ZACHARY BANCSHARES, INC.
AND SUBSIDIARY
TABLE OF CONTENTS
President's Message......................................
Independent Auditor's Report.............................
Consolidated Balance Sheets
December 31, 1994 and 1993.............................
Consolidated Statements of Income
for the years ended December 31, 1994 and 1993.........
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1994 and 1993.........
Consolidated Statements of Cash Flows for the
years ended December 31, 1994 and 1993.................
Notes to Consolidated Financial Statements
December 31, 1994 and 1993.............................
Condensed Consolidated Balance Sheets
December 31, 1994, 1993, 1992, 1991 and 1990...........
Condensed Consolidated Statements of Income
for the years ended December 31, 1994, 1993, 1992,
1991 and 1990..........................................
Average Balance Sheets and Interest Rate Analysis
for the years ended December 31, 1994 and 1993.........
Interest Differential
for the year ended December 31, 1994 ..................
Condensed Consolidated Statements of Income
for the quarter periods in the years ended
December 31, 1994 and 1993.............................
Management's Discussion and Results of Operation.........
Officers.................................................
Board of Directors.......................................
Bank Locations...........................................
ZACHARY BANCSHARES, INC.
March 14, 1995
Dear Shareholders:
Zachary Bancshares Inc. had another profitable year in 1994. Net
income was $725,236.00 as compared to $890,337.00 in 1993. The
decrease in 1994 profits was due to losses on sales of securities as
interest rates increased. The securities sales allowed reinvestment in
higher earning assets which will increase future earnings. In 1993, we
experienced Gains on Sales of Securities and Gains on Sales of Other
Real Estate which helped improve our profit above this year's level.
Once again, our Board of Directors has increased cash dividends per
share from $1.00 in 1992, to $1.20 in 1993 and then to $1.35 per share
in 1994. Our return on average equity was 12.19%. With the low
interest rates during 1994 and the excellent public schools that we
have on the north end of the parish, many people have moved to the
Zachary and Central communities. In Zachary alone, there were 99 new
homes built in 1994. This continued growth was financed in part by our
community bank, as our loan to deposit ratio grew from 34.66% in 1993
to 46.95% in 1994. This represents a net loan growth of $7,390,000
during the year.
During the year 1994, the people in our trade area have learned to
appreciate the value of keeping the Bank of Zachary as a community
owned bank. While many other banks seemed to be losing interest in
Zachary, and Central, we were financing a new fire station for the
city, three major local church constructions and many area homes. Our
officers and employees have worked to help develop a vision plan for
the future of our city, a new city map, beautification in the downtown
area, and a new chamber of commerce office. In addition, the Bank and
it's employees have assisted in raising funds for the Boy Scouts,
adoption agencies, financial assistance for the area schools and helped
to provide Christmas meals and gifts for the poor in both Zachary and
Central communities.
We promise to continue to work for you, our shareholders and
customers. Without your support these accomplishments would not have
been possible.
Sincerely,
Harry S. Morris, Jr.
President
HANNIS T. BOURGEOIS & CO., L.L.P.
Certified Public Accountants
2322 Tremont Drive, Suite 200
Baton Rouge, LA 70809
(504) 928-4770
January 13, 1995
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, 1994 and
1993 and the related Consolidated Statements of Income, Changes
Stockholders' Equity and Cash Flows for the years then ended. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Zachary
Bancshares, Inc. and Subsidiary as of December 31, 1994 and 1993, and
the results of their operations, changes in their stockholders' equity
and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
Respectfully submitted,
/s/ Hannis T. Bourgeois & Co., L.L.P.
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
ASSETS
1994 1993
Cash and Due from Banks - Note B $ 2,592,065 $ 2,446,066
Reserve Funds Sold 2,100,000 3,500,000
Securities - Note C:
Held to Maturity (Fair Value
$-0- and $19,403,100) $ - $19,209,841
Available for Sale (Fair Value
$29,685,000 and $16,819,287) 29,685,000 16,819,287
$29,685,000 $36,029,128
Loans - Note D $28,241,397 $20,850,372
Less: Allowance for Loan Losses - Note E (820,000) (819,047)
$27,421,397 $20,031,325
Bank Premises and Equipment - Note F 909,465 957,044
Other Real Estate 563,369 769,526
Accrued Interest Receivable 553,417 475,390
Other Assets 583,333 246,250
Total Assets $64,408,046 $64,454,729
LIABILITIES
Deposits - Note G:
Noninterest Bearing $12,192,031 $10,906,751
Interest Bearing 46,212,790 46,889,845
$58,404,821 $57,796,596
Accrued Interest Payable 125,111 106,623
Other Liabilities 199,643 233,068
Total Liabilities $58,729,575 $58,136,287
STOCKHOLDERS' EQUITY
Common Stock - $10 par value;
authorized 2,000,000 shares;
issued 216,000 shares - Note H $ 2,160,000 $ 2,160,000
Surplus 1,480,000 1,480,000
Retained Earnings 3,460,525 2,996,739
Unrealized Gain (Loss) on Securities
Available for Sale, Net - Note C (975,394) 128,363
Treasury Stock - 22,333 Shares,
at Cost (446,660) (446,660)
Total Stockholders' Equity $ 5,678,471 $ 6,318,442
Total Liabilities and Stockholders'
Equity $64,408,046 $64,454,729
The accompanying notes are an integral part of these financial statements.
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1994 and 1993
1994 1993
Interest Income:
Interest and Fees on Loans $2,132,999 $1,878,667
Interest on Securities 1,950,667 2,191,506
Other Interest Income 105,328 95,787
Total Interest Income $4,188,994 $4,165,960
Interest Expense on Deposits - Note G 1,356,065 1,333,250
Net Interest Income $2,832,929 $2,832,710
Provision (Credit) for Loan Losses - Note E (42,338) -
Net Interest Income after
Provision for Loan Losses $2,875,267 $2,832,710
Other Income:
Service Charges on Deposit
Accounts $ 513,064 $ 542,376
Gain (Loss) on Securities - Note C (122,096) 83,027
Other Operating Income 54,593 33,276
Total Other Income $ 445,561 $ 658,679
Income before Other Expenses $3,320,828 $3,491,389
Other Expenses:
Salaries and Employee Benefits - Note I $1,251,473 $1,201,213
Occupancy Expense 162,008 190,465
Net Other Real Estate Expense (28,877) (86,829)
Other Operating Expenses - Note J 833,518 835,725
Total Other Expenses $2,218,122 $2,140,574
Income before Income Taxes $1,102,706 $1,350,815
Applicable Income Tax - Note K 377,470 460,478
Net Income $ 725,236 $ 890,337
Per Share - Note H:
Net Income $ 3.75 $ 4.60
Cash Dividends $ 1.35 $ 1.20
The accompanying notes are an integral part of these financial statements.
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
for the years ended December 31, 1994 and 1993
1994 1993
Common Stock:
Balance - Beginning and End of Year $ 2,160,000 $ 2,160,000
Surplus:
Balance - Beginning and End of Year $ 1,480,000 $ 1,480,000
Retained Earnings:
Balance - Beginning of Year $ 2,996,739 $ 2,338,801
Net Income 725,236 890,337
Cash Dividends (261,450) (232,399)
Balance - End of Year $ 3,460,525 $ 2,996,739
Net Unrealized Gain (Loss) on Securities
Available for Sale:
Balance - Beginning of Year $ 128,363 $ -
Net Change in Unrealized Gain
on Securities Available for Sale (1,103,757) 128,363
Balance - End of Year $ (975,394) $ 128,363
Treasury Stock:
Balance - Beginning and End of Year $ (446,660) $ (446,660)
The accompanying notes are an integral part of these financial statements.
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1994 and 1993
1994 1993
Cash Flows From Operating Activities:
Net Income $ 725,236 $ 890,337
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision (Credit) for Loan Losses (42,338) -
Provision for Losses on
Other Real Estate (46,700) -
Provision for Depreciation 119,862 158,155
Provision (Credit) for Deferred Tax (37,291) 48,740
Amortization (Accretion) of Securities
Premiums (Discounts) 174,072 227,296
(Gain) Loss on Sale of Securities 122,096 (83,027)
Gain on Sale of Other Real Estate (720) (111,131)
(Gain) Loss on Sale of Premises and
Equipment - 20,341
(Increase) Decrease in Interest
Receivable (78,027) 102,760
(Increase) Decrease in Other Assets 196,125 43,600
Increase (Decrease) in Interest Payable 18,488 (19,828)
Increase (Decrease) in Other Liabilities 39,259 (57,679)
Net Cash Provided by Operating
Activities $ 1,190,062 $ 1,219,564
Cash Flows From Investing Activities:
Net Decrease in Reserve Funds Sold $ 1,400,000 $ 850,000
Purchases of Securities (19,163,297) (22,178,049)
Proceeds from Maturities of Securities 6,555,006 15,620,046
Proceeds from Sale of Securities 16,983,893 7,596,538
Net (Increase) Decrease in Loans (7,231,774) (2,086,022)
Proceeds from Sale of Premises
and Equipment - 23,130
Purchases of Premises and Equipment (72,283) (22,877)
Sales of Other Real Estate 137,617 366,002
Net Cash Provided by (Used in)
Investing Activities $ (1,390,838) $ 168,768
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
for the years ended December 31, 1994 and 1993
1994 1993
Cash Flows From Financing Activities:
Net Increase (Decrease) in Demand
Deposits, NOW Accounts and Savings
Accounts $ 1,092,765 $ (104,448)
Net Decrease in Certificates of
Deposit (484,540) (1,629,925)
Cash Dividends (261,450) (232,399)
Net Cash Provided by (Used in)
Financing Activities $ 346,775 $ (1,966,772)
Increase (Decrease) in Cash and Due
from Banks $ 145,999 $ (578,440)
Cash and Due from Banks -Beginning of Year 2,446,066 3,024,506
Cash and Due from Banks - End of Year $ 2,592,065 $ 2,446,066
Supplemental Disclosures of Cash Flow
Information:
Noncash Investing Activities:
Other Real Estate Acquired
(Disposed) in Settlement of Loans $ (115,960) $ (38,883)
Change in Unrealized Gain (Loss) on
Securities Available for Sale $ (1,672,358) $ 194,489
Change in Deferred Tax Effect on
Unrealize Gain on Securities
Available for Sale $ (568,601) $ 66,126
Cash Payments for:
Interest Paid on Deposits $ 1,337,577 $ 1,353,077
Income Tax Payments $ 377,000 $ 453,530
The accompanying notes are an integral part of these financial statements.
Zachary Bancshares, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
Note A - Summary of Significant Accounting Policies -
The accounting principles followed by Zachary Bancshares, Inc. and
its wholly-owned Subsidiary, Bank of Zachary, are those which are
generally practiced within the banking industry. The methods of
applying those principles conform with generally accepted accounting
principles and have been applied on a consistent basis. The
principles which significantly affect the determination of financial
position, results of operations, changes in stockholders' equity and
cash flows are summarized below.
Principles of Consolidation
The consolidated financial statements include the accounts of
Zachary Bancshares, Inc. (the Company), and its wholly-owned
subsidiary, Bank of Zachary (the Bank). All material intercompany
accounts and transactions have been eliminated. Certain
reclassifications to previously published financial statements have
been made to comply with current reporting requirements.
Securities
Securities classified as held to maturity are those debt securities
the Bank has both the intent and ability to hold to maturity
regardless of changes in market conditions, liquidity needs or
changes in general economic conditions. These securities are carried
at cost adjusted for amortization of premium and accretion of
discount, computed by various methods approximating the interest
method over their contractual lives.
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 cost of
specific securities sold, are included in earnings. The Bank does
not engage in trading activities. Reference should be made to Note C
regarding a change to this method of accounting for securities.
Loans
Loans are stated at principal amounts outstanding, less unearned
income and allowance for loan losses. Interest on commercial loans is
accrued daily based on the principal outstanding. Interest on
installment loans is recognized and included in interest income using
the sum-of-the-digits method, which does not differ materially from the
interest method.
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. If the underlying collateral value is sufficient to cover the
principal balance and accrued interest, the Bank may decide to continue
the accrual of interest.
Allowance for Loan Losses
The allowance for loan losses is an amount which in management's
judgment is adequate to absorb potential losses in the loan portfolio.
The allowance for loan losses is based upon management's review and
evaluation of the loan portfolio. Factors considered in the
establishment of the allowance for loan losses include management's
evaluation of specific loans; the level and composition of classified
loans; historical loss experience; results of examinations by
regulatory agencies; an internal asset review process; expectations of
future economic conditions and their impact on particular borrowers;
and other judgmental factors.
The allowance for loan losses is based on estimates of potential
future losses, and ultimate losses may vary from the current estimates.
These estimates are reviewed periodically and as adjustments become
necessary, the effect of the change in estimate is charged to operating
expenses in the period incurred. All losses are charged to the
allowance for loan losses when the loss actually occurs or when
management believes that the collectibility of the principal is
unlikely. Recoveries are credited to the allowance at the time of
recovery.
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation is provided at rates based upon estimated
useful service lives using the straight-line method for financial
reporting purposes and accelerated methods for income tax purposes.
The cost of assets retired or otherwise disposed of and the related
accumulated depreciation are eliminated from the accounts in the year
of disposal and the resulting gains or losses are included in current
operations.
Expenditures for maintenance and repairs are charged to operations as
incurred. Cost of major additions and improvements are capitalized.
Other Real Estate
Other real estate is comprised of properties acquired through
foreclosure or negotiated settlement. The carrying value of these
properties is lower of cost or fair market value. Loan losses arising
from the acquisition of these properties are charged against the
allowance for loan losses. Any subsequent market reductions required
are charged to Net Other Real Estate Expense. Revenues and expenses
associated with maintaining or disposing of foreclosed properties are
recorded during the period in which they are incurred.
Income Taxes
The provision for income taxes is based on income as reported in the
financial statements after interest income from state and municipal
securities is excluded. Also certain items of income and expenses are
recognized in different time periods for financial statement purposes
than for income tax purposes. Thus provisions for deferred taxes are
recorded in recognition of such timing differences.
Deferred taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of
enactment. Reference should also be made to Note K regarding a change
in the method of accounting for income taxes.
The corporation and its subsidiary file a consolidated federal income
tax return. In addition, state income tax returns are filed
individually by Company in accordance with state statutes.
Earnings per Common Share
The computation of earnings per share and other per share amounts of
common stock is based on the weighted average number of shares of
common stock outstanding during each year, which is 193,667 in 1994 and
193,667 in 1993.
Statements of Cash Flows
For purposes of reporting cash flows, cash and due from banks
includes cash on hand and amounts due from banks (including cash items
in process of clearing)
Current Accounting Developments
In December, 1991, the Financial Accounting Standards Board issued
Statement No. 107, "Disclosures about Fair Value of Financial
Instruments." This statement requires disclosure of the fair value of
financial instruments, both assets and liabilities, whether or not such
instruments are recognized in the balance sheet. As it relates to the
Company, financial instruments include primarily cash equivalents,
securities, loans, and deposits. SFAS No. 107 will be adopted by the
Company for the fiscal year ended December 31, 1995.
The Financial Accounting Standards Board has issued Statement No.
114, "Accounting by Creditors for Impairment of a Loan", which becomes
effective for years beginning after December 15, 1994. The Statement
generally requires impaired loans to be measured on the present value
of expected future cash flows discounted at the loan's
effective interest rate, or as an expedient, at the loan's observable
market price or the fair value of the collateral if the loan is
collateral dependent. A loan is impaired when it is probable the creditor
will be unable to collect all contractual principal and interest
payments due in accordance with the terms of the loan agreement. The
Company has addressed the potential future impact of the application of
this statement, and considers it to be immaterial.
Note B - Cash and Due from Banks -
The Bank is required by state law to maintain average cash reserve
balances. The amounts of those required reserves at December 31, 1994
and 1993 were approximately $405,000 and $392,000, respectively.
Note C - Securities -
The Financial Accounting Standards Board has issued Statement No.
115, "Accounting for Investments in Debt and Equity Securities." The
Statement establishes accounting and reporting standards for
investments in debt and equity securities that have readily determinable fair
value. This statement was required to be adopted for years beginning
after December 15, 1993. The Company elected early adoption of this
statement effective December 31, 1993. The net effect is reflected in
the consolidated financial statements as a separate component of
stockholder's equity as Unrealized Gain (Loss) on Securities Available for
Sale, Net in the amount of $(975,394) and $128,363 for the years ended
December 31, 1994 and 1993, respectively.
In 1993, the Company classified its U.S. Treasury Securities and
U.S. Government Agency Securities as held to maturity and its mortgage-
back securities and collateralized mortgage obligations as available
for sale. In 1994, the Company elected to transfer all securities into
the available for sale classification. As a result, the Company has
applied the "mark-to-market" guidelines set forth in SFAS No. 115 to
its entire securities portfolio at December 31, 1994.
Amortized cost amounts and fair values of securities available for
sale at December 31, 1994 and 1993 are summarized as follows:
1994
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
U.S. Treasury
Securities $ 4,002,523 $ - $ (192,853) $ 3,809,670
Securities of Other
U.S. Government
Agencies 13,116,107 - (337,837) 12,778,270
Mortgage-Backed
Securities 5,261,137 32,777 (234,178) 5,059,736
Collateralized
Mortgage Obliga-
tions 8,783,102 - (745,778) 8,037,324
$31,162,869 $ 32,777 $(1,510,646) $29,685,000
1993
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
Mortgage-Backed
Securities $ 6,705,766 $ 249,096 $ - $ 6,954,862
Collateralized
Mortgage
Obligations 9,919,033 9,642 (64,250) 9,864,425
Total $16,624,799 $ 258,738 $ (64,250) $16,819,287
The amortized cost and fair values of securities available for sale
as of December 31, 1994 by contractual maturity are shown below.
Maturities may differ from contractual maturities in mortgage-backed
securities and collateralized mortgage obligations because the
mortgages underlying the securities may be called or repaid without any
penalties. Therefore, these securities are not included in the
maturity categories in the following maturity summary.
AMORTIZED FAIR
COST VALUE
One to Five Years 16,118,630 15,635,150
Five to Ten Years 1,000,000 952,791
$17,118,630 $16,587,940
Securities available for sale with an amortized cost of $11,995,434
and a fair value of $11,575,670 at December 31, 1994, were pledged as
collateral on public deposits and for other purposes as required or
permitted by law. There were no securities available for sale
pledged as collateral on public deposit at December 31, 1993.
The amortized cost and fair values of securities being held to
maturity as of December 31, 1993 are summarized as follows:
1993
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
U.S. Treasury
Securities $11,171,021 $ 59,458 $ (1,779) $11,228,700
Securities of Other
U.S. Government
Agencies 8,038,820 138,904 (3,314) 8,174,410
$19,209,841 $ 198,362 $ (5,093) $19,403,110
Securities being held to maturity with a carrying amount of
$10,175,328 at December 31, 1993, were pledged as collateral on public
deposits and for the other purposes as required or permitted by law.
Gross realized gains and losses from the sale of securities for the
years ended December 31, 1994 and 1993 are as follows:
1994 1993
Realized Gains $ 24,339 $ 102,815
Realized Losses (146,435) (19,788)
$ (122,096) $ 83,027
Note D - Loans -
An analysis of the loan portfolio at December 31, 1994 and 1993, is
as follows:
1994 1993
Real Estate Loans - Construction $ 2,441,270 $ 1,587,354
Real Estate Loans - Mortgage 20,492,858 14,215,330
Loans to Farmers 14,039 14,893
Commercial and Industrial Loans 2,430,331 2,026,174
Loans to Individuals 2,703,428 2,515,496
All Other Loans 159,503 491,864
Total Loans $28,241,429 $20,851,111
Unearned Income (32) (739)
$28,241,397 $20,850,372
The Bank had non-performing loans on a non-accrual basis totaling
approximately $178,700 and $183,400 at December 31, 1994 and 1993,
respectively. The Bank recognized $5,488, and $18,953 in interest
income relating to these loans during the years ended December 31,
1994 and 1993. Had the loans been performing, approximately $22,100
and $10,200 of additional interest income would have been recognized
for the years ended December 31, 1994 and 1993. Loans contractually
past due 90 days or more, in addition to loans on non-accrual, were
$-0- at December 31, 1994 and 1993, respectively.
The Bank is permitted under the laws of the State of Louisiana to
make extensions of credit to its executive officers, directors and
their affiliates in the ordinary course of business. The amount of
such related party loans was $1,267,975 and $1,433,621 at
December 31, 1994 and 1993, respectively. An analysis of the aggregate of
these loans for 1994, is as follows:
Balance - Beginning of Year $ 1,433,621
New Loans 237,123
Repayments (402,769)
Balance - End of Year $ 1,267,975
Note E - Allowance for Loan Losses -
Following is a summary of the activity in the allowance for loan
losses:
1994 1993
Balance - Beginning of Year $ 819,047 $ 830,000
Current Provision (Credit) from Income (42,338) -
Recoveries of Amounts Previously
Charged Off 83,627 44,156
Amounts Charged Off (40,336) (55,109)
Balance - End of Year $ 820,000 $ 819,047
Ratio of Reserve for Possible Loan
Losses to Non-Performing Loans
at End of Year 458.87% 446.59%
Ratio of Reserve for Possible Loan
Losses to Loans Outstanding at
at End of Year 2.90% 3.93%
Ratio of Net Loans Charged Off to
Average Loans Outstanding for
the Year (.18)% .05%
Note F - Bank Premises and Equipment -
Bank premises and equipment costs and the related accumulated
depreciation at December 31, 1994 and 1993, are as follows:
ACCUMULATED
ASSET COST DEPRECIATION NET
December 31, 1994:
Land $ 450,908 $ - $ 450,908
Bank Premises 685,670 418,831 266,839
Furniture and Equipment 1,037,689 845,971 191,718
$2,174,267 $1,264,802 $ 909,465
December 31, 1993:
Land $ 450,908 $ - $ 450,908
Bank Premises 685,670 401,831 283,839
Furniture and Equipment 995,452 773,155 222,297
$2,132,030 $1,174,986 $ 957,044
The provision for depreciation charged to operating expenses was
$119,862 and $158,155, respectively, for the years ended December 31,
1994 and 1993.
Note G - Deposits -
Following is a detail of deposits:
1994 1993
Demand Deposit Accounts $12,192,031 $10,906,751
NOW and Super NOW Accounts 7,377,218 7,181,385
Money Market Accounts 6,777,381 6,645,308
Savings Accounts 7,461,709 7,982,131
Certificates of Deposit Over $100,000 7,062,425 6,801,698
Certificates of Deposit 17,534,057 18,279,323
$58,404,821 $57,796,596
Interest expense on certificates of deposit over $100,000 for the
years ended December 31, 1994 and 1993, amounted to $246,645 and
$247,547, respectively.
Public fund deposits at December 31, 1994 and 1993, were $5,618,654
and $5,287,177, respectively.
Note H - Stockholders' Equity and Regulatory Matters -
Dividends are paid by the Company from its assets which are
provided primarily by dividends from the Bank. Dividends are payable
only out of retained earnings and current earnings of the Company.
Certain restrictions exist regarding the ability of the Bank to
transfer funds to the Company in the form of cash dividends.
Louisiana statutes require approval to pay dividends in excess of a
state bank's earnings in the current year plus retained net profits
for the preceding year. As of January 1, 1995, the Bank had retained
earnings of $4,197,254 of which $944,540 was available for
distribution without prior regulatory approval.
The Bank is also required to maintain minimum amounts of capital to
total risk weighted assets, as required by banking regulators. At
December 31, 1994, the Bank is required to have minimum Tier 1 and
Total Capital ratios of 4.00% and 8.00%, respectively. The Bank's
actual ratios at that date were 23.53% and 24.78%, respectively. The
Bank's Leverage Ratio at December 31, 1994, was 9.82%.
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, 1994 and 1993.
Note I - Employee Benefit Plans -
The Bank of Zachary has a defined contribution Profit Sharing Plan
and Trust for its qualified employees. Each year the Board of
Directors of the Bank determines the Bank's contribution. No contribution
is required by qualified participants. Contributions charged to
expense for this plan were $55,266, and $58,000 for the years ended
December 31, 1994 and 1993.
In addition, the Bank has a 401(K) plan for those employees who
meet the necessary eligibility requirements. Covered employees may
voluntarily contribute 1% to 15% of gross pay to the plan. The Bank
matched one-half of the employee's contribution to a maximum of 6% of
gross pay in 1994 and to a maximum of 6% in 1993. Contributions
charged to expense for this plan were $24,734 and $22,000 for the
years ended December 31, 1994 and 1993, respectively.
Note J - Other Operating Expenses -
An analysis of Other Operating Expenses for the years ended
December 31, 1994 and 1993, is as follows:
1994 1993
Regulatory Assessments $ 142,362 $ 144,136
Computer Service Fees 90,286 91,131
Equipment 188,007 182,029
Public Relations and Advertising 53,326 39,336
Other 359,537 379,093
$ 833,518 $ 835,725
Note K - Income Tax -
The total provision for income taxes charged to income amounted to
$377,470 and $460,478 for 1994 and 1993, respectively. The
provisions represent effective tax rates of 34% and 34% in 1994 and
1993.
Following is a reconciliation between income tax expense based on
the federal statutory tax rates and income taxes reported in the
statements of income.
1994 1993
Income Taxes Based on Statutory
Rate - 34% in 1994 and 1993 $ 374,920 $ 459,277
Other - Net 2,550 1,201
$ 377,470 $ 460,478
The components of consolidated income tax expense (benefits) are:
Provision for Current Taxes $ 414,761 $ 411,738
Provision (Credit) for Deferred Taxes (37,291) 48,740
$ 377,470 $ 460,478
Effective January 1, 1993, the Company adopted FASB Statement No.
109, "Accounting for Income Taxes". As explained in Note A,
Statement 109 adopts a liability method that requires the recognition of
deferred tax assets and liabilities for the expected future
consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax
consequences, Statement 109 generally considers all expected future events
other than enactments of changes in tax laws or rates. Previously,
the Company used a liability method under FASB Statement No. 96, but
that method gave no recognition to future events other than the
recovery of assets and settlement of liabilities at their reported
amounts. The effect of the adjustments to the January 1, 1993
balance sheet to adopt Statement 109 was $-0-.
A deferred income tax asset of $533,208 is included in other assets
at December 31, 1994, and a deferred income tax liability of $72,684
is included in other liabilities at December 31, 1993.
The deferred tax provision consists of the following timing
differences:
1994 1993
Depreciation Expense for Tax Reporting
in Excess of Amount for Financial Reporting $ 8,181 $ (6,341)
Provision for Loan Losses for Financial
Reporting in Excess of Amount for
Tax Reporting 324 3,724
Other Real Estate Write-offs for Financial
Reporting in Excess of Amount for Tax
Reporting (18,091) 50,891
Accretion Income for Financial
Reporting in Excess of Tax Reporting (4,123) 466
Provision for Deferred Leave for
Financial Reporting in Excess of
the Amount for Tax Reporting 51,000 -
$ 37,291 $ 48,740
The net deferred tax asset and liability consist of the following
components at December 31, 1994 and 1993:
1994 1993
Depreciation $ (44,441) $ (52,622)
Provision for Loan Losses 25,316 24,992
Other Real Estate 3,536 21,627
Accretion Income (4,678) (555)
Deferred Leave 51,000 -
Unrealized (Gain) Loss on Securities
Available for Sale 502,475 (66,126)
Total Deferred Tax Asset (Liability) $ 533,208 $ (72,684)
Note L - Off-Balance-Sheet Instruments -
The Company is a party to financial instruments with off-balance-
sheet risk in the normal course of business to meet the financing
needs of its customers. These financial instruments include
commitments to extend credit and letters of credit. Those instruments
involve, to varying degrees, elements of credit risk in excess of
the amount recognized in the balance sheets.
The Company's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to
extend credit and letters of credit is represented by the contractual
amount of those instruments. The Bank uses the same credit policies
in making 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 $2,670,377 at December 31, 1994. This amount
includes unfunded loan commitments aggregating $2,630,859 and letters of
credit of $31,518.
The Bank has an outstanding line of credit for the purchase of
Federal Funds with a Banker's Bank in the amount of $1,500,000. No
funds were drawn on this line at December 31, 1994.
Note M - 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 related
borrowers in excess of $750,000.
Note N - Contingencies -
In the normal course of business, the Company is involved in various
legal proceedings. In the opinion of management and counsel, any
liability resulting from such proceedings would not have a material
adverse effect on the Company's financial statements.
Note O - Financial Information - Parent Company Only -
The financial statements for Zachary Bancshares, Inc. (Parent
Company) are presented below:
BALANCE SHEETS
December 31, 1994 and 1993
1994 1993
Assets:
Cash $ 256,611 $ 260,761
Investment in Subsidiary 5,421,860 6,063,850
Due from Subsidiary 33,638 -
Other Assets - 4,124
Total Assets $5,712,109 $6,328,735
Liabilities:
Due to Subsidiary $ - $ 10,293
Income Tax Payable 33,638 -
Total Liabilities $ 33,638 $ 10,293
Stockholders' Equity:
Common Stock $2,160,000 $2,160,000
Surplus 1,480,000 1,480,000
Retained Earnings 2,485,131 3,125,102
Treasury Stock (446,660) (446,660)
Total Stockholders' Equity $5,678,471 $6,318,44
Total Liabilities and Stockholders'
Equity $5,712,109 $6,328,735
STATEMENTS OF INCOME
for the years ended December 31, 1994 and 1993
1994 1993
Income:
Dividend from Subsidiary $ 266,500 $ 415,000
Expenses:
Operating Expenses 11,729 7,436
Income before Equity in Undistributed
Net Income of Subsidiary $ 254,771 $ 407,564
Equity in Undistributed Net Income
of Subsidiary 461,767 482,773
Net Income before Income Taxes $ 716,538 $ 890,337
Applicable Income Tax Expense (Benefit) (8,698) -
Net Income $ 725,236 $ 890,337
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1994 and 1993
1994 1993
Cash Flows From Operating Activities:
Net Income $ 725,236 $ 890,337
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Equity in Undistributed Net Income
of Subsidiary (461,767) (482,773)
(Increase) Decrease in Receivable
From Subsidiary (33,638) 32,058
(Increase) Decrease in Other Assets 4,124 (4,124)
Increase (Decrease) in Due to Subsidiary (10,293) 10,293
Increase (Decrease) in Income Tax Payable 33,638 (37,669)
Net Cash Provided by Operating
Activities $ 257,300 $ 408,122
Cash Flows From Financing Activities:
Dividends Paid $ (261,450) $ (232,399)
Net Cash Used in Financing
Activities $ (261,450) $ (232,399)
Net Increase (Decrease) in Cash $ (4,150) $ 175,723
Cash - Beginning of Year 260,761 85,038
Cash - End of Year $ 256,611 $ 260,761
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1994, 1993, 1992, 1991 and 1990
ASSETS
1994 1993
Cash and Due from Banks $ 2,592,065 $ 2,446,066
Securities 31,785,000 39,529,128
Loans 27,421,397 20,031,325
Other Assets 2,609,584 2,448,210
Total Assets $64,408,046 $64,454,729
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $58,404,821 $57,796,596
Other Liabilities 324,754 339,691
Stockholders' Equity 5,678,471 6,318,442
Total Liabilities and Stockholders' Equity $64,408,046 $64,454,729
Selected Ratios:
Loans to Assets 42.57% 31.08%
Loans to Deposits 46.95% 34.66%
Deposits to Assets 90.68% 89.67%
Equity to Assets 8.82% 9.80%
Return on Average Assets 1.11% 1.36%
Return on Average Equity 12.19% 15.34%
See auditor's report on the selected financial and statistical data.
(Continued)
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1994, 1993, 1992, 1991 and 1990
ASSETS
1992 1991 1990
Cash and Due from Banks $ 3,024,506 $ 2,393,643 $ 2,292,368
Securities 41,367,443 37,632,028 30,473,653
Loans 17,906,420 18,671,743 20,833,159
Other Assets 3,067,072 3,198,764 3,649,191
Total Assets $65,365,441 $61,896,178 $57,248,371
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $59,530,969 $56,247,896 $52,246,790
Other Liabilities 302,331 668,112 663,138
Stockholders' Equity 5,532,141 4,980,170 4,338,443
Total Liabilities
and Stockholders' Equity $65,365,441 $61,896,178 $57,248,371
Selected Ratios:
Loans to Assets 27.39% 30.17% 36.39%
Loans to Deposits 30.08% 33.19% 39.87%
Deposits to Assets 91.07% 90.87% 91.26%
Equity to Assets 8.46% 8.05% 7.58%
Return on Average Assets 1.19% 1.28% .14%
Return on Average Equity 15.10% 16.77% 1.81%
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1994, 1993, 1992, 1991 and 1990
1994 1993
Interest Income $ 4,188,994 $ 4,165,960
Interest Expense 1,356,065 1,333,250
Net Interest Income $ 2,832,929 $ 2,832,710
Provision (Credit) for Loan Losses (42,338) -
Net Interest Income after Provision
for Loan Losses $ 2,875,267 $ 2,832,710
Other Income 445,561 658,679
Other Expenses 2,218,122 2,140,574
Income (Loss) before Income Taxes $ 1,102,706 $ 1,350,815
Applicable Income Tax Expense (Benefit) 377,470 460,478
Net Income $ 725,236 $ 890,337
Earnings Per Share:
Net Income $ 3.75 $ 4.60
Cash Dividends $ 1.35 $ 1.20
Book Value - End of Year $ 29.32 $ 32.63
See auditor's report on the selected financial and statistical data.
(Continued)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1994, 1993, 1992, 1991 and 1990
1992 1991 1990
Interest Income $ 4,636,137 $ 4,979,984 $ 5,153,894
Interest Expense 1,832,414 2,688,535 3,018,877
Net Interest Income $ 2,803,723 $ 2,291,449 $ 2,135,017
Provision (Credit) for Loan Losses 134,272 286,186 13,070
Net Interest Income after Provision
for Loan Losses $ 2,669,451 $ 2,005,263 $ 2,121,947
Other Income 784,851 1,030,503 (273,555)
Other Expenses 2,307,663 2,080,497 1,926,032
Income (Loss) before Income Taxes $ 1,146,639 $ 955,269 $ (77,640)
Applicable Income Tax Expense(Benefit) 383,000 196,802 (159,200)
Net Income $ 763,639 $ 758,467 $ 81,560
Earnings Per Share:
Net Income $ 3.94 $ 3.90 $ .42
Cash Dividends $ 1.00 $ .60 $ .50
Book Value - End of Year $ 28.57 $ 25.60 $ 22.30
Zachary Bancshares, Inc. and Subsidiary
AVERAGE BALANCE SHEETS AND INTEREST RATE ANALYSIS
for the years ended December 31, 1994 and 1993
1994
INTEREST AVERAGE
AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE
ASSETS
Reserve Funds Sold $ 2,719,000 $ 105,328 3.87%
Securities:
Taxable 34,273,000 1,950,667 5.69
Loans-Net 23,877,000 2,132,999 8.93
Total Earning Assets $60,869,000 $4,188,994 6.88%
Allowance for Loan Losses (830,000)
Nonearning Assets 5,061,000
Total Assets $65,100,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Savings and NOW Accounts $15,364,000 $ 343,457 2.24%
Insured Money Market Accounts 6,723,000 132,424 1.97
Certificates of Deposit 24,713,000 880,184 3.56
Total Interest Bearing
Liabilities $46,800,000 $1,356,065 2.90%
Demand Deposits 11,866,000
Other Liabilities 485,000
Stockholders' Equity 5,949,000
Total Liabilities and
Stockholders' Equity $65,100,000
Net Interest Income - Tax Equivalent Basis $2,832,929
Tax Equivalent Adjustment -
Net Interest Income $2,832,929
Net Interest Income - Spread 3.98%
Net Interest Income as a % of Total Earning Assets 4.65%
See auditor's report on the selected financial and statistical data.
(Continued)
AVERAGE BALANCE SHEETS AND INTEREST RATE ANALYSIS
for the years ended December 31, 1994 and 1993
1993
INTEREST AVERAGE
AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE
ASSETS
Reserve Funds Sold $ 3,216,000 $ 95,787 2.98%
Securities:
Taxable 37,797,000 2,191,506 5.80
Loans-Net 19,463,000 1,878,668 9.65
Total Earning Assets $60,476,000 $4,165,961 6.89%
Allowance for Loan Losses (836,000)
Nonearning Assets 5,683,000
Total Assets $65,323,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Savings and NOW Accounts $16,125,000 $ 306,736 1.90%
Insured Money Market Accounts 6,400,000 126,933 1.98
Certificates of Deposit 25,928,000 899,582 3.47
Total Interest Bearing
Liabilities $48,453,000 $1,333,251 2.75%
Demand Deposits 10,584,000
Other Liabilities 482,000
Stockholders' Equity 5,804,000
Total Liabilities and
Stockholders'Equity $65,323,000
Net Interest Income - Tax Equivalent Basis $2,832,710
Tax Equivalent Adjustment -
Net Interest Income $2,832,710
Net Interest Income - Spread 4.14%
Net Interest Income as a % of Total Earning Assets 4.68%
Zachary Bancshares, Inc. and Subsidiary
INTEREST DIFFERENTIAL
for the year ended December 31, 1994
1994 OVER 1993
CHANGE TOTAL
ATTRIBUTABLE TO INCREASE
VOLUME RATE (DECREASE)
Interest Earning Assets:
Reserve Funds Sold $ (16,967) $ 26,508 $ 9,541
Securities (202,153) (38,686) (240,839)
Loans 410,507 (156,176) 254,331
Total Interest Income $ 191,387 $(168,354) $ 23,033
Interest Bearing Liabilities:
Savings and NOW Accounts $ (16,109) $ 52,830 $ 36,721
Insured Money Market
Accounts 6,375 (884) 5,491
Certificates of Deposit (42,504) 23,106 (19,398)
Total Interest Expense $ (52,238) $ 75,052 $ 22,814
Increase (Decrease) in Interest
Differential $ 243,625 $(243,406) $ 219
Note: The change in interest due to both volume and rate changes has
been allocated equally between volume and rate.
Zachary Bancshares, Inc. and Subsidiary
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
for the quarter periods in the years ended December 31, 1994 and 1993
1994
4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER
Interest Income $1,167,245 $1,056,095 $ 986,654 $ 979,000
Interest Expense 369,238 341,370 321,170 324,287
Net Interest Income $ 798,007 $ 714,725 $ 665,484 $ 654,713
Provision (Credit) for
Loan Losses (42,338) - - -
Net Interest Income
after Provision
for Loan Losses $ 840,345 $ 714,725 $ 665,484 $ 654,713
Other Income 81,478 57,695 141,575 164,813
Other Expenses 522,569 537,396 590,247 567,910
Income before
Income Taxes $ 399,254 $ 235,024 $ 216,812 $ 251,616
Applicable Income Tax
Expense 135,340 80,500 68,630 93,000
Net Income $ 263,914 $ 154,524 $ 148,182 $ 158,616
Per Share:
Net Income $ 1.36 $ .80 $ .77 $ .82
Cash Dividends $ .75 $ - $ .60 $ -
(Continued)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
for the quarter periods in the years ended December 31, 1994 and 1993
1993
4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER
Interest Income $1,008,661 $1,024,336 $1,051,742 $1,081,221
Interest Expense 325,414 324,897 328,132 354,807
Net Interest Income $ 683,247 $ 699,439 $ 723,610 $ 726,414
Provision (Credit) for
Loan Losses (7,040) 7,040 - -
Net Interest Income
after Provision
for Loan Losses $ 690,287 $ 692,399 $ 723,610 $ 726,414
Other Income 114,740 194,029 157,598 192,312
Other Expenses 439,370 600,733 586,867 513,604
Income before
Income Taxes $ 365,657 $ 285,695 $ 294,341 $ 405,122
Applicable Income Tax
Expense 127,378 96,100 99,000 138,000
Net Income $ 238,279 $ 189,595 $ 195,341 $ 267,122
Per Share:
Net Income $ 1.23 $ .98 $ 1.01 $ 1.38
Cash Dividends $ .60 $ - $ .60 $ -
See auditor's report on the selected financial and statistical data.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL OPERATIONS AND RESULTS OF OPERATIONS
The Company evaluates its financial strength through continual review of
management, asset quality, capital, earnings and liquidity. The Company
continuously addresses each area on an individual and corporate basis.
The following Management's Discussion and Analysis relates to the
Company's financial position for the years 1994 and 1993. This
information is a part of and should be read in conjunction with the
Financial Statements and related Notes. The Company is unaware of any
trends, uncertainties or events which would or could have a material
impact on future operating results, liquidity or capital.
CAPITAL
The Company's capital continues to exceed regulatory requirements and peer
group averages. Regulatory Risk Based Capital requirements for 1994 and
1993 were 8.0%. Regulatory Leverage Ratio requirements were 4% for the
same time period. The Company's 1994 Equity to Assets Ratio (below)
includes the effect of the Unrealized Loss ($975,394) on Securities
discussed in Note C. The company's ratios as of December 31 are as
follow:
1994 1993
Risk Based Capital Ratio 24.78% 27.63%
Leverage Ratio 9.82% 9.07%
Equity to Assets Ratio 8.82% 9.80%
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
1994 $725,236 $261,450 64%
1993 $890,337 $232,339 74%
The Company distributed to shareholders, cash dividends of $1.35 and $1.20
per share in 1994 and 1993, respectively.
LIQUIDITY
Liquidity management is the process of ensuring that the Bank's assets and
liabilities are appropriately structured. The Company's short-term and
long-term liquidity is provided by two sources: core deposits and an
adequate level of assets readily convertible to cash. Management
continually monitors the balance sheet to insure its ability to meet
current and future depositor requirements and loan funding commitments.
The Company does not anticipate difficulties in meeting funding
obligations.
RESULTS OF OPERATIONS
Overview
Zachary Bancshares, Inc.'s (ZBI) net income for 1994 was $725,236 compared
to $890,337 for 1993. ZBI's income level differential is attributable to
securities transactions and reduced gains from Other Real Estate sales.
ZBI continues to benefit from improvements in our regional and local
economies and expects these trends to continue, although not at the 1992
to 1994 levels. The following table indicates our equity position and
balance sheet trends; the 1994 Equity decrease reflects the FASB 115
Unrealized Loss on Securities of $(975,394).
Growth Trends
(year to year in $ and %)
94 to 93 93 to 92
Stockholders' Equity $(639,971) or -10.1% $ 786,301 or 14.2%
Average Assets $(223,000) or -.3% $1,019,000 or 1.5%
Earnings Analysis
The Company's 1994 Net Interest Income increased slightly. Net Interest
Income in 1994 was $2,832,949 compared to $2,832,710 for 1993.
Average earning assets were $60,869,000 in 1994 compared to $60,476,000 in
1993. The following table depicts the Company's average earning assets
components in thousands of dollars and the respective percentage
relationship.
1994 1993
Reserve Funds $ 2,719 05% $ 3,216 05%
Securities 34,273 56% 37,797 63%
Loans (Net) 23,877 39% 19,463 32%
Avg. Earning Assets $60,869 100% $60,476 100%
The previous table indicates average earning assets stability. The
Company experienced a cyclical loan volume decrease trend starting in
1984, stabilized in 1992, but reversed in 1994. Management actively
pursued increases in the Company's loan portfolio in 1994. The majority
of the Company's new loans are local, single family dwellings with a fixed
rate, 5 year balloon repricing term.
Average deposit liabilities were $58,666,000 in 1994 compared to
$59,037,000 in 1993. The following table depicts ZBI's average deposit
liabilities components and the respective percentage relationship, dollars
in thousands.
1994 1993
Demand Deposits $11,866 20% $10,584 18%
Savings & NOW 15,364 26% 16,125 27%
Money Market 6,723 11% 6,400 11%
Certificates 24,713 43% 25,928 44%
Avg. Depositor Liability $58,666 100% $59,037 100%
As interest rates decreased in recent years, depositors have moved funds
from the longer maturities(Certificates) into shorter maturities.
Management expects an increase in market rates may influence depositors to
return some funds to longer term Certificates. Management remains
committed to accepting only trade area deposits, which have core deposit
characteristics.
The Company's Net Interest Spread and Margin are shown below. Net
Interest Spread is the difference between the yield on earning assets and
the cost of funding. Net Interest Margin is interest income as a percent
of average earning assets.
1994 1993
Net Interest Spread 3.98% 4.14%
Net Interest Margin 4.65% 4.68%
The Company's interest rate sensitivity is modeled in the following GAP
Analysis Table. The Table depicts Management's measurement of the average
balance sheet interest rate sensitivity GAP at December 31, 1994.
Interest rate sensitivity results from the timing differences at which
assets and liabilities may be repriced as market rates change. The
Company also utilizes other measurement techniques to analyze interest
rate sensitivity.
GAP Analysis Table
(Dollars in Thousands, @ par)
0-365 1-3 3+ Non Interest Total
Days Years Years Bearing
Assets
Reserve Funds 2,100 - - - 2,100
Securities 6,550 15,418 7,717 - 29,685
Loans 8,125 4,012 15,285 - 27,422
Other Assets - - - 5,201 5,201
Total Assets 16,775 19,430 23,002 5,201 64,408
Liabilities
Transfer Accts 4,066 7,137 2,950 - 14,155
Savings - 4,477 2,984 - 7,462
Certificates 20,127 1,902 2,567 - 24,596
Other Liabilities
& Capital - - - 18,195 18,195
Total Liabilities
& Capital 24,193 13,516 8,501 18,195 64,408
Cumulative GAP (7,418) (1,504) 12,997
The Company sold securities in 1993 resulting in a $83,027 cumulative
gain; sales in 1994 resulted in a $122,096 cumulative loss. The total
financial change from 1993 to 1994 was a $205,123 negative effect reported
to shareholders in 1994. In both years, the Company was repositioning the
Securities portfolio to enhance future earnings. A primary Company
objective with all securities transactions is to increase interest margin;
which was accomplished with the majority of transactions in 1993 and 1994.
Allowance and Provision for Loan Losses
The Allowance for Loan Losses is the amount Management determines
necessary to reduce loans to their estimated collectible amounts and to
provide for future losses in certain loans which are yet undefined. The
Provision for Loan Losses is the amount charged to current earnings which
are contributed to the Allowance, hereby maintaining the Allowance's
integrity. The Company had a negative 1994 Provision of $42,338, (see
Note E). The following table reflects year end Allowance and Provision
totals:
1994 1993
Allowance for Losses $820,000 $819,047
Provision for Losses $(42,338) $ -
Management utilizes diversification by loan type, borrower, purpose and
industry in combination with individual credit standards to balance the
Company's credit risks. Loans are reviewed to facilitate identification
and monitoring of potentially deteriorating credits. Management considers
the current Allowance adequate to absorb potential losses; therefore a
1995 Provision is not anticipated.
Non-Performing Assets
Non-performing assets include non-accrual loans, restructured loans and
foreclosed assets. Loans are placed on non-accrual when a borrower's
financial position has weakened or the ability to comply with contractual
agreements becomes reasonably doubtful. Restructured loans have had
original contractual agreements renegotiated because of the borrower's
apparent inability to fulfill the contract. In-substance foreclosure
loans have not been foreclosed upon or dationed; however, the collateral
securing these loans, in Management's opinion have substantially the same
characteristics as Other Real Estate and may become Other Real Estate.
Therefore, all loans classified as in-substance, are carried in Other Real
Estate totals. Other Real Estate, by State Law, is carried at the lower
of cost or current market value for any asset appraised in excess of
$40,000.
The following table represents non-performing and renegotiated assets at
year end:
1994 1993
Non-Accrual Loans $178,700 $ 183,400
Restructured Loans 144,090 145,161
Other Real Estate 563,369 769,526
Total $886,159 $1,098,087
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:
1994 1993
$831,000 $836,000
Management anticipates a positive Watch List trend to continue in 1995.
In 1993, the Company realized a $86,829 Gain on Sale of Other Real Estate,
similar 1994 sales resulted in a $28,877 Gain on Sale. Therefore, 1994
Gain on Sale of Other Real Estate revenues decreased by $57,952 or 66.74%.
Other Income
Service Charges on Deposit Accounts decreased 5.3% or $29,312 in 1994.
Management considers the 1994 decrease, a possible trend as depositors
maintain higher balances, thereby offsetting direct service charges.
Other Operating Income in 1993, included $20,341 in Loss on Disposal of
Fixed Assets. After adjusting the 1993 income for the above Loss on
Disposal, this income category was unchanged.
Other Expense
Salaries and Employee benefits increased 4.1% in 1994. This increase
includes health care premiums and salaries. Occupancy expense decreased
14.5% or $28,457 in 1994, as a result of lower depreciation expense.
Other Operating Expense was relatively unchanged in the aggregate.
However, within this expense category, Management increased 1994 Public
Relations and Advertising by $13,990 or 35%. Other expense's within this
category offset the Public Relations' increase.
Income Tax
The Company was fully taxable in both 1993 and 1994 and expects to remain
so in 1995.
ZACHARY BANCSHARES, INC.
OFFICERS
Harry S. Morris, Jr.
President & C.E.O.
Winston E. Canning
Secretary
Mark Thompson
Treasurer
BANK OF ZACHARY
OFFICERS
Harry S. Morris, Jr.
President & C.E.O.
Winston E. Canning
Executive Vice President
Mark Thompson
Vice President & Cashier
Warren Couvillion
Vice President
Judy W. Andrews
Assistant Vice President
Virginia Hillman
Assistant Vice President
Kathleen Parker
Assistant Vice President
Ethel Mae Womack
Assistant Vice President
Laura Steen
Operations Officer
Melinda White
Note Supervisor
& Compliance Officer
ZACHARY BANCSHARES, INC.
AND BANK OF ZACHARY
DIRECTORS
Leonard F. Aguillard
Chairman of the Board
Russell Bankston, Vice Chairman
Hardee M. Brian
Winston E. Canning
Sam Johnson
Howard L. Martin, M.D.
Albert C. Mills, III, PhD.
Harry S. Morris, Jr.
Director Emeritus
R. O. McCraine
A. C. Mills, Jr.
STOCK INFORMATION
The Company's stock is not listed on any security exchange. Therefore, Zachary
Bancshares, Inc. does not have exchange data that provides high and low stock
prices. The Company did not have any stock trades in 1994.
There was a cash dividend paid in 1994 of $1.35 per share and
$1.20 in 1993.
BANK LOCATIONS
Main Branch
4700 Main Street
The Plaza
2210 Hwy 64, Zachary
Central Branch
13444 Hooper Road, Baton Rouge
INFORMATION
Requests for additional information or copies of Form 10-K filed
with the Securities and Exchange Commission in Washington, D.C.
should be directed to:
Chief Financial Officer
Zachary Bancshares, Inc.
P. O. Box 497
Zachary, Louisiana 70791-0497
TRANSFER AGENT
& REGISTRAR
Bank of Zachary
P. O. Box 497
Zachary, Louisiana 70791-0497
INDEPENDENT ACCOUNTANTS
Hannis T. Bourgeois & Co., L.L.P.
Certified Public Accountants
2322 Tremont Drive, Suite 200
Baton Rouge, LA 70809-1487