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 March 31, 2002 Commission File Number 2-89559
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, Louisiana 70791-0497
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code 225 654 2701
None
(Former name, former address and former fiscal
year if changed 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, $10 par value, 193,667 shares outstanding as of March 31, 2002.
I N D E X
Financial Statements:
Consolidated Balance Sheets - March 31, 2002,
December 31, 2001 and March 31, 2001 2
Consolidated Statements of Income - for the three
months ended March 31, 2002 and 2001 3
Consolidated Statements of Changes in Stockholders'
Equity - for the three months ended March 31,
2002 and 2001 4
Consolidated Statements of Cash Flows -
for the three months ended March 31, 2002 and 2001 5-6
Notes to Consolidated Financial Statements 7-10
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-12
Part II - Other Information 13
Signatures 13
Management's Responsibility for Financial Reporting 14
Independent Accountant's Report 15
1
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
March 31, 2002, December 31, 2001 and March 31, 2001
($ in Thousands)
ASSETS
(UNAUDITED) (UNAUDITED)
March 31, December 31, March 31,
2002 2001 2001
Cash and Due from Banks $ 2,940 $ 2,719 $ 3,466
Interest Bearing Deposits in
Other Institutions 30 33 4,030
Reserve Funds Sold 3,450 925 8,025
Securities Available for Sale
(Amortized Cost $34,046,
$31,025 and $13,057) 33,892 31,249 13,240
Total Loans 55,431 58,720 60,434
Less: Allowance for Loan Losses (1,317) (1,297) (1,195)
Net Loans 54,114 57,423 59,239
Bank Premises and Equipment 3,528 3,557 3,825
Other Real Estate Owned 8 28 -
Accrued Interest Receivable 744 602 527
Other Assets 340 178 208
Total Assets $99,046 $96,714 $92,560
LIABILITIES
Deposits:
Noninterest Bearing $19,569 $18,370 $19,672
Interest Bearing 67,583 66,704 61,585
87,152 85,074 81,257
Borrowed Funds - - -
Accrued Interest Payable 188 207 269
Other Liabilities 312 116 252
Total Liabilities 87,652 85,397 81,778
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 8,303 7,976 7,468
Accumulated Other Comprehensive
Income (Loss) (102) 148 121
Treasury Stock (22,333 Shares at Cost) (447) (447) (447)
Total Stockholders' Equity 11,394 11,317 10,782
Total Liabilities and
Stockholders' Equity $99,046 $96,714 $92,560
The accompanying notes are an integral part of these financial statements.
2
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
for the three months ended March 31, 2002 and 2001
($ in Thousands) except per share data
(UNAUDITED)
MARCH 31,
2002 2001
Interest Income:
Interest and Fees on Loans $1,210 $1,395
Interest on Securities 435 220
Other Interest Income 27 122
Total Interest Income 1,672 1,737
Interest Expense:
Interest Expense on Deposits 522 709
Interest Expense on Borrowings - -
Total Interest Expense 522 709
Net Interest Income 1,150 1,028
Provision for Loan Losses 74 59
Net Interest Income After
Provision for Loan Losses 1,076 969
Non Interest Income:
Service Charges on Deposit Accounts 171 160
Other Operating Income 68 53
Total Other Income 239 213
Income before Other Expenses 1,315 1,182
Other Expenses:
Salaries and Employee Benefits 459 442
Occupancy Expense 54 56
Equipment Expense 84 96
Net Other Real Estate Expense (23) -
Other Operating Expenses 251 213
Total Other Expenses 825 807
Income before Income Taxes 490 375
Applicable Income Taxes 164 126
Net Income $ 326 $ 249
Per Share:
Net Income $ 1.68 $ 1.29
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 three months ended March 31, 2002 and 2001
($ in Thousands)
ACCUMULATED
OTHER
COMMON RETAINED COMPREHENSIVE TREASURY TOTAL
STOCK SURPLUS EARNINGS INCOME(LOSS) STOCK EQUITY
Balances,
January 1, 2001 $2,160 $1,480 $7,219 $ (9) $(447) $10,403
Comprehensive Income:
Net Income 249 249
Change in Unrealized
Gain (Loss) on Securities
Available for Sale 130 130
Less: Reclassification Adjustment
Total Comprehensive Income 379
Cash Dividends - -
Balances,(Unaudited)
March 31, 2001 $2,160 $1,480 $7,468 $ 121 $(447) $10,782
Balances,
January 1, 2002 $2,160 $1,480 $7,977 $ 148 $(447) $11,318
Comprehensive Income:
Net Income 326 326
Change in Unrealized
Gain (Loss) on Securities
Available for Sale (250) (250)
Less: Reclassification Adjustment - -
Total Comprehensive Income 76
Cash Dividends - -
Balances, (Unaudited)
March 31, 2002 $2,160 $1,480 $8,303 $ (102) $(447) $11,394
The accompanying notes are an integral part of these financial statements.
4
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2002 and 2001
($ in Thousands)
(UNAUDITED)
March 31,
2002 2001
Cash Flows From Operating Activities:
Net Income $ 326 $ 249
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Deferred Tax Benefit - (2)
Provision for Loan Losses 74 59
Provision for Depreciation and Amortization 76 79
Stock Dividends - Federal Home Loan Bank - (5)
Net Amortization (Accretion) of Securities 11 1
(Gain) on Sale of Other Real Estate (24) -
(Increase) Decrease in Accrued Interest Recv (142) 21
(Increase) in Other Assets (34) (58)
Increase (Decrease) in Accrued Interest Payable (19) 11
Increase (Decrease) in Other Liabilities 197 58
Net Cash Provided by Operating Activities 465 413
Cash Flows From Investing Activities:
Net (Increase) in Reserve Funds Sold (2,525) (1,075)
Purchases of Securities Available for Sale (5,779) (997)
Maturities or Calls of Securities Available for Sale 2,000 2,000
Principal Payments on Mortgage-Backed Securities 746 290
Net (Increase) Decrease in Loans 3,236 2,082
Purchases of Premises and Equipment (47) (16)
Proceeds from Sales of Other Real Estate 44 -
Net Cash Provided by (Used in)
Investing Activities (2,325) 2,284
(CONTINUED)
5
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
For the three months ended March 31, 2002 and 2001
($ in Thousands)
(UNAUDITED)
March 31,
2002 2001
Cash Flows From Financing Activities:
Net Increase (Decrease) in Demand Deposits,
NOW Accounts and Savings Accounts 1,545 1,583
Net Increase (Decrease) in Certificates of Deposits 533 407
Net Cash Provided by Financing Activities 2,078 1,990
Increase (Decrease) in Cash and Cash Equivalents 218 4,687
Cash and Cash Equivalents -
Beginning of Period 2,752 2,809
Cash and Cash Equivalents -
End of Period $2,970 $7,496
Supplemental Disclosures of Cash Flow Information:
Noncash Investing Activities:
Change in Unrealized Gain or (Loss)
on Securities Available for Sale $ (379) $ 196
Change in Deferred Tax Effect on
Unrealized Gain or (Loss) on Securities
Available for Sale $ (129) $ 67
Cash Payments For:
Interest Paid on Deposits $ 541 $ 698
Income Tax $ 180 $ 158
The accompanying notes are an integral part of these financial statements.
6
Zachary Bancshares, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 2002 and 2001
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 three months ended
March 31, 2002 are no indication of the expected results for the annual
period which ends December 31, 2002. Additional information concerning the
audited financial statements and notes can be obtained from Zachary Bancshares,
Inc's annual report and Form 10KSB filed for the period ended December 31, 2001.
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 inter-company 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 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
the 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 March 31, 2002 or
2001.
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 stockholders' equity, net of
the related deferred tax effect. Realized gains or losses, determined on the
basis of the amortized 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. Subsequent cash
receipts on non-accrual loans are accounted for on the cost recovery method,
until principal and interest amounts contractually due are brought current
and future payments are reasonably assured. 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. Impairment
is measured on a loan by loan basis by either 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.
8
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 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 collection
of the principal is unlikely. Recoveries are credited to the allowance at the
time of recovery.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less accumulated depreciation.
Depreciation is provided at rates based upon estimated useful service lives
using the straight-line methods 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 the 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
9
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 carry forwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liability and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the date of
enactment.
The Company and its subsidiary file a consolidated federal income tax return.
In addition, the Company in accordance with state statutes files a Louisiana
state income tax return.
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
March 31, 2002, 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 basis EPS was 193,667 for the periods ended March 31,
2002 and 2001, respectively.
STATEMENTS OF CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents includes 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 Statement
of Changes in Stockholder's Equity for all periods presented.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 2002, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) No. 01-6. SOP 01-6 provides industry
specific guidance and disclosure requirements regarding the accounting for
certain transactions by banks, savings institutions and other entities that lend
to or finance the activities of others. This pronouncement provides guidance
concerning the recognition and measurement of loans, credit losses, investments
in Federal Home Loan Bank or Federal Reserve Bank stock, deposit accounts, and
purchases and sales of securities. SOP 01-6 is effective for annual and interim
financial statements for fiscal years beginning after December 15, 2001. The
Company has adopted the provisions of SOP 01-6 effective January 1, 2002. The
adoption of SOP 01-6 did not have a material impact on the Company's financial
position or results of operations as of March 31, 2002.
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ($ in Thousands)
March 31, 2002
The following is management's discussion and analysis of the significant
changes in income and expenses in relation to the changes in financial
position for the three months ended March 31, 2002 and 2001. This information
should be read in conjunction with the financial statements and 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
LOANS
Total loans were $55,431 at March 31, 2002 compared to $60,434 at March
31, 2001. This represents a decrease of $5,003 or 8%. Interim loan
repayments and loans being refinanced accounted for the decrease in total
loans along with a slowdown in the general economy.
INVESTMENT SECURITIES
Investment securities increased 156% to $33,892 at March 31, 2002 compared
to $13,240 at March 31, 2001. A combination of reinvesting short term funds
into longer securities, the decrease in loan volume and an increase in deposits
all contributed to this increase.
FED FUNDS SOLD/INTEREST BEARING DEPOSITS
Fed funds sold decreased to $3,450 at March 31, 2002 from $8,025 at
March 31, 2001. Interest bearing deposits at other banks decreased from
$4,030 at March 31, 2001 to $30 at March 31, 2002. Both of these accounts
decreased as the funds were reinvested in long term investment securities in
order to compensate for the unprecedented fall in short term interest rates
during 2001.
DEPOSITS
Total deposits increased $5,895 to $87,152 at March 31, 2002 compared to
$81,257 at March 31, 2001 as the bank was able to attract new checking, savings
and certificate accounts from individuals and commercial customers. The
general decline in the market value of equity stock portfolios during 2001 led
some customers to deposit funds in FDIC insured accounts instead of keeping
those funds in the stock market.
RESULTS OF OPERATION
For the three month period Ended March 31, 2002 over 2001
NET INCOME
Net Income was $326 for the three month period ended March 31, 2002
compared to $249 in the same period in 2001. This change was primarily due
to an decrease in interest expense to $522 at March 31, 2002 from $709 at
March 31, 2001. This expense decrease was offset by smaller increases in
provision for loans losses and total non interest expenses and a decrease in
total interest income.
11
INTEREST INCOME
Interest Income for the three month period ended March 31, 2002 decreased
4% to $1,672 compared to $1,737 for the same period in 2001. The interest
income decrease resulted primarily from the Company's decrease in loan volume
and the general reduction in interest rates during 2001.
INTEREST EXPENSE
Total interest expense for the three months ended March 31, 2002 was
$522, compared to $709 for the three month period ended March 31, 2001. This
was a decrease of $187 or 26% between the two periods. Interest bearing
deposits increased 9% to $67,583 at March 31, 2002 from $61,585 at March 31,
2001. Weighted average interest costs decreased to 2.40% at March 31, 2002
from 3.61% at March 31, 2000 as interest rate reductions in the general U.S.
economy led to lowest rates on deposits in over forty years. As consumers
certificates of deposit matured their rates were dramatically lower.
PROVISION FOR LOAN LOSSES
The Company included $74 for provision for loan losses during the three
month period ended March 31, 2002 compared to $59 at March 31, 2001. Loans are
reviewed monthly 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.
TOTAL OTHER INCOME
Total other income for the three month period ended March 31, 2002
increased $26 compared to March 31, 2001. The 2002 results included an
increase in service charges on deposit accounts of $11 and other operating
income increased $15.
TOTAL NON INTEREST EXPENSE
Total non interest expenses increased slightly to $825 at March 31, 2002
from $807 at March 31, 2001. Employee salaries and benefits increased $17 for
the three month period under consideration as the Bank increased pay 5% for
all non officer employees at January 1, 2002. Net other real estate owned
expense showed a credit balance of $23 at March 31, 2002 resulting from the
gain on sale of three properties compared to zero balance at March 31, 2001.
INCOME TAX
The Company is fully taxable at the maximum rate (34%) in both 2002 and
2001 and expects to remain taxable at the current rate throughout 2002.
EARNINGS PER SHARE
The Company's 2002 earnings per share at March 31, 2002 were $1.68 a 30%
increase compared to $1.29 per share the previous year, primarily due to
lower interest expense on deposits incurred thus far in the present year.
DIVIDENDS
The Company does not normally pay a cash dividend during the first quarter
of the year but plans to continue its practice of paying dividends to
shareholders at the end of the 2nd and 4th quarters.
12
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
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: April 30, 2002 /s/Harry S. Morris, Jr.
Harry S. Morris, Jr.
President
/s/J. Larry Bellard
J. Larry Bellard
Treasurer
13
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 principles and include some
amounts that are necessarily based on management'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, objectivity,
consistency and fair presentation of the financial statements and financial
information through an accounting system and related internal accounting
controls that are designed to provide reasonable assurance that assets are
safeguarded and that transactions are authorized and recorded in accordance
with established policies and procedures. The concept of reasonable
assurance is based on the recognition that the cost of a system of internal
accounting controls should not exceed the related benefits. As an integral
part of the system of internal accounting controls, Zachary Bancshares, Inc.
has a professional staff who monitors compliance with and assesses the
effectiveness of the system of internal accounting controls and coordinates
audit coverage with the independent public accountants.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with management, and the independent public
accountants to review matters relating to financial reporting, 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, 2001, were examined by Hannis T.
Bourgeois, LLP, independent public accountants, who rendered an independent
professional opinion on the financial statements prepared by management. The
financial statements, as of March 31, 2002, have been reviewed by Hannis T.
Bourgeois, LLP.
/s/J. Larry Bellard
J. Larry Bellard
Treasurer
14
INDEPENDENT ACCOUNTANT'S REPORT
April 25, 2002
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 March 31, 2002 and 2001, and the
related Consolidated Statements of Income, Changes in Stockholders' Equity and
Cash Flows for the three month periods then ended.
We previously audited and expressed our unqualified opinion in our
report dated January 9, 2002 on the Consolidated Balance Sheet of Zachary
Bancshares, Inc. and Subsidiary as of December 31, 2001.
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,
/s/HANNIS T. BOURGEOIS, LLP
HANNIS T. BOURGEOIS, LLP
Baton Rouge, Louisiana
15