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 June 30, 1999 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 225 654 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 June 30,
1999.
I N D E X
Financial Statements:
Consolidated Balance Sheets -
June 30, 1999, December 31, 1998 and June 30, 1998 2
Consolidated Statements of Income -
for the three months and six months ended
June 30, 1999 and 1998 3
Consolidated Statements of Changes in Stockholders' Equity -
for the six months ended June 30, 1999 and 1998 4
Consolidated Statements of Cash Flows -
for the six months ended June 30, 1999 and 1998 5-6
Notes to Consolidated Financial Statements 7-11
Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-14
Part II - Other Information 15
Signatures 16
Management's Responsibility for Financial Reporting 17
1
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
June 30, 1999, December 31, 1998 and June 30,
1998
ASSETS
(UNAUDITED) (UNAUDITED) (UNAUDITED)
JUNE 30, DECEMBER 31, June 30,
1999 1998 1998
Cash and Due from Banks $ 3,226,907 $ 2,815,507 $ 3,874,104
Interest Bearing Deposits in
Other Institutions 1,739,945 1,701,873 1,662,292
Reserve Funds Sold 2,950,000 6,175,000 3,175,000
Securities Available for Sale
(Amortized Cost $18,370,944
$17,563,961 and $22,553,745) 18,131,654 17,572,539 22,615,974
Loans 56,655,956 52,372,002 48,919,894
Less: Allowance for Loan
Losses (912,643) (858,856) (792,803)
Bank Premises and Equipment 4,271,467 3,067,869 1,893,170
Other Real Estate 47 191,592 206,153
Accrued Interest Receivable 536,791 518,258 564,159
Other Assets 168,322 231,935 171,234
Total Assets $86,768,446 $86,787,719 $82,289,177
Deposits
Noninterest Bearing $18,997,484 $17,636,206 $16,088,072
Interest Bearing 58,387,795 56,814,190 57,062,222
77,385,279 74,450,396 73,180,294
Accrued Interest Payable 195,825 231,360 216,868
Other Liabilities 158,592 203,202 334,893
Total Liabilities $77,739,696 $74,884,958 $73,702,055
Common Stock - $10 Par Value;
Authorized 2,000,000 Shares;
Issued 216,000 Shares 2,160,000 2,160,000 2,160,000
Surplus 1,480,000 1,480,000 1,480,000
Retained Earnings 5,993,341 5,703,759 5,352,711
Unrealized Gain (Loss) on
Securitie Available for
Sale, Net (157,931) 5,662 41,071
Treasury Stock-22,333 Shares,
at Cost (446,660) (446,660) (446,660)
Total Stockholders' Equity 9,028,750 8,902,761 8,587,122
Total Liabilities and
Stockholders' Equity $86,768,446 $83,787,719 $82,289,177
The accompanying notes are in integral part of these financial statements.
2
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
for the three and six months ended
June 30, 1999 and 1998
(UNAUDITED) (UNAUDITED)
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
Interest Income:
Interest and Fees on Loans $1,248,185 $1,077,033 $2,428,642 $2,094,534
Interest on Securities 260,967 355,243 522,746 733,870
Other Interest Income 77,652 79,112 149,964 128,209
Total Interest Income $1,586,804 $1,511,388 $3,101,352 $2,956,613
Interest Expense:
Interest Expense on Deposits $ 562,961 $ 591,170 $1,107,131 $1,155,507
Interest Expense on Borrowings 132 441 233 441
Total Interest Expense $ 563,093 $ 591,611 $1,107,364 $1,155,948
Net Interest Income 1,023,711 919,777 1,993,988 1,800,665
Provision for Loan Losses 44,876 51,567 89,260 75,352
Net Interest Income After
Provision for Loan Losses $ 978,835 $ 868,210 $1,904,728 $1,725,313
Other Income:
Service Charges on Deposit
Accounts 122,303 120,830 238,522 238,996
Other Operating Income 43,233 41,136 83,211 81,266
Total Other Income $ 165,536 $ 161,966 $ 321,733 $ 320,262
Income before Other Expenses 1,144,371 $1,030,176 $2,226,461 $2,045,575
Other Expenses:
Salaries and Employee Benefits$ 391,096 $ 378,875 $ 769,094 $ 743,864
Occupancy Expense 49,092 39,693 96,549 81,115
Net Other Real Estate Expense 843 757 82,206 5,679
Other Operating Expenses 286,264 232,181 547,847 466,837
Total Other Expenses 727,295 651,506 1,495,696 1,297,495
Income before Income Taxes 417,076 378,670 730,765 748,080
Applicable Income Tax 142,524 122,910 247,516 245,135
Net Income $ 274,552 $ 255,760 $ 483,249 $ 502,945
Per Share
Net Income $ 1.42 $ 1.32 $ 2.50 $ 2.60
Cash Dividends $ 1.00 $ 0.90 $ 1.00 $ 0.90
The accompanying notes are an integral part of these financial statements.
3
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
for the six months ended June 30,1999 and 1998
ACCUMULATED
OTHER COMPRE- TOTAL
COMMON RETAINED HEMSIVE TREASURY STOCKHOLDERS
STOCK SURPLUS EARNINGS INCOME STOCK EQUITY
Balances, (Unaudited)
January 1, 1999 $2,160,000 $1,480,000 $5,703,759 $ 5,662 $(446,660) $8,902,761
Comprehensive Income:
Net Income 483,249 483,249
Change in Unrealized
Gain (Loss) on Securities
Available for Sale (163,593) (163,593)
Less: Reclassification
Adjustment - -
Total Comprehensive
Income 319,656
Cash Dividends (193,667) (193,667)
Balances, (Unaudited)
June 30, 1999 $2,160,000 $1,480,000 $5,993,341 $(157,931) $(446,660)$9,028,750
Balances, (Unaudited)
January 1, 1998$2,160,000 $1,480,000 $5,024,066 $ (2,671) $(446,660)$8,214,735
Comprehensive Income:
Net Income 502,945 502,945
Change in Unrealized
Gain (Loss) on Securities
Available for Sale 43,742 43,742
Less: Reclassification
Adjustment - -
Total Comprehensive _________
Income 546,687
Cash Dividends (174,300) (174,300)
Balances, (Unaudited)
June 30, 1998 $2,160,000 $1,480,000 $5,352,711 $ 41,071 $(446,660) $8,587,122
The accompanying notes are an integral part of these financial statements.
4
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1999 and 1998
(UNAUDITED)
JUNE 30
1999 1998
Cash Flows From Operating Activities:
Net Income $ 483,249 $ 502,945
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Loan Losses 89,260 75,352
Provision for Depreciation and Amortization 103,536 102,637
Stock Dividends - Federal Home Loan Bank (4,800) (7,800)
Net Amortization Securities Premium 15,750 1,632
Charge Off of Other Real Estate 92,613 -
Gain on Sale of Real Estate (11,239) -
(Increase) in Accrued Interest Receivable (18,533) ( 5,658)
(Increase) Decrease in Other Assets 144,972 (102,095)
Increase (Decrease) in Accrued Interest Payable (35,535) 28,680
Increase (Decrease) in Other Liabilities (41,694) 90,374
Net Cash Provided by Operating Activities 817,579 686,067
Cash Flows From Investing Activities:
Net (Increase) Decrease in Reserve Funds Sold 3,225,000 (1,475,000)
Purchase of Securities Available for Sale (8,786,186) (51,300)
Maturities or Calls of Securities
Available for Sale 6,000,000 1,500,000
Principal Payments on Mortgaged
Back Securities 1,968,253 1,627,884
Net Increase in Loans (4,319,427) (2,832,720)
Purchases of Premises and Equipment (1,307,134) (301,920)
Proceeds from Sales of Other Real Estate 110,171 11,248
Net Cash Used in Investing Activities (3,109,323) (1,521,808)
(CONTINUED)
5
(UNAUDITED)
JUNE 30,
1999 1998
Cash Flows From Financing Activities:
Net Increase (Decrease) in Demand
Deposits, NOW Accounts and
Savings Accounts 3,637,018 2,921,392
Net Increase (Decrease) in Certificate
of Deposit (702,135) 1,048,130
Cash Dividends (193,667) (174,300)
Net Cash Provided by Financing Activities 2,741,216 3,795,222
Increase (Decrease) in Cash and Interest
Bearing Deposits 449,472 2,959,481
Cash and Interest Bearing Deposits -
Beginning of Period 4,517,380 2,576,915
Cash and Interest Bearing Deposits -
End of Period $ 4,966,852 $ 5,536,396
Supplemental Disclosures of Cash Flow
Information:
Noncash Investing Activities:
Change in Unrealized Gain or (Loss)
on Securities Available for Sale $ (247,868) $ 66,277
Change in Deferred Tax Effect on
Unrealized Gain or (Loss) on Securities
Available for Sale $ 84,275 $ 22,534
Cash Payments For:
Interest Paid on Deposits $ 1,142,898 $ 1,127,268
Income Tax $ 315,000 $ 248,500
The accompanying notes are an integral part of these financial statements.
6
Zachary Bancshares, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 1999 and 1998
Summary of Significant Accounting Policies -
The accounting principles followed by Zachary Bancshares, Inc. and
its wholly-owned Subsidiary, Bank of Zachary, are those which are
generally practiced within the banking industry. The methods of
applying those principles conform with generally accepted accounting
principles and have been applied on a consistent basis. The principles
which significantly affect the determination of financial position,
results of operations, changes in stockholders' equity and cash flows
are summarized below.
Presentation
The accompanying unaudited consolidated interim financial statements do
not include all of the information and footnotes required by generally
accepted accounting principles. Management is of the opinion that the
unaudited interim financial statements reflect all normal, recurring
accrual adjustments necessary to provide a fair statement of the
results for the interim periods presented. It is noted that the
results for the first six months ended June 30, 1999 are no indication
of the expected results for the annual period which ends December 31,
1999. Additional information concerning the audited financial
statements and notes can be obtained from Zachary Bancshares, Inc.'s
annual report and Form 10-KSB filed for the period ended December 31,
1998.
Principles of Consolidation
The consolidated financial statements include the accounts of Zachary
Bancshares, Inc. (the Company), and its wholly-owned subsidiary, Bank
of Zachary (the Bank). All material intercompany accounts and
transactions have been eliminated. Certain reclassifications to
previously published financial statements have been made to comply with
current reporting requirements.
Estimates
The preparation of financial statements in conformity with gener
ally accepted accounting principles requires management to make esti
mates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
The determination of the adequacy of the allowance for loan
losses is based on estimates that are particularly susceptible to
significant changes in the economic environment and market
conditions. In connection with the determination of the estimated
losses on loans, management obtains independent appraisals for
significant collateral.
The Bank's loans are generally secured by specific items of
collateral including real property, consumer assets, and business
assets. Although the Bank has a diversified loan portfolio, a
substantial portion of its debtors' ability to honor their contracts
is dependent on local economic conditions.
7
While management uses available information to recognize losses on
loans, further reductions in the carrying amounts of loans may be
necessary based on changes in local economic conditions. In
addition, regulatory agencies, as an integral part of their
examination process, periodically review the estimated losses on
loans. Such agencies may require the Bank to recognize additional
losses based on their judgments about information available to them
at the time of their examination. Because of these factors, it is
reasonably possible that the estimated losses on loans may change
materially in the near term. However, the amount of the change that
is reasonably possible cannot be estimated.
Securities
Securities classified as held to maturity are those debt securities the
Bank has both the intent and ability to hold to maturity regardless of
changes in 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 move
ments. The Bank had no securities classified as held to maturity or
trading at June 30, 1999 or 1998.
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 stockholders' eq
uity, net of the related deferred tax effect. Realized gains or losse
s, determined on the basis of the cost of specific securities sold, are
included in earnings.
Loans
Loans are stated at principal amounts outstanding, less the allow
ance for loan losses. Interest on commercial and individual loans is
accrued daily based on the principal outstanding.
Generally, the Bank discontinues the accrual of interest income
when a loan becomes 90 days past due as to principal or interest. When
a loan is placed on non-accrual status, previously recognized but
uncollected interest is reversed to income or charged to the allowance
for loan losses. Interest income is subsequently recognized only to
the extent cash payments are received. The Bank classifies loans as
impaired if, based on current information and events, it is probable
that the Bank will be unable to collect the scheduled payments of
principal and interest when due according to the contractual terms of
the loan agreement. The measurement of impaired loans is based on the
present value of the expected future cash flows discounted at the
loan's effective interest rate or the loan's observable market price or
based on the fair value of the collateral if the loan is collateral-
dependent.
Allowance for Loan Losses
The allowance for loan losses is maintained at a level which in
management's judgment is adequate to absorb credit losses inherent in
the loan portfolio. The allowance for loan losses is based upon
management's review and evaluation of the loan portfolio. Factors
considered in the establishment of the allowance for loan losses
include management's evaluation of specific loans; the level and
composition of classified loans; historical loss experience; results of
examinations by regulatory agencies; an internal asset review process;
expectations of future economic conditions and their impact on
particular borrowers; and other judgmental
8
factors. Allowances for impaired loans are generally determined based
on collateral values or the present value of estimated cash flows.
Although management uses available information to recognize losses on
loans, because of uncertainties associated with local economic
conditions, collateral values, and future cash flows on impaired loans,
it is reasonably possible that a material change could occur in the
allowance for loan losses in the near term. However, the amount of the
change that is reasonably possible cannot be estimated.
The allowance for loan losses is based on estimates of potential
future losses, and ultimate losses may vary from the current estimates.
These estimates are reviewed periodically and as adjustments become
necessary, the effect of the change in estimate is charged to operating
expenses in the period incurred. All losses are charged to the
allowance for loan losses when the loss actually occurs or when
management believes that the collectibility of the principal is un
likely. 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 reporting.
The cost of assets retired or otherwise disposed of and the
related accumulated depreciation are eliminated from the accounts in
the year of disposal and the resulting gains or losses are included in
current operations.
Expenditures for maintenance and repairs are charged to operations
as incurred. Cost of major additions and improvements are capitalized.
Other Real Estate
Other real estate is comprised of properties acquired through fore
closure or negotiated settlement. The carrying value of these prop
erties is lower of cost or fair value, minus estimated costs to sell.
Loan losses arising from the acquisition of these properties are
charged against the allowance for loan losses. Any subsequent
market reductions required are charged to Net Other Real Estate
Expense. Revenues and expenses associated with maintaining or
disposing of foreclosed properties are recorded during the period in
which they are incurred.
Income Taxes
The provision for income taxes is based on income as reported
in the financial statements. Also certain items of income and expenses
are recognized in different time periods for financial statement
purposes than for income taxes purposes. Thus provisions for deferred
taxes are recorded in recognition of such timing differences.
Deferred taxes are provided utilizing a liability method whereby
deferred tax assets are recognized for deductible temporary differences
and operating loss and tax credit carryforwards and deferred tax
liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts
of assets and liabilities and their tax bases. Deferred tax assets are
reduced by a valuation
9
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 in
dividually by the Company in accordance with state statutes.
Earnings per Common Share
In February 1997, Statement of Financial Accounting Standard No.
128 "Earnings Per Share" ("SFAS No. 128") was issued which establishes
standards for computing and presenting earnings per share (EPS). Under
SFAS No. 128, primary EPS is replaced with basic EPS. Basic EPS is
computed by dividing income applicable to common shares by the weighted
average shares outstanding; no dilution for any potentially convertible
shares is included in the calculation. Fully diluted EPS, now called
diluted EPS, reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock
that then shared in the earnings of the Company. At June 30, 1999, the
Company had no convertible shares or other contracts to issue common
stock. The weighted average number of shares of common stock used to
calculate basic EPS was 193,667 for the periods ended June 30, 1999 and
1998, respectively.
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).
Comprehensive Income
The Financial Accounting Standards Board (FASB) issued Statement
No. 130 "Reporting Comprehensive Income." which became effective for
fiscal years beginning after December 15, 1997. This statement
established standards for the reporting and display of comprehensive
income and its components which are revenues, expenses, gains, and
losses that under GAAP are included in comprehensive income but
excluded from net income. The Company adopted this statement in 1998.
The components of comprehensive income are disclosed in the Statements
of Changes in Stockholder's Equity for all periods presented.
10
Zachary Bancshares, Inc. and Subsidiary
MANAGEMENT'S DISCUSSION
June 30, 1999
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 six months ended June 30, 1999 and 1998 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.
FINANCIAL CONDITION ANALYSIS
Loans
Total loans were $56,655,956 at June 30, 1999 compared to $48,919,894
at June 30, 1998. This represents an increase of $7,736,062 or 16%.
Loan growth was funded from reallocation of investment securities as
they matured and from deposit growth.
Investment Securities
Investment securities decreased 20% to $18,131,654 at June 30, 1999
compared to $22,615,974 at June 30, 1998. This decrease was due to the
reallocation of funds to the loan portfolio as securities matured as
well as the funding of the new main office facility which is discussed
below.
Bank Premises and Equipment
Total bank premises and equipment were $4,271,467 at June 30, 1999
compared to $1,893,170 at June 30, 1998. The Company entered into a
contract totaling $2,920,806 for the construction of a new main office
facility to be located in Zachary, Louisiana. Construction began in
March, 1998 and was completed during the second quarter of 1999. Under
the terms of the contract, disbursements totaling $2,788,478 have been
made as of June 30, 1999. The operations of the Bank were moved to the
new location on June 14, 1999.
11
Deposits
Total deposits increased $4,234,985 or 6% to $77,385,279 at June 30,
1999 compared to $73,150,294 at June 30, 1998.
RESULTS OF OPERATION
For the Six Month Period Ended June 30, 1999 over 1998
Net Income
Net Income was $483,249 for the six month period ended June 30, 1999
compared to $502,945 in the same period in 1998. This change was
primarily due to a $144,739 increase in total interest income offset by
a $82,206 charge off of Other Real Estate Owned and $30,709 Year 2000
expenses.
Interest Income
Interest Income for the six month period ended June 30, 1999 was
$3,101,352 or a 5% increase over the same period in 1998. The interest
income increase resulted from the Company's continued asset mix
reallocation from lower yielding securities to higher yielding loans.
The Subsidiary's loan portfolio increased 16% to $56,655,956 while its
investment portfolio decreased 20% to $18,131,654 in the time period
under consideration.
Interest Expense
Interest Expense for the six months ended June 30, 1999 was $1,107,364
or a decrease of 4% over the same period in 1998 at $1,155,948. Non-
interest bearing deposits increased $2,909,412 to $18,997,484 at June
30, 1999 from $16,088,072 at June 30, 1998. Interest bearing deposits
also increased to $58,387,795 at June 30, 1999 from $57,062,222.
Weighted average deposit rates decreased to 2.97% at June 30, 1999 from
3.26% at June 30, 1998.
Provision for Loan Losses
The Company included $89,260 for provision for loan losses during the
six month period ended June 30, 1999 due to continued increases in the
loan portfolio. The Company's Watch List volumes were stable in the
last half of 1998 and to date in 1999. Management does not anticipate
any unusual Watch List changes and remains committed to providing for
losses in a timely manner.
12
Total Other Expense
Total Other Expenses increased 15% or $198,201 to $1,495,696 at June
30, 1999 from $1,297,495 at June 30, 1998. $82,206 of this increase
was due to the complete writedown of Other Real Estate Owned property
which had been on the books of the Company for ten years. After ten
years Louisiana State Law requires that property in this situation be
written off. The amount represents 42 lots in an existing residential
subdivision.
Employee salaries and benefits increased 3% for the six month period
under consideration. Other expenses increased 17% or $81,010 to
$547,847 from $466,837 at June 30,1998. This increase was primarily
due to expenditures of $30,709 for Year 2000 expenses and expenses
related to moving into the Company's new Main Office in June.
Income Tax
The Company's income is fully taxable at the maximum rate (34%) both in
1999 and 1998 and expects to remain taxable at the current rate
throughout 1999.
Earnings Per Share
The Company's 1999 earnings per share at June 30, 1999 was $2.50
compared to $2.60 per share the previous year.
Year 2000 Issues
Management does not feel that the issues related to Y2K are reasonably
likely to have or will have a material effect on the Company's
liquidity, capital resources, or results of operation. The following
information is given regarding this determination.
The Bank has had two FDIC Y2K readiness exams during the last six
months and received satisfactory results on both.
Approximately $15,000 was expensed during 1998 for software upgrades
and testing. For 1999, $60,000 has been budgeted for these types of
expenses, known and unknown.
13
The Board of Directors of the Bank have been given monthly updates on
the status of our Y2K readiness and have approved the following
policies: (a) Policy for responding to Customer Inquiries Regarding
Y2K; (b) Bank of Zachary 2000 Test Plan; (c) Bank of Zachary Emergency
Operating Procedures and Y2K Business Resumption Plan. The Bank has
performed a risk assessment of its larger customers and these do not
represent any material financial effect on the Bank. A customer
liquidity assessment is planned for the third quarter so that adequate
currency supplies can be on hand by November 1, 1999.
This discussion entitled "Year 2000 Issues" includes certain "forward
looking statements" within the meaning of the Private Securities
Litigation Act of 1995 (PSLA). This statement is included for the
purpose of availing the Company of the protections of the safe harbor
provisions of the PSLA. Management's ability to predict the results of
the effects of Year 2000 issues is inherently uncertain and subject to
factors that may cause actual results to materially differ from those
anticipated. Factors that could affect actual results include the
possibility that contingency plans and remediation efforts will not
operate as intended, the Bank's failure to timely or completely
identify all software and hardware applications that require
remediation, unexpected costs, and the general uncertainty associated
with the impact of Year 2000 issues on the banking industry, the Bank's
customers, vendors, and others with whom it conducts business. Readers
are cautioned not to place undue reliance on these forward looking
statements.
14
PART II
Item l. LEGAL PROCEEDINGS
During the normal course of business, the Company is involved
in various legal proceedings. In the opinion of management and
counsel, any liability resulting from such proceedings would not have a
material adverse effect on the Company's financial statements.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. None
15
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: August 12, 1999 _______________________
Harry S. Morris, Jr.
President
Larry Bellard
Treasurer
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
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, 1998 were examined by
Hannis T. Bourgeois, L.L.P., independent public accountants, who
rendered an independent professional opinion on the financial state
ments prepared by management. Hannis T. Bourgeois, L.L.P. has not
reviewed the financial statements as of June 30, 1999.
Larry Bellard, Treasurer
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