal
accounting controls and coordinates audit coverage with the independent
public accountants.
The Audit Committee of the Board of Directors, composed solely of
outside directors, meets periodically with management, and the indepen-
dent public accountants to review matters relating to financial report-
ing, internal accounting control and the nature, extent and results of
the audit effort. The independent public accountants have direct access
to the Audit Committee with or without management present.
The financial statements as of December 31, 1995, were examined by
Hannis T. Bourgeois & Co., L.L.P., independent public accountants, who
rendered an independent professional opinion on the financial statements
prepared by management.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securi-
ties Exchange Act of 1934, as amended, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ZACHARY BANCSHARES, INC.
/s/ Harry S. Morris, Jr.
Harry S. Morris, Jr.
President
Dated March 14, 1996
20
Pursuant to the requirements of the Securities Act of 1934, as
amended, this report has been signed by the following persons in the
capacities indicated on March 14, 1996:
/s/ Leonard F. Aguillard Chairman and Director
Leonard F. Aguillard
/s/ Harry S. Morris, Jr. President and Director (Principal
Harry S. Morris, Jr. Executive Officer)
/s/ Winston E. Canning Secretary and Director
Winston E. Canning
/s/ Mark Thompson Treasurer
Mark Thompson
/s/ Russell Bankston Director
Russell Bankston
/s/ Hardee M. Brian Director
Hardee M. Brian
/s/ Howard L. Martin, M.D. Director
Howard L. Martin, M.D.
/s/ A. C. Mills, III Director
A. C. Mills, III
/s/ Rodney Samuel Johnson Director
Rodney Samuel Johnson
21
ZACHARY BANCSHARES, INC. AND SUBSIDIARY
TABLE OF CONTENTS
President's Message.......................................... 2
Independent Auditor's Report................................ 3
Consolidated Balance Sheets
December 31, 1995 and 1994................................ 4
Consolidated Statements of Income
for the years ended December 31, 1995 and 1994............ 5
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1995 and 1994............ 6
Consolidated Statements of Cash Flows for the
years ended December 31, 1995 and 1994.................... 7 - 8
Notes to Consolidated Financial Statements
December 31, 1995 and 1994................................ 9 - 21
Condensed Consolidated Balance Sheets
December 31, 1995, 1994, 1993, 1992 and 1991.............. 22
Condensed Consolidated Statements of Income
for the years ended December 31, 1995, 1994, 1993,
1992 and 1991............................................. 23
Average Balance Sheets and Interest Rate Analysis
for the years ended December 31, 1995 and 1994............ 24
Interest Differential
for the year ended December 31, 1995 ..................... 25
Condensed Consolidated Statements of Income
for the quarter periods in the years ended
December 31, 1995 and 1994................................ 26
Management's Discussion and Results of Operation............ 27 - 31
Officers.................................................... 32
Board of Directors.......................................... 32
Bank Locations.............................................. 32
ZACHARY BANCSHARES, INC.
March 11, 1996
Dear Shareholders:
I am happy to report that Zachary Bancshares, Inc. had a net income of
$765,783 in 1995 as compared to $725,236 in 1994. Our Board of Directors
were able to increase our cash dividend per share from $1.35 in 1994 to $1.50
per share in 1995 and our return on average equity was 12.13%.
The Bank's loan to deposit ratio has continued to increase as the Zachary
and Central communities have continued to grow. Most of the Bank's loan growth
has been due to new home construction in the area. Zachary is growing at a 11%
rate as compared to 6% a year for East Baton Rouge Parish. This growth has
caused Wal-Mart to start construction on a Super Wal-Mart. Ryan's Steakhouse
will probably build a restaurant in front of Wal-Mart and many other
businesses, such as Anthony's Limited, are looking at the possibilities of
locating in the area.
The Bank and it's personnel have been very involved in the
development and growth of the community. I have been the Chairman of Team
City, an economic development arm of the Zachary Chamber of Commerce for the
past four years and Melinda White, head of our Note Department, is President-
Elect of the Zachary Chamber of Commerce.
During 1996, we are planning to renovate our Main Office and
add some additional offices. We hope this will not be too much
of an inconvenience to our customers.
We thank you for your continued support and ask that you
recommend the Bank of Zachary whenever possible.
Sincerely,
Harry S. Morris, Jr.
President
HANNIS T. BOURGEOIS & CO., L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
2322 TREMONT DRIVE, SUITE 200
BATON ROUGE, LOUISIANA 70809
(504) 928-4770
January 12, 1996
To the Shareholders
and Board of Directors
Zachary Bancshares, Inc. and Subsidiary
Zachary, Louisiana
We have audited the accompanying Consolidated Balance Sheets
of Zachary Bancshares, Inc. and Subsidiary as of December 31,
1995 and 1994, and the related Consolidated Statements of Income,
Changes in Stockholders' Equity and Cash Flows for the years then
ended. 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 audit 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 financial statements referred to above
present fairly, in all material respects, the financial position
of Zachary Bancshares, Inc. and Subsidiary as of December 31,
1995 and 1994, and the results of their operations, changes in
their stockholders' equity and their cash flows for the years
then ended, in conformity with generally accepted accounting
principles.
Respectfully submitted,
/s/ Hannis T. Bourgeois & Co., L.L.P.
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
1995 1994
Cash and Due from Banks - Note B $ 2,312,940 $ 2,592,065
Interest Bearing Deposits in Other
Institutions 100,102 -
Reserve Funds Sold 2,700,000 2,100,000
Securities Available for Sale (Amortized
Cost of $30,016,679 and $31,162,869) -
Note C 30,074,648 29,685,000
Loans - Note D $30,427,051 $28,241,397
Less: Allowance for Loan Losses - Note E (820,000) (820,000)
$29,607,051 $27,421,397
Bank Premises and Equipment - Note F 935,552 909,465
Other Real Estate 451,770 563,369
Accrued Interest Receivable 584,547 553,417
Other Assets 103,825 583,333
Total Assets $66,870,435 $64,408,046
LIABILITIES
Deposits - Note G:
Noninterest Bearing $11,980,278 $12,192,031
Interest Bearing 47,376,247 46,212,790
$59,356,525 $58,404,821
Accrued Interest Payable 170,278 125,111
Other Liabilities 176,225 199,643
Total Liabilities $59,703,028 $58,729,575
STOCKHOLDERS' EQUITY
Common Stock - $10 par value;
authorized 2,000,000 shares;
issued 216,000 shares - Note H $ 2,160,000 $ 2,160,000
Surplus 1,480,000 1,480,000
Retained Earnings 3,935,807 3,460,525
Unrealized Gain (Loss) on Securities
Available for Sale, Net - Note C 38,260 (975,394)
Treasury Stock - 22,333 Shares,
at Cost (446,660) (446,660)
Total Stockholders' Equity $ 7,167,407 $ 5,678,471
Total Liabilities and Stockholders'
Equity $66,870,435 $64,408,046
The accompanying notes are an integral part of these financial statements.
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1995 and 1994
1995 1994
Interest Income:
Interest and Fees on Loans $2,626,956 $2,132,999
Interest on Securities 1,832,056 1,950,667
Other Interest Income 225,118 105,328
Total Interest Income $4,684,130 $4,188,994
Interest Expense on Deposits - Note G $1,795,453 $1,356,065
Interest Expense on Borrowings 31,406 -
Total Interest Expense $1,826,859 $1,356,065
Net Interest Income $2,857,271 $2,832,929
Provision (Credit) for Loan Losses - Note E (77,374) (42,338)
Net Interest Income after
Provision for Loan Losses $2,934,645 $2,875,267
Other Income:
Service Charges on Deposit
Accounts $ 512,017 $ 513,064
Gain (Loss) on Securities - Note C (22,950) (122,096)
Other Operating Income 53,597 54,593
Total Other Income $ 542,664 $ 445,561
Income before Other Expenses $3,477,309 $3,320,828
Other Expenses:
Salaries and Employee Benefits -
Note I $1,360,468 $1,251,473
Occupancy Expense 162,470 162,008
Net Other Real Estate Expense (5,147) (28,877)
Other Operating Expenses - Note J 808,223 833,518
Total Other Expenses $2,326,014 $2,218,122
Income before Income Taxes $1,151,295 $1,102,706
Applicable Income Tax - Note K 385,512 377,470
Net Income $ 765,783 $ 725,236
Per Share - Note H:
Net Income $ 3.95 $ 3.75
Cash Dividends $ 1.50 $ 1.35
The accompanying notes are an integral part of these financial statements.
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
for the years ended December 31, 1995 and 1994
1995 1994
Common Stock:
Balance - Beginning and End
of Year $ 2,160,000 $ 2,160,000
Surplus:
Balance - Beginning and End
of Year $ 1,480,000 $ 1,480,000
Retained Earnings:
Balance - Beginning of Year $ 3,460,525 $ 2,996,739
Net Income 765,783 725,236
Cash Dividends (290,501) (261,450)
Balance - End of Year $ 3,935,807 $ 3,460,525
Net Unrealized Gain (Loss) on Securities
Available for Sale:
Balance - Beginning of Year $ (975,394) $ 128,363
Net Change in Unrealized Gain
on Securities Available for Sale 1,013,654 (1,103,757)
Balance - End of Year $ 38,260 $ (975,394)
Treasury Stock:
Balance - Beginning and End of Year $ (446,660) $ (446,660)
The accompanying notes are an integral part of these financial statements.
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1995 and 1994
1995 1994
Cash Flows From Operating Activities:
Net Income $ 765,783 $ 725,236
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision (Credit) for Loan Losses (77,374) (42,338)
Provision for Losses on
Other Real Estate - (46,700)
Provision for Depreciation 112,122 119,862
Provision (Credit) for Deferred Tax (8,267) (37,291)
Amortization (Accretion) of Securities
Premiums (Discounts) 60,613 174,072
Dividends on FHLB Stock (5,300) -
(Gain) Loss on Sale of Securities 22,950 122,096
Gain on Sale of Other Real Estate (21,344) (720)
(Increase) Decrease in Interest
Receivable (31,130) (78,027)
(Increase) Decrease in Other Assets (34,409) 196,125
Increase (Decrease) in Interest Payable 45,167 18,488
Increase (Decrease) in Other Liabilities (23,418) 39,259
Net Cash Provided by Operating
Activities $ 805,393 $ 1,190,062
Cash Flows From Investing Activities:
Net (Increase) Decrease in Reserve
Funds Sold $ (600,000) $ 1,400,000
Purchases of Securities (4,252,138) (19,163,297)
Proceeds from Maturities of Securities 2,809,145 6,555,006
Proceeds from Sale of Securities 2,510,920 16,983,893
Net (Increase) Decrease in Loans (2,108,280) (7,231,774)
Purchases of Premises and Equipment (138,209) (72,283)
Sales of Other Real Estate 132,943 137,617
Net Cash Used in Investing
Activities $ (1,645,619) $ (1,390,838)
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
1995 1994
Cash Flows From Financing Activities:
Net Increase (Decrease) in Demand
Deposits, NOW Accounts and Savings
Accounts $ (1,608,097) $ 1,092,765
Net Increase (Decrease)in Certificates
of Deposit 2,559,801 (484,540)
Cash Dividends (290,501) (261,450)
Net Cash Provided by Financing
Activities $ 661,203 $ 346,775
Increase (Decrease) in Cash and Due
from Banks $ (179,023) $ 145,999
Cash and Due from Banks - Beginning of Year 2,592,065 2,446,066
Cash and Due from Banks - End of Year $ 2,413,042 $ 2,592,065
Supplemental Disclosures of Cash Flow
Information:
Noncash Investing Activities:
Other Real Estate Acquired
(Disposed) in Settlement of Loans $ - $ (115,960)
Change in Unrealized Gain (Loss) on
Securities Available for Sale $ 1,535,838 $ (1,672,358)
Change in Deferred Tax Effect on
Unrealized Gain (Loss) on Securities
Available for Sale $ 522,184 $ (568,601)
Cash Payments for:
Interest Paid on Deposits $ 1,750,286 $ 1,337,577
Income Tax Payments $ 440,093 $ 377,000
The accompanying notes are an integral part of these financial statements.
Zachary Bancshares, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
Note A - Summary of Significant Accounting Policies -
The accounting principles followed by Zachary Bancshares, Inc. and
its wholly-owned Subsidiary, Bank of Zachary, are those which are
generally practiced within the banking industry. The methods of applying
those principles conform with generally accepted accounting principles and
have been applied on a consistent basis. The principles which significantly
affect the determination of financial position, results of operations,
changes in stockholders' equity and cash flows are summarized below.
Principles of Consolidation
The consolidated financial statements include the accounts of Zachary
Bancshares, Inc. (the Company), and its wholly-owned subsidiary, Bank of
Zachary (the Bank). All material intercompany accounts and transactions
have been eliminated. Certain reclassifications to previously published
financial statements have been made to comply with current reporting
requirements.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Securities
Securities are being accounted for in accordance with Statement of
Financial Accounting Standards (SFAS) No. 115, Accounting for Investments
in Debt and Equity Securities, which requires the classification of
securities as held to maturity, trading, or available for sale.
Securities classified as held to maturity are those debt securities the
Bank has both the intent and ability to hold to maturity regardless of
changes in market conditions, liquidity needs or changes in general economic
conditions. Securities classified as trading are those securities held for
resale in anticipation of short-term market movements. The Bank had no
securities classified as held to maturity or trading at December 31, 1995.
Securities classified as available for sale are those debt securities
that the Bank intends to hold for an indefinite period of time but not
necessarily to maturity. Any decision to sell a security classified as
available for sale would be based on various factors, including signifi
cant movements in interest rates, changes in the maturity mix of the Bank's
assets and liabilities, liquidity needs, regulatory capital considerations,
and other similar factors. Securities available for sale are carried at fair
value. Unrealized gains or losses are reported as increases or decreases in
stockholders' equity, net of the related deferred tax effect. Realized gains
or losses, determined on the basis of the cost of specific securities sold,
are included in earnings.
Loans
Loans are stated at principal amounts outstanding, less the allowance for
loan losses. Interest on commercial loans is accrued daily based on the
principal outstanding.
The Bank discontinues the accrual of interest income when a loan
becomes 90 days past due as to principal or interest. When a loan is
placed on non-accrual or impaired status, previously recognized but
uncollected interest is reversed to income or charged to the allowance for
loan losses. If the underlying collateral value is sufficient to cover the
principal balance and accrued interest, the Bank may decide to continue the
accrual of interest.
Allowance for Loan Losses
The allowance for loan losses is an amount which in management's
judgment is adequate to absorb potential losses in the loan portfolio.
The allowance for loan losses is based upon management's review and
evaluation of the loan portfolio. Factors considered in the establishment
of the allowance for loan losses include management's evaluation of
specific loans; the level and composition of classified loans; historical loss
experience; results of examinations by regulatory agencies; an internal asset
review process; expectations of future economic conditions and their impact
on particular borrowers; and other judgmental factors.
The allowance for loan losses is based on estimates of potential
future losses, and ultimate losses may vary from the current estimates.
These estimates are reviewed periodically and as adjustments become
necessary, the effect of the change in estimate is charged to
operating expenses in the period incurred. All losses are charged to
the allowance for loan losses when the loss actually occurs or when
management believes that the collectibility of the principal is unlikely.
Recoveries are credited to the allowance at the time of recovery.
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation is provided at rates based upon estimated
useful service lives using the straight-line method for financial
reporting purposes and accelerated methods for income tax purposes.
The cost of assets retired or otherwise disposed of and the related
accumulated depreciation are eliminated from the accounts in the year
of disposal and the resulting gains or losses are included in current
operations.
Expenditures for maintenance and repairs are charged to operations
as incurred. Cost of major additions and improvements are capitalized.
Other Real Estate
Other real estate is comprised of properties acquired through foreclosure
or negotiated settlement. The carrying value of these properties is lower
of cost or fair market value. Loan losses arising from the acquisition of
these properties are charged against the allowance for loan losses. Any
subsequent market reductions required are charged to Net Other Real Estate
Expense. Revenues and expenses associated with maintaining or disposing of
foreclosed properties are recorded during the period in which they are
incurred.
Income Taxes
The provision for income taxes is based on income as reported in the
financial statements after interest income from state and municipal
securities is excluded. Also certain items of income and expenses are
recognized in different time periods for financial statement purposes
than for income tax purposes. Thus provisions for deferred taxes are
recorded in recognition of such timing differences.
Deferred taxes are provided on a liability method in accordance with
SFAS No. 109 whereby deferred tax assets are recognized for deductible
temporary differences and operating loss and tax credit carryforwards and
deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of
assets and liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is
more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the date of enactment.
The corporation and its subsidiary file a consolidated federal
income tax return. In addition, state income tax returns are filed
individually by Company in accordance with state statutes.
Earnings per Common Share
The computation of earnings per share and other per share amounts
of common stock is based on the weighted average number of shares of
common stock outstanding during each year, which is 193,667 in 1995
and 1994.
Statements of Cash Flows
For purposes of reporting cash flows, cash and due from banks includes
cash on hand and amounts due from banks (including cash items in process of
clearing).
Current Accounting Developments
In December, 1991, the Financial Accounting Standards Board issued
Statement No. 107, "Disclosures about Fair Value of Financial Instruments.
"This statement requires disclosure of the fair value of financial
instruments, both assets and liabilities, whether or not such instruments
are recognized in the balance sheet. As it relates to the Company,
financial instruments include primarily cash equivalents, securities,
loans, and deposits. SFAS No. 107 was adopted by the Company for the
fiscal year ended December 31, 1995. Referenc should be made to Note M
regarding the adoption of this statement.
The Financial Accounting Standards Board has issued Statement No.
114, "Accounting by Creditors for Impairment of a Loan", which became
effective for years beginning after December 15, 1994. The Statement
generally requires impaired loans to be measured on the present value
of expected future cash flows discounted at the loan's effective
interest rate, or as an expedient, at the loan's observable market
price or the fair value of the collateral if the loan is collateral
dependent. A loan is impaired when it is probable the creditor will
be unable to collect all contractual principal and interest payments
due in accordance with the terms of the loan agreement. Reference
should be made to Note D regarding the application of this statement.
Note B - Cash and Due from Banks -
The Bank is required by state law to maintain average cash reserve
balances. The amounts of required reserves at December 31, 1995 and
1994 were approximately $411,000 and $405,000, respectively.
Note C - Securities -
Amortized cost amounts and fair values of securities available for
sale at December 31, 1995 and 1994 are summarized as follows:
1995
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
U.S. Treasury
Securities $ 3,999,167 $ 20,464 $ (13,061) $ 4,006,570
Securities of Other
U.S. Government
Agencies 14,073,850 142,885 (2,885) 14,213,850
Mortgage-Backed
Securities 3,936,765 71,047 - 4,007,812
Collateralized
Mortgage Obliga-
tions 7,792,897 - (160,481) 7,632,416
Equity Securities 214,000 - - 214,000
$30,016,679 $ 234,396 $ (176,427) $30,074,648
1994
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
U.S. Treasury
Securities $ 4,002,523 $ - $ (192,853) $ 3,809,670
Securities of Other
U.S. Government
Agencies 13,116,107 - (337,837) 12,778,270
Mortgage-Backed
Securities 5,261,137 32,777 (234,178) 5,059,736
Collateralized
Mortgage Obliga-
tions 8,783,102 - (745,778) 8,037,324
Total $31,162,869 $ 32,777 $(1,510,646) $29,685,000
The amortized cost and fair values of securities available for sale
as of December 31, 1995 by contractual maturity are shown below.
Maturities may differ from contractual maturities in mortgage-backed
securities and collateralized mortgage obligations because the mortgages
underlying the securities may be called or repaid without any penalties.
Therefore, these securities are not included in the maturity categories in
the following maturity summary.
AMORTIZED FAIR
COST VALUE
Within One Year $ 8,027,342 $ 8,046,280
One to Five Years 10,045,675 10,174,140
$18,073,017 $18,220,420
Securities available for sale with a fair value of $11,774,009 and
$11,575,670 at December 31, 1995 and 1994, were pledged as collateral on
public deposits and for other purposes as required or permitted by law.
The Company has invested in Federal Home Loan Bank Stock which is
included in Equity Securities and is reflected at the lower of cost
or market in these financial statements. The cost of these securities was
$214,000 with unrealized gains of -0- at December 31, 1995.
Gross realized gains and losses from the sale of securities for the
years ended December 31, 1995 and 1994 are as follows:
1995 1994
Realized Gains $ 38,659 $ 24,339
Realized Losses (61,609) (146,435)
$ (22,950) $ (122,096)
Note D - Loans -
An analysis of the loan portfolio at December 31, 1995 and 1994, is
as follows:
1995 1994
Real Estate Loans - Construction $ 2,380,561 $ 2,441,270
Real Estate Loans - Mortgage 22,117,255 20,492,858
Loans to Farmers 54,043 14,039
Commercial and Industrial Loans 2,298,901 2,430,331
Loans to Individuals 2,865,982 2,703,428
All Other Loans 710,309 159,503
Total Loans $30,427,051 $28,241,429
Unearned Income - (32)
$30,427,051 $28,241,397
The Bank had non-performing loans on a non-accrual basis totaling
approximately $214,200 and $178,700 at December 31, 1995 and 1994,
respectively. The Bank recognized $16,002 and $5,488 in interest income
relating to these loans during the years ended December 31, 1995
and 1994. Had the loans been performing, approximately $10,200 and
$22,100 of additional interest income would have been recognized for
the years ended December 31, 1995 and 1994. Loans contractually past
due 90 days or more, in addition to loans on non-accrual, were $-0-
at December 31, 1995 and 1994, respectively. The Company has no
impaired loans at December 31, 1995, in accordance with SFAS No. 114.
The Bank is permitted under the laws of the State of Louisiana to
make extensions of credit to its executive officers, directors and
their affiliates in the ordinary course of business. The amount of
such related party loans was $1,070,683 and $1,267,975 at December 31, 1995
and 1994, respectively. An analysis of the aggregate of these loans for
1995, is as follows:
Balance - Beginning of Year $ 1,267,975
New Loans 449,317
Repayments 646,609
Balance - End of Year $ 1,070,683
Note E - Allowance for Loan Losses -
Following is a summary of the activity in the allowance for loan losses:
1995 1994
Balance - Beginning of Year $ 820,000 $ 819,047
Current Provision (Credit) from Income (77,374) (42,338)
Recoveries of Amounts Previously
Charged Off 96,858 83,627
Amounts Charged Off (19,484) (40,336)
Balance - End of Year $ 820,000 $ 820,000
Ratio of Reserve for Possible Loan
Losses to Non-Performing Loans
at End of Year 382.82% 458.87%
Ratio of Reserve for Possible Loan
Losses to Loans Outstanding at
at End of Year 2.70% 2.90%
Ratio of Net Loans Charged Off to
Average Loans Outstanding for
the Year (.26)% (.18)%
Note F - Bank Premises and Equipment -
Bank premises and equipment costs and the related accumulated de-
preciation at December 31, 1995 and 1994, are as follows:
ACCUMULATED
ASSET COST DEPRECIATION NET
December 31, 1995:
Land $ 450,908 $ - $ 450,908
Bank Premises 736,865 436,466 300,399
Furniture and Equipment 1,102,351 918,106 184,245
$2,290,124 $1,354,572 $ 935,552
December 31, 1994:
Land $ 450,908 $ - $ 450,908
Bank Premises 685,670 418,831 266,839
Furniture and Equipment 1,037,689 845,971 191,718
$2,174,267 $1,264,802 $ 909,465
The provision for depreciation charged to operating expenses was
$112,122 and $119,862, respectively, for the years ended December 31,
1995 and 1994.
Note G - Deposits -
Following is a detail of deposits:
1995 1994
Demand Deposit Accounts $11,980,278 $12,192,031
NOW and Super NOW Accounts 7,723,607 7,377,218
Money Market Accounts 5,390,808 6,777,381
Savings Accounts 7,105,549 7,461,709
Certificates of Deposit Over $100,000 9,581,163 7,062,425
Certificates of Deposit 17,575,120 17,534,057
$59,356,525 $58,404,821
Interest expense on certificates of deposit over $100,000 for the
years ended December 31, 1995 and 1994, amounted to $327,842 and
$246,645, respectively.
Public fund deposits at December 31, 1995 and 1994, were $7,109,057
and $5,618,654, respectively.
Note H - Stockholders' Equity and Regulatory Matters -
Dividends are paid by the Company from its assets which are provided
primarily by dividends from the Bank. Dividends are payable only out of
retained earnings and current earnings of the Company. Certain restrictions
exist regarding the ability of the Bank to transfer funds to the Company in
the form of cash dividends. Louisiana statutes require approval to pay
dividends in excess of a state bank's earnings in the current year plus
retained net profits for the preceding year. As of January 1, 1996, the
Bank had retained earnings of $4,607,964 of which $872,477 was available for
distribution without prior regulatory approval.
The Bank is also required to maintain minimum amounts of capital to
total risk weighted assets, as required by banking regulators. At
December 31, 1995, the Bank is required to have minimum Tier 1 and
Total Capital ratios of 4.00% and 8.00%, respectively. The Bank's
actual ratios at that date were 26.27% and 27.52%, respectively. The
Bank's Leverage Ratio at December 31, 1995, was 10.13%.
Under current regulations, the Bank is limited in the amount it may
loan to its Parent. Loans to the Parent may not exceed 10% of the
Bank's capital and surplus. There were no loans outstanding at
December 31, 1995 and 1994.
Note I - Employee Benefit Plans -
The Bank of Zachary has a defined contribution Profit Sharing Plan
and Trust for its qualified employees. Each year the Board of Directors of
the Bank determines the Bank's contribution. No contribution is required
by qualified participants. Contributions charged to expense for this plan
were $49,070 and $55,266 for the years ended December 31, 1995 and 1994.
In addition, the Bank has a 401(K) plan for those employees who
meet the necessary eligibility requirements. Covered employees may
voluntarily contribute 1% to 15% of gross pay to the plan. The Bank
matched one-half of the employee's contribution to a maximum of 7% of
gross pay in 1995 and to a maximum of 6% in 1994. Contributions
charged to expense for this plan were $30,930 and $24,734 for the
years ended December 31, 1995 and 1994, respectively.
Note J - Other Operating Expenses -
An analysis of Other Operating Expenses for the years ended
December 31, 1995 and 1994, is as follows:
1995 1994
Regulatory Assessments $ 80,827 $ 142,362
Computer Service Fees 87,796 90,286
Equipment 176,987 188,007
Professional Fees 61,231 57,511
Public Relations and Advertising 44,381 53,326
Other 357,001 302,026
$ 808,223 $ 833,518
Note K - Income Tax -
The total provision for income taxes charged to income amounted to
$385,512 and $377,470 for 1995 and 1994, respectively. The provisions
represent effective tax rates of 34% in 1995 and 1994.
Following is a reconciliation between income tax expense based on
the federal statutory tax rates and income taxes reported in the
statements of income.
1995 1994
Income Taxes Based on Statutory
Rate - 34% in 1995 and 1994 $ 391,440 $ 374,920
Other - Net (5,928) 2,550
$ 385,512 $ 377,470
The components of consolidated income tax expense (benefits) are:
Provision for Current Taxes $ 393,779 $ 414,761
Provision (Credit) for Deferred Taxes (8,267) (37,291)
$ 385,512 $ 377,470
A deferred income tax asset of $19,291 and $533,208 is included in
other assets at December 31, 1995 and 1994, respectively.
The deferred tax provision consists of the following timing differences:
1995 1994
Accumulated Depreciation for Tax Reporting
in Excess of Amount for Financial Reporting $ (5,318) $ (8,181)
Provision for Loan Losses for Financial
Reporting in Excess of Amount for
Tax Reporting - (324)
Other Real Estate Write-offs for Financial
Reporting in Excess of Amount for Tax
Reporting 3,536 18,091
Accretion Income for Financial
Reporting in Excess of Tax Reporting 9,883 4,123
Provision for Deferred Leave for
Financial Reporting in Excess of
the Amount for Tax Reporting (7,990) (51,000)
Hospitalization Expense for Financial
Reporting in Excess of Amount for
Tax Reporting (8,378) -
$ (8,267) $ (37,291)
The net deferred tax asset and liability consist of the following
components at December 31, 1995 and 1994:
1995 1994
Depreciation $ (39,123) $ (44,441)
Provision for Loan Losses 25,316 25,316
Other Real Estate - 3,536
Accretion Income (14,327) (4,678)
Deferred Leave 58,756 51,000
Self-Insured Hospitalization Plan 8,378 -
Unrealized (Gain) Loss on Securities
Available for Sale (19,709) 502,475
Total Deferred Tax Asset (Liability) $ 19,291 $ 533,208
Note L - Off-Balance-Sheet Instruments -
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit and letters of credit. Those instruments involve, to varying
degrees, elements of credit risk in excess of the amount recognized in the
balance sheets.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit and letters of credit is represented by the contractual amount of
those instruments. The Bank uses the same credit policies in making commit
ments and conditional obligations as they do for on-balance-sheet instru
ments. In the normal course of business the Bank has made commitments to
extend credit of $3,185,199 at December 31, 1995. This amount in
cludes unfunded loan commitments aggregating $3,141,901 and letters
of credit of $43,298.
The Bank has an outstanding line of credit for the purchase of
Federal Funds with a Banker's Bank in the amount of $1,500,000. No
funds were drawn on this line at December 31, 1995.
The Bank maintains an open line of credit with the Federal Home
Loan Bank of Dallas to assist in maintaining short-term liquidity.
The total line of credit available with the Federal Home Loan Bank at
December 31, 1995 amounts to approximately $4,348,000. No funds were
drawn on this line at December 31, 1995.
Note M - Fair Value of Financial Instruments -
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and Short-Term Investments - For those short-term instruments,
the carrying amount is a reasonable estimate of fair value.
Securities - Fair value of securities held to maturity and available for
sale is based on quoted market prices or dealer notes. If a quoted market
price is not available, fair value is estimated using quoted market prices
for similar securities.
Loans - The fair value for loans is estimated using discounted cash
flow analyses, with interest rates currently being offered for similar
loans to borrowers with similar credit rates. Loans with similar
classifications are aggregated for purposes of the calculations. The
allowance for loan loss which was used to measure the credit risk, is
subtracted from loans.
Deposits - The fair value of demand deposits, savings account, and
certain money market deposits is the amount payable at the reporting
date. The fair value of fixed-maturity certificates of deposit is
estimated using discounted cash flow analyses, with interest rates
currently offered for deposits of similar remaining maturities.
Commitments to Extend Credit and Standby Letters of Credit - The
fair values of commitments to extend credit and standby letters of
credit were not significant.
The estimated approximate fair values of the Bank's financial in-
struments as of December 31, 1995 are as follows:
1995
CARRYING FAIR
AMOUNT VALUE
Financial Assets:
Cash and Short-Term Investments $ 5,113,042 $ 5,113,042
Securities 30,074,648 30,074,648
Loans-Net 29,607,051 30,226,000
$64,794,741 $65,413,690
Financial Liabilties:
Deposits $59,356,525 $57,524,278
Note N - Concentrations of Credit -
The majority of the Bank's business activities are with customers in
the Bank's market area, which consists primarily of East Baton Rouge
and adjacent parishes. The majority of such customers are depositors
of the Bank. The concentrations of credit by type of loan are shown
in Note D. Most of the Bank's credits are to individuals and small
businesses secured by real estate. The Bank, as a matter of policy,
does not extend credit to any single borrower or group of related borrowers
in excess of $750,000.
Note O - Contingencies -
In the normal course of business, the Company is involved in various
legal proceedings. In the opinion of management and counsel, any
liability resulting from such proceedings would not have a material
adverse effect on the Company's financial statements.
Note P - Financial Information - Parent Company Only -
The financial statements for Zachary Bancshares, Inc. (Parent
Company) are presented below:
BALANCE SHEETS
December 31, 1995 and 1994
1995 1994
Assets:
Cash $ 321,183 $ 256,611
Investment in Subsidiary 6,846,224 5,421,860
Due from Subsidiary - 33,638
Other Assets 12,676 -
Total Assets $7,180,083 $5,712,109
Liabilities:
Due to Subsidiary $ 12,676 $ -
Income Tax Payable - 33,638
Total Liabilities $ 12,676 $ 33,638
Stockholders' Equity:
Common Stock $2,160,000 $2,160,000
Surplus 1,480,000 1,480,000
Retained Earnings 3,974,067 2,485,131
Treasury Stock (446,660) (446,660)
Total Stockholders' Equity $7,167,407 $5,678,471
Total Liabilities and Stockholders'
Equity $7,180,083 $5,712,109
STATEMENTS OF INCOME
for the years ended December 31, 1995 and 1994
1995 1994
Income:
Dividend from Subsidiary $ 375,000 $ 266,500
Expenses:
Operating Expenses 23,915 11,729
Income before Equity in Undistributed
Net Income of Subsidiary $ 351,085 $ 254,771
Equity in Undistributed Net Income
of Subsidiary 410,710 461,767
Net Income before Income Taxes $ 761,795 $ 716,538
Applicable Income Tax Expense (Benefit) (3,988) (8,698)
Net Income $ 765,783 $ 725,236
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1995 and 1994
1995 1994
Cash Flows From Operating Activities:
Net Income $ 765,783 $ 725,236
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Equity in Undistributed Net Income
of Subsidiary (410,710) (461,767)
(Increase) Decrease in Receivable
From Subsidiary 33,638 (33,638)
(Increase) Decrease in Other Assets (12,676) 4,124
Increase (Decrease) in Due to Subsidiary 12,676 (10,293)
Increase (Decrease) in Income Tax Payable (33,638) 33,638
Net Cash Provided by Operating
Activities $ 355,073 $ 257,300
Cash Flows From Financing Activities:
Dividends Paid $ (290,501) $ (261,450)
Net Cash Used in Financing
Activities $ (290,501) $ (261,450)
Net Increase (Decrease) in Cash $ 64,572 $ (4,150)
Cash - Beginning of Year 256,611 260,761
Cash - End of Year $ 321,183 $ 256,611
Zachary Bancshares, Inc. and Subsidiary
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1995, 1994, 1993, 1992 and 1991
ASSETS
1995 1994
Cash and Due from Banks $ 2,413,042 $ 2,592,065
Securities 32,774,648 31,785,000
Loans 29,607,051 27,421,397
Other Assets 2,075,694 2,609,584
Total Assets $66,870,435 $64,408,046
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $59,356,525 $58,404,821
Other Liabilities 346,503 324,754
Stockholders' Equity 7,167,407 5,678,471
Total Liabilities
and Stockholders' Equity $66,870,435 $64,408,046
Selected Ratios:
Loans to Assets 44.27% 42.57%
Loans to Deposits 49.88% 46.95%
Deposits to Assets 88.76% 90.68%
Equity to Assets 10.72% 8.82%
Return on Average Assets 1.14% 1.11%
Return on Average Equity 12.13% 12.19%
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1995, 1994, 1993, 1992 and 1991
(continued)
ASSETS
1993 1992 1991
Cash and Due from Banks $ 2,446,066 $ 3,024,506 $ 2,393,643
Securities 39,529,128 41,367,443 37,632,028
Loans 20,031,325 17,906,420 18,671,743
Other Assets 2,448,210 3,067,072 3,198,764
Total Assets $64,454,729 $65,365,441 $61,896,178
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $57,796,596 $59,530,969 $56,247,896
Other Liabilities 339,691 302,331 668,112
Stockholders' Equity 6,318,442 5,532,141 4,980,170
Total Liabilities and
Stockholders' Equity $64,454,729 $65,365,441 $61,896,178
Selected Ratios:
Loans to Assets 31.08% 27.39% 30.17%
Loans to Deposits 34.66% 30.08% 33.19%
Deposits to Assets 89.67% 91.07% 90.87%
Equity to Assets 9.80% 8.46% 8.05%
Return on Average Assets 1.36% 1.19% 1.28%
Return on Average Equity 15.34% 15.10% 16.77%
Zachary Bancshares, Inc. and Subsidiary
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1995, 1994, 1993, 1992 and 1991
1995 1994
Interest Income $ 4,684,130 $ 4,188,994
Interest Expense 1,826,859 1,356,065
Net Interest Income $ 2,857,271 $ 2,832,929
Provision (Credit) for Loan Losses (77,374) (42,338)
Net Interest Income after Provision
for Loan Losses $ 2,934,645 $ 2,875,267
Other Income 542,664 445,561
Other Expenses 2,326,014 2,218,122
Income before Income Taxes $ 1,151,295 $ 1,102,706
Applicable Income Tax Expense (Benefit) 385,512 377,470
Net Income $ 765,783 $ 725,236
Per Share:
Net Income $ 3.95 $ 3.75
Cash Dividends $ 1.50 $ 1.35
Book Value - End of Year $ 37.01 $ 29.32
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1995, 1994, 1993, 1992 and 1991
(continued)
1993 1992 1991
Interest Income $ 4,165,960 $ 4,636,137 $ 4,979,984
Interest Expense 1,333,250 1,832,414 2,688,535
Net Interest Income $ 2,832,710 $ 2,803,723 $ 2,291,449
Provision (Credit) for Loan Losses - 134,272 286,186
Net Interest Income after
Provision for Loan Losses $ 2,832,710 $ 2,669,451 $ 2,005,263
Other Income 658,679 784,851 1,030,503
Other Expenses 2,140,574 2,307,663 2,080,497
Income before Income Taxes $ 1,350,815 $ 1,146,639 $ 955,269
Applicable Income Tax Expense(Benefit) 460,478 383,000 196,802
NET INCOME $ 890,337 $ 763,639 $ 758,467
PER SHARE:
Net Income $ 4.60 $ 3.94 $ 3.90
Cash Dividends $ 1.20 $ 1.00 $ .60
Book Value - End of Year $ 32.63 $ 28.57 $ 25.60
Zachary Bancshares, Inc. and Subsidiary
AVERAGE BALANCE SHEETS AND INTEREST RATE ANALYSIS
for the years ended December 31, 1995 and 1994
1995
INTEREST AVERAGE
AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE
ASSETS
Interest Earning Deposits and
Reserve Funds Sold $ 3,941,000 $ 225,118 5.71%
Securities:
Taxable 28,991,000 1,832,056 6.32
Loans-Net 30,284,000 2,626,956 8.67
Total Earning Assets $63,216,000 $4,684,130 7.41%
Allowance for Loan Losses (830,000)
Nonearning Assets 4,779,000
Total Assets $67,165,000
LIABILITIES AND STOCKHOLDERS' EQUITY
FHLB Borrowings $ 500,000 $ 31,406 6.28%
Savings and NOW Accounts 15,355,000 421,797 2.75
Insured Money Market Accounts 6,493,000 134,794 2.08
Certificates of Deposit 25,692,000 1,238,862 4.82
Total Interest Bearing
Liabilities $48,040,000 $1,826,859 3.80%
Demand Deposits 12,259,000
Other Liabilities 554,000
Stockholders' Equity 6,312,000
Total Liabilities and
Stockholders' Equity $67,165,000
Net Interest Income - Tax Equivalent Basis $2,857,271
Tax Equivalent Adjustment
Net Interest Income $2,857,271
Net Interest Income - Spread 3.61%
Net Interest Income as a % of Total Earning Assets 4.52%
AVERAGE BALANCE SHEETS AND INTEREST RATE ANALYSIS
for the years ended December 31, 1995 and 1994
(continued)
1994
INTEREST AVERAGE
AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE
ASSETS
Interest EArning Deposits and
Reserve Funds Sold $ 2,719,000 $ 105,328 3.87%
Securities:
Taxable 34,273,000 1,950,667 5.69
Loan-Net 23,877,000 2,132,999 8.93
Total Earning Assets $60,869,000 $4,188,994 6.88%
Allowance for Loan Losses (830,000)
Nonearning Assets 5,061,000
Total Assets $65,100,000
LIABILITIES AND STOCKHOLDERS' EQUITY
FHLB Borrowings $ - $ - - %
Savings and NOW Accounts 15,364,000 343,457 2.24
Insured Money Market Accounts 6,723,000 132,424 1.97
Certificates of Deposit 24,713,000 880,184 3.56
Total Interest Bearing
Liabilities $46,800,000 $1,356,065 2.90%
Demand Deposits 11,866,000
Other Liabilities 485,000
Stockholders' Equity 5,949,000
Total Liabilities and
Stockholder's Equity $65,100,000
Net Interest Income $2,832,929
Net Interest Income - Spread 3.98%
Net Interest Income as a % of Total Earning Assets 4.65%
Zachary Bancshares, Inc. and Subsidiary
INTEREST DIFFERENTIAL
for the year ended December 31, 1995
1995 OVER 1994
CHANGE TOTAL
ATTRIBUTABLE TO INCREASE
VOLUME RATE (DECREASE)
Interest Earning Assets:
Reserve Funds Sold $ 58,526 $ 61,264 $ 119,790
Securities (317,538) 198,927 (118,611)
Loans 564,091 (70,134) 493,957
Total Interest Income $ 305,079 $ 190,057 $ 495,136
Interest Bearing Liabilities:
Bank Borrowings $ 31,406 $ - $ 31,406
Savings and NOW Accounts (109) 78,449 78,340
Insured Money Market Accounts (4,778) 7,148 2,370
Certificates of Deposit 41,073 317,605 358,678
Total Interest Expense $ 67,592 $ 403,202 $ 470,794
Increase (Decrease) in Interest
Differential $ 237,487 $(213,145) $ 24,342
Note: The change in interest due to both volume and rate changes has
been allocated equally between volume and rate.
Zachary Bancshares, Inc. and Subsidiary
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
for the quarter periods in the years ended December 31, 1995 and 1994
1995
4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER
Interest Income $1,203,163 $1,163,324 $1,170,741 $1,146,902
Interest Expense 462,673 481,088 458,911 424,187
Net Interest Income $ 740,490 $ 682,236 $ 711,830 $ 722,715
Provision (Credit) for
Loan Losses (61,205) - (16,169) -
Net Interest Income
after Provision
for Loan Losses $ 801,695 $ 682,236 $ 727,999 $ 722,715
Other Income 134,999 136,306 137,387 133,972
Other Expenses 572,251 553,248 609,260 591,255
Income before
Income Taxes $ 364,443 $ 265,294 $ 256,126 $ 265,432
Applicable Income Tax
Expense 120,550 91,175 86,375 87,412
Net Income $ 243,893 $ 174,119 $ 169,751 $ 178,020
Per Share:
Net Income $ 1.25 $ .90 $ .88 $ .92
Cash Dividends $ .85 $ - $ .65 $ -
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
for the quarter periods in the years ended December 31, 1995 and 1994
(continued)
1994
4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER
Interest Income $1,167,245 $1,056,095 $ 986,654 $ 979,000
interest Expense 369,238 341,370 321,170 324,287
Net Interest Income $ 798,007 $ 714,725 $ 665,484 $ 654,713
Provision (Credit) for
Loan Losses (42,338) - - -
Net Interest Income
after Provision
for Loan Losses $ 840,345 $ 714,725 $ 665,484 $ 654,713
Other Income 81,478 57,695 141,575 164,813
Other Expenses 522,569 537,396 590,247 567,910
Income before
Income Taxes $ 399,254 $ 235,024 $ 216,812 $ 251,616
Applicable Income Tax
Expense 135,340 80,500 68,630 93,000
Net Income $ 263,914 $ 154,524 $ 148,182 $ 158,616
Per Share:
Net Income $ 1.36 $ .80 $ .77 $ .82
Cash Dividends $ .75 $ - $ .60 $ -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL OPERATIONS AND RESULTS OF OPERATIONS
The Company evaluates its financial strength through continual review of
management, asset quality, capital, earnings and liquidity. The Company
continuously addresses each area on an individual and corporate basis. The
following Management's Discussion and Analysis relates to the Company's
financial position for the years 1995 and 1994. This information is a part
of and should be read in conjunction with the Financial Statements and
related Notes. The Company is unaware of any trends, uncertainties or events
which would or could have a material impact on future operating results,
liquidity or capital.
CAPITAL
The Company's capital continues to exceed regulatory requirements and peer
group averages. Regulatory Risk Based Capital requirements for 1995 and 1994
were 8.0%. Regulatory Leverage Ratio requirements were 4% for the same time
period. The Company's 1994 Equity to Assets Ratio (below) includes the effect
of the Unrealized Loss ($975,394) on Securities discussed in Note C. The
Company's ratios as of December 31 are as follow:
1995 1994
Risk Based Capital Ratio 24.52% 24.78%
Leverage Ratio 10.13% 9.82%
Equity to Assets Ratio 10.71% 8.82%
Earnings will continue to be The Company's main source of capital growth.
Management is committed to capital growth through earnings retention. An
earnings retention ratio is the percentage of current earnings retained within
the capital structure. The Company's earnings retention ratios at December
31 are as follows:
Shareholder Retention
Net Income Dividends Ratio
1995 $765,783 $290,500 62%
1994 $725,236 $261,450 64%
The Company distributed to shareholders, cash dividends of $1.50 and
$1.35 per share in 1995 and 1994, respectively.
LIQUIDITY
Liquidity management is the process of ensuring that the Bank's assets
and liabilities are appropriately structured. The Company's short-term
and long-term liquidity is provided by two sources: core deposits and an
adequate level of assets readily convertible to cash. Management continually
monitors the balance sheet to insure its ability to meet current and future
depositor requirements and loan funding commitments. The Company does not
anticipate difficulties in meeting funding obligations.
RESULTS OF OPERATIONS
Overview
Zachary Bancshares, Inc.'s (ZBI) net income for 1995 was $765,783 compared
to $725,236 for 1994. ZBI's income stream is from core banking products and
services. ZBI continues to benefit from improvements in our regional and
local economies and expects these trends to continue. The following table
indicates ZBI equity position and balance sheet trends. The 1994 Equity
decrease reflects the FASB 115 Unrealized Loss on Securities of $(975,394).
The corresponding 1995 amount is $57,969; therefore, net change effect upon
equity is $1,033,363.
Growth Trends
(year to year in $ and %)
95 to 94 94 to 93
Stockholders' Equity $1,483,936 or 26.2% $(639,971) or -10.1%
Average Assets $2,065,000 or 3.2% $(223,000) or - .3%
Earnings Analysis
The Company's 1995 Net Interest Income increased slightly. Net Interest
Income in 1995 was $2,857,271 compared to $2,832,949 for 1994.
Average Earning Assets were $63,216,000 in 1995 compared to $60,869,000
in 1994. The following table depicts The Company's average earning assets
components in thousands of dollars and the respective percentage relationship.
1995 1994
Reserve & FHLB Funds $ 3,914 06% $ 2,719 05%
Securities 28,991 46% 34,273 56%
Loans (Net) 30,284 48% 23,877 39%
Avg. Earning Assets $63,216 100% $60,869 100%
The previous table indicates average earning assets stability. Management
actively pursued increases in The Company's loan portfolio in 1994 and 1995.
The majority of The Company's new loans are secured by local, single family
dwellings, with a fixed rate and 5 year balloon repricing terms.
Average deposit liabilities were $60,299,000 in 1995 compared to
$58,666,000 in 1994. The following table depicts ZBI's average deposit
liabilities components and the respective percentage relationship, dollars
in thousands.
1995 1994
FHLB Borrowings $ 500 1% $ 0
Demand Deposits 12,259 20% 11,866 20%
Savings & NOW 15,355 25% 15,364 26%
Money Market 6,493 11% 6,723 11%
Certificates 25,692 43% 24,713 43%
Avg. Depositor Liability $60,299 100% $58,666 100%
As interest rates decreased in recent years, depositors have moved
funds from the longer maturities (Certificates) into shorter maturities.
Management expects an increase in market rates may influence depositors to
return some funds to longer term Certificates. Management remains committed
to accepting only trade area deposits, which have core deposit character
istics.
The Company's Net Interest Spread and Margin are shown below. Net Interest
Spread is the difference between the yield on earning assets and
the cost of funding. Net Interest Margin is interest income as a percent
of average earning assets.
1995 1994
Net Interest Spread 3.61% 3.98%
Net Interest Margin 4.52% 4.65%
The Company's interest rate sensitivity is modeled in the following GAP
Analysis Table. The Table depicts Management's measurement of the average
balance sheet interest rate sensitivity GAP at December 31, 1995. Interest
rate sensitivity results from the timing differences at which assets
and liabilities may be repriced as market rates change. The Company also
utilizes other measurement techniques to analyze interest rate sensitivity.
GAP Analysis Table
(Dollars in Thousands, @ book)
0-365 1-3 3+ Non Interest Total
Days Years Years Bearing
Assets
Cash & Funds $ 2,800 $ - $ - $ - $ 2,800
Securities 13,718 13,059 3,297 - 30,074
Loans 7,154 5,643 17,630 - 30,427
Other Assets - - - 3,569 3,569
Total Assets $23,672 $18,702 $20,927 $3,569 $66,870
Liabilities
Transfer Accts $ 5,391 $ 4,635 $3,091 $ - $13,117
Savings - 4,263 2,843 - 7,106
Certificates 21,151 5,085 917 - 27,153
Other Liabilities
& Capital $ - $ - $ - $19,494 $19,494
Total Liabilities
& CAPITAL $26,542 $13,983 $ 6,851 $19,494 $66,870
Cumulative GAP $(2,870) $ 1,849 $15,925 $ -0-
The Company sold Securities in 1994 resulting in a $122,950 cumulative
loss; sales in 1995 resulted in a $22,950 cumulative loss. In both years,
The Company was repositioning the Securities Portfolio to enhance future
earnings, sell less marketable items and/or effect the Asset-Liability
position.
Allowance and Provision for Loan Losses
The Allowance for Loan Losses is the amount Management determines neces
sary to reduce loans to their estimated collectible amounts and to provide
for future losses in certain loans which are currently unidentified.
The Provision for Loan Losses is the amount charged to current earnings
which are contributed to the Allowance, hereby maintaining the Allowance's
integrity. The Company had a negative 1995 Provision of $77,374, (see
Note E). The following table reflects year end Allowance and Provision
totals:
1995 1994
Allowance for Losses $820,000 $820,000
Provision for Losses $(77,374) $(42,338)
Management utilizes diversification by loan type, borrower, purpose and
industry in combination with individual credit standards to balance the
Company's credit risks. Loans are reviewed to facilitate identification
and monitoring of potentially deteriorating credits. Management considers
the current Allowance adequate to absorb potential losses.
Non-Performing Assets
Non-performing assets include non-accrual loans, restructured loans and
foreclosed assets. Loans are placed on non-accrual when a borrower's financial
position has weakened or the ability to comply with contractual
agreements becomes reasonably doubtful. Restructured loans have had original
contractual agreements renegotiated because of the borrower's apparent
inability to fulfill the contract. In-substance foreclosure loans
have not been foreclosed upon or dationed; however, the collateral securing
these loans, in Management's opinion, have substantially the same
characteristics as Other Real Estate and may become Other Real Estate.
Therefore, all loans classified as in-substance, are carried in Other Real
Estate totals. Other Real Estate, by State Law, is carried at the lower
of cost or current market value for any asset appraised in excess of
$40,000.
The following table represents non-performing and renegotiated assets at
year end:
1995 1994
Non-Accrual Loans $214,200 $178,700
Restructured Loans 69,572 144,090
Other Real Estate 451,770 563,369
Total $735,542 $886,159
The Company maintains an internal Watch List for Management purposes
for loans (both performing and non-performing) that have been identified
as requiring special monitoring. The Watch List consists of accruing,
non-accruing and restructured loans. These loans have characteristics
resulting in Management's concern of the borrower's current ability to
meet the loan contract. Watch List totals at December 31 are:
1995 1994
$1,209,000 $831,000
In 1995, The Company realized a $5,147 Gain on Sale of Other Real Estate,
similar 1994 sales resulted in a $28,877 Gain on Sale.
Other Income
Service Charges on Deposit Accounts is flat for the years under consider
ation. The Company reduced service charge rates in the second quarter of 1995;
however, volume increases were sufficient to offset the rate decrease.
Other Expense
Salaries and Employee benefits increased 8.7% in 1995. The 1995 Salary
Expense represented a 8.1% increase, while health benefits increased
12.6%. In 1995, The Company established a partially self-funded medical
plan which may decrease the rate of future cost increases. Occupancy Expense
decreased 6.2% in 1995, as a result of lower depreciation expense.
The Company remodeled the Central Branch in 1995 and is currently review
ing options for remodeling the Main Office. Regulatory Assessment decreased
43% to $80,827 as a result of legislative required reductions in FDIC
premiums. The Company does not expect the 1996 assessment expense to exceed
$20,000.
Income Tax
The Company was fully taxable in both 1995 and 1994 and expects to remain
so in 1996.
ZACHARY BANCHARES, INC. ZACHARY BANCSHARES, INC BANK LOCATIONS
OFFICERS AND BANK OF ZACHARY
DIRECTORS MAIN OFFICE
4700 Main Street
Harry S. Morris, Jr.
President & C.E.O. Leonard F. Aguillard
Chairman of the Board The Plaza
Winston E. Canning 2210 Hwy 64, Zachary
Secretary Russell Bankston, Vice Chairman
Hardee M. Brian
Winston E. Canning Central Branch
Mark Thompson Rodney S. Johnson 13444 Hooper Rd.
Treasurer Howard L. Martin, M.D. Baton Rouge
Albert C. Mills, III, PhD.
Harry S. Morris, Jr.
BANK OF ZACHARY INFORMATION
OFFICERS
Requests for addi-
Harry S. Morris, Jr. tional information
President & C.E.O. or copies of Form
Director Emeritus 10KSB filed with the
Winston E. Canning R. O. McCraine Securities and Ex-
Executive Vice President A. C. Mills, Jr. change Commission
in Washington,D.C.
Mark Thompson should be directed
Vice President & Cashier to:
Warren Couvillion Chief Financial Officer
Vice President Zachary Bancshares, Inc.
Post Office Box 497
Judy W. Andrews Zachary, LA 70791-0497
Assistant Vice President
Virginia Hillman TRANSFER AGENT
Assistant Vice President & REGISTRAR
Kathleen Parker STOCK INFORMATION Bank of Zachary
Assistant Vice President Post Office Box 497
The Company's stock Zachary, LA 70791
Ethel Mae Womack is not listed on any
Assistant Vice President security exchange.
Therefore, Zachary
Laura Steen Bancshares, Inc. does INDEPENDENT ACCOUNTANTS
Operations Officer not have exchange data
that provides high and Hannis T. Bourgeois &
Melinda White low stock prices. The Co., L.L.P.
Note Supervisor Company did not have Certified Public
& Compliance Officer stock trades in 1995. Accountants
2322 Tremont Drive
There was a cash divi- Suite 200
dend paid in 1995 of Baton Rouge, LA 70809
$1.50 per share and
$1.35 in 1994.
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