P R O X Y S T A T E M E N T
2 0 0 0
Z A C H A R Y B A N C S H A R E S, I N C.
ZACHARY BANCSHARES, INC.
Post Office Box 497
4743 Main Street
Zachary, LA 70791
1-225-654-2701
March 20, 2000
Dear Shareholders:
Your Board of Directors is pleased to invite you to attend
the Annual Meeting of Shareholders of Zachary Bancshares, Inc. on
April 20, 2000 at 2:30 P.M. The meeting will be held in the Bank
of Zachary Community Room on the second floor, at 4743 Main Street,
Zachary, LA.
The Notice of Meeting, Proxy Statement and The Annual Report
of the Company for 1999 are enclosed. The business of the meeting
will be: The election of Company Directors and any other business
that may properly come before the meeting.
During the course of the meeting, Management will report on
current activities of The Company and comment on future plans.
Thank you for your interest and consideration.
Sincerely,
Harry S. Morris, Jr.
President
IMPORTANT
PLEASE SIGN AND RETURN YOUR PROXY IN THE ENCLOSED
ENVELOPE TO AUTHORIZE THE VOTING OF YOUR SHARES.
ZACHARY BANCSHARES, INC.
Post Office Box 497
4743 Main Street
Zachary, LA 70791
1-225-654-2701
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of the
Shareholders of ZACHARY BANCSHARES, INC., (herein referred to as
"The Company") Zachary, Louisiana, will be held at 4743 Main
Street, Zachary, LA on Thursday, April 20, 2000 at 2:30 P.M., for
the following purposes:
To elect Directors.
To transact any other business that may properly come before
the meeting.
Shareholders of record as of the close of business on March
20, 2000 will be entitled to receive notice of and to vote at this
meeting. Each shareholder will be entitled to one (1) vote for each
share of stock outstanding as of the record date (March 16, 2000).
If you do not plan to be present at the meeting and wish to
have your share or shares voted by an authorized agent, please date
and sign the enclosed Proxy and return it in the self addressed
envelope which we have enclosed for your convenience. The Proxy is
revocable and may be revoked by you prior to its exercise in
writing. If you elect to revoke your executed proxy, the
revocation may be delivered to Winston E. Canning, Secretary, 4700
Main Street, (P. O. Box 497), Zachary, LA 70791-0497. Your
cooperation and confidence in The Company's management is sincerely
appreciated.
BY ORDER OF THE BOARD OF DIRECTORS
Harry S. Morris, Jr.
President
Zachary, Louisiana
March 20, 2000
1
ZACHARY BANCSHARES, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Zachary
Bancshares, Inc. herein called "The Company", for the Annual
Meeting of the Shareholders which is to be held at 4743 Main
Street, Zachary, Louisiana, at 2:30 P.M. on Thursday, April 20,
2000.
The only shares that may be voted are the outstanding shares
of common stock at the close of business on March 16, 2000, the
record date of the meeting. Each share is entitled to one vote.
Shares held in The Company's Treasury on that date cannot be voted.
The Proxy which is being solicited by this statement on behalf
of the Board of Directors may be revoked in writing prior to its
exercise.
The Board of Directors anticipates that these Proxy materials
will be mailed to shareholders on or about March 20, 2000.
Any shareholder proposals intended to be presented at the next
annual meeting (April 19, 2001) for inclusion in The Company's
Proxy Statement and form of Proxy relating to that meeting must be
submitted not later than December 6, 2000. All proposals shall be
in writing and addressed to the Board of Directors, Zachary
Bancshares, Inc., P. O. Box 497, Zachary, Louisiana 70791-0497.
All costs of soliciting proxies, including the costs of
preparing and mailing this Proxy Statement, will be borne by The
Company. It is anticipated that solicitations will be made only by
mail; however, certain officers and employees of The Company, who
will receive no additional compensation for their services, may
solicit proxies by telephone, telegraph and personally.
No Directors, nominees for election to the Board of Directors
or Officers of The Company has any substantial interest in any
matter to be acted upon at this meeting other than the election to
office.
ZACHARY BANCSHARES, INC. SHALL PROVIDE TO EACH SHAREHOLDER
SOLICITED HEREBY, ON THE WRITTEN REQUEST OF ANY SUCH SHAREHOLDER, A
COPY OF THE COMPANY'S ANNUAL REPORT OR FORM 10-KSB, INCLUDING THE
FINANCIAL STATEMENTS AND THE SCHEDULES THERETO REQUIRED TO BE FILED
WITH THE SECURITIES EXCHANGE COMMISSION PURSUANT TO ITS REGULATIONS
FOR THE COMPANY'S MOST RECENT FISCAL YEAR. ZACHARY BANCSHARES,
INC. SHALL PROVIDE TO ANY INTERESTED PARTY A COPY OF THE
SUBSIDIARY'S CURRENT ANNUAL DISCLOSURE STATEMENT AS REQUIRED BY
FEDERAL DEPOSIT INSURANCE CORPORATION REGULATION. THE ADDRESS TO
WHICH WRITTEN REQUESTS MAY BE DIRECTED IS AS FOLLOWS:
Zachary Bancshares, Inc.
Post Office Box 497
Zachary, LA 70791-0497
2
MATTERS TO BE CONSIDERED
At the Annual Meeting of The Company's shareholders, the
matters to be considered will include: The election of Company
Directors and any other business that may properly come before the
meeting.
The Management of The Company knows of no other matters (other
than the election of Directors) which may come before this meeting.
However, if any such matters should properly come before this
meeting, it is the intention of the person named in the enclosed
Proxy to vote the Proxy in accordance with his best judgment.
The shares represented by the Proxy hereby solicited will be
voted in accordance with the specifications made on the face of the
Proxy. No Proxy shall confer authority to vote for the election of
any person to any office for which a bona fide nominee is not named
in this Proxy Statement, or to vote at any annual meeting other
than the next annual meeting (or any adjournment thereof) to be
held after the date on which this Proxy Statement and enclosed
Proxy are first sent or given to shareholders. The matters brought
to the shareholders require a simple majority vote for approval.
VOTING SECURITIES AND PRINCIPAL HOLDERS OF VOTING SECURITIES
As of December 31, 1987, 216,000 shares of Zachary Bancshares,
Inc. Common Stock were authorized and issued. These shares
represent the only class of stock. Each share of stock is entitled
to one (1) vote. The date of record for determining voting rights
at the Shareholders' Meeting is March 16, 2000. The Company does
not, as of March 16, 2000 have any principal shareholder(s) (an
individual or entity who owns more than 5% of the outstanding
shares). Shares held in The Company's Treasury on March 16, 2000
cannot be voted.
EXECUTIVE OFFICERS
Director Morris and Director Canning serve The Company and
Bank as Executive Officers. Harry S. Morris, Jr. serves The Company
as a Director and President and the Bank as a Director and
President. Winston E. Canning serves The Company as a Director and
Secretary and the Bank as a Director and Chief Lending Officer. J.
Larry Bellard serves The Company as Treasurer and Bank as Vice
President and Cashier.
3
ELECTION OF DIRECTORS
The Articles of Incorporation of The Company provide that the
number of directors will be set by the By-Laws which currently
provide for a board of not less than five (5) nor more than thirty
(30) persons.
Class I Directors will be elected at this meeting to serve until
2003, or until their successors are duly elected and have
qualified.
It is the intention of the persons named in the accompanying
Proxy to vote in favor of the election of director nominees named
below. If any nominee becomes unavailable for any reason, the
shares represented by the proxies will be voted for such person, if
any, as may be designated by the Board of Directors. Management has
no reason to believe that any nominee will be unavailable.
The information set forth below and on the following page as
to age, principal occupation or employment and amount and nature of
beneficial ownership of common stock of The Company is furnished
for each nominee for election and each director whose term as a
director will continue after the meeting. Unless otherwise
indicated, (1) all such nominees and directors have been with the
same organization in essentially the same position as listed below
for the past five years, and (2) such nominees and directors own,
with sole voting and investment power, the shares listed. The year
listed under the heading "First Elected Director" indicates the
year in which the nominee or director was elected as a Bank of
Zachary Director (which may be prior to the formation of The
Company).
Shares Percent
Principal Occupation First Beneficially of
Name Age or Employment Elected Owned as of Common
Director Dec. 31, 1999 Stock
CLASS I (DIRECTORS NOMINEES: TERMS EXPIRE 2003)
Hardee M.Brian*~ 73 Agribusiness 1982 840 .43
Winston E. Canning*# 55 Exec. Vice President 1984 1,224 .63
(1) of Bank of Zachary
Howard L. Martin M.D.~ 73 Surgeon 1974 567 .29
CLASS II (Directors whose terms expire 2001)
Russell Bankston*~#+ 71 Retired Judge 1971 3,030 1.56
(1)
A. C. Mill,III,Ph.D.* 56 Portable Embryonics,Inc. 1986 1,959 1.00
4
Shares Percent
Principal Occupation First Beneficially of
Name Age or Employment Elected Owned as of Common
Director Dec. 31, 1999 Stock
CLASS III (Directors whose terms expire 2002)
Harry S. Morris, Jr.*# 54 President and Chief 1974 1,164 .60
(1) Executive Officer
of Bank of Zachary
Rodney S. Johnson~ 42 Insurance Agent 1991 820 .42
All directors and executive officers 9,504 4.93
as a group, 7 persons
~ Member of Bank Audit Committee
* Member of Bank Finance Committee
+ Member of Bank Investment Advisory Committee
# Member of Community Reinvestment Act Committee
(1) Shares beneficially owned by Mr. Bankston include 882 owned by his
wife. Mr. Canning's beneficially owned shares include 270 shares
which are in his children's names. Mr. Morris' beneficially owned
shares include 164 shares which are in his children's names.
During 1999, The Company's Board of Directors held a total of seven
meetings. The Board of Directors of The Company has no committees.
The Bank's Board of Directors met thirteen times (twelve regular
and one special meeting) during 1999. All Directors attended
eighty-three percent or more of the aggregate number of meetings of
the Board of Directors of The Company, the Bank, and Committee(s)
of the Board of Directors on which they served with the exception
of A. C. Mills, III who attended sixty percent of the Finance
Committee meetings. Bank Directors were paid $300 per month board
fee. Directors are allowed two paid absences annually. All
Directors received a $1,200 retainer in 1999. The Board of
Directors of the Bank has a Finance Committee, Audit Committee,
Investment Committee and Community Reinvestment Act (CRA)
Committee. The Finance Committee met thirty-three times during
1999 to consider loan applications presented by the Bank's lending
officers. Non-employee Finance Committee members receive $2,400
annually. The Audit Committee met twice during 1999. Maximum
compensation per Audit Committee member was $200 in 1999. The
Investment Committee's responsibility is to provide guidance in
securities transactions. No compensation is provided for members
of this Committee. The CRA Committee which provides direction and
oversight to the applicable Federal Statutes met four times in
1999, and received no compensation. The various Committee
memberships are indicated in the preceding table.
5
STOCK OPTION - INCENTIVE PLANS
The company has no outstanding options, warrants or rights
granted to any individual or entity.
TRANSACTIONS WITH MANAGEMENT
The Bank has had, and expects to have in the future, banking
transactions in the ordinary course of business with directors
and officers on the same terms, including interest rates and
collateral on loans, as those prevailing at the same time for
comparable transactions with others and, in the opinion of the
Bank, not involving more than the normal risk of collectibility
or presenting other unfavorable features.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table discloses the compensation paid during
the past to the Company's executive officers.
Annual Compensation
Name & Principal Year Salary1 Bonus1 Other2 All3
Position Annual Other
Comp. Comp.
Harry S. Morris, Jr. 1999 $98,818 $13,786 $11,060 $5,660
President & CEO 1998 94,074 18,833 11,590 4,798
1997 93,074 7,758 10,807 4,750
Winston E. Canning 1999 $ 89,798 $12,522 $10,167 $5,286
Exec. Vice President 1998 83,741 17,107 10,807 6,036
1997 83,729 5,230 9,991 6,916
1Salary & Bonus -
Mr. Morris' 1997 salary included $9,089.61 deferred compensation
under Internal Revenue Code, Section 401(K), $5,383.99 automobile
benefit and $1,526.62 disability insurance premium.
Mr. Canning's 1999 salary included $8,256.40 deferred
compensation under Internal Revenue Code, Section 401(K),
$1,936.66 automobile benefit, $823.44 Country Club benefit, and
$1,711.29 disability insurance premium.
2Other Annual Compensation - Includes the following Bank Contributions
to:
1999 1998 1997
Mr. Morris'
401(K) Savings Plan $3,712 $3,760 $3,302
Employee Money Purchase Plan $3,712 $3,760 -
Employee Profit Sharing Plan $3,636 $4,070 $7,505
6
1999 1998 1997
Mr. Canning's
401(K) Savings Plan $3,425 $3,517 $3,075
Employee Money Purchase Plan $3,425 $3,517 -
Employee Profit Sharing Plan $3,317 $3,773 $6,916
3All Other Compensation - Includes the following:
1999 1998 1997
Mr. Morris'
Director Compensation $5,100 $4,600 4,600
Term Life Insurance 186 198 150
Accrued Leave Plan 374 - -
Mr. Canning's
Director Compensation $5,100 $4,600 $4,600
Term Life Insurance 186 198 150
Accrued Leave Plan - 1,238 2,166
FINANCIAL STATEMENTS
The consolidated financial statements, management's
discussion and analysis of financial condition and results of
operations included in Zachary Bancshares, Inc. Annual Report to
shareholders for the year ended December 31, 1999 are
incorporated herein by reference. A copy of such Annual Report
is being mailed with this Proxy Statement to each shareholder of
record for the Annual Meeting.
ACCOUNTING SERVICES
The independent public accounting firm retained by the Board
of Directors is Hannis T. Bourgeois & Co., LLP,(HTB) Certified
Public Accountants. HTB has served as the Bank's principal
accounting firm since 1976. It is expected that a representative
of HTB will be present at the Shareholders' Meeting.
HTB performed audit services in 1997 including financial
statement examinations, consultations relevant to regulatory
filings, and preparation of various Federal Tax filings. The
accounting firm also performed professional services in 1996 as
deemed necessary by the Audit Committee or Management. It is
expected that HTB will be retained as accountants for The Company
for the year 2000 forming primarily the same services rendered in
1999.
7
_____________________________________________________________
P L E A S E S I G N
A N D R E T U R N
Y O U R P R O X Y
I M M E D I A T E L Y
IN THE ENCLOSED PRE-ADDRESSED POSTAGE PAID ENVELOPE
____________________________________________________________
PROXY
(THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF
ZACHARY BANCSHARES, INC.)
KNOW ALL PERSONS BY THESE PRESENT, that the undersigned
hereby names, constitutes and appoints Russell Bankston or Rodney
S. Johnson, with full power of substitution, as attorney and
proxy to appear and vote all of the shares of stock outstanding
in my name at the annual Meeting of the Shareholders of Zachary
Bancshares, Inc. to be held at 4743 Main Street, Zachary,
Louisiana on Thursday, April 20, 2000, at 2:30 P.M., and at any
and all adjournments thereof; and the undersigned hereby revokes
any and all previously executed proxies.
The undersigned hereby instructs the said attorney and
proxy to vote said shares as follows:
To vote FOR the nominations and election to the Board of
Directors nominees named in the Proxy Statement dated March 20,
2000, accompanying the Notice of said meeting and this Proxy
namely:
Class I Directors
(Term expires 2003)
Authority Authority Abstain
Granted Withheld Hardee M. Brian
Winston E. Canning
Howard L. Martin, M.D.
ANY SHAREHOLDER MAY WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE BY
LINING THROUGH OR OTHERWISE STRIKING OUT THE NAME OF ANY NOMINEE.
ANY PROXY WHICH IS EXECUTED BY THE SHAREHOLDER IN SUCH A MANNER
AS NOT TO WITHHOLD AUTHORITY, TO VOTE FOR, OR ABSTENTION SHALL BE
DEEMED TO GRANT SUCH AUTHORITY.
To transact any other business that may properly come before
the meeting.
The Board of Directors of Zachary Bancshares, Inc. does not
know, as of the time this Proxy is solicited, of any other
matters which may be presented at the meeting; however, if any
such other matters should come before the meeting, IT IS THE
INTENTION OF THE PERSON NAMED IN THIS PROXY TO VOTE THE PROXY IN
ACCORDANCE WITH HIS BEST JUDGMENT, UNLESS SUCH AUTHORITY IS
WITHHELD.
The undersigned hereby acknowledges receipt of the Proxy
Statement submitted with this Proxy by the Board of Directors of
Zachary Bancshares, Inc., dated March 20, 2000, and acknowledges
that, unless authority is withheld or unless the contrary is so
specified above, the said attorney and proxy shall vote the
shares represented by this Proxy FOR, the nomination and election
to the Board of Directors as named above; and in his discretion
in accordance with his best judgment with respect to any other
matters presented at the meeting.
Dated and signed, on this____________________, 2000
________________________________
(Signature of Shareholder)
PLEASE SIGN AND RETURN YOUR PROXY IMMEDIATELY
IN THE ENCLOSED PRE-ADDRESSED STAMPED ENVELOPE
ZACHARY BANCSHARES, INC. AND SUBSIDIARY
TABLE OF CONTENTS
President's Message................................................ 2
Independent Auditor's Report....................................... 3
Financial Statements:
Consolidated Balance Sheets
December 31, 1999 and 1998.................................... 4
Consolidated Statements of Income
for the years ended December 31, 1999 and 1998............. 5
Consolidated Statements of Changes in Stockholders'
Equity for the years ended December 31, 1999
and 1998............................................. 6
Consolidated Statements of Cash Flows for the
years ended December 31, 1999 and 1998.................. 7-8
Notes to Consolidated Financial Statements
December 31, 1999 and 1998.................................. 9-24
Condensed Consolidated Balance Sheets
December 31, 1999, 1998, 1997, 1996 and 1995............... 25
Condensed Consolidated Statements of Income
for the years ended December 31, 1999, 1998, 1997,
1996, and 1995........................................ 25
Average Balance Sheets and Interest Rate Analysis
for the years ended December 31, 1999 and 1998............. 26
Interest Differential for the year ended December 31, 1999.... 27
Condensed Consolidated Statements of Income
for the quarter periods in the years ended
December 31, 1999 and 1998...................................27- 28
Management's Discussion and Analysis
and Results of Operation...................................29-33
Officers....................................................... 34
Board of Directors............................................. 34
Bank Locations................................................. 34
1
ZACHARY BANCSHARES, INC.
March 20, 2000
Dear Shareholders:
Zachary Bancshares, Inc. had income of $1,215,588 in
1999 as compared to $1,047,660 in 1998. Our Board of
Directors paid a cash dividend of $2.10 in 1999 as compared to
$1.90 in 1998 and our 1999 return on average equity was 13.79%.
The Bank's total assets increased from $83,787,719 as
of December 31, 1998 to $85,295,062 as of December 31, 1999.
Total loans grew from $52,372,002 in 1998 to $61,252,111 in
1999.
In 1999, we moved into our new main office building,
and sold our old buildings and parking lots. As one of the few
community banks left in the area, the Bank of Zachary continues
to offer friendly convenient service and new products such as
our 50 plus checking account and interest plus checking.
To insure more convenience for our banking customers,
we will add Internet Banking and an electronic Bill Payment
System in the second quarter of 2000. In the fourth quarter,
the Bank will add Statement Imaging so that you can view your
statements and see copies of your canceled checks on your
computer.
In October, the Bank hired Preston L. Kennedy as a Vice
President. Mr. Kennedy comes to us from another area bank
where he held several titles during his 21 year association
with that bank, culminating with his being named President
and Chief Executive Officer in 1995. He grew up in
Zachary and is an ardent supporter of community banking.
Pres has served as a Director for the Community Bankers of
Louisiana and for the Independent Community Bankers of America.
I want to personally thank our directors, officers and
employees for making 1999 such a good year for the Bank
and especially thank our employees for their extra effort in
moving to a new building, working under adverse conditions, and
continuing to do a great job.
Once again, I thank you our shareholders. Please come by
and see our new building if you haven't had a chance and have a
coke or cup of coffee.
Sincerely,
Harry S. Morris, Jr.
President
2
HANNIS T. BOURGEOIS, LLP
CERTIFIED PUBLIC ACCOUNTANTS
2322 TREMONT DRIVE, SUITE 200
BATON ROUGE, LA 70809
January 07, 2000
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, 1999 and 1998, 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 manage
ment. 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 presenta
tion. 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, 1999 and 1998, 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,
3
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
ASSETS
1999 1998
Cash and Due from Banks $ 3,160,518 $ 2,815,507
Interest Bearing Deposits in
Other Institutions 29,267 1,701,873
Reserve Funds Sold 1,425,000 6,175,000
Securities Available for Sale (Amortized
Cost of $15,876,106 and $17,563,961) 15,432,869 17,572,539
Loans 61,252,111 52,372,002
Less: Allowance for Loan Losses (965,384) (858,856)
60,286,727 51,513,146
Bank Premises and Equipment 4,156,820 3,067,869
Other Real Estate 44 191,592
Accrued Interest Receivable 501,863 518,258
Other Assets 301,954 231,935
Total Assets $85,295,062 $83,787,719
LIABILITIES
Deposits
Noninterest Bearing $17,848,229 $17,636,206
Interest Bearing 55,717,622 56,814,190
73,565,851 74,450,396
Borrowed Funds 2,000,000 -
Accrued Interest Payable 194,329 231,360
Other Liabilities 121,433 203,202
Total Liabilities 75,881,613 74,884,958
STOCKHOLDERS' EQUITY
Common Stock - $10 par value;
authorized 2,000,000 shares;
issued 216,000 shares 2,160,000 2,160,000
Surplus 1,480,000 1,480,000
Retained Earnings 6,512,646 5,703,759
Accumulated Other Comprehensive Income (292,537) 5,662
Treasury Stock - 22,333 Shares, at Cost (446,660) (446,660)
Total Stockholders' Equity 9,413,449 8,902,761
Total Liabilities and Stockholders'
Equity $85,295,062 $83,787,719
The accompanying notes are an integral part of these financial statements
4
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1999 and 1998
1999 1998
Interest Income:
Interest and Fees on Loans $5,151,434 $4,450,667
Interest on Securities 1,032,582 1,352,543
Other Interest Income 246,444 288,461
Total Interest Income 6,430,460 6,091,671
Interest Expense:
Interest Expense on Deposits 2,257,709 2,324,265
Interest Expense on Borrowings 24,130 681
Total Interest Expense 2,281,839 2,324,946
Net Interest Income 4,148,621 3,766,725
Provision for Loan Losses 180,000 190,565
Net Interest Income after
Provision for Loan Losses 3,968,621 3,576,160
Other Income:
Service Charges on Deposit Accounts 524,072 497,413
Gain on Sales of Premises & Equipment 381,137 -
Loss on Securities (104,783) -
Other Operating Income 154,042 167,651
Total Other Income 954,468 665,064
Income before Other Expenses 4,923,089 4,241,224
Other Expenses:
Salaries and Employee Benefits 1,643,378 1,485,386
Occupancy Expense 250,463 185,397
Net Other Real Estate Expense 45,075 12,366
Other Operating Expenses 1,116,546 973,973
Total Other Expenses 3,055,462 2,657,122
Income before Income Taxes 1,867,627 1,584,102
Applicable Income Tax 652,039 536,442
Net Income $1,215,588 $1,047,660
Per Share
Net Income $ 6.28 $ 5.41
Cash Dividends $ 2.10 $ 1.90
The accompanying notes are an integral part of these financial statements.
5
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
for the years ended December 31, 1999 and 1998
ACCUMULATED
OTHER TOTAL
COMMON RETAINED COMPREHENSIVE TREASURY STOCKHOLDERS'
STOCK SURPLUS EARNINGS INCOME STOCK EQUITY
Balances,
January 1, 1998$2,160,000 $1,480,000$5,024,066 $(2,671) $(446,660) $8,214,735
Comprehensive Income:
Net Income 1,047,660 1,047,660
Change in Unrealized
Gain (Loss) on Securities
Available for Sale 8,333 8,333
Less: Reclassification
Adjustment - -
Total Comprehensive
Income 1,055,993
(367,967) (367,967)
Balances,
December 31,1998 $2,160,000 $1,480,000 $5,703,759 $ 5,662 $(446,660)$8,902,761
Comprehensive Income:
Net Income 1,215,588 1,215,588
Change in Unrealized
Gain (Loss) on Securities
Available for Sale (402,982) (402,982)
Less: Reclassification
Adjustment 104,783 104,783
Total Comprehensive
Income 917,389
Cash Dividends (406,701) (406,701)
Balances,
December 31 1999$2,160,000 $1,480,000 $6,512,646 $(292,537)$(446,660)$9,413,449
The accompanying notes are an integral part of these financial statements.
6
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1999 and 1998
1999 1998
Cash Flows From Operating Activities:
Net Income $ 1,215,588 $1,047,660
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Deferred Tax Benefit (88,900) (27,678)
Provision for Loan Losses 180,000 190,565
Provision for Depreciation and Amortization 277,369 202,714
Stock Dividends on Federal Home Loan Bank Stock (18,400) (17,500)
Net Amortization (Accretion )Securities Discounts 22,796 (2,335)
Charge Off of Other Real Estate 92,613 -
Gain on Sale of Other Real Estate (49,158) -
Gain on Sales of Bank Premises & Equipment (381,137) -
Loss on Sale of Securities 104,783 -
Decrease in Accrued Interest Receivable 16,395 40,243
(Increase) Decrease in Other Assets 135,682 (162,796)
Increase (Decrease) in Accrued Interest Payable (37,031) 43,172
Increase (Decrease) in Other Liabilities (44,953) 4,622
Net Cash Provided by Operating Activities 1,425,647 1,318,667
Cash Flows From Investing Activities:
Net (Increase) Decrease in Reserve Funds Sold 4,750,000 (4,475,000)
Purchases of Securities Available for Sale (13,371,824) (885,998)
Maturities or Calls of Securities
Available for Sale 10,500,000 5,500,000
Principal Payments on Mortgage Backed Securities 2,815,820 3,466,034
Net (Increase) in Loans (8,953,581) (6,334,008)
Purchases of Premises and Equipment (1,559,183) (1,576,696)
Proceeds from Sales of Other Real Estate 148,093 25,809
Proceeds from Sale of Bank Premises & Equipment 574,000 -
Proceeds from Sales of Securities
Available For Sale 1,897,179 -
Purchase of Other Equity Securities (262,500) -
Net Cash Used in Investing Activities (3,461,996) (4,279,859)
(CONTINUED)
7
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
for the years ended December 31, 1999 and 1998
1999 1998
Cash Flows From Financing Activities:
Increase in Borrowed Funds 2,000,000 -
Net Increase in Demand Deposits, NOW Accounts
and Savings Accounts 599,871 4,394,721
Net Increase in Certificates of Deposit (1,484,416) 874,903
Cash Dividends (406,701) (367,967)
Net Cash Provided by Financing Activities 708,754 4,901,657
Increase (Decrease) in Cash and Interest
Bearing Deposits (1,327,595) 1,940,465
Cash and Interest Bearing
Deposits -Beginning of Year 4,517,380 2,576,915
Cash and Interest Bearing
Deposits-End of Year $ 3,189,785 $ 4,517,380
Supplemental Disclosures of Cash Flow Information:
Noncash Investing Activities:
Change in Unrealized Gain or (Loss)
on Securities Available for Sale $ (451,816) $ 12,626
Change in Deferred Tax Effect on
Unrealized Gain or (Loss) on Securities
Available for Sale $ 153,617 $ (4,293)
Cash Payments for:
Interest Paid on Deposits $ 2,318,870 $ 2,281,093
Income Tax Payments $ 735,000 $ 549,500
The accompanying notes are an integral part of these financial statements.
8
Zachary Bancshares, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
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 prin
ciples 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 stock
holders' 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.
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 indepen
dent 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.
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
9
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 that
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, 1999 or
1998.
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 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. Securities available for sale are carried at fair value.
Unrealized gains or losses are reported as increases or decreases in stock
holders' 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 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 infor
mation 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 manage
ment'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
10
agencies; an internal asset review process; expectations of future economic
conditions and their impact on particular borrowers; and other judgmental
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 collecti
bility 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 deprecia
tion. 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 foreclosure
or negotiated settlement. The carrying value of these properties 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 taxes
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
11
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
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
December 31, 1999, 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 years ended December 31, 1999 and
1998, respectively.
Statements of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents includes
cash on hand and amounts due from banks. Comprehensive Income The Financial
Accounting Standards Board (FASB) issued Statement No. 130 "Reporting Comprehen
sive Income." which became effective for fiscal years beginning after December
15, 1997. This statement established standards for the reporting and display
of comprehensive income and its components, which are revenues, expenses, gains,
and losses that under GAAP are included in comprehensive income but excluded
from net income. The Company adopted this statement in 1998. The components
of comprehensive income are disclosed in the Statements of Changes in Stock
holder's Equity for all periods presented.
Current Accounting Developments
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which establishes standards for the
reporting of financial information from operating segments in annual and
interim financial statements. SFAS No. 131 requires that financial information
be reported on the same basis that it is reported internally for evaluating
segment performance and allocating resources to segments. The adoption of
this statement had no effect on the financial statements as of December 31,
1999.
In February 1998, the FASB issued Statement No. 132, "Employers' Dis
closures about Pensions and Other Postretirement Benefits. FASB Statement
No. 132 revises employers' disclosures about pension and other postretirement
benefit plans. It does not change the measurement or recognition of
12
those plans. It standardizes the disclosure requirements for pensions and other
postretirement benefits. The adoption of this statement in 1999 had no
material impact on the Company's financial position or results of operations.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The provisions of this statement were
effective for the Company's year end December 31, 1999. The adoption of this
statement had no effect on the Company's fnancial position or results of
operations.
Note B - Cash and Due from Banks -
The Bank is required by federal law to maintain cash reserve balances.
The average cash balance required for 1999 and 1998 was $719,000 and $616,000,
respectively.
Note C - Securities -
Amortized cost amounts and fair values of securities available for sale at
December 31, 1999 and 1998 are summarized as follows:
1999
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
Securities of Other
U.S. Government
Agencies $10,011,502 $ - $(406,902) $9,604,600
Mortgage-Backed
Securities 5,000,739 2,538 (35,664) 4,967,613
Collateralized Mortgage
Obligations 250,865 - (3,209) 247,656
Equity Securities 613,000 - - 613,000
Total $15,876,106 $ 2,538 $(445,775) $15,432,869
1998
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
Securities of Other
U.S. Government
Agencies $ 9,011,142 $ 61,958 $ - $ 9,073,100
Mortgage-Backed
Securities 4,625,166 43,356 (2,931) 4,665,591
Collaterized Mortgage
Obligations 3,595,553 - (93,805) 3,501,748
Equity Securities 332,100 - - 332,100
Total $17,563,961 $ 105,314 $ (96,736) $17,572,539
13
The amortized cost and fair values of securities available for
sale as of December 31, 1999 by contractual maturity are shown below.
Maturities may differ from contractual maturities in mortgage-backed
securities and collateralized mortgage obligations because the mort
gages underlying the securities may be called or repaid without any
penalties. Therefore, these securities are not included in the matu
rity categories in the following maturity summary.
AMORTIZED FAIR
COST VALUE
Within One Year $ 498,511 $ 498,300
One to Five Years 3,499,196 3,393,400
Five to Ten Years 6,013,795 5,712,900
$10,011,502 $9,604,600
Securities available for sale with a fair value of $14,477,426
and $15,462,474 at December 31, 1999 and 1998, 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 Bank is required
to hold these securities in order to have access to the funding
products offered by the FHLB. The cost of these securities was
$350,500 with no unrealized gains or loss at December 31, 1999.
The Bank has purchased securities issued by First National Bankers
Bankshares, Inc. The cost of these securities was $262,500 which
approximates the market value at December 31, 1999.
Gross realized gains and losses from the sale of securities for
the years ended December 31, 1999 and 1998 are as follows:
1999 1998
Realized Gains $ - $ -
Realized Losses (104,783) -
$(104,783) $ -
Note D - Loans -
An analysis of the loan portfolio at December 31, 1999 and 1998,
is as follows:
1999 % of 1998 % of
Balances Loans Balances Loans
Real Estate Loans - Construction $ 9,462,680 15.45% $ 5,086,020 9.71%
Real Estate Loans - Mortgage 30,093,732 49.13 26,824,063 51.22
Loans to Farmers 34,653 .06 63,370 .12
Commercial and Industrial Loans 17,715,666 28.92 17,142,525 32.73
Loans to Individuals 3,740,770 6.11 3,127,188 5.97
All Other Loans 204,610 .33 128,836 .25
Total Loans $61,252,111 100.00% $52,372,002 100.00%
14
The Bank had non-performing loans on a non-accrual basis totaling
$223,147 and $126,829 at December 31, 1999 and 1998, respectively. The
Bank recognized $4,407 and $4,455 in interest income relating to these
loans during the years ended December 31, 1999 and 1998. Had the loans
been performing, approximately $8,892 and $5,811 of additional interest
income would have been recognized for the years ended December 31, 1999
and 1998. Loans contractually past due 90 days or more, in addition to
loans on non-accrual, were $138,713 and $26,631 at December 31, 1999
and 1998, respectively. The Company has no impaired loans at December
31, 1999, 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 these
loans was $498,540 and $540,254 at December 31, 1999 and 1998,
respectively. An analysis of the aggregate of these loans for 1999, is
as follows:
Balance - Beginning of Year $ 540,254
New Loans 92,915
Repayments (134,629)
Balance - End of Year $ 498,540
Note E - Allowance for Loan Losses -
Following is a summary of the activity in the allowance for loan losses:
1999 1998
Balance - Beginning of Year $ 858,856 $ 771,850
Current Provision from Income 180,000 190,565
Recoveries of Amounts Previously
Charged Off 35,424 46,281
Amounts Charged Off (108,896) (149,840)
Balance - End of Year $ 965,384 $ 858,856
Ratio of Reserve for Possible Loan Losses to
Non-Performing Loans at End of Year 432.62% 677.18%
Ratio of Reserve for Possible Loan Losses
to Loans Outstanding at End of Year 1.58% 1.64%
Ratio of Net Loans Charged Off to Average
Loans Outstanding for the year .13% .21%
15
Note F - Bank Premises and Equipment -
Bank premises and equipment costs and the related accumulated depreciation
at December 31, 1999 and 1998, are as follows:
ACCUMULATED
ASSET COST DEPRECIATION NET
December 31, 1999:
Land $ 399,703 $ - $ 399,703
Bank Premises 2,965,458 163,376 2,802,082
Furniture and Equipment 2,035,351 1,080,316 955,035
$5,400,512 $1,243,692 $4,156,820
December 31, 1998:
Land $ 450,908 $ - $ 450,908
Bank Premises 743,265 492,410 250,855
Furniture and Equipment 1,687,232 1,097,050 590,182
Construction in Progress 1,775,924 - 1,775,924
$4,657,329 $1,589,460 $3,067,869
The provision for depreciation charged to operating expenses
was $277,369 and $202,714, respectively, for the years ended December
31, 1999 and 1998. The construction in progress amount in 1998
represented the cost to date of the new main office facility. This
facility was completed in the second quarter of 1999 at a total cost
of $3,239,041 including furniture and equipment.
Note G - Deposits -
Following is a detail of deposits:
1999 1998
Demand Deposit Accounts $17,848,229 $17,636,206
NOW and Super NOW Accounts 12,298,314 11,489,734
Money Market Accounts 3,232,272 3,987,876
Savings Accounts 8,824,606 8,489,733
Certificates of Deposit Over $100,000 14,055,936 15,716,515
Certificates of Deposit 17,306,494 17,130,332
$73,565,851 $74,450,396
Following is a detail of certificate of deposit maturities as of
December 31, 1999:
December 31, 2000 $26,953,296
December 31, 2001 2,541,063
December 31, 2002 443,768
December 31, 2003 928,352
December 31, 2004 & After 495,951
Total Certificates of Deposit $31,362,430
16
Interest expense on certificates of deposit over $100,000 for the
years ended December 31, 1999 and 1998, amounted to $777,952 and
$904,665, respectively.
Public fund deposits at December 31, 1999 and 1998, were
$10,466,810 and $13,437,325, respectively.
Note H - Stockholders' Equity and Regulatory Matters -
Stockholders' Equity of the Company includes the undistributed
earnings of the Bank. 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, 2000, the Bank had retained earnings of
$7,057,443 of which $1,443,291 was available for distribution without
prior regulatory approval.
The Company and the Bank are subject to various regulatory capital
requirements administered by federal and state banking agencies.
Failure to meet minimum regulatory capital requirements can initiate
certain mandatory, and possible additional discretionary actions by
regulators, that if undertaken, could have a direct material affect on
the Company's financial statements. Under the capital adequacy
guidelines and the regulatory framework for prompt corrective action,
the Company and the Bank must meet specific capital guidelines involving
quantitative measures of assets, liabilities, and certain off-balance-
sheet items as calculated under regulatory accounting practices. The
Company and the Bank's capital amounts and classification under the
prompt corrective action guidelines are also subject to qualitative
judgments by regulators about components, risk weightings and other
factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company to maintain minimum amounts and ratios. As
detailed below, as of December 31, 1999 and 1998, the Company met all of
the capital requirements to which it is subject.
As of December 31, 1999 and 1998, the Company was categorized as
well capitalized under the regulatory framework for prompt corrective
action. There are no conditions or events since the most recent
notification that management believes have changed the prompt corrective
action category.
17
Following is a summary of capital levels at December 31, 1999 and
1998:
TO BE WELL
CAPITALIZED UNDER
ACTUAL REQUIRED FOR CAPITAL PROMPT CORRECTIVE
RATIOS ADEQUACY PURPOSES ACTION PROVISIONS
As of December 31,
1999:
Total Capital (to
Risk-Weighted
Assets) 17.82% 8.00% 10.00%
Tier I Capital(to
Risk-Weighted
Assets) 16.57% 4.00% 6.00%
Tier I Leveraged
Capital (to
Average Assets) 10.79% 4.00% 5.00%
TO BE WELL
CAPITALIZED UNDER
ACTUAL REQUIRED FOR CAPITAL PROMPT CORRECTIVE
RATIOS ADEQUACY PURPOSES ACTION PROVISIONS
As of December 31,
1998:
Total Capital(to
Risk-Weighted
Assets) 18.12% 8.00% 10.00%
Tier I Capital(to
Risk-Weighted
Assets) 16.87% 4.00% 6.00%
Tier I Leveraged
Capital(to
Average Assets) 10.42% 4.00% 5.00%
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, 1999 and 1998.
Note I - Employee Benefit Plans -
The Bank of Zachary has two plans which provide employee
retirement benefits. The Bank has a defined contribution Profit Shar
ing 401K Plan Trust and a Money Purchase Retirement Plan. Each year
the Board of Directors of the Bank determines the total contribution to
be made to the plans. This contribution is then allocated to the
components of the retirement plans in order to obtain the maximum
benefit for all employees. No contribution is required by eligible
participants.
18
The Profit Sharing 401K Plan includes two components. The 401K
component allows eligible employees to 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 1999 and
1998. The profit sharing component of this plan receives an
additional allocation as determined by the Board of Directors.
In December 1998, the Bank implemented a Money Purchase
Retirement Plan, to which the Bank makes a contribution of 3% of pay
for each eligible employee. This plan is funded from Bank
contributions prior to funding the Profit Sharing Plan.
The contributions charged to retirement expense for the
plans in 1999 and 1998 are shown below:
1999 1998
401K Bank Match $32,875 $29,740
Profit Sharing Contribution 26,276 20,760
Money Purchase Plan Contribution 36,849 34,500
Total Retirement Expense $96,000 $85,000
Note J - Other Operating Expenses -
An analysis of Other Operating Expenses for the years ended
December 31, 1999 and 1998, is as follows:
1999 1998
Data Processing $ 36,154 $ 33,496
Computer and Office Expenses 362,894 310,841
Professional Fees 183,102 173,378
Other 534,396 456,258
$1,116,546 $ 973,973
Note K - Income Tax -
The total provision for income taxes charged to income amounted
to $652,039 and $536,442 for 1999 and 1998, respectively. The provi
sions represent effective tax rates of 34% in 1999 and 1998.
Following is a reconciliation between income tax expense based
on the federal statutory tax rates and income taxes reported in the
statements of income.
1999 1998
Income Taxes Based on Statutory
Rate - 34% in 1999 and 1998 $ 634,993 $ 538,595
Other - Net 17,046 (2,153)
$ 652,039 $ 536,442
19
The components of consolidated income tax expense are:
Provision for Current Taxes $ 740,939 $ 564,120
Provision(Credit)for
Deferred Taxes (88,900) (27,678)
$ 652,039 $ 536,442
A deferred income tax asset of $205,701 is included in other
assets at December 31, 1999 and a deferred income tax liability of
$36,817 is included in other liabilities at December 31, 1998.
The deferred tax provision consists of the following timing differ
ences:
1999 1998
Accumulated Depreciation for Tax
Reporting in Excess of Amount
for Financial Reporting $ (4,830) $ 24,228
Provision for Loan Losses
for Financial Reporting in
Excess of Amount for Tax (37,070) (43,745)
Accretion Income for Tax Reporting in
Excess of Financial Reporting (17,300) (6,045)
Hospitalization Expense for Financial
Reporting in Excess of Amount for
Tax Reporting (13,300) (2,116)
Write Down of Other Real Estate for
Financial reporting purposes in
Excess of amount of tax reporting
Purposes (28,600) -
FHLB Dividends for financial reporting
Purposes in excess of the amount for
Tax reporting purposes 12,200 -
$(88,900) $(27,678)
The net deferred tax liability consist of the following components
at December 31, 1999 and 1998:
1999 1998
Depreciatio n $(64,500) $(69,330)
Provision for Loan Losses 74,700 37,630
Accretion Income (3,000) (20,300)
Self-Insured Hospitalization Plan 31,400 18,100
Write Down of Other Real Estate 28,600 -
FHLB Stock Dividends (12,200) -
Unrealized (Gain) Loss on Securities
Available for Sale 150,701 (2,917)
Total Deferred Tax Asset (Liability) $205,701 $(36,817)
20
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 commit
ments to extend credit and letters of credit. These instruments in
volve, 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 commitments and conditional obligations
as they do for on-balance-sheet instruments.
In the normal course of business the Bank has made commitments
to extend credit of $8,281,479 and $8,519,300 as of December 31,
1999 and 1998, respectively. Commitments as of December 31, 1999
include unfunded loan commitments aggregating $8,212,679 and letters
of credit of $ 68,800. Commitments as of December 31, 1998 include
unfunded loan commitments totaling $8,387,000 and letters of credit
of $132,300.
The Bank has three lines of credit available as of December 31,
1999 to assist in the management of short-term liquidity. One line
is with its correspondent bank and totals $2,100,000. The second is
with the Federal Home Loan Bank of Dallas and totals $10,858,426.
Funds advanced on this line are secured by 1-4 family mortgage loans.
The third line available is through the Federal Reserve Discount
Window for up to $5,434,614. This line is also secured by 1-4 family
mortgage loans. At December 31, 1999, $2,000,000 was drawn on the
Federal Home Loan Bank as part of the Bank's Y2K liquidity
preparations. This advance matures in January of 2000.
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 avail
able for sale is based on quoted market prices. 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.
21
Commitments to Extend Credit and Standby Letters of Credit -
The fair values of commitments to extend credit and standby letters of
credit do not differ significantly from the commitment amount and are
therefore omitted from this disclosure.
The estimated approximate fair values of the Bank's financial
instruments as of December 31, 1999 and 1998 are as follows:
1999
CARRYING FAIR
AMOUNT VALUE
Financial Assets:
Cash and Short-Term Investments $ 4,614,785 $ 4,614,785
Securities 15,432,869 15,432,869
Loans-Net 60,286,727 59,167,727
$80,334,381 $79,215,381
Financial Liabilities:
Deposit $73,565,851 $71,374,851
Borrowed Funds 2,000,000 1,995,000
$75,565,851 $73,369,851
1998
CARRYING FAIR
AMOUNT VALUE
Financial Assets:
Cash and Short-Term Investments $10,692,380 $10,692,380
Securities 17,572,539 17,572,539
Loans-Net 51,513,146 51,366,000
$79,778,065 $79,630,919
Financial Liabilities:
Deposits $74,450,396 $72,889,000
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 $1,000,000.
Note O - Commitments and 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.
22
Note P - Financial Information - Parent Company Only -
The financial statements for Zachary Bancshares, Inc. (Parent
Company) are presented below:
BALANCE SHEETS
December 31, 1999 and 1998
1999 1998
Assets:
Cash $ 448,543 $ 412,816
Investment in Subsidiary 8,964,906 8,489,945
Other Assets 4,129 27,678
Total Assets $9,417,578 $8,930,439
Liabilities:
Income Tax Payable $ 4,129 $ 27,678
Due to Subsidiary - -
Total Liabilities $ 4,129 $ 27,678
Stockholders' Equity:
Common Stock $2,160,000 $2,160,000
Surplus 1,480,000 1,480,000
Retained Earnings 6,220,109 5,709,421
Treasury Stock (446,660) (446,660)
Total Stockholders' Equity $9,413,449 $8,902,761
Total Liabilities and Stockholders'
Equity $9,417,578 $8,930,439
STATEMENTS OF INCOME
for the years ended December 31, 1999 and 1998
1999 1998
Income:
Dividend from Subsidiary $ 450,000 $ 384,300
Expenses:
Operating Expenses 10,601 11,228
Income before Equity in Undistributed
Net Income of Subsidiary 439,399 373,072
Equity in Undistributed Net Income
of Subsidiary 773,160 670,130
Net Income before Income Taxes 1,212,559 1,043,202
Applicable Income Tax Expense (Benefit) (3,029) (4,458)
Net Income $1,215,588 $1,047,660
23
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1999 and 1998
1999 1998
Cash Flows From Operating Activities:
Net Inco me $1,215,588 $1,047,660
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Equity in Undistributed Net Income
of Subsidiary (773,160) (670,130)
(Increase) Decrease in Other Assets 23,549 (27,678)
Decrease in Due to Subsidiary - (20,620)
Increase in Income Tax Payable (23,549) 21,619
Net Cash Provided by Operating Activities 442,428 350,851
Cash Flows From Financing Activities:
Dividends Paid (406,701) (367,967)
Net Cash Used in Financing Activities (406,701) (367,967)
Net Increase (Decrease) in Cash 35,727 (17,116)
Cash - Beginning of Year 412,816 429,932
Cash - End of Year $ 448,543 $ 412,816
24
Zachary Bancshares, Inc. and Subsidiary
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1999, 1998, 1997, 1996 and 1995
ASSETS
1999 1998 1997 1996 1995
Cash and Due
from Banks $ 3,189,785 $ 4,517,380 $ 2,576,915 $ 3,766,270 $ 2,413,042
Securities 16,857,869 23,747,539 27,320,114 33,378,819 32,774,648
Loans 60,286,727 51,513,146 45,369,723 36,439,826 29,607,051
Other Assets 4,960,681 4,009,654 2,538,928 2,442,512 2,075,694
Total Assets $85,295,062 $83,787,719 $77,805,680 $76,027,427 $66,870,435
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $73,565,851 $74,450,396 $69,180,772 $68,169,269 $59,356,525
Borrowed Funds 2,000,000 - - - -
Other Liabilities 315,762 434,562 410,173 246,282 346,503
Stockholders'
Equity 9,413,449 8,902,761 8,214,735 7,611,876 7,167,407
Total Liabilities
and Stockholders'
Equity $85,295,062 $83,787,719 $77,805,680 $76,027,427 $66,870,435
Selected Ratios:
Loans to Assets 70.68% 61.48% 58.31% 47.93% 44.27%
Loans to Deposits 81.95% 69.19% 65.58% 53.45% 49.88%
Deposits to Assets 86.25% 88.86% 88.91% 89.66% 88.76%
Equity to Assets 11.04% 10.63% 10.56% 10.01% 10.72%
Return on Avg Assets 1.42% 1.29% 1.23% 1.11% 1.14%
Return on Avg Equity 13.79% 12.71% 11.71% 11.50% 12.13%
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1999, 1998, 1997, 1996 and 1995
1999 1998 1997 1996 1995
Interest Income $ 6,430,460 $ 6,091,671 $ 5,472,682 $ 5,119,871 $4,684,130
Interest Expense 2,281,839 2,324,946 2,148,247 2,126,280 1,826,859
Net Interest Income 4,148,621 3,766,725 3,324,435 2,993,591 2,857,271
Provision (Credit)
for Loan Losses 180,000 190,565 30,854 - (77,374)
Net Interest after
Provision for
Loan Losses 3,968,621 3,576,160 3,293,581 2,993,591 2,934,645
Other Income 954,468 665,064 658,468 600,993 542,664
Other Expenses 3,055,462 2,657,122 2,555,235 2,362,389 2,326,014
Income before
Income Taxes 1,867,627 1,584,102 1,396,814 1,232,195 1,151,295
Applicable Income
Tax Expense 652,039 536,442 469,412 412,869 385,512
Net Income $ 1,215,588 $1,047,660 $ 927,402 $ 819,326 $ 765,783
Per Share:
Net Income $ 6.28 $ 5.41 $ 4.79 $ 4.23 $ 3.95
Cash Dividends $ 2.10 $ 1.90 $ 1.75 $ 1.65 $ 1.50
Book Value -
End of Year $ 48.61 $ 45.97 $ 42.42 $ 39.30 $ 37.01
2
25
Zachary Bancshares, Inc. and Subsidiary
AVERAGE BALANCE SHEETS AND INTEREST RATE ANALYSIS
for the years ended December 31, 1999 and 1998
1999 1998
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
ASSETS
Interest Earning Deposits
and Reservse Funds $ 5,053,389 $ 246,444 4.88% $ 5,474,365 $ 288,461 5.27%
Securities:
Taxable 17,111,116 1,032,582 6.03 22,013,923 1,352,543 6.14
Loans 56,988,909 5,151,434 9.04 48,987,560 4,450,667 9.09
Total Earning Assets 79,153,414 6,430,460 8.12% 76,475,848 6,091,671 7.97%
Allowance for Loan
Losses (915,634) (795,754)
Nonearning Assets 7,601,829 5,775,238
Total Assets $85,839,609 $81,455,332
LIABILITIES AND
STOCKHOLDERS' EQUITY
FHLB Borrowings $ 403,562 $ 24,130 5.98% $ 13,151 $ 681 5.18%
Savings/NOW Accounts 21,405,603 576,919 2.70 19,143,843 539,028 2.82
Insured Money Market
Accounts 3,617,054 71,809 1.99 4,411,314 86,917 1.97
Certificates
of Deposit 32,173,293 1,608,981 5.00 32,627,785 1,698,320 5.21
Total Interest Bearing
Liabilities 57,599,512 2,281,839 3.96% 56,196,093 2,324,946 4.14%
Demand Deposits 18,907,066 16,355,885
Other Liabilities 518,986 657,854
Stockholders' Equity 8,814,045 8,245,500
Total Liabilities
and Stockholders'
Equity $85,839,609 $81,455,332
Net Interest Income $4,148,621 $3,766,725
Net Interest Income - Spread 4.16% 3.83%
Net Interest Income as a percent
of Total Earning Assets 5.24% 4.93%
26
Zachary Bancshares, Inc. and Subsidiary
INTEREST DIFFERENTIAL
for the year ended December 31, 1999
1999 OVER 1998
CHANGE TOTAL
ATTRIBUTABLE TO INCREASE
VOLUME RATE (DECREASE)
Interest Earning Assets:
Reserve Funds Sold $ (22,247) $(19,770) $ (42,017)
Securities (301,086) (18,875) (319,961)
Loans 728,291 (27,524) 700,767
Total Interest Income 404,958 (66,169) 338,789
Interest Bearing Liabilities:
Bank Borrowings 20,222 3,227 23,449
Savings and NOW Accounts 63,679 (25,788) 37,891
Insured Money Market Accounts (15,739) 631 (15,108)
Certificates of Deposit (22,727) (66,612) (89,339)
Total Interest Expense 45,435 (88,542) (43,107)
Increase in Interest
Differential $ 359,523 $ 22,373 $ 381,896
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
for the quarter periods in the year ended December 31, 1999
1999
4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER
Interest Income $1,687,663 $1,641,445 $1,586,804 $1,514,548
Interest Expense 598,788 575,687 563,093 544,271
Net Interest Income 1,088,875 1,065,758 1,023,711 970,277
Provision for
Loan Losses 45,370 45,370 44,876 44,384
Net Interest Income
after Provision
for Loan Losses 1,043,505 1,020,388 978,835 925,893
Other Income 72,028 560,707 165,536 156,197
Other Expenses 795,175 764,591 727,295 768,401
Income before
Income Taxes 320,358 816,504 417,076 313,689
Applicable Income Tax
Expense 126,866 277,657 142,524 104,992
Net Income $ 193,492 $ 538,847 $ 274,552 $ 208,697
Per Share:
Net Income $ 1.00 $ 2.78 $ 1.42 $ 1.08
Cash Dividends $ 1.10 $ - $ 1.00 $ -
27
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
for the quarter periods in the year ended December 31, 1998
1998
4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER
Interest Income $1,600,194 $1,534,864 $1,511,388 $1,445,225
Interest Expense 576,072 592,926 591,611 564,337
Net Interest Income 1,024,122 941,938 919,777 880,888
Provision for
Loan Losses 63,079 52,134 51,567 23,785
Net Interest Income
after Provision
for Loan Losses 961,043 889,804 868,210 857,103
Other Income 169,168 175,634 161,966 158,296
Other Expenses 665,135 694,491 651,506 645,990
Income before
Income Taxes 465,076 370,947 378,670 369,409
Applicable Income Tax
Expense 159,547 131,760 122,910 122,225
Net Income $ 305,529 $ 239,187 $ 255,760 $ 247,184
Per Share:
Net Income $ 1.57 $ 1.24 $ 1.32 $ 1.28
Cash Dividends $ 1.00 $ - $ .90 $ -
28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company evaluates its financial strength through continual
review of management, asset quality, capital, earnings and li
quidity.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 1999 and 1998. 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 Capi
tal requirements for 1999 and 1998 was 8.0%. Regulatory Leverage
Ratio requirements was 4% for the same time period. The Company's
Tier 1 Leveraged Capital to Average Assets Ratio (below)includes
the effect of the unrealized gain or loss on securities discussed
in Note C. The Company's ratios as of December 31 are as follow:
1999 1998
Total Capital to Risk Weighted Assets 17.82% 18.12%
Tier 1 Capital to Risk Weighted Assets 16.57% 16.87%
Tier 1 Leveraged Capital to Average Assets 10.79% 10.42%
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
1999 $1,215,588 $406,701 67%
1998 $1,047,660 $367,967 65%
The Company distributed to shareholders, cash dividends of $2.10
and $1.90 per share in 1999 and 1998, 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
ensure its ability to meet current and future depositor require
ments and loan funding commitments. The Company does not antici
pate difficulties in meeting funding obligations.
29
RESULTS OF OPERATIONS
Overview
Zachary Bancshares, Inc.'s (ZBI) net income for 1999 was
$1,215,588 compared to $1,047,660 for 1998 or a 16% increase.
ZBI's income stream is from core banking products and services.
ZBI continues to benefit from strong regional and local economies
and expects continued growth. The following table indicates ZBI's
equity position and balance sheet trends. The effect of the
unrealized gain or loss on securities discussed in Note C is
included in the Stockholders' Equity data.
Growth Trends
(year to year in $ and %)
1999 to 1998 1998 to 1997
Stockholders' Equity $ 510,688 or 5.7% $ 688,026 or 8.4%
Average Assets $4,384,277 or 5.4% $6,159,332 or 8.2%
Earnings Analysis
The Company's 1999 Net Interest Income increased 10.1%. Net
Interest Income in 1999 was $4,148,621 compared to $3,766,725 for
1998.
Average earning assets were $79,153,414 in 1999 compared to
$76,475,848 in 1998. The following table depicts the Company's
average earning assets components in thousands of dollars and the
respective percentage relationship.
1999 1998
Reserve & FHLB Funds $ 5,053 6% $ 5,474 7%
Securities 17,111 22% 22,014 29%
Loans 56,989 72% 48,988 64%
Average Earning Assets $79,153 100% $76,476 100%
The previous table indicates growth in average earning assets.
Management actively pursued increases in the Company's loan
portfolio in 1999 and 1998. The majority of the Company's loans are
secured by local, single family dwellings, with a fixed rate and 5
year balloon repricing terms.
Average interest bearing liabilities were $57,599,512 in 1999
compared to $56,196,093 in 1998. The following table depicts the
Company's average interest bearing liability components and the
respective percentage relationship, dollars in thousands.
1999 1998
Borrowed Funds $ 404 1% $ 13 0%
Savings & NOW 21,406 37% 19,144 34%
Money Market 3,617 6% 4,411 8%
Certificates 32,173 56% 32,628 58%
Average Interest Bearing
Liabilities $57,600 100% $56,196 100%
30
Marketing emphasis has been on checking products that fit the
people's needs in the local community while emphasizing the
Company's community bank orientation. Free checking for depositors
50 years or older and student checking accounts are two examples of
how the Company has adjusted its product mix to increase the
checking customer base. The Company plans to offer an internet
banking product and a new tiered rate checking account in 2000
while still maintaining its community flexibility and local
control.
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 net
interest income as a percent of average earning assets.
1999 1998
Net Interest Spread 4.16% 3.83%
Net Interest Margin 5.24% 4.93%
The Company's interest rate sensitivity is measured quarterly
and considered by the board and management. Interest rate
sensitivity results from the timing differences at which assets
and liabilities may be repriced as market rates change. The
Company utilizes various measurement techniques to analyze and
predict interest rate sensitivity. The Company's cumulative GAP
(Interest Rate Sensitive Assets\Interest Rate Sensitive
Liabilities) on December 31, 1999 was -20.31 at the one year time
horizon and -12.5% at the 24 month time horizon. The 12 month GAP
indicates $15,857,000 more liabilities will reprice than assets.
The 24 month horizon will reprice $9,726,000 more liabilities than
assets.
The Company uses computer simulation to predict the net interest
margin change at various interest rate shifts. The fourth quarter
1999 simulation indicates the Company's net interest margin will
change by less than 7.00% if interest rates move up or down 3% at
the 12 month horizon.
The Company sold Collateralized Mortgage Obligations in 1999
resulting in a loss of $104,783. There were no sales of securities
in 1998. These securities were sold in 1999 to reposition the
investment portfolio to earn more in the future.
Bank Premises and Equipment
Bank Premises and Equipment increased $1,088,951 to $4,156,820
at December 31, 1999 from $3,067,869 at December 31, 1998. The
Company completed a contract totaling $2,920,806 for the
construction of a new main office facility located in Zachary,
Louisiana. Construction of the facility began in March, 1998 and
was completed during the second quarter of 1999.
31
Allowance and Provision for Loan Losses
The Allowance for Loan Losses is the amount Management deems nec
essary 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 following table reflects year end
Allowance and Provision totals:
1999 1998
Allowance for Losses $965,384 $858,856
Provision for Losses $180,000 $190,565
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. Other Real Estate, by State Law, is carried
at the lower of cost or current market value for any asset ap
praised in excess of $40,000.
The following table represents non-performing and renegotiated
assets at year end:
1999 1998
Non-Accrual Loans $223,147 $126,829
Restructured Loans - -
Other Real Estate 44 191,592
Total $223,191 $318,421
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:
1999 1998
$1,597,000 $1,474,000
In 1999, the Company realized a $49,158 gain on the sale of
other real estate, similar 1998 sales resulted in a $299 gain.
Charge offs of Other Real Estate totaled $92,613 in 1999 and were
$-0- in 1998.
32
Other Income
Total other income increased 44% to $954,468 at December 31,
1999 from $665,064 at December 31, 1998. This increase included
the gain on sale of premises of $381,137 as the Company sold its
old headquarters to the City of Zachary after completing
construction of a new facility. Other Income totals also include
service charges on deposit accounts which were $524,072 for 1999
and $497,413 in 1998. Other Operating Income includes fee income
from investment sales which the Company received under the terms of
a contract with a third party which offers discount brokerage
service at the Company's facility.
Other Expense
Salaries and employee benefits increased 10.6% to $1,643,378
compared to $1,485,386 in 1998. Occupancy expense increased 35.1%
to $250,463 from $185,397 in 1998. Other operating expenses
increased 14.6% as a half year of depreciation and other expenses
related to the Company's new main office facility are reflected in
the 1999 figures. Year 2000 (Y2K) expenses accounted for $36,154 of
the increase in other operating expense.
Income Tax
The Company's income was fully taxable in both 1999 and 1998 and
expects to remain so in 2000.
The Year 2000
The Bank formed a Year 2000 committee to identify and provide
for potential costs and uncertainties related to the Year 2000 date
change. "Mission-critical" systems as well as business-resumption
contingency plans were implemented and tested. The Year 2000
threshold was crossed with no problems encountered to date that
effected significantly the Company's liquidity, capital resources,
or results of operation. The Bank will remain vigilant for the
remainder of the year 2000 for any undiscovered date change
problems. Costs expensed in 1999 related to the Year 2000 issue
were not material.
The discussion entitled "Year 2000" includes certain "forward-
looking statements" within the meaning of the Private Securities
Litigation Relief Act of 1995 (PSLRA). This statement is included
for the purpose of availing the Company of the protections of the
safe harbor provisions of the PSLRA. Management's ability to
predict the total effects of Year 2000 issued 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 completely identify all software and hardware
applications that require remediation, unexpected costs, and
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.
33
ZACHARY BANCSHARES, INC. ZACHARY BANCSHARES, INC. BANK LOCATIONS
OFFICERS AND BANK OF ZACHARY
DIRECTORS MAIN OFFICE
Harry S. Morris, Jr. 4743 Main Street
President & C.E.O. Russell Bankston Zachary, LA
Chairman of the Board
Winston E. Canning PLAZA BRANCH
Secretary Rodney S. Johnson 2110 HWY 64
Vice Chairman Zachary, LA
J. Larry Bellard
Treasurer Hardee M. Brian CENTRAL BRANCH
Winston E. Canning 13444 Hooper Road
BANK OF ZACHARY Howard L. Martin, M.D. Baton Rouge, LA
OFFICERS Albert C. Mills, III, PhD.
Harry S. Morris, Jr.
Harry S. Morris, Jr.
President & C.E.O. Directors Emeritus
A. C. Mills, Jr.
Winston E. Canning Leonard F. Aguillard INFORMATION
Executive Vice President
Request for additional
J. Larry Bellard STOCK INFORMATION information or copies
Vice President & Cashier of Form 10KSB filed
The Company's stock is with the Securities
Gerard R. "Bubba" Beatty not on any security and Exchange Commission
Vice President exchange. Therefore, in Washington, D. C.
does not have exchange should be directed to:
Warren Couvillion data that provides high
Vice President and low stock prices. Chief Financial Officer
Zachary Bancshares, Inc
Preston L. Kennedy Cash dividends paid were Post Office Box 497
Vice President $2.10 per share in 1999 Zachary, LA 70791-0497
and $1.90 in 1998.
Judy W. Andrews TRANSFER AGENT
Assistant Vice President & REGISTRAR
INDEPENDENT ACCOUNTANTS
Ethel M. Womack Bank of Zachary
Assistant Vice President Hannis T. Bourgeois, LLP Post Office Box 497
Certified Public Accountants Zachary, LA 70791-0497
Laura Steen 2322 Tremont Dr., Suite 200
Operations Officer Baton Rouge, LA 70809
Melinda White
Note Supervisor
& Compliance Officer
Sandra Worthy
Operations Officer
Cindy Chaisson
Administrative Assistant
Fonda Funderburk
Administrative Assistant
34
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 3161
<INT-BEARING-DEPOSITS> 29
<FED-FUNDS-SOLD> 1425
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 15433
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 61252
<ALLOWANCE> (965)
<TOTAL-ASSETS> 8595
<DEPOSITS> 73566
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2316
<LONG-TERM> 0
0
0
<COMMON> 2160
<OTHER-SE> 7253
<TOTAL-LIABILITIES-AND-EQUITY> 9413
<INTEREST-LOAN> 5151
<INTEREST-INVEST> 1033
<INTEREST-OTHER> 246
<INTEREST-TOTAL> 6430
<INTEREST-DEPOSIT> 2258
<INTEREST-EXPENSE> 24
<INTEREST-INCOME-NET> 4148
<LOAN-LOSSES> 180
<SECURITIES-GAINS> (105)
<EXPENSE-OTHER> 3055
<INCOME-PRETAX> 1868
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1216
<EPS-BASIC> 6.28
<EPS-DILUTED> 0
<YIELD-ACTUAL> 5.31
<LOANS-NON> 223
<LOANS-PAST> 1597
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 859
<CHARGE-OFFS> 109
<RECOVERIES> 35
<ALLOWANCE-CLOSE> 965
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 965
</TABLE>
