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, 1995 Commission File Number
0-13397
Zachary Bancshares, Inc.
(Exact name of registrant as specified in its charter)
Louisiana 72-0981148
(State of or other jurisdiction (I.R.S. Employer
Incorporation
of organization) or Identification
No.)
4700 Main Street
Post Office Box 497
Zachary, LA 70791-0497
(Address of principal executive office) (Zipcode)
Registrant's telephone number, including area code 504 654 2701
NONE
(Former name, former address and former fiscal
year of change since last report)
Indicate by check mark whether the registrant (1) has filed
all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act
of 1934 during the preceding 12 months (or for such shorter period
that the
registrant was required to file such reports), and (2) has been
subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes
of common stock, as of the latest practicable date.
Common Stock, $10 par value, 193,667 shares outstanding as of
March 31,
1995.
I N D E X
Part I - Financial Statements:
Consolidated Balance Sheets -
March 31, 1995, December 31, 1994 and March 31, 1994 2
Consolidated Statements of Income -
for the three months ended March 31, 1995 and 1994 3
Consolidated Statements of Changes in Stockholders' Equity -
for the three months ended March 31, 1995 and 1994 4
Consolidated Statements of Cash Flows -
for the three months ended March 31, 1995 and 1994 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 14
Exhibit 15 - Report of Independent Accountant 15-16
Management's Responsibility for Financial Reporting 17-18
1
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
March 31, 1995, December 31, 1994 and March 31, 1994
ASSETS
(UNAUDITED)
(UNAUDITED)
MARCH 31, DECEMBER 31,
MARCH 31,
1995 1994
1994
Cash and Due from Banks $ 2,897,855 $ 2,592,065 $
3,249,258
Reserve Funds Sold 4,300,000 2,100,000
4,100,000
Securities:
Held for Investment (Fair
Value $-0-, $-0- and
$18,116,000) $ - $ -
$18,150,046
Held for Sale (Fair Value
$29,962,977, $31,162,869
and $17,390,812) 29,225,343 29,685,000
17,181,667
$29,225,343 $29,685,000
$35,331,713
Loans $29,908,522 $28,241,397
$21,748,183
Less: Allowance for Loan Losses (828,579) (820,000)
(829,855)
$29,079,943 $27,421,397
$20,918,328
Bank Premises and Equipment 915,496 909,465
974,878
Other Real Estate 563,369 563,369
710,880
Accrued Interest Receivable 448,659 553,417
501,244
Other Assets 377,296 583,333
248,461
Total Assets $67,807,961 $64,408,046
$66,034,762
LIABILITIES
Deposits:
Noninterest Bearing $11,836,607 $12,192,031
$10,672,064
Interest Bearing 49,179,263 46,212,790
48,732,594
$61,015,870 $58,404,821
$59,404,658
Accrued Interest Payable 143,051 125,111
109,093
Other Liabilities 303,994 199,643
310,352
Total Liabilities $61,462,915 $58,729,575
$59,824,103
STOCKHOLDERS' EQUITY
Common Stock - $10 Par Value;
Authorized 2,000,000 Shares;
Issued 216,000 Shares,
Respectively $ 2,160,000 $ 2,160,000 $
2,160,000
Surplus 1,480,000 1,480,000
1,480,000
Retained Earnings 3,638,545 3,460,525
3,155,355
Unrealized Gain (Loss) on Securities
Available for Sale, Net (486,839) (975,394)
(138,036)
Treasury Stock - 22,333 Shares,
at Cost (446,660) (446,660)
(446,660)
Total Stockholders' Equity $ 6,345,046 $ 5,678,471 $
6,210,659
Total Liabilities and
Stockholders' Equity $67,807,961 $64,408,046
$66,034,762
See accountant's report and accompanying notes.
2
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
for the three months ended March 31, 1995 and 1994
(UNAUDITED)
MARCH 31,
1995 1994
Interest Income:
Interest and Fees on Loans $ 608,464 $
463,780
Interest on Securities 474,091
479,959
Other Interest Income 64,347
35,261
Total Interest Income $1,146,902 $
979,000
Interest Expense on Deposits 424,187
324,287
Net Interest Income $ 722,715 $
654,713
Provision for Loan Losses - -
Net Interest Income after
Provision for Loan Losses $ 722,715 $
654,713
Other Income:
Service Charges on Deposit Accounts $ 128,764 $
130,282
Gain on Securities (11,537)
17,813
Other Operating Income 16,745
16,718
Total Other Income $ 133,972 $
164,813
Income before Other Expenses $ 856,687 $
819,526
Other Expenses:
Salaries and Employee Benefits $ 320,197 $
310,536
Occupancy Expense 38,962
38,971
Net Other Real Estate Expense 5,693
2,580
Other Operating Expenses 226,403
215,823
Total Other Expenses $ 591,255 $
567,910
Income before Income Taxes $ 265,432 $
251,616
Applicable Income Taxes 87,412
93,000
Net Income $ 178,020 $
158,616
Per Share:
Net Income $ .92 $
.82
See accountant's report and accompanying notes.
3
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
for the three months ended March 31, 1995 and 1994
(UNAUDITED)
MARCH 31,
1995 1994
Common Stock:
Balance - Beginning and End of Period $2,160,000
$2,160,000
Surplus:
Balance - Beginning and End of Period $1,480,000
$1,480,000
Retained Earnings:
Balance - Beginning of Period $3,460,525
$2,996,739
Net Income 178,020
158,616
Balance - End of Period $3,638,545
$3,155,355
Net Unrealized Gain (Loss) on Securities
Available for Sale:
Balance - Beginning of Period $ (975,394) $
128,363
Net Change in Unrealized Gain (Loss)
on Securities Available for Sale 488,555
(266,399)
Balance - End of Period $ (486,839) $
(138,036)
Treasury Stock:
Balance - Beginning and End of Period $ (446,660) $
(446,660)
See accountant's report and accompanying notes.
4
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the three months ended March 31, 1995 and 1994
(UNAUDITED)
MARCH 31,
1995 1994
Cash Flows From Operating Activities:
Net Income $ 178,020 $
158,616
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Provision for Loss on Other Real
Estate -
3,300
Provision for Depreciation and
Amortization 29,355
30,830
Amortization (Accretion) of
Securities Premiums (Discounts) 17,578
55,688
Gain on Sale of Securities 11,537
(17,813)
Gain on Sale of Other Real Estate -
(720)
(Increase) Decrease in Interest
Receivable 104,758
(25,854)
(Increase) Decrease in Other Assets (45,643)
135,024
Increase (Decrease) in Interest
Payable 17,940
2,470
Increase (Decrease) in Other
Liabilities 104,351
77,284
Net Cash Provided by Operating
Activities $ 417,896 $
418,825
Cash Flows From Investing Activities:
Net Decrease in Reserve Funds Sold $(2,200,000) $
(600,000)
Purchases of Securities -
(3,041,875)
Proceeds from Maturities of Securities 153,277
2,279,968
Proceeds from Sales of Securities 1,017,500
1,017,813
Net Decrease in Loans (1,658,546)
(887,003)
Purchases of Premises and Equipment (35,386)
(48,664)
Proceeds from Sales of Other Real Estate -
56,066
Net Cash Used in Investing
Activities $(2,723,155)
$(1,223,695)
(CONTINUED)
5
(UNAUDITED)
MARCH 31,
1995 1994
Cash Flows From Financing Activities:
Net Increase in Demand Deposits,
NOW Accounts and Savings Accounts $ 1,009,953 $
1,613,300
Net Increase (Decrease) in Certificates
of Deposit 1,601,096
(5,238)
Net Cash Provided by Financing
Activities $ 2,611,049 $
1,608,062
Increase in Cash and Due from Banks $ 305,790 $
803,192
Cash and Due from Banks - Beginning of
Period 2,592,065
2,446,066
Cash and Due from Banks - End of Period $ 2,897,855 $
3,249,258
Supplemental Disclosures of Cash Flow
Information:
Noncash Investing Activities:
Other Real Estate Acquired in
Settlement of Loans $ - $ -
Increase (Decrease) in Unrealized
Gain (Loss) on Securities Available
for Sale $ 740,235 $
(403,634)
Increase (Decrease) in Deferred Tax
Effect on Unrealized Gain on
Securities Available for Sale $ 251,680 $
(137,235)
Cash Payments for:
Interest Paid on Deposits $ 406,247 $
321,818
See accountant's report and accompanying notes.
6
Zachary Bancshares, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 1995 and 1994
Note A - Summary of Significant Accounting Policies -
The accounting principles followed by Zachary Bancshares, Inc.
and
its wholly-owned Subsidiary, Bank of Zachary, are those which are
generally practiced within the banking industry. The methods of
applying those principles conform with generally accepted
accounting
principles and have been applied on a consistent basis. The
princi-
ples which significantly affect the determination of financial
posi-
tion, 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
subsid-
iary, 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
regard-
less 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,
com-
puted by various methods approximating the interest method over
their
contractual lives.
Securities classified as available for sale are those debt
securi-
ties that the Bank intends to hold for an indefinite period of
time
but not necessarily to maturity. Any decision to sell a security
classified as available for sale would be based on various
factors,
including significant movements in interest rates, changes in the
maturity mix of the Bank's assets and liabilities, liquidity
needs,
regulatory capital considerations, and other similar factors.
Secu-
rities available for sale are carried at fair value. Unrealized
gains or losses are reported as increases or decreases in 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. The Bank does not
engage
in trading activities.
7
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.
The Financial Accounting Standards Board has issued Statement
No.
114, "Accounting by Creditors for Impairment of a Loan", which
was
adopted by the Bank on January 1, 1995. The Statement generally
requires impaired loans to be measured on the present value of
ex-
pected 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
accor-
dance with the terms of the loan agreement. The effect of this
statement on the financial statements of the Bank is immaterial.
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 port-
folio. 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
man-
agement'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;
expecta-
tions 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
esti-
mates. These estimates are reviewed periodically and as
adjustments
become necessary, the effect of the change in estimate is charged
to
operating expenses in the period incurred. All losses are
charged to
the allowance for loan losses when the loss actually occurs or
when
management believes that the collectibility of the principal is
un-
likely. Recoveries are credited to the allowance at the time of
recovery.
8
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
capital-
ized.
Other Real Estate
Other real estate is comprised of properties acquired through
fore-
closure or negotiated settlement. The carrying value of these
prop-
erties is lower of cost or fair 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
liabili-
ties are recognized for taxable temporary differences. Temporary
dif-
ferences 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
as-
sets will not be realized. Deferred tax assets and liabilities
are
adjusted for the effects of changes in tax laws and rates on the
date
of enactment.
The corporation and its subsidiary file a consolidated federal
income tax return. In addition, state income tax returns are
filed
individually by Company in accordance with state statutes.
Earnings per Common Share
The computation of earnings per share and other per share
amounts
of common stock is based on the weighted average number of shares
of
common stock outstanding during each year, which is 193,667 in
1995
and 1994.
9
Statements of Cash Flows
For purposes of reporting cash flows, cash and due from banks
in-
cludes 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
Instru-
ments." 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
equiva-
lents, securities, loans, and deposits. SFAS No. 107 must be
adopted
by the Company no later than July 1, 1995.
10
Zachary Bancshares, Inc. and Subsidiary
MANAGEMENT'S DISCUSSION
March 31, 1995
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of the
signifi-
cant changes in income and expenses in relation to the changes in
fi-
nancial position for the three months ended March 31, 1995 and
1994.
This information should be read in conjunction with the financial
statements and the notes relating thereto. The Company is unaware
of
any trends, uncertainties or events which would or could have a
materi-
al impact on future operating results, liquidity or capital.
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1995 OVER 1994
NET INCOME
Net Income for the three month period ended March 31, 1995 as
compared
to the respective period in 1994 increased $19,404 or 12% to
$178,020
from $158,616. The increase is attributable to increased interest
rate
income.
INTEREST INCOME
Interest Income for the three month period ended March 31, 1995 is
$1,146,902, a 17% increase over the same period in 1994. The
interest
income increase resulted from the Corporation's asset mix
reallocation
from lower yielding securities to higher rate loans. The
subsidiary's
loan portfolio increased 37% and the investment portfolio decreased
17%
in the time period under consideration.
INTEREST EXPENSE
Interest Expense for the quarter ended March 31, 1995 was $424,187,
a
34% increase over the same quarter in 1994. Interest bearing
deposits
increased 9% from March 1994; therefore, interest rates are
responsible
for the interest expense change.
PROVISION FOR LOSSES
The Corporation did not make a first quarter provision for loss in
1995
or 1994. The Corporation's Watch List volumes was stable in the
last
half of 1994 and to date in 1995. Management does not anticipate
any
unusual Watch List changes. Management remains committed to
providing
for losses in a timely manner.
11
TOTAL OTHER INCOME
Total Other Income for the time period under consideration
decreased
$30,841. The Corporation's income decreased $29,350 from Gain or
Loss
on Securities Sales transactions in 1995 as compared to the similar
period in 1994. The 1995 loss on Security Sales allowed the
Corpora-
tion to reinvest in assets that will improve future earnings.
Service
Charge Income remains constant.
TOTAL OTHER EXPENSES
Expenses increased 4.1% to $591,255 from $567,910 in 1994.
Employee
benefits increased 3.1% from March 1994 to 1995. Advertising and
con-
sultant expenses have modestly increased in 1995.
INCOME TAXES
The Corporation is fully taxable at the maximum rate (34%) in both
1995
and 1994 and expect to remain taxable at the current rate
throughout
1995.
12
PART II
Item 6. EXHIBITS AND REPORT
a. The following exhibit is filed as a part of this report.
Exhibit 15 - Report of Independent Accountants
13
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: May 8, 1995
Harry S. Morris, Jr.
President
Mark Thompson
Treasurer
14
May 2, 1995
Independent Accountant's Report
To the 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, 1995 and
1994,
and the related Consolidated Statements of Income and Cash Flows
for
the three month periods then ended all in accordance with standards
established by the American Institute of Certified Public
Accountants.
We previously audited and expressed our unqualified opinion in
our
report dated January 13, 1995, on the Consolidated Balance Sheet of
Zachary Bancshares, Inc. and Subsidiary as of December 31, 1994.
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
finan-
cial 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.
15
Based on our reviews, we are not aware of any material
modifica-
tions that should be made to the accompanying consolidated
financial
statements for them to be in conformity with generally accepted ac-
counting principles.
Respectfully submitted,
16
Management's Responsibility for Financial Reporting
The management of Zachary Bancshares, Inc. is responsible for
the
preparation of the financial statements, related financial data and
other information in this quarterly report. The financial
statements
are prepared in accordance with generally accepted accounting
princi-
ples and include some amounts that are necessarily based on manage-
ment's informed estimates and judgments, with consideration given
to
materiality. All financial information contained in this quarterly
report is consistent with that in the financial statements.
Management fulfills its responsibility for the integrity,
objec-
tivity, consistency and fair presentation of the financial
statements
and financial information through an accounting system and related
internal accounting controls that are designed to provide
reasonable
assurance that assets are safeguarded and that transactions are
author-
ized and recorded in accordance with established policies and
proce-
dures. The concept of reasonable assurance is based on the
recognition
that the cost of a system of internal accounting controls should
not
exceed the related benefits. As an integral part of the system of
internal accounting controls, Zachary Bancshares, Inc. has a
profes-
sional staff who monitors compliance with and assesses the
effective-
ness 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 in-
dependent 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, 1994 were examined
by
Hannis T. Bourgeois & Co., L.L.P., independent public accountants,
who
rendered an independent professional opinion on the financial
state-
ments prepared by management. The financial statements as of March
31,
1995 have been reviewed by Hannis T. Bourgeois & Co., L.L.P. in
accor-
dance with standards established by the American Institute of
Certified
Public Accountants.
_______________________________
Mark Thompson, Treasurer and
Chief Financial Officer