SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10 - QSB
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter ended June 30, 2000 Commission File Number 13397
Zachary Bancshares, Inc.
(Exact name of registrant as specified in its charter)
Louisiana 72-0981148
(State of or other jurisdiction (I.R.S. Employer Incorporation
of organization) or Identification No.)
4743 Main Street
Post Office Box 497
Zachary, LA 70791-0497
(Address of principal executive office) (Zipcode)
Registrant's telephone number, including area code 225 654 2701
NONE (Former
name, former address and former fiscal
year of change since last report)
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
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $10 par value, 193,667 shares outstanding as of June 30,
2000.
I N D E X
Financial Statements:
Consolidated Balance Sheets -
June 30, 2000, December 31, 1999 and June 30, 1999 2
Consolidated Statements of Income -
for the three and six months ended June 30, 2000 and 1999 3
Consolidated Statements of Changes in Stockholders' Equity -
for the six months ended June 30, 2000 and 1999 4
Consolidated Statements of Cash Flows -
for the six months ended June 30, 2000 and 1999 5-6
Notes to Consolidated Financial Statements 7-10
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-13
Part II - Other Information 14
Signatures 15
Management's Responsibility for Financial Reporting 16
Independent Accountant's Report 17
1
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
June 30, 2000, December 31, 1999 and June 30, 1999
($ in Thousands)
ASSETS
(UNAUDITED) (UNAUDITED)
JUNE 30, DECEMBER 31, JUNE 30,
2000 1999 1999
Cash and Due from Banks $2,954 $ 3,161 $ 3,227
Interest Bearing Deposits
in Other Institutions 11 29 1,740
Reserve Funds Sold 2,100 1,425 2,950
Securities Available for Sale (Amortized
Cost $15,789, $15,876 and $18,371) 15,320 15,433 18,132
Loans 63,014 61,252 56,656
Less: Allowance for Loan Losses (1,078) (965) (913)
61,936 60,287 55,743
Bank Premises and Equipment 4,025 4,157 4,271
Accrued Interest Receivable 517 502 537
Other Assets 346 301 168
Total Assets $ 87,209 $85,295 $86,768
LIABILITIES
Deposits:
Noninterest Bearing $ 19,566 $17,848 $18,997
Interest Bearing 56,417 55,718 58,388
75,983 73,566 77,385
Borrowed Funds 1,000 2,000 -
Accrued Interest Payable 202 194 196
Other Liabilities 242 122 159
Total Liabilities 77,427 75,882 77,740
STOCKHOLDERS' EQUITY
Common Stock - $10 Par Value;
Authorized 2,000,000 Shares;
Issued 216,000 Shares, Respectively 2,160 2,160 2,160
Surplus 1,480 1,480 1,480
Retained Earnings 6,899 6,513 5,993
Accumulated Other Comprehensive Income (310) (293) (158)
Treasury Stock (22,333 Shares at Cost) (447) (447) (447)
Total Stockholders' Equity 9,782 9,413 9,028
Total Liabilities and
Stockholders' Equity $87,209 $85,295 $86,768
The accompanying notes are an integral part of these financial statements.
2
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
for the three and six months ended
June 30, 2000 and 1999
($ in Thousands, except per share data)
(UNAUDITED) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
Interest Income:
Interest and Fees on Loans $1,413 $1,248 $2,817 $2,428
Interest on Securities 259 261 508 523
Other Interest Income 31 78 79 150
Total Interest Income 1,703 1,587 3,404 3,101
Interest Expense:
Interest Expense on Deposits 587 563 1,147 1,107
Interest Expense on Borrowings 18 - 42 -
Total Interest Expense 605 563 1,189 1,107
Net Interest Income 1,098 1,024 2,215 1,994
Provision for Loan Losses 70 45 129 89
Net Interest Income After Provision
for Loan Losses 1,028 979 2,086 1,905
Other Income:
Service Charges on Deposit Accounts 154 122 297 239
Other Operating Income 51 43 97 83
Total Other Income 205 165 394 322
Income before Other Expenses 1,233 1,144 2,480 2,227
Other Expenses:
Salaries and Employee Benefits 449 391 901 769
Occupancy Expense 83 49 161 97
Net Other Real Estate Expense (60) 1 (82) 82
Other Operating Expenses 291 286 593 548
Total Other Expenses 763 727 1,573 1,496
Income before Income Taxes 470 417 907 731
Applicable Income Taxes 160 142 308 248
Net Income $ 310 $ 275 $ 599 $ 483
Per Share:
Net Income $ 1.60 $ 1.42 $ 3.09 $ 2.49
Cash Dividends $ 1.10 $ 1.00 $ 1.10 $ 1.00
The accompanying notes are an integral part of these financial statements.
3
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
for the six months ended June 30, 2000 and 1999
($ in Thousands)
ACCUMULATED
OTHER TOTAL
COMMON RETAINED COMPREHENSIVE TREASURY STOCKHOLDERS'
STOCK SURPLUS EARNINGS INCOME STOCK EQUITY
Balances,
January 1, 1999 $2,160 $1,480 $5,704 $ 6 $(447) $8,903
Comprehensive Income:
Net Income 483 483
Change in Unrealized
Gain (Loss) on
Securities Available
for Sale (164) (164)
Less: Reclassification
Adjustment - -
Total Comprehensive
Income 319
Cash Dividends (194) (194)
Balances, (Unaudited)
June 30, 1999 $2,160 $1,480 $5,993 $ (158) $(447) $9,028
Balances,
January 1, 2000 $2,160 $1,480 $6,513 $ (293) $(447) $9,413
Comprehensive Income:
Net Income 599 599
Change in Unrealized
Gain (Loss) on Securities
Available for Sale (17) (17)
Less: Reclassification
Adjustment - -
Total Comprehensive
Income 582
Cash Dividends (213) (213)
Balances, (Unaudited)
June 30, 2000 $2,160 $1,480 $6,899 $ (310) $(447) $9,782
The accompanying notes are an integral part of these financial statements.
4
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 2000 and 1999
($ in Thousands)
(UNAUDITED)
JUNE 30
2000 1999
Cash Flows From Operating Activities:
Net Income $ 599 $ 483
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Loan Losses 129 89
Provision for Depreciation and Amortization 165 104
Stock Dividends - Federal Home Loan Bank (21) (5)
Net Amortization (Accretion) of Securities (11) 16
Charge Off of Other Real Estate - 93
Gain on Sale of Other Real Estate (85) (11)
(Increase) in Accrued Interest Receivable (15) (19)
(Increase) Decrease in Other Assets (35) 145
Increase (Decrease) in Accrued Interest Payable 8 (36)
Increase (Decrease) in Other Liabilities 120 (42)
Net Cash Provided by Operating
Activities 854 817
Cash Flows From Investing Activities:
Net(Increase)Decrease in Reserve Funds Sold (675) 3,225
Purchase of Securities Available for Sale (969) (8,786)
Maturities or Calls of Securities Available for Sale 500 6,000
Principal Payments on Mortgaged Back Securities 588 1,968
Net Increase in Loans (1,778) (4,319)
Purchases of Premises and Equipment (33) (1,307)
Proceeds from Sales of Other Real Estate 85 110
Net Cash Used in Investing Activities (2,282) (3,109)
(CONTINUED)
5
(UNAUDITED)
JUNE 30,
2000 1999
Cash Flows From Financing Activities:
Decrease in Borrowed Funds (1,000) -
Net Increase in Demand Deposits,
NOW Accounts and Savings Accounts 2,352 3,637
Net Increase in Certificate of Deposit 64 (702)
Cash Dividends (213) (194)
Net Cash Provided by Financing Activities 1,203 2,741
Increase (Decrease) in Cash and Cash Equivalents (225) 449
Cash and Cash Equivalents -
Beginning of Period 3,190 4,518
Cash and Cash Equivalents -
End of Period $ 2,965 $ 4,967
Supplemental Disclosures of Cash Flow
Information:
Noncash Investing Activities:
Change in Unrealized Gain or (Loss)
on Securities Available for Sale $ (26) $ (248)
Change in Deferred Tax Effect on
Unrealized Gain or (Loss) on Securities
Available for Sale $ ( 9) $ 84
Cash Payments For:
Interest Paid on Deposits $ 1,139 $ 1,143
Income Tax $ 334 $ 315
The accompanying notes are an integral part of these financial statements.
6
Zachary Bancshares, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 2000 and 1999
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.
Presentation
The accompanying unaudited consolidated interim financial statements
do not include all of the information and footnotes required by
generally accepted accounting principles. Management is of the opinion
that the unaudited interim financial statements reflect all normal,
recurring accrual adjustments necessary to provide a fair statement of
the results for the interim periods presented. It is noted that the
results for the first six months ended June 30, 2000 are no indication
of the expected results for the annual period which ends December 31,
2000. Additional information concerning the audited financial
statements and notes can be obtained from Zachary Bancshares, Inc.'s
annual report and Form 10-KSB filed for the period ended December 31,
1999.
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 gener
ally accepted accounting principles requires management to make esti
mates 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.
The determination of the adequacy of the allowance for loan
losses is based on estimates that are particularly susceptible to
significant changes in the economic environment and market
conditions. In connection with the determination of the estimated
losses on loans, management obtains independent appraisals for
significant collateral.
The Bank's loans are generally secured by specific items of
collateral including real property, consumer assets, and business
assets. Although the Bank has a diversified loan portfolio, a
substantial portion of its debtors' ability to honor their contracts
is dependent on local economic conditions.
7
While management uses available information to recognize losses on
loans, further reductions in the carrying amounts of loans may be
necessary based on changes in local economic conditions. In
addition, regulatory agencies, as an integral part of their
examination process, periodically review the estimated losses on
loans. Such agencies may require the Bank to recognize additional
losses based on their judgments about information available to them
at the time of their examination. Because of these factors, it is
reasonably possible that the estimated losses on loans may change
materially in the near term. However, the amount of the change that
is reasonably possible cannot be estimated.
Securities
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 gen
eral economic conditions. Securities classified as trading are those
securities held for resale in anticipation of short-term market move
ments. The Bank had no securities classified as held to maturity or
trading at June 30, 2000 or 1999.
Securities classified as available for sale are those debt securi
ties 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 significant 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. Secu
rities 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 allow
ance for loan losses. Interest on commercial and individual loans is
accrued daily based on the principal outstanding.
Generally, 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 status, previously recognized but
uncollected interest is reversed to income or charged to the allowance
for loan losses. Interest income is subsequently recognized only to
the extent cash payments are received. The Bank classifies loans as
impaired if, based on current information and events, it is probable
that the Bank will be unable to collect the scheduled payments of
principal and interest when due according to the contractual terms of
the loan agreement. The measurement of impaired loans is based on the
present value of the expected future cash flows discounted at the
loan's effective interest rate or the loan's observable market price or
based on the fair value of the collateral if the loan is collateral-
dependent.
Allowance for Loan Losses
The allowance for loan losses is maintained at a level which in
management's judgment is adequate to absorb credit losses inherent 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
8
factors. Allowances for impaired loans are generally determined based
on collateral values or the present value of estimated cash flows.
Although management uses available information to recognize losses on
loans, because of uncertainties associated with local economic
conditions, collateral values, and future cash flows on impaired loans,
it is reasonably possible that a material change could occur in the
allowance for loan losses in the near term. However, the amount of the
change that is reasonably possible cannot be estimated.
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 un
likely. 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 reporting.
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 fore
closure or negotiated settlement. The carrying value of these prop
erties is lower of cost or fair value, minus estimated costs to sell.
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. 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 utilizing a liability method 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
9
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 in
dividually by the Company in accordance with state statutes.
Earnings per Common Share
Basic EPS is computed by dividing income applicable to common
shares by the weighted average shares outstanding; no dilution for any
potentially convertible shares is included in the calculation.
Diluted EPS, reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock
that then shared in the earnings of the Company. At June 30, 2000, the
Company had no convertible shares or other contracts to issue common
stock. The weighted average number of shares of common stock used to
calculate basic EPS was 193,667 for the periods ended June 30, 2000 and
1999, respectively.
Statements of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents in
cludes cash and due from banks and interest bearing deposits in other
banks.
Comprehensive Income
Components of comprehensive income are revenues, expenses, gains,
and losses that under GAAP are included in comprehensive income but
excluded from net income. The components of comprehensive income are
disclosed in the Statements of Changes in Stockholder's Equity for all
periods presented.
10
Zachary Bancshares, Inc. and Subsidiary
MANAGEMENT'S DISCUSSION
June 30, 2000
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of the signifi
cant changes in income and expenses in relation to the changes in fi
nancial position for the six months ended June 30, 2000 and 1999. This
information should be read in conjunction with the financial statements
and the notes relating thereto. 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.
FINANCIAL CONDITION ANALYSIS -
Unaudited - ($ in Thousands)
Loans
Total loans were $63,014 at June 30, 2000 compared to $56,656 at June
30, 1999. This represents an increase of $6,358 or 11%. Loan growth
was funded from reallocation of investment securities as they matured
and from deposit growth.
Investment Securities
Investment securities decreased 16% to $15,320 at June 30, 2000
compared to $18,132 at June 30, 1999. This decrease was due to the
reallocation of these funds to the loan portfolio as the securities
matured, and payments made on the building contract discussed below.
Bank Premises and Equipment
Total bank premises and equipment were $4,025 at June 30, 2000 compared
to $4,271 at June 30, 1999. The Company completed a contract totaling
$2,921 for the construction of a new main office facility located in
Zachary, Louisiana. Construction began in March, 1998 and was
completed during the second quarter of 1999.
11
Deposits
Total deposits decreased $1,402 or 2% to $75,983 at June 30, 2000
compared to $77,385 at June 30, 1999 as the bank bid less aggressively
on public funds that were renewing.
RESULTS OF OPERATION
For the Six Month Period Ended June 30, 2000 over 1999
Net Income
Net Income was $599 for the six month period ended June 30, 2000
compared to $483 in the same period in 1999. This change was primarily
due to an 11% increase in net interest income offset by a 5% increase
in other overhead expense. The Company moved into their new building
during the latter part of the second quarter of 1999 which has resulted
in additional occupancy expenses primarily depreciation compared to the
prior period.
Interest Income
Interest Income for the six month period ended June 30, 2000 increased
10% to $3,404 compared to $3,101 for the same period in 1999. The
interest income increase resulted from the Company's continued asset
mix reallocation from lower yielding securities to higher yielding
loans. The bank's loan portfolio increased 11% to $63,014 while its
investment portfolio decreased 16% to $15,320 in the time period under
consideration.
Interest Expense
Interest Expense for the six months ended June 30, 2000 was $1,189 or
an increase of 7% over the same period in 1999 at $1,107. Non-interest
bearing deposits increased $569 to $19,566 at June 30, 2000 from
$18,997 at June 30, 1999. Interest bearing deposits decreased to
$56,417 at June 30, 2000 from $58,388 as the bank bid less aggressively
on public fund CDs than in the past. Weighted average deposit rates
increased to 3.10% at June 30, 2000 from 2.97% at June 30, 1999 as
interest rate hikes in the general U.S. economy have led to higher
rates in the local market for CDs.
Provision for Loan Losses
The Company included $129 for provision for loan losses during the six
month period ended June 30, 2000 due to continued increases in the loan
portfolio and the beginnings of tightening in the general economy.
Loans are reviewed to facilitate identification and monitoring of
potentially deteriorating credit. Management considers the current
allowance adequate to absorb potential losses but continues to monitor
the situation very closely.
12
Total Other Expense
Total Other Expenses increased 5% or $77 to $1,573 at June 30, 2000
from $1,496 at June 30, 1999.
Employee salaries and benefits increased $132 for the six months ended
June 30, 2000 compared to the same period in 1999. Salary increases,
new hires, and increased hospitalization insurance and retirement
expenses all contributed to this increase. Occupancy expense increased
$64 for the period reviewed as the Company occupied its new building
resulting in additional depreciation expense along with other overhead
expenses relating to a larger facility.
Income Tax
The Company's income is fully taxable at the maximum rate (34%) both in
2000 and 1999 and expects to remain taxable at the current rate
throughout 2000.
Earnings Per Share
The Company's 2000 earnings per share at June 30, 2000 was $3.09
compared to $2.49 per share the previous year.
Year 2000 Issues
The Year 2000 threshold was crossed without any problems encountered to
date that effected significantly the Company's liquidity, capital
resources, or results of operation. The Company will remain vigilant
for the remainder of the year 2000 for any undiscovered date change
problems.
This discussion entitled "Year 2000 Issues" includes certain "forward
looking statements" within the meaning of the Private Securities
Litigation Act of 1995 (PSLA). This statement is included for the
purpose of availing the Company of the protections of the safe harbor
provisions of the PSLA. Management's ability to predict the results of
the effects of Year 2000 issues is inherently uncertain and subject to
factors that may cause actual results to materially differ from those
anticipated. Factors that could affect actual results include the
possibility that contingency plans and remediation efforts will not
operate as intended, the Bank's failure to timely or completely
identify all software and hardware applications that require
remediation, unexpected costs, and the general uncertainty associated
with the impact of Year 2000 issues on the banking industry, the Bank's
customers, vendors, and others with whom it conducts business. Readers
are cautioned not to place undue reliance on these forward looking
statements.
13
PART II
Item l. LEGAL PROCEEDINGS
During 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.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. None
14
SIGNATURES
Pursuant to the requirement of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ZACHARY BANCSHARES, INC.
Date: August 11, 2000 /s/ Harry S. Morris, Jr.
Harry S. Morris, Jr.
President
/s/ Larry Bellard
Larry Bellard
Treasurer
15
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 quarterly report. The financial statements
are prepared in accordance with generally accepted accounting princi
ples and include some amounts that are necessarily based on manage
ment's informed estimates and judgments, with consideration given to
materiality. All financial information contained in this quarterly
report is consistent with that in the financial statements.
Management fulfills its responsibility for the integrity, objec
tivity, 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 author
ized and recorded in accordance with established policies and proce
dures. 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 controls, Zachary Bancshares, Inc. has a profes
sional 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, 1999 were examined by
Hannis T. Bourgeois, LLP, independent public accountants, who rendered
an independent professional opinion. The financial statements as of
June 30, 2000 were reviewed by Hannis T. Bourgeois, LLP.
Larry Bellard, Treasurer
16
INDEPENDENT ACCOUNTANT'S REPORT
August 08, 2000
To the Shareholders and Board of Directors
Zachary Bancshares, Inc. and Subsidiary
Zachary, Louisiana
We have reviewed the accompanying Consolidated Balance Sheets of
Zachary Bancshares, Inc. and Subsidiary as of June 30, 2000 and 1999,
and the related Consolidated Statements of Income for the three and six
month periods then ended, and the related Consolidated Statements of
Changes in Stockholders' Equity and Cash Flows for the six month
periods then ended.
We previously audited and expressed our unqualified opinion in our
report dated January 7, 2000 on the Consolidated Balance Sheet of
Zachary Bancshares, Inc. and Subsidiary as of December 31, 1999.
We conducted our reviews in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of obtaining an
understanding of the system for the preparation of interim financial
information, applying analytical review procedures to financial data,
and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
examination in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our reviews, we are not aware of any material modifications
that should be made to the accompanying consolidated financial
statements for them to be in conformity with generally accepted
accounting principles.
Respectfully submitted,
HANNIS T. BOURGEOIS, LLP
Baton Rouge, Louisiana
17
