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, 1997 Commission File Number 13397
Zachary Bancshares, Inc
(Exact name of registrant as specified in its charter)
Louisiana 72-0981148
(State of or other jurisdiction (I.R.S. Employer Incorporation
of organization) or Identification No.)
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,
1997.
I N D E X
Financial Statements:
Consolidated Balance Sheets -
March 31, 1997, December 31, 1996 and March 31, 1996 2
Consolidated Statements of Income -
for the three months ended March 31, 1997 and 1996 3
Consolidated Statements of Changes in Stockholders' Equity -
for the three months ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows -
for the three months ended March 31, 1997 and 1996 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
Report of Independent Accountant 15
Management's Responsibility for Financial Reporting 16
1
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
March 31, 1997, December 31, 1996 and March 31, 1996
ASSETS
(UNAUDITED) (UNAUDITED)
MARCH 31, DECEMBER 31, MARCH 31,
__1997__ __1996__ __1996__
Cash and Due from Banks $ 3,628,342 $ 3,654,801 $ 2,839,834
Interest Bearing Deposits in
Other Institutions 91,063 111,469 1,105,255
Reserve Funds Sold 800,000 850,000 5,800,000
Securities Available for Sale
(Amortized Cost $29,536,576,
$32,554,647 and $31,333,679) 29,322,066 32,528,819 31,227,248
Loans 37,581,194 37,260,053 31,577,859
Less: Allowance for
Loan Losses (825,339) (820,227) (822,481)
36,755,855 36,439,826 30,755,378
Bank Premises and Equipment 1,448,099 1,339,439 921,562
Other Real Estate 408,181 408,181 454,374
Accrued Interest Receivable 545,480 612,568 542,250
Other Assets 68,566 82,324 124,736
Total Assets $73,067,652 $76,027,427 $73,770,637
LIABILITIES
Deposits:
Noninterest Bearing $12,456,517 $12,327,349 $12,451,227
Interest Bearing 52,577,401 55,841,920 53,557,318
65,033,918 68,169,269 66,008,545
Accrued Interest Payable 178,912 185,288 171,778
Other Liabilities 163,643 60,994 328,201
Total Liabilities 65,376,473 68,415,551 66,508,524
STOCKHOLDERS' EQUITY
Common Stock - $10 Par Value;
Authorized 2,000,000 Shares;
Issued 216,000 Shares, Respec-
tively 2,160,000 2,160,000 2,160,000
Surplus 1,480,000 1,480,000 1,480,000
Retained Earnings 4,639,416 4,435,582 4,142,317
Unrealized Gain (Loss) on Secur-
ities Available for Sale, Ne (141,577) (17,046) (73,544)
Treasury Stock (22,333 Shares
at Cost) (446,660) (446,660) (446,660)
Total Stockholders'
Equity 7,691,179 7,611,876 7,262,113
Total Liabilities and
Stockholders' Equity $73,067,652 $76,027,427 $73,770,637
See accountant's report and accompanying notes.
2
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
for the three months ended
March 31, 1997 and 1996
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31
1997 1996
Interest Income:
Interest and Fees on Loans $ 798,961 $ 656,087
Interest on Securities 473,627 461,944
Other Interest Income 24,549 61,844
Total Interest Income 1,297,137 1,179,875
Interest Expense on Deposits 530,872 475,357
Net Interest Income 766,265 704,518
Provision for (Recovery of) Loan Losses 7,479 -
Net Interest Income After Provision for
(Recovery of) Loan Losses 758,786 704,518
Other Income:
Service Charges on Deposit Accounts 124,487 121,855
Gain (Loss) on Securities (913) -
Other Operating Income 27,494 21,323
Total Other Income 151,068 143,178
Income before Other Expenses 909,854 847,696
Other Expenses:
Salaries and Employee Benefits 332,266 326,748
Occupancy Expense 49,358 43,758
Net Other Real Estate Expense 1,200 (11,018)
Other Operating Expenses 227,143 186,770
Total Other Expenses 609,967 546,258
Income before Income Taxes 299,887 301,438
Applicable Income Taxes 96,053 94,928
Net Income $ 203,834 $ 206,510
Per Share:
Net Income $ 1.05 $ 1.07
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, 1997 and 1996
(UNAUDITED)
MARCH 31,
1997 1996
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 $4,435,582 $3,935,807
Net Income 203,834 206,510
Balance - End of Period $4,639,416 $4,142,317
Net Unrealized Gain (Loss) on Securities
Available for Sale:
Balance - Beginning of Period $ (17,046) $ 38,260
Net Change in Unrealized Gain (Loss)
on Securities Available for Sale (124,531) (111,804)
Balance - End of Period $ (141,577) $ (73,544)
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, 1997 and 1996
(UNAUDITED)
MARCH 31,
1997 1996
Cash Flows From Operating Activities:
Net Income $ 203,834 $ 206,510
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating
Activities:
Provision for (Recovery of) Loan
Losses 7,479 -
Provision for Depreciation and
Amortization 34,097 23,675
Stock Dividends on Federal Home Loan
Bank Stock (3,300) (3,400)
Net (Accretion) Amortization of
Securities (Discounts) Premiums (8,035) 15,681
(Gain) Loss on Sale of Securities 913 -
Gain on Sale of Other Real Estate - (12,971)
(Increase) Decrease in Accrued
Interest Receivable 67,088 42,297
(Increase) Decrease in Other Assets 86,691 36,685
Increase (Decrease) in Accrued
Interest Payable (6,376) 1,500
Increase (Decrease) in Other
Liabilities 93,867 151,976
Net Cash Provided by Operating
Activities 476,258 461,953
Cash Flows From Investing Activities:
(Increase) Decrease in Interest Bearing
Deposits in Other Institutions 20,406 (1,005,153)
Net (Increase) Decrease in Reserve
Funds Sold 50,000 (3,100,000)
Purchase of Federal Home Loan Bank Stock (21,900) -
Purchases of Securities Available for Sale (2,030,544) (1,487,109)
Principal Paydowns on Mortgage-Backed
Securities 98,698 152,828
Proceeds from Sales of Securities 4,982,239 -
Net (Increase) Decrease in Loans (323,508) (1,167,931)
Purchases of Premises and
Equipment (142,757) (9,685)
Proceeds from Sales of Other
Real Estate - 29,971
Net Cash Provided by (Used in)
Investing Activities 2,632,634 (6,587,079)
(CONTINUED)
5
(UNAUDITED)
MARCH 31,
1997 1996
Cash Flows From Financing Activities:
Net Increase (Decrease) in Demand
Deposits, NOW Accounts and
Savings Accounts (3,155,438) 7,492,123
Net Increase (Decrease) in Certificate
of Deposit 20,087 (840,103)
Net Cash Provided by Financing
Activities (3,135,351) 6,652,020
Increase (Decrease) in Cash and Due
from Banks (26,459) 526,894
Cash and Due from Banks - Beginning of
Period 3,654,801 2,312,940
Cash and Due from Banks - End of Period $ 3,628,342 $ 2,839,834
Supplemental Disclosures of Cash Flow
Information:
Noncash Investing Activities:
Other Real Estate Acquired in
Settlement of Loans $ - $ 19,604
Increase (Decrease) in Unrealized
Gain (Loss) on Securities Available
for Sale $ (188,682) $ (169,400)
Increase (Decrease) in Deferred Tax
Effect on Unrealized Gain (Loss)
on Securities Available for Sale $ 64,151 $ 57,596
Cash Payments For:
Interest Paid on Deposits $ 537,248 $ 473,857
Income Tax Payments (Refunds) $ (14,719) $ -
See accountant's report and accompanying notes.
6
Zachary Bancshares, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 1997 and 1996
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 con-
sistent 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 adjust-
ments 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, 1997 are no indication of the expected results for the annual
period which ends December 31, 1997. Additional information concerning the
audited financial statements and notes can be obtained from Zachary Banc-
shares, Inc.s annual report and Form 10-KSB filed for the period ended
December 31, 1996.
Principles of Consolidation
The consolidated financial statements include the accounts of Zachary Banc-
shares, 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 finan-
cial 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
reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
7
Securities
Securities are being accounted for in accordance with Statement of Financial
Accounting Standards (SFAS) No. 115, Accounting for Investments in Debt and
Equity Securities, which requires the classification of securities as held
to maturity, trading, or available for sale.
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.
Securities classified as trading are those securities held for resale in
anticipation of short-term market movements. The Bank holds no securities
classified as held to maturity or trading.
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 Banks assets and lia-
bilities, liquidity needs, regulatory capital considerations, and other
similar factors. Securities available for sale are carried at fair value.
Unrealized gains or losses are reported as increases or decreases in stock-
holders equity, net of the reported deferred tax effect. Realized gains or
losses, determined on the basis of the costs of specific securities sold, are
included in earnings.
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 recog-
nized 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. Interest on impaired loans is discon-
tinued when, in managements opinion the borrower may be unable to meet
payments as they become due. When a loan is placed on non-accrual status,
previously recognized but uncollected interest is reversed to income or
charged to the allowance for loan losses. Interest income is subsequently
recognized only to the extent cash payments are received.
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 port-
folio. Factors considered inthe 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 re-
gulatory agencies; an internal asset review process; expectations of future
economic conditions and their impact on particular borrowers; and other judg-
mental factors.
8
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 accele-
rated methods for income tax purposes.
The cost of assets retired or otherwise disposed of and the related accumu-
lated depreciation are eliminated from the accounts in the year of disposal
and the resulting gains or losses are included in current operations.
Expenditures for maintenance and repairs are charged to operations as incurred.
Cost of major additions and improvements are capitalized.
Other Real Estate
Other real estate is comprised of properties acquired through foreclosure or
negotiated settlement. The carrying value of these properties is lower of
cost or fair value. Loan losses arising from the acquisition of these pro-
perties 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 ex-
cluded. Also certain items of income and expenses are recognized in dif-
ferent 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 in accordance with SFAS No.
109 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
9
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes
in tax laws and rates on the date of enactment.
The corporation and its subsidiary file a consolidated federal income tax return
In addition, state income tax returns are filed individually by the Company in
accordance with state statutes.
Earnings per Common Share
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 out-
standing during each year, which is 193,667 for all periods presented.
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 clear-
ing).
10
Zachary Bancshares, Inc. and Subsidiary
MANAGEMENT'S DISCUSSION
March 31, 1997
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, 1997 and 1996
This information should be read in conjunction with the financial
statements and the notes relating thereto. The Company is unaware of
any trends, uncertainties or events which would or could have a
material impact on future operating results, liquidity or capital.
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1997 OVER 1996
NET INCOME
Net Income was $203,834 for the three month period ended March 31, 1997
compared to $206,510 in the same period in 1996. The change is largely
attributable one time expenses incurred with a data processing system
installed in February, 1997.
INTEREST INCOME
Interest Income for the three month period ended March 31, 1997 is
$1,297,137, a 10% increase over the same period in 1996. The interest
income increase resulted from the Corporation's asset mix reallocation
from lower yielding securities to higher yielding loans. The subsidia-
ry's loan portfolio increased 19% and the investment portfolio
decreased 6.1% in the time period under consideration.
INTEREST EXPENSE
Interest Expense for the quarter ended March 31, 1997 was $530,872, a
11% increase over the same quarter in 1996. Interest bearing deposits
decreased 2% from March 1996. However, the 1997 average balance in
interest bearing deposits was approximately $1,500,000. higher than the
quarter end amount. Both volume and rates contributed to the net
interest expense change.
11
PROVISION FOR LOSSES
The Corporation did not make a first quarter provision for loss in
1996. The Corporation has expensed $7,499 provision for loan losses
thus far in 1997, due to increase loan volume. The Corporation's Watch
List volumes were stable in the last half of 1996 and to date in 1997.
Management does not anticipate any unusual Watch List changes.
Management remains committed to providing for losses in a timely
manner.
TOTAL OTHER INCOME
Total Other Income for the time period under consideration increased
$7,890 or 5.5%. In 1997, the Corporation waived approximately $12,000
in service charge connected with the afore mention data processing
installation.
TOTAL OTHER EXPENSES
Other Expenses at March 1997, increased 11% or $60,709 to $609,967 from
$546,258 at March 1996. Employee benefits were virtually unchanged in
the time periods under consideration. Occupancy expense increase 12%,
the majority this increase is related data processing equipment
installed late in the first quarter of 1997. The Corporation incurred
approximately $15,000 in one time expenses (printing, training, etc.)
attributable to the data processing conversion.
INCOME TAXES
The Corporation is fully taxable at the maximum rate (34%) in both 1997
and 1996 and expects to remain taxable at the current rate throughout
1997.
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:
Harry S. Morris, Jr.
President
Mark Thompson
Treasurer
14
April 30, 1996
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, 1996 and 1995,
and the related Consolidated Statements of Income and Cash Flows for
the three month periods then ended in accordance with Statements on
Standards for Accounting and Review Services issued by the American
Institute of Certified Public Accountants.
We previously audited and expressed our unqualified opinion in our
report dated January 12, 1996, on the Consolidated Balance Sheet of
Zachary Bancshares, Inc. and Subsidiary as of December 31, 1995.
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.
Based on our reviews, we are not aware of any material modifications
that should be made to the accompanying consolidated financial state-
ments for them to be in conformity with generally accepted accounting
principles.
Respectfully submitted,
/s/ HANNIS T. BOURGEOIS & CO., L.L.P.
15
Management's Responsibility for Financial Reporting
The management of Zachary Bancshares, Inc. is responsible for the
preparation of the financial statements, related financial data and
other information in this quarterly report. The financial statements
are prepared in accordance with generally accepted accounting princi-
ples and include some amounts that are necessarily based on manage-
ment's informed estimates and judgments, with consideration given to
materiality. All financial information contained in this quarterly
report is consistent with that in the financial statements.
Management fulfills its responsibility for the integrity, objec-
tivity, consistency and fair presentation of the financial statements
and financial information through an accounting system and related
internal accounting controls that are designed to provide reasonable
assurance that assets are safeguarded and that transactions are author-
ized and recorded in accordance with established policies and proce-
dures. The concept of reasonable assurance is based on the recognition
that the cost of a system of internal accounting controls should not
exceed the related benefits. As an integral part of the system of
internal accounting controls, Zachary Bancshares, Inc. has a profes-
sional staff who monitors compliance with and assesses the
effectiveness of the system of internal accounting controls and
coordinates audit coverage with the independent public accountants.
The Audit Committee of the Board of Directors, composed solely of
outside directors, meets periodically with management, and the indepen-
dent public accountants to review matters relating to financial report-
ing, internal accounting control and the nature, extent and results of
the audit effort. The independent public accountants have direct
access to the Audit Committee with or without management present.
The financial statements as of December 31, 1996 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,
1996 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
16