UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
ZACHARY BANCSHARES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
(2) Aggregate number of securities to which transaction applies: 19,039
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): $70.00
(4) Proposed maximum aggregate value of transaction: $1,332,730.00
(5) Total fee paid: $123.00
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[ZACHARY BANCSHARES INC. LETTERHEAD]
February 5, 2003
Dear Shareholder of Zachary Bancshares, Inc.:
You are cordially invited to attend a special meeting of shareholders of
Zachary Bancshares, Inc. ("Bancshares") to be held at the offices of Bank of
Zachary, 4743 Main Street, Zachary, Louisiana, at 2:30 p.m., March 11, 2003.
At the special meeting, you will be asked to vote on a proposed transaction
that will result in termination of the registration of the Bancshares common
stock under federal securities laws and thereby eliminate the significant
expense required to comply with reporting requirements under those laws.
Referred to as "going private," the proposed transaction will reduce the number
of shareholders to fewer than 300 persons, as required for termination of the
registration. The reduction in the number of shareholders is accomplished by a
merger of a newly-formed, wholly-owned subsidiary of Bancshares ("New ZBI,
Inc."), with and into Bancshares on terms set forth in the merger agreement, a
copy of which is attached as Appendix A to the enclosed proxy statement.
Under the terms of the merger, (i) each share of common stock owned of
record on November 1, 2002, by a holder of fewer than 150 shares will be
converted into the right to receive, from Bancshares, $70.00 in cash per share,
and (ii) each share of common stock owned of record on November 1, 2002, by a
holder of 150 or more shares will remain as outstanding Bancshares common stock
after the merger. Because Bancshares currently has many shareholders who own
only a few shares, the effect of the purchase from holders of less than 150
shares will be reduction in the total number of shareholders from approximately
600 to approximately 250 as required for termination of registration, while the
number of shares outstanding is reduced by less than 10% (to 174,628 shares
outstanding from the current 193,667 shares outstanding).
The Bancshares Board of Directors has approved the "going private"
transaction as in the best interest of all Bancshares shareholders and
recommends that you vote in favor of the proposed transaction. The attached
notice of special meeting and proxy statement describe the transaction and
provide specific information concerning the special meeting. The "going private"
transaction is important for Bancshares and its shareholders but will only be
approved upon the affirmative vote of the holders of not less than seventy (70%)
percent of the number of shares entitled to vote at the special meeting.
Therefore, whether or not you plan to attend the special meeting, we would
appreciate your completing (vote, date and sign) and promptly returning the
enclosed proxy to ensure that your shares are voted at the meeting.
Sincerely,
/s/ RUSSELL BANKSTON
RUSSELL BANKSTON
Chairman of the Board
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DISCUSSED IN THE
ENCLOSED PROXY STATEMENT, PASSED UPON THE MERITS OR FAIRNESS OF THE CONTEMPLATED
TRANSACTIONS, OR DETERMINED THAT THE PROXY STATEMENT IS TRUTHFUL OR COMPLETE. IT
IS ILLEGAL FOR ANY PERSON TO TELL YOU OTHERWISE.
ZACHARY BANCSHARES, INC.
4743 MAIN STREET
POST OFFICE BOX 497
ZACHARY, LOUISIANA 70791
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 11, 2003
To the shareholders of Zachary Bancshares, Inc.:
PLEASE TAKE NOTICE that a special meeting of shareholders of Zachary
Bancshares, Inc. ("Bancshares") will be held at the offices of Bank of Zachary,
4743 Main Street, Zachary Louisiana on Tuesday, March 11, 2003, at 2:30 p.m.
The special meeting is being held:
1. To consider and act upon a proposal to approve the merger of New ZBI,
Inc., a wholly-owned subsidiary of Bancshares, with and into Bancshares as
contemplated by the merger agreement attached as Appendix A to the enclosed
proxy statement. Pursuant to the terms of the merger agreement, (a) each share
of Bancshares common stock owned of record on November 1, 2002, by a holder of
fewer than 150 shares of common stock, will be converted into, and will
represent the right to receive from Bancshares $70.00 cash per share; and (b)
each share of Bancshares common stock owned of record on November 1, 2002, by a
holder of 150 or more shares of common stock will continue to represent one
share of Bancshares common stock after the merger. DISSENTING SHAREHOLDERS WHO
COMPLY WITH THE PROCEDURAL REQUIREMENTS OF THE BUSINESS CORPORATION LAW OF
LOUISIANA WILL BE ENTITLED TO RECEIVE PAYMENT OF THE FAIR CASH VALUE OF THEIR
SHARES IF THE MERGER PROPOSAL IS EFFECTED UPON APPROVAL OF LESS THAN EIGHTY
PERCENT (80%) OF OUR TOTAL VOTING POWER;
2. To transact such other business as may properly come before the special
meeting or any adjournment thereof.
The matters to be considered at the special meeting are more fully described
in the attached proxy statement, which we urge you to read carefully. The full
text of the merger agreement is attached as Appendix A to the proxy statement.
If the merger is approved by less than 80% of our total voting power, dissenting
shareholders who do not wish to receive the merger consideration, and who
properly demand appraisal under Louisiana law, will be entitled to have the fair
value of their shares determined by a Louisiana court. A copy of the relevant
provisions of Louisiana law is included in the attached proxy statement as
Appendix C. The dissenters' rights are subject to a number of restrictions and
technical requirements that are discussed in the attached proxy statement.
Only shareholders of record at the close of business on January 31, 2003,
the record date, are entitled to notice of, and to vote at, the special
shareholders' meeting and any adjournment or postponement thereof.
Sending in your proxy will not prevent you from voting your shares at the
meeting if you desire to do so, as your proxy is revocable at your option. You
may revoke your proxy at any time before it is voted at the special
shareholders' meeting in the manner described in the section of the proxy
statement entitled "Information About the Special Meeting -- How to vote my
proxy." Any executed but unmarked proxies that we receive will be voted for the
proposal to approve the merger and the merger agreement.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. HOWEVER, TO
ENSURE THAT YOUR SHARES ARE VOTED IN ACCORDANCE WITH YOUR WISHES AND THAT A
QUORUM IS PRESENT AT THE MEETING SO THAT THE SHAREHOLDERS CAN CONSIDER THE
MERGER AGREEMENT, YOU ARE URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY
AS PROMPTLY AS POSSIBLE IN THE ENCLOSED, SELF-ADDRESSED, STAMPED ENVELOPE. YOUR
PROMPT RESPONSE WILL HELP REDUCE PROXY COSTS WHICH ARE PAID FOR BY BANCSHARES.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ RUSSELL BANKSTON
----------------------------------------
Russell Bankston
Chairman of the Board
February 5, 2003
Zachary, Louisiana
IMPORTANT
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE DATE, SIGN AND MAIL
PROMPTLY THE ENCLOSED PROXY FOR WHICH A RETURN ENVELOPE IS PROVIDED.
2
ZACHARY BANCSHARES, INC.
4743 MAIN STREET
POST OFFICE BOX 497
ZACHARY, LOUISIANA 70791
PROXY STATEMENT FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 11, 2003
This proxy statement and the accompanying proxy are being furnished to
holders of Zachary Bancshares, Inc. common stock in connection with the
solicitation of proxies by the board of directors for use at the special meeting
of shareholders to be held at 2:30 p.m. on Tuesday, March 11, 2003, at the
offices of Bank of Zachary, 4743 Main Street, Zachary, Louisiana and any
postponements or adjournments thereof. We anticipate that the notice of special
meeting, proxy statement and proxy will be first sent or given to shareholders
on approximately February 5, 2003. In this proxy statement, Zachary Bancshares,
Inc. will sometimes be referred to as "Bancshares" and sometimes as "we", "us"
and "our", and the "Bank" refers to Bank of Zachary, a wholly-owned subsidiary
of Bancshares.
At the special meeting, you will be requested to consider and act upon a
proposal to approve and adopt the merger agreement by and between Bancshares and
New ZBI, Inc. (a newly-created, wholly-owned subsidiary of Bancshares), and the
merger of New ZBI, Inc. with and into Bancshares, with Bancshares being the
survivor to the merger as provided in the merger agreement.
A copy of the merger agreement is attached to this proxy statement as
Appendix A. The primary purpose of the merger is to enable Bancshares to reduce
the number of holders of its common stock to below 300 persons, which will then
permit termination of the registration of Bancshares common stock under the
Securities Exchange Act of 1934, as amended. The merger is a "going private"
transaction under the rules and regulations of the Securities and Exchange
Commission.
The board of directors has fixed the close of business on January 31, 2003,
as the record date for the determination of the shareholders entitled to notice
of, and to vote at, the special meeting. On the record date, Bancshares had
issued and outstanding and entitled to vote 193,667 shares of common stock,
$10.00 par value per share. The common stock is the only outstanding class of
voting securities. Each outstanding share of common stock will be entitled to
one vote on each matter considered at the special meeting.
A quorum for the special meeting requires that holders of a majority of the
outstanding shares of common stock must be present in person or by proxy.
The board of directors recommends that you vote "FOR" approval of the merger
and the merger agreement.
Proxies will be voted in the manner you specify in your proxy. You must sign
your proxy. If you return your proxy, but do not specify how it should be voted,
your shares will be voted for the merger transaction. If your stock is held by a
broker or other custodian in "street name," your shares will not be voted
(broker non-votes) unless you provide specific instructions to the broker or
custodian. Proxies submitted by brokers or custodians who have not received
voting instructions will be counted for the purposes of determining a quorum,
but will not be voted for or against the merger and the merger agreement.
The affirmative vote of seventy (70%) percent of the total shares of common
stock entitled to vote at the special meeting is required to approve the merger
proposal. Abstentions and broker non-votes will have the effect of a vote
against the merger proposal.
You are urged to complete and return your proxy or, if your shares are held
in street name, to provide voting instructions in accordance with the materials
you receive from your broker or other custodian.
No person has been authorized to give any information or make any
representation other than those contained in this proxy statement, and, if given
or made, such information or representation must not be relied upon as having
been authorized. This proxy statement does not constitute a solicitation of a
proxy in any jurisdiction from any person to whom it is unlawful to make a proxy
solicitation in such jurisdiction. The information in this proxy statement may
only be accurate on the date of this proxy statement.
The principal executive offices of Bancshares are located at 4743 Main
Street, Post Office Box 497, Zachary, Louisiana 70791, and our telephone number
is (225) 654-2701.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DISCUSSED IN THE PROXY
STATEMENT, PASSED UPON THE MERITS OR FAIRNESS OF THE CONTEMPLATED TRANSACTIONS,
OR DETERMINED THAT THIS PROXY STATEMENT IS TRUTHFUL OR COMPLETE. IT IS ILLEGAL
FOR ANY PERSON TO TELL YOU OTHERWISE.
The date of this proxy statement is February 5, 2003.
2
TABLE OF CONTENTS
<Table>
SUMMARY TERM SHEET.................................................................................................. 5
OVERVIEW OF THE MERGER..................................................................................... 5
VOTING ON THE MERGER....................................................................................... 5
PURPOSE, STRUCTURE AND EFFECTS OF THE MERGER............................................................... 5
RECOMMENDATION OF THE BOARD OF DIRECTORS................................................................... 6
THE MERGER CONSIDERATION................................................................................... 6
NATIONAL CAPITAL'S FAIRNESS OPINION........................................................................ 6
POTENTIAL CONFLICTS OF INTEREST OF EXECUTIVE OFFICERS AND DIRECTORS........................................ 7
CONDITIONS TO THE MERGER................................................................................... 7
TERMINATION OF THE MERGER TRANSACTION...................................................................... 7
DISSENTER'S RIGHTS......................................................................................... 7
FEDERAL INCOME TAX CONSEQUENCES............................................................................ 7
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER...................................................... 8
FORWARD-LOOKING STATEMENTS.......................................................................................... 9
ADDITIONAL INFORMATION ABOUT THE SPECIAL MEETING.................................................................... 10
SOLICITATION OF PROXIES.................................................................................... 10
VOTES NEEDED FOR A QUORUM.................................................................................. 10
VOTE REQUIRED TO APPROVE THE MERGER........................................................................ 10
HOW TO VOTE MY PROXY....................................................................................... 10
PROPOSAL 1: APPROVAL OF THE MERGER................................................................................. 11
GENERAL.................................................................................................... 11
ZACHARY BANCSHARES, INC. AND THE BANK................................................................ 11
NEW ZBI, INC. ....................................................................................... 12
SPECIAL FACTORS............................................................................................ 12
BACKGROUND OF THE MERGER PROPOSAL.................................................................... 12
PURPOSES OF AND REASONS FOR THE MERGER PROPOSAL...................................................... 15
STRUCTURE OF THE MERGER.............................................................................. 15
DETERMINATION OF THE TERMS OF THE MERGER............................................................. 16
FINANCIAL FAIRNESS................................................................................... 16
RECOMMENDATION OF OUR BOARD OF DIRECTORS............................................................. 23
PURPOSES AND REASONS OF NEW ZBI FOR THE MERGER PROPOSAL.............................................. 25
POSITION OF NEW ZBI AS TO FAIRNESS OF THE MERGER..................................................... 25
PURPOSES AND REASONS OF THE BANK FOR THE MERGER PROPOSAL............................................. 25
POSITION OF THE BANK AS TO FAIRNESS OF THE MERGER.................................................... 25
INTEREST OF CERTAIN PERSONS IN THE MERGER............................................................ 25
CERTAIN CONSEQUENCES OF THE MERGER; BENEFITS AND DETRIMENTS TO
AFFILIATED AND NON-AFFILIATED SHAREHOLDERS....................................................... 26
OPERATIONS OF THE BANK FOLLOWING THE MERGER.......................................................... 26
FINANCING OF THE MERGER.............................................................................. 26
EXPENSES OF THE MERGER............................................................................... 27
CERTAIN TERMS OF THE MERGER......................................................................................... 27
EFFECTIVE TIME OF THE MERGER............................................................................... 27
CONVERSION AND EXCHANGE OF STOCK CERTIFICATES.............................................................. 27
CONDITIONS TO CONSUMMATION OF THE MERGER................................................................... 28
AMENDMENT OR TERMINATION OF THE MERGER AGREEMENT........................................................... 28
REGULATORY REQUIREMENTS.................................................................................... 28
RIGHTS OF DISSENTING SHAREHOLDERS................................................................................... 28
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER......................................................... 29
TAX CONSEQUENCES TO SHAREHOLDERS WHO RETAIN THEIR SHARES................................................... 30
TAX CONSEQUENCES TO SHAREHOLDERS WHO RECEIVE CASH FOR THEIR SHARES......................................... 30
TAX CONSEQUENCES TO BANCSHARES, NEW ZBI AND THE BANK....................................................... 30
BACKUP WITHHOLDING......................................................................................... 31
RATIO OF EARNINGS TO FIXED CHARGES AND BOOK VALUE PER SHARE......................................................... 31
COMMON STOCK INFORMATION; DIVIDEND INFORMATION...................................................................... 31
DIRECTORS OF ZACHARY BANCSHARES, INC. .............................................................................. 32
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................................................... 33
</Table>
3
<Table>
EXECUTIVE OFFICERS OF BANCSHARES AND THE BANK........................................................................... 33
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................................................................... 34
FUTURE SHAREHOLDER PROPOSALS............................................................................................ 34
OTHER MATTERS........................................................................................................... 34
WHERE YOU CAN FIND MORE INFORMATION..................................................................................... 34
APPENDIX A - MERGER AGREEMENT
APPENDIX B - OPINION OF NATIONAL CAPITAL, L.L.C.
APPENDIX C - LOUISIANA REVISED STATUTES SECTION 12:131
APPENDIX D - TABLE OF COMPARABLE TRANSACTIONS
APPENDIX E - ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2001
APPENDIX F - QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 2002
</Table>
4
SUMMARY TERM SHEET
This summary term sheet, together with the following Question and Answers
section highlights the material information included in this proxy statement.
This summary may not contain all of the information that is important to you. To
understand the merger proposal fully, and for a more complete description of the
legal terms of the merger proposal, you should read carefully this entire
document and the other documents referenced in this document. The actual terms
of the merger are contained in the merger agreement, a copy of which is attached
as Appendix A to this proxy statement.
OVERVIEW OF THE MERGER
We are furnishing this proxy statement to allow Bancshares shareholders to
consider and vote on a proposal to approve the merger of a newly-created,
wholly-owned subsidiary, New ZBI, Inc. with and into Bancshares. Pursuant to the
terms of the merger agreement,
o each share of common stock owned of record on November 1, 2002, by a
holder of fewer than 150 shares of Bancshares common stock will be
converted into, and will represent the right to receive $70.00 per share
in cash; and
o each share of common stock owned of record on November 1, 2002, by a
holder of 150 or more shares of common stock will continue to represent
one share of Bancshares common stock after the merger.
According to our stock records, as of the record date for the special meeting
(January 31, 2003) there are approximately 346 shareholders who own fewer
than 150 shares (who, together, own approximately 19,039 shares of common stock,
or about 10% of total outstanding shares) and approximately 252 shareholders who
own 150 or more shares (who together own approximately 174,628 shares of common
stock or about 90% of total outstanding shares).
The sole purpose of the merger is to reduce the number of record
shareholders below 300 persons so that we may terminate the registration of the
common stock with the SEC and thereby avoid the significant costs and personnel
time commitment necessary for compliance with the SEC reporting requirements.
VOTING ON THE MERGER (PAGES 10-11)
At the special meeting, you will be asked to vote on a proposal to approve
the merger transaction as described in the merger agreement. Each share of
common stock is entitled to one vote. The Company's Articles of Incorporation
and the merger agreement provide that the merger must be approved by the
affirmative vote of not less than seventy (70%) of the number of shares of
common stock (approximately 135,567 shares) entitled to vote on the merger
proposal. A majority vote of non-affiliated shareholders (i.e., shareholders who
are not officers and directors of Bancshares or of the Bank) is not required to
approve the merger proposal. Abstentions and broker non-votes will have the same
effect as a vote against the merger proposal.
The record date for determining who is entitled to vote at the special
meeting has been fixed as the close of business on January 31, 2003. On the
record date, there were 193,667 shares of common stock outstanding, held of
record by approximately 598 holders. Of those shares, 10,780 shares are
beneficially owned by directors and executive officers (approximately 5.57% of
the outstanding shares). We have been informed that all but one of Bancshares'
directors and all of Bancshares' executive officers intend to vote in favor of
the merger proposal.
PURPOSE, STRUCTURE AND EFFECTS OF THE MERGER (PAGES 15-16, 25-26)
The purpose of the merger is to reduce the total number of holders of shares
of the common stock to less than 300 persons so that we may terminate our status
as a reporting company and avoid the reporting and other SEC filing requirements
attendant to that status. The board of directors believes that the management
burden and monetary expense associated with the SEC reporting and other filing
requirements far outweigh any advantage of remaining as an SEC reporting
company.
5
The merger has been structured as follows: A newly-created, wholly-owned
subsidiary of Bancshares, New ZBI, Inc., will be merged with and into Bancshares
with Bancshares remaining as the surviving corporation to the merger. New ZBI,
Inc. will then cease to exist. In the merger:
o each share of common stock owned of record on November 1, 2002, by a
holder of fewer than 150 shares of common stock will be converted into,
and will represent the right to receive $70.00 in cash from Bancshares
for each share, and those shares will be cancelled; and
o each share of common stock owned of record on November 1, 2002, by a
holder of 150 or more shares of common stock will continue to represent
one share of Bancshares common stock following the merger.
Upon completion of the merger, shareholders whose shares are converted into
cash (generally those owning fewer than 150 shares) will cease to have any
ownership interest in Bancshares and will cease to participate in future
earnings and growth, if any, of Bancshares or to benefit from any increases, if
any, in the value of the Bancshares stock. Moreover, upon completion of the
merger, the certificates representing those shares of common stock will be
cancelled. Generally, shareholders of record who own 150 or more shares on the
record date will retain their shares of common stock in the merger.
Shareholder records indicate that approximately 252 of the total 598 record
shareholders own 150 or more shares of our common stock. Since 252 is
comfortably below the 300 shareholder threshold, the board determined to use 150
shares as the minimum required share ownership level. The 252 shareholders who
own 150 or more shares own approximately 90% of the outstanding shares. The 346
shareholders who will receive cash for their shares in the merger own
approximately 10% of the outstanding shares.
RECOMMENDATION OF THE BOARD OF DIRECTORS (PAGES 23-25)
The board of directors of Bancshares has approved the merger transaction
(with six directors voting for and one director, Rodney Samuel Johnson, voting
against the transaction) and recommends that you vote to approve the
transaction. The board of directors believes that the transaction is in the best
interests of Bancshares and its shareholders, and that the transaction is fair
to all Bancshares shareholders, including the non-affiliated Bancshares
shareholders. In reaching their decision to recommend and approve the merger
proposal, the board of directors considered a number of factors, including the
valuation of the common stock by National Capital, L.L.C. See "Proposal 1:
Approval of the Merger -- Special Factors -- Recommendation of our board of
directors"; and "-- Financial fairness."
THE MERGER CONSIDERATION (PAGE 26)
If the merger is completed, Bancshares will pay $70.00 in cash per share for
each share of common stock converted into cash in the merger transaction. In the
aggregate, Bancshares will pay approximately $1,350,000 to acquire all of the
shares from shareholders who will receive cash as a result of the merger. The
funds necessary to acquire these shares are anticipated to come from a special
dividend paid by the Bank to Bancshares. Further, we estimate that Bancshares
will incur approximately $87,500 in costs and expenses associated with the
merger transaction.
NATIONAL CAPITAL'S FAIRNESS OPINION (PAGES 16-23)
National Capital, L.L.C., Bancshares' independent financial advisor,
delivered to the board of directors a written opinion dated December 2, 2002,
stating that the consideration of $70.00 per share is fair to the shareholders
who receive cash in the transaction. National Capital will receive a fee of
approximately $20,000 for the services it has provided to Bancshares in respect
of the proposed merger. The full text of National Capital's opinion dated
December 2, 2002, is attached as Appendix B to this proxy statement. Please read
this opinion. See "Proposal 1: Approval of the Merger -- Special Factors --
Financial fairness" for a description of National Capital's opinion and the
analyses performed by it.
6
POTENTIAL CONFLICTS OF INTEREST OF EXECUTIVE OFFICERS AND DIRECTORS (PAGES 25,
26, 33, 34)
The executive officers and directors of Bancshares and the Bank may have
interests in the transaction that are different from your interests as a
shareholder, or relationships that may present conflicts of interest, including
the following:
o Each member of the board of directors and each of the executive officers
hold of record 150 or more shares of the common stock and will retain
their shares in the merger; and
o As a result of the merger, the shareholders who own of record on
November 1, 2002, 150 or more shares, such as our directors and
executive officers, will increase their percentage ownership interest in
Bancshares as a result of the purchase by Bancshares of the shares owned
by the holders of less than 150 shares. For example, assuming the merger
is approved, the aggregate ownership percentage of the directors and
officers will increase from 5.57% to approximately 6.17% as a result of
the reduction of the number of shares of the common stock outstanding by
approximately 19,039 shares.
The Bancshares and New ZBI directors and executive officers are the same.
See "Proposal 1: Approval of the Merger -- Special Factors -- Interests of
certain persons in the merger" and "Certain Relationships and Related
Transactions" for a description of these potential conflicts.
CONDITIONS TO THE MERGER (PAGE 28)
The merger agreement and the transactions contemplated by the merger
agreement are subject to a number of conditions, including:
o approval of the merger by our shareholders; and
o satisfaction of certain conditions including receipt of all regulatory
approvals.
See "Certain Terms of The Merger -- Conditions to consummation of the merger"
and "-- Regulatory requirements" for a description of the conditions to the
consummation of the merger under the merger agreement.
TERMINATION OF THE MERGER TRANSACTION (PAGE 28)
The merger transaction may be terminated in specified circumstances, such as
if the required shareholder vote is not obtained. See "Certain Terms of the
Merger -- Amendment or termination of the merger agreement" for a description of
the termination events under the merger agreement.
DISSENTERS' RIGHTS (PAGES 28-29)
If the merger is approved by the holders of less than 80% of the outstanding
common stock (154,934 shares), you will be entitled to dissent from the merger
(if you follow certain procedures) and receive payment by Bancshares of the fair
value of your shares. The board of directors believes that holders of less than
150 shares of the common stock will receive the fair value of their shares under
the terms of the merger transaction. For more information regarding your right
to dissent from the merger, please read the section of this proxy statement
entitled "Rights of Dissenting Shareholders," and the provisions of La. R.S.
Section 12:131 attached as Appendix C to this proxy statement.
FEDERAL INCOME TAX CONSEQUENCES (PAGES 29-31)
A shareholder who receives cash in the merger will generally be taxed on
receipt of the merger consideration if and to the extent that the amount
received exceeds tax basis in the common stock. Determining the tax consequences
of the merger can be complicated. See "Material U.S. Federal Income Tax
Consequences of the Merger" for more details on the federal income tax
consequences of the merger. You should consult your financial and tax advisors
in order to understand fully how the merger will affect you.
7
QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND THE MERGER
The following questions and answers are intended to briefly address commonly
asked questions regarding the special meeting and the merger. These questions
and answers may not address all questions that may be important to you as a
shareholder. Please refer to the more detailed information contained elsewhere
in this proxy statement, the appendices to this proxy statement, and the
documents referred to or incorporated by reference in this proxy statement.
WHEN AND WHERE IS THE SPECIAL MEETING?
The meeting will be held on March 11, 2003, at 2:30 p.m., local time, at
Bank of Zachary's main offices, located at 4743 Main Street, Zachary, Louisiana
70791.
HOW MANY VOTES DO I HAVE?
You will have one vote for every share of common stock you owned on January
31, 2003, the record date.
HOW MANY VOTES CAN BE CAST BY ALL STOCKHOLDERS?
As of January 31, 2003 (the record date), 193,667 shares of common stock
were issued and outstanding and held of record by approximately 598
shareholders.
CAN I CHANGE MY VOTE?
Yes, just send in a new proxy with a later date, or send a written notice of
revocation to the corporate secretary at the address on the cover of this proxy
statement. If you attend the special meeting and want to vote in person, you can
deliver a written revocation of your proxy to the secretary at the meeting.
WHAT HAPPENS IF THE MEETING IS POSTPONED OR ADJOURNED?
Your proxy will be good and may be voted at the postponed or adjourned
meeting. You will still be able to change or revoke your proxy until it is
voted.
WHY SHOULD I VOTE TO APPROVE THE PLAN OF MERGER?
The board of directors believes that the merger is in the best interests of
all Bancshares shareholders. The merger will reduce the number of holders of
shares of common stock to below 300 persons, which will then allow termination
of the registration of the common stock under the Securities Exchange Act of
1934, as amended (the "1934 Act"). The board believes that the monetary expense
and the burden to management incident to continued compliance with the 1934 Act
significantly outweigh any material benefits derived from continued registration
of the shares.
The merger will also serve as a source of liquidity for those shareholders
who receive cash for their shares. The board recognizes that there is no active
trading market for the common stock and no market is expected to develop upon
consummation of the merger. The board believes that the merger provides a means
for those shareholders with a limited number of shares to receive cash for their
shares at a fair price and without out-of-pocket costs.
HOW WILL THE MERGER AFFECT THE DAY-TO-DAY OPERATIONS?
The merger will have very little effect on Bancshares or on the Bank's
operations. The Bank will continue to conduct its existing operations in the
same manner as now conducted. The articles of incorporation and by-laws of
Bancshares and the Bank will remain in effect and unchanged by the merger. The
deposits of the Bank will continue to be insured by the FDIC. After the merger
is completed, the current officers and directors of the Bank will
8
continue to hold the positions each now holds with the Bank, and the Bank will
continue to be regulated by the same agencies as before the merger.
HOW WAS THE CASH PRICE FOR SHARES OF THE COMMON STOCK DETERMINED?
The board of directors retained National Capital, L.L.C., an independent
financial advisor experienced in the financial analysis and valuation of
financial institutions, to assist the board in determining a fair price for the
shares of common stock to be purchased by Bancshares in the merger transaction.
National Capital delivered a valuation to the board valuing a share of the
common stock at between $65.00 and $75.00 per share. The board of directors
considered the independent valuation and other factors and determined that the
cash consideration under the merger agreement should be $70.00 per share.
Subsequently, National Capital issued an opinion to the board of directors that
the cash consideration to be paid under the merger agreement was fair, from a
financial point of view, to the shareholders receiving cash in the merger. A
copy of the fairness opinion of National Capital is attached as Appendix B to
this proxy statement for your review.
MAY I OBTAIN A COPY OF NATIONAL CAPITAL'S VALUATION?
In connection with National Capital's fairness opinion, National Capital has
prepared and delivered to Bancshares a fairness opinion report that details the
valuation principles and methodologies used to determine the fairness of the
proposed transaction. You or your representative (designated in writing) may
inspect and copy the fairness opinion report at the Bank's main office during
regular business hours. You or your representative (designated in writing) may
also receive a copy of the report upon written request and at your expense.
Please send in your written request to the address set forth on the cover page
of this proxy statement. Additional information or documentation may be
requested from you if necessary to verify your identity or that of your
representative or the authority of your representative. You may also be required
to execute an agreement to protect the confidentiality of the information
contained in the report.
WHEN WILL THE MERGER BE COMPLETED?
We plan to complete the transaction during March, 2003 so that registration
of the common stock can be terminated by the end of March, 2003.
SHOULD I SEND IN MY COMMON STOCK CERTIFICATES NOW?
No. After the merger transaction is completed, those shareholders who
receive cash in the merger will receive written instructions for exchange of
their common stock certificates for cash.
WHO CAN HELP ANSWER MY QUESTIONS?
If you have any questions about the special meeting or any of the items to
be considered by the shareholders at the meeting, or if you need additional
copies of the enclosed materials or proxy, you should contact: Winston E.
Canning, Post Office Box 497, Zachary, Louisiana 70791. His telephone number is
(225) 654-2701.
WHAT DO I NEED TO DO NOW?
o Mail your signed proxy in the enclosed return envelope as soon as
possible so that your shares may be represented at the meeting. If you
sign and return your proxy but do not include instructions on how to
vote, your shares will be voted "FOR" the proposal to approve and adopt
the merger and the merger agreement.
For a more complete description of voting at the shareholders' meeting, see
the section entitled "Additional Information About the Special Meeting -- How to
vote my proxy" beginning on page 10 of this proxy statement.
FORWARD-LOOKING STATEMENTS
Forward-looking statements are included in this proxy statement and the
documents incorporated herein by reference. These forward-looking statements
include discussions of expectations concerning future operations,
9
profitability, liquidity and capital resources and the expected effects on us
and our shareholders if the merger transaction is completed. You can identify
these forward-looking statements by use of the words "expects," "estimates,"
"believes," "plans," "anticipates" or similar expressions. Actual results could
differ materially from those expressed or implied by the forward-looking
statements as a result of known and unknown risks, uncertainties and other
factors. A factor that might cause such a difference is the uncertainty as to
the cost savings to be realized after termination of public registration of the
common stock. There can be no assurance that, our business strategy will be
successful or that the business and operations will not be adversely affected by
the proposed merger transaction.
ADDITIONAL INFORMATION ABOUT THE SPECIAL MEETING
SOLICITATION OF PROXIES
Bancshares will pay the expenses of soliciting proxies to be voted at the
special shareholders' meeting. In addition to soliciting proxies through the
mails, proxies may be solicited by directors, officers and employees in person
or by telephone or other means of communication. Directors, officers and
employees will not receive additional compensation for their efforts during this
solicitation, but may be reimbursed for out-of-pocket expenses incurred in
connection with the solicitation. After the original mailing of the proxies and
other solicitation materials, we will request that brokers, custodians, nominees
and other record holders of common stock forward copies of the proxy and
solicitation materials to beneficial owners for whom they hold shares.
VOTES NEEDED FOR A QUORUM
The holders of a majority of the shares of the common stock (96,835 shares)
entitled to vote at the shareholders' meeting must be present at the meeting,
either in person or by a properly executed proxy, to obtain the quorum necessary
to transact business at the meeting. The shares owned by shareholders present at
the meeting or represented at the meeting by a properly executed proxy, but who
abstain from voting on the merger, will be treated as shares that are present
and entitled to vote at the meeting for determining whether or not a quorum
exists. Further, broker non-votes, if any, will be treated as present for
determining whether a quorum exists.
VOTE REQUIRED TO APPROVE THE MERGER
If a quorum is present at the meeting, the affirmative vote of the holders
of at least seventy (70%) percent of the total shares of common stock entitled
to vote on the merger proposal (approximately 135,567 shares), will be required
to approve the merger transaction.
Approval of any other matters as may properly come before the meeting will
require the affirmative vote of a majority of the total voting power present at
the meeting, in person or by proxy.
Abstentions and broker non-votes will have the effect of a vote against the
merger proposal.
HOW TO VOTE MY PROXY
The proxy accompanying this proxy statement is solicited on behalf of the
board of directors for use at the special shareholders' meeting. We encourage
you to attend the special meeting, and execution of a proxy will not affect your
right to attend the meeting and to vote in person. However, to ensure that your
shares are voted in accordance with your wishes and that a quorum is present at
the meeting so that we can transact business, you are urged to complete, sign
and return the enclosed proxy as promptly as possible in the enclosed,
self-addressed stamped envelope. Your prompt response will help reduce proxy
costs, which are paid for by Bancshares.
Please complete, date and sign the accompanying proxy and promptly return it
in the enclosed envelope or otherwise mail it to Post Office Box 497, Zachary,
Louisiana 70791, Attention: Winston E. Canning. All properly signed proxies
received prior to the vote being taken at the meeting will be voted as indicated
on the proxy unless the proxy is revoked prior to its exercise. You have the
unconditional right to revoke your proxy by:
o a written, dated instrument delivered to us at or prior to the meeting
stating that the proxy is revoked; or
10
o a subsequent proxy that is signed by the same person who signed the
earlier proxy and is presented at or prior to the meeting.
However, mere attendance at the shareholders' meeting will not of itself revoke
a proxy.
If your shares are held of record in "street name" by a broker, bank or
other nominee and you intend to vote your shares in person at the special
meeting, you must bring to the meeting a letter from the broker, bank or other
nominee confirming your beneficial ownership of the shares.
The board of directors does not know of any matters other than the proposal
to approve the merger and merger agreement to be presented for a vote at the
special meeting. If any other matters are properly brought before the meeting,
or any adjournment, the persons named in the proxies, acting under the proxy,
will have discretion to vote on those matters in accordance with their best
judgment, including adjournment of the special meeting.
PROPOSAL 1: APPROVAL OF THE MERGER
You are being asked to consider and vote upon a proposal to approve the
merger of New ZBI, Inc., a newly-formed, wholly-owned subsidiary of Bancshares,
with and into Bancshares, with Bancshares being the surviving corporation.
Pursuant to the terms of the merger,
o each share of common stock owned of record on November 1, 2002, by a
shareholder who holds fewer than 150 shares of common stock will be
converted into the right to receive $70.00 in cash per share, and
o each share of common stock owned of record on November 1, 2002, by a
shareholder who holds 150 or more shares of common stock, will continue
to represent one share of common stock in Bancshares following the
merger.
The sole purpose of the merger is to allow Bancshares to reduce the number of
shareholders below 300 in order to terminate registration of the common stock
and our status as a public company, which will allow us to avoid the time and
expense of compliance with SEC reporting and other filing requirements.
GENERAL
ZACHARY BANCSHARES, INC. AND THE BANK
Bancshares is a Louisiana corporation and a registered bank holding company,
incorporated in 1984 to hold the outstanding stock of Bank of Zachary. The Bank
is a wholly-owned subsidiary of Bancshares and, except for New ZBI, Bancshares
has no other subsidiaries. At September 30, 2002, Bancshares had total
consolidated assets of approximately $106.5 million, and shareholders' equity of
approximately $12.3 million. The Bank's and Bancshares' principal executive
offices are located at 4743 Main Street, Post Office Box 497, Zachary, Louisiana
70791 and the Bank's telephone number is (225) 654-2701.
The Bank was organized as a Louisiana state bank in 1904. The Bank is
engaged in primarily the same business operations as any independent commercial
bank, with special emphasis in retail banking, including the acceptance of
checking and savings deposits, and the making of commercial, real estate,
personal, home improvement, automobile and other installment and term loans. It
also offers among its services, travelers' cheques, safe deposit boxes, note
collection, and other customary bank services to its customers, with the
exception of trust services. In addition, the Bank offers drive-up teller
services and night depository facilities. The Bank is insured under the Federal
Deposit Insurance Act but is not a member of the Federal Reserve System.
The Bank's loan portfolio consists of three main areas: (1) real estate
construction and mortgage loans; (2) loans to individuals for household, family
and other consumer expenditures; and (3) commercial and industrial loans. As of
September 30, 2002, these three categories accounted for approximately 54%, 13%,
and 32%, respectively, of the Bank's loan portfolio.
11
As of September 30, 2002, the Bank had a total of 4,714 accounts
representing non-interest bearing demand deposits and NOW accounts with a total
balance of $34.6 million; 105 accounts representing money market accounts with a
total balance of $2.6 million; 2,286 savings accounts with a total balance of
$10.6 million; and 1,442 other time deposit accounts with a total balance of
$46.3 million.
Most of the Bank's business originates from within East Baton Rouge Parish,
Louisiana; however, some business is obtained from the parishes immediately
surrounding East Baton Rouge Parish.
The Bank has not been convicted in a criminal proceeding during the past
five years, nor has it been a party to any judicial or administrative
proceeding, excluding traffic violations and similar misdemeanors, during the
past five years that resulted in a judgment decree or final order enjoining it
from future violations of, or prohibiting activities subject to, federal or
state securities laws, or finding any violation of federal or state securities
laws.
NEW ZBI, INC.
New ZBI is a newly-formed Louisiana corporation, and is a wholly-owned
subsidiary of Bancshares. New ZBI's executive offices are located at 4743 Main
Street, Post Office Box 497, Zachary, Louisiana 70791, and its telephone number
is (225) 654-2701. New ZBI was organized solely for the purpose of facilitating
the merger transaction. New ZBI will merge into Bancshares, and will cease to
exist after the merger. New ZBI has not conducted any activities other than
those incident to its formation, its negotiation and execution of the merger
agreement, and its assistance in preparing various SEC filings related to the
proposed going private transaction. New ZBI has no significant assets,
liabilities or shareholders' equity.
New ZBI has not been convicted in a criminal proceeding during the past five
years, nor has it been a party to any judicial or administrative proceeding,
excluding traffic violations and similar misdemeanors, during the past five
years that resulted in a judgment, decree or final order enjoining it from
future violations of, or prohibiting activities subject to, federal or state
securities laws, or finding any violation of federal or state securities laws.
SPECIAL FACTORS
BACKGROUND OF THE MERGER PROPOSAL
At its inception in 1984, Bancshares' total number of shareholders exceeded
500, triggering an SEC requirement for registration of the Bancshares common
stock under Section 12(g) of the Securities Exchange Act of 1934, as amended. As
an SEC reporting company, Bancshares is required to prepare and file with the
SEC, among other items, the following:
o Annual Reports on Form 10-KSB;
o Quarterly Reports on Form 10-QSB; and
o Proxy Statements and related materials as required by Regulation 14A
under the Securities Exchange Act of 1934, as amended.
The costs associated with these reports and other filing obligations comprise a
significant corporate overhead expense. These costs include securities counsel
fees, auditor fees, costs of printing and mailing the SEC documents and the word
processing, specialized software and filing costs associated with the SEC
reports and other filings. These SEC registration-related expenses have been
increasing over the years, and we believe that they will continue to increase,
particularly in light of the Sarbanes-Oxley Act of 2002, and the additional
rules and regulations of the SEC related to such Act.
As a result of these expenses, the burden on management required for
compliance with SEC rules and regulations, and the additional requirements of
the Sarbanes-Oxley Act, Bancshares management held internal discussions, during
the summer of 2002, concerning the possibility of terminating the registration
of the common stock with the SEC. Based upon these internal discussions,
management concluded that any benefits from being a registered ("public")
company are substantially outweighed by the burden on management and the expense
related to
12
the SEC reporting obligations. Based upon these conclusions, management
contacted corporate counsel and Bancshares' independent accountants and set up a
meeting on October 1, 2002, to discuss issues related to terminating
registration of the common stock with the SEC.
After discussions with corporate counsel, management determined that the
number of record shareholders must be reduced below 300 persons in a transaction
that would be deemed by the SEC to be a "going private" transaction in order to
terminate the registration of the Bancshares common stock with the SEC.
Management's review of stock records confirmed that, if Bancshares
repurchased all of the shares of every shareholder that owned fewer than 150
shares of common stock, only approximately 252 total record shareholders would
remain after the purchases were completed, and 252 total shareholders is
comfortably below the 300 shareholder threshold required to terminate SEC
registration.
At the October 1, 2002 meeting, management also discussed with Bancshares'
corporate counsel and independent accountants possible structures for a
transaction by which all shares owned by holders of fewer than 150 shares would
be acquired by Bancshares. Based upon these discussions, management determined
that three viable alternatives existed: a tender offer structure, a reverse
stock split, and a merger of a wholly-owned subsidiary with and into Bancshares.
Based upon these discussions, management later presented these three alternative
structures to the board for consideration. Management also contacted National
Capital, L.L.C., an independent financial advisor experienced in the financial
analysis and valuation of financial institutions, to provide advice concerning
the potential financial terms of a "going private" transaction.
On October 17, 2002, management, counsel and a representative of Bancshares'
independent accountants presented to the board of directors alternative
structures for, and an overview of, a "going private" transaction. Management
presented to the board the projected savings in costs and management time that
would result from terminating the SEC registration of our common stock. The
board considered three alternative structures for a going private transaction, a
tender offer, a reverse stock split and a merger. The board of directors did not
make any determination whether to proceed with the proposed "going private"
transaction at this meeting. However, the board concluded that it was in the
best interests of the shareholders of Bancshares, particularly the shareholders
who would receive cash for their shares in the merger, that an independent
financial advisor be retained to conduct valuation of the common stock. The
board reviewed the credentials of National Capital, L.L.C., and Mr. Ken Walters
of that firm and authorized the retention of National Capital to perform a
valuation of the common stock.
The board of directors met again on Thursday, October 31, 2002, and Friday,
November 1, 2002, to discuss the proposed transaction. The board of directors,
based upon the presentation of management, counsel, Bancshares' independent
accountants, and representatives of National Capital, determined to proceed with
a "going private" transaction. The board approved the proposed transaction by a
six-to-one vote. The dissenting director, Rodney Samuel Johnson, opposed the
proposed transaction for the reasons set forth below in "--Recommendation of our
board of directors."
Unless otherwise specifically provided, all references in this proxy
statement to any approvals, determinations, agreements or beliefs of the
Bancshares board shall mean the board acting upon a six-to-one vote.
The board agrees with management that the burden on management and the
expense of the SEC reporting and other filing obligations outweighs any benefit
from the SEC registration of our common stock. The board also determined that a
merger was the preferred structure because
o a tender offer process is more expensive, could take many months to
complete, and would provide no assurances that a sufficient number of
shareholders would tender their shares;
o a reverse stock split (which would be accomplished through an amendment
to the Company's Articles of Incorporation) would be subject to a
shareholder vote of only a majority of the voting power present in
person or by proxy at the special meeting, while the merger structure
requires a much greater affirmative vote of not less than 70% of the
shares entitled to vote on the merger proposal, and unlike a merger, a
reverse stock split structure would not provide shareholders with
statutory appraisal rights under Louisiana law. See "Rights of
Dissenting Shareholders."
13
The board reviewed the stockholder records and preliminarily determined that
shares held of record on November 1, 2002 by a shareholder owning fewer than 150
shares would be converted to the right to receive cash in the merger. Counsel
explained that, if the board approved the merger proposal, a proxy statement and
Schedule 13E-3 would be filed with the SEC. The board then authorized management
to begin the process of preparing the required transaction documents as well as
the necessary SEC filings.
National Capital presented to the board members its valuation of the common
stock. The range of values provided to the board were from $65.00 per share to
$75.00 per share. National Capital explained the detailed procedures performed
and the financial analyses supporting the range of values. The board members
discussed the different factors involved in these procedures and National
Capital further clarified the assumptions utilized in its valuation.
After these discussions, the board determined that $70.00 was a fair value
for the shares of common stock to be purchased by Bancshares in the merger and
that the merger transaction was fair to all shareholders (including
non-affiliated shareholders). While one of the board members, Rodney Samuel
Johnson, voted against, and is opposed to, the proposed transaction for the
reasons set forth in "--Recommendation of our board of directors," Mr. Johnson
did agree with the board's determination that $70.00 was a fair value for the
shares of common stock to be purchased in the going private transaction. In
consideration of National Capital's valuation range of $65.00 to $75.00, and
after discussions concerning valuation, the individual board members were all in
agreement that a $70.00 price was most appropriate since $70.00 is directly in
the middle of the National Capital range.
The board requested an opinion by National Capital that the $70.00 per share
price was fair, from a financial point of view, to the shareholders owning fewer
than 150 shares who would receive cash in the merger. National Capital later
delivered a fairness opinion, dated December 2, 2002, to all shareholders of
Bancshares, including the board, which opinion states that $70.00 per share is
fair, from a financial point of view, to all shareholders of Bancshares,
including the shareholders receiving cash in the merger.
At a subsequent meeting on November 21, 2002, the Board reviewed with
management and counsel a draft merger agreement. The board then adopted
resolutions approving a form of merger agreement, authorizing management to
proceed with the merger transaction and to seek shareholder approval of the
merger proposal. In addition, the board members reviewed with management and
counsel a draft proxy statement and transaction statement on Schedule 13E-3 and
discussed the necessary SEC disclosures. Thereafter, the board approved the form
of proxy statement and Schedule 13E-3 and authorized management to make all
necessary filings with the SEC or otherwise to consummate the proposed "going
private" transaction.
The board determined that the merger proposal was fair to all shareholders
(including non-affiliated shareholders), generally, and specifically with
respect to shareholders receiving cash in the merger. In making this
determination, the board did not utilize the following procedural safeguards:
o the merger transaction was not structured to require separate approval
by a majority of those shareholders who are not officers or directors of
Bancshares or the Bank; and
o the directors did not retain any unaffiliated representative to act
solely on behalf of shareholders who are not officers or directors for
purposes of negotiating the terms of the merger transaction or to
prepare a report regarding the fairness of the transaction.
The board has determined that, based upon the factors described in
"--Recommendation of our board of directors" below, the merger is fair to all
shareholders of Bancshares, including shareholders who are not officers or
directors.
The board did not consider any alternatives to a going private transaction.
The board did not consider a possible sale of Bancshares since no firm offers
had been presented to the board and no determination had been made that such a
sale would be in the best interest of the shareholders. Further, the board did
not view a sale as an alternative that could achieve the benefits of the going
private transaction, including liquidity for those shareholders being paid cash
in the merger while allowing a reduction of costs for Bancshares and those
shareholders who retain their shares.
14
PURPOSES OF AND REASONS FOR THE MERGER PROPOSAL
The purpose of the proposed merger is to terminate Bancshares' status as a
reporting company with the SEC, which the board believes will reduce expenses
and create shareholder value. We are aware that the advantages to being a public
company, including potential investment liquidity and the possibility for use of
company securities to raise capital or make acquisitions, may be important to
some companies. We have not, however, taken advantage of any of these benefits
and will not be in a position to do so in the foreseeable future. In the board's
judgment, the registration of Bancshares stock with the SEC yields no advantages
and, therefore, no justification exists for the continuing direct and indirect
costs of registration with the SEC. In addition, the board believes that
management has reduced corporate overhead as much as possible, and that the
majority of the corporate costs remaining are those associated with being a
public company. We believe these costs will only continue to increase.
Bancshares incurs direct and indirect costs associated with the filing and
reporting requirements imposed on public companies by the 1934 Act. Examples of
anticipated direct cost savings from terminating registration of the common
stock include substantially less complicated disclosure, reduced professional
and advisory fees, reduced accounting fees, reduced insurance costs, reduced
printing and mailing costs for corporate communications, and reduced
miscellaneous, clerical and other expenses (e.g., the word processing,
specialized software and electronic filings associated with SEC filings).
Our direct costs associated with the routine SEC filing and reporting
requirements were approximately $25,000 or 90% of our overhead expense in 2001.
These expenses consisted of the following:
<Table>
Accounting Fees...................................................... $ 15,000
Securities Counsel................................................... $ 500
Corporate Communications............................................. $ 7,200
Specialized Software................................................. $ 800
SEC Filing Fees and Miscellaneous.................................... $ 1,500
</Table>
We believe that the costs incurred in 2001 are a reasonable estimate for the
recurring annual cost savings that should result from the going private
transaction and subsequent termination of our SEC registration. Estimates of the
annual savings to be realized if the merger is implemented are based upon (i)
the actual costs of the services and disbursements in each of the above
categories that are reflected in recent historical financial statements and (ii)
management's estimates of the portion of the expenses and disbursements in each
category believed to be solely or primarily attributable to the public company
status. In some instances, management's estimates are based on information
provided by third parties or upon verifiable assumptions. For example, our
auditors have informed us that there will likely be a reduction in accounting
fees if we cease to be public as legal reviews of SEC filings will not be needed
if we no longer file reports with the SEC. Other estimates are more subjective.
For example, we expect lower printing and mailing costs as a result of less
complicated disclosure required by our private status, and the reduction in
direct miscellaneous clerical and other expenses.
The amounts set forth above are only estimates, and the actual savings to be
realized may be higher or lower than these estimates. These estimated savings
will not be realized until after the fiscal year ended December 31, 2002.
The projected reduction in the number of total record shareholders from 598
to approximately 252 will also result in reduced expenses and less burden on
management because Bancshares will have less than 50% of its current number of
shareholders. The decrease in number of shareholders reduces the volume of
communications and amount of postage and related expenses associated with the
semi-annual issuance of dividend checks to shareholders and other shareholder
communications.
STRUCTURE OF THE MERGER
The merger proposal is structured as a "going private" transaction because
it is intended to and, if completed, will likely result in the termination of
our reporting requirements and other filing obligations under the Securities
Exchange Act of 1934, as amended.
The merger has been structured so that upon consummation of the merger,
Bancshares will have fewer than 300
15
record holders of its shares of common stock. We have recently organized New
ZBI, Inc. as a wholly-owned subsidiary to facilitate the merger transaction. New
ZBI will be merged with and into Bancshares pursuant to the terms of the merger
agreement. Bancshares will be the surviving corporation to the merger. If
completed, the merger will have the following effects.
Shares held on November 1, 2002, by shareholders owning fewer than 150
shares. Each share of common stock owned of record on November 1, 2002, by a
holder of fewer than 150 shares will be converted, pursuant to the terms of the
merger, into the right to receive a cash payment of $70.00 per share. After the
merger and payment of that amount, holders of these shares will have no further
interest in Bancshares. These shareholders will not have to pay any service
charges or brokerage commissions in connection with the merger or the cash
payments to them.
Shares held on November 1, 2002, by shareholders owing 150 or more shares.
Each share of common stock owned of record on November 1, 2002, by a holder of
150 or more shares of common stock will remain outstanding and continue to
represent one share of common stock in Bancshares following the merger.
Beneficial owners of shares of the common stock. Nominees (such as a bank
or broker) may have required procedures, and shareholders holding common stock
in "street name" should contact their nominees to determine how they will be
affected by the merger transaction.
Under the merger agreement, each share of common stock owned by a
shareholder who holds of record fewer than 150 shares will be converted into the
right to receive cash. The board selected 150 shares as the ownership minimum
for several reasons, including to ensure that, after completion of the merger:
o the number of record shareholders would be less than the 300 shareholder
limit necessary to terminate registration with the SEC;
o shareholders would have the ability to make future transfers (by gift or
otherwise) of common stock; and
o Bancshares would have sufficient flexibility to issue stock in the
future for corporate purposes, including raising equity capital for
Bancshares or the Bank or attracting and retaining qualified employees,
directors or executive officers.
Out of a total of 598 record shareholders, approximately 252 shareholders own
150 or more shares of our common stock. These 252 shareholders own, in the
aggregate, approximately 90% of the outstanding shares of common stock.
If the merger is approved by the holders of less than 80% of the outstanding
common stock, those shareholders who vote against the merger proposal will be
entitled to dissent from the merger by following the procedures set forth in La.
R.S. Section 12:131, which statute is included as part of Appendix C to this
proxy statement. See "Rights of Dissenting Shareholders" beginning on page 28 of
this proxy statement.
DETERMINATION OF THE TERMS OF THE MERGER
The structure and terms of the merger were determined by current management
and the board of directors. Because New ZBI is a wholly-owned subsidiary, the
terms of the merger cannot be considered the result of arm's-length negotiations
between unrelated parties. Consequently, the board retained National Capital, an
independent financial advisor experienced in the financial analysis and
valuation of financial institutions, to value the common stock. The cash
consideration to be paid for the common stock under the merger was determined by
the board of directors, in part, in reliance on National Capital's valuation and
fairness opinion. See "-- Financial fairness."
FINANCIAL FAIRNESS
The board of directors believes that the merger proposal is fair to, and in
the best interests of, Bancshares and all shareholders, including those
shareholders who are officers and directors as well as those who are not
officers and directors, and to all shareholders who will receive cash for their
shares. The board of directors also believes that the
16
process by which the merger is to be approved is fair.
The board of directors believes that the merger proposal is fair despite the
absence of statutory safeguards identified by the SEC, namely that
o the board did not retain an unaffiliated representative to act solely on
behalf of the shareholders who are not officers or directors, including
shareholders who will receive only cash in the merger, for the purpose
of negotiating the terms of the merger proposal or preparing a report
covering the fairness of the merger proposal; and
o the merger proposal is not structured so that the approval of at least a
majority of those shareholders who are not officers and directors is
required.
However, despite the absence of an SEC requirement to do so, the board did
obtain an opinion from an unaffiliated third-party relating to the fairness of
the cash consideration to be paid to certain shareholders. As a result of
obtaining an independent fairness opinion, the board determined that the cost of
obtaining an additional fairness opinion or valuation from an unaffiliated
representative for the purpose of negotiating the terms of the merger proposal
on behalf of the non-affiliated shareholders would be costly and would not
provide any meaningful additional benefit.
The board of directors approved the merger proposal, and the board
recommends that the shareholders approve the proposal. All but one of the
members of the board of directors has expressed an intention to vote in favor of
the merger proposal, including the board members who are not employees of
Bancshares or the Bank. Rodney Samuel Johnson voted against the merger as a
member of the board of directors, and has expressed an intention to vote his
shares of common stock against the merger proposal.
The board of directors required that National Capital (i) value the common
stock, and (ii) issue a fairness opinion on the price determined by the board of
directors to be paid for shares of common stock in connection with the merger
proposal. The board imposed no limitations upon National Capital with respect to
the investigations made or procedures followed in rendering the valuation or the
fairness opinion. A copy of National Capital's fairness opinion is attached to
this proxy statement as Appendix B.
National Capital, a Louisiana limited liability company, is an independent
financial advisor with extensive experience in the valuation of banks and bank
holding companies in the states of Louisiana and Mississippi. The board chose
National Capital to perform the valuation based upon its reputation and
management's recommendations.
In rendering its valuation and fairness opinion, National Capital considered
such financial and other factors as it deemed appropriate under the
circumstances, including, among others:
o the historical and current financial position and results of operations
of Bancshares;
o the historical and current financial position and results of operations
of the Bank, including information related to interest income, interest
expense, net interest margin, net non-interest margin, provision for
loan losses, non-interest income, non-interest expense, earnings,
dividends, book value, intangible assets, return on assets, return on
shareholders' equity, capitalization, the amount and type of
non-performing assets, loan losses and the reserve for loan losses, all
as set forth in the financial statements of the Bank;
o the assets and liabilities of Bancshares and the Bank, including the
loan, investment and mortgage portfolios, deposits, other liabilities,
historical and current liability sources, costs and liquidity;
o results of recent regulatory examinations of the Bank;
o future earnings and dividend paying capacity;
17
o certain other publicly available financial and other information
concerning Bancshares and the Bank;
o the general economic, market and financial conditions affecting Bank
operations and business prospects;
o the competitive and economic outlook for the Bank's trade area and the
banking industry in general; and
o publicly available information concerning certain other banks and bank
holding companies, the trading markets and prevailing market prices for
their securities, and the nature and terms of certain other merger
transactions involving banks or bank holding companies.
In addition, National Capital interviewed senior management concerning past
and current operations, financial condition and future prospects, as well as the
results of recent regulatory examinations. Based in part on the foregoing
factors, National Capital developed earnings projections for the years ending
December 31, 2002 through December 31, 2008. National Capital used these
projections, the factors described above and other relevant factors and
information deemed appropriate in National Capital's professional judgment to
develop a valuation for the common stock and an opinion as to the financial
fairness of the merger transaction.
In rendering its valuation and fairness opinion, National Capital relied
upon and assumed the accuracy and completeness of the financial and other
information provided to it or publicly available, and did not attempt to
independently verify the information. National Capital did not make or obtain
any evaluations or appraisals of the properties of Bancshares or the Bank, nor
did it examine any individual loan credit files. National Capital's valuation
and fairness opinion are necessarily based upon conditions as they existed at
the time and can be evaluated only as of the respective date that each was
rendered.
The preparation of a valuation and a fairness opinion is a complex process
involving subjective judgments and is not necessarily susceptible to partial
analysis or summary description. In its valuation and fairness opinion, National
Capital made numerous assumptions with respect to industry performance, business
and economic conditions and other matters. While National Capital believes that
these projections and the assumptions upon which they were based were
reasonable, National Capital has no control over the future occurrence of any of
the events upon which the projections were based. Certain of the projections are
based on factors, such as general and local economic conditions, that are beyond
management's control. In addition, National Capital's projections do not provide
for unforeseen risks and contingencies that may arise in the operation of
Bancshares and the Bank. Consequently, National Capital cannot assure you that
the projections on which its valuation and fairness opinion were based will
accurately forecast the future results of operations of Bancshares and the Bank.
The actual future results of operations may be significantly more or less
favorable than National Capital's financial projections. In addition, estimates
of values of other companies used in rendering the valuation and fairness
opinion do not purport to be valuations of those companies or necessarily
reflect the prices at which those companies or their securities may actually be
sold.
Standard of value
Before assessing the value of the common stock, National Capital was
required to determine the proper valuation standard to use. The fair market
value standard of valuation contemplates a willing buyer and a willing seller,
each with full knowledge of the relevant facts and under no compulsion to
transact. On the other hand, the fair value standard of valuation contemplates a
scenario where one of the parties to the transaction may be compelled to
complete a transaction. The fair value standard is also the measure of value
that generally applies in dissenting shareholder lawsuits and, at times, in
corporate dissolutions. Shares being valued under the fair value standard of
valuation are generally held by shareholders with a minority interest in the
entity. Under the fair value standard, an appraiser must lean toward a value
that favors the unwilling party in the transaction, but not so much as to be
unfair to the shareholders who remain after the transaction is completed. Thus,
the fair value standard will yield a value higher than the fair market value
standard of value. Based on the nature of the transaction and the parties
involved, National Capital determined that the fair value standard of valuation
would be appropriate in this transaction.
In determining the fair value of the common stock, National Capital
considered the use of a number of different valuation methods, including the net
asset value approach, market valuation approach, earnings capitalization
approach, guideline company approach and investment value approach, as explained
below. The analyses
18
underlying the valuation must be considered in their entirety. The failure to
consider all factors, analyses and methods underlying the whole of the valuation
could create an incomplete view of the analyses and the processes underlying the
valuation and the fairness opinion. A summary of the primary valuation
approaches considered by National Capital is set forth below.
Net asset value approach
The net asset value approach derives a value by determining the market value
of the individual balance sheet components. This approach typically assumes
liquidation of the entity's property on the date of valuation with recognition
of securities gains or losses, real estate appreciation or depreciation and any
adjustments to the loan loss reserve, discounts to the loan portfolio or changes
in the net value of other assets. Even if the assets and liabilities are
adjusted to reflect prevailing prices and yields (which is often of limited
accuracy because readily available data is often lacking), the net asset value
approach results in a liquidation value and does not take into account the
values attributable to the going concern, such as the interrelationship among
assets, liabilities, customer relations, market presence, image and reputation,
and staff expertise and depth. Therefore, National Capital did not perform a net
asset appraisal and gave no weight to the net asset value approach in
determining the fair value of the common stock.
Market value or comparative transaction approach
The market value approach is frequently used to determine the price of a
minority block of stock when both the quantity and quality of comparable data
are deemed sufficient. Under the market value approach, the "hypothetical" fair
value for a small bank whose stock is not actively traded may be determined by
creating a universe of similar whole bank and whole bank holding company
transactions over a suitable period of time and within an appropriate geography.
A summary of these transactions is included in Appendix D to this proxy
statement. The pricing multiples and financial characteristics of the companies
that were acquired are then compared with the financial characteristics of the
entity being valued. National Capital determined that the market value approach
was an appropriate method to use in determining the fair value of the common
stock. In applying the market value approach, National Capital analyzed the
following financial characteristics of Bancshares and the acquired companies:
(i) price to tangible book value; (ii) price to earnings; (iii) price to
deposits; (iv) price to assets; and (v) premium over tangible book value as a
percentage of core deposits. The per share values obtained by using each of the
financial characteristics of the acquired companies applied to the financial
characteristics of Bancshares yielded the results in the following table.
MARKET VALUE APPROACH
<Table>
<Caption>
PER SHARE VALUE
---------------
(i) Price to tangible book value $73.13
(ii) Price to earnings $74.11
(iii) Price to deposits $61.53
(iv) Price to assets $60.37
(v) Premium over tangible book value $60.48
</Table>
Taking all values in the table above into consideration, National Capital
determined that the fair value of the common stock under the market value
approach was $69.71 per share.
Capitalization of earnings approach
The capitalization of earnings approach relies on historical data rather
than estimates of future performance as the basis of valuation, and can provide
a reasonable indication of value, especially in cases where the subject company
has a history of stable earnings or growth and such stability or growth can be
reasonably expected to continue in a similar manner. Bancshares has experienced
stable earnings over a relatively long period. As indicated in the table below,
a weighted average of Bancshares' earnings over the past five years was used to
establish the earnings level to be capitalized and an average of price to
earnings ratios of comparable public companies was used to calculate the
appropriate capitalization rate.
19
CAPITALIZATION OF EARNINGS APPROACH
Weighted Average Earnings
<Table>
<Caption>
1997 1998 1999 2000 2001
==== ==== ==== ==== ====
Income (000) $937 $1,054 $1,223 $1,147 $1,231
Weighting 1 2 3 4 5
Weighted average earnings (000): 1,164
</Table>
Price to Earnings Ratios
<Table>
<Caption>
Symbol Company Price to Earnings (as of 10/22/02)
====== ======= ==================================
TSH Teche Holding Company 9.30
CIZ Citizens Holding Company 13.50
MSL MidSouth Bancorp, Inc. 10.80
BKBK Britton & Koontz Capital Corporation 11.60
</Table>
Average price to earnings ratio: 11.30
Capitalization rate: 8.85% (1/11.30)
National Capital determined that the fair value of the common stock under the
capitalization of earnings approach (utilizing weighted average earnings of
$1,164,000 and a capitalization rate of 8.85%) was $67.90 per share.
Non-dilutive exchange value or guideline companies approach
The exchange value approach of valuation looks at a potential acquisition
transaction from the point of view of the chief financial officer of a potential
acquirer. An acquiring company's objective would be to enhance its earnings per
share by means of the acquisition transaction. Accordingly, under the exchange
value approach, the appraiser would analyze the earnings stream of the target
entity and take into consideration any synergies that the acquirer would be able
to realize upon consummation of the transaction. National Capital determined
that the exchange value approach was an appropriate method to use in determining
the fair value of the common stock.
Under this method, National Capital developed a universe of guideline
banking companies using publicly traded banks that operate in Louisiana and
Mississippi. The value obtained under this method assumes that the common stock
would trade as if it was listed on the NASDAQ small cap market and that
transactions in the common stock were occurring on a regular basis and in
sufficient volume to represent a liquid market. National Capital selected a
basket of four companies operating in Louisiana and Mississippi whose operating
characteristics, geographic footprint and lines of business were most similar to
Bancshares. The guideline companies selected were Britton & Koontz Capital
Corporation, Natchez, Mississippi (ticker symbol BKBK); Citizens Holding
Company, Philadelphia, Mississippi (ticker symbol CIZ); MidSouth Bancorp.,
Lafayette, Louisiana (ticker symbol MSL); and Teche Holding Company, New Iberia,
Louisiana (ticker symbol TSH). National Capital determined that the fair value
of the common stock under the exchange value approach was $69.98 per share.
Investment value approach
The investment value approach considers projected dividends, earnings,
maximum dividend paying capacity and future terminal value. This method is a
common approach utilized by appraisers to estimate share value -- particularly
for mature entities with modest growth rates, such as Bancshares. The investment
value approach produces a value based on a required return and a cash flow that
shareholders can expect to receive by holding and ultimately liquidating the
shares. National Capital determined that the investment value approach was an
appropriate method to use in determining the fair value of the common stock.
20
The table below demonstrates the five-year earnings history of Bancshares
and the seven-year projected earnings developed by National Capital and used in
this method. At the time National Capital developed the projections, Bancshares
had not yet completed its year ending December 31, 2002.
<Table>
<Caption>
YEAR RETURN ON
ACTUAL EARNINGS DIVIDENDS AVERAGE ASSETS AVERAGE ASSETS
------ --------- --------- -------------- --------------
(000) (000) (000)
1997........................................ $ 927 $339 1.23% $75,399
1998........................................ $1,048 $368 1.29% $81,455
1999........................................ $1,216 $407 1.42% $85,840
2000........................................ $1,142 $436 1.31% $87,388
2001........................................ $1,221 $464 1.30% $94,012
PROJECTED
2002........................................ $1,347 $517 1.37% $ 98,487
2003........................................ $1,426 $548 1.39% $102,498
2004........................................ $1,505 $578 1.41% $106,976
2005........................................ $1,583 $608 1.42% $111,453
2006........................................ $1,662 $638 1.43% $115,931
2007........................................ $1,741 $669 1.45% $120,409
2008........................................ $1,820 $699 1.46% $124,886
</Table>
To determine the present value of all future economic benefits associated
with the common stock, National Capital was required to select a discount rate.
The discount rate reflects the risk of uncertainty associated with the future
economic benefits and a rate of return that an investor would require from a
similar investment with similar risks.
National Capital developed an appropriate discount rate using the build-up
method. National Capital used the August 2002 ten-year constant maturity U.S.
Treasury yield (4.26%) as the benchmark risk-free rate. National Capital used an
equity risk premium of 7.40%, which was the historic average annual difference
between the yield on the intermediate U.S. Treasury Note, and the total returns
on stocks of large companies as calculated by Ibbotson Associates ("Ibbotson")
in its Stocks, Bonds, Bills and Inflation 2002 Yearbook.
National Capital also considered adjustments to the risk-free and equity
risk premium due to the industry in which Bancshares operates. An industry risk
premium is required to adjust for valuation differences by industry and was
determined to be -0.16% based on data compiled by Ibbotson.
National Capital also considered adjustments to the risk-free and equity
risk premium due to the small size of Bancshares' market value and
characteristics specific to Bancshares. A micro-cap premium is required for
companies with very small market capitalizations and was determined to be 3.30%
based on data compiled by Ibbotson. Specific company risk factors, including
location and economic concentration, added another 2.00% premium.
The build up method produced a discount rate of 16.80% as demonstrated
below:
BUILD UP METHOD
SEPTEMBER 2002
<Table>
Riskless Rate (Ten Yr. Treasury)........................ 4.26%
Equity Risk Premium..................................... 7.40%
Industry Risk Premium................................... (0.16)%
Micro-Cap Size Premium.................................. 3.30%
Specific Company Premium................................ 2.00%
-----
Discount Rate........................................... 16.80%
=====
</Table>
The table below describes the utilization by National Capital of the discount
rate to determine the present value
21
of all future economic benefits, namely (i) projected annual dividend payments
by Bancshares and (ii) a future terminal value (projected sale value in 2008)
for Bancshares, which value was determined by National Capital utilizing the
calculations described in "-- Market value or comparative transaction approach"
above.
PRESENT VALUE CALCULATIONS
<Table>
<Caption>
Discount Rate Projected Present Value of Projected Sale Present Value of
Year (16.80%) Dividends (000) Dividends (000) Value (000) Sale (000)
==== ============= =============== ================ ============== ================
2003 85.62% $548 $ 469
2004 73.30% $578 $ 424
2005 62.76% $608 $ 382
2006 53.73% $638 $ 343
2007 46.00% $669 $ 308
2008 39.39% $699 $ 275 $28,769 $11,331
Present Values (000) $2,200 $11,331
</Table>
Based upon the sum of these present value calculations ($13,531,000), National
Capital determined that the fair value of the common stock under the investment
value approach was $69.87 per share.
Summary
Based upon its review of the empirical information more fully described in
the valuation and all of the other relevant factors and information deemed
appropriate in its professional judgment, National Capital advised the board of
directors that, in its considered opinion, the estimated fair value of a share
of common stock as of October 31, 2002, was $65.00 to $75.00 per share. The
board of directors considered the valuation, the factors underlying the
valuation, and other factors that the Board deemed relevant and set the value of
the cash consideration to be received under the merger agreement at $70.00 per
share.
Following the board's determination of the cash to be paid to holders of
fewer than 150 shares in the going private transaction, the board engaged
National Capital to evaluate the fairness, from a financial point of view, of
the cash consideration to be paid to those shareholders pursuant to the
transaction. National Capital reviewed the cash consideration ($70.00)
determined by the board of directors, the factors underlying the valuation and
all of the other relevant factors and information deemed appropriate in its
professional judgment. Accordingly, National Capital issued an opinion dated
December 2, 2002 to the board that the cash consideration to be received under
the merger agreement was fair, from a financial point of view, to all
shareholders of Bancshares, including the shareholders who receive cash in the
merger. For purposes of the fairness opinion, National Capital relied on the
accuracy of the disclosures set forth in this proxy statement and, as to legal
matters, exclusively on Bancshares' legal counsel. A copy of the fairness
opinion is attached as Appendix B to this proxy statement for your review.
Neither National Capital nor its principals have a present or contemplated
future ownership interest in Bancshares or make a market in the stock of any
company, banking or otherwise. Bancshares has agreed to pay National Capital a
professional fee of approximately $20,000 for its services as an independent
financial analyst and advisor in connection with the merger. No portion of
National Capital's fee was contingent upon the conclusion reached in the
valuation.
The board will make the valuation and fairness opinion available at the
Bank's main office during regular business hours for inspection and copying by
you or your representative (designated in writing). We will also transmit a copy
of the valuation to you or your representative (designated in writing) upon
written request and at your expense. We may request additional information or
documentation from you if we believe that it is necessary to verify your or your
representative's identity or the authority of your representative. You may also
be required to enter into an agreement with us to protect the confidentiality of
the information contained in the valuation.
The foregoing discussion is intended only to provide you with a summary of
selected information from the valuation and the fairness opinion rendered by
National Capital. This discussion does not purport to be a complete
22
description of the valuation or the fairness opinion and may not contain all of
the information that is important to you. The discussion is qualified in its
entirety by reference to the text of the valuation and fairness opinion. The
fairness opinion is directed only to the financial terms of the transaction and
does not constitute a recommendation to you as to how you should vote at the
meeting.
RECOMMENDATION OF OUR BOARD OF DIRECTORS
The board of directors of Bancshares has determined that the merger proposal
is in the best interests of, and fair to, the shareholders of Bancshares
(including the non-affiliated shareholders) and that the merger consideration
($70.00 per share) payable to the shareholders who receive the cash in the
merger is fair to those shareholders. See "-- Financial fairness." Accordingly,
the board of directors approved the merger proposal (six directors in favor, one
opposed), and recommends that the shareholders vote in favor of the merger and
the merger agreement. One director, Rodney Samuel Johnson, opposed the
transaction and indicated his belief that better uses (such as establishing new
Bank branch locations) exist for the funds that will be required for purchase of
the shares of common stock and related expenses.
In reaching its decision to approve the merger proposal and in making its
recommendation, the Bancshares board of directors considered a number of
material factors, with each of them considered as positive or negative from a
fairness standpoint.
Positive factors for all shareholders. The factors that the board considered
positive for all the shareholders, including all non-affiliated shareholders,
included:
o the fact that the cash price per share of $70.00 offered in the merger
represents a 10% premium over the September 30, 2002 book value per
share of $63.26;
o the fact that the board retained and received advice from an independent
financial advisor, National Capital, in determining the fairness of the
price of $70.00 per share;
o the fact that the board retained and received advice from independent
legal counsel in evaluating the terms of the merger agreement; and
o the opinion of National Capital, delivered on December 2, 2002, that the
merger consideration to be received by holders of fewer than 150 shares
pursuant to the merger agreement is fair to the Bancshares shareholders;
and
Positive factors for shareholders who receive cash in the merger. In
addition to the positive factors applicable to all shareholders set forth above,
the factors that the board considered positive for the shareholders who receive
cash in the merger (including non-affiliated shareholders) included:
o the fact that the merger consideration is all cash, which provides
certainty of value to those shareholders and immediate liquidity for the
shareholders who receive cash in the merger;
o the fact that no brokerage or other transaction costs are to be incurred
by shareholders who receive cash in the merger; and
o the fact that the merger structure entitles shareholders receiving cash
in the merger to dissenters' rights under Louisiana law, provided that
any shareholder that desires to exercise his or her dissenters' rights
complies with the requirements for exercising dissenters' rights,
including voting against the merger proposal.
Positive factors for remaining shareholders. In addition to the positive
factors applicable to all shareholders set forth above, the factors that the
board considered as positive for the shareholders who will remain shareholders
following the merger, including all such non-affiliated shareholders, included:
o the fact that such shareholders would have the opportunity to
participate in any future growth and earnings
23
of Bancshares;
o the fact that such shareholders would not be required to pay income
taxes as a result of the merger; and
o the fact that the remaining shareholders would realize the potential
benefits of termination of registration of the common stock, including,
reduced expenses of Bancshares for no longer having to comply with SEC
requirements.
Negative factors for all shareholders. The factors that the board of
directors considered negative for all the shareholders, including all
non-affiliated shareholders, included:
o the fact that the directors and executive officers of Bancshares have
interests in the merger or have relationships that present actual or
potential, or the appearance of actual or potential, conflicts of
interest in connection with the merger; and
o the fact that there was no independent committee of the board charged
with negotiating the terms of the merger on behalf of the shareholders
and no unaffiliated representative was retained by the board to act
solely on behalf of the non-affiliated shareholders.
Negative factors for shareholders receiving cash in the merger. In addition
to the negative factors applicable to all shareholders set forth above, the
factors that the board considered negative for the shareholders who would
receive cash in the merger included:
o the fact that such shareholders would not have the opportunity to
participate in any future growth and earnings of Bancshares;
o the fact that such shareholders would be required to pay income tax on
the receipt of cash in the merger; and
o the fact that the board is not seeking the approval of a majority of
these shareholders receiving cash in the merger.
Negative factors for remaining shareholders. In addition to the negative
factors applicable to all shareholders set forth above, the factors that the
board considered negative for the shareholders who will retain their shares in
the merger, including all such non-affiliated shareholders, included:
o the fact that after the completion of the merger and registration is
terminated, the shareholders will have decreased access to information
about Bancshares; and
o the fact that after the completion of the merger, Bancshares will no
longer be subject to the proxy rules of the 1934 Act.
In connection with its determination, the board did not consider, and did
not request that National Capital evaluate Bancshares' liquidation value. The
board did not consider Bancshares' liquidation value to be a relevant measure of
valuation, given that the $70.00 price per share offered in the merger
represents a 10% premium over the book value per share of $63.26 at September
30, 2002. It was the determination of the board that Bancshares is more valuable
as a going concern than its book value per share.
Shares of Bancshares common stock have no current or historical market price
because the shares have never been a marketable security since there have never
been "bid" and "ask" prices for the Bancshares common stock, as reported by the
National Quotation Bureau, Inc. ("Pink Sheets"). Therefore, any consideration of
market value or historical prices would not have been helpful. The board did not
consider the timing of the transaction in its analysis.
The foregoing discussion of the factors considered by the board of directors
is not intended to be exhaustive. In view of the variety of factors considered
in connection with their evaluation of the merger proposal, the board of
directors did not find it practicable to, and did not quantify or otherwise
assign relative weights to the specific
24
factors considered in reaching its determination. The board considered all the
factors as a whole in reaching its determination. In addition, individual
members of the board of directors may have given different weights to different
factors.
The board did not consider and vote upon whether or not to, and as a result,
did not, retain an unaffiliated representative to act solely on behalf of
shareholders who are not directors or officers of Bancshares or the Bank for
purposes of negotiating the terms of the merger transaction or preparing a
report on the fairness of the transaction. The board, based upon the factors
outlined above, believes that the merger proposal is fair to all shareholders of
Bancshares, including all non-affiliated shareholders.
PURPOSES AND REASONS OF NEW ZBI FOR THE MERGER PROPOSAL
New ZBI was organized solely for the purpose of facilitating the merger
transaction. New ZBI's directors and executive officers are the same as
Bancshares. As a result, New ZBI's purpose and reasons for engaging in the
merger transaction are the same as those set forth in "-- Purposes of and
reasons for the merger proposal."
POSITION OF NEW ZBI AS TO THE FAIRNESS OF THE MERGER
New ZBI has considered the analyses and findings of the Bancshares board of
directors with respect to the fairness of the merger proposal to the Bancshares
shareholders, including all non-affiliated Bancshares shareholders. As of the
date hereof, New ZBI adopts the analyses and findings of the Bancshares board of
directors with respect to the merger, and believes that the merger is fair to
the Bancshares shareholders, including the non-affiliated shareholders of
Bancshares. New ZBI is not making any recommendation regarding how the
shareholders of Bancshares should vote on the merger proposal.
PURPOSES AND REASONS OF THE BANK FOR THE MERGER PROPOSAL
The Bank is the sole operating subsidiary of Bancshares. Bancshares has no
material operations, and thus, any expenses of Bancshares, particularly those
incurred as a result of Bancshares' status as an SEC reporting company, are paid
by the Bank. Further, certain members of management of the Bank also serve as
management of Bancshares. As a result, then, the Bank's purposes and reasons for
engaging in the merger transaction are the same as Bancshares, which are set
forth in "--Purposes of and reasons for the merger proposal."
POSITION OF THE BANK AS TO THE FAIRNESS OF THE MERGER
The Bank has considered the analyses and findings of the Bancshares board of
directors with respect to the fairness of the merger proposal to the Bancshares
shareholders, including all non-affiliated Bancshares shareholders. As of the
date hereof, the Bank adopts the analyses and findings of the Bancshares board
of directors with respect to the merger, and believes that the merger is fair to
the Bancshares shareholders, including the non-affiliated shareholders of
Bancshares. The Bank is not making any recommendation regarding how the
shareholders of Bancshares should vote on the merger proposal.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The officers and directors of Bancshares and the Bank who are also
shareholders will participate in the merger in the same manner and to the same
extent as all of the other shareholders of Bancshares. See "-- Financial
fairness." The directors and executive officers of Bancshares and New ZBI are
the same. However, all of the directors and the executive officers of the Bank
own in excess of 150 shares and will, therefore, retain their shares in the
merger, unlike many other shareholders who will be required to relinquish their
interest in Bancshares as a result of the merger. And, if the merger is
completed, the respective ownership percentages of each of the directors and
some of the executive officers will increase, as will the ownership interests of
any other shareholder who retains his or her shares. As a result of the merger,
the collective ownership interest of the directors and officers will increase
from 5.57% to approximately 6.17%. See "Security Ownership of Certain Beneficial
Owners and Management."
We understand that all but one of the directors of Bancshares and the Bank
and all of the executive officers intend at this time to vote their shares in
favor of the proposal to approve and adopt the merger and the merger
25
agreement.
CERTAIN CONSEQUENCES OF THE MERGER; BENEFITS AND DETRIMENTS TO AFFILIATED AND
NON-AFFILIATED SHAREHOLDERS
Pursuant to the terms of the merger agreement, following shareholder
approval of the merger proposal and subject to the fulfillment or waiver of
certain conditions, New ZBI will be merged with and into Bancshares, and
Bancshares will continue as the surviving company in the merger. The merger will
cause a reduction in the number of Bancshares' shareholders from approximately
598 to approximately 252. Further, the merger will result in termination of the
registration of the common stock with the SEC, which will eliminate the
reporting and proxy solicitation obligations of Bancshares pursuant to the
Securities Exchange Act of 1934.
The shares that are acquired in the merger will become treasury shares until
the board determines that the treasury shares should be cancelled or otherwise
issued in the sole discretion of the board.
Because all shares of common stock held by the shareholders, who, on
November 1, 2002, own fewer than 150 shares will be cancelled in the merger,
shareholders who own these shares will cease to participate in future earnings
or growth, if any, of Bancshares or benefit from any increases, if any, in the
value of Bancshares or its stock, and they no longer will bear the risk of any
decreases in value.
Distributions by the surviving Bancshares after completion of the merger
(other than any distribution for which the record date is a date prior to the
date of completion of the merger) will be paid to the owners of Bancshares and
not to the shareholders who receive cash in the merger.
The merger will also provide shareholders who receive cash in the merger a
cost-effective way to cash out their investments, because Bancshares will pay
all transaction costs in connection with the merger proposal.
A potential disadvantage to shareholders who remain as shareholders after
the merger is completed and registration terminated is decreased liquidity and
decreased access to information about Bancshares.
A potential disadvantage to shareholders receiving cash in the merger
include the tax consequences described in "Material U.S. Federal Income Tax
Consequences of the Merger" beginning on page 29 below.
OPERATIONS OF THE BANK FOLLOWING THE MERGER
Following the merger, Bancshares and the Bank will continue to conduct their
existing operations in the same manner as now conducted. The executive officers
and directors immediately prior to the merger will be the executive officers and
directors of Bancshares immediately after the merger. Bancshares and the Bank's
articles of incorporation and by-laws will remain in effect and unchanged by the
merger. The deposits of the Bank will continue to be insured by the FDIC. The
corporate existence of neither Bancshares nor the Bank will be affected by the
merger. Bancshares and the Bank will continue to be regulated by the same
agencies by which each was regulated before the merger.
FINANCING OF THE MERGER
The funds necessary to acquire shares of common stock in the merger,
approximately $1,350,000, are anticipated to come from a special dividend paid
to Bancshares by the Bank. Although this dividend will reduce the capital of the
Bank, the Bank's capital structure following the dividend will continue to
comply with all regulatory capital requirements.
26
EXPENSES OF THE MERGER
The estimated expenses of the merger, including those associated with this
proxy statement, will be paid by us. The expenses are estimated (other than the
filing fee) to be as follows:
<Table>
Fees and Expenses of Independent Financial Advisor.............. $20,000
Filing Fees..................................................... $ 123
Legal Fees and Expenses......................................... $35,000
Accounting Fees................................................. $15,000
Printing and Mailing............................................ $15,000
Miscellaneous Fees.............................................. $ 2,500
-------
Total........................................................... $87,623
=======
</Table>
CERTAIN TERMS OF THE MERGER
The following is a summary of certain provisions of the merger agreement and
certain matters relating to the merger. The following summary does not purport
to be complete and is qualified in its entirety by reference to the merger
agreement which is attached as Appendix A to this proxy statement and is
incorporated herein by reference. You are urged to read the merger agreement in
its entirety and to consider it carefully.
EFFECTIVE TIME OF THE MERGER
We are working to complete the merger during March, 2003 so that we will
terminate our registration with the SEC by March, 2003. However, we cannot
guarantee that the merger will be effective by the end of March 2003.
The merger will become effective at the time (i) of the filing with and
acceptance for record of the certificate of merger by the Secretary of State of
the State of Louisiana, or (ii) at such time as we specify in the certificate of
merger (not to exceed 30 days after the certificate of merger is accepted for
filing by the Louisiana Secretary of State). The certificate of merger will be
filed as soon as practicable after the requisite approval of the merger proposal
by the shareholders at the special meeting is obtained and the other conditions
precedent to the consummation of the merger have been satisfied or waived. We
cannot assure you that all conditions to the merger contained in the merger
agreement will be satisfied or waived. See "-- Conditions to consummation of the
merger."
CONVERSION AND EXCHANGE OF STOCK CERTIFICATES
As soon as practicable after the merger is completed, we will mail to each
shareholder receiving cash in the merger a letter of transmittal and
instructions for surrendering their stock certificates. When these shareholders
deliver their stock certificates to us along with the letter of transmittal and
any other required documents, their stock certificates will be cancelled and
they will be issued a check in the amount of $70.00 per share of common stock
that is being cancelled in the merger.
When the merger is completed, the shares of common stock owned by each
shareholder receiving cash in the merger will automatically be converted into
cash without any further action on the shareholder's part. In order to receive
the cash, however, such shareholders must deliver to Bancshares their stock
certificates along with a letter of transmittal and any other required
documents. No service charge will be payable by shareholders in connection with
the cash payments or otherwise; and all expenses will be borne by Bancshares. A
shareholder will not be entitled to any distributions that are declared after
the merger is completed on any shares of common stock that are automatically
converted into cash as a result of the merger, regardless of whether the
shareholder has surrendered his or her stock certificates to us. Each
shareholder will be entitled to distributions on his or her common stock
declared prior to the date on which the merger is completed, even if it is not
paid until after the merger is completed.
PLEASE DO NOT SURRENDER YOUR STOCK CERTIFICATES UNTIL YOU RECEIVE THE LETTER
OF TRANSMITTAL.
27
CONDITIONS TO CONSUMMATION OF THE MERGER
The boards of directors of Bancshares and New ZBI have approved the merger
agreement and authorized the consummation of the merger. As the sole shareholder
of New ZBI, Bancshares has approved the merger. The completion of the merger
depends upon a number of events, including:
o the approval of the merger and the merger agreement by the shareholders
of Bancshares;
o the satisfaction of certain conditions as more fully set forth in
Article V of the merger agreement; and
o the receipt of all regulatory approvals, if any. See "-- Regulatory
requirements."
AMENDMENT OR TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be amended by mutual written agreement of our board
of directors and board of directors of New ZBI, generally without the necessity
of further action by you. However, your approval is required for any
modification or amendment that:
o changes the amount or kind of consideration that you will receive for
your shares of common stock;
o changes any provision of Bancshares' articles of incorporation; or
o changes any of the terms of the merger agreement, if the change would
adversely affect your rights as a shareholder.
No amendments or modifications to the merger agreement are presently
contemplated. However, if there is any material amendment to the merger
agreement before the special meeting, we will notify you and provide you with
information relating to the amendments prior to the meeting.
The merger agreement may be terminated by the mutual consent in writing of
Bancshares and New ZBI at any time before the filing of a certificate of merger
with the Louisiana Secretary of State. At this time, the parties have no
intention of terminating the merger agreement.
REGULATORY REQUIREMENTS
Except for the filing of the certificate of merger with the Secretary of
State of the State of Louisiana upon the approval of the merger by the
Bancshares shareholders, and compliance with federal and state securities laws,
we are not aware of any material United States federal or state or foreign
governmental regulatory requirement necessary to be complied with or approval
that must be obtained in connection with the merger.
RIGHTS OF DISSENTING SHAREHOLDERS
The provisions of Section 131 of the Louisiana Business Corporation Law, La.
R.S. Section 12:131 (the "LBCL"), provide the exclusive means by which you may
exercise your right to dissent from the merger. We have attached a copy of La.
R.S. Section 12:131, which is included as a part of Appendix C to this proxy
statement. The following is a summary of the dissenters' rights provisions and
is qualified in its entirety by reference to Section 131 of the LBCL.
To dissent from the merger, you will be required to deliver to us a written
objection to the proposed merger before the shareholder vote on the merger.
Thereafter, you must vote against the proposal to approve the merger and merger
agreement. A vote against the merger proposal, without submitting the written
objection, is not sufficient to satisfy the notice requirement.
If the merger is approved by the holders of less than eighty percent (80%)
of the total outstanding common stock
28
(154,934 shares), Bancshares will promptly notify you in writing by mail of the
shareholder approval. Within 20 days after mailing by Bancshares of the notice
of shareholder approval, you must file with Bancshares your written demand for
the fair value of your shares of common stock, valued as of the day before the
merger was effected. In addition to stating the value that you are demanding,
your written demand must provide a post office address to which we may respond.
At the same time, you will be required to deposit the stock certificates
representing your shares of common stock in escrow at a bank or trust company
located in East Baton Rouge Parish, Louisiana. The certificates must be duly
endorsed and transferred to Bancshares upon the sole condition that Bancshares
pay you the value of your shares as determined under the dissenters' rights
provisions. To verify the deposit in escrow, you will be required to deliver to
Bancshares the written acknowledgement of the depository bank or trust company
that it holds your shares. If you fail to make and deliver the objection,
written demand and acknowledgement within the prescribed time period, you will
conclusively be presumed to have accepted the terms of the merger.
Within 20 days after Bancshares has received your written demand and
acknowledgement, we will notify you in writing if we disagree with the value
demanded or that a payment is due. If we determine that a payment is due, we
will state in the notice of disagreement the price deemed by us to be the fair
value of your shares. If Bancshares fails to respond timely to your written
demand and acknowledgement, Bancshares will be liable for the amount that you
have demanded.
Thereafter, if any disagreement remains with respect to the fair value of
your shares of common stock, you may file suit against Bancshares in a East
Baton Rouge Parish district court requesting that the court determine the fair
value of your shares of common stock as of the day before the merger was
effected. If you are entitled to file a suit under the provisions of La. R.S.
Section 12:131, but fail to file within 60 days after you receive our notice of
disagreement, you will be deemed to have accepted our statement that no payment
is due, or if we do not contend that no payment is due, the value for your
shares as fixed by Bancshares in the notice of disagreement.
You will cease to have any of the rights of a shareholder, except the rights
under the dissenters' right provisions, when you file your written demand for
the fair value of your shares of common stock. You will have the unconditional
right to withdraw your demand to proceed under the dissenters' rights provisions
and accept the terms offered under the merger proposal at any time before you
receive our notice of disagreement. After you receive our notice of
disagreement, you will be required to obtain written consent before you may
withdraw your demand to proceed under the dissenters' rights provisions. If you
withdraw your written demand or if you otherwise lose your right to dissent from
the merger, you will receive the consideration to which you are entitled under
the merger agreement.
If you do not follow the prescribed procedures, you will not be entitled to
dissenters' rights with respect to your shares.
Because of the complexity of the procedures necessary to exercise the rights
of a dissenting shareholder, we recommend that any shareholder wishing to
exercise the right to dissent consult with his or her own legal counsel.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion summarizes the material U.S. federal income tax
consequences of the merger. The discussion is based upon the Internal Revenue
Code of 1986, as amended, its legislative history, applicable Treasury
regulations, existing administrative interpretations and court decisions
currently in effect. Any of these authorities could be repealed, overruled or
modified at any time after the date of this proxy statement, and any such change
could be applied retroactively. This discussion does not address any tax
consequences under state, local or foreign laws.
The discussion that follows neither binds the IRS nor precludes the IRS from
adopting a position contrary to that expressed in this proxy statement, and we
cannot assure you that such a contrary position could not be asserted
successfully by the IRS or adopted by a court if the positions were litigated.
Bancshares does not intend to obtain a ruling from the IRS with respect to the
U.S. federal income tax consequences of the merger. In addition, Bancshares does
not intend to obtain an opinion from tax counsel with respect to the federal
income tax consequences of the merger.
29
This discussion assumes that you hold your shares of common stock as a
capital asset within the meaning of Section 1221 of the Internal Revenue Code.
This discussion is for general information only and does not address all aspects
of federal income taxation that may be important to you in light of your
particular circumstances or if you are subject to certain rules, such as those
rules relating to:
o shareholders who are not citizens or residents of the United States;
o financial institutions;
o tax-exempt organizations and entities, including IRAs;
o insurance companies;
o dealers in securities; and
o shareholders who acquired their shares of common stock through the
exercise of employee stock options or similar derivative securities or
otherwise as compensation.
TAX CONSEQUENCES TO SHAREHOLDERS WHO RETAIN THEIR SHARES
If you are a shareholder who retains your shares of common stock in the
merger, you will not recognize gain or loss for U.S. federal income tax purposes
as a result of the merger. The merger will not affect the adjusted tax basis or
holding period of any shares of common stock that you continue to own following
the merger.
TAX CONSEQUENCES TO SHAREHOLDERS WHO RECEIVE CASH FOR THEIR SHARES
If you are a shareholder who receives cash for your shares of common stock
in the merger, you should be treated for federal income tax purposes as having
had your shares redeemed by Bancshares under Section 302 of the Internal Revenue
Code. Unless the cash received is treated as a dividend under Section 301 of the
Internal Revenue Code (as discussed below), you will recognize gain or loss for
U.S. federal income tax purposes with respect to the cash received for your
shares of common stock. The gain or loss will be measured by the difference
between the amount of cash received, $70.00 per share, and the adjusted tax
basis of your shares of common stock. The gain or loss will be capital gain or
loss and will be long-term capital gain or loss if you will have had owned your
shares of common stock for more than one year at the time the merger is
completed.
Section 301 of the Internal Revenue Code provides that the cash distribution
will not be treated as a dividend if the distribution is (i) "not essentially
equivalent to a dividend," (ii) "substantially disproportionate" with respect to
the shareholder or (iii) completely terminates the shareholder's interest in our
company. The constructive ownership rules of Section 318 of the Internal Revenue
Code apply in comparing a shareholder's percentage interest in Bancshares
immediately before and immediately after the merger. Generally, the constructive
ownership rules under Section 318 treat a shareholder as owning (i) shares of
common stock owned by certain relatives, related corporations, partnership,
estates or trusts, and (ii) shares of common stock the shareholder has an option
to acquire. If you receive cash for your common stock in the merger and
completely terminate your direct and constructive ownership interest in
Bancshares, you should recognize gain or loss as a result of the merger, and the
cash distribution should not be treated as a dividend.
TAX CONSEQUENCES TO BANCSHARES, NEW ZBI AND THE BANK
Neither Bancshares, New ZBI nor the Bank will recognize gain or loss for
U.S. income tax purposes as a result of the merger.
30
BACKUP WITHHOLDING
Certain of the shareholders of Bancshares may be subject to backup
withholding at a 31% rate on the cash payments received for their shares of
common stock. Backup withholding will not apply, however, if you:
o furnish to Bancshares a correct taxpayer identification number and
certify that you are not subject to backup withholding on the substitute
Form W-9 or successor form included in the letter of transmittal to be
delivered to you following the date of completion of the merger;
o Provide a certificate of foreign status on Form W-8 or successor form;
or
o Otherwise are exempt from backup withholding.
Backup withholding is not an additional tax but is credited against the
federal income tax liability of the taxpayer subject to the withholding. If
backup withholding results in an overpayment of a taxpayer's federal income
taxes, that taxpayer may obtain a refund from the IRS.
This discussion is only intended to provide you with a general summary and
is not intended to be a complete analysis or description of all potential U.S.
federal income tax consequences of the merger. In addition, this discussion does
not address tax consequences that may vary with, or are contingent on, your
individual circumstances. Moreover, this discussion does not address any
non-income tax or any foreign, state or local tax consequences of the merger.
Accordingly, you are strongly encouraged to consult with your own tax advisor to
determine the particular U.S. federal, state, local or foreign income or other
tax consequences of the merger that are applicable to you.
RATIO OF EARNINGS TO FIXED CHARGES AND BOOK VALUE PER SHARE
The following table sets forth Bancshares' ratio of earnings to fixed
charges for the periods set forth below:
<Table>
<Caption>
AS OF THE YEAR ENDED AS OF THE NINE MONTH
DECEMBER 31 PERIOD ENDED SEPTEMBER 30
------------------------ -------------------------
2001 2000 2002 2001
---------- ---------- ---------- ----------
Earnings to Fixed Charges:............................ $1.69x $1.68x $1.87x $1.65x
</Table>
The book value per share of the Bancshares common stock as of September 30, 2002
was $63.26.
COMMON STOCK INFORMATION; DIVIDEND INFORMATION
Common stock. Bancshares has only one class of outstanding equity
securities, its common stock, par value $10.00 per share. On January 31, 2003,
193,667 shares of the common stock were outstanding. These shares were held by
approximately 598 holders.
Trading market. No established trading market for the shares of the common
stock exists, and Bancshares does not expect a trading market to ever develop.
Recent trading activity. From October 1, 2000 through December 31, 2002, the
transfer records of Bancshares indicate that there were approximately eleven
separate sales and purchases of the common stock, totaling approximately 1,600
shares. Five of these transactions were at a sales price of $20.00 per share,
one transaction was at a sales price of approximately $30.00 per share, one
transaction was at a sales price of approximately $32.50 per share, and the
remaining four transactions were at prices not known to Bancshares.
31
Dividends. Set forth in the table is dividend information with respect to
dividends paid on each share of the common stock during the past three fiscal
years:
<Table>
<Caption>
PERIOD CASH DIVIDEND
------ -------------
2002
First six months................................ $1.25
Second six months............................... $1.30
-----
Total.................................... $2.55
=====
2001
First six months................................ $1.15
Second six months............................... $1.25
-----
Total.................................... $2.40
=====
2000
First six months................................ $1.10
Second six months............................... $1.15
-----
Total.................................... $2.25
=====
</Table>
The amount of dividends payable by Bancshares to shareholders is limited by the
amount of dividends payable by the Bank to Bancshares. Federal and state banking
regulations place certain restrictions on dividends that the Bank may pay to
Bancshares, as the Bank's sole shareholder. The total amount of dividends that
may be paid by the Bank at any date is generally limited to the current year's
net profits, plus the prior year's retained net profits. Further, dividends paid
by the Bank to Bancshares would be prohibited if the effect of the dividend
would be to cause the Bank's capital to be reduced below applicable minimum
capital requirements.
DIRECTORS OF ZACHARY BANCSHARES, INC.
The following is a biographical summary of the experience of each director
nominee. Each nominee is a United States citizen. None of the nominees has been
convicted in a criminal proceeding during the past five years, or been a party
to any judicial or administrative proceeding, excluding traffic violations and
similar misdemeanors, during the past five years that resulted in a judgment
decree or final order enjoining them from future violations of, or prohibiting
activities subject to, federal or state securities laws, or finding any
violation of federal or state securities laws.
Russell Bankston, age 74, has been a director since 1971 and has been
Chairman of the Board since 1996. Mr. Bankston is an attorney, and he has been
retired since 1994. His principal business address is 3757 Nelson Street,
Zachary, Louisiana 70791.
A. C. Mills, III., age 59, has been serving as a director since 1986. Dr.
Mills is a self-employed reproductive physiologist. His principal business
address is 22300 Ligon Road, Zachary, Louisiana 70791.
Harry S. Morris, Jr., age 57, has been serving as a director since 1974. Mr.
Morris has served as President of the Bank since 1974. His principal business
address is 4743 Main Street, Post Office Box 497, Zachary, Louisiana 70791.
Rodney Samuel Johnson, age 45, has been serving as a director since 1991.
Mr. Johnson is an insurance agent with State Farm Insurance Companies. His
principal business address is 5145 Main Street, Suite A, P.O. Box 593, Zachary,
Louisiana 70791.
Hardee M. Brian, age 75, has served as a director from 1982. Mr. Brian is
retired, formerly being engaged in agri-business. His principal business address
is 23686 Brian Road, Zachary, Louisiana 70791.
Winston E. Canning, age 58, has been a director since 1984. Mr. Canning is
Executive Vice President of the Bank and has served in such capacity since 1974.
His principal business address is 4743 Main Street, Post Office Box 497,
Zachary, Louisiana 70791.
32
Howard L. Martin, M.D., age 76, has been a director since 1974. Dr. Martin
is a general surgeon. His principal business address is Lane Memorial Hospital,
6300 Main Street, Zachary, Louisiana 70791.
The present Bancshares directors are also directors of New ZBI and the Bank.
See discussion of "Executive Officers of Bancshares and the Bank" below.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership as of January 31,
2003, of common stock by (i) each person or group of affiliated persons known by
us to own beneficially more than 5% of the outstanding shares of common stock,
(ii) each director, (iii) each of our executive officers; and (iv) all directors
and executive officers of Bancshares and the Bank as a group. Neither the Bank
nor New ZBI currently owns shares of Bancshares common stock. Each of the
following shareholders has sole voting and investment power with respect to
shares beneficially owned by such shareholder, except to the extent that
authority is shared by spouses under applicable law.
<Table>
<Caption>
PERCENT OF CLASS PERCENT OF CLASS
DIRECTORS AND EXECUTIVE OFFICERS SHARES BENEFICIALLY OWNED BEFORE THE MERGER AFTER THE MERGER (1)
-------------------------------- ------------------------- ----------------- --------------------
Russell Bankston 3,030 1.56% 1.74%
A. C. Mills, III 1,959 1.01% 1.12%
Howard L. Martin, M.D. 1,467 * *
Winston E. Canning 1,224 * *
Harry S. Morris, Jr. 1,050 * *
Rodney S. Johnson 910 * *
Hardee M. Brian 840 * *
J. Larry Bellard 300 * *
All directors and executive officers as a
group (8 persons) 10,780 5.57% 6.17%
</Table>
- ------------
less than 1.0%*
(1) Assumes that the merger is consummated and that Bancshares purchased a total
of 19,039 shares, which is the aggregate number of shares held by record
shareholders who owned on November 1, 2002, 150 or less shares each of the
common stock.
EXECUTIVE OFFICERS OF BANCSHARES AND THE BANK
The following is a biographical summary, including the names, ages and
positions of each of Bancshares' and the Bank's executive officers. The officers
serve at the pleasure of the board of directors. Each executive officer is a
United States citizen. None of the executive officers has been convicted in a
criminal proceeding during the past five years, or been a party to any judicial
or administrative proceeding, excluding traffic violations and similar
misdemeanors, during the past five years that resulted in a judgment, decree or
final order enjoining them from future violations of, or prohibiting activities
subject to, federal or state securities laws, or finding any violation of
federal or state securities law. The principal business address of each of the
executive officers is 4743 Main Street, Post Office Box 497, Zachary, Louisiana
70791.
Harry S. Morris, Jr. - See "Directors of Zachary Bancshares, Inc."
Winston E. Canning - See "Directors of Zachary Bancshares, Inc."
J. Larry Bellard, age 51, is the Treasurer of Bancshares and serves as Vice
President/Cashier of the Bank. Mr. Bellard has been employed by the Bank for
over five years.
33
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time, in the ordinary course of its business, the Bank has made
loans to certain of the directors and executive officers of the Bank and
Bancshares, as well as to the family members and affiliates of certain of such
directors and executive officers. Each of these loans (i) was made in the
ordinary course of the Bank's business, (ii) was made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons, and (iii) did not involve more
than the normal risk of collectibility or present other unfavorable features.
The Bank expects to continue to make loans to directors and executive
officers of the Bank and Bancshares in the ordinary course of its business in
the future.
As of September 30, 2002 and December 31, 2001, loans outstanding to the
directors and executive officers of the Bank and Bancshares totaled $508,000 and
$566,000, respectively.
FUTURE SHAREHOLDER PROPOSALS
In the event the merger proposal is not approved by the shareholders or, if
approved, is not ultimately completed, then shareholders may submit proposals
for consideration at the 2003 annual meeting of shareholders under Rule 14a-8 of
the 1934 Act. Shareholder proposals submitted pursuant to Rule 14a-8 for
inclusion in the proxy statement and form of proxy must be received by us a
reasonable time before we begin to print and mail our proxy statement for that
meeting. The proposal must also comply with the requirements as to form and
substance established by the SEC in order to be included in the proxy statement
and should be directed to: Zachary Bancshares, Inc., Attention: Winston E.
Canning, Post Office Box 497, Zachary, Louisiana 70791.
OTHER MATTERS
The board of directors knows of no other matters which may be properly or
are likely to be brought before the meeting. However, if any matters are
properly brought before the meeting, the persons named in the enclosed proxy
will vote thereon as the board of directors recommends.
WHERE YOU CAN FIND MORE INFORMATION
As required by law, we file reports, proxy statements and other information
with the SEC. Because the merger is a "going private" transaction, we have filed
a Rule 13e-3 Transaction Statement on Schedule 13E-3 with respect to the merger.
The Schedule 13E-3 and such reports, proxy statements and other information
contain additional information about Bancshares. You can inspect and copy these
materials at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. For further information concerning
the Commission's public reference rooms, you may call the Commission at
1-800-SEC-0330. Some of this information may also be accessed on the World Wide
Web through the Commission's Internet address as http://www.sec.gov. The
information contained in our Annual Report on Form 10-KSB for the year ended
December 31, 2001, including the consolidated financial statements and notes
thereto, the report of our independent accountants, thereon and management's
discussion and analysis of financial condition and results of operations
included in such Annual Report on Form 10-KSB for the year ended December 31,
2001, is incorporated herein by reference. A copy of the Annual Report on Form
10-KSB for the year ended December 31, 2001 (including the 2001 Annual Report to
Shareholders) is attached to the proxy statement as Appendix E.
The information contained in our Quarterly Reports on Form 10-QSB for the
quarters ended March 31, 2002, June 30, 2002 and September 30, 2002, including
the consolidated financial statements and notes thereto and management's
discussion and analysis of financial condition and results of operations
included therein, are incorporated herein by reference. A copy of our Quarterly
Report on Form 10-QSB for the quarter ended September 30, 2002 is attached to
this proxy statement as Appendix F.
34
We undertake to provide without charge to each person to whom a copy of this
proxy statement has been delivered, upon request, by first class mail or other
equally prompt means, within one business day of receipt of such request, a copy
of any or all of the documents incorporated herein, other than the exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into the information that this proxy statement incorporates. Requests for copies
should be directed to:
Winston E. Canning
Corporate Secretary
Zachary Bancshares, Inc.
Post Office Box 497
Zachary, Louisiana 70791
Telephone: (225) 654-2701
You should rely only on the information contained in, or incorporated by
reference into, this proxy statement. We have not authorized anyone to give any
information different from the information contained in, or incorporated by
reference into, this proxy statement. This proxy statement is dated February 5,
2003. You should not assume the information contained in this proxy statement is
accurate as of any later date, and the mailing of this proxy statement to
shareholders shall not create any implication to the contrary.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Winston E. Canning
-------------------------------------------
Winston E. Canning, Secretary
Zachary, Louisiana
February 5, 2003
35
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into effective as of the 21st day of November, 2002, by and between ZACHARY
BANCSHARES, INC., a Louisiana corporation and registered bank holding company,
domiciled in East Baton Rouge Parish, Louisiana ("Bancshares"), and NEW ZBI,
INC., a Louisiana corporation, domiciled in East Baton Rouge Parish, Louisiana
("Newco").
RECITALS
WHEREAS, Bancshares is a corporation duly organized and existing under
the laws of the State of Louisiana, having authorized capital stock consisting
of 2,000,000 shares of common stock, par value $10.00 per share (the "Bancshares
Stock"), of which 193,667 shares are currently issued and outstanding;
WHEREAS, Newco is a newly-formed shell corporation and wholly-owned
subsidiary of Bancshares, duly organized and existing under the laws of the
State of Louisiana, having authorized capital stock consisting of 100 shares of
common stock, par value $1.00 per share ("Newco Stock"), of which one share is
currently issued and outstanding; and
WHEREAS, the boards of directors of Newco and Bancshares deem it
advisable and to the benefit of Newco and Bancshares and their respective
shareholders that Newco and Bancshares participate in a merger ("Merger") in
accordance with the provisions of Sections 111 and 112 of the Louisiana Business
Corporation Law, La. R.S. Section 12:1 et seq. (the "LBCL"), pursuant to which
Newco shall merge with and into Bancshares and the separate corporate existence
of Newco shall cease.
NOW, THEREFORE, in consideration of the premises and the mutual
promises, covenants, and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
ARTICLE I
THE MERGER AND RELATED MATTERS
1.01. The Merger.
(a) Merger of Newco and Bancshares. Subject to the terms of
this Agreement, at the Effective Time (as such term is defined in Section 1.04
hereof), Newco shall be merged with and into Bancshares pursuant to the
provisions of Sections 111 and 112 of the LBCL.
(b) Effects of the Merger. The Merger shall have the effects
set forth in Section 115 of the LBCL. Following the Merger, Bancshares shall
continue in existence under the same legal name as it existed immediately prior
to the Merger, and the separate corporate existence of Newco shall cease. The
offices and facilities of Bancshares immediately prior to the Merger shall be
the offices and facilities of Bancshares following the Merger. At the Effective
Time, all rights, title and interests to all assets of every kind and character
owned by each of Newco and Bancshares shall be allocated to and vested in
Bancshares without reversion or impairment, without further act or deed and
without any transfer or assignment, but subject to any existing liens or
encumbrances thereon. At the Effective Time, all liabilities and obligations of
each of Newco and Bancshares shall be allocated to and vested in Bancshares.
A-1
(c) Conversion of Bancshares Stock. At the Effective Time by
virtue of this Agreement and without any further action on the part of any
holder:
(1) Each share of Bancshares Stock owned of record by
a Bancshares Shareholder who satisfies the definition of a "Qualified
Shareholder" in Section 1.02 and who is not a Dissenting Shareholder (as such
term is defined in Section 1.01(e) hereof) will continue to represent one share
of Bancshares Stock at the Effective Time;
(2) Each share of Bancshares Stock owned of record by
a shareholder of Bancshares who is not a Qualified Shareholder and not a
Dissenting Shareholder will represent the right to receive $70.00 in cash,
payable in the form of a Bancshares check.
(d) Conversion of Newco Stock. At the Effective Time by virtue
of this Agreement and without any further action on the part of any holder, each
share of Newco Stock shall be cancelled and the holder thereof shall be entitled
to receive $1.00 in cash per share of Newco Stock.
(e) Dissenting Shareholders. Notwithstanding anything in this
Agreement to the contrary, a shareholder of Bancshares (a "Shareholder") who
complies with the procedural requirements of Section 131 of the LBCL (a
"Dissenting Shareholder") will be entitled to receive the fair cash value of his
or her shares if the Merger is effected upon the approval of less than eighty
percent (80%) of Bancshares's total voting power. In the event that a
Shareholder fails to perfect, withdraws or otherwise loses such holder's
dissenters' rights pursuant to the relevant provisions, the Shareholder shall be
entitled only to receive the consideration specified in Section 1.01(c) of this
Agreement.
(f) Articles of Incorporation. As a result of the Merger, the
articles of incorporation of Bancshares, as in effect immediately prior to the
Effective Time, shall remain in effect thereafter, unless and until amended or
repealed as provided by the articles of incorporation or applicable law.
(g) Bylaws. As a result of the Merger, the bylaws of
Bancshares, as in effect immediately prior to the Effective Time, shall remain
in effect thereafter, unless and until amended or repealed as provided by the
bylaws, the articles of incorporation or applicable law.
(h) Directors and Officers. The directors and officers of
Bancshares immediately prior to the Merger shall be the directors and officers
of Bancshares following the Merger, and each of such persons shall hold office
from the Effective Time until their respective successors are duly elected or
appointed and qualified in the manner provided in the articles of incorporation
and bylaws of Bancshares, as in effect at that time, or as otherwise provided by
law.
(i) Bancshares Shareholders' Meeting. This Agreement shall be
submitted to a vote or written consent of (i) the shareholders of Bancshares at
an annual or special meeting of the shareholders (the "Shareholders' Meeting")
duly called by the board of directors of Bancshares as soon as is practicable
following execution hereof and (ii) the sole shareholder of Newco. Upon approval
by the requisite vote of the shareholders of Bancshares and the approval of the
sole shareholder of Newco, this Agreement shall be made effective in the manner
provided in Section 1.04 hereof.
1.02 Qualified Shareholder. A Qualified Shareholder is a Shareholder
who: either individually, or with his or her spouse, owns of record on November
1, 2002, 150 or more shares of Bancshares Stock.
Bancshares shall have the exclusive authority to determine whether a
Shareholder is a Qualified Shareholder, and that determination, after
consultation with counsel, shall be final and binding.
A-2
1.03. Surrender of Certificates. As soon as practicable after the
Effective Time, Bancshares (acting as the exchange agent), shall mail to each
holder of record who is receiving cash for the shares of Bancshares stock as a
result of the Merger and who is not a Dissenting Shareholder a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the certificates shall pass, only upon delivery of the
certificates to Bancshares) and instructions for use in effecting the surrender
of the certificates representing shares of Bancshares Stock in exchange for the
consideration set forth in Section 1.01(c) hereof.
In the event that any certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such certificate to be lost, stolen or destroyed and, if required by Bancshares,
the posting by such person of a bond in such amount as Bancshares may determine
is necessary as indemnity against any claim that may be made against it with
respect to such certificate, Bancshares shall deliver in exchange for such lost,
stolen or destroyed certificate the consideration set forth in Section 1.01(c)
hereof.
Notwithstanding the foregoing, none of Bancshares, Newco or any
exchange agent shall be liable to any former Shareholder for any amount
delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat or similar laws.
1.04 Effective Time. This Agreement shall become effective on the date
specified in the Certificate of Merger filed with the Secretary of State of the
State of Louisiana, or if no such time is specified therein, on the date of such
filing ("Effective Time"). Bancshares and Newco anticipate that the Effective
Time will be not later than February 2003.
1.05 Closing. The closing of the transactions contemplated by this
Agreement, including the filing of the Certificate of Merger described in
Section 1.04 hereof, shall take place at such time and place as the parties may
mutually agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BANCSHARES
Bancshares hereby represents and warrants to Newco as follows:
2.01. Corporate Organization, Authorization, etc. Bancshares is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Louisiana and has full corporate power and authority to conduct
its business as it is now being conducted and to own or lease the properties and
assets it now owns or holds under lease. Bancshares is duly registered with the
Board of Governors of the Federal Reserve System as a bank holding company under
the Bank Holding Company Act of 1956, as amended. Bancshares is duly qualified
or licensed to do business and is in good standing in every state of the United
States and other jurisdictions where the charter of its business or the nature
of its properties makes such qualification or licensing necessary, and the
failure to be so qualified, licensed and in good standing would have a material
adverse effect on the rights, property or business of Bancshares. Bancshares has
full corporate power and authority to enter into this Agreement and, subject to
the requisite approval of its shareholders, to consummate the transactions
contemplated herein. This Agreement has been duly executed and delivered by
Bancshares and, subject to such approval, is a valid and binding agreement of
Bancshares in accordance with its terms, subject to laws relating to creditors'
rights generally.
A-3
2.02. Authorized and Outstanding Stock. The authorized capital stock of
Bancshares consists of 2,000,000 shares of common stock, par value $10.00 per
share. As of the date hereof, (i) 193,667 shares of Bancshares Stock are fully
paid, validly issued, nonassessable and outstanding. Except as otherwise
provided herein, Bancshares does not have outstanding, and is not bound by, any
subscriptions, options, warrants, calls, commitments or agreements to issue any
additional shares of its capital stock, including any right of conversion or
exchange under any outstanding security or other instrument, and Bancshares is
not obligated to issue any shares of its capital stock for any purpose. There
are no unsatisfied preemptive rights with respect to Bancshares Stock.
2.03 Consents, Approvals, Filings, etc., of Governmental Authorities.
Neither the business nor operations of Bancshares requires any consent, approval
or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
herein, except for (i) such filings with the Securities and Exchange Commission
required for "going private" transactions; (ii) filings and approvals required
by the Federal Reserve Board; and (iii) the filing of this Agreement or a
Certificate of Merger with corporate and regulatory authorities, as appropriate.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NEWCO
Newco hereby represents and warrants to Bancshares that:
3.01. Corporate Organization, Authorization, etc. Newco is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Louisiana and has full corporate power and authority to enter
into this Agreement and, subject to the approval of its sole shareholder, to
consummate the transactions contemplated hereby. Newco is duly qualified or
licensed to do business and is in good standing in every state of the United
States and other jurisdictions where the character of its business or the nature
of its properties makes such qualification or licensing necessary, and the
failure to be so qualified, licensed and in good standing could have a material
adverse effect on the rights, property or business of the Newco. This Agreement
has been duly executed and delivery by Newco and, subject to such approval, is a
valid and binding agreement of Newco in accordance with its terms, subject to
laws relating to creditors' rights generally.
3.02. Authorized and Outstanding Stock. The authorized capital stock of
Newco consists of 100 shares of common stock, par value $1.00 per share. As of
the date hereof, one share of Newco Stock is fully paid, validly issued,
nonassessable and outstanding. Newco does not have outstanding, and is not bound
by, any subscriptions, options, warrants, calls, commitments or agreements to
issue any additional shares of its capital stock, including any right of
conversion or exchange under any outstanding security or other instrument, and
Newco is not obligated to issue any shares of its capital stock for any purpose.
There are no unsatisfied preemptive rights in respect to Newco Stock.
3.03 Consents, Approvals, Filings, etc., of Governmental Authorities.
Neither the business nor operations of Newco requires any consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein, except
for the filing of this Agreement or a Certificate of Merger with corporate and
regulatory authorities, as appropriate.
A-4
ARTICLE IV
OBLIGATIONS PRIOR AND SUBSEQUENT TO EFFECTIVE TIME
4.01. Filing Requirements. Newco and Bancshares will promptly comply
with all filing requirements that federal, state or local law may impose on
Newco or Bancshares with respect to this Agreement and the transactions
contemplated hereby.
4.02. Shareholder Approval. Promptly following the execution of this
Agreement, Bancshares and Newco shall commence to take such actions as may be
necessary to obtain requisite approval of this Agreement by the shareholders of
Bancshares and the sole shareholder of Newco, including, without limitation, the
calling of a Shareholders' Meeting and the preparation of proxy or similar
materials for a meeting of Shareholders to be held as soon as practicable.
4.03. Further Assurances. Each party hereto agrees to execute and
deliver such instruments and take such other actions as the other party may
reasonably require in order to carry out the intent of this Agreement. Each
party shall use its best efforts to perform and fulfill all conditions and
obligations on its part to be performed or fulfilled under this Agreement and to
effect the Merger in accordance with the terms and conditions of this Agreement.
ARTICLE V
CONDITIONS PRECEDENT
5.01 Conditions to Bancshares's Obligations. The obligations of
Bancshares to effect the Merger are subject to the satisfaction of the following
conditions, unless waived by Bancshares:
(a) Representations and Warranties. The representations and
warranties of Newco set forth in this Agreement shall be true and correct in all
material respects (except for such representations and warranties that are
qualified by their terms by a reference to materiality, which representations
and warranties are so qualified shall be true in all respects) (i) as of the
date of this Agreement, and (ii) as of the Effective Time, as though made as of
each such time, except as otherwise contemplated by this Agreement.
(b) Shareholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved by the Shareholders in accordance
with applicable law.
(c) Performance of Obligations of the Newco. Newco shall have
performed all obligations and covenants required to be performed by it under
this Agreement prior to the Effective Time.
(d) Approvals and Consents. All approvals of applications to
public authorities, federal, state or local, and all approvals of private
persons, the granting of which is necessary for the consummation of the Merger,
for the prevention of the termination of any material right, privilege, license
or agreement of, or any material loss or disadvantage to, or the withholding of
which might have a material adverse effect on, the business, results of
operations, prospects or financial condition of the Newco upon the consummation
of the Merger, shall have been obtained.
(e) Litigation. There shall not be pending or threatened any
litigation in any court or any proceeding before or by any governmental
department, agency or instrumentality against Newco or
A-5
Bancshares (or any officer or director thereof) in which it is sought to
restrain or prohibit or obtain damages in respect of the consummation of
transactions contemplated by this Agreement.
5.02. Conditions to Newco's Obligations. The obligations of Newco to
effect the Merger are subject to the satisfaction of the following conditions,
unless waived by Newco:
(a) Representations and Warranties. The representations and
warranties of Bancshares set forth in this Agreement shall be true and correct
in all material respects (except such representations and warranties which are
qualified by there terms by a reference to materiality, which representations
and warranties as so qualified shall be true in all respects) (i) as of the date
of this Agreement, and (ii) as of the Effective Time, as though made as of each
such time, except as otherwise contemplated by this Agreement.
(b) Shareholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved by the sole shareholder of Newco in
accordance with applicable law.
(c) Performance of Obligations of Bancshares. Bancshares shall
have performed all obligations and covenants required to be performed by it
under this Agreement prior to the Effective Time.
(d) Approvals and Consents. All approvals of applications to
public authorities, federal, state or local, and all approvals of private
persons, the granting of which is necessary for the consummation of the Merger,
for the prevention of the termination of any material right, privilege, license
or agreement of, or any material loss or disadvantage to, or the withholding of
which might have a material adverse effect on, the business, results of
operations, prospectus or financial condition of Bancshares upon the
consummation of the Merger, shall have been obtained, and all statutory waiting
periods with respect thereto shall have expired.
(e) Litigation. There shall not be pending or threatened any
litigation in any court or any proceeding before or by any governmental
department, agency or instrumentality against Newco or Bancshares (or any
officer or director thereof) in which it is sought to restrain or prohibit or
obtain damages in respect of the consummation of transactions contemplated by
this Agreement.
ARTICLE VI
TERMINATION AND ABANDONMENT
6.01. Right of Termination. Anything herein to the contrary
notwithstanding, prior to filing of this Agreement or a Certificate of Merger
with the Secretary of State of the State of Louisiana, this Agreement may be
terminated and the transactions contemplated hereby may be abandoned at any time
by the mutual consent in writing of the boards of directors of Bancshares and
Newco, whether before or after action thereon by the Shareholders.
6.02. Effect of Termination. If this Agreement is terminated pursuant
to this ARTICLE VI, the same shall be of no further force or effect and there
shall be no liability by reason of this Agreement or the termination thereof on
the part of Newco, Bancshares or any of the directors, officers, employees, or
agents, or shareholders of any of them, except as to any liability for breach of
any duty, representation, warranty or obligation under this Agreement arising
prior to the date of termination.
A-6
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.01 Amendment and Modification. To the fullest extent provided by
applicable law, this Agreement may be amended, modified and supplemented by
mutual consent in writing of the respective boards of directors of Newco and
Bancshares at any time prior to the Effective Time with respect to any of the
terms contained herein; provided that Shareholder approval shall be required for
any modification or amendment that (i) alters or changes the amount or kind of
consideration to be received in exchange for or on conversion of all or part of
the shares of Bancshares Stock; (ii) alters or changes any term of the articles
of incorporation of Bancshares or Newco; or (iii) alters or changes any of the
terms of this Agreement if such alteration or change would adversely affect the
Shareholders. Any amendment or modification shall be in writing.
7.02. Waiver of Compliance. Any failure of Newco or Bancshares to
comply with any obligation, covenant, agreement or condition herein may be
expressly waived (to the extent permitted under applicable law) in writing by
the President of Newco or Bancshares, as the case may be; provided, however,
such waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
7.03. Notices. Any notice or communication required or permitted to be
made hereunder shall be in writing, duly signed by the party giving such notice
or communication and shall be by hand; by a nationally recognized overnight
courier service; by registered or certified mail, postage prepaid; or by
facsimile transmission, receipt confirmed, as follows (or at such other address
for a party as shall be specified by like notice):
(a) if given to Newco, at Newco's mailing address set forth below:
New ZBI, Inc.
4743 Main Street
Zachary, LA 70791
(b) if given to Bancshares, at Bancshares's mailing address set
forth below:
Zachary Bancshares, Inc.
4743 Main Street
Zachary, LA 70791
(c) if given to a shareholder of Newco or Bancshares, at the
address set forth on the books and records of Newco or
Bancshares, respectively.
Where this Agreement provides for notice in any manner, such notice may
be waived in writing by the person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by holders shall be filed with the secretary of Newco
or Bancshares, as applicable, but such notice shall not be a condition precedent
to the validity of any action taken in reliance upon such waiver.
All notices or communications shall be deemed delivered upon actual
receipt thereof by the appropriate person if delivered by hand; upon the date of
the receipt confirming the delivery if transmitted
A-7
by facsimile; upon the next business day following deposit with a nationally
recognized overnight courier service; or upon the third succeeding business day
following deposit in the United States mail.
7.04. Severability. If any provision of this Agreement, or the
application thereof, shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, but this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. The parties further agree to replace such invalid,
illegal or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of the invalid, illegal or unenforceable provision.
If any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only as broad as is enforceable.
7.05. Attorneys' Fees. If any legal action, arbitration or other
proceeding is brought for the enforcement of this Agreement, or as a result of
any other dispute, in connection with any of the provisions of this Agreement,
the prevailing party shall be entitled to recover reasonable attorneys' fees and
other costs and expenses incurred in that action or proceeding, in addition to
any other relief to which it may be entitled.
7.06. Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by the
respective parties hereto without the prior written consent of the other
parties; provided, no such consent shall be required for assignment by Newco or
Bancshares to a corporate affiliate, as such term is defined under the Banking
Affiliates Act of 1982. No such assignment shall relieve Bancshares or Newco of
its obligations hereunder.
7.07. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
EACH OF THE PARTIES SUBJECT TO THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA, WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES. IN THE EVENT OF A DISPUTE INVOLVING THIS AGREEMENT,
THE PARTIES IRREVOCABLY AGREE THAT VENUE FOR SUCH DISPUTE SHALL LIE IN ANY COURT
OF COMPETENT JURISDICTION IN EAST BATON ROUGE PARISH, LOUISIANA.
7.08. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
7.09. Headings. The heading of the sections of this Agreement are
inserted for convenience of reference only and shall not affect the construction
of this Agreement or any provision thereof.
7.10. Entire Agreement. This Agreement, including the other documents
referred to herein which form a part hereof, contains the entire understanding
of the parties hereto in respect of the subject matter contained herein. There
are no restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth or referred to herein. This
Agreement supersedes all prior agreements and understandings among the parties
with respect to such subject matter.
A-8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered effective of the day and year first above written.
ZACHARY BANCSHARES, INC.,
a Louisiana corporation and registered bank holding
company
By: /s/ Harry S. Morris, Jr.
-------------------------------------------------
Harry S. Morris, Jr., President
NEW ZBI, INC.,
a Louisiana corporation
By: /s/ Harry S. Morris, Jr.
-------------------------------------------------
Harry S. Morris, Jr., President
A-9
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF EAST BATON ROUGE
On this ____ day of ______________, 2003, before me, the undersigned
authority, personally came and appeared Harry S. Morris, Jr., to me personally
known, who, being by me duly sworn, declared and acknowledged before me and the
undersigned competent witnesses, that he is the President of Zachary Bancshares,
Inc., a Louisiana corporation ("Company"), and that in such capacity he was duly
authorized to and did execute the foregoing Agreement and Plan of Merger on
behalf of the Company for the purposes therein expressed and as his and the
Company's free act and deed.
WITNESSES:
- -------------------------------- --------------------------------
Harry S. Morris, Jr.
Name:
--------------------------
(Please print)
- -------------------------------
Name:
--------------------------
(Please print)
--------------------------------------------
Notary Public
My Commission Expires:
----------------------
A-10
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF EAST BATON ROUGE
On this ____ day of ______________, 2003, before me, the undersigned
authority, personally came and appeared Harry S. Morris, Jr., to me personally
known, who, being by me duly sworn, declared and acknowledged before me and the
undersigned competent witnesses, that he is the President of New ZBI, Inc., a
Louisiana corporation ("Company"), and that in such capacity he was duly
authorized to and did execute the foregoing Agreement and Plan of Merger on
behalf of the Company for the purposes therein expressed and as his and the
Company's free act and deed.
WITNESSES:
- ------------------------------- --------------------------------
Harry S. Morris, Jr.
Name:
-------------------------
(Please print)
- -------------------------------
Name:
-------------------------
(Please print)
---------------------------------------------
Notary Public
My Commission Expires:
----------------------
A-11
SECRETARY'S CERTIFICATE OF SHAREHOLDERS' APPROVAL
1. I hereby certify that I am the Secretary of Zachary Bancshares, Inc.,
located in the City of Zachary, State of Louisiana ("Company") and that I
have been duly appointed and am presently serving in that capacity.
2. I further certify that at a duly called and convened meeting of the
shareholders of the Company held on _______________, 2003, the shareholders
of the Company adopted and approved the foregoing Agreement and Plan of
Merger.
IN WITNESS WHEREOF, I have executed this certification this ____ day of
_____________, 2003.
--------------------------------------
Winston E. Canning, Secretary
A-12
SECRETARY'S CERTIFICATE OF SHAREHOLDERS' APPROVAL
1. I hereby certify that I am the Secretary of New ZBI, Inc., located in the
City of Zachary, State of Louisiana ("Company") and that I have been duly
appointed and am presently serving in that capacity.
2. I further certify that Zachary Bancshares, Inc., the sole shareholder of the
Company, at a meeting held on November 21, 2002, adopted and approved the
foregoing Agreement and Plan of Merger.
IN WITNESS WHEREOF, I have executed this certification this ____ day of
_________________, 2003.
------------------------------------------
Winston E. Canning, Secretary
A-13
APPENDIX B
[NATIONAL CAPITAL, L.L.C. LETTERHEAD]
December 2, 2002
Board of Directors
Zachary Bancshares, Inc.
P.O. Box 497
Zachary, Louisiana 70791
Gentlemen:
You have requested that National Capital, L.L.C. ("National Capital") act as an
independent financial advisor to the directors of Zachary Bancshares, Inc. (the
"Company") in connection with the merger of New ZBI, Inc., a wholly-owned
subsidiary of the Company, with and into the Company as contemplated by the
merger agreement currently in final draft form.
You have requested our opinion with regard to the financial fairness - from the
perspective of the shareholders of the Company - of the $70.00 per share cash
consideration to be paid by the Company to shareholders holding fewer than 150
shares.
In connection with this opinion, we have reviewed material bearing upon the
financial and operating condition of the Company and its subsidiary, including
the following: 1) The economic outlook of the Primary Trade Area of the Company;
2) Audited Financial Statements for fiscal years 1997-2001; 3) The nature of the
Company's subsidiary, The Bank of Zachary (the "Bank") and the outlook for the
lines of business of its major customers; 4) The book value of the Company's
stock and the financial condition of the Company; 5) The estimated future
earnings capacity of the Company; 6) Data extracted from the Bank's Call Reports
for the periods ended December 31, 1997 through September 30, 2002; 7) The
estimated dividend paying capacity of the Bank; 8) Various management reports,
including audited and unaudited financial statements; 9) The market prices of
bank stocks where the companies are similarly situated; 10) The market currently
existing for minority shares of this and other bank holding companies; 11) The
current regulatory status of the Bank and the Company; and 12) Other unique
factors that we deemed appropriate to use in the determination of value.
This valuation opinion is based on an analysis of a number of factors, including
the historical performance of the Company, the present financial condition of
the Company, our evaluation of management and the Board's ability to execute
your Business Plan successfully, and the general economic and financial trends
in the industry and region in which the Company operates. We have relied solely
on the Company for information as to the adequacy of the loan loss reserve and
the value of other real estate. We did not perform an independent review of the
Bank's assets or liabilities.
National Capital, L.L.C. has extensive experience in investment analysis,
appraisals, and related investment banking activities in the Banking Industry.
In the process of developing our opinion
B-1
Zachary Bancshares, Inc.
Fairness Opinion
Page 2 of 2
we have used methodologies widely accepted in the investment banking industry
for banking companies, especially for those situations in which a valuation is
desired and there is either a very limited public market for the Company's
shares, or no market at all. We have prepared composite data on the financial
terms of recent acquisitions of banking companies from publicly available
information. These composites were prepared regionally and nationally to serve
as a benchmark for our analyses. We utilized a number of valuation methodologies
including book value multiples, earnings capitalization, discounted cash flow,
and present value analyses. In addition, we performed other analyses and
investigations, as we deemed appropriate.
In our review we have relied, without independent verification, upon the
accuracy and completeness of all information submitted to us for review and
consideration.
Based on all factors that we deem relevant and assuming the accuracy and
completeness of the information and data provided to us, we conclude that the
cash consideration of $70.00 per share to be paid by the Company is fair, from a
financial point of view, to all shareholders of the Company, including those
shareholders receiving the cash consideration.
This opinion is available for disclosure to the shareholders of the Company.
Accordingly, we hereby consent to the inclusion of this opinion and the
reference to our firm in the Offering Document provided to the shareholders of
the Company.
Sincerely,
NATIONAL CAPITAL, L.L.C.
By: /s/ T. JEFFERSON FAIR
------------------------
T. Jefferson Fair
Principal
B-2
APPENDIX C
SECTION 131. RIGHTS OF A SHAREHOLDER DISSENTING FROM CERTAIN CORPORATE ACTIONS
A. Except as provided in subsection B of this section, if a corporation has,
by vote of its shareholders, authorized a sale, lease or exchange of all of its
assets, or has, by vote of its shareholders, become a party to a merger or
consolidation, then, unless such authorization or action shall have been given
or approved by at least eighty per cent of the total voting power, a shareholder
who voted against such corporate action shall have the right to dissent. If a
corporation has become a party to a merger pursuant to R.S. 12:112(G), the
shareholders of any subsidiaries party to the merger shall have the right to
dissent without regard to the proportion of the voting power which approved the
merger and despite the fact that the merger was not approved by vote of the
shareholders of any of the corporations involved.
B. The right of dissent provided by this Section shall not exist in the
case of:
(1) A sale pursuant to an order of a court having jurisdiction in the
premises.
(2) A sale for cash on terms requiring distribution of all or
substantially all of the net proceeds to the shareholders in accordance with
their respective interests within one year after the date of the sale.
(3) Shareholders holding shares of any class of stock which, at the
record date fixed to determine shareholders entitled to receive notice of and to
vote at the meeting of shareholders at which a merger or consolidation was acted
on, were listed on a national securities exchange, or were designated as a
national market system security on an inter-dealer quotation system by the
National Association of Securities Dealers, unless the articles of the
corporation issuing such stock provide otherwise or, except in the case of
shareholders of a corporation surviving the merger or consolidation in which
each share of such corporation outstanding immediately prior to the effective
date of the merger or consolidation is an identical outstanding or treasury
share of such corporation after the effective date of the merger or
consolidation, the shares of such shareholders were not converted by the merger
or consolidation solely into shares of the surviving or new corporation.
C. (1)(a) Except as provided in Paragraph (4) of this Subsection, any
shareholder electing to exercise such right of dissent shall file with the
corporation, prior to or at the meeting of shareholders at which such proposed
corporate action is submitted to a vote, a written objection to such proposed
corporate action, and shall vote his shares against such action. If such
proposed corporate action be taken by the required vote, but by less than eighty
percent of the total voting power, and the merger, consolidation or sale, lease
or exchange of assets authorized thereby be effected, the corporation shall
promptly thereafter give written notice thereof to each shareholder who filed
such written objection to, and voted his shares against, such action, at such
shareholder's last address on the corporation's records.
(b) An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that such notice has been given shall, in
the absence of fraud, be prima facie evidence of the facts stated therein.
(2) Each such shareholder may, within twenty days after the mailing of
such notice to him, but not thereafter, file with the corporation a demand in
writing for the fair cash value of his shares as of the day before such vote was
taken; provided that he state in such demand
C-1
the value demanded, and a post office address to which the reply of the
corporation may be sent, and at the same time deposit in escrow in a chartered
bank or trust company located in the parish of the registered office of the
corporation, the certificates representing his shares, duly endorsed and
transferred to the corporation upon the sole condition that said certificates
shall be delivered to the corporation upon payment of the value of the shares
determined in accordance with the provisions of this Section. With his demand
the shareholder shall deliver to the corporation, the written acknowledgment of
such bank or trust company that it so holds his certificates of stock.
(3) Unless the objection, demand, and acknowledgment are made and
delivered by the shareholder within the period limited in Paragraph (1) and (2),
he shall conclusively be presumed to have acquiesced in the corporate action
proposed or taken.
(4) In the case of a merger pursuant to R.S. 12:112(G), the dissenting
shareholder need not file an objection with the corporation nor vote against the
merger, but need only file with the corporation within twenty days after a copy
of the merger certificate was mailed to him, a demand in writing for the cash
value of his shares as of the day before the certificate was filed with the
secretary of state, state in such demand the value demanded and a post office
address to which the corporation's reply may be sent, deposit the certificates
representing his shares in escrow as provided in Paragraph (2), and deliver to
the corporation with his demand the acknowledgment of the escrow bank or trust
company as prescribed in Paragraph (2).
D. If the corporation does not agree to the value so stated and demanded, or
does not agree that a payment is due, it shall, within twenty days after receipt
of such demand and acknowledgment, notify in writing the shareholder, at the
designated post office address, of its disagreement, and shall state in such
notice the value it will agree to pay if any payment should be held to be due;
otherwise it shall be liable for, and shall pay to the dissatisfied shareholder,
the value demanded by him for his shares.
E. In case of disagreement as to such fair cash value, or as to whether any
payment is due, after compliance by the parties with the provisions of
subsections C and D of this section, the dissatisfied shareholder, within sixty
days after receipt of notice in writing of the corporation's disagreement, but
not thereafter, may file suit against the corporation, or the merged or
consolidated corporation, as the case may be, in the district court of the
parish in which the corporation or the merged or consolidated corporation, as
the case may be, has its registered office, praying the court to fix and decree
the fair cash value of the dissatisfied shareholder's shares as of the day
before such corporate action complained of was taken, and the court shall, on
such evidence as may be adduced in relation thereto, determine summarily whether
any payment is due, and, if so, such cash value, and render judgment
accordingly. Any shareholder entitled to file such suit may, within such
sixty-day period but not thereafter, intervene as of plaintiff in such suit
filed by another shareholder, and recover therein judgment against the
corporation for the fair cash value of his shares. No order or decree shall be
made by the court staying the proposed corporate action, and any such corporate
action may be carried to completion notwithstanding any such suit. Failure of
the shareholder to bring suit, or to intervene in such a suit, within sixty days
after receipt of notice of disagreement by the corporation shall conclusively
bind the shareholder (1) by the corporation's statement that no payment is due,
or (2) if the corporation does not contend that no payment is due, to accept the
value of his shares as fixed by the corporation in its notice of disagreement.
C-2
F. When the fair value of the shares has been agreed upon between the
shareholder and the corporation, or when the corporation has become liable for
the value demanded by the shareholder because of failure to give notice of
disagreement and of the value it will pay, or when the shareholder has become
bound to accept the value the corporation agrees is due because of his failure
to bring suit within sixty days after receipt of notice of the corporation's
disagreement, the action of the shareholder to recover such value must be
brought within five years from the date the value was agreed upon, or the
liability of the corporation became fixed.
G. If the corporation or the merged or consolidated corporation, as the case
may be, shall, in its notice of disagreement, have offered to pay to the
dissatisfied shareholder on demand an amount in cash deemed by it to be the fair
cash value of his shares, and if, on the institution of a suit by the
dissatisfied shareholder claiming an amount in excess of the amount so offered,
the corporation, or the merged or consolidated corporation, as the case may be,
shall deposit in the registry of the court, there to remain until the final
determination of the cause, the amount so offered, then, if the amount finally
awarded such shareholder, exclusive of interest and costs, be more than the
amount offered and deposited as aforesaid, the costs of the proceeding shall be
taxed against the corporation, or the merged or consolidated corporation, as the
case may be; otherwise the costs of the proceeding shall be taxed against such
shareholder.
H. Upon filing a demand for the value of his shares, the shareholder shall
cease to have any of the rights of a shareholder except the rights accorded by
this section. Such a demand may be withdrawn by the shareholder at any time
before the corporation gives notice of disagreement, as provided in subsection D
of this section. After such notice of disagreement is given, withdrawal of a
notice of election shall require the written consent of the corporation. If a
notice of election is withdrawn, or the proposed corporate action is abandoned
or rescinded, or a court shall determine that the shareholder is not entitled to
receive payment for his shares, or the shareholder shall otherwise lose his
dissenter's rights, he shall not have the right to receive payment for his
shares, his share certificates shall be returned to him (and, on his request,
new certificates shall be issued to him in exchange for the old ones endorsed to
the corporation), and he shall be reinstated to all his rights as a shareholder
as of the filing of his demand for value, including any intervening preemptive
rights, and the right to payment of any intervening dividend or other
distribution, or, if any such rights have expired or any such dividend or
distribution other than in cash has been completed, in lieu thereof, at the
election of the corporation, the fair value thereof in cash as determined by the
board as of the time of such expiration or completion, but without prejudice
otherwise to any corporate proceedings that may have been taken in the interim.
C-3
APPENDIX D
STANDARD M&A REPORT (WHOLE)
<Table>
ABN AMRO NORTH AMERICA, INC. ACQUIRING HAWTHORN CORPORATION
ABINGTON BANCORP, INC. ACQUIRING MASSACHUSETTS FINCORP, INC.
ADBANC, INC. ACQUIRING VBI, INC.
AFFINITY BANK ACQUIRING WESTCOAST SAVINGS & LOAN ASSOCIATION
ALABAMA NATIONAL BANCORPORATION ACQUIRING FARMERS NATIONAL BANCSHARES
AMERICAN BANCORPORATION, INC. ACQUIRING CLEVELAND HOLDING COMPANY
AMERICAN BANCSHARES, INC. ACQUIRING SOUTHWEST MISSOURI BANCSHARES, INC.
AMERICAN HOME MORTGAGE HOLDINGS, INC. ACQUIRING VALLEY BANCORP, INC.
AMERICANWEST BANCORPORATION ACQUIRING LATAH BANCORPORATION, INC.
AVISTON FINANCIAL CORPORATION ACQUIRING AVISTON BANCORP, INC.
BCSB BANKCORP, INC. ACQUIRING WHG BANCSHARES CORPORATION
BFM BANCSHARES, INC. ACQUIRING CITIZENS NATIONAL BANK
BK2 BANK, SSB ACQUIRING FRANKLIN BANK, SSB
BOK FINANCIAL CORPORATION ACQUIRING BANK OF TANGLEWOOD, N.A.
BPABANK ACQUIRING INTERBANK OF NEW YORK
BANC CORP (THE) ACQUIRING CF BANCSHARES, INC.
BANCTRUST FINANCIAL GROUP, INC. ACQUIRING GULF COAST COMMUNITY BANCSHARES, INC.
BANCORP OF LUCEDALE, INC. ACQUIRING GRAND BANCORP
BANCORPSOUTH, INC. ACQUIRING PINNACLE BANCSHARES, INC.
BANK OF DAVIE ACQUIRING BOC FINANCIAL CORP.
BANK OF NORTH CAROLINA ACQUIRING INDEPENDENCE BANK
BANNER CORPORATION ACQUIRING OREGON BUSINESS BANK
BARABOO BANCORPORATION, INC. ACQUIRING BANCORP, INC., (THE)
BASTROP BANCSHARES, INC. ACQUIRING CBCT BANCSHARES, INC.
BAYLOR BANCSHARES, INC. ACQUIRING CITIZENS STATE BANK
BERESFORD BANCORPORATION ACQUIRING A&S FINANCIAL SERVICES
BLACK DIAMOND FINANCIAL GROUP ACQUIRING BANK OF ST. PETERSBURG
BORDER BANCSHARES, INC. ACQUIRING NORTHERN PLAINS BANCSHARES, INC.
BOSTON BANK OF COMMERCE ACQUIRING FAMILY SAVINGS BANK, FSB
BRADFORD BANK ACQUIRING WYMAN PARK BANCORPORATION, INC.
BUSINESS BANCORP ACQUIRING MCB FINANCIAL CORPORATION
CBA BANCSHARES, INC. ACQUIRING COMMUNITY BANK OF ARIZONA
CVB FINANCIAL CORP. ACQUIRING WESTERN SECURITY BANCORP
<Caption>
Buyer Buyer Buyer
Name City State
ABN AMRO NORTH AMERICA, INC. ABN AMRO North America, Inc. Chicago IL
ABINGTON BANCORP, INC. Abington Bancorp, Inc. Abington MA
ADBANC, INC. Adbanc, Inc. Ogallala NE
AFFINITY BANK Affinity Bank Ventura CA
ALABAMA NATIONAL BANCORPORATION Alabama National BanCorporation Birmingham AL
AMERICAN BANCORPORATION, INC. American Bancorporation, Inc. Sapulpa OK
AMERICAN BANCSHARES, INC. American Bancshares, Inc. Baxter Springs KS
AMERICAN HOME MORTGAGE HOLDINGS, INC. American Home Mortgage Holdings, Inc. New York NY
AMERICANWEST BANCORPORATION AmericanWest Bancorporation Spokane WA
AVISTON FINANCIAL CORPORATION Aviston Financial Corporation Trenton IL
BCSB BANKCORP, INC. BCSB Bankcorp, Inc. Baltimore MD
BFM BANCSHARES, INC. BFM Bancshares, Inc. Kingman KS
BK2 BANK, SSB BK2 Bank, SSB Houston TX
BOK FINANCIAL CORPORATION BOK Financial Corporation Tulsa OK
BPABANK BPABank Newark NJ
BANC CORP (THE) Banc Corp (The) Birmingham AL
BANCTRUST FINANCIAL GROUP, INC. BancTrust Financial Group, Inc. Mobile AL
BANCORP OF LUCEDALE, INC. Bancorp of Lucedale, Inc. Lucedale MS
BANCORPSOUTH, INC. BancorpSouth, Inc. Tupelo MS
BANK OF DAVIE Bank of Davie Mocksville NC
BANK OF NORTH CAROLINA Bank of North Carolina Thomasville NC
BANNER CORPORATION Banner Corporation Walla Walla WA
BARABOO BANCORPORATION, INC. Baraboo Bancorporation, Inc. Baraboo WI
BASTROP BANCSHARES, INC. Bastrop Bancshares, Inc. Bastrop TX
BAYLOR BANCSHARES, INC. Baylor Bancshares, Inc. Seymour TX
BERESFORD BANCORPORATION Beresford Bancorporation Britton SD
BLACK DIAMOND FINANCIAL GROUP Black Diamond Financial Group Tampa FL
BORDER BANCSHARES, INC. Border Bancshares, Inc. Greenbush MN
BOSTON BANK OF COMMERCE Boston Bank of Commerce Boston MA
BRADFORD BANK Bradford Bank Baltimore MD
BUSINESS BANCORP Business Bancorp San Bernardino CA
CBA BANCSHARES, INC. CBA Bancshares, Inc. Minneapolis MN
CVB FINANCIAL CORP. CVB Financial Corp. Ontario CA
<Caption>
Target Target Target Announce
Name City State Date
ABN AMRO NORTH AMERICA, INC. Hawthorn Corporation Mundelein IL 10/1/2002
ABINGTON BANCORP, INC. Massachusetts Fincorp, Inc. Quincy MA 4/10/2002
ADBANC, INC. VBI, Inc. Colorado Springs CO 9/15/2002
AFFINITY BANK Westcoast Savings & Loan Association Pacific Palisade CA 10/3/2001
ALABAMA NATIONAL BANCORPORATION Farmers National Bancshares Opelika AL 9/6/2001
AMERICAN BANCORPORATION, INC. Cleveland Holding Company Cleveland OK 2/6/2002
AMERICAN BANCSHARES, INC. Southwest Missouri Bancshares, Inc. Ozark MO 1/17/2002
AMERICAN HOME MORTGAGE HOLDINGS, INC. Valley Bancorp, Inc. Owings Mills MD 8/27/2001
AMERICANWEST BANCORPORATION Latah Bancorporation, Inc. Latah WA 4/1/2002
AVISTON FINANCIAL CORPORATION Aviston Bancorp, Inc. Aviston IL 6/26/2002
BCSB BANKCORP, INC. WHG Bancshares Corporation Lutherville MD 2/27/2002
BFM BANCSHARES, INC. Citizens National Bank Anthony KS 1/28/2002
BK2 BANK, SSB Franklin Bank, SSB Austin TX 10/3/2001
BOK FINANCIAL CORPORATION Bank of Tanglewood, N.A. Houston TX 5/16/2002
BPABANK Interbank of New York New York NY 8/2/2002
BANC CORP (THE) CF Bancshares, Inc. Port St. Joe FL 8/9/2001
BANCTRUST FINANCIAL GROUP, INC. Gulf Coast Community Bancshares, Inc. Wewahitchka FL 11/2/2001
BANCORP OF LUCEDALE, INC. Grand Bancorp Grand Bay AL 12/28/2001
BANCORPSOUTH, INC. Pinnacle Bancshares, Inc. Little Rock AR 11/15/2001
BANK OF DAVIE BOC Financial Corp. Landis NC 7/20/2001
BANK OF NORTH CAROLINA Independence Bank Kernersville NC 12/19/2001
BANNER CORPORATION Oregon Business Bank Lake Oswego OR 9/26/2001
BARABOO BANCORPORATION, INC. Bancorp, Inc., (The) Elcho WI 2/20/2002
BASTROP BANCSHARES, INC. CBCT Bancshares, Inc. Smithville TX 4/4/2002
BAYLOR BANCSHARES, INC. Citizens State Bank Princeton TX 11/26/2001
BERESFORD BANCORPORATION A&S Financial Services Omaha NE 7/2/2002
BLACK DIAMOND FINANCIAL GROUP Bank of St. Petersburg St. Petersburg FL 9/21/2001
BORDER BANCSHARES, INC. Northern Plains Bancshares, Inc. Thief River Falls MN 1/22/2002
BOSTON BANK OF COMMERCE Family Savings Bank, FSB Los Angeles CA 7/31/2002
BRADFORD BANK Wyman Park Bancorporation, Inc. Lutherville MD 7/9/2002
BUSINESS BANCORP MCB Financial Corporation San Rafael CA 8/15/2001
CBA BANCSHARES, INC. Community Bank of Arizona Wickenburg AZ 10/16/2001
CVB FINANCIAL CORP. Western Security Bancorp Burbank CA 1/18/2002
<Caption>
Completion Trans Consider Reason
Date Status Type for Trans
ABN AMRO NORTH AMERICA, INC. N/A Pending N/A In-market expansion
ABINGTON BANCORP, INC. 9/13/2002 Completed Cash,Common Stock In-market expansion
ADBANC, INC. N/A Pending N/A Entry into new market
AFFINITY BANK 11/26/2001 Completed N/A In-market expansion
ALABAMA NATIONAL BANCORPORATION 12/14/2001 Completed Cash,Common Stock Entry into new market
AMERICAN BANCORPORATION, INC. 4/13/2002 Completed N/A In-market expansion
AMERICAN BANCSHARES, INC. N/A Pending Cash Alternative to starting new bank
AMERICAN HOME MORTGAGE HOLDINGS, INC. N/A Pending Cash,Common Stock Acquire Target's product line(s)
AMERICANWEST BANCORPORATION 7/31/2002 Completed Cash,Common Stock In-market expansion
AVISTON FINANCIAL CORPORATION N/A Pending Cash,Debt Alternative to starting new bank
BCSB BANKCORP, INC. 7/24/2002 Completed Cash In-market expansion
BFM BANCSHARES, INC. 4/23/2002 Completed Cash Entry into new market
BK2 BANK, SSB 4/12/2002 Completed Cash Alternative to starting new bank
BOK FINANCIAL CORPORATION N/A Pending Common Stock In-market expansion
BPABANK N/A Pending Cash Acquire strategic location
BANC CORP (THE) 2/15/2002 Completed Cash,Common Stock In-market expansion
BANCTRUST FINANCIAL GROUP, INC. 4/16/2002 Completed Common Stock In-market expansion
BANCORP OF LUCEDALE, INC. 6/1/2002 Completed N/A Entry into new market
BANCORPSOUTH, INC. 2/28/2002 Completed Cash,Common Stock Entry into new market
BANK OF DAVIE 12/31/2001 Completed Common Stock In-market expansion
BANK OF NORTH CAROLINA 6/17/2002 Completed Cash,Common Stock In-market expansion
BANNER CORPORATION 1/1/2002 Completed Cash In-market expansion
BARABOO BANCORPORATION, INC. 6/10/2002 Completed Cash Entry into new market
BASTROP BANCSHARES, INC. 7/29/2002 Completed Cash In-market expansion
BAYLOR BANCSHARES, INC. N/A Pending Cash Entry into new market
BERESFORD BANCORPORATION 8/2/2002 Completed N/A Entry into new market
BLACK DIAMOND FINANCIAL GROUP 1/2/2002 Completed Cash,Common Stock Alternative to starting new bank
BORDER BANCSHARES, INC. N/A Pending Cash Entry into new market
BOSTON BANK OF COMMERCE N/A Pending Cash Prevent competitor buying Target
BRADFORD BANK N/A Pending Cash In-market expansion
BUSINESS BANCORP 12/31/2001 Completed Common Stock Entry into new market
CBA BANCSHARES, INC. 1/30/2002 Completed Cash Alternative to starting new bank
CVB FINANCIAL CORP. 6/28/2002 Completed Cash In-market expansion
<Caption>
DA:Total DA: DA:Price DA:Price
Accounting Merger of Hostile/ Price Price to to Tang to LTM Net
Type Equals? Unsolic? $0 Equity(x) Equity(x) Income(x)
ABN AMRO NORTH AMERICA, INC. Purchase No No N/A N/A N/A N/A
ABINGTON BANCORP, INC. Purchase No No 16,701 1.66 1.66 17.47
ADBANC, INC. Purchase No No 5,870 2 2 N/A
AFFINITY BANK Purchase No No N/A N/A N/A N/A
ALABAMA NATIONAL BANCORPORATION Purchase No No 17,391 0.98 0.98 N/A
AMERICAN BANCORPORATION, INC. Purchase No No 4,250 3.08 3.08 17.71
AMERICAN BANCSHARES, INC. Purchase No No 5,452 1.67 1.67 N/A
AMERICAN HOME MORTGAGE HOLDINGS, INC. Purchase No No 5,598 1.21 1.21 39.33
AMERICANWEST BANCORPORATION Purchase No No 17,533 2.66 2.77 11.66
AVISTON FINANCIAL CORPORATION Purchase No No 15,000 1.43 1.43 18.75
BCSB BANKCORP, INC. Purchase No No 19,457 1.08 1.08 45.55
BFM BANCSHARES, INC. Purchase No No 7,935 1.2 1.2 24.57
BK2 BANK, SSB Purchase No No 9,000 2.16 2.16 59.21
BOK FINANCIAL CORPORATION Purchase No No 65,000 3.65 3.65 24.61
BPABANK Purchase No No 35,000 1.72 2.03 18.04
BANC CORP (THE) Purchase No No 15,250 1.88 1.88 16.15
BANCTRUST FINANCIAL GROUP, INC. Purchase No No 4,150 1.63 1.63 N/A
BANCORP OF LUCEDALE, INC. Purchase No No 5,300 1.65 1.7 15.5
BANCORPSOUTH, INC. Purchase No No 19,435 2.24 2.24 16.7
BANK OF DAVIE Purchase No No 10,131 1.17 1.17 N/A
BANK OF NORTH CAROLINA Purchase No No 7,059 1.47 1.47 N/A
BANNER CORPORATION Purchase No No 10,000 2.02 2.02 52.38
BARABOO BANCORPORATION, INC. Purchase No No 6,500 1.25 1.52 12.35
BASTROP BANCSHARES, INC. Purchase No No 7,561 1.27 1.27 23.49
BAYLOR BANCSHARES, INC. Purchase No No 8,371 2.06 2.06 11.37
BERESFORD BANCORPORATION Purchase No No N/A N/A N/A N/A
BLACK DIAMOND FINANCIAL GROUP Purchase No No 11,000 2.37 2.37 23.01
BORDER BANCSHARES, INC. Purchase No No 5,512 1.58 1.58 12.11
BOSTON BANK OF COMMERCE Purchase No No N/A N/A N/A N/A
BRADFORD BANK Purchase No No 13,479 1.32 1.32 28.91
BUSINESS BANCORP Purchase Yes No 29,789 1.96 1.96 8.35
CBA BANCSHARES, INC. Purchase No No 21,014 1.57 1.57 9.4
CVB FINANCIAL CORP. Purchase No No 6,225 0.78 0.78 N/A
<Caption>
DA:Price DA:Price DA:Premium Target Tot Target Tang Target LTM
to Total to Total to Core Equity Cap Equity Cap Net Income
Assets(%) Dep(%) Dep(%) $0 $0 $0
ABN AMRO NORTH AMERICA, INC. N/A N/A N/A 3,979 3,979 -338
ABINGTON BANCORP, INC. 13.48 16.4 7.61 10,038 10,038 956
ADBANC, INC. 10.48 13.38 13.38 2,938 2,938 -1,414
AFFINITY BANK N/A N/A N/A 9,213 9,213 2,656
ALABAMA NATIONAL BANCORPORATION 8.64 9.65 -0.2 17,249 17,249 68
AMERICAN BANCORPORATION, INC. 16.91 17.95 14.99 1,380 1,380 240
AMERICAN BANCSHARES, INC. 12.9 15.06 7.84 3,257 3,257 -203
AMERICAN HOME MORTGAGE HOLDINGS, INC. 11.29 14.2 2.83 4,070 4,070 135
AMERICANWEST BANCORPORATION 13.68 15.71 11.79 9,593 9,331 1,504
AVISTON FINANCIAL CORPORATION 15.95 18.16 6.04 10,506 10,506 800
BCSB BANKCORP, INC. 11.17 14.76 1.24 16,935 16,935 402
BFM BANCSHARES, INC. 22.61 28.19 5.25 6,599 6,599 323
BK2 BANK, SSB 19.76 21.85 14.9 4,174 4,174 152
BOK FINANCIAL CORPORATION 25.36 29.74 25.28 16,313 16,313 2,418
BPABANK 14.69 16.22 9.45 20,314 17,272 1,940
BANC CORP (THE) 14.49 19.02 10.83 7,469 7,469 944
BANCTRUST FINANCIAL GROUP, INC. 10.47 11.24 6.11 2,633 2,633 -209
BANCORP OF LUCEDALE, INC. 14.22 15.69 7.37 3,207 3,113 342
BANCORPSOUTH, INC. 15.2 19.52 13.17 8,683 8,683 1,164
BANK OF DAVIE 23.48 33.38 5.45 8,014 8,014 77
BANK OF NORTH CAROLINA 12.23 13.84 6.24 4,794 4,794 -1,039
BANNER CORPORATION 27.44 33 25.85 4,648 4,648 179
BARABOO BANCORPORATION, INC. 12.47 14.01 6.18 5,090 4,195 517
BASTROP BANCSHARES, INC. 21.32 27 6.27 4,600 4,600 310
BAYLOR BANCSHARES, INC. 15.16 16.44 12.33 4,059 4,059 736
BERESFORD BANCORPORATION N/A N/A N/A 1,893 1,893 -606
BLACK DIAMOND FINANCIAL GROUP 18.38 20.4 13.21 4,640 4,640 478
BORDER BANCSHARES, INC. 11.74 13.54 5.38 3,486 3,486 455
BOSTON BANK OF COMMERCE N/A N/A N/A 12,333 12,333 1,507
BRADFORD BANK 17.11 20.1 5.75 8,460 8,460 429
BUSINESS BANCORP 11.97 13.08 7.5 13,855 13,855 3,246
CBA BANCSHARES, INC. 12.77 14.41 5.77 13,370 13,370 2,236
CVB FINANCIAL CORP. 4.41 5.16 -1.69 11,919 11,822 -2,642
<Caption>
Target Tot Target Tot Target Tot
Assets Deposits Core Dep
$0 $0 $0
ABN AMRO NORTH AMERICA, INC. 48,341 43,488 35,731
ABINGTON BANCORP, INC. 123,865 101,805 87,500
ADBANC, INC. 56,005 43,872 21,909
AFFINITY BANK 183,541 115,747 89,960
ALABAMA NATIONAL BANCORPORATION 196,307 175,663 146,702
AMERICAN BANCORPORATION, INC. 25,137 23,680 19,145
AMERICAN BANCSHARES, INC. 42,260 36,204 28,001
AMERICAN HOME MORTGAGE HOLDINGS, INC. 47,034 37,402 32,211
AMERICANWEST BANCORPORATION 128,185 111,580 95,041
AVISTON FINANCIAL CORPORATION 94,023 82,601 74,369
BCSB BANKCORP, INC. 163,892 124,053 111,000
BFM BANCSHARES, INC. 35,089 28,153 25,466
BK2 BANK, SSB 45,548 41,185 32,385
BOK FINANCIAL CORPORATION 234,696 200,106 170,864
BPABANK 238,318 215,789 187,666
BANC CORP (THE) 103,712 79,127 65,868
BANCTRUST FINANCIAL GROUP, INC. 39,653 36,907 26,265
BANCORP OF LUCEDALE, INC. 37,262 33,789 29,681
BANCORPSOUTH, INC. 127,856 99,583 81,622
BANK OF DAVIE 41,133 30,960 25,678
BANK OF NORTH CAROLINA 57,721 51,002 36,276
BANNER CORPORATION 34,175 28,415 18,289
BARABOO BANCORPORATION, INC. 51,230 45,597 35,470
BASTROP BANCSHARES, INC. 34,157 26,974 24,445
BAYLOR BANCSHARES, INC. 55,198 50,929 34,969
BERESFORD BANCORPORATION 36,469 25,292 22,066
BLACK DIAMOND FINANCIAL GROUP 59,847 53,925 48,158
BORDER BANCSHARES, INC. 46,946 40,700 37,657
BOSTON BANK OF COMMERCE 207,650 130,940 101,715
BRADFORD BANK 69,934 59,548 50,177
BUSINESS BANCORP 226,280 207,051 176,415
CBA BANCSHARES, INC. 164,513 145,784 132,562
CVB FINANCIAL CORP. 141,008 120,674 102,234
</Table>
D-1
<Table>
CAPITAL BANK CORPORATION ACQUIRING FIRST COMMUNITY FINANCIAL CORPORATION
CAPITAL BANK CORPORATION ACQUIRING HIGH STREET CORPORATION
CENTERSTATE BANKS OF FLORIDA, INC. ACQUIRING CENTERSTATE BANK OF FLORIDA
CENTRAL BANCSHARES, INC. ACQUIRING MARQUETTE BANK ILLINOIS
CHARTER BANKING CORP. ACQUIRING FLORIDA BANCORPORATION, INC.
CHARTER FINANCIAL CORPORATION ACQUIRING EBA BANCSHARES, INC.
CITIZENS BANCSHARES CORPORATION ACQUIRING CFS BANCSHARES, INC.
CITIZENS HOLDING COMPANY ACQUIRING CB&T CAPITAL CORPORATION
CITIZENS SOUTH BANKING CORPORATION ACQUIRING INNES STREET FINANCIAL CORP
COASTAL COMMUNITY INVESTMENTS INC. ACQUIRING APALACHICOLA STATE BANKING CORP.
COLONY BANKCORP, INC. ACQUIRING QUITMAN BANCORP, INC
COMMUNITY BANKSHARES, INC. ACQUIRING RIDGEWAY BANCSHARES, INC.
COMMUNITY TRUST BANCORP, INC. ACQUIRING CITIZENS NATIONAL BANK & TRUST OF HAZARD
EUROBANK ACQUIRING BANCO FINANCIERO DE PR
EXTRACO CORPORATION ACQUIRING TEXAS STATE BANCSHARES, INC.
F.N.B. CORPORATION ACQUIRING CENTRAL BANK SHARES, INC.
F.N.B.C. OF LA GRANGE, INC. ACQUIRING FOXDALE BANCORP, INC.
FBOP CORPORATION ACQUIRING AMERICAN HOME LOAN CORPORATION
FNB BANKING COMPANY ACQUIRING AMERICAN COMMUNITY BANK OF GEORGIA
FNB CORP. ACQUIRING ROWAN BANCORP, INC.
FNB CORPORATION ACQUIRING SALEM COMMUNITY BANKSHARES
FARMERS AND MERCHANTS BANCSHARES, INC. ACQUIRING WEST BURLINGTON BANCORPORATION, INC.
FIDELITY BANCORP, INC. ACQUIRING CARNEGIE FINANCIAL CORPORATION
FIDELITY COMPANY ACQUIRING WORTHINGTON BANCORPORATION
FINANCIAL CORPORATION OF LOUISIANA ACQUIRING SECURITY ACADIA BANCSHARES
FIRST BANCORP ACQUIRING CAROLINA COMMUNITY BANCSHARES, INC.
FIRST BANKS, INC. ACQUIRING BANK OF STE. GENEVIEVE
FIRST CAPITAL, INC. ACQUIRING HOMETOWN BANCSHARES, INC.
FIRST CITIZENS BANC CORP. ACQUIRING INDEPENDENT COMMUNITY BANC CORP.
FIRST CITIZENS BANCORPORATION OF SC ACQUIRING CB FINANCIAL CORP.
FIRST CITIZENS BANCORPORATION OF SC ACQUIRING FIRST BANKS, INC.
FIRST CITIZENS BANCSHARES ACQUIRING METROPOLITAN BANCSHARES, INC.
FIRST COMMUNITY BANCORP ACQUIRING PACIFIC WESTERN NATIONAL BANK
FIRST COMMUNITY BANCORP ACQUIRING BANK OF CORONADO
FIRST COMMUNITY BANCORP ACQUIRING MARATHON BANCORP
FIRST COMMUNITY BANCORP ACQUIRING UPLAND BANK
FIRST COMMUNITY BANCORP ACQUIRING W.H.E.C., INC.
<Caption>
Buyer Buyer Buyer
Name City State
CAPITAL BANK CORPORATION Capital Bank Corporation Raleigh NC
CAPITAL BANK CORPORATION Capital Bank Corporation Raleigh NC
CENTERSTATE BANKS OF FLORIDA, INC. Centerstate Banks of Florida, Inc. Winter Haven FL
CENTRAL BANCSHARES, INC. Central Bancshares, Inc. Muscatine IA
CHARTER BANKING CORP. Charter Banking Corp. Tampa FL
CHARTER FINANCIAL CORPORATION Charter Financial Corporation West Point GA
CITIZENS BANCSHARES CORPORATION Citizens Bancshares Corporation Atlanta GA
CITIZENS HOLDING COMPANY Citizens Holding Company Philadelphia MS
CITIZENS SOUTH BANKING CORPORATION Citizens South Banking Corporation Gastonia NC
COASTAL COMMUNITY INVESTMENTS INC. Coastal Community Investments Inc. Panama City Beach FL
COLONY BANKCORP, INC. Colony Bankcorp, Inc. Fitzgerald GA
COMMUNITY BANKSHARES, INC. Community Bankshares, Inc. Orangeburg SC
COMMUNITY TRUST BANCORP, INC. Community Trust Bancorp, Inc. Pikeville KY
EUROBANK Eurobank Hato Rey PR
EXTRACO CORPORATION Extraco Corporation Waco TX
F.N.B. CORPORATION F.N.B. Corporation Naples FL
F.N.B.C. OF LA GRANGE, INC. F.N.B.C. of La Grange, Inc. La Grange IL
FBOP CORPORATION FBOP Corporation Oak Park IL
FNB BANKING COMPANY FNB Banking Company Griffin GA
FNB CORP. FNB Corp. Asheboro NC
FNB CORPORATION FNB Corporation Christiansburg VA
FARMERS AND MERCHANTS BANCSHARES, INC. Farmers and Merchants Bancshares, Inc. Burlington IA
FIDELITY BANCORP, INC. Fidelity Bancorp, Inc. Pittsburgh PA
FIDELITY COMPANY Fidelity Company Dyersville IA
FINANCIAL CORPORATION OF LOUISIANA Financial Corporation of Louisiana Crowley LA
FIRST BANCORP First Bancorp Troy NC
FIRST BANKS, INC. First Banks, Inc. St. Louis MO
FIRST CAPITAL, INC. First Capital, Inc. Corydon IN
FIRST CITIZENS BANC CORP. First Citizens Banc Corp. Sandusky OH
FIRST CITIZENS BANCORPORATION OF SC First Citizens Bancorporation of SC Columbia SC
FIRST CITIZENS BANCORPORATION OF SC First Citizens Bancorporation of SC Columbia SC
FIRST CITIZENS BANCSHARES First Citizens Bancshares Dyersburg TN
FIRST COMMUNITY BANCORP First Community Bancorp Rancho Santa Fe CA
FIRST COMMUNITY BANCORP First Community Bancorp Rancho Santa Fe CA
FIRST COMMUNITY BANCORP First Community Bancorp Rancho Santa Fe CA
FIRST COMMUNITY BANCORP First Community Bancorp Rancho Santa Fe CA
FIRST COMMUNITY BANCORP First Community Bancorp Rancho Santa Fe CA
<Caption>
Target Target Target Announce
Name City State Date
CAPITAL BANK CORPORATION First Community Financial Corporation Burlington NC 10/5/2001
CAPITAL BANK CORPORATION High Street Corporation Asheville NC 5/1/2002
CENTERSTATE BANKS OF FLORIDA, INC. Centerstate Bank of Florida Winter Haven FL 4/16/2002
CENTRAL BANCSHARES, INC. Marquette Bank Illinois Galesburg IL 12/15/2001
CHARTER BANKING CORP. Florida Bancorporation, Inc. Palm Harbor FL 11/10/2001
CHARTER FINANCIAL CORPORATION EBA Bancshares, Inc. Opelika AL 9/10/2002
CITIZENS BANCSHARES CORPORATION CFS Bancshares, Inc. Birmingham AL 5/30/2002
CITIZENS HOLDING COMPANY CB&T Capital Corporation Louisville MS 1/22/2002
CITIZENS SOUTH BANKING CORPORATION Innes Street Financial Corp Salisbury NC 7/16/2001
COASTAL COMMUNITY INVESTMENTS INC. Apalachicola State Banking Corp. Apalachicola FL 8/17/2001
COLONY BANKCORP, INC. Quitman Bancorp, Inc. Quitman GA 10/23/2001
COMMUNITY BANKSHARES, INC. Ridgeway Bancshares, Inc. Ridgeway SC 11/21/2001
COMMUNITY TRUST BANCORP, INC. Citizens National Bank & Trust of Hazard Hazard KY 10/16/2001
EUROBANK Banco Financiero De PR Ponce PR 9/6/2002
EXTRACO CORPORATION Texas State Bancshares, Inc. Harker Heights TX 10/7/2002
F.N.B. CORPORATION Central Bank Shares, Inc. Orlando FL 11/7/2001
F.N.B.C. OF LA GRANGE, INC. Foxdale Bancorp, Inc. S Elgin IL 10/26/2001
FBOP CORPORATION American Home Loan Corporation Phoenix AZ 6/24/2002
FNB BANKING COMPANY American Community Bank of Georgia McDonough GA 9/1/2001
FNB CORP. Rowan Bancorp, Inc. China Grove NC 2/12/2002
FNB CORPORATION Salem Community Bankshares Salem VA 8/1/2001
FARMERS AND MERCHANTS BANCSHARES, INC. West Burlington Bancorporation, Inc. West Burlington IA 7/23/2002
FIDELITY BANCORP, INC. Carnegie Financial Corporation Carnegie PA 10/10/2001
FIDELITY COMPANY Worthington Bancorporation Worthington IA 8/13/2002
FINANCIAL CORPORATION OF LOUISIANA Security Acadia Bancshares Rayne LA 6/20/2002
FIRST BANCORP Carolina Community Bancshares, Inc. Latta SC 7/16/2002
FIRST BANKS, INC. Bank of Ste. Genevieve Ste. Genevieve MO 9/18/2002
FIRST CAPITAL, INC. Hometown Bancshares, Inc. New Albany IN 9/26/2002
FIRST CITIZENS BANC CORP. Independent Community Banc Corp. Norwalk OH 11/1/2001
FIRST CITIZENS BANCORPORATION OF SC CB Financial Corp. Warrenton GA 7/5/2002
FIRST CITIZENS BANCORPORATION OF SC First Banks, Inc. Carnesville GA 9/17/2002
FIRST CITIZENS BANCSHARES Metropolitan Bancshares, Inc. Munford TN 3/4/2002
FIRST COMMUNITY BANCORP Pacific Western National Bank Brea CA 8/22/2001
FIRST COMMUNITY BANCORP Bank of Coronado Coronado CA 9/20/2002
FIRST COMMUNITY BANCORP Marathon Bancorp Los Angeles CA 5/14/2002
FIRST COMMUNITY BANCORP Upland Bank Upland CA 4/18/2002
FIRST COMMUNITY BANCORP W.H.E.C., Inc. Carlsbad CA 11/13/2001
<Caption>
Completion Trans Consider Reason
Date Status Type for Trans
CAPITAL BANK CORPORATION 1/18/2002 Completed Cash,Common Stock Entry into new market
CAPITAL BANK CORPORATION N/A Pending Common Stock In-market expansion
CENTERSTATE BANKS OF FLORIDA, INC. N/A Pending Cash,Common Stock In-market expansion
CENTRAL BANCSHARES, INC. N/A Pending Cash Entry into new market
CHARTER BANKING CORP. 2/16/2002 Completed Cash In-market expansion
CHARTER FINANCIAL CORPORATION N/A Pending Cash In-market expansion
CITIZENS BANCSHARES CORPORATION N/A Pending Cash Entry into new market
CITIZENS HOLDING COMPANY 5/17/2002 Completed Cash Entry into new market
CITIZENS SOUTH BANKING CORPORATION 12/31/2001 Completed Cash In-market expansion
COASTAL COMMUNITY INVESTMENTS INC. 3/29/2002 Completed Cash,Common Stock Alternative to starting new bank
COLONY BANKCORP, INC. 3/29/2002 Completed Cash,Common Stock Entry into new market
COMMUNITY BANKSHARES, INC. 7/1/2002 Completed Cash,Common Stock Entry into new market
COMMUNITY TRUST BANCORP, INC. 1/2/2002 Completed Cash In-market expansion
EUROBANK N/A Pending N/A In-market expansion
EXTRACO CORPORATION N/A Pending N/A In-market expansion
F.N.B. CORPORATION 1/31/2002 Completed N/A Acquire strategic location
F.N.B.C. OF LA GRANGE, INC. 12/17/2001 Completed N/A Entry into new market
FBOP CORPORATION N/A Pending Cash Entry into new market
FNB BANKING COMPANY 5/31/2002 Completed Cash In-market expansion
FNB CORP. 8/1/2002 Completed Cash,Common Stock Entry into new market
FNB CORPORATION 12/31/2001 Completed Cash,Common Stock In-market expansion
FARMERS AND MERCHANTS BANCSHARES, INC. N/A Pending Cash In-market expansion
FIDELITY BANCORP, INC. 2/22/2002 Completed Cash,Common Stock Entry into new market
FIDELITY COMPANY N/A Pending Cash Entry into new market
FINANCIAL CORPORATION OF LOUISIANA N/A Pending Cash,Common Stock Entry into new market
FIRST BANCORP N/A Pending Cash,Common Stock Entry into new market
FIRST BANKS, INC. N/A Pending Common Stock In-market expansion
FIRST CAPITAL, INC. N/A Pending Cash,Common Stock In-market expansion
FIRST CITIZENS BANC CORP. 4/1/2002 Completed Common Stock Entry into new market
FIRST CITIZENS BANCORPORATION OF SC 10/1/2002 Completed Cash,Debt Entry into new market
FIRST CITIZENS BANCORPORATION OF SC N/A Pending N/A Entry into new market
FIRST CITIZENS BANCSHARES 5/31/2002 Completed Cash,Debt Entry into new market
FIRST COMMUNITY BANCORP 1/31/2002 Completed Cash In-market expansion
FIRST COMMUNITY BANCORP N/A Pending Cash In-market expansion
FIRST COMMUNITY BANCORP 8/23/2002 Completed Cash,Common Stock In-market expansion
FIRST COMMUNITY BANCORP 8/22/2002 Completed Cash,Common Stock In-market expansion
FIRST COMMUNITY BANCORP 3/7/2002 Completed Common Stock In-market expansion
<Caption>
DA:Total DA: DA:Price DA:Price
Accounting Merger of Hostile/ Price Price to to Tang to LTM Net
Type Equals? Unsolic? $0 Equity(x) Equity(x) Income(x)
CAPITAL BANK CORPORATION Purchase No No 51,680 1.11 1.11 58.47
CAPITAL BANK CORPORATION Purchase No No 20,710 1.36 1.36 N/A
CENTERSTATE BANKS OF FLORIDA, INC. Purchase No No 13,903 1.52 1.52 N/A
CENTRAL BANCSHARES, INC. Purchase No No 23,500 1.76 1.76 13.91
CHARTER BANKING CORP. Purchase No No 8,150 1.78 1.78 37.39
CHARTER FINANCIAL CORPORATION Purchase No No 8,446 1.64 1.64 20.96
CITIZENS BANCSHARES CORPORATION Purchase No No 9,500 1.09 1.09 14.3
CITIZENS HOLDING COMPANY Purchase No No 12,761 1.51 1.51 65.44
CITIZENS SOUTH BANKING CORPORATION Purchase No No 37,935 1.36 1.36 31.14
COASTAL COMMUNITY INVESTMENTS INC. Purchase No No 12,000 2.3 2.3 21.66
COLONY BANKCORP, INC. Purchase No No 7,073 1.03 1.03 22.39
COMMUNITY BANKSHARES, INC. Purchase No No 15,950 1.86 1.93 15.79
COMMUNITY TRUST BANCORP, INC. Purchase No No 20,000 1.18 1.18 27.74
EUROBANK Purchase No No N/A N/A N/A N/A
EXTRACO CORPORATION Purchase No No N/A N/A N/A N/A
F.N.B. CORPORATION Purchase No No 80,000 3.16 3.16 17.74
F.N.B.C. OF LA GRANGE, INC. Purchase No No 2,500 1.16 1.16 N/A
FBOP CORPORATION Purchase No No 14,697 2.49 2.49 10.25
FNB BANKING COMPANY Purchase No No 9,837 1.58 1.58 67.84
FNB CORP. Purchase No No 21,797 1.99 1.99 29.11
FNB CORPORATION Purchase No No 43,051 2.13 2.13 16.33
FARMERS AND MERCHANTS BANCSHARES, INC. Purchase No No N/A N/A N/A N/A
FIDELITY BANCORP, INC. Purchase No No 3,413 1.11 1.11 23.35
FIDELITY COMPANY Purchase No No 6,206 2.45 2.45 12.31
FINANCIAL CORPORATION OF LOUISIANA Purchase No No 13,437 1.11 1.11 10.64
FIRST BANCORP Purchase No No 17,700 2.09 2.33 15.26
FIRST BANKS, INC. Purchase No No 17,900 1 1.28 85.24
FIRST CAPITAL, INC. Purchase No No 11,301 1.59 1.59 24.04
FIRST CITIZENS BANC CORP. Purchase No No 23,273 1.9 2.68 16.84
FIRST CITIZENS BANCORPORATION OF SC Purchase No No 7,204 1.63 1.63 30.4
FIRST CITIZENS BANCORPORATION OF SC Purchase No No N/A N/A N/A N/A
FIRST CITIZENS BANCSHARES Purchase No No 19,000 1.94 1.94 12.4
FIRST COMMUNITY BANCORP Purchase No No 36,633 1.84 1.85 17.02
FIRST COMMUNITY BANCORP Purchase No No 11,697 1.92 1.92 79.49
FIRST COMMUNITY BANCORP Purchase No No 19,109 1.55 1.55 15.5
FIRST COMMUNITY BANCORP Purchase No No 18,358 1.57 1.57 14.36
FIRST COMMUNITY BANCORP Purchase No No 21,084 1.79 1.8 11.93
<Caption>
DA:Price DA:Price DA:Premium Target Tot Target Tang Target LTM
to Total to Total to Core Equity Cap Equity Cap Net Income
Assets(%) Dep(%) Dep(%) $0 $0 $0
CAPITAL BANK CORPORATION 23.44 31.67 3.97 44,374 44,374 846
CAPITAL BANK CORPORATION 12.29 14.63 6.4 14,850 14,850 N/A
CENTERSTATE BANKS OF FLORIDA, INC. 21.06 25.1 10.51 8,924 8,924 -359
CENTRAL BANCSHARES, INC. 16.31 19.45 9.41 13,351 13,351 1,690
CHARTER BANKING CORP. 14.06 15.38 7.62 4,229 4,229 218
CHARTER FINANCIAL CORPORATION 10.83 12.8 7.33 5,078 5,078 403
CITIZENS BANCSHARES CORPORATION 8.3 11.42 1.84 9,403 9,403 629
CITIZENS HOLDING COMPANY 18.3 22.79 8.32 8,479 8,479 195
CITIZENS SOUTH BANKING CORPORATION 16.97 21.41 6.9 26,843 26,843 1,173
COASTAL COMMUNITY INVESTMENTS INC. 18.58 21.42 15.35 5,207 5,207 554
COLONY BANKCORP, INC. 10.53 12.31 0.34 6,123 6,123 305
COMMUNITY BANKSHARES, INC. 20.81 24.57 13.53 8,586 8,264 1,010
COMMUNITY TRUST BANCORP, INC. 14.34 16.41 2.82 17,018 17,018 721
EUROBANK N/A N/A N/A 3,479 3,479 -1,688
EXTRACO CORPORATION N/A N/A N/A 6,538 6,538 1,226
F.N.B. CORPORATION 33.21 41.2 33.24 25,345 25,345 4,509
F.N.B.C. OF LA GRANGE, INC. 6.2 6.63 1 2,154 2,154 -878
FBOP CORPORATION 12.65 15.53 16.56 9,800 9,800 1,434
FNB BANKING COMPANY 17.63 20.47 10.19 6,240 6,240 145
FNB CORP. 17.23 20.61 13.21 9,801 9,801 687
FNB CORPORATION 17.69 20.39 12.74 19,822 19,822 2,590
FARMERS AND MERCHANTS BANCSHARES, INC. N/A N/A N/A 5,318 5,318 579
FIDELITY BANCORP, INC. 12.04 17.94 1.86 2,914 2,914 142
FIDELITY COMPANY 18.05 21.09 15.27 2,521 2,521 504
FINANCIAL CORPORATION OF LOUISIANA 10.28 11.35 1.35 10,971 10,971 1,263
FIRST BANCORP 25.13 29.85 20.94 7,984 7,153 1,094
FIRST BANKS, INC. 15.84 19.18 4.66 17,084 13,198 210
FIRST CAPITAL, INC. 12.99 14.22 7 7,109 7,109 470
FIRST CITIZENS BANC CORP. 16.43 18.53 13.8 14,348 10,863 1,364
FIRST CITIZENS BANCORPORATION OF SC 16.38 18.26 8.07 4,286 4,286 237
FIRST CITIZENS BANCORPORATION OF SC N/A N/A N/A 35,061 35,061 3,354
FIRST CITIZENS BANCSHARES 16.54 19 11.82 9,799 9,799 1,532
FIRST COMMUNITY BANCORP 14.68 16.02 9.5 18,553 18,455 2,011
FIRST COMMUNITY BANCORP 13.08 14.1 8.63 5,905 5,905 143
FIRST COMMUNITY BANCORP 16.92 19.47 7.77 11,932 11,932 1,193
FIRST COMMUNITY BANCORP 16.48 18.91 8.52 11,534 11,534 1,260
FIRST COMMUNITY BANCORP 13.23 14.41 7.26 10,419 10,321 1,560
<Caption>
Target Tot Target Tot Target Tot
Assets Deposits Core Dep
$0 $0 $0
CAPITAL BANK CORPORATION 211,031 156,164 128,222
CAPITAL BANK CORPORATION 164,361 138,074 83,639
CENTERSTATE BANKS OF FLORIDA, INC. 64,237 53,905 43,825
CENTRAL BANCSHARES, INC. 144,052 120,832 107,834
CHARTER BANKING CORP. 57,975 52,980 46,740
CHARTER FINANCIAL CORPORATION 76,326 63,895 45,086
CITIZENS BANCSHARES CORPORATION 108,177 78,721 38,385
CITIZENS HOLDING COMPANY 69,738 56,002 51,439
CITIZENS SOUTH BANKING CORPORATION 215,223 170,617 140,323
COASTAL COMMUNITY INVESTMENTS INC. 64,581 56,010 44,260
COLONY BANKCORP, INC. 64,696 55,468 49,068
COMMUNITY BANKSHARES, INC. 76,629 64,904 56,808
COMMUNITY TRUST BANCORP, INC. 139,505 121,878 105,703
EUROBANK 89,475 84,675 66,370
EXTRACO CORPORATION 55,288 48,635 45,928
F.N.B. CORPORATION 240,884 194,169 164,423
F.N.B.C. OF LA GRANGE, INC. 40,349 37,700 34,475
FBOP CORPORATION 116,177 94,636 53,110
FNB BANKING COMPANY 55,804 48,045 35,294
FNB CORP. 116,033 97,005 75,369
FNB CORPORATION 239,079 207,424 176,449
FARMERS AND MERCHANTS BANCSHARES, INC. 56,706 49,235 47,474
FIDELITY BANCORP, INC. 27,537 18,477 16,951
FIDELITY COMPANY 34,387 29,428 24,081
FINANCIAL CORPORATION OF LOUISIANA 130,694 118,402 100,496
FIRST BANCORP 66,406 55,904 45,542
FIRST BANKS, INC. 113,040 93,340 83,396
FIRST CAPITAL, INC. 86,982 79,474 59,886
FIRST CITIZENS BANC CORP. 139,793 123,962 104,233
FIRST CITIZENS BANCORPORATION OF SC 43,972 39,462 34,639
FIRST CITIZENS BANCORPORATION OF SC 244,933 205,224 169,503
FIRST CITIZENS BANCSHARES 114,890 100,006 77,838
FIRST COMMUNITY BANCORP 233,131 213,635 165,931
FIRST COMMUNITY BANCORP 86,885 80,629 63,272
FIRST COMMUNITY BANCORP 109,304 95,008 84,413
FIRST COMMUNITY BANCORP 109,836 95,736 77,058
FIRST COMMUNITY BANCORP 140,614 129,133 114,200
</Table>
D-2
<Table>
FIRST COMMUNITY BANCSHARES, INC. ACQUIRING MONROE FINANCIAL, INC.
FIRST COMMUNITY CAPITAL CORP. ACQUIRING EXPRESS BANK
FIRST COMMUNITY FINANCIAL GROUP ACQUIRING HARBOR BANK, N.A.
FIRST DELTA BANKSHARES, INC. ACQUIRING BANK OF TRUMANN
FIRST FEDERAL BANCSHARES, INC. ACQUIRING PFSB BANCORP, INC.
FIRST FINANCIAL CORPORATION ACQUIRING OMEGA CITY HOLDING COMPANY
FIRST INDEPENDENT BANCORP ACQUIRING FIRST TUTTLE BANCORP, INC.
FIRST INDIANA CORPORATION ACQUIRING METROBANCORP
FIRST INTERSTATE BANCSYSTEM, INC. ACQUIRING SILVER RUN BANCORPORATION
FIRST LIBERTY BANCORP, INC. ACQUIRING ENTERPRISE BANCORP
FIRST OKMULGEE CORPORATION ACQUIRING FIRST NATIONAL OF HENRYETTA
FIRST SECURITY GROUP, INC. ACQUIRING FIRST STATE BANK
FIRST SLEEPY EYE BANCORPORATION, INC. ACQUIRING STEARNS BANK CANBY, N.A.
FIRST STAUNTON BANCSHARES, INC. ACQUIRING HAMEL BANCORP, INC.
FIRST WESTERN BANCORP, INC. ACQUIRING MARQUETTE BANK NEBRASKA, N.A.
FIRSTFED FINANCIAL CORP. ACQUIRING FRONTIER STATE BANK
FIRSTFED FINANCIAL CORP. ACQUIRING DEL AMO SAVINGS BANK, FSB
FOLKSTON INVESTORS, LLC ACQUIRING FIRST NATIONAL CORPORATION
FRANDSEN FINANCIAL CORPORATION ACQUIRING F&M BANK-MINNESOTA
FRANDSEN FINANCIAL CORPORATION ACQUIRING COMMUNITY NATIONAL CORP.
GB&T BANCSHARES, INC. ACQUIRING HOMETOWN BANK OF VILLA RICA
GBC BANCORP ACQUIRING LIBERTY BANK & TRUST CO.
GN BANKSHARES, INC. ACQUIRING FINANCIAL BANCSHARES, INC.
GREAT RIVER FINANCIAL GROUP, INC. ACQUIRING SOUTHEAST SECURITY BANK
GRUPO CAIXA GERAL DE DEPOSITOS ACQUIRING CROWN BANK, NA
GWINNETT COMMERCIAL GROUP ACQUIRING EMBRY BANKSHARES, INC.
HAZLEHURST INVESTORS, INC. ACQUIRING BANK OF HAZLEHURST
HORIZONS BANCORP, INC. ACQUIRING AMERICAN NATIONAL BANCSHARES
ITLA CAPITAL CORPORATION ACQUIRING ASAHI BANK OF CALIFORNIA
ILLINI CORPORATION ACQUIRING ILLINOIS COMMUNITY BANCORP, INC.
INVESTOR GROUP ACQUIRING FARMERS BANK
INVESTOR GROUP ACQUIRING FIRST BANCORP OF OKLAHOMA, INC.
INVESTOR GROUP ACQUIRING NORTH STAR HOLDING COMPANY
JOHNSON INTERNATIONAL, INC. ACQUIRING CAPITAL BANCSHARES, INC.
KEARNY FINANCIAL CORP. ACQUIRING PULASKI BANCORP, INC.
KERNDT BANK SERVICES, INC. ACQUIRING WESTMONT CORPORATION
LANDMARK BANCORP ACQUIRING GREATER PACIFIC BANCSHARES
<Caption>
Buyer Buyer Buyer
Name City State
FIRST COMMUNITY BANCSHARES, INC. First Community Bancshares, Inc. Bluefield VA
FIRST COMMUNITY CAPITAL CORP. First Community Capital Corp. Houston TX
FIRST COMMUNITY FINANCIAL GROUP First Community Financial Group Lacey WA
FIRST DELTA BANKSHARES, INC. First Delta Bankshares, Inc. Blytheville AR
FIRST FEDERAL BANCSHARES, INC. First Federal Bancshares, Inc. Colchester IL
FIRST FINANCIAL CORPORATION First Financial Corporation Arthur ND
FIRST INDEPENDENT BANCORP First Independent Bancorp Chickasha OK
FIRST INDIANA CORPORATION First Indiana Corporation Indianapolis IN
FIRST INTERSTATE BANCSYSTEM, INC. First Interstate BancSystem, Inc. Billings MT
FIRST LIBERTY BANCORP, INC. First Liberty Bancorp, Inc. Washington DC
FIRST OKMULGEE CORPORATION First Okmulgee Corporation Okmulgee OK
FIRST SECURITY GROUP, INC. First Security Group, Inc. Chattanooga TN
FIRST SLEEPY EYE BANCORPORATION, INC. First Sleepy Eye Bancorporation, Inc. Sioux Falls SD
FIRST STAUNTON BANCSHARES, INC. First Staunton Bancshares, Inc. Staunton IL
FIRST WESTERN BANCORP, INC. First Western Bancorp, Inc. Huron SD
FIRSTFED FINANCIAL CORP. FirstFed Financial Corp. Santa Monica CA
FIRSTFED FINANCIAL CORP. FirstFed Financial Corp. Santa Monica CA
FOLKSTON INVESTORS, LLC Folkston Investors, LLC Savannah GA
FRANDSEN FINANCIAL CORPORATION Frandsen Financial Corporation Forest Lake MN
FRANDSEN FINANCIAL CORPORATION Frandsen Financial Corporation Forest Lake MN
GB&T BANCSHARES, INC. GB&T Bancshares, Inc. Gainesville GA
GBC BANCORP GBC Bancorp Los Angeles CA
GN BANKSHARES, INC. GN Bankshares, Inc. Girard KS
GREAT RIVER FINANCIAL GROUP, INC. Great River Financial Group, Inc. Burlington IA
GRUPO CAIXA GERAL DE DEPOSITOS Grupo Caixa Geral de Depositos Lisbon N/A
GWINNETT COMMERCIAL GROUP Gwinnett Commercial Group Lawrenceville GA
HAZLEHURST INVESTORS, INC. Hazlehurst Investors, Inc. Hazlehurst GA
HORIZONS BANCORP, INC. Horizons Bancorp, Inc. Monroe LA
ITLA CAPITAL CORPORATION ITLA Capital Corporation La Jolla CA
ILLINI CORPORATION Illini Corporation Springfield IL
INVESTOR GROUP Investor Group N/A CO
INVESTOR GROUP Investor Group Oklahoma City OK
INVESTOR GROUP Investor Group N/A ND
JOHNSON INTERNATIONAL, INC. Johnson International, Inc. Racine WI
KEARNY FINANCIAL CORP. Kearny Financial Corp. Kearny NJ
KERNDT BANK SERVICES, INC. Kerndt Bank Services, Inc. Lansing IA
LANDMARK BANCORP Landmark Bancorp Anaheim CA
<Caption>
Target Target Target Announce
Name City State Date
FIRST COMMUNITY BANCSHARES, INC. Monroe Financial, Inc. Greenville WV 5/22/2002
FIRST COMMUNITY CAPITAL CORP. Express Bank Alvin TX 1/10/2002
FIRST COMMUNITY FINANCIAL GROUP Harbor Bank, N.A. Gig Harbor WA 8/5/2002
FIRST DELTA BANKSHARES, INC. Bank of Trumann Trumann AR 4/12/2002
FIRST FEDERAL BANCSHARES, INC. PFSB Bancorp, Inc. Palmyra MO 6/4/2002
FIRST FINANCIAL CORPORATION Omega City Holding Company La Moure ND 2/19/2002
FIRST INDEPENDENT BANCORP First Tuttle Bancorp, Inc. Tuttle OK 9/27/2002
FIRST INDIANA CORPORATION MetroBanCorp Indianapolis IN 9/4/2002
FIRST INTERSTATE BANCSYSTEM, INC. Silver Run Bancorporation Red Lodge MT 8/27/2002
FIRST LIBERTY BANCORP, INC. Enterprise Bancorp Largo MD 6/28/2002
FIRST OKMULGEE CORPORATION First National of Henryetta Henryetta OK 10/1/2002
FIRST SECURITY GROUP, INC. First State Bank Maynardville TN 3/14/2002
FIRST SLEEPY EYE BANCORPORATION, INC. Stearns Bank Canby, N.A. Canby MN 7/1/2002
FIRST STAUNTON BANCSHARES, INC. Hamel Bancorp, Inc. Hamel IL 2/14/2002
FIRST WESTERN BANCORP, INC. Marquette Bank Nebraska, N.A. O'Neil NE 7/1/2001
FIRSTFED FINANCIAL CORP. Frontier State Bank Redondo Beach CA 8/16/2001
FIRSTFED FINANCIAL CORP. Del Amo Savings Bank, FSB Torrance CA 8/16/2001
FOLKSTON INVESTORS, LLC First National Corporation Folkston GA 1/17/2002
FRANDSEN FINANCIAL CORPORATION F&M Bank-Minnesota Dundas MN 7/23/2001
FRANDSEN FINANCIAL CORPORATION Community National Corp. Grand Forks ND 1/5/2002
GB&T BANCSHARES, INC. HomeTown Bank of Villa Rica Villa Rica GA 1/31/2002
GBC BANCORP Liberty Bank & Trust Co. Boston MA 10/11/2001
GN BANKSHARES, INC. Financial Bancshares, Inc. Holton KS 11/26/2001
GREAT RIVER FINANCIAL GROUP, INC. Southeast Security Bank Mediapolis IA 8/13/2001
GRUPO CAIXA GERAL DE DEPOSITOS Crown Bank, NA Ocean City NJ 10/4/2001
GWINNETT COMMERCIAL GROUP Embry Bankshares, Inc. Duluth GA 5/18/2002
HAZLEHURST INVESTORS, INC. Bank of Hazlehurst Hazlehurst GA 7/9/2002
HORIZONS BANCORP, INC. American National Bancshares Ruston LA 2/21/2002
ITLA CAPITAL CORPORATION Asahi Bank of California Los Angeles CA 11/2/2001
ILLINI CORPORATION Illinois Community Bancorp, Inc. Effingham IL 11/21/2001
INVESTOR GROUP Farmers Bank Ault CO 7/13/2001
INVESTOR GROUP First Bancorp of Oklahoma, Inc. Tonkawa OK 6/11/2002
INVESTOR GROUP North Star Holding Company Jamestown ND 6/10/2002
JOHNSON INTERNATIONAL, INC. Capital Bancshares, Inc. Green Bay WI 7/16/2002
KEARNY FINANCIAL CORP. Pulaski Bancorp, Inc. Springfield NJ 1/10/2002
KERNDT BANK SERVICES, INC. Westmont Corporation West Union IA 7/5/2001
LANDMARK BANCORP Greater Pacific Bancshares Whittier CA 1/25/2002
<Caption>
Completion Trans Consider Reason
Date Status Type for Trans
FIRST COMMUNITY BANCSHARES, INC. N/A Pending Cash Entry into new market
FIRST COMMUNITY CAPITAL CORP. 5/10/2002 Completed Cash In-market expansion
FIRST COMMUNITY FINANCIAL GROUP 10/1/2002 Completed Cash In-market expansion
FIRST DELTA BANKSHARES, INC. 8/30/2002 Completed Cash Entry into new market
FIRST FEDERAL BANCSHARES, INC. N/A Pending Cash,Common Stock Entry into new market
FIRST FINANCIAL CORPORATION N/A Pending Cash Entry into new market
FIRST INDEPENDENT BANCORP N/A Pending N/A Entry into new market
FIRST INDIANA CORPORATION N/A Pending Cash In-market expansion
FIRST INTERSTATE BANCSYSTEM, INC. N/A Pending N/A Entry into new market
FIRST LIBERTY BANCORP, INC. N/A Pending N/A Entry into new market
FIRST OKMULGEE CORPORATION N/A Pending N/A Entry into new market
FIRST SECURITY GROUP, INC. 7/20/2002 Completed Cash Entry into new market
FIRST SLEEPY EYE BANCORPORATION, INC. N/A Pending Cash Entry into new market
FIRST STAUNTON BANCSHARES, INC. 5/15/2002 Completed Cash Entry into new market
FIRST WESTERN BANCORP, INC. 3/1/2002 Completed Cash In-market expansion
FIRSTFED FINANCIAL CORP. 11/30/2001 Completed Cash In-market expansion
FIRSTFED FINANCIAL CORP. 11/30/2001 Completed Cash In-market expansion
FOLKSTON INVESTORS, LLC N/A Pending Cash Alternative to starting new bank
FRANDSEN FINANCIAL CORPORATION 11/30/2001 Completed Cash Entry into new market
FRANDSEN FINANCIAL CORPORATION 4/4/2002 Completed Cash In-market expansion
GB&T BANCSHARES, INC. N/A Pending Cash,Common Stock In-market expansion
GBC BANCORP 2/28/2002 Completed Cash Entry into new market
GN BANKSHARES, INC. 2/1/2002 Completed N/A Entry into new market
GREAT RIVER FINANCIAL GROUP, INC. 11/15/2001 Completed Cash,Common Stock Entry into new market
GRUPO CAIXA GERAL DE DEPOSITOS N/A Pending Cash Entry into new market
GWINNETT COMMERCIAL GROUP N/A Pending N/A In-market expansion
HAZLEHURST INVESTORS, INC. N/A Pending Cash Alternative to starting new bank
HORIZONS BANCORP, INC. N/A Pending Cash,Common Stock Entry into new market
ITLA CAPITAL CORPORATION 1/31/2002 Completed Cash In-market expansion
ILLINI CORPORATION N/A Pending Common Stock Entry into new market
INVESTOR GROUP 12/28/2001 Completed N/A Alternative to starting new bank
INVESTOR GROUP N/A Pending Cash Alternative to starting new bank
INVESTOR GROUP N/A Pending Cash Entry into new market
JOHNSON INTERNATIONAL, INC. N/A Pending Cash Entry into new market
KEARNY FINANCIAL CORP. N/A Pending Cash In-market expansion
KERNDT BANK SERVICES, INC. 10/4/2001 Completed Cash Entry into new market
LANDMARK BANCORP N/A Pending Cash Alternative to starting new bank
<Caption>
DA:Total DA: DA:Price DA:Price
Accounting Merger of Hostile/ Price Price to to Tang to LTM Net
Type Equals? Unsolic? $0 Equity(x) Equity(x) Income(x)
FIRST COMMUNITY BANCSHARES, INC. Purchase No No 2,000 1.36 1.36 N/A
FIRST COMMUNITY CAPITAL CORP. Purchase No No 15,000 2.23 2.23 9.24
FIRST COMMUNITY FINANCIAL GROUP Purchase No No 6,922 2.08 2.08 N/A
FIRST DELTA BANKSHARES, INC. Purchase No No 14,280 1.3 1.3 20.4
FIRST FEDERAL BANCSHARES, INC. Purchase No No 9,229 0.97 0.97 29.08
FIRST FINANCIAL CORPORATION Purchase No No 8,723 1.69 1.69 11.04
FIRST INDEPENDENT BANCORP Purchase No No N/A N/A N/A N/A
FIRST INDIANA CORPORATION Purchase No No 40,703 2.34 2.34 23.57
FIRST INTERSTATE BANCSYSTEM, INC. Purchase No No N/A N/A N/A N/A
FIRST LIBERTY BANCORP, INC. Purchase No No N/A N/A N/A N/A
FIRST OKMULGEE CORPORATION Purchase No No N/A N/A N/A N/A
FIRST SECURITY GROUP, INC. Purchase No No 8,100 1.41 1.41 24.7
FIRST SLEEPY EYE BANCORPORATION, INC. Purchase No No 4,126 1.5 1.5 N/A
FIRST STAUNTON BANCSHARES, INC. Purchase No No 7,473 1.7 1.7 14.51
FIRST WESTERN BANCORP, INC. Purchase No No 6,577 1.51 1.51 13.21
FIRSTFED FINANCIAL CORP. Purchase No No 10,134 1.3 1.3 N/A
FIRSTFED FINANCIAL CORP. Purchase No No 12,498 1.3 1.3 N/A
FOLKSTON INVESTORS, LLC Purchase No No 3,416 1.58 1.58 29.45
FRANDSEN FINANCIAL CORPORATION Purchase No No 3,750 1.29 1.47 13.11
FRANDSEN FINANCIAL CORPORATION Purchase No No 21,590 1.55 1.55 18.14
GB&T BANCSHARES, INC. Purchase No No 13,531 1.74 1.74 31.32
GBC BANCORP Purchase No No 11,445 1.8 1.8 13.58
GN BANKSHARES, INC. Purchase No No N/A N/A N/A N/A
GREAT RIVER FINANCIAL GROUP, INC. Purchase No No 2,938 1.26 1.26 31.25
GRUPO CAIXA GERAL DE DEPOSITOS Purchase No No 17,916 1.5 1.5 20.22
GWINNETT COMMERCIAL GROUP Purchase No No N/A N/A N/A N/A
HAZLEHURST INVESTORS, INC. Purchase No No 11,500 2.34 2.34 7.71
HORIZONS BANCORP, INC. Purchase No No 8,500 1.35 1.35 40.48
ITLA CAPITAL CORPORATION Purchase No No 14,900 1.2 1.2 26.65
ILLINI CORPORATION Purchase No No 2,313 0.62 0.58 N/A
INVESTOR GROUP Purchase No No N/A N/A N/A N/A
INVESTOR GROUP Purchase No No 5,096 1.23 1.23 N/A
INVESTOR GROUP Purchase No No 16,494 1.55 1.55 11.27
JOHNSON INTERNATIONAL, INC. Purchase No No N/A N/A N/A N/A
KEARNY FINANCIAL CORP. Purchase No No 64,276 2.49 2.49 62.94
KERNDT BANK SERVICES, INC. Purchase No No 3,262 1.35 1.35 8.43
LANDMARK BANCORP Purchase No No 7,750 2.47 2.47 52.96
<Caption>
DA:Price DA:Price DA:Premium Target Tot Target Tang Target LTM
to Total to Total to Core Equity Cap Equity Cap Net Income
Assets(%) Dep(%) Dep(%) $0 $0 $0
FIRST COMMUNITY BANCSHARES, INC. 6.27 6.59 1.87 1,470 1,470 -507
FIRST COMMUNITY CAPITAL CORP. 17.9 19.63 12.15 6,738 6,738 1,623
FIRST COMMUNITY FINANCIAL GROUP 8.61 9 5.28 3,326 3,326 -919
FIRST DELTA BANKSHARES, INC. 17.13 21.22 5.77 10,999 10,999 700
FIRST FEDERAL BANCSHARES, INC. 12.21 13.95 -0.49 8,374 8,374 302
FIRST FINANCIAL CORPORATION 11.86 16.1 8.14 6,035 6,035 790
FIRST INDEPENDENT BANCORP N/A N/A N/A 4,770 4,770 608
FIRST INDIANA CORPORATION 20.63 26.44 17.38 15,342 15,342 1,521
FIRST INTERSTATE BANCSYSTEM, INC. N/A N/A N/A 4,049 4,049 727
FIRST LIBERTY BANCORP, INC. N/A N/A N/A 2,355 1,666 -331
FIRST OKMULGEE CORPORATION N/A N/A N/A 5,257 5,257 567
FIRST SECURITY GROUP, INC. 18.79 21.93 7.23 5,762 5,762 328
FIRST SLEEPY EYE BANCORPORATION, INC. 10.98 14.98 6.88 8,146 8,146 1,313
FIRST STAUNTON BANCSHARES, INC. 13.88 15.42 6.61 4,589 4,589 515
FIRST WESTERN BANCORP, INC. 14.4 16.39 5.94 4,360 4,360 498
FIRSTFED FINANCIAL CORP. 13.96 15.84 5.14 7,796 7,796 -7,596
FIRSTFED FINANCIAL CORP. 9.78 10.68 3.27 9,614 9,614 -4,309
FOLKSTON INVESTORS, LLC 19.24 22.19 12.83 3,603 3,603 145
FRANDSEN FINANCIAL CORPORATION 14.3 16.15 5.85 2,909 2,558 286
FRANDSEN FINANCIAL CORPORATION 18.87 20.94 7.87 9,257 9,257 1,190
GB&T BANCSHARES, INC. 13.45 15.45 7.98 7,467 7,467 414
GBC BANCORP 30.62 37.42 21 6,361 6,361 843
GN BANKSHARES, INC. N/A N/A N/A 7,560 7,519 994
GREAT RIVER FINANCIAL GROUP, INC. 9.5 12.81 3.03 2,329 2,329 94
GRUPO CAIXA GERAL DE DEPOSITOS 16.91 19.2 8.79 11,944 11,944 886
GWINNETT COMMERCIAL GROUP N/A N/A N/A 8,917 8,917 -41
HAZLEHURST INVESTORS, INC. 18.9 20.84 14.03 4,920 4,920 1,492
HORIZONS BANCORP, INC. 8.6 9.25 3.15 6,278 6,278 210
ITLA CAPITAL CORPORATION 29.8 25.8 5.09 22,766 22,766 559
ILLINI CORPORATION 4.03 5.1 -3.82 4,006 3,959 -1,149
INVESTOR GROUP N/A N/A N/A 9,991 9,699 552
INVESTOR GROUP 11.08 12.33 2.63 4,879 4,879 -60
INVESTOR GROUP 14.42 15.99 6.41 10,658 10,658 1,463
JOHNSON INTERNATIONAL, INC. N/A N/A N/A 7,836 7,836 853
KEARNY FINANCIAL CORP. 26.67 31.85 22.34 25,343 25,343 1,004
KERNDT BANK SERVICES, INC. 7.32 9.49 2.57 4,190 4,190 387
LANDMARK BANCORP 23.26 25.82 18.26 3,106 3,106 145
<Caption>
Target Tot Target Tot Target Tot
Assets Deposits Core Dep
$0 $0 $0
FIRST COMMUNITY BANCSHARES, INC. 31,887 30,348 28,417
FIRST COMMUNITY CAPITAL CORP. 83,807 76,428 67,983
FIRST COMMUNITY FINANCIAL GROUP 80,392 76,873 68,160
FIRST DELTA BANKSHARES, INC. 83,355 67,293 56,912
FIRST FEDERAL BANCSHARES, INC. 71,906 62,971 58,622
FIRST FINANCIAL CORPORATION 73,557 54,176 43,805
FIRST INDEPENDENT BANCORP 52,491 46,870 41,815
FIRST INDIANA CORPORATION 173,753 135,576 118,004
FIRST INTERSTATE BANCSYSTEM, INC. 43,112 33,647 27,280
FIRST LIBERTY BANCORP, INC. 44,886 42,393 35,260
FIRST OKMULGEE CORPORATION 49,610 43,989 36,119
FIRST SECURITY GROUP, INC. 43,114 36,939 32,345
FIRST SLEEPY EYE BANCORPORATION, INC. 67,649 50,551 40,591
FIRST STAUNTON BANCSHARES, INC. 53,828 48,463 46,549
FIRST WESTERN BANCORP, INC. 45,685 40,136 37,343
FIRSTFED FINANCIAL CORP. 72,600 63,980 45,517
FIRSTFED FINANCIAL CORP. 127,741 116,990 88,238
FOLKSTON INVESTORS, LLC 28,896 25,090 15,160
FRANDSEN FINANCIAL CORPORATION 26,228 23,215 20,359
FRANDSEN FINANCIAL CORPORATION 114,415 103,083 97,250
GB&T BANCSHARES, INC. 96,442 83,955 68,913
GBC BANCORP 37,377 30,586 24,214
GN BANKSHARES, INC. 93,631 82,762 75,079
GREAT RIVER FINANCIAL GROUP, INC. 30,913 22,938 20,101
GRUPO CAIXA GERAL DE DEPOSITOS 105,941 93,305 67,967
GWINNETT COMMERCIAL GROUP 109,331 99,591 93,932
HAZLEHURST INVESTORS, INC. 60,855 55,179 46,906
HORIZONS BANCORP, INC. 98,891 91,881 69,516
ITLA CAPITAL CORPORATION 80,966 57,749 48,793
ILLINI CORPORATION 57,455 45,390 43,069
INVESTOR GROUP 46,527 36,425 30,773
INVESTOR GROUP 54,165 48,668 42,788
INVESTOR GROUP 114,400 103,152 90,977
JOHNSON INTERNATIONAL, INC. 74,428 58,681 44,927
KEARNY FINANCIAL CORP. 236,989 198,443 169,405
KERNDT BANK SERVICES, INC. 44,551 34,361 32,965
LANDMARK BANCORP 33,014 29,740 25,039
</Table>
D-3
<Table>
<Caption>
LAREDO NATIONAL BANCSHARES ACQUIRING DEL RIO NATIONAL BANCSHARES
LAUREL CAPITAL GROUP, INC. ACQUIRING SFSB HOLDING COMPANY
LEGACY BANK ACQUIRING NORTHERN STATE BANK
LIBERTY BANCSHARES, INC. ACQUIRING HANCOCK COUNTY BANK & TRUST
LIMA BANCSHARES, INC. ACQUIRING WHITE HALL NATIONAL BANK
LINN HOLDING COMPANY ACQUIRING SOUTH GASCONADE INVESTMENT CORP.
LOCAL FINANCIAL CORPORATION ACQUIRING CITIZENS FINANCIAL CORP.
MB FINANCIAL INC. ACQUIRING FIRST LINCOLNWOOD CORP.
MSB CAPITAL CORPORATION ACQUIRING PENDLETON FEDERAL SAVINGS BANK
MADISON & BRADFORD FEDERAL S&L ASSOC. ACQUIRING BOHEMIAN AMERICAN FEDERAL S&L ASSOC.
MAHASKA INVESTMENT COMPANY ACQUIRING BELLE PLAINE SERVICE CORP.
MAIN STREET BANKS, INC. ACQUIRING FIRST NATIONAL BANK OF JOHNS CREEK
MARION COUNTY BANCSHARES, INC. ACQUIRING TRIANGLE BANCORPORATION
MARSHALL BANCORP INC. ACQUIRING NORKITT BANCORP, INC.
MCLAUGHLIN BANCSHARES, INC. ACQUIRING FIRST HALE CENTER, INC.
MERCHANTS & MANUFACTURERS BANCORP ACQUIRING FORTRESS BANCSHARES, INC.
METROCORP, INC. ACQUIRING CHADWICK BANCSHARES, INC.
METROPOLITAN BANK GROUP, INC. ACQUIRING FIRSTCOM BANCORP, INC.
MIDWEST BANC HOLDINGS, INC. ACQUIRING BIG FOOT FINANCIAL CORP.
MOUNTAINBANK FINANCIAL CORPORATION ACQUIRING FIRST WESTERN BANK
MOUNTAINBANK FINANCIAL CORPORATION ACQUIRING CNB HOLDINGS, INC.
MOUNTAINBANK FINANCIAL CORPORATION ACQUIRING CARDINAL BANKSHARES CORPORATION
NASB FINANCIAL, INC. ACQUIRING CBES BANCORP, INC
NB&T FINANCIAL GROUP, INC. ACQUIRING SABINA BANK
NATIONAL BANCSHARES CORPORATION ACQUIRING PEOPLES FINANCIAL CORPORATION
NATIONAL MERCANTILE BANCORP ACQUIRING SOUTH BAY BANK N.A.
NODAWAY VALLEY BANCSHARES ACQUIRING BUCHANAN COUNTY BANCSHARES
NORTHWEST BANCORP, INC. ACQUIRING PRESTIGE BANCORP, INC
ONEIDA FINANCIAL CORP. ACQUIRING SBC FINANCIAL CORPORATION
ORITANI SAVINGS BANK ACQUIRING HAMILTON BANCORP, MHC
OUTSOURCE HOLDINGS, INC. ACQUIRING FIRST CITIZENS BANK, N.A.
P.C.B. BANCORP, INC. ACQUIRING GATEWAY AMERICAN BANCSHARES, INC.
PANHANDLE AVIATION, INC. ACQUIRING FARMERS STATE BANK
PARKVALE FINANCIAL CORP. ACQUIRING SECOND NATIONAL BANK
PEOPLES BANCORP INC. ACQUIRING FIRST COLONY BANCSHARES, INC.
PEOPLES COMMUNITY BANCORP ACQUIRING KENWOOD BANCORP, INC
PINNACLE BANCORP, INC. ACQUIRING COOK INVESTMENT, INC.
<Caption>
Buyer Buyer Buyer
Name City State
LAREDO NATIONAL BANCSHARES Laredo National Bancshares Laredo TX
LAUREL CAPITAL GROUP, INC. Laurel Capital Group, Inc. Allison Park PA
LEGACY BANK Legacy Bank Harrisburg PA
LIBERTY BANCSHARES, INC. Liberty Bancshares, Inc. Arnolds Park IA
LIMA BANCSHARES, INC. Lima Bancshares, Inc. Lima IL
LINN HOLDING COMPANY Linn Holding Company Linn MO
LOCAL FINANCIAL CORPORATION Local Financial Corporation Oklahoma City OK
MB FINANCIAL INC. MB Financial Inc. Chicago IL
MSB CAPITAL CORPORATION MSB Capital Corporation Columbus OH
MADISON & BRADFORD FEDERAL S&L ASSOC. Madison & Bradford Federal S&L Assoc. Forest Hill MD
MAHASKA INVESTMENT COMPANY Mahaska Investment Company Oskaloosa IA
MAIN STREET BANKS, INC. Main Street Banks, Inc. Kennesaw GA
MARION COUNTY BANCSHARES, INC. Marion County Bancshares, Inc. Hamilton AL
MARSHALL BANCORP INC. Marshall Bancorp Inc. Minneapolis MN
MCLAUGHLIN BANCSHARES, INC. McLaughlin Bancshares, Inc. Ralls TX
MERCHANTS & MANUFACTURERS BANCORP Merchants & Manufacturers Bancorp New Berlin WI
METROCORP, INC. Metrocorp, Inc. East Moline IL
METROPOLITAN BANK GROUP, INC. Metropolitan Bank Group, Inc Chicago IL
MIDWEST BANC HOLDINGS, INC. Midwest Banc Holdings, Inc. Melrose Park IL
MOUNTAINBANK FINANCIAL CORPORATION MountainBank Financial Corporation Hendersonville NC
MOUNTAINBANK FINANCIAL CORPORATION MountainBank Financial Corporation Hendersonville NC
MOUNTAINBANK FINANCIAL CORPORATION MountainBank Financial Corporation Hendersonville NC
NASB FINANCIAL, INC. NASB Financial, Inc. Grandview MO
NB&T FINANCIAL GROUP, INC. NB&T Financial Group, Inc. Wilmington OH
NATIONAL BANCSHARES CORPORATION National Bancshares Corporation Orrville OH
NATIONAL MERCANTILE BANCORP National Mercantile Bancorp Los Angeles CA
NODAWAY VALLEY BANCSHARES Nodaway Valley Bancshares Maryville MO
NORTHWEST BANCORP, INC. Northwest Bancorp, Inc. Warren PA
ONEIDA FINANCIAL CORP. Oneida Financial Corp. Oneida NY
ORITANI SAVINGS BANK Oritani Savings Bank Hackensack NJ
OUTSOURCE HOLDINGS, INC. Outsource Holdings, Inc. Lubbock TX
P.C.B. BANCORP, INC. P.C.B. Bancorp, Inc. Largo FL
PANHANDLE AVIATION, INC. Panhandle Aviation, Inc. Clarinda IA
PARKVALE FINANCIAL CORP. Parkvale Financial Corp. Monroeville PA
PEOPLES BANCORP INC. Peoples Bancorp Inc. Marietta OH
PEOPLES COMMUNITY BANCORP Peoples Community Bancorp West Chester OH
PINNACLE BANCORP, INC. Pinnacle Bancorp, Inc. Central City NE
<Caption>
Target Target Target Announce
Name City State Date
LAREDO NATIONAL BANCSHARES Del Rio National Bancshares Del Rio TX 7/3/2001
LAUREL CAPITAL GROUP, INC. SFSB Holding Company Pittsburgh PA 9/12/2002
LEGACY BANK Northern State Bank Towanda PA 7/10/2002
LIBERTY BANCSHARES, INC. Hancock County Bank & Trust Garner IA 9/30/2002
LIMA BANCSHARES, INC. White Hall National Bank White Hall IL 7/10/2001
LINN HOLDING COMPANY South Gasconade Investment Corp. Owensville MO 7/29/2002
LOCAL FINANCIAL CORPORATION Citizens Financial Corp. Midwest City OK 7/17/2002
MB FINANCIAL INC. First Lincolnwood Corp. Lincolnwood IL 12/27/2001
MSB CAPITAL CORPORATION Pendleton Federal Savings Bank Falmouth KY 1/21/2002
MADISON & BRADFORD FEDERAL S&L ASSOC. Bohemian American Federal S&L Assoc. Baltimore MD 1/25/2002
MAHASKA INVESTMENT COMPANY Belle Plaine Service Corp. Belle Plaine IA 10/4/2002
MAIN STREET BANKS, INC. First National Bank of Johns Creek Suwanee GA 7/18/2002
MARION COUNTY BANCSHARES, INC. Triangle Bancorporation Carbon Hill AL 12/4/2001
MARSHALL BANCORP INC. Norkitt Bancorp, Inc. Hallock MN 11/5/2001
MCLAUGHLIN BANCSHARES, INC. First Hale Center, Inc. Plainview TX 10/24/2001
MERCHANTS & MANUFACTURERS BANCORP Fortress Bancshares, Inc. Westby WI 6/3/2002
METROCORP, INC. Chadwick Bancshares, Inc. Chadwick IL 7/31/2001
METROPOLITAN BANK GROUP, INC. FirstCom Bancorp, Inc. Chicago IL 1/29/2002
MIDWEST BANC HOLDINGS, INC. Big Foot Financial Corp. Long Grove IL 7/22/2002
MOUNTAINBANK FINANCIAL CORPORATION First Western Bank Burnsville NC 8/28/2001
MOUNTAINBANK FINANCIAL CORPORATION CNB Holdings, Inc. Pulaski VA 6/21/2002
MOUNTAINBANK FINANCIAL CORPORATION Cardinal Bankshares Corporation Floyd VA 5/30/2002
NASB FINANCIAL, INC. CBES Bancorp, Inc Excelsior Spring MO 9/6/2002
NB&T FINANCIAL GROUP, INC. Sabina Bank Sabina OH 7/9/2001
NATIONAL BANCSHARES CORPORATION Peoples Financial Corporation Massillon OH 10/2/2001
NATIONAL MERCANTILE BANCORP South Bay Bank N.A. Torrance CA 7/20/2001
NODAWAY VALLEY BANCSHARES Buchanan County Bancshares St. Joseph MO 9/24/2002
NORTHWEST BANCORP, INC. Prestige Bancorp, Inc Pleasant Hills PA 2/7/2002
ONEIDA FINANCIAL CORP. SBC Financial Corporation Chittenango NY 11/21/2001
ORITANI SAVINGS BANK Hamilton Bancorp, MHC Union City NJ 10/24/2001
OUTSOURCE HOLDINGS, INC. First Citizens Bank, N.A. Dallas TX 12/7/2001
P.C.B. BANCORP, INC. Gateway American Bancshares, Inc. Fort Lauderdale FL 6/25/2002
PANHANDLE AVIATION, INC. Farmers State Bank Schleswig IA 7/24/2001
PARKVALE FINANCIAL CORP. Second National Bank Masontown PA 7/30/2001
PEOPLES BANCORP INC. First Colony Bancshares, Inc. Cambridge OH 1/4/2002
PEOPLES COMMUNITY BANCORP Kenwood Bancorp, Inc Cincinnati OH 8/23/2001
PINNACLE BANCORP, INC. Cook Investment, Inc. Beatrice NE 5/1/2002
<Caption>
Completion Trans Consider Reason
Date Status Type for Trans
LAREDO NATIONAL BANCSHARES 11/30/2001 Completed N/A Entry into new market
LAUREL CAPITAL GROUP, INC. N/A Pending Cash In-market expansion
LEGACY BANK N/A Pending Common Stock Increase organization size
LIBERTY BANCSHARES, INC. N/A Pending N/A Entry into new market
LIMA BANCSHARES, INC. N/A Pending Cash Entry into new market
LINN HOLDING COMPANY N/A Pending Cash In-market expansion
LOCAL FINANCIAL CORPORATION N/A Pending N/A In-market expansion
MB FINANCIAL INC. 4/5/2002 Completed Cash In-market expansion
MSB CAPITAL CORPORATION 6/28/2002 Completed N/A Entry into new market
MADISON & BRADFORD FEDERAL S&L ASSOC. 3/4/2002 Completed N/A In-market expansion
MAHASKA INVESTMENT COMPANY N/A Pending Cash Entry into new market
MAIN STREET BANKS, INC. N/A Pending Cash,Common Stock Entry into new market
MARION COUNTY BANCSHARES, INC. 4/1/2002 Completed Cash In-market expansion
MARSHALL BANCORP INC. 6/7/2002 Completed Cash Alternative to starting new bank
MCLAUGHLIN BANCSHARES, INC. 1/2/2002 Completed Cash In-market expansion
MERCHANTS & MANUFACTURERS BANCORP N/A Pending Cash,Common Stock Entry into new market
METROCORP, INC. 11/1/2001 Completed N/A Entry into new market
METROPOLITAN BANK GROUP, INC. 6/3/2002 Completed Cash In-market expansion
MIDWEST BANC HOLDINGS, INC. N/A Pending Common Stock In-market expansion
MOUNTAINBANK FINANCIAL CORPORATION 12/31/2001 Completed Common Stock In-market expansion
MOUNTAINBANK FINANCIAL CORPORATION N/A Pending Cash,Common Stock Entry into new market
MOUNTAINBANK FINANCIAL CORPORATION N/A Pending Common Stock In-market expansion
NASB FINANCIAL, INC. N/A Pending Cash In-market expansion
NB&T FINANCIAL GROUP, INC. 12/10/2001 Completed Cash In-market expansion
NATIONAL BANCSHARES CORPORATION 4/3/2002 Completed Cash Entry into new market
NATIONAL MERCANTILE BANCORP 12/14/2001 Completed Cash In-market expansion
NODAWAY VALLEY BANCSHARES N/A Pending N/A In-market expansion
NORTHWEST BANCORP, INC. 9/13/2002 Completed Cash In-market expansion
ONEIDA FINANCIAL CORP. 5/31/2002 Completed Cash In-market expansion
ORITANI SAVINGS BANK 8/23/2002 Completed N/A In-market expansion
OUTSOURCE HOLDINGS, INC. N/A Pending Cash,Common Stock Alternative to starting new bank
P.C.B. BANCORP, INC. N/A Pending Cash Entry into new market
PANHANDLE AVIATION, INC. 1/7/2002 Completed Cash Entry into new market
PARKVALE FINANCIAL CORP. 1/31/2002 Completed Cash Entry into new market
PEOPLES BANCORP INC. 6/14/2002 Completed Cash,Other Entry into new market
PEOPLES COMMUNITY BANCORP 4/26/2002 Completed Cash In-market expansion
PINNACLE BANCORP, INC. 7/3/2002 Completed N/A Entry into new market
<Caption>
DA:Total DA: DA:Price DA:Price
Accounting Merger of Hostile/ Price Price to to Tang to LTM Net
Type Equals? Unsolic? $0 Equity(x) Equity(x) Income(x)
LAREDO NATIONAL BANCSHARES Purchase No No 28,000 2.44 2.44 14.92
LAUREL CAPITAL GROUP, INC. Purchase No No 9,947 1.33 1.33 62.8
LEGACY BANK Purchase No No 12,700 1.42 1.43 N/A
LIBERTY BANCSHARES, INC. Purchase No No N/A N/A N/A N/A
LIMA BANCSHARES, INC. Purchase No No 7,020 1.04 1.04 N/A
LINN HOLDING COMPANY Purchase No No 6,195 1.42 1.42 15.76
LOCAL FINANCIAL CORPORATION Purchase No No N/A N/A N/A N/A
MB FINANCIAL INC. Purchase No No 35,000 1.67 1.67 18.22
MSB CAPITAL CORPORATION Purchase No No N/A N/A N/A N/A
MADISON & BRADFORD FEDERAL S&L ASSOC. Other No No N/A N/A N/A N/A
MAHASKA INVESTMENT COMPANY Purchase No No 6,800 1.71 1.71 13.39
MAIN STREET BANKS, INC. Purchase No No 27,013 2.51 2.51 44.33
MARION COUNTY BANCSHARES, INC. Purchase No No 12,628 1.36 1.36 22.19
MARSHALL BANCORP INC. Purchase No No 13,577 1.13 1.13 22.29
MCLAUGHLIN BANCSHARES, INC. Purchase No No 4,500 1.42 1.42 58.44
MERCHANTS & MANUFACTURERS BANCORP Purchase No No 21,170 1.5 2.04 12.52
METROCORP, INC. Purchase No No N/A N/A N/A N/A
METROPOLITAN BANK GROUP, INC. Purchase No No 17,000 1.84 1.84 44.74
MIDWEST BANC HOLDINGS, INC. Purchase No No 33,584 1.1 1.1 31.26
MOUNTAINBANK FINANCIAL CORPORATION Purchase No No 19,983 1.43 1.56 N/A
MOUNTAINBANK FINANCIAL CORPORATION Purchase No No 13,826 1.69 1.69 22.74
MOUNTAINBANK FINANCIAL CORPORATION Purchase No No 36,858 1.68 1.68 17.53
NASB FINANCIAL, INC. Purchase No No 15,331 1.08 1.08 N/A
NB&T FINANCIAL GROUP, INC. Purchase No No 11,500 1.54 1.89 27.45
NATIONAL BANCSHARES CORPORATION Purchase No No 15,118 1.45 1.45 32.23
NATIONAL MERCANTILE BANCORP Purchase No No 29,113 1.44 1.44 11.38
NODAWAY VALLEY BANCSHARES Purchase No No N/A N/A N/A N/A
NORTHWEST BANCORP, INC. Purchase No No 14,728 1.25 1.25 N/A
ONEIDA FINANCIAL CORP. Purchase No No 11,910 1.94 1.94 30.46
ORITANI SAVINGS BANK Purchase No No N/A N/A N/A N/A
OUTSOURCE HOLDINGS, INC. Purchase No No 4,185 1.16 1.16 17.88
P.C.B. BANCORP, INC. Purchase No No 11,259 1.2 1.29 N/A
PANHANDLE AVIATION, INC. Purchase No No N/A N/A N/A N/A
PARKVALE FINANCIAL CORP. Purchase No No 36,800 1.5 1.5 15.31
PEOPLES BANCORP INC. Purchase No No 20,000 2.1 2.1 17.27
PEOPLES COMMUNITY BANCORP Purchase No No 7,500 1.64 1.64 99.41
PINNACLE BANCORP, INC. Purchase No No N/A N/A N/A N/A
<Caption>
DA:Price DA:Price DA:Premium Target Tot Target Tang Target LTM
to Total to Total to Core Equity Cap Equity Cap Net Income
Assets(%) Dep(%) Dep(%) $0 $0 $0
LAREDO NATIONAL BANCSHARES 19.75 21.57 15.53 11,485 11,485 1,877
LAUREL CAPITAL GROUP, INC. 17.62 22.05 5.95 7,100 7,100 150
LEGACY BANK 16.41 19.25 6.81 8,917 8,881 -1,089
LIBERTY BANCSHARES, INC. N/A N/A N/A 11,609 11,188 939
LIMA BANCSHARES, INC. 19.57 24.36 0.89 6,772 6,772 -20
LINN HOLDING COMPANY 14.64 16.34 5.47 4,179 4,179 393
LOCAL FINANCIAL CORPORATION N/A N/A N/A 3,759 3,759 175
MB FINANCIAL INC. 12.55 16.24 7.98 18,090 18,090 1,654
MSB CAPITAL CORPORATION N/A N/A N/A 3,912 3,912 -2,065
MADISON & BRADFORD FEDERAL S&L ASSOC. N/A N/A N/A 5,807 5,807 90
MAHASKA INVESTMENT COMPANY 8.75 10.15 4.9 5,898 5,898 508
MAIN STREET BANKS, INC. 26.7 31.57 28.06 9,366 9,366 531
MARION COUNTY BANCSHARES, INC. 18.65 22.39 7.11 10,594 10,594 569
MARSHALL BANCORP INC. 26.56 32.22 4.38 8,146 8,146 609
MCLAUGHLIN BANCSHARES, INC. 12.69 14.1 5.02 3,172 3,172 77
MERCHANTS & MANUFACTURERS BANCORP 10.12 13.33 7.69 13,962 10,262 1,671
METROCORP, INC. N/A N/A N/A 13,298 12,818 1,937
METROPOLITAN BANK GROUP, INC. 11.7 12.85 8.08 9,253 9,253 380
MIDWEST BANC HOLDINGS, INC. 14.12 24.31 2.61 29,233 29,233 1,027
MOUNTAINBANK FINANCIAL CORPORATION 24.75 31.61 14.61 13,406 12,288 166
MOUNTAINBANK FINANCIAL CORPORATION 22.5 26.08 12.79 7,390 7,390 550
MOUNTAINBANK FINANCIAL CORPORATION 19.95 22.77 10.92 21,983 21,983 2,102
NASB FINANCIAL, INC. 13.57 17.45 1.44 14,172 14,172 -598
NB&T FINANCIAL GROUP, INC. 22.07 25.93 14.44 7,488 6,082 419
NATIONAL BANCSHARES CORPORATION 13.84 19.98 6.99 10,406 10,406 469
NATIONAL MERCANTILE BANCORP 15.11 18.68 7.62 20,265 20,265 2,558
NODAWAY VALLEY BANCSHARES N/A N/A N/A 11,451 11,451 3,144
NORTHWEST BANCORP, INC. 7.56 11.83 2.65 11,757 11,757 33
ONEIDA FINANCIAL CORP. 18.28 20.38 11.01 6,124 6,124 391
ORITANI SAVINGS BANK N/A N/A N/A 8,106 8,076 544
OUTSOURCE HOLDINGS, INC. 11.22 12.47 2.09 3,596 3,596 234
P.C.B. BANCORP, INC. 12.05 14.47 4.32 9,352 8,756 -1,238
PANHANDLE AVIATION, INC. N/A N/A N/A 9,644 9,644 777
PARKVALE FINANCIAL CORP. 18.8 23.52 8.55 24,489 24,489 2,403
PEOPLES BANCORP INC. 16.36 18 13.45 8,586 8,586 1,042
PEOPLES COMMUNITY BANCORP 12.75 14.82 6.49 4,434 4,434 73
PINNACLE BANCORP, INC. N/A N/A N/A 7,889 7,889 -2,311
<Caption>
Target Tot Target Tot Target Tot
Assets Deposits Core Dep
$0 $0 $0
LAREDO NATIONAL BANCSHARES 141,758 129,780 106,333
LAUREL CAPITAL GROUP, INC. 53,457 42,725 39,000
LEGACY BANK 77,408 65,971 56,039
LIBERTY BANCSHARES, INC. 118,280 79,624 70,832
LIMA BANCSHARES, INC. 35,878 28,815 27,758
LINN HOLDING COMPANY 42,316 37,909 33,666
LOCAL FINANCIAL CORPORATION 32,250 28,423 24,259
MB FINANCIAL INC. 240,017 185,491 150,817
MSB CAPITAL CORPORATION 42,196 37,930 33,995
MADISON & BRADFORD FEDERAL S&L ASSOC. 42,137 36,282 31,390
MAHASKA INVESTMENT COMPANY 77,748 67,006 57,639
MAIN STREET BANKS, INC. 88,183 74,565 50,517
MARION COUNTY BANCSHARES, INC. 67,693 56,404 46,694
MARSHALL BANCORP INC. 51,116 42,137 35,985
MCLAUGHLIN BANCSHARES, INC. 35,448 31,920 26,448
MERCHANTS & MANUFACTURERS BANCORP 206,635 156,864 138,438
METROCORP, INC. 164,744 144,285 121,349
METROPOLITAN BANK GROUP, INC. 145,269 132,314 95,898
MIDWEST BANC HOLDINGS, INC. 227,382 132,082 110,000
MOUNTAINBANK FINANCIAL CORPORATION 77,540 60,710 47,261
MOUNTAINBANK FINANCIAL CORPORATION 55,583 47,940 40,000
MOUNTAINBANK FINANCIAL CORPORATION 184,724 161,883 136,248
NASB FINANCIAL, INC. 112,916 87,822 80,000
NB&T FINANCIAL GROUP, INC. 52,110 44,358 37,514
NATIONAL BANCSHARES CORPORATION 109,203 75,647 67,384
NATIONAL MERCANTILE BANCORP 192,618 155,842 116,105
NODAWAY VALLEY BANCSHARES 153,720 131,618 122,325
NORTHWEST BANCORP, INC. 194,786 124,451 112,000
ONEIDA FINANCIAL CORP. 65,159 58,432 52,566
ORITANI SAVINGS BANK 124,951 105,945 88,405
OUTSOURCE HOLDINGS, INC. 37,293 33,572 28,215
P.C.B. BANCORP, INC. 93,449 77,819 57,955
PANHANDLE AVIATION, INC. 61,275 50,861 43,223
PARKVALE FINANCIAL CORP. 195,782 156,488 143,939
PEOPLES BANCORP INC. 148,031 137,720 102,478
PEOPLES COMMUNITY BANCORP 56,909 48,975 43,526
PINNACLE BANCORP, INC. 99,886 87,059 79,712
</Table>
D-4
<Table>
<Caption>
PINNACLE BANCORP, INC. ACQUIRING KEENE BANCORP, INC.
PIPER BANKSHARES, INC. ACQUIRING CREST BANCORP, INC.
PLAINVILLE BANCSHARES, INC. ACQUIRING FARMERS BANCSHARES, INC.
POCAHONTAS BANCORP, INC. ACQUIRING NORTH ARKANSAS BANCSHARES
POCAHONTAS BANCORP, INC. ACQUIRING MARKED TREE BANCSHARES, INC.
POCAHONTAS BANCORP, INC. ACQUIRING PEOPLES BANK OF IMBODEN
PROSPERITY BANCSHARES, INC. ACQUIRING TEXAS GUARANTY BANK, N.A.
PROSPERITY BANCSHARES, INC. ACQUIRING SOUTHWEST BHC
PROSPERITY BANCSHARES, INC. ACQUIRING FIRST NATIONAL BANK OF BAY CITY
PROVIDENT BANCORP, INC. ACQUIRING NATIONAL BANK OF FLORIDA
PUTNAM-GREENE FINANCIAL CORP. ACQUIRING CITIZENS BANK OF COCHRAN
RANDOLPH BANK & TRUST CO. ACQUIRING MORRIS PLAN SAVINGS BANK, SSB
REGIONS FINANCIAL CORPORATION ACQUIRING FIRST BANCSHARES OF TEXAS
REGIONS FINANCIAL CORPORATION ACQUIRING BROOKHOLLOW BANCSHARES, INC.
REGIONS FINANCIAL CORPORATION ACQUIRING INDEPENDENCE BANK
RICHMOND MUTUAL BANCORP INC. ACQUIRING AMTRUST CAPITAL CORP
S.B.C.P. BANCORP, INC. ACQUIRING WAUNAKEE BANK SHARES, INC.
SALIN BANCSHARES, INC. ACQUIRING BLUE RIVER FEDERAL SAVINGS BANK
SAVANNA-THOMSON INVESTMENT, INC. ACQUIRING THOMSON INVESTMENT COMPANY, INC.
SCHAUMBURG BANCSHARES, INC. ACQUIRING FIRST SCHAUMBURG BANCORPORATION, INC.
SECOND BANCORP, INC. ACQUIRING COMMERCE EXCHANGE CORP.
SHAY INVESTMENT SERVICES INC. ACQUIRING IBL BANCORP, INC.
SOUTH FINANCIAL GROUP, INC. (THE) ACQUIRING CENTRAL BANK OF TAMPA
SOUTHTRUST CORPORATION ACQUIRING LANDMARK BANCSHARES, INC.
SOUTHERN FINANCIAL BANCORP, INC. ACQUIRING METRO-COUNTY BANK OF VIRGINIA, INC.
SOUTHERN SECURITY BANK CORP ACQUIRING PANAMERICAN BANK
STATE CAPITAL CORPORATION ACQUIRING MISSISSIPPI SOUTHERN BANK
STERLING BANCSHARES, INC. ACQUIRING COMMUNITY BANCSHARES, INC.
STERLING BANCSHARES, INC. ACQUIRING ENB BANKSHARES, INC.
STERLING FINANCIAL CORP. ACQUIRING EMPIRE FEDERAL BANCORP, INC.
SUN FINANCIAL CORPORATION ACQUIRING QUAD COUNTY STATE BANK
SUNFLOWER BANKS, INC. ACQUIRING FIRST CANON BANCORP, INC.
SUNFLOWER BANKS, INC. ACQUIRING MONTE VISTA BANK CORP.
SYNERGY FINANCIAL GROUP, INC. ACQUIRING FIRST BANK OF CENTRAL JERSEY
TEXAS REGIONAL BANCSHARES ACQUIRING SAN JUAN BANCSHARES, INC.
TEXAS REGIONAL BANCSHARES ACQUIRING CORPUS CHRISTI BANCSHARES
TEXAS UNITED BANCSHARES, INC. ACQUIRING BRYAN-COLLEGE STATION FINANCIAL HOLDING CO.
<Caption>
Buyer Buyer Buyer
Name City State
PINNACLE BANCORP, INC. Pinnacle Bancorp, Inc. Central City NE
PIPER BANKSHARES, INC. Piper Bankshares, Inc. Piper City IL
PLAINVILLE BANCSHARES, INC. Plainville Bancshares, Inc. Plainville KS
POCAHONTAS BANCORP, INC. Pocahontas Bancorp, Inc. Jonesboro AR
POCAHONTAS BANCORP, INC. Pocahontas Bancorp, Inc. Jonesboro AR
POCAHONTAS BANCORP, INC. Pocahontas Bancorp, Inc. Jonesboro AR
PROSPERITY BANCSHARES, INC. Prosperity Bancshares, Inc. Houston TX
PROSPERITY BANCSHARES, INC. Prosperity Bancshares, Inc. Houston TX
PROSPERITY BANCSHARES, INC. Prosperity Bancshares, Inc. Houston TX
PROVIDENT BANCORP, INC. Provident Bancorp, Inc. Montebello NY
PUTNAM-GREENE FINANCIAL CORP. Putnam-Greene Financial Corp. Eatonton GA
RANDOLPH BANK & TRUST CO. Randolph Bank & Trust Co. Asheboro NC
REGIONS FINANCIAL CORPORATION Regions Financial Corporation Birmingham AL
REGIONS FINANCIAL CORPORATION Regions Financial Corporation Birmingham AL
REGIONS FINANCIAL CORPORATION Regions Financial Corporation Birmingham AL
RICHMOND MUTUAL BANCORP INC. Richmond Mutual Bancorp Inc Richmond IN
S.B.C.P. BANCORP, INC. S.B.C.P. Bancorp, Inc. Cross Plains WI
SALIN BANCSHARES, INC. Salin Bancshares, Inc. Indianapolis IN
SAVANNA-THOMSON INVESTMENT, INC. Savanna-Thomson Investment, Inc. Fulton IL
SCHAUMBURG BANCSHARES, INC. Schaumburg Bancshares, Inc. Hinsdale IL
SECOND BANCORP, INC. Second Bancorp, Inc. Warren OH
SHAY INVESTMENT SERVICES INC. Shay Investment Services Inc. Coral Gables FL
SOUTH FINANCIAL GROUP, INC. (THE) South Financial Group, Inc. (The) Greenville SC
SOUTHTRUST CORPORATION SouthTrust Corporation Birmingham AL
SOUTHERN FINANCIAL BANCORP, INC. Southern Financial Bancorp, Inc. Warrenton VA
SOUTHERN SECURITY BANK CORP Southern Security Bank Corp Hollywood FL
STATE CAPITAL CORPORATION State Capital Corporation Greenwood MS
STERLING BANCSHARES, INC. Sterling Bancshares, Inc. Houston TX
STERLING BANCSHARES, INC. Sterling Bancshares, Inc. Houston TX
STERLING FINANCIAL CORP. Sterling Financial Corp. Spokane WA
SUN FINANCIAL CORPORATION Sun Financial Corporation Ellington MO
SUNFLOWER BANKS, INC. Sunflower Banks, Inc. Salina KS
SUNFLOWER BANKS, INC. Sunflower Banks, Inc. Salina KS
SYNERGY FINANCIAL GROUP, INC. Synergy Financial Group, Inc. Cranford NJ
TEXAS REGIONAL BANCSHARES Texas Regional Bancshares McAllen TX
TEXAS REGIONAL BANCSHARES Texas Regional Bancshares McAllen TX
TEXAS UNITED BANCSHARES, INC. Texas United Bancshares, Inc. La Grange TX
<Caption>
Target Target Target Announce
Name City State Date
PINNACLE BANCORP, INC. Keene Bancorp, Inc. Keene TX 5/24/2002
PIPER BANKSHARES, INC. Crest Bancorp, Inc. Roberts IL 5/22/2002
PLAINVILLE BANCSHARES, INC. Farmers Bancshares, Inc. Lincoln KS 11/2/2001
POCAHONTAS BANCORP, INC. North Arkansas Bancshares Newport AR 11/20/2001
POCAHONTAS BANCORP, INC. Marked Tree Bancshares, Inc. Marked Tree AR 10/9/2002
POCAHONTAS BANCORP, INC. Peoples Bank of Imboden Imboden AR 1/16/2002
PROSPERITY BANCSHARES, INC. Texas Guaranty Bank, N.A. Houston TX 2/22/2002
PROSPERITY BANCSHARES, INC. Southwest BHC Dallas TX 7/15/2002
PROSPERITY BANCSHARES, INC. First National Bank of Bay City Bay City TX 8/15/2002
PROVIDENT BANCORP, INC. National Bank of Florida Florida NY 11/2/2001
PUTNAM-GREENE FINANCIAL CORP. Citizens Bank of Cochran Cochran GA 9/5/2002
RANDOLPH BANK & TRUST CO. Morris Plan Savings Bank, SSB Burlington NC 11/20/2001
REGIONS FINANCIAL CORPORATION First Bancshares of Texas Tomball TX 8/13/2001
REGIONS FINANCIAL CORPORATION Brookhollow Bancshares, Inc. Dallas TX 12/14/2001
REGIONS FINANCIAL CORPORATION Independence Bank Houston TX 12/21/2001
RICHMOND MUTUAL BANCORP INC. AmTrust Capital Corp Peru IN 10/18/2001
S.B.C.P. BANCORP, INC. Waunakee Bank Shares, Inc. Waunakee WI 4/29/2002
SALIN BANCSHARES, INC. Blue River Federal Savings Bank Edinburgh IN 7/3/2002
SAVANNA-THOMSON INVESTMENT, INC. Thomson Investment Company, Inc. Savanna IL 11/7/2001
SCHAUMBURG BANCSHARES, INC. First Schaumburg Bancorporation, Inc. Schaumburg IL 4/19/2002
SECOND BANCORP, INC. Commerce Exchange Corp. Beachwood OH 7/23/2001
SHAY INVESTMENT SERVICES INC. IBL Bancorp, Inc. Plaquemine LA 6/19/2002
SOUTH FINANCIAL GROUP, INC. (THE) Central Bank of Tampa Tampa FL 10/3/2002
SOUTHTRUST CORPORATION Landmark Bancshares, Inc. Euless TX 12/14/2001
SOUTHERN FINANCIAL BANCORP, INC. Metro-County Bank of Virginia, Inc. Richmond VA 4/25/2002
SOUTHERN SECURITY BANK CORP PanAmerican Bank Miami FL 7/1/2001
STATE CAPITAL CORPORATION Mississippi Southern Bank Port Gibson MS 7/3/2002
STERLING BANCSHARES, INC. Community Bancshares, Inc. Katy TX 10/2/2001
STERLING BANCSHARES, INC. ENB Bankshares, Inc. Dallas TX 5/22/2002
STERLING FINANCIAL CORP. Empire Federal Bancorp, Inc. Livingston MT 9/19/2002
SUN FINANCIAL CORPORATION Quad County State Bank Viburnum MO 8/26/2002
SUNFLOWER BANKS, INC. First Canon Bancorp, Inc. Canon City CO 8/9/2001
SUNFLOWER BANKS, INC. Monte Vista Bank Corp. Monte Vista CO 6/22/2002
SYNERGY FINANCIAL GROUP, INC. First Bank of Central Jersey North Brunswick NJ 10/11/2002
TEXAS REGIONAL BANCSHARES San Juan Bancshares, Inc. San Juan TX 7/2/2002
TEXAS REGIONAL BANCSHARES Corpus Christi Bancshares Corpus Christ TX 10/10/2002
TEXAS UNITED BANCSHARES, INC. Bryan-College Station Financial Holding Co. Bryan TX 11/5/2001
<Caption>
Completion Trans Consider Reason
Date Status Type for Trans
PINNACLE BANCORP, INC. N/A Pending N/A Entry into new market
PIPER BANKSHARES, INC. N/A Pending Cash Entry into new market
PLAINVILLE BANCSHARES, INC. 1/1/2002 Completed Common Stock Entry into new market
POCAHONTAS BANCORP, INC. 6/18/2002 Completed Common Stock In-market expansion
POCAHONTAS BANCORP, INC. N/A Pending Common Stock Entry into new market
POCAHONTAS BANCORP, INC. 5/31/2002 Completed Cash In-market expansion
PROSPERITY BANCSHARES, INC. 5/8/2002 Completed Cash In-market expansion
PROSPERITY BANCSHARES, INC. 10/1/2002 Completed Cash Entry into new market
PROSPERITY BANCSHARES, INC. N/A Pending Cash In-market expansion
PROVIDENT BANCORP, INC. 4/23/2002 Completed Cash In-market expansion
PUTNAM-GREENE FINANCIAL CORP. N/A Pending Cash,Debt Entry into new market
RANDOLPH BANK & TRUST CO. 5/31/2002 Completed N/A Entry into new market
REGIONS FINANCIAL CORPORATION 11/30/2001 Completed Common Stock Entry into new market
REGIONS FINANCIAL CORPORATION 4/2/2002 Completed Cash In-market expansion
REGIONS FINANCIAL CORPORATION 5/16/2002 Completed Cash In-market expansion
RICHMOND MUTUAL BANCORP INC. 7/1/2002 Completed Cash Entry into new market
S.B.C.P. BANCORP, INC. 7/31/2002 Completed Cash In-market expansion
SALIN BANCSHARES, INC. N/A Pending Cash In-market expansion
SAVANNA-THOMSON INVESTMENT, INC. 5/23/2002 Completed Cash Alternative to starting new bank
SCHAUMBURG BANCSHARES, INC. N/A Pending Cash,Other Alternative to starting new bank
SECOND BANCORP, INC. 10/25/2001 Completed Cash In-market expansion
SHAY INVESTMENT SERVICES INC. N/A Pending Cash Alternative to starting new bank
SOUTH FINANCIAL GROUP, INC. (THE) N/A Pending Common Stock In-market expansion
SOUTHTRUST CORPORATION 3/1/2002 Completed Cash Increase organization size
SOUTHERN FINANCIAL BANCORP, INC. 8/13/2002 Completed Cash,Common Stock Entry into new market
SOUTHERN SECURITY BANK CORP 12/31/2001 Completed Cash,Common Stock Entry into new market
STATE CAPITAL CORPORATION N/A Pending Cash Entry into new market
STERLING BANCSHARES, INC. 12/17/2001 Completed Cash,Common Stock In-market expansion
STERLING BANCSHARES, INC. 9/13/2002 Completed Cash In-market expansion
STERLING FINANCIAL CORP. N/A Pending Common Stock Entry into new market
SUN FINANCIAL CORPORATION N/A Pending Cash Entry into new market
SUNFLOWER BANKS, INC. 11/7/2001 Completed N/A Entry into new market
SUNFLOWER BANKS, INC. 9/9/2002 Completed N/A Entry into new market
SYNERGY FINANCIAL GROUP, INC. N/A Pending Cash In-market expansion
TEXAS REGIONAL BANCSHARES N/A Pending Common Stock Entry into new market
TEXAS REGIONAL BANCSHARES N/A Pending Common Stock Entry into new market
TEXAS UNITED BANCSHARES, INC. 7/31/2002 Completed Common Stock In-market expansion
<Caption>
DA:Total DA: DA:Price DA:Price
Accounting Merger of Hostile/ Price Price to to Tang to LTM Net
Type Equals? Unsolic? $0 Equity(x) Equity(x) Income(x)
PINNACLE BANCORP, INC. Purchase No No 17,600 1.95 1.95 9.23
PIPER BANKSHARES, INC. Purchase No No 3,843 1.41 1.41 12.2
PLAINVILLE BANCSHARES, INC. Purchase No No N/A N/A N/A N/A
POCAHONTAS BANCORP, INC. Purchase No No 4,512 0.88 0.89 34.15
POCAHONTAS BANCORP, INC. Purchase No No N/A N/A N/A N/A
POCAHONTAS BANCORP, INC. Purchase No No 8,000 1.42 1.42 10.54
PROSPERITY BANCSHARES, INC. Purchase No No 11,800 1.25 1.25 N/A
PROSPERITY BANCSHARES, INC. Purchase No No 21,000 1.49 1.5 18.2
PROSPERITY BANCSHARES, INC. Purchase No No 5,000 1.52 1.52 N/A
PROVIDENT BANCORP, INC. Purchase No No 28,100 1.66 1.66 24.65
PUTNAM-GREENE FINANCIAL CORP. Purchase No No 14,000 2.3 2.3 9.23
RANDOLPH BANK & TRUST CO. Purchase No No 2,889 1.01 1.01 14.66
REGIONS FINANCIAL CORPORATION Purchase No No 32,755 2.5 2.56 26.22
REGIONS FINANCIAL CORPORATION Purchase No No 26,563 2.31 2.31 16.92
REGIONS FINANCIAL CORPORATION Purchase No No 20,000 2.1 2.1 18.98
RICHMOND MUTUAL BANCORP INC. Purchase No No 4,282 0.81 0.91 N/A
S.B.C.P. BANCORP, INC. Purchase No No 6,765 1.22 1.22 N/A
SALIN BANCSHARES, INC. Purchase No No 3,606 1.3 1.3 18.68
SAVANNA-THOMSON INVESTMENT, INC. Purchase No No 9,400 1.63 1.63 93.07
SCHAUMBURG BANCSHARES, INC. Purchase No No 16,000 2.49 2.49 5.44
SECOND BANCORP, INC. Purchase No No 26,500 2.11 2.11 14.66
SHAY INVESTMENT SERVICES INC. Purchase No No 5,303 1.21 1.21 17.88
SOUTH FINANCIAL GROUP, INC. (THE) Purchase No No 68,000 2.37 2.37 17.66
SOUTHTRUST CORPORATION Purchase No No 38,880 2.73 2.73 5.19
SOUTHERN FINANCIAL BANCORP, INC. Purchase No No 17,047 1.99 1.99 58.13
SOUTHERN SECURITY BANK CORP Purchase No No 5,000 1.67 1.67 N/A
STATE CAPITAL CORPORATION Purchase No No 6,084 1.5 1.5 7.74
STERLING BANCSHARES, INC. Purchase No No 34,000 4.64 4.64 11.76
STERLING BANCSHARES, INC. Purchase No No 10,098 2.42 2.42 44.6
STERLING FINANCIAL CORP. Purchase No No 29,776 1.02 1.02 93.02
SUN FINANCIAL CORPORATION Purchase No No 1,310 1 1 N/A
SUNFLOWER BANKS, INC. Purchase No No 16,500 1.79 1.79 9.62
SUNFLOWER BANKS, INC. Purchase No No N/A N/A N/A N/A
SYNERGY FINANCIAL GROUP, INC. Purchase No No 2,098 0.81 0.81 N/A
TEXAS REGIONAL BANCSHARES Purchase No No 4,824 1.06 1.06 20.97
TEXAS REGIONAL BANCSHARES Purchase No No 1,704 0.66 0.66 N/A
TEXAS UNITED BANCSHARES, INC. Purchase No No 2,616 2.57 2.57 N/A
<Caption>
DA:Price DA:Price DA:Premium Target Tot Target Tang Target LTM
to Total to Total to Core Equity Cap Equity Cap Net Income
Assets(%) Dep(%) Dep(%) $0 $0 $0
PINNACLE BANCORP, INC. 15.18 17.18 10.18 9,029 9,029 1,906
PIPER BANKSHARES, INC. 13.6 15.12 4.93 2,728 2,728 315
PLAINVILLE BANCSHARES, INC. N/A N/A N/A 2,461 2,461 384
POCAHONTAS BANCORP, INC. 10.96 14.65 -2.06 4,498 4,438 129
POCAHONTAS BANCORP, INC. N/A N/A N/A 3,455 3,455 1,009
POCAHONTAS BANCORP, INC. 11.83 13.07 4.98 5,629 5,629 759
PROSPERITY BANCSHARES, INC. 14.35 18.75 4.69 9,447 9,447 68
PROSPERITY BANCSHARES, INC. 16.53 18.67 7.74 14,084 13,979 1,154
PROSPERITY BANCSHARES, INC. 17.75 20.22 7.89 3,287 3,287 38
PROVIDENT BANCORP, INC. 28.22 34.43 14.69 16,924 16,924 1,140
PUTNAM-GREENE FINANCIAL CORP. 18.14 21.46 15.79 6,089 6,089 1,517
RANDOLPH BANK & TRUST CO. 7.11 9.69 0.16 2,860 2,860 197
REGIONS FINANCIAL CORPORATION 19.35 21.57 15.43 13,103 12,808 1,249
REGIONS FINANCIAL CORPORATION 18.99 20.81 13.99 11,717 11,717 1,570
REGIONS FINANCIAL CORPORATION 18.71 20.92 13.35 9,514 9,514 1,054
RICHMOND MUTUAL BANCORP INC. 5.08 7.46 -0.88 5,625 5,031 -329
S.B.C.P. BANCORP, INC. 6.56 7.11 2.06 6,259 6,259 -126
SALIN BANCSHARES, INC. 14.28 20.94 6.61 2,765 2,765 193
SAVANNA-THOMSON INVESTMENT, INC. 16.72 18.81 7.81 5,766 5,766 101
SCHAUMBURG BANCSHARES, INC. 14.94 16.36 10.33 7,593 7,593 2,611
SECOND BANCORP, INC. 22.23 25.52 20.4 12,570 12,570 1,808
SHAY INVESTMENT SERVICES INC. 16.27 19.68 4.41 3,341 3,341 286
SOUTH FINANCIAL GROUP, INC. (THE) 31.62 39.25 29.49 26,949 26,845 3,851
SOUTHTRUST CORPORATION 20.8 23.27 17.86 14,240 14,240 7,491
SOUTHERN FINANCIAL BANCORP, INC. 16.5 18.1 9.88 7,666 7,666 262
SOUTHERN SECURITY BANK CORP 15.3 17.71 8.38 2,996 2,996 -84
STATE CAPITAL CORPORATION 14.33 15.91 7.06 4,056 4,056 786
STERLING BANCSHARES, INC. 28.71 30.92 32.08 7,324 7,324 2,892
STERLING BANCSHARES, INC. 12.19 13.45 10.96 5,942 5,942 182
STERLING FINANCIAL CORP. 13.61 17.05 0.46 28,471 28,471 312
SUN FINANCIAL CORPORATION 5.58 5.94 0 1,997 1,997 -312
SUNFLOWER BANKS, INC. 16.32 20.54 9.81 9,216 9,216 1,716
SUNFLOWER BANKS, INC. N/A N/A N/A 8,357 8,357 387
SYNERGY FINANCIAL GROUP, INC. 3.56 3.78 -1.01 3,034 3,034 -2,113
TEXAS REGIONAL BANCSHARES 9.45 10.49 0.71 4,299 4,299 230
TEXAS REGIONAL BANCSHARES 4.84 5.52 -3.44 4,242 2,648 -217
TEXAS UNITED BANCSHARES, INC. 3.13 3.43 2.36 5,224 5,224 58
<Caption>
Target Tot Target Tot Target Tot
Assets Deposits Core Dep
$0 $0 $0
PINNACLE BANCORP, INC. 115,952 102,431 84,190
PIPER BANKSHARES, INC. 28,249 25,410 22,598
PLAINVILLE BANCSHARES, INC. 29,083 23,384 19,897
POCAHONTAS BANCORP, INC. 40,205 30,073 25,880
POCAHONTAS BANCORP, INC. 30,192 26,604 23,332
POCAHONTAS BANCORP, INC. 67,633 61,230 47,650
PROSPERITY BANCSHARES, INC. 82,204 62,935 50,170
PROSPERITY BANCSHARES, INC. 127,055 112,479 90,666
PROSPERITY BANCSHARES, INC. 28,174 24,728 21,704
PROVIDENT BANCORP, INC. 99,569 81,619 76,096
PUTNAM-GREENE FINANCIAL CORP. 77,178 65,226 50,111
RANDOLPH BANK & TRUST CO. 40,623 29,808 18,663
REGIONS FINANCIAL CORPORATION 169,253 151,828 129,246
REGIONS FINANCIAL CORPORATION 139,847 127,641 107,645
REGIONS FINANCIAL CORPORATION 106,922 95,600 78,522
RICHMOND MUTUAL BANCORP INC. 83,601 56,952 46,925
S.B.C.P. BANCORP, INC. 103,141 95,155 58,218
SALIN BANCSHARES, INC. 25,247 17,220 12,727
SAVANNA-THOMSON INVESTMENT, INC. 56,226 49,973 46,538
SCHAUMBURG BANCSHARES, INC. 95,054 86,792 82,278
SECOND BANCORP, INC. 119,225 103,851 68,288
SHAY INVESTMENT SERVICES INC. 30,537 25,977 20,406
SOUTH FINANCIAL GROUP, INC. (THE) 215,029 173,258 133,181
SOUTHTRUST CORPORATION 186,944 167,096 137,994
SOUTHERN FINANCIAL BANCORP, INC. 92,313 84,137 76,547
SOUTHERN SECURITY BANK CORP 32,686 28,225 23,928
STATE CAPITAL CORPORATION 42,450 38,245 28,723
STERLING BANCSHARES, INC. 118,408 109,969 83,161
STERLING BANCSHARES, INC. 66,607 60,350 43,425
STERLING FINANCIAL CORP. 213,303 170,226 120,000
SUN FINANCIAL CORPORATION 25,606 23,498 21,499
SUNFLOWER BANKS, INC. 101,108 80,323 74,234
SUNFLOWER BANKS, INC. 68,923 58,041 49,390
SYNERGY FINANCIAL GROUP, INC. 58,865 55,516 49,674
TEXAS REGIONAL BANCSHARES 51,038 46,002 36,326
TEXAS REGIONAL BANCSHARES 35,250 30,895 26,063
TEXAS UNITED BANCSHARES, INC. 83,536 76,249 67,614
</Table>
D-5
<Table>
<Caption>
THE CONTINUUM COMPANY, L.L.C. ACQUIRING BRIDGEVIEW BANK, N.A.
THIRD FEDERAL SAVINGS & LOAN ASSOC. OF CLEVELAND ACQUIRING COMMUNITY PLUS SAVINGS BANK
TONGANOXIE BANKSHARES, INC. ACQUIRING SECOND CENTURY FINANCIAL
TRICO BANCSHARES ACQUIRING NORTH STATE NATIONAL BANK
TRUSTMARK CORPORATION ACQUIRING NASHOBA BANCSHARES, INC.
UMPQUA HOLDINGS CORPORATION ACQUIRING LINN-BENTON BANK
UNION COMMUNITY BANCORP ACQUIRING MONTGOMERY FINANCIAL CORP
UNIONBANCAL CORPORATION ACQUIRING FIRST WESTERN BANK
UNITED BANCOR, LTD ACQUIRING BISMARCK BANCSHARES, INC.
UNITED COMMUNITY BANCORP ACQUIRING COMMUNITY BANCSHARES, INC.
UNITED COMMUNITY BANKS, INC. ACQUIRING PEOPLES BANCORP, INC.
UNITED COMMUNITY FINANCIAL CORP. ACQUIRING POTTERS FINANCIAL CORPORATION
UNITED HERITAGE BANK ACQUIRING COMMUNITY NATIONAL BANK OF MID-FLORIDA
VALLEY VIEW BANCSHARES, INC. ACQUIRING GUARANTY BANCSHARES CORP.
WASHINGTON TRUST BANCORP ACQUIRING FIRST FINANCIAL CORP.
WESTAMERICA BANCORPORATION ACQUIRING KERMAN STATE BANK
WESTERN SIERRA BANCORP ACQUIRING CENTRAL CALIFORNIA BANK
YADKIN VALLEY BANK & TRUST CO. ACQUIRING MAIN STREET BANKSHARES, INC.
ZIONS BANCORPORATION ACQUIRING FRONTIER STATE BANK
<Caption>
Buyer Buyer Buyer
Name City State
THE CONTINUUM COMPANY, L.L.C. The Continuum Company, L.L.C. New York NY
THIRD FEDERAL SAVINGS & LOAN ASSOC. OF CLEVELAND Third Federal Savings & Loan Assoc. of Cleveland Cleveland OH
TONGANOXIE BANKSHARES, INC. Tonganoxie Bankshares, Inc. Tonganoxie KS
TRICO BANCSHARES TriCo Bancshares Chico CA
TRUSTMARK CORPORATION Trustmark Corporation Jackson MS
UMPQUA HOLDINGS CORPORATION Umpqua Holdings Corporation Portland OR
UNION COMMUNITY BANCORP Union Community Bancorp Crawfordsville IN
UNIONBANCAL CORPORATION UnionBanCal Corporation San Francisco CA
UNITED BANCOR, LTD United Bancor, Ltd Dickinson ND
UNITED COMMUNITY BANCORP United Community Bancorp Hickory NC
UNITED COMMUNITY BANKS, INC. United Community Banks, Inc. Blairsville GA
UNITED COMMUNITY FINANCIAL CORP. United Community Financial Corp. Youngstown OH
UNITED HERITAGE BANK United Heritage Bank Orlando FL
VALLEY VIEW BANCSHARES, INC. Valley View Bancshares, Inc. Overland Park KS
WASHINGTON TRUST BANCORP Washington Trust Bancorp Westerly RI
WESTAMERICA BANCORPORATION Westamerica Bancorporation San Rafael CA
WESTERN SIERRA BANCORP Western Sierra Bancorp Cameron Park CA
YADKIN VALLEY BANK & TRUST CO. Yadkin Valley Bank & Trust Co. Elkin NC
ZIONS BANCORPORATION Zions Bancorporation Salt Lake City UT
<Caption>
Target Target Target Announce
Name City State Date
THE CONTINUUM COMPANY, L.L.C. Bridgeview Bank, N.A. Oklahoma City OK 7/31/2002
THIRD FEDERAL SAVINGS & LOAN ASSOC. OF CLEVELAND Community Plus Savings Bank Rochester Hills MI 8/19/2002
TONGANOXIE BANKSHARES, INC. Second Century Financial Perry KS 5/2/2002
TRICO BANCSHARES North State National Bank Chico CA 10/7/2002
TRUSTMARK CORPORATION Nashoba Bancshares, Inc. Memphis TN 9/7/2001
UMPQUA HOLDINGS CORPORATION Linn-Benton Bank Albany OR 8/21/2001
UNION COMMUNITY BANCORP Montgomery Financial Corp Crawfordsville IN 7/24/2001
UNIONBANCAL CORPORATION First Western Bank Simi Valley CA 12/19/2001
UNITED BANCOR, LTD Bismarck Bancshares, Inc. Bismarck ND 8/31/2001
UNITED COMMUNITY BANCORP Community Bancshares, Inc. Wilkesboro NC 8/5/2002
UNITED COMMUNITY BANKS, INC. Peoples Bancorp, Inc. Carrollton GA 7/6/2001
UNITED COMMUNITY FINANCIAL CORP. Potters Financial Corporation East Liverpool OH 9/6/2001
UNITED HERITAGE BANK Community National Bank of Mid-Florida Lake Mary FL 4/15/2002
VALLEY VIEW BANCSHARES, INC. Guaranty Bancshares Corp. Kansas City KS 12/8/2001
WASHINGTON TRUST BANCORP First Financial Corp. Providence RI 11/13/2001
WESTAMERICA BANCORPORATION Kerman State Bank Kerman CA 2/25/2002
WESTERN SIERRA BANCORP Central California Bank Sonora CA 11/15/2001
YADKIN VALLEY BANK & TRUST CO. Main Street BankShares, Inc. Statesville NC 1/23/2002
ZIONS BANCORPORATION Frontier State Bank Show Low AZ 8/19/2002
<Caption>
Completion Trans Consider Reason
Date Status Type for Trans
THE CONTINUUM COMPANY, L.L.C. N/A Pending Cash Alternative to starting new bank
THIRD FEDERAL SAVINGS & LOAN ASSOC. OF CLEVELAND N/A Pending N/A Entry into new market
TONGANOXIE BANKSHARES, INC. 7/10/2002 Completed N/A Entry into new market
TRICO BANCSHARES N/A Pending Cash,Common Stock In-market expansion
TRUSTMARK CORPORATION 12/14/2001 Completed Cash In-market expansion
UMPQUA HOLDINGS CORPORATION 12/27/2001 Completed Cash,Common Stock In-market expansion
UNION COMMUNITY BANCORP 1/2/2002 Completed Cash,Common Stock In-market expansion
UNIONBANCAL CORPORATION 5/13/2002 Completed Cash,Common Stock In-market expansion
UNITED BANCOR, LTD 1/4/2002 Completed Cash,Common Stock Entry into new market
UNITED COMMUNITY BANCORP N/A Pending Cash,Common Stock In-market expansion
UNITED COMMUNITY BANKS, INC. 11/6/2001 Completed Common Stock Entry into new market
UNITED COMMUNITY FINANCIAL CORP. 4/1/2002 Completed Cash In-market expansion
UNITED HERITAGE BANK N/A Pending Common Stock Other
VALLEY VIEW BANCSHARES, INC. 1/18/2002 Completed Cash In-market expansion
WASHINGTON TRUST BANCORP 4/16/2002 Completed Cash,Common Stock Entry into new market
WESTAMERICA BANCORPORATION 6/21/2002 Completed Common Stock In-market expansion
WESTERN SIERRA BANCORP 4/1/2002 Completed Cash,Common Stock In-market expansion
YADKIN VALLEY BANK & TRUST CO. 7/31/2002 Completed Cash,Common Stock Entry into new market
ZIONS BANCORPORATION N/A Pending Common Stock In-market expansion
<Caption>
DA:Total DA: DA:Price
Accounting Merger of Hostile/ Price Price to to Tang
Type Equals? Unsolic? $0 Equity(x) Equity(x)
THE CONTINUUM COMPANY, L.L.C. Purchase No No 5,814 1.47 1.71
THIRD FEDERAL SAVINGS & LOAN ASSOC. OF CLEVELAND Other No No N/A N/A N/A
TONGANOXIE BANKSHARES, INC. Purchase No No N/A N/A N/A
TRICO BANCSHARES Purchase No No 31,808 2.31 2.31
TRUSTMARK CORPORATION Purchase No No 27,550 2.18 2.18
UMPQUA HOLDINGS CORPORATION Purchase No No 20,026 1.95 1.95
UNION COMMUNITY BANCORP Purchase No No 18,508 1.08 1.08
UNIONBANCAL CORPORATION Purchase No No 44,613 2.2 2.2
UNITED BANCOR, LTD Purchase No No 25,000 2.01 2.04
UNITED COMMUNITY BANCORP Purchase No No 35,799 2.03 2.03
UNITED COMMUNITY BANKS, INC. Purchase No No 14,303 1.67 1.67
UNITED COMMUNITY FINANCIAL CORP. Purchase No No 23,445 1.7 1.7
UNITED HERITAGE BANK Purchase Yes No N/A N/A N/A
VALLEY VIEW BANCSHARES, INC. Purchase No No N/A N/A N/A
WASHINGTON TRUST BANCORP Purchase No No 38,840 2.1 2.1
WESTAMERICA BANCORPORATION Purchase No No 16,129 1.36 1.36
WESTERN SIERRA BANCORP Purchase No No 9,173 1.74 1.74
YADKIN VALLEY BANK & TRUST CO. Purchase No No 27,583 1.77 1.77
ZIONS BANCORPORATION Purchase No No 10,881 1.54 1.54
<Caption>
DA:Price DA:Price DA:Price DA:Premium Target Tot Target Tang
to LTM Net to Total to Total to Core Equity Cap Equity Cap
Income(x) Assets(%) Dep(%) Dep(%) $0 $0
THE CONTINUUM COMPANY, L.L.C. 22.98 18.06 20.87 10.18 3,952 3,405
THIRD FEDERAL SAVINGS & LOAN ASSOC. OF CLEVELAND N/A N/A N/A N/A 3,574 3,571
TONGANOXIE BANKSHARES, INC. N/A N/A N/A N/A 2,851 2,851
TRICO BANCSHARES 14.96 20.89 23.1 15.68 13,053 13,053
TRUSTMARK CORPORATION 12.89 15.55 18.11 13.37 12,662 12,662
UMPQUA HOLDINGS CORPORATION 13.26 16.69 19.09 9.95 9,707 9,707
UNION COMMUNITY BANCORP 48.34 13.32 18.11 1.78 16,909 16,909
UNIONBANCAL CORPORATION 15.34 18.75 20.68 12.14 17,720 17,720
UNITED BANCOR, LTD 16.02 15.39 16.95 9.13 12,450 12,227
UNITED COMMUNITY BANCORP 32.94 25.3 29.49 19.11 12,558 12,558
UNITED COMMUNITY BANKS, INC. 32.81 19.12 23.54 11.23 6,770 6,770
UNITED COMMUNITY FINANCIAL CORP. 12.18 14.5 18.37 8.66 12,945 12,945
UNITED HERITAGE BANK N/A N/A N/A N/A 7,876 7,876
VALLEY VIEW BANCSHARES, INC. N/A N/A N/A N/A 16,349 14,487
WASHINGTON TRUST BANCORP 18.29 22.3 31.18 18.81 18,476 18,476
WESTAMERICA BANCORPORATION 17.24 15.03 17.08 7.62 11,698 11,698
WESTERN SIERRA BANCORP 21.76 12.73 13.85 7.22 4,972 4,972
YADKIN VALLEY BANK & TRUST CO. 32.96 10.89 12.15 5.87 14,586 14,586
ZIONS BANCORPORATION N/A 10.44 11.25 4.28 6,843 6,843
<Caption>
Target LTM Target Tot Target Tot Target Tot
Net Income Assets Deposits Core Dep
$0 $0 $0 $0
THE CONTINUUM COMPANY, L.L.C. 253 32,199 27,859 23,664
THIRD FEDERAL SAVINGS & LOAN ASSOC. OF CLEVELAND N/A 42,195 38,068 37,274
TONGANOXIE BANKSHARES, INC. 407 34,139 25,607 23,418
TRICO BANCSHARES 2,013 144,195 130,420 108,884
TRUSTMARK CORPORATION 2,138 177,226 152,099 111,338
UMPQUA HOLDINGS CORPORATION 1,430 113,630 99,380 93,030
UNION COMMUNITY BANCORP 377 136,855 100,635 74,000
UNIONBANCAL CORPORATION 2,546 208,216 188,800 175,601
UNITED BANCOR, LTD 1,561 162,426 147,472 139,963
UNITED COMMUNITY BANCORP 1,040 135,393 116,186 90,907
UNITED COMMUNITY BANKS, INC. 436 74,815 60,764 51,229
UNITED COMMUNITY FINANCIAL CORP. 1,803 151,466 119,526 104,020
UNITED HERITAGE BANK 159 91,528 83,050 61,777
VALLEY VIEW BANCSHARES, INC. 1,679 194,785 152,979 119,721
WASHINGTON TRUST BANCORP 2,124 174,148 124,577 108,235
WESTAMERICA BANCORPORATION 920 105,535 92,878 54,617
WESTERN SIERRA BANCORP 397 67,873 62,401 50,820
YADKIN VALLEY BANK & TRUST CO. 783 237,080 212,484 191,351
ZIONS BANCORPORATION -214 100,639 93,356 85,468
</Table>
D-6
APPENDIX E
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the
Fiscal Year Ended December 31, 2001
COMMISSION FILE NUMBER 0-13397
ZACHARY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
LOUISIANA 72-0981148
(State or other jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
4743 MAIN STREET, ZACHARY, LOUISIANA 70791
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (225)654-2701
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $10.00 Par Value
(Title of Class)
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 past 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or other information
statements incorporated by reference in Part III of this Form 10- KSB or any
amendments to this Form 10-KSB ______.
The registrant's revenues for the fiscal year ended December 31, 2001 were $8.0
million.
The aggregate market value of the voting stock held by non-affiliates of the
registrant was $3,657,740 (182,887 Shares @ $20 per share). For purposes of this
computation, shares owned by executive officers, directors and 5% shareholders
have been excluded.
As of March 1, 2002, 193,667 shares of Common Stock $10.00 par value, were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report for Fiscal Year Part I and Part II
Ended December 31, 2001
Definitive Proxy Statement for 2002 Part I and Part III
Annual Meeting of Stockholders
E-1
10-KSB TABLE OF CONTENTS
<Table>
PART I:
ITEM 1. Description of Business E-3
Supplemental Financial Information:
Average Balance Sheets and Interest Yield Analysis E-6
Interest Differential E-6
Securities Portfolio E-6
Loan Portfolio E-6
Non-Performing Loans E-7
Summary of Loan Loss Experience E-7
Allowance for Loan Losses E-7
Deposits E-8
Return on Equity and Assets E-9
ITEM 2. Description of Properties E-9
ITEM 3. Legal Proceedings E-9
ITEM 4. Submission of Matters to a VOTE of Security Holders E-9
PART II:
ITEM 5. Market for the Registrant's Common Stock
and Related Stockholder Matters E-9
ITEM 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations E-9
ITEM 7. Financial Statements and Supplemental Data E-10
ITEM 8. Disagreements with Accountants on Accounting and
Financial Disclosures E-10
PART III:
ITEM 9. Directors and Executive Officers of the Registrant E-10
ITEM 10. Executive Compensation E-10
ITEM 11. Security Ownership of Certain Beneficial Owners
and Management E-10
ITEM 12. Certain Relationships and Related Transactions E-10
ITEM 13. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K E-10
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING E-11
SIGNATURES E-12
</Table>
E-2
PART I
ITEM 1. DESCRIPTION OF BUSINESS
THE REGISTRANT
Zachary Bancshares, Inc., (the "Corporation") was incorporated in Louisiana on
October 10, 1983. At the annual shareholders meeting on April 11, 1984, the
shareholders of the Bank of Zachary (the "Bank") approved a merger agreement
pursuant to which Consolidated Bank of Louisiana, a wholly owned subsidiary of
Zachary Bancshares, Inc., was merged into the Bank. On May 17, 1984, the Bank
was merged into Consolidated Bank of Louisiana and the surviving Bank, Bank of
Zachary, became a wholly owned subsidiary of Zachary Bancshares, Inc., through a
one-for-one exchange for all of the outstanding common stock of the Bank. The
reorganization was accounted for as pooling- of-interests. Zachary Bancshares,
Inc. is now engaged, through its subsidiary, in the banking business. The Bank
is the Corporation's principal asset and primary source of revenue.
THE BANK
The Bank of Zachary was incorporated under the laws of the State of Louisiana on
March 15, 1904, and was licensed by the Louisiana State Banking Department and
commenced operations as a Louisiana State chartered bank on July 2, 1904. The
Bank's securities consist of one class of common stock, of which there were
72,000 shares held 100%, by its parent, Zachary Bancshares, Inc. since May 17,
1984.
The Bank presently has a main office at 4743 Main Street, Zachary, East Baton
Rouge Parish, Louisiana and two branch offices. One branch is located at 2110
Church Street, Zachary, East Baton Rouge Parish, Louisiana and the second branch
is located at 13444 Hooper Road, Baton Rouge, East Baton Rouge Parish,
Louisiana.
Bank of Zachary is engaged in primarily the same business operations as any
independent commercial bank, with special emphasis in retail banking, including
the acceptance of checking and savings deposits, and the making of commercial,
real estate, personal, home improvement, automobile and other installment and
term loans. It also offers among its services, travelers' cheques, safe deposit
boxes, note collection, and other customary bank services to its customers, with
the exception of trust services. In addition, the Bank offers drive-up teller
services and night depository facilities. Bank of Zachary is insured under the
Federal Deposit Insurance Act but is not a member of the Federal Reserve System.
The Bank's loan portfolio consists of three main areas. (1) real estate
construction and mortgage loans; (2) loans to individuals for household, family
and other consumer expenditures; and (3) commercial and industrial loans. As of
December 31, 2001, these three categories accounted for approximately 63%, 9%,
and 28%, respectively, of the Bank's loan portfolio. (See Note D to the
financial statements for a detailed analysis of the loan portfolio.)
The majority of the Bank's deposits are attracted from individuals and small
business-related sources from the market area surrounding our branches. The
average deposit balance is relatively small; however, this makes the Bank less
subject to the adverse effects from the loss of a substantial depositor who may
be seeking higher yields in other markets or have need of money otherwise on
deposit in the Bank. In addition to the deposits mentioned above, the Bank is a
depository for some local governments as well as other governmental agencies.
The time deposit balances of all public funds were $5.2 million and demand
deposits of $1.9 million as of December 31, 2001. These depositors are
considered by management to be of importance to the Bank. Although no agreement
or understanding exists between these customers and the Bank, management has no
reason to believe that these deposit balances will substantially decrease or
increase. In connection with the deposits of these public funds, the Bank is
required to pledge securities to secure such deposits.
As of December 31, 2001, the Bank had a total of 4,683 accounts representing
non-interest bearing demand deposits and NOW accounts with a total balance of
$29.2 million; 106 accounts representing money market accounts with a total
balance of $2.4 million; 2,327 savings accounts with a total balance of $10.5
million; and 1,375 other time deposit accounts with a total balance of $42.9
million. There are no securities held by the Bank that are subject to repurchase
agreements.
E-3
The Bank holds no patents, registered trademarks, licenses (other than licenses
required to be obtained from appropriate bank regulatory agencies), franchises
or concessions. There has been no significant change in the kinds of services
offered by the Bank during the last three fiscal years.
The Bank has not engaged in any research activities relating to the development
of new services or the improvement of existing services except in the normal
course of the business activities. The Bank presently has no plans for any new
line of business requiring the investment of a material amount to total assets.
Most of the Bank's business originates from within East Baton Rouge Parish,
Louisiana; however, some business is obtained from the parishes immediately
surrounding East Baton Rouge Parish. There has been no material effect upon the
Bank's capital expenditures, earnings, or competitive position as a result of
federal, state, or local environmental regulations.
COMPETITION
The financial industry in which the Bank operates is very competitive. The Bank
competes with national and state banks, credit unions, savings and loan
associations, brokerage firms, investment companies and others for deposits and
loans. The Bank's general market area, which is East Baton Rouge Parish and the
Feliciana Parishes, has a population approximating 400,000 people. The primary
market of the Bank is the City of Zachary with a population of approximately
12,000 people. This is the location of the main office and one of its two
branches. The secondary marketing area is the northern portion of East Baton
Rouge Parish, where the Central branch is located.
East Baton Rouge Parish, in which the City of Zachary is located, contains in
excess of 142 banking offices. In the primary market area, there are four major
regional banks aggressively pursuing loans, deposits and other accounts.
Interest rates on loans made and deposits received were mostly deregulated by
law in 1983, but are substantially the same among banks operating in the area
served. Competition among banks for loan customers is generally governed by such
factors as loan terms, interest charges, restrictions on borrowers and
compensating balances, and the services offered by the Bank. Competition for
deposits is influenced by general and local economic conditions, changes in
interest rate pricing, services offered, and convenience of locations. EMPLOYEES
As of December 31, 2001, the Bank had 39 full time employees, and 9 part-time
employees. Management considers its relationship with the employees to be good.
SUPERVISION AND REGULATION
Zachary Bancshares, Inc., a bank holding company within the meaning of the Bank
Holding Company Act of 1956 (the "Act"), as amended, is subject to the
provisions of the Act and to regulation by the Board of Governors of the Federal
Reserve System (the "Board").
The Act requires Zachary Bancshares, Inc. to file with the Board an annual
report containing such information as the Board may require. The Board is
authorized by the Act to examine the Corporation and all of its activities. The
activities that may be engaged in by the Corporation and its subsidiaries are
limited by the Act to those so closely related to banking or managing or
controlling banks as to be a proper incident thereto. In determining whether a
particular activity is a proper incident to banking or managing or controlling
banks, the Board must consider whether its performance by an affiliate of a
holding company can reasonably be expected
E-4
to produce benefits to the public, such as greater convenience, increased
competition, or gains in efficiency that outweigh possible adverse effects, such
as undue concentration of resources, decreased or unfair competition, conflicts
of interest, or unsound banking practices.
The Board has adopted regulations implementing the provisions of the Act with
respect to the activities of bank holding companies. Such regulations reflect a
determination by the Board that the following activities are permissible for
bank holding companies: (1) making, for its own account or for the account of
others, loans such as would be made, for example, by a mortgage, finance or
factoring company; (2) operating as an industrial bank; (3) servicing loans; (4)
acting as a fiduciary; (5) acting as an investment or financial advisor,
including acting in such capacity for a mortgage investment trust or real estate
investment trust; (6) leasing personal or real property, where the lease is to
serve as the functional equivalent of an extension of credit to the lessee of
the property; (7) investing in community welfare corporations or projects; (8)
providing bookkeeping and data processing services for a bank holding company
and its subsidiaries, or storing and processing certain other banking,
financial, or related economic data; (9) acting as an insurance agent,
principally insurance issued in connection with extensions of credit by the
holding company or any of its subsidiaries; (10) underwriting credit life and
credit accident and health insurance related to extensions of credit; (11)
providing courier services for documents and papers related to banking
transactions; (12) providing management consulting advice to non-affiliated
banks; and (13) selling money orders, travelers cheques and U.S. Savings Bonds.
In each case, the Corporation must secure the approval of the Board prior to
engaging in any of these activities.
Whether or not a particular non-banking activity is permitted under the Act, the
Board is authorized to require a holding company to terminate any activity or
divest itself of any non-banking subsidiary if in its judgment the activity or
subsidiaries would be unsound.
Under the Act and the Board's regulations, a bank holding company and its
subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit or provision of any property or
services.
In addition to the limitations of Louisiana law with respect to the ownership of
banks, as described below, the ownership or control of voting shares of a second
bank by a bank holding company such as Zachary Bancshares, Inc. is restricted by
the Act unless the prior approval of the Board is obtained. The Act prohibits
the Board from approving an application from a bank holding company to acquire
shares of a bank located outside the state in which the operations of the
holding company's subsidiaries are principally conducted, unless such an
acquisition is specifically authorized by statute of the state in which the Bank
whose shares are to be acquired is located.
Under the Louisiana Bank Holding Company Act of 1962, as amended (the "Louisiana
Act"), one-bank holding companies are authorized to operate in Louisiana
provided the activities of the non banking subsidiaries are limited to the
ownership of real estate and improvements, computer services, equipment leasing
and other directly related banking activities. The Louisiana Act, as amended in
1984, authorizes multi-bank holding companies within the state. The State
Commissioner of Financial Institutions is authorized to administer the Louisiana
Act by the issuance of orders and regulations.
E-5
In addition, Louisiana banking laws were changed in 1985 and 1986 to allow inter
parish banking, limited statewide branching began January 1, 1987, and regional
banking began July 1, 1987. These changes have allowed Louisiana and the
regional banks and other financial institutions to engage in a wider range of
activities than were previously allowed to such institutions. Also, effective
January 1, 1989, Louisiana's reciprocal interstate banking law allowed bank
holding companies domiciled in any state of the United States to acquire
Louisiana banks and bank holding companies, if the state in which the bank
holding company is domiciled allows Louisiana banks and bank holding companies
the same opportunities.
The Bank is subject to regulation and regular examination by the Federal Deposit
Insurance Corporation and the Office of Financial Institutions of the State of
Louisiana. Applicable regulations relate to reserves, investments, loans,
issuance of securities, establishment of branches and other aspects of its
operations.
SUPPLEMENTAL FINANCIAL INFORMATION
The following data contains information concerning the business and operations
of Zachary Bancshares, Inc. and its subsidiary, Bank of Zachary. This
information should be read in conjunction with the Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
AVERAGE BALANCE SHEETS AND INTEREST YIELD ANALYSIS
The following information called for by Item 1 is included in the 2001 Annual
Report and is incorporated herein by reference.
Average Balance Sheets and Interest Rate Analysis for the years ended
December 31, 2001 and 2000.
INTEREST DIFFERENTIAL
The following information called for by Item 1 is included in the 2001 Annual
Report and is incorporated herein by reference.
Interest Differential for the year ended December 31, 2001.
SECURITIES PORTFOLIOS
The following information called for by Item 1 is included in the 2001 Annual
Report in the section titled "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS", Note
C-Securities and is incorporated herein by reference.
Amortized cost and fair values of securities available for sale at December
31, 2001 and 2000.
LOAN PORTFOLIO
The following information called for by Item 1 is included in the 2001 Annual
Report in the section titled "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS", Note
D-Loans and is incorporated herein by reference.
An analysis of the loan portfolio at December 31, 2001 and 2000.
E-6
The following table represents the detail maturities and sensitivity of loans to
change in interest rates at December 31, 2001 and 2000:
<Table>
<Caption>
($ in Thousands)
INTEREST RATE MATURITY 2001 2000
VARIABLE LOANS 1 YEAR OR LESS:
Commercial Loans $ 1,355 $ 2,406
Mortgage Loans 57 96
Installment Loans -- --
TOTAL VARIABLE LOANS 1 YEAR OR LESS 1,412 2,502
FIXED RATE LOANS 1 YEAR OR LESS:
Commercial Loans 6,643 5,412
Mortgage Loans 13,502 14,034
Installment Loans 2,204 1,819
TOTAL FIXED RATE LOANS 1 YEAR OR LESS 22,349 21,265
FIXED RATE LOANS OVER 1 YR THRU 5 YRS:
Commercial Loans 8,347 10,378
Mortgage Loans 23,440 25,382
Installment Loan 2,705 2,504
TOTAL FIXED RATE LOANS OVER 1 YR THRU 5 YRS 34,492 38,264
FIXED RATE LOANS OVER 5 YEARS:
Commercial Loans 86 86
Mortgage Loans 373 415
Installment Loans 8 18
TOTAL FIXED RATE LOANS OVER 5 YEARS 467 519
GRAND TOTAL LOANS $ 58,720 $ 62,550
</Table>
NON-PERFORMING LOANS
The following information called for by Item 1 is included in the 2001 Annual
Report in the section titled "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS", Note
D-Loans and is incorporated herein by reference.
Impaired loans as of December 31, 2001 and 2000.
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes the allowance for loan losses:
($ in Thousands)
<Table>
<Caption>
Year Ended December 31
2001 2000
Amount of Loans Outstanding at End of Period $ 58,720 $ 62,550
Daily Average Amount of Loans $ 60,849 $ 63,047
Balance of Allowance for Loan Losses
at Beginning of Period $ 1,170 $ 965
Loans Charged Off:
Real Estate -- (13)
Commercial, Industrial and Agricultural -- --
Individuals and Other Loans (162) (89)
Total Loans Charged Off (162) (102)
Recoveries of Loans previously charged off:
Real Estate -- --
Commercial, Industrial and Agricultural -- --
Individuals and Others 18 26
Total Recoveries 18 26
Net Loans Charged Off (144) (76)
Additions to Allowance Charged to Expense 271 281
Balance at End of Period $ 1,297 $ 1,170
Ratio of Net Charge-Offs to Total Loans Outstanding .25% .12%
Ratio of Net Charge-Offs to Average Loans Outstanding .24% .12%
</Table>
ALLOWANCE FOR LOAN LOSSES
The following information called for by Item 1 included in the 2001 Annual
Report in the section titled, "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS", Note
A-Summary of Significant Accounting Policies and is incorporated herein by
reference.
E-7
Allowance for loan losses methodology
The allowance for loan losses has been allocated as presented below:
($ in Thousands)
<Table>
<Caption>
2001 2000
Allowance for Allowance for
Loan Losses Loan Losses
Real Estate Loans $ 335 $ 333
Commercial, Industrial & Agricultural Loans 418 184
Loans to Individuals and Other Loans 14 12
Unallocated 530 641
Total Allowance for Loan Losses $ 1,297 $ 1,170
</Table>
Management reviews the allowance for loan loss on a monthly basis. We consider
historical loss experience as well as economic factors that affect our local
economy. Specific risk factors that are inherent with certain types of lending
are also considered.
Management's internal Watch List identifies loans requiring special supervision
because of unexpected changes in various risk conditions. The Watch List may
include both accruing and non-accrual loans. The Watch List is routinely
evaluated and may vary dramatically based upon the borrower's status as well as
industry and economic trends. Past experience shows that our greatest exposures
are in the area of commercial and real estate mortgage loans. Real Estate loans
represent 63.5% of the loan portfolio and Commercial, Industrial and
Agricultural loans represent approximately 27.7% of the portfolio.
After reviewing these factors and reviewing the loan portfolio through internal
procedures, it is management's opinion that current allowance levels are
adequate.
DEPOSITS
The average daily balances and average rates paid on deposits for the
reported periods are listed below:
<Table>
<Caption>
($ in Thousands) 2001 2000
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE PAID BALANCE RATE PAID
Noninterest Bearing
Demand Deposits $ 19,365 --% $ 19,007 --%
Savings and Now
Accounts 20,739 2.24% 21,317 2.92%
Insured Money Market
Accounts 1,973 1.92% 2,672 1.95%
Certificates of
Deposit 40,666 5.32% 33,576 5.43%
TOTAL DEPOSITS $ 82,743 3.22% $ 76,572 3.26%
</Table>
Maturities of time deposits of $100,000 or more at December 31, 2001, are
summarized below:
($ in Thousands)
<Table>
3 Months or Less $ 7,611
Over 3 through 12 Months 10,458
Over 12 Months 1,540
TOTAL $100,000 MATURITIES $19,609
</Table>
E-8
RETURN ON EQUITY AND ASSETS
The table below summarizes significant financial ratios for the years ended
December 31, 2001 and 2000:
<Table>
<Caption>
2001 2000
Average Total Assets $ 94,012 $ 87,388
Average Stockholders' Equity $ 10,519 $ 9,387
Net Income $ 1,221 $ 1,142
Earnings per Share-Common $ 6.30 $ 5.90
Cash Dividends Paid per Share-Common $ 2.40 $ 2.25
Return on Average Total Assets 1.30% 1.31%
Return on Average Stockholders' Equity 11.61% 12.17%
Dividend Payout Percentage 38.10% 38.14%
Average Equity to Average Assets 11.19% 10.74%
</Table>
ITEM 2. DESCRIPTION OF PROPERTIES
The Bank owns five pieces of property described below: (a) The Bank's main
office facility is located at 4743 Main Street, Zachary, Louisiana. The 2.7155
acres of land for this facility are carried at a cost of $310 thousand and the
cost of construction for this 16,333 square feet building was $2.7 million. The
building includes the executive offices, operations offices, computer operations
and paying and receiving functions. An 1,800 square foot storage building is
also on the site. (b) A parcel of land located in East Baton Rouge Parish,
Louisiana at 13444 Hooper Road was purchased in 1976 for branch expansion. The
lot is being carried at a cost of $18,260 and construction and improvements have
totaled $170,310. This branch is known as the Central Branch. (c) Another parcel
adjacent to this location was purchased in 1978 at a cost of $55,000. This may
be used for future expansion. (d) In 1977 a parcel was purchased at 2210 Highway
64 for a branch site at the cost of $10,000. The construction cost with
improvements totaled $75,831. This is known as the Plaza Branch. (e) Another
parcel adjacent to this location was purchased later in 1977 at a cost of $6,500
for parking.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which the Corporation or a subsidiary
is a party of which any of its property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 2001.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Corporation's stock is not listed on any security exchange. Due to the lack
of an active trading market, Zachary Bancshares, Inc. does not have the
available information to furnish the high and low sales prices or the range of
bid and ask quotations for its stock.
The Corporation has 601 stockholders of record as of March 1, 2002.
Cash dividends of $2.40 and $2.25 per share were paid for the years 2001 and
2000. Dividends are payable only out of retained earnings and current earnings.
The amount of dividends payable by the Bank may be restricted by law and require
regulatory approval.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following information called for by ITEM 6 is included in the Corporation's
2001 Annual Report in the Section titled "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
E-9
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The following financial statements of the Corporation in its 2001 Annual Report
are hereby specifically incorporated by reference.
AUDITED FINANCIAL STATEMENTS:
Independent Auditor's Report
Consolidated Balance Sheets December 31, 2001 and 2000
Consolidated Statements of Income
for the years ended December 31, 2001 and 2000
Consolidated Statements of Changes in
Stockholders' Equity for the years ended
December 31, 2001 and 2000
Consolidated Statements of Cash Flows
for the years ended December 31, 2001 and 2000
Notes to Consolidated Financial Statements
December 31, 2001 and 2000
Condensed Consolidated Statements of Income for the Quarter
periods in the years ended December 31, 2001 and 2000
ITEM 8. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
No disagreement with the Corporation's independent accountants on accounting and
financial disclosure has occurred during the past 24 months.
PART III
ITEMS 9, 10, 11, and 12
The information required by items 9, 10, 11 and 12, is included in the
Corporation's definitive Proxy Statement, for the 2002 Annual Meeting of
Stockholders and is incorporated herein by reference.
ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this Annual Report on Form 10KSB (1) The
financial statements of Zachary Bancshares, Inc. in the Corporation's 2001
Annual Report are incorporated by reference in Item 7.
(2) Other financial statement schedules are either omitted because they are
inapplicable or included in the financial statements or related notes.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter ended
December 31, 2001.
(c) Exhibits
(3)(i)(ii) Articles of Incorporation and bylaws of Zachary Bancshares,
Inc. are incorporated by reference to the Corporation's
Registration Statement on Form S-14 filed on February 17,
1986, with the Securities and Exchange Commission.
(12) 2001 Annual Report of Zachary Bancshares, Inc.
(21) Subsidiary of the Registrant: Bank of Zachary, incorporated
under the laws of the State of Louisiana
(22) Definitive Proxy Statement for the 2002 Annual Meeting of the
Stockholders' of Zachary Bancshares, Inc.
E-10
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
annual report. The financial statements are prepared in accordance with
generally accepted accounting principles and include some amounts that are
necessarily based on management's informed estimates and judgments, with
consideration given to materiality. All financial information contained in this
annual report is consistent with that in the financial statements.
Management fulfills its responsibility for the integrity, objectivity,
consistency and fair presentation of the financial statements and financial
information through an accounting system and related internal accounting
controls that are designed to provide reasonable assurance that assets are
safeguarded and that transactions are authorized and recorded in accordance with
established policies and procedures. The concept of reasonable assurance is
based on the recognition that the cost of a system of internal accounting
controls should not exceed the related benefits. As an integral part of the
system of internal accounting controls, Zachary Bancshares, Inc. has a
professional staff that monitors compliance with and assesses the effectiveness
of the system of internal accounting controls and coordinates audit coverage
with the independent public accountants.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with management, and the independent public
accountants to review matters relating to financial reporting, internal
accounting control and the nature, extent and results of the audit effort. The
independent public accountants have direct access to the Audit Committee with or
without management present.
The financial statements as of December 31, 2001, were examined by Hannis T.
Bourgeois, LLP, independent public accountants, who rendered an independent
professional opinion on the financial statements prepared by management.
E-11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ZACHARY BANCSHARES, INC.
Dated: March 20, 2002 /s/ Harry S. Morris, Jr.
Harry S. Morris, Jr.
President
Pursuant to the requirements of the Securities Act of 1934, as amended, this
report has been signed by the following persons in the capacities indicated on:
Dated: March 20, 2002
/s/ Russell Bankston Chairman and Director
Russell Bankston
/s/ Rodney Samuel Johnson Vice Chairman and Director
Rodney Samuel Johnson
/s/ Harry S. Morris, Jr. President and Director (Principal
Harry S. Morris, Jr. Executive Officer)
/s/ Winston E. Canning Secretary and Director
Winston E. Canning
/s/ J. Larry Bellard Treasurer
J. Larry Bellard
/s/ Hardee M. Brian Director
Hardee M. Brian
/s/ Howard L. Martin, M.D. Director
Howard L. Martin, M.D.
/s/ A. C. Mills, III Director
A. C. Mills, III
E-12
ZACHARY
BANCSHARES, INC.
2001
Annual
Report
E-13
ZACHARY BANCSHARES, INC. AND SUBSIDIARY
TABLE OF CONTENTS
<Table>
President's Message ............................................................. 2
Independent Auditor's Report .................................................... 3
Financial Statements:
Consolidated Balance Sheets December 31, 2001 and 2000 ...................... 4
Consolidated Statements of Income
for the years ended December 31, 2001 and 2000 ........................... 5
Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 2001 and 2000 ................................... 6
Consolidated Statements of Cash Flows for the years ended
December 31, 2001 and 2000 ............................................... 7-8
Notes to Consolidated Financial Statements December 31, 2001 and 2000 ....... 9-23
Condensed Consolidated Balance Sheets December 31, 2001, 2000, 1999,
1998, and 1997 ........................................................... 24
Condensed Consolidated Statements of Income for the years ended
December 31, 2001, 2000, 1999, 1998, and 1997 ............................ 24
Average Balance Sheets and Interest Rate Analysis for the years ended
December 31, 2001 and 2000 ............................................... 25
Interest Differential for the year ended December 31, 2001 .................. 26
Condensed Consolidated Statements of Income for the quarter periods
in the years ended December 31, 2001 and 2000 ............................ 27
Management's Discussion and Analysis ............................................. 28-32
Officers ......................................................................... 33
Board of Directors ............................................................... 33
Bank Locations ................................................................... 33
</Table>
E-14
ZACHARY BANCSHARES, INC.
March 21, 2002
Dear Shareholders:
Zachary Bancshares, Inc. had income of $1,221,000 in 2001 as compared to
$1,142,000 in 2000. Our Board of Directors paid a cash dividend of $2.40 per
share in 2001 as compared to $2.25 per share in 2000 and our 2001 return on
average equity was 11.61%.
The Bank's total assets increased from $90,122,000 as of December 31, 2000 to
$96,714,000 as of December 31, 2001. Total deposits increased from $79,267,000
in 2000 to $85,074,000 in 2001.
Zachary has finally received approval to set up its own school system by the
fall of 2003. This should be a tremendous boost to our economy in that it will
attract people who want to live in a community with a stable and quality public
school system while still enjoying the benefits of living near Baton Rouge.
Beaver Creek Golf Course and the Copper Mill Golf Club are due to open in 2002.
Each golf course will have residential lots surrounding them and should attract
new people to our community. The increase in population will in turn attract
more commercial businesses to Zachary. All of this growth should help the Bank
in the form of new deposits and loans.
During 2002, the Bank will install the Intercept computer software system. This
is a superior system to what we have now and will provide many new enhancements.
The new teller system includes excellent controls and audit trails, while
providing more decision making data for the tellers, and improved customer
service capabilities. Our statement imaging equipment will allow us to mail
images rather than physical checks in our customer's statements. This will
reduce our postage expense and processing time. Our loans can be processed much
faster because the new system interfaces into the loan system and pre-fills
customer information in the loan documents. The statement imaging system also
allows more bank personnel to view a customer's transactions at their work
stations and help them with their banking needs. These are just a few of what
our new capabilities will be, as we implement this new system.
I would like to thank our Directors, Officers and employees for their efforts in
making 2001 another good year and to you our shareholders for your continued
support.
Sincerely,
/s/ HARRY S. MORRIS, JR.
Harry S. Morris, Jr.
President
E-15
REPORT OF INDEPENDENT AUDITOR
HANNIS T. BOURGEOIS, LLP
CERTIFIED PUBLIC ACCOUNTANTS
2322 TREMONT DRIVE, SUITE 200
BATON ROUGE, LA 70809
January 9, 2002
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, 2001 and 2000, and the
related Consolidated Statements of Income, Changes in 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 auditing standards generally accepted
in the United States of America. 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, 2001 and 2000, and the results of their
operations, changes in their stockholders' equity and their cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States of America.
Respectfully submitted,
/s/ HANNIS T. BOURGEOIS, LLP
E-16
ZACHARY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000
($ in Thousands)
<Table>
<Caption>
ASSETS
2001 2000
--------- ----------
Cash and Due from Banks $ 2,719 $ 2,785
Interest Bearing Deposits in Other Institutions 33 24
Reserve Funds Sold 925 6,950
Securities Available for Sale (Amortized
Cost of $31,025 and $14,346) 31,249 14,333
Loans 58,720 62,550
Less: Allowance for Loan Losses (1,297) (1,170)
--------- ----------
57,423 61,380
Bank Premises and Equipment 3,557 3,888
Other Real Estate 28 --
Accrued Interest Receivable 602 548
Other Assets 178 214
--------- ----------
TOTAL ASSETS $ 96,714 $ 90,122
========= ==========
LIABILITIES
Deposits
Noninterest Bearing $ 18,370 $ 17,420
Interest Bearing 66,704 61,847
--------- ----------
85,074 79,267
Accrued Interest Payable 207 258
Other Liabilities 116 194
--------- ----------
TOTAL LIABILITIES 85,397 79,719
STOCKHOLDERS' EQUITY
Common Stock - $10 par value;
authorized 2,000,000 shares; issued
216,000 shares 2,160 2,160
Surplus 1,480 1,480
Retained Earnings 7,976 7,219
Accumulated Other Comprehensive Income (Loss) 148 (9)
Treasury Stock - 22,333 Shares, at Cost (447) (447)
--------- ----------
TOTAL STOCKHOLDERS' EQUITY 11,317 10,403
--------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 96,714 $ 90,122
========= ==========
</Table>
The accompanying notes are an integral part of these financial statements
E-17
ZACHARY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 2001 and 2000
($ in Thousands except per share data)
<Table>
<Caption>
2001 2000
------------ ------------
INTEREST INCOME:
Interest and Fees on Loans $ 5,402 $ 5,691
Interest on Securities 1,174 998
Other Interest Income 301 185
------------ ------------
TOTAL INTEREST INCOME 6,877 6,874
INTEREST EXPENSE:
Interest Expense on Deposits 2,665 2,500
Interest Expense on Borrowings -- 63
------------ ------------
TOTAL INTEREST EXPENSE 2,665 2,563
NET INTEREST INCOME 4,212 4,311
PROVISION FOR LOAN LOSSES 271 281
------------ ------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,941 4,030
OTHER INCOME:
Service Charges on Deposit Accounts 656 618
Gain on Sales of Premises & Equipment -- 1
Gain on Sale/Call of Securities 34 --
Other Operating Income 413 245
------------ ------------
TOTAL OTHER INCOME 1,103 864
------------ ------------
INCOME BEFORE OTHER EXPENSES 5,044 4,894
OTHER EXPENSES:
Salaries and Employee Benefits 1,799 1,800
Occupancy Expense 244 238
Equipment Expense 461 400
Net Other Real Estate Expense (220) (148)
Other Operating Expenses 908 867
------------ ------------
TOTAL OTHER EXPENSES 3,192 3,157
------------ ------------
INCOME BEFORE INCOME TAXES 1,852 1,737
APPLICABLE INCOME TAX 631 595
------------ ------------
NET INCOME $ 1,221 $ 1,142
============ ============
PER SHARE
NET INCOME $ 6.30 $ 5.90
============ ============
CASH DIVIDENDS $ 2.40 $ 2.25
============ ============
</Table>
The accompanying notes are an integral part of these financial statements.
E-18
ZACHARY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
for the years ended December 31, 2001 and 2000
($ in Thousands)
<Table>
<Caption>
ACCUMULATED
OTHER TOTAL
COMMON RETAINED COMPREHENSIVE TREASURY STOCKHOLDERS'
STOCK SURPLUS EARNINGS INCOME (LOSS) STOCK EQUITY
------------ ------------ ------------ ------------ ------------ ------------
BALANCES, JANUARY 1, 2000 $ 2,160 $ 1,480 $ 6,513 $ (293) $ (447) $ 9,413
Comprehensive Income:
Net Income 1,142 1,142
Change in Unrealized
Gain (Loss) on Securities
Available for Sale 284 284
Less: Reclassification
Adjustment -- --
------------
Total Comprehensive Income 1,426
Cash Dividends (436) (436)
------------ ------------ ------------ ------------ ------------ ------------
BALANCES, DECEMBER 31, 2000 $ 2,160 $ 1,480 $ 7,219 $ (9) $ (447) $ 10,403
Comprehensive Income:
Net Income 1,221 1,221
Change in Unrealized
Gain (Loss) on Securities
Available for Sale 191 191
Less: Reclassification
Adjustment (34) (34)
------------
Total Comprehensive Income 1,378
Cash Dividends (464) (464)
------------ ------------ ------------ ------------ ------------ ------------
BALANCES, DECEMBER 31, 2001 $ 2,160 $ 1,480 $ 7,976 $ 148 $ (447) $ 11,317
============ ============ ============ ============ ============ ============
</Table>
The accompanying notes are an integral part of these financial statements.
E-19
ZACHARY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 2001 and 2000
($ in Thousands)
<Table>
<Caption>
2001 2000
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,221 $ 1,142
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Deferred Tax Benefit (31) (34)
Provision for Loan Losses 271 281
Provision for Depreciation and Amortization 389 328
Stock Dividends on Federal Home Loan Bank Stock (16) (34)
Net Amortization (Accretion) of Securities 6 (23)
Gain on Sale of Other Real Estate (221) (151)
Gain on Sales of Bank Premises & Equipment -- (1)
Gain on Sale/Call of Securities (34) --
(Increase) Decrease in Accrued Interest Receivable (54) (46)
(Increase) Decrease in Other Assets (12) (25)
Increase (Decrease) in Accrued Interest Payable (51) 64
Increase (Decrease) in Other Liabilities (79) 73
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,389 1,574
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (Increase) Decrease in Reserve Funds Sold 6,025 (5,525)
Purchases of Securities Available for Sale (25,860) (969)
Maturities or Calls of Securities Available for Sale 7,500 1,500
Principal Payments on Mortgage Backed Securities 1,726 1,055
Net Decrease (Increase) in Loans 3,658 (1,374)
Purchases of Premises and Equipment (59) (59)
Proceeds from Sales of Other Real Estate 221 151
Proceeds from Sale of Bank Premises & Equipment -- 1
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (6,789) (5,220)
</Table>
(CONTINUED)
E-20
ZACHARY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
for the years ended December 31, 2001 and 2000
($ in Thousands)
<Table>
<Caption>
2001 2000
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) in Borrowed Funds -- (2,000)
Net Increase (Decrease) in Demand Deposits,
NOW Accounts and Savings Accounts 1,869 (1,890)
Net Increase (Decrease) in Certificates of Deposit 3,938 7,591
Cash Dividends (464) (436)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,343 3,265
Net (Decrease) in Cash and Cash Equivalents (57) (381)
Cash and Cash Equivalents -
Beginning of Year 2,809 3,190
------------ ------------
Cash and Cash Equivalents -
End of Year $ 2,752 $ 2,809
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Noncash Investing Activities:
Change in Unrealized Gain or (Loss)
On Securities Available for Sale $ 238 $ 429
============ ============
Change in Deferred Tax Effect on
Unrealized Gain or (Loss) on Securities
Available for Sale $ 81 $ 146
============ ============
Other Real Estate Acquired
in Settlement of Loans $ 28 $ --
============ ============
Cash Payments for:
Interest Paid on Deposits $ 2,716 $ 2,437
============ ============
Income Tax Payments $ 637 $ 626
============ ============
</Table>
The accompanying notes are an integral part of these financial statements.
E-21
ZACHARY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001 and 2000
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 that are generally practiced
within the banking industry. The methods of applying those principles conform to
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.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The determination of the adequacy of the allowance for loan losses is
based on estimates that are particularly susceptible to significant changes in
the economic environment and market conditions. In connection with the
determination of the estimated losses on loans, management obtains independent
appraisals for significant collateral.
The Bank's loans are generally secured by specific items of collateral
including real property, consumer assets, and business assets. Although The Bank
has a diversified loan portfolio, a substantial portion of its debtors' ability
to honor their contracts is dependent on local economic conditions.
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.
E-22
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 movements. The Bank had no securities
classified as held to maturity or trading at December 31, 2001 or 2000.
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.
LOANS
Loans are stated at principal amounts outstanding, less the allowance
for loan losses. Interest on commercial and individual loans is accrued daily
based on the principal outstanding.
Generally, The Bank discontinues the accrual of interest income when a
loan becomes 90 days past due as to principal or interest. When a loan is placed
on non-accrual status, previously recognized but uncollected interest is
reversed to income or charged to the allowance for loan losses. Subsequent cash
receipts on non-accrual loans are accounted for on the cost recovery method,
until the loans qualify for return to accrual status. Loans are returned to
accrual status when all the principal and interest amounts contractually due are
brought current and future payments are reasonably assured. The Bank classifies
loans as impaired if, based on current information and events, it is probable
that The Bank will be unable to collect the scheduled payments of principal and
interest when due according to the contractual terms of the loan agreement.
Impairment is measured on a loan-by-loan basis by either the present value of
the expected future cash flows discounted at the loan's effective interest rate
or the loan's observable market price or based on the fair value of the
collateral if the loan is collateral-dependent.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level that in
management's judgment is adequate to absorb credit losses inherent in the loan
portfolio. The allowance for loan losses is based upon management's review and
evaluation of the loan portfolio. Factors considered in the establishment of the
allowance for loan losses include management's evaluation of specific loans; the
level and composition of classified loans; historical loss experience; results
of examinations by regulatory agencies; an internal asset review process;
expectations of future economic conditions and their impact on particular
borrowers; and other judgmental factors. Allowances for impaired loans are
generally determined based on collateral values or the present value of
estimated cash flows.
E-23
Although management uses available information to recognize losses on
loans, because of uncertainties associated with local economic conditions,
collateral values, and future cash flows on impaired loans, it is reasonably
possible that a material change could occur in the allowance for loan losses in
the near term. However, the amount of the change that is reasonably possible
cannot be estimated.
The allowance for loan losses is based on estimates of potential future
losses, and ultimate losses may vary from the current estimates. These estimates
are reviewed periodically and as adjustments become necessary, the effect of the
change in estimate is charged to operating expenses in the period incurred. All
losses are charged to the allowance for loan losses when the loss actually
occurs or when management believes that the collection of the principal is
unlikely. Recoveries are credited to the allowance at the time of recovery.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation is provided at rates based upon estimated useful
service lives using the straight-line 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
foreclosure or negotiated settlement. The carrying value of these properties 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 tax
purposes. Thus provisions for deferred taxes are recorded in recognition of such
timing differences.
Deferred taxes are provided utilizing a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carry forwards and deferred tax liabilities are
recognized for taxable temporary differences.
E-24
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.
The Company and its subsidiary file a consolidated federal income tax
return. In addition, The Company in accordance with state statutes files a
Louisiana state income tax return.
EARNINGS PER COMMON SHARE
Basic EPS is computed by dividing income applicable to common shares by
the weighted average shares outstanding; no dilution for any potentially
convertible shares is included in the calculation. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the Company. At
December 31, 2001, 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 years ended December 31, 2001 and
2000, respectively.
STATEMENTS OF CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents
includes cash and due from banks, and interest bearing deposits in other
institutions.
COMPREHENSIVE INCOME
Components of comprehensive income are revenues, expenses, gains and
losses that under GAAP are included in comprehensive income but excluded from
net income. The components of comprehensive income are disclosed in the
Statements of Changes in Stockholders' Equity for all periods presented.
NOTE B - CASH AND DUE FROM BANKS -
The Bank is required by federal law to maintain cash reserve balances.
The average cash reserve balance required for 2001 and 2000 was $718 thousand
and $685 thousand, respectively.
E-25
NOTE C - SECURITIES -
Amortized costs and fair values of securities available for sale at
December 31, 2001 and 2000 are summarized as follows:
($ In Thousands)
<Table>
<Caption>
2001
-------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ------------ ------------ ------------
U.S. Government
Agency Securities $ 16,134 $ 260 $ (78) $ 16,316
Mortgage-Backed Securities 14,228 112 (70) 14,270
Equity Securities 663 -- -- 663
------------ ------------ ------------ ------------
TOTAL $ 31,025 $ 372 $ (148) $ 31,249
============ ============ ============ ============
</Table>
<Table>
<Caption>
2000
-------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ------------ ------------ ------------
U.S. Government
Agency Securities $ 9,499 $ 24 $ (105) $ 9,418
Mortgage-Backed Securities 4,130 69 (1) 4,198
Collateralized Mortgage
Obligations 70 -- -- 70
Equity Securities 647 -- -- 647
------------ ------------ ------------ ------------
Total $ 14,346 $ 93 $ (106) $ 14,333
============ ============ ============ ============
</Table>
The amortized cost and fair values of securities available for sale as
of December 31, 2001 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.
<Table>
<Caption>
AMORTIZED FAIR
($ In Thousands) COST VALUE
------------ ------------
After One but within Five Years $ 1,498 $ 1,566
After Five but within Ten Years 5,642 5,735
After Ten Years 8,994 9,015
------------ ------------
$ 16,134 $ 16,316
============ ============
</Table>
E-26
Securities available for sale with a carrying value of $9.6 million and
$10.3 million at December 31, 2001 and 2000, were pledged as collateral on
public deposits and for other purposes as required or permitted by law.
The Bank has invested in Federal Home Loan Bank and First National
Bankers Bankshares Stock, which are included in Equity Securities and reflected
at cost in these financial statements. The Bank is required to hold FHLB stock
in order to have access to the funding products offered by the FHLB. The cost of
these securities approximates fair value at December 31, 2001 and 2000.
Gross realized gains from the sale or call of securities for the years
ended December 31, 2001 and 2000 are as follows:
<Table>
<Caption>
($ In Thousands) 2001 2000
------------ ------------
Realized Gains $ 34 $ --
------------ ------------
$ 34 $ --
============ ============
</Table>
NOTE D - LOANS -
An analysis of the loan portfolio at December 31, 2001 and 2000, is as
follows:
<Table>
<Caption>
2001 % OF 2000 % OF
($ In Thousands) BALANCES LOANS BALANCES LOANS
------------ ------------ ------------ ------------
Real Estate Loans - Mortgage $ 32,973 56.16% $ 34,882 55.77%
Real Estate Loans - Construction 4,301 7.32 4,791 7.66
Commercial and Industrial Loans 16,260 27.69 18,254 29.18
Loans to Farmers 18 .03 26 .04
Loans to Individuals 4,867 8.29 4,341 6.94
All Other Loans 301 .51 256 .41
------------ ------------ ------------ ------------
Total Loans $ 58,720 100.00% $ 62,550 100.00%
============ ============ ============ ============
</Table>
Impaired loans having recorded investments of $1,249 thousand at
December 31, 2001 have been recognized in conformity with SFAS No. 114 as
amended by SFAS No. 118. Impaired loans at December 31, 2000 were $656 thousand.
The allowance for loan losses related to these loans was $399 thousand at
December 31, 2001 and $131 thousand at December 31, 2000. Interest recognized on
impaired loans totaled $9 thousand and $26 thousand for the years ended December
31, 2001 and 2000, respectively. All non-accrual loans were considered impaired
at December 31, 2001 and 2000.
The Bank is permitted under the laws of the State of Louisiana to make
extensions of credit to its executive officers, directors and their affiliates
in the ordinary course of business. An analysis of the aggregate of these loans
for December 31, 2001 and 2000 are as follows:
<Table>
<Caption>
($ In Thousands) 2001 2000
----------- -----------
Balance - Beginning of Year $ 616 $ 499
New Loans 70 661
Repayments (120) (544)
----------- -----------
Balance - End of Year $ 566 $ 616
=========== ===========
</Table>
E-27
NOTE E - ALLOWANCE FOR LOAN LOSSES -
Following is a summary of the activity in the allowance for loan
losses:
<Table>
<Caption>
($ In Thousands) 2001 2000
------------ ------------
Balance - Beginning of Year $ 1,170 $ 965
Current Provision from Income 271 281
Recoveries of Amounts Previously Charged Off 18 26
Amounts Charged Off (162) (102)
------------ ------------
Balance - End of Year $ 1,297 $ 1,170
============ ============
Ratio of Allowance for Loan Losses
To Impaired Loans at End of Year 103.84% 178.18%
Ratio of Allowance for Loan Losses to
Loans Outstanding at End of Year 2.21% 1.87%
Ratio of Net Loans Charged Off to Average
Loans Outstanding for the year .24% .12%
</Table>
NOTE F - BANK PREMISES AND EQUIPMENT -
Bank premises and equipment costs and the related accumulated
depreciation at December 31, 2001 and 2000, are as follows:
<Table>
<Caption>
($ In Thousands) ACCUMULATED
ASSET COST DEPRECIATION NET
------------ ------------ ------------
DECEMBER 31, 2001:
LAND $ 400 $ -- $ 400
BANK PREMISES 3,007 316 2,691
FURNITURE AND EQUIPMENT 2,097 1,631 466
------------ ------------ ------------
$ 5,504 $ 1,947 $ 3,557
============ ============ ============
December 31, 2000:
Land $ 400 $ -- $ 400
Bank Premises 2,965 240 2,725
Furniture and Equipment 2,081 1,318 763
------------ ------------ ------------
$ 5,446 $ 1,558 $ 3,888
============ ============ ============
</Table>
The provision for depreciation charged to operating expenses was $389
thousand and $328 thousand respectively, for the years ended December 31, 2001
and 2000.
NOTE G - DEPOSITS -
Following is a detail of deposits as of December 31, 2001 and 2000:
<Table>
<Caption>
($ In Thousands) 2001 2000
------------ ------------
Noninterest Bearing Accounts $ 18,370 $ 17,420
NOW and Super NOW Accounts 10,789 12,447
Money Market Accounts 2,494 2,183
Savings Accounts 10,529 8,263
Certificates of Deposit Over $100,000 19,609 17,656
Other Certificates of Deposit 23,283 21,298
------------ ------------
$ 85,074 $ 79,267
============ ============
</Table>
E-28
Following is a detail of certificate of deposit maturities as of
December 31, 2001:
<Table>
<Caption>
($ In Thousands)
December 31, 2002 $ 37,389
December 31, 2003 3,356
December 31, 2004 1,099
December 31, 2005 640
December 31, 2006 & After 408
-----------
Total Certificates of Deposit $ 42,892
===========
</Table>
Interest expense on certificates of deposit over $100 thousand for the
years ended December 31, 2001 and 2000, amounted to $989 thousand and $879
thousand, respectively.
Public fund deposits at December 31, 2001 and 2000, were $7.2 million
and $8.6 million, respectively.
NOTE H - STOCKHOLDERS' EQUITY AND REGULATORY MATTERS -
Stockholders' Equity of The Company includes the undistributed earnings
of The Bank. The Company pays dividends 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,
2002, The Bank had retained earnings of $8.5 million of which $1.4 million was
available for distribution without prior regulatory approval.
The Company and The Bank are subject to various regulatory capital
requirements administered by federal and state banking agencies. Failure to meet
minimum regulatory capital requirements can initiate certain mandatory, and
possible additional discretionary actions by regulators that if undertaken,
could have a direct material affect on both The Company's and The Bank's
financial statements. Under the capital adequacy guidelines and the regulatory
framework for prompt corrective action, The Company and The Bank must meet
specific capital guidelines involving quantitative measures of assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Company and The Bank's capital amounts and
classifications are also subject to qualitative judgments by regulators about
components, risk weightings and other factors. Prompt corrective action
provisions are not applicable to Bank holding companies.
Quantitative measures established by regulation to ensure capital
adequacy require The Company and The Bank to maintain minimum amounts and
ratios. As detailed below, as of December 31, 2001 and 2000, The Company and The
Bank met all of the capital requirements to which they are subject. As of
December 31, 2001 and 2000, The Bank was categorized as well capitalized under
the regulatory framework for prompt corrective action. There are no conditions
or events since the most recent notification that management believes have
changed the prompt corrective action category.
E-29
Following is a summary of capital ratios of the Bank at December 31,
2001 and 2000. The ratios presented for The Bank do not differ from ratios for
The Company (consolidated) at December 31, 2001 and 2000.
<Table>
<Caption>
TO BE WELL
CAPITALIZED UNDER
ACTUAL REQUIRED FOR CAPITAL PROMPT CORRECTIVE
RATIOS ADEQUACY PURPOSES ACTION PROVISIONS
-------- -------------------- -----------------
AS OF DECEMBER 31, 2001:
TOTAL CAPITAL
(TO RISK-WEIGHTED ASSETS) 20.63% 8.00% 10.00%
TIER I CAPITAL
(TO RISK-WEIGHTED ASSETS) 19.37% 4.00% 6.00%
TIER I LEVERAGED CAPITAL
(TO AVERAGE ASSETS) 10.96% 4.00% 5.00%
</Table>
<Table>
<Caption>
TO BE WELL
CAPITALIZED UNDER
ACTUAL REQUIRED FOR CAPITAL PROMPT CORRECTIVE
RATIOS ADEQUACY PURPOSES ACTION PROVISIONS
-------- -------------------- -----------------
As of December 31,2000:
Total Capital
(To Risk-Weighted Assets) 18.36% 8.00% 10.00%
Tier I Capital
(To Risk-Weighted Assets) 17.11% 4.00% 6.00%
Tier I Leveraged Capital
(To Average Assets) 11.08% 4.00% 5.00%
</Table>
Under current regulations, the amount The Bank may loan to its Parent
may not exceed 10% of the Bank's capital and surplus. There were no loans
outstanding at December 31, 2001 and 2000.
NOTE I - EMPLOYEE BENEFIT PLANS -
The Bank has two plans which provide employee retirement benefits. The
Bank has a defined contribution Profit Sharing 401K Plan Trust and a Money
Purchase Retirement Plan. Each year the Board of Directors of The Bank
determines the total contribution to the plans.
The provisions of the Profit Sharing 401K Plan include two components,
the 401K component and the Profit Sharing component. The 401K component allows
eligible employees to voluntarily contribute 1% to 15% of gross regular pay to
the plan. The Bank matched one half of the employee's contribution to the first
of 7% of gross regular pay in 2001 and 2000. The Profit Sharing component
receives an optional allocation determined by the Board of Directors.
E-30
Under the provisions of the Money Purchase Retirement Plan, The Bank
makes a contribution of 3.50% of pay for each eligible employee. No contribution
is required by eligible participants of the plan.
The contributions charged to retirement expense for the plans in 2001
and 2000 are shown below:
<Table>
<Caption>
($ In Thousands) 2001 2000
----------- -----------
401K Bank Match $ 37 $ 33
Profit Sharing Contribution 27 30
Money Purchase Plan Contribution 42 38
----------- -----------
Total Retirement Expense $ 106 $ 101
=========== ===========
</Table>
NOTE J - OTHER OPERATING EXPENSES -
An analysis of Other Operating Expenses for the years ended December
31, 2001 and 2000, is as follows:
<Table>
<Caption>
($ In Thousands) 2001 2000
----------- -----------
Data Processing $ 134 $ 106
Computer and Office Expenses 163 156
Professional Fees 209 180
State Tax on Equity 101 111
Other 301 314
----------- -----------
Total Other Operating Expenses $ 908 $ 867
=========== ===========
</Table>
NOTE K - INCOME TAX -
The total provision for income taxes charged to income amounted to $631
thousand and $595 thousand for 2001 and 2000, respectively. The provisions
represent effective tax rates of 34% in 2001 and 2000.
Following is a reconciliation between income tax expense based on the
federal statutory tax rates and income taxes reported in the statements of
income.
<Table>
<Caption>
($ In Thousands) 2001 2000
----------- -----------
Income Taxes Based on Statutory
Rate - 34% in 2001 and 2000 $ 629 $ 591
Other - Net 2 4
----------- -----------
$ 631 $ 595
=========== ===========
</Table>
The components of consolidated income tax expense are:
<Table>
<Caption>
2001 2000
----------- -----------
Provision for Current Taxes $ 662 $ 629
(Credit) for Deferred Taxes (31) (34)
----------- -----------
$ 631 $ 595
=========== ===========
</Table>
A deferred income tax asset of $44 thousand and $94 thousand is
included in other assets at December 31, 2001 and 2000, respectively.
E-31
The deferred tax provision (credit) consists of the following timing
differences:
<Table>
<Caption>
($ In Thousands) 2001 2000
------------ ------------
Accumulated Depreciation for Tax Reporting
In Excess of Amount for Financial Reporting $ (31) $ 10
Provision for Loan Losses for Financial
Reporting in Excess of Amount for Tax (39) (74)
Accretion Income for Tax Reporting in
Excess of Financial Reporting (10) 9
Hospitalization Expense for Financial Reporting
in Excess of Amount for Tax Reporting 29 2
Write Down of Other Real Estate for Financial
reporting purposes in Excess of amount of
tax reporting purposes 13 9
FHLB Dividends for financial reporting
Purposes in excess of the amount for
Tax reporting purposes 7 10
------------ ------------
$ (31) $ (34)
============ ============
</Table>
The net deferred tax asset consists of the following components at
December 31, 2001 and 2000:
<Table>
<Caption>
($ in Thousands) 2001 2000
------------ ------------
Depreciation $ (44) $ (75)
Provision for Loan Losses 188 149
Accretion Income (2) (12)
Self-Insured Hospitalization Plan -- 29
Write Down of Other Real Estate 7 20
FHLB Stock Dividends (29) (22)
Unrealized (Gain) Loss on Securities
Available for Sale (76) 5
------------ ------------
Total Deferred Tax Asset $ 44 $ 94
============ ============
</Table>
NOTE L - OFF-BALANCE-SHEET INSTRUMENTS -
The Bank 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. These instruments involve, to varying degrees, elements of
credit risk in excess of the amount recognized in the balance sheets.
The Bank'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.
E-32
In the normal course of business The Bank has made commitments to
extend credit of $7.4 million as of December 31, 2001. Commitments as of
December 31, 2001 include unfunded loan commitments aggregating $7.2 million and
letters of credit of $159 thousand.
The Bank maintains two open lines of credit to assist in the management
of short-term liquidity. The first is with its correspondent bank, First
National Bankers Bank and totals $2.5 million. The second is with the Federal
Home Loan Bank of Dallas and has approximately $8.0 million available at
December 31, 2001. If funded, this line would be secured by investments in FHLB
Capital Stock and certain loans qualifying as collateral. Qualifying loans
totaled approximately $33 million at December 31, 2001. There were no funds
drawn on either of these two lines of credit at December 31, 2001 or 2000.
NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS -
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value:
Cash and Short-Term Investments - For those short-term instruments, the
carrying amount is a reasonable estimate of fair value.
Securities - Fair value of securities held to maturity and available
for sale is based on quoted market prices. If a quoted market price is not
available, fair value is estimated using quoted market prices for similar
securities.
Loans - The fair value for loans is estimated using discounted cash
flow analyses, with interest rates currently being offered for similar loans to
borrowers with similar credit rates. Loans with similar classifications are
aggregated for purposes of the calculations. The allowance for loan loss, which
was used to measure the credit risk, is subtracted from loans.
Deposits - The fair value of demand deposits, savings account, and
certain money market deposits is the amount payable at the reporting date. The
fair value of fixed-maturity certificates of deposit is estimated using
discounted cash flow analyses, with interest rates currently offered for
deposits of similar remaining maturities.
Commitments to Extend Credit and Standby Letters of Credit - The fair
values of commitments to extend credit and standby letters of credit do not
differ significantly from the commitment amount and are therefore omitted from
this disclosure.
E-33
The estimated approximate fair values of The Bank's financial
instruments as of December 31, 2001 and 2000 are as follows:
<Table>
<Caption>
2001
------------------------------
CARRYING
AMOUNT FAIR
------------ ------------
Financial Assets:
Cash and Short-Term Investments $ 3,677 $ 3,677
Securities 31,249 31,249
Loans-Net 57,423 56,368
------------ ============
$ 92,349 $ 91,294
============ ============
Financial Liabilities:
Deposits $ 85,074 $ 82,728
============ ============
</Table>
<Table>
<Caption>
2000
------------------------------
CARRYING FAIR
AMOUNT VALUE
------------ ------------
Financial Assets:
Cash and Short-Term Investments $ 9,759 $ 9,759
Securities 14,333 14,333
Loans-Net 61,380 60,161
------------ ------------
$ 85,472 $ 84,253
============ ============
Financial Liabilities:
Deposits $ 79,267 $ 76,954
============ ============
</Table>
NOTE N - 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 of related borrowers in excess of legal lending limits. Included in
Cash and Due from Banks, and Reserve Funds Sold are amounts deposited in various
institutions in excess of federally insured limits.
NOTE O - COMMITMENTS AND 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.
E-34
NOTE P - FINANCIAL INFORMATION - PARENT COMPANY ONLY -
The financial statements for Zachary Bancshares, Inc. (Parent Company)
are presented below:
BALANCE SHEETS
December 31, 2001 and 2000
($ in Thousands)
<Table>
<Caption>
2001 2000
----------- -----------
ASSETS:
Cash $ 488 $ 483
Investment in Subsidiary 10,829 9,920
Other Assets -- 2
----------- -----------
TOTAL ASSETS $ 11,317 $ 10,405
=========== ===========
LIABILITIES:
Income Tax Payable -- 2
----------- -----------
TOTAL LIABILITIES -- 2
STOCKHOLDERS' EQUITY:
Common Stock 2,160 2,160
Surplus 1,480 1,480
Retained Earnings 8,124 7,210
Treasury Stock (447) (447)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 11,317 10,403
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,317 $ 10,405
=========== ===========
</Table>
STATEMENTS OF INCOME
for the years ended December 31, 2001 and 2000
($ in Thousands)
<Table>
<Caption>
2001 2000
------------ ------------
INCOME:
Dividend from Subsidiary $ 480 $ 475
EXPENSES:
Operating Expenses 13 9
------------ ------------
Income before Equity in Undistributed
Net Income of Subsidiary 467 466
Equity in Undistributed Net Income of Subsidiary 751 672
------------ ------------
Net Income before Income Taxes 1,218 1,138
Applicable Income Tax Expense (Benefit) (3) (4)
------------ ------------
NET INCOME $ 1,221 $ 1,142
============ ============
</Table>
E-35
STATEMENTS OF CASH FLOWS
for the years ended December 31, 2001 and 2000
($ in Thousands)
<Table>
<Caption>
2001 2000
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,221 $ 1,142
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Equity in Undistributed Net Income
of Subsidiary (751) (672)
Decrease in Other Assets 2 2
(Decrease) in Income Tax Payable (2) (2)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 470 470
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends Paid (465) (436)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (465) (436)
------------ ------------
Increase in Cash 5 34
Cash - Beginning of Year 483 449
------------ ------------
Cash - End of Year $ 488 $ 483
============ ============
</Table>
E-36
ZACHARY BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2001, 2000, 1999, 1998, and 1997
($ in Thousands)
<Table>
<Caption>
ASSETS
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
Cash and Cash Equivalents $ 2,752 $ 2,809 $ 3,190 $ 4,517 $ 2,577
Securities 32,174 21,283 16,858 23,748 27,320
Loans 57,423 61,380 60,287 51,513 45,370
Other Assets 4,365 4,650 4,960 4,010 2,539
---------- ---------- ---------- ---------- ----------
Total Assets $ 96,714 $ 90,122 $ 85,295 $ 83,788 $ 77,806
========== ========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 85,074 $ 79,267 $ 73,566 $ 74,450 $ 69,181
Borrowed Funds -- -- 2,000 -- --
Other Liabilities 323 452 316 435 410
Stockholders' Equity 11,317 10,403 9,413 8,903 8,215
---------- ---------- ---------- ---------- ----------
Total Liabilities and Stockholders' Equity $ 96,714 $ 90,122 $ 85,295 $ 83,788 $ 77,806
========== ========== ========== ========== ==========
SELECTED RATIOS:
Loans to Assets 59.37% 68.11% 70.68% 61.48% 58.31%
Loans to Deposits 67.50% 77.43% 81.95% 69.19% 65.58%
Deposits to Assets 87.96% 87.96% 86.25% 88.86% 88.91%
Equity to Assets 11.70% 11.54% 11.04% 10.63% 10.56%
Return on Avg Assets 1.30% 1.31% 1.42% 1.29% 1.23%
Return on Avg Equity 11.61% 12.17% 13.79% 12.71% 11.71%
</Table>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 2001, 2000, 1999, 1998, and 1997
($ in Thousands except Per Share Data)
<Table>
<Caption>
2001 2000 1999 1998 1997
----------- ----------- ----------- ----------- -----------
Interest Income $ 6,877 $ 6,874 $ 6,431 $ 6,092 $ 5,472
Interest Expense 2,665 2,563 2,282 2,325 2,148
----------- ----------- ----------- ----------- -----------
Net Interest Income 4,212 4,311 4,149 3,767 3,324
Provision for Loan Losses 271 281 180 191 31
Net Interest Income after Provision
for Loan Losses 3,941 4,030 3,969 3,576 3,293
Other Income 1,103 864 954 665 658
Other Expenses 3,192 3,157 3,055 2,657 2,555
----------- ----------- ----------- ----------- -----------
Income before Income Taxes 1,852 1,737 1,868 1,584 1,396
Applicable Income Tax Expense 631 595 652 536 469
----------- ----------- ----------- ----------- -----------
Net Income $ 1,221 $ 1,142 $ 1,216 $ 1,048 $ 927
=========== =========== =========== =========== ===========
Per Share:
Net Income $ 6.30 $ 5.90 $ 6.28 $ 5.41 $ 4.79
=========== =========== =========== =========== ===========
Cash Dividends $ 2.40 $ 2.25 $ 2.10 $ 1.90 $ 1.75
=========== =========== =========== =========== ===========
Book Value - End of Year $ 58.44 $ 53.72 $ 48.61 $ 45.97 $ 42.42
=========== =========== =========== =========== ===========
</Table>
E-37
ZACHARY BANCSHARES, INC. AND SUBSIDIARY
AVERAGE BALANCE SHEETS AND INTEREST RATE ANALYSIS
for the years ended December 31, 2001 and 2000
($ in Thousands)
<Table>
<Caption>
2001 2000
------------------------------------------- ----------------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------------ ------------ ------------ ------------ ------------ ---------
ASSETS
Interest Earning Deposits
and Reserve Funds $ 7,511 $ 301 4.01% $ 3,023 $ 185 6.11%
Securities: Taxable 19,335 1,174 6.07 15,385 998 6.49
Loans 60,849 5,402 8.88 63,047 5,691 9.03
------------ ------------ ------------ ------------ ------------ ---------
Total Earning Assets 87,695 6,877 7.84% $ 81,455 6,874 8.44%
------------ ------------ ------------ ---------
Allowance for Loan Losses (1,251) (1,083)
Nonearning Assets 7,568 7,016
------------ ------------
Total Assets $ 94,012 $ 87,388
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
FHLB Borrowings $ -- $ -- --% $ 973 $ 63 6.46%
Savings/NOW Accounts 20,739 464 2.24 21,317 623 2.92
Money Market Accounts 1,973 38 1.92 2,672 52 1.95
Certificates of Deposit 40,666 2,163 5.32 33,576 1,825 5.43
------------ ------------ ------------ ------------ ------------ ---------
Total Interest Bearing
Liabilities 63,378 2,665 4.20% 58,538 2,563 4.38%
------------ ------------ ------------ ---------
Demand Deposits 19,365 19,007
Other Liabilities 750 456
Stockholders' Equity 10,519 9,387
------------ ------------
Total Liabilities and
Stockholders' Equity $ 94,012 $ 87,388
============ ============
Net Interest Income $ 4,212 $ 4,311
============ ============
Net Interest Income - Spread 3.64% 4.06%
============ =========
Net Interest Income as a percent
of Total Earning Assets 4.80% 5.29%
============ =========
</Table>
E-38
ZACHARY BANCSHARES, INC. AND SUBSIDIARY
INTEREST DIFFERENTIAL
for the year ended December 31, 2001
($ in Thousands)
<Table>
<Caption>
2001 OVER 2000
--------------------------------------------
CHANGE
ATTRIBUTABLE TO TOTAL
---------------------------- INCREASE
VOLUME RATE (DECREASE)
------------ ------------ ------------
INTEREST EARNING ASSETS:
Reserve Funds Sold $ 274 $ (158) $ 116
Securities 257 (81) 176
Loans (198) (91) (289)
------------ ------------ ------------
TOTAL INTEREST INCOME 333 (330) 3
INTEREST BEARING LIABILITIES:
Bank Borrowings (63) -- (63)
Savings and NOW Accounts (16) (142) (158)
Insured Money Market Accounts (14) (1) (15)
Certificates of Deposit 384 (46) 338
------------ ------------ ------------
TOTAL INTEREST EXPENSE 291 (189) 102
------------ ------------ ------------
Increase (Decrease) in Interest
Differential $ 42 $ (141) $ (99)
============ ============ ============
</Table>
E-39
ZACHARY BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
for the quarter periods in the years ended December 31, 2001 and 2000
($ in Thousands except per share data)
<Table>
<Caption>
2001
-----------------------------------------------------
4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
Interest Income $ 1,686 $ 1,720 $ 1,734 $ 1,737
Interest Expense 585 667 704 709
----------- ----------- ----------- -----------
Net Interest Income 1,101 1,053 1,030 1,028
Provision for Loan Losses 91 61 60 59
----------- ----------- ----------- -----------
Net Interest Income after
Provision for Loan Losses 1,010 992 970 969
Other Income 295 372 223 213
Other Expenses 815 716 854 807
----------- ----------- ----------- -----------
Income before Income Taxes 490 648 339 375
Applicable Income Tax Expense 167 220 118 126
----------- ----------- ----------- -----------
Net Income $ 323 $ 428 $ 221 $ 249
=========== =========== =========== ===========
Per Share:
Net Income $ 1.66 $ 2.21 $ 1.14 $ 1.29
=========== =========== =========== ===========
Cash Dividends $ 1.25 $ -- $ 1.15 $ --
=========== =========== =========== ===========
</Table>
<Table>
<Caption>
2000
-----------------------------------------------------
4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
Interest Income $ 1,740 $ 1,730 $ 1,703 $ 1,701
Interest Expense 719 655 605 584
----------- ----------- ----------- -----------
Net Interest Income 1,021 1,075 1,098 1,117
Provision for Loan Losses 76 76 70 59
----------- ----------- ----------- -----------
Net Interest Income after
Provision for Loan Losses 945 999 1,028 1,058
Other Income 265 205 205 189
Other Expenses 787 797 763 810
----------- ----------- ----------- -----------
Income before Income Taxes 423 407 470 437
Applicable Income Tax Expense 150 137 160 148
----------- ----------- ----------- -----------
Net Income $ 273 $ 270 $ 310 $ 289
=========== =========== =========== ===========
Per Share:
Net Income $ 1.41 $ 1.39 $ 1.60 $ 1.50
=========== =========== =========== ===========
Cash Dividends $ 1.15 $ -- $ 1.10 $ --
=========== =========== =========== ===========
</Table>
E-40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
($ in Thousands)
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 2001 and 2000. 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 that would
or could have a material impact on future operating results, liquidity or
capital.
CAPITAL
The Company and The Bank's capital continues to exceed regulatory
requirements and peer group averages. Regulatory Risk Based Capital requirements
for 2001 and 2000 were 8.0%. Regulatory Leverage Ratio requirements were 4% for
the same time period. The Ratios (below) include the effect of the unrealized
gain or loss on securities discussed in Note C. The Company's ratios as of
December 31 are as follows:
<Table>
<Caption>
2001 2000
----------- -----------
Total Capital to Risk Weighted Assets 20.63% 18.36%
Tier 1 Capital to Risk Weighted Assets 19.37% 17.11%
Tier 1 Leveraged Capital to Average Assets 10.96% 11.08%
</Table>
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:
<Table>
<Caption>
($ in Thousands) SHAREHOLDER RETENTION
NET INCOME DIVIDENDS RATIO
------------ ----------- -----------
2001 $ 1,221 $ 464 62%
2000 $ 1,142 $ 436 62%
</Table>
The Company distributed to shareholders, cash dividends of $2.40 and
$2.25 per share in 2001 and 2000, respectively.
LIQUIDITY
Liquidity management is the process that measures how The Bank's assets
and liabilities maturities are structured so that it may fund loan commitments
and meet deposit maturities and withdrawals in a timely and profitable way. 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 ensure its ability to meet current and
future requirements and believes that its current levels of liquidity are
adequate to meet the Company's funding obligations.
E-41
RESULTS OF OPERATIONS
OVERVIEW
Zachary Bancshares, Inc.'s (ZBI) net income for 2001 was $1.22 million
compared to $1.14 million for 2000 or a 7% increase. ZBI's normal income stream
is from core banking products and services and it continues to benefit from
strong regional and local economies and expects continued moderate growth. The
following table indicates ZBI's equity position and balance sheet trends. The
effect of the unrealized gain or loss on securities discussed in Note C is
included in the Stockholders' Equity data.
<Table>
<Caption>
Growth Trends
(Year to Year in $ and %)
2001 TO 2000 2000 to 1999
--------------------- ----------------------
Stockholders' Equity $914 THOUSAND OR 8.8% $990 thousand or 10.5%
Average Assets $6.6 MILLION OR 7.6% $1.5 million or 1.8%
</Table>
EARNINGS ANALYSIS
The Company's 2001 Net Interest Income decreased 2.3% to $4.2 million
at December 31, 2001 compared to $4.3 million at December 31, 2000 due to a
decrease in loans and an increase in interest bearing deposits.
Average earning assets were $87.7 million in 2001 compared to $81.5
million in 2000. The following table depicts The Company's average earning
assets components in thousands of dollars and the respective percentage
relationship.
<Table>
<Caption>
($ in thousands) 2001 2000
--------------------------- ---------------------------
Interest Earning Deposits $ 7,511 9% $ 3,023 4%
Securities 19,335 22% 15,385 19%
Loans 60,849 69% 63,047 77%
------------ ------------ ------------ ------------
Average Earning Assets $ 87,695 100% $ 81,455 100%
============ ============ ============ ============
</Table>
This table indicates 7.7% growth in total average earning assets while
showing that average loans decreased 3.5% from 2000 to 2001. Average securities
and interest earning deposits increased 48% as loan demand softened during the
year increasing the amount of liquidity.
Average interest bearing liabilities were $63.4 million in 2001
compared to $58.5 million in 2000. The following table depicts The Company's
average interest bearing liability components and their respective percentage
relationships.
<Table>
<Caption>
($ in thousands) 2001 2000
--------------------------- ---------------------------
Borrowed Funds $ -- 0% $ 973 2%
Savings & NOW Accts 20,739 33% 21,317 36%
Money Market 1,973 3% 2,672 5%
Certificates 40,666 64% 33,576 57%
------------ ------------ ------------ ------------
Avg. Interest Bearing Liabilities $ 63,378 100% $ 58,538 100%
============ ============ ============ ============
</Table>
E-42
Emphasizing core deposit account products that fit the local
community's needs continues to be the primary focus of The Company's marketing.
Free checking for depositors 50 years or older and student checking accounts
continue to be very successful examples of how The Company has adjusted its
product mix to increase the checking customer base. In 2001 The Company
continued to offer competitive market rates for all of its deposit products that
helped to increase its deposits while still keeping its community bank
flexibility and local control.
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 net interest income as a percent of
average earning assets.
<Table>
<Caption>
2001 2000
------------ ------------
Net Interest Spread 3.64% 4.06%
Net Interest Margin 4.80% 5.29%
</Table>
The Company's interest rate risk is measured quarterly in terms of its
rate sensitivity ratio and reviewed by the board of directors and management.
Interest rate risk represents the potential impact of interest rate changes on
net income resulting from the timing differences at which assets and liabilities
may be repriced as market rates change. The Company's rate sensitivity ratio
(Cumulative Rate Sensitive Assets-Cumulative Rate Sensitive Liabilities/Total
Earning Assets) on December 31, 2001 was -10.02% at the 12-month time horizon
and -13.02% at the 24-month time horizon. The 12-month horizon GAP ratio
indicates $9.0 million more liabilities will reprice than assets and the
24-month horizon will reprice $11.7 million more liabilities than assets.
Although this gap analysis indicates The Company is liability-sensitive in the
one year horizon, this may not be true in practice as the one-month deposit
category includes 20% of all NOW, money market and savings deposits, which have
no specific maturities. These deposits with an average balance totaling $22.7
million represent 36% of all average interest bearing liabilities but the rates
paid on these core deposits only changed by -.6% during 2001 even though the
Federal Reserve cut short term interest rates eleven times totaling 4.75%
indicating that The Company does not normally reprice these deposits in direct
relationship to market interest rate changes and was able to maintain those
deposits.
The Company uses monthly deposit and loan maturity and cash flow
analysis to estimate the net interest margin change at various interest rate
shifts. The December 31, 2001 results indicate The Company's net interest margin
will change by less than 12.67% or $125 thousand if interest rates move up or
down 3% at the 12-month horizon.
Several investment securities were called during 2001. Three of these
securities had been carried on the books at a discount and were called at par
resulting in gains at the call date of $34 thousand. There were no sales of
securities in 2000.
BANK PREMISES AND EQUIPMENT
Bank Premises and Equipment decreased $331 thousand to $3.6 million at
December 31, 2001 from $3.9 million at December 31, 2000.
E-43
ALLOWANCE AND PROVISION FOR LOAN LOSSES
The Allowance for Loan Losses is the amount Management determines
necessary to reduce loans to their estimated collectible amounts and to provide
for future losses in certain loans, which are currently unidentified.
The provision for loan losses is the amount charged to current
earnings, which are contributed to the allowance, maintaining the allowance at a
level consistent with management's assessment. The following table reflects year
end Allowance and Provision totals:
<Table>
<Caption>
($ in Thousands) 2001 2000
------------ ------------
Allowance for Losses $ 1,297 $ 1,170
Provision for Losses 271 281
</Table>
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 monthly to facilitate identification
and monitoring of potentially deteriorating credits. Management considers the
current allowance adequate to absorb potential losses.
NON-PERFORMING ASSETS
Non-performing assets include non-accrual and impaired 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. Other Real Estate, by State Law, is carried
at the lower of cost or current market value for any asset appraised in excess
of $40,000.
The following table represents non-performing and renegotiated assets
at year-end:
<Table>
<Caption>
($ in Thousands)
2001 2000
------------ ------------
Non-Accrual and Impaired Loans $ 1,249 $ 657
Restructured Loans -- --
Other Real Estate 28 --
------------ ------------
Total $ 1,277 $ 657
</Table>
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:
<Table>
<Caption>
($ in Thousands) 2001 2000
------------ ------------
$ 3,021 $ 2,237
</Table>
In 2001, The Company realized $221 thousand in gains on the sale of
other real estate, similar 2000 sales resulted in $151 thousand in gains. Charge
offs and writedowns of Other Real Estate were $37 thousand in 2001 and totaled
$0 in 2000.
E-44
OTHER INCOME
Total other income increased 28% to $1.1 million at December 31, 2001
from $864 thousand at December 31, 2000. The 2001 results included an increase
of $83 thousand in mortgage brokerage fees from $42 thousand at December 31,
2000 to $125 thousand at December 31, 2001 as many customers in the area took
advantage of lower mortgage rates to refinance their long term home loans. Other
Income totals include service charges on deposit accounts that were $656
thousand for 2001 and $618 thousand for 2000. Other Operating Income also
includes fee income from investment sales which The Company received under the
terms of a contract with a third party which offers discount brokerage service
at the Company's facility.
OTHER EXPENSE
Total other expenses increased $35 thousand to $3.19 million at
December 31, 2001 from $3.16 million at December 31, 2000.
Salaries and employee benefits decreased $1 thousand during 2001. Any
salary increases, were offset by the retirement of a bank vice president whose
position was not filled with a new hire and decreased hospitalization insurance
expense as The Company switched from a partially self funded plan to preferred
provided plan.
Occupancy expense increased $6 thousand from $238 thousand at December
31, 2000 to $244 thousand at December 31, 2001.
Equipment expense increased 15.3% to $461 thousand at December 31, 2001
from $400 thousand at December 31, 2000 primarily because The Company shortened
the book useful life of its core computer processing hardware and software to
coincide with their tax useful life resulting in additional book depreciation
expense of $63 thousand.
Net other real estate expense consisted of a net benefit of $220
thousand at December 31, 2001 due to gains on sale of other real estate while
2000 offered a benefit of $148 thousand due to similar gains.
INCOME TAX
The Company's income was fully taxable in both 2001 and 2000 and
expects to remain so in 2002.
E-45
<Table>
<Caption>
ZACHARY BANCSHARES, INC. BANK OF ZACHARY
OFFICERS OFFICERS BANK LOCATIONS
Harry S. Morris, Jr. Harry S. Morris, Jr. Main Office
President President 4743 Main Street
Zachary, LA
Winston E. Canning Winston E. Canning
Secretary Executive Vice President Plaza Branch
2110 Church Street
J. Larry Bellard J. Larry Bellard Zachary, LA
Treasurer Vice President and Cashier
Central Branch
ZACHARY BANCSHARES, INC. Judy W. Andrews 13444 Hooper Road
AND BANK OF ZACHARY Vice President Baton Rouge, LA
DIRECTORS
Warren Couvillion INFORMATION
Russell Bankston Vice President
Chairman of the Board Request for additional information
Preston L. Kennedy or copies of Form 10KSB filed with
Rodney S. Johnson Vice President the Securities and Exchange
Vice Chairman Commission in Washington, D.C.
Kathleen Parker should be directed to:
Hardee M. Brian Vice President
Winston E. Canning Treasurer
Howard L. Martin, M.D. Kelley W. Sharpe Zachary Bancshares, Inc.
Albert C. Mills, III, PhD Vice President Post Office Box 497
Harry S. Morris, Jr. Zachary, LA 70791-0497
Loretta Barber
Director Emeritus Account Services Supervisor TRANSFER AGENT
& REGISTRAR
A.C. Mills, Jr. Cindy Chaisson
Leonard F. Aguillard Administrative Assistant Bank of Zachary
Post Office Box 497
STOCK INFORMATION Fonda Funderburk Zachary, LA 70791-0497
Administrative Assistant
The Company's stock is not INDEPENDENT ACCOUNTANTS
listed on any security Laura Steen
exchange. Therefore, Zachary Operations Officer Hannis T. Bourgeois, LLP
Bancshares, Inc. does not have Certified Public Accountants
any exchange data that Sandra Thornton 2322 Tremont Dr., Suite 200
provides high and low stock Information Systems Officer Baton Rouge, LA 70809
prices.
Melinda White
Cash dividends of $2.40 per Note Supervisor
share were paid in 2001 and And Compliance Officer
$2.25 in 2000.
Sandra Worthy
Internal Auditor
</Table>
E-46
APPENDIX F
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 September 30, 2002 Commission File Number 2-89559
Zachary Bancshares, Inc.
(Exact name of registrant as specified in its charter)
Louisiana 72-0981148
(State of or other jurisdiction (I.R.S. Employer incorporation
of organization) or Identification No.)
4743 Main Street
Post Office Box 497
Zachary, Louisiana 70791-0497
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code 225-654-2701
None
(Former name, former address and former fiscal
year if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $10 par value, 193,667 shares outstanding as of November 14,
2002.
F-1
INDEX
<Table>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets - September 30, 2002,
December 31, 2001 and September 30, 2001 F-3
Consolidated Statements of Income - for the three and
nine months ended September 30, 2002 and 2001 F-4
Consolidated Statements of Changes in Stockholders'
Equity - for the nine months ended September 30,
2002 and 2001 F-5
Consolidated Statements of Cash Flows -
for the nine months ended September 30, 2002 and 2001 F-6-7
Notes to Consolidated Financial Statements F-8-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations F-12-13
Item 3. Controls and Procedures F-14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings F-14
Item 6. Exhibits and Reports on Form 8-K F-14
Signatures F-15
Certifications F-16-17
Management's Responsibility for Financial Reporting F-18
Independent Accountant's Report F-19
</Table>
F-2
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
September 30, 2002, December 31, 2001 and September 30, 2001
($ in Thousands)
<Table>
<Caption>
ASSETS
(UNAUDITED) (UNAUDITED)
September 31, December 31, September 31,
2002 2001 2001
Cash and Due from Banks $ 3,066 $ 2,719 $ 2,938
Interest Bearing Deposits in
Other Institutions 415 33 33
Reserve Funds Sold 5,200 925 6,700
Securities Available for Sale
(Amortized Cost $40,565,
$31,025 and $21,766) 41,263 31,249 22,342
Total Loans 52,709 58,720 60,809
Less: Allowance for Loan Losses (1,286) (1,297) (1,297)
Net Loans 51,423 57,423 59,512
Bank Premises and Equipment 4,033 3,557 3,594
Other Real Estate Owned 113 28 8
Accrued Interest Receivable 756 602 720
Other Assets 255 178 146
Total Assets $ 106,524 $ 96,714 $ 95,993
LIABILITIES
Deposits:
Noninterest Bearing $ 21,713 $ 18,370 $ 19,247
Interest Bearing 71,897 66,704 64,535
93,610 85,074 83,782
Accrued Interest Payable 167 207 230
Other Liabilities 496 116 513
Total Liabilities 94,273 85,397 84,525
STOCKHOLDERS' EQUITY
Common Stock - $10 Par Value; Authorized
2,000,000 Shares; Issued 216,000
Shares, Respectively 2,160 2,160 2,160
Surplus 1,480 1,480 1,480
Retained Earnings 8,597 7,976 7,895
Accumulated Other Comprehensive
Income (Loss) 461 148 380
Treasury Stock (22,333 Shares at Cost) (447) (447) (447)
Total Stockholders' Equity 12,251 11,317 11,468
Total Liabilities and
Stockholders' Equity $ 106,524 $ 96,714 $ 95,993
</Table>
The accompanying notes are an integral part of these financial statements.
F-3
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
for the three and nine months ended September 30, 2002 and 2001
($ in Thousands) except per share data
<Table>
<Caption>
(UNAUDITED) (UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
Interest Income:
Interest and Fees on Loans $1,121 $1,343 $3,422 $4,105
Interest on Securities 465 334 1,363 822
Other Interest Income 31 43 84 264
Total Interest Income 1,617 1,720 4,869 5,191
Interest Expense:
Interest Expense on Deposits 485 667 1,487 2,080
Total Interest Expense 485 667 1,487 2,080
Net Interest Income 1,132 1,053 3,382 3,111
Provision for Loan Losses 93 61 259 180
Net Interest Income After
Provision for Loan Losses 1,039 992 3,123 2,931
Non Interest Income:
Service Charges on Deposit Accounts 173 166 523 495
Gain (Loss) on Sale of Assets - - - 4
Other Operating Income 98 206 232 309
Total Other Income 271 372 755 808
Income before Other Expenses 1,310 1,364 3,878 3,739
Other Expenses:
Salaries and Employee Benefits 459 447 1,386 1,340
Occupancy Expense 59 70 164 196
Equipment Expense 81 170 256 366
Net Other Real Estate Expense(Benefit) 3 (209) (20) (221)
Other Operating Expenses 306 238 802 696
Total Other Expenses 908 716 2,588 2,377
Income before Income Taxes 402 648 1,290 1,362
Applicable Income Taxes 127 220 427 464
Net Income $ 275 $ 428 $ 863 $ 898
Per Share:
Net Income $ 1.42 $ 2.21 $4.46 $4.64
</Table>
The accompanying notes are an integral part of these financial statements.
F-4
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
for the nine months ended September 30, 2002 and 2001
($ in Thousands)
<Table>
<Caption>
ACCUMULATED
OTHER
COMMON RETAINED COMPREHENSIVE TREASURY TOTAL
STOCK SURPLUS EARNINGS INCOME(LOSS) STOCK EQUITY
Balances,
January 1, 2001 $ 2,160 $ 1,480 $ 7,219 $ (9) $ (447) $ 10,403
Comprehensive Income:
Net Income 898 898
Change in Unrealized
Gain (Loss) on Securities
Available for Sale 393 393
Less: Reclassification Adjustment (4) (4)
Total Comprehensive Income 1,287
Cash Dividends (222) (222)
Balances,(Unaudited)
September 30, 2001 $ 2,160 $ 1,480 $ 7,895 $ 380 $ (447) $ 11,468
Balances,
January 1, 2002 $ 2,160 $ 1,480 $ 7,976 $ 148 $ (447) $ 11,317
Comprehensive Income:
Net Income 863 863
Change in Unrealized
Gain (Loss) on Securities
Available for Sale 313 313
Less: Reclassification Adjustment -- --
Total Comprehensive Income 1,176
Cash Dividends (242) (242)
Balances, (Unaudited)
September 30, 2002 $ 2,160 $ 1,480 $ 8,597 $ 461 $ (447) $ 12,251
</Table>
The accompanying notes are an integral part of these financial statements.
F-5
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2002 and 2001
($ in Thousands)
<Table>
<Caption>
(UNAUDITED)
September 30,
2002 2001
Cash Flows From Operating Activities:
Net Income $ 863 $ 898
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Deferred Tax Benefit (Increase) -- (2)
Provision for Loan Losses 259 180
Provision for Depreciation and Amortization 228 311
Stock Dividends - Federal Home Loan Bank (9) (13)
Net Amortization (Accretion) of Securities 84 1
(Gain) on Sale of Other Real Estate (24) (221)
(Gain) on Call of Securities -- (4)
(Increase) in Accrued Interest Receivable (154) (172)
(Increase) in Other Assets (77) (25)
Increase (Decrease) in Accrued Interest Payable (40) (28)
Increase in Other Liabilities 219 214
Net Cash Provided by Operating Activities 1,349 1,139
Cash Flows From Investing Activities:
Net (Increase)Decrease in Reserve Funds Sold (4,275) 250
Purchases of Securities Available for Sale (19,439) (14,148)
Purchase of FNBB Equity Stock (105) --
Maturities or Calls of Securities Available for Sale 6,100 5,500
Principal Payments on Mortgage-Backed Securities 3,828 1,244
Net Decrease in Loans 5,635 1,680
Purchases of Premises and Equipment (702) (17)
Proceeds from Sales of Other Real Estate 44 221
Net Cash Provided by (Used in)
Investing Activities (8,914) (5,270)
</Table>
(CONTINUED)
F-6
Zachary Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
For the nine months ended September 30, 2002 and 2001
($ in Thousands)
<Table>
<Caption>
(UNAUDITED)
September 30,
2002 2001
Cash Flows From Financing Activities:
Net Increase in Demand Deposits,
NOW Accounts and Savings Accounts 5,167 1,953
Net Increase in Certificates of Deposits 3,369 2,562
Cash Dividends (242) (222)
Net Cash Provided by Financing Activities 8,294 4,293
Increase in Cash and Cash Equivalents 729 162
Cash and Cash Equivalents -
Beginning of Period 2,752 2,809
Cash and Cash Equivalents -
End of Period $ 3,481 $ 2,971
Supplemental Disclosures of Cash Flow Information:
Noncash Investing Activities:
Change in Unrealized Gain
on Securities Available for Sale $ 473 $ 589
Change in Deferred Tax Effect on
Unrealized Gain or on Securities
Available for Sale $ 161 $ 200
Other Real Estate Acquired in
Settlement of Loan $ 106 $ 8
Cash Payments For:
Interest Paid on Deposits $ 1,527 $ 2,107
Income Tax $ 441 $ 432
</Table>
The accompanying notes are an integral part of these financial statements.
F-7
Zachary Bancshares, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 2002 and 2001
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-
The accounting principles followed by Zachary Bancshares, Inc. and its wholly-
owned Subsidiary, Bank of Zachary, are those which are generally practiced
within the banking industry. The methods of applying those principles conform
with generally accepted accounting principles and have been applied on a
consistent basis. The principles which significantly affect the determination of
financial position, results of operations, changes in stockholders' equity and
cash flows are summarized below.
PRESENTATION
The accompanying unaudited consolidated interim financial statements do not
include all of the information and footnotes required by generally accepted
accounting principles. Management is of the opinion that the unaudited interim
financial statements reflect all normal, recurring accrual adjustments necessary
to provide a fair statement of the results for the interim periods presented. It
is noted that the results for the first nine months ended September 30, 2002 are
no indication of the expected results for the annual period which ends December
31, 2002. Additional information concerning the audited financial statements and
notes can be obtained from Zachary Bancshares, Inc's annual report and Form
10KSB filed for the period ended December 31, 2001.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Zachary
Bancshares, Inc. (the "Company"), and its wholly-owned subsidiary, Bank of
Zachary (the "Bank"). All material inter-company accounts and transactions have
been eliminated. Certain reclassifications to previously published financial
statements have been made to comply with current reporting requirements.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The determination of the adequacy of the allowance for loan losses is based on
estimates that are particularly susceptible to significant changes in the
economic environment and market conditions. In connection with the determination
of the estimated losses on loans, management obtains independent appraisals for
significant collateral.
The Bank's loans are generally secured by specific items of collateral including
real property, consumer assets, and business assets. Although the Bank has a
diversified loan portfolio, a substantial portion of its debtors' ability to
honor their contracts is dependent on local economic conditions.
F-8
While management uses available information to recognize losses on loans,
further reductions in the carrying amounts of loans may be necessary based on
changes in local economic conditions. In addition, regulatory agencies, as an
integral part of their examination process, periodically review the estimated
losses on loans. Such agencies may require the Bank to recognize additional
losses based on their judgments about information available to them at the time
of their examination. Because of these factors, it is reasonably possible that
the estimated losses on loans may change materially in the near term. However,
the amount of the change that is reasonably possible cannot be estimated.
SECURITIES
Securities classified as held to maturity are those debt securities the Bank has
both the intent and ability to hold to maturity regardless of changes in the
market conditions, liquidity needs or changes in general economic conditions.
Securities classified as trading are those securities held for resale in
anticipation of short-term market movements. The Bank had no securities
classified as held to maturity or trading at September 30, 2002 or 2001.
Securities classified as available for sale are those debt securities that the
Bank intends to hold for an indefinite period of time but not necessarily to
maturity. Any decision to sell a security classified as available for sale would
be based on various factors, including significant movements in interest rates,
changes in the maturity mix of the Bank's assets and liabilities, liquidity
needs, regulatory capital considerations, and other similar factors. Securities
available for sale are carried at fair value. Unrealized gains or losses are
reported as increases or decreases in stockholders' equity, net of the related
deferred tax effect. Realized gains or losses, determined on the basis of the
amortized cost of specific securities sold, are included in earnings.
LOANS
Loans are stated at principal amounts outstanding, less the allowance for loan
losses. Interest on commercial and individual loans is accrued daily based on
the principal outstanding.
Generally, the Bank discontinues the accrual of interest income when a loan
becomes 90 days past due as to principal or interest. When a loan is placed on
non-accrual status, previously recognized but uncollected interest is reversed
to income or charged to the allowance for loan losses. Subsequent cash receipts
on non-accrual loans are accounted for on the cost recovery method, until
principal and interest amounts contractually due are brought current and future
payments are reasonably assured. The Bank classifies loans as impaired if, based
on current information and events, it is probable that the Bank will be unable
to collect the scheduled payments of principal and interest when due according
to the contractual terms of the loan agreement. Impairment is measured on a loan
by loan basis by either the present value of the expected future cash flows
discounted at the loan's effective interest rate or the loan's observable market
price or based on the fair value of the collateral if the loan is
collateral-dependent.
F-9
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level which in management's
judgment is adequate to absorb credit losses inherent in the loan portfolio. The
allowance for loan losses is based upon management's review and evaluation of
the loan portfolio. Factors considered in the establishment of the allowance for
loan losses include management's evaluation of specific loans; the level and
composition of classified loans; historical loss experience; results of
examinations by regulatory agencies; an internal asset review process;
expectations of future economic conditions and their impact on particular
borrowers; and other judgmental factors. Allowances for impaired loans are
generally determined based on collateral values or the present value of
estimated cash flows. Although management uses available information to
recognize losses on loans, because of uncertainties associated with local
economic conditions, collateral values, and future cash flows on impaired loans,
it is reasonably possible that a material change could occur in the allowance
for loan losses in the near term. However, the amount of the change that is
reasonably possible cannot be estimated.
The allowance for loan losses is based on estimates of potential future losses,
and ultimate losses may vary from the current estimates. These estimates are
reviewed periodically and as adjustments become necessary, the effect of the
change in estimate is charged to operating expenses in the period incurred. All
losses are charged to the allowance for loan losses when the loss actually
occurs or when management believes that the collection of the principal is
unlikely. Recoveries are credited to the allowance at the time of recovery.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less accumulated depreciation.
Depreciation is provided at rates based upon estimated useful service lives
using the straight-line methods for financial reporting purposes and accelerated
methods for income tax reporting.
The cost of assets retired or otherwise disposed of and the related accumulated
depreciation are eliminated from the accounts in the year of disposal and the
resulting gains or losses are included in current operations.
Expenditures for maintenance and repairs are charged to operations as incurred.
Cost of major additions and improvements are capitalized.
OTHER REAL ESTATE
Other real estate is comprised of properties acquired through foreclosure or
negotiated settlement. The carrying value of these properties is the lower of
cost or fair value, minus estimated costs to sell. Loan losses arising from the
acquisition of these properties are charged against the allowance for loan
losses. Any subsequent market reductions required are charged to Net Other Real
Estate Expense. Revenues and expenses associated with maintaining or disposing
of foreclosed properties are recorded during the period in which they are
incurred.
INCOME TAXES
The provision for income taxes is based on income as reported in the financial
statements. Also certain items of income and expenses are recognized in
F-10
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 utilizing a liability method whereby deferred tax
assets are recognized for deductible temporary differences and operating loss
and tax credit carry forwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences between
the reported amounts of assets and 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.
The Company and its subsidiary file a consolidated federal income tax return. In
addition, the Company in accordance with state statutes files a Louisiana state
income tax return.
EARNINGS PER COMMON SHARE
Basic EPS is computed by dividing income applicable to common shares by the
weighted average shares outstanding; no dilution for any potentially convertible
shares is included in the calculation. Diluted EPS, reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the Company. At September 30,
2002, the Company had no convertible shares or other contracts to issue common
stock. The weighted average number of shares of common stock used to calculate
basis EPS was 193,667 for the periods ended September 30, 2002 and 2001,
respectively.
STATEMENTS OF CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents includes cash
and due from banks and interest bearing deposits in other banks.
COMPREHENSIVE INCOME
Components of comprehensive income are revenues, expenses, gains, and losses
that under GAAP are included in comprehensive income but excluded from net
income. The components of comprehensive income are disclosed in the Statement of
Changes in Stockholder's Equity for all periods presented.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 2002, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) No. 01-6. SOP 01-6 provides industry specific
guidance and disclosure requirements regarding the accounting for certain
transactions by banks, savings institutions and other entities that lend to or
finance the activities of others. This pronouncement provides guidance
concerning the recognition and measurement of loans, credit losses, investments
in Federal Home Loan Bank or Federal Reserve Bank stock, deposit accounts, and
purchases and sales of securities. SOP 01-6 is effective for annual and interim
financial statements for fiscal years beginning after December 15, 2001. The
Company has adopted the provisions of SOP 01-6 effective January 1, 2002. The
adoption of SOP 01-6 did not have a material impact on the Company's financial
position or results of operations as of September 30, 2002.
F-11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ($ in Thousands)
September 30, 2002
The following is management's discussion and analysis of the significant
changes in income and expenses in relation to the changes in financial position
for the nine months ended September 30, 2002 and 2001. This information should
be read in conjunction with the financial statements and notes relating thereto.
The Company is unaware of any trends, uncertainties or events which would or
could have a material impact on future operating results, liquidity, or capital.
FINANCIAL CONDITION ANALYSIS
LOANS
Total loans were $52,709 at September 30, 2002 compared to $60,809 at
September 30, 2001. This represents a decrease of $8,100 or 13%. Interim loan
repayments and loans being refinanced, accounted for the decrease in total loans
along with a slowdown in the general economy and uneasiness about the stock
market. Non-performing loans consist of non-accrual and impaired loans, loans 90
days past due and accruing, and restructured loans. Total non- performing loans
as of September 30, 2002 were $1,096 compared to $785 as of September 30, 2001.
INVESTMENT SECURITIES
Investment securities increased 85% to $41,263 at September 30, 2002
compared to $22,342 at September 30, 2001. A combination of reinvesting short
term funds into longer securities, the decrease in loan volume and an increase
in deposits all contributed to this increase.
FED FUNDS SOLD/INTEREST BEARING DEPOSITS
Fed funds sold decreased to $5,200 at September 30, 2002 from $6,700 at
September 30, 2001. Interest bearing deposits at other banks increased from $33
at September 30, 2001 to $415 at September 30, 2002 as the Company purchased
Certificates of Deposit in other banks to diversify the Investment Portfolio.
DEPOSITS
Total deposits increased to $93,610 at September 30, 2002 compared to
$83,782 at September 30, 2001 as the Bank was able to attract new checking,
savings and certificate accounts from individuals and commercial customers. The
general decline in the market value of equity stock portfolios during 2001 and
2002 led some customers to deposit funds in FDIC insured accounts instead of
keeping those funds in the stock market.
RESULTS OF OPERATION
For the nine month period ended September 30, 2002 over 2001
NET INCOME
Net Income was $863 for the nine month period ended September 30, 2002
compared to $898 in the same period in 2001. This change was primarily due to a
decrease in interest expense to $1,487 at September 30, 2002 from $2,080 at
September 30, 2001 offset by a $322 decrease in interest income due to a
decrease in loan volume of $8,100, and a decrease of $200 in the Net Other Real
Estate Benefit.
F-12
INTEREST INCOME
Interest Income for the nine month period ended September 30, 2002
decreased 6% to $4,869 compared to $5,191 for the same period in 2001. The
interest income decrease resulted primarily from the Company's decrease in loan
volume and the general reduction in investment interest rates during late 2001
and 2002.
INTEREST EXPENSE
Total interest expense for the nine months ended September 30, 2002 was
$1,487, compared to $2,080 for the nine month period ended September 30, 2001.
NonInterest bearing deposits increased 13% to $21,713 at September 30, 2002 from
$19,247 at September 30, 2001. Interest bearing deposits increased $7,362 or 11%
to $71,897 at September 30, 2002 from $64,535 at September 30, 2001.
PROVISION FOR LOAN LOSSES
The Company included $259 for provision for loan losses during the nine
month period ended September 30, 2002 compared to $180 at September 30, 2001.
Loans are reviewed monthly to facilitate identification and monitoring of
potentially deteriorating credit. Management considers the current allowance
adequate to absorb potential losses but continues to closely monitor the
situation.
TOTAL OTHER INCOME
Total other income for the nine month period ended September 30, 2002
decreased $53 compared to September 30, 2001. The 2002 results included an
increase in service charges on deposit accounts of $28 and a decrease in other
operating income of $77. The 2001 results included $94 other income from
termination of the Company's partially self funded hospitalization insurance
plan.
TOTAL OTHER EXPENSE
Total other expenses increased to $2,588 at September 30, 2002 from $2,377
at September 30, 2001. Employee salaries and benefits increased $46 for the nine
month period under consideration as the Bank increased pay 5% for all non
officer employees at January 1, 2002 and hospitalization insurance expense
increases $27. Net other real estate owned expense showed a credit balance of
$20 at September 30, 2002 resulting from the gain on sale of three properties
compared to a credit of $221 at September 30, 2001 from the sale of multiple
properties.
INCOME TAX
The Company is fully taxable at the maximum rate (34%) in both 2002 and
2001 and expects to remain taxable throughout 2002.
EARNINGS PER SHARE
The Company's 2002 earnings per share at September 30, 2002 were $4.46
compared to $4.64 per share the previous year.
DIVIDENDS
The Company paid a cash dividend on June 24, 2002 of $1.25 per share
compared to the $1.15 per share paid at the same time in 2001.
F-13
Item 3. Controls and Procedures
The Company's President, acting as its Chief Executive Officer and the Company's
Treasurer, acting as its Chief Financial Officer after evaluating the
effectiveness of the Company's disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14(c) and 15-d-14(c) as of a date within 90 days of the
filing date of the quarterly report(the "Evaluation Date") have concluded that
as of the Evaluation Date, the Company's disclosure controls and procedures were
adequate and effective to ensure that material information relating to the
Company and its consolidated subsidiaries would be made known to them by others
within those entities, particularly during the period in which this quarterly
report was being prepared.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect the Company's disclosure controls and
procedures subsequent to the Evaluation Date, nor any significant deficiencies
or material weaknesses in such disclosure controls and procedures requiring
corrective actions. As a result, no corrective actions were taken.
PART II - OTHER INFORMATION
Item 1. 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
EXHIBITS
Exhibit 99.1 Certification of Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
Exhibit 99.2 Certification of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
REPORTS ON FORM 8-K
Not Applicable
F-14
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.
(Registrant)
Date: November 14, 2002 By: /s/ Harry S. Morris, Jr.
Harry S. Morris, Jr.
President
Date: November 14, 2002 By: /s/ J. Larry Bellard
J. Larry Bellard
Treasurer
F-15
CERTIFICATION
I, Harry S. Morris, Jr., do certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Zachary
Bancshares, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002 /s/ Harry S. Morris, Jr.
Harry S. Morris, Jr.
President
F-16
CERTIFICATION
I, J. Larry Bellard, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Zachary Bancshares,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors:
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002 /s/ J. Larry Bellard
J. Larry Bellard
Treasurer
F-17
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Zachary Bancshares, Inc. is responsible for the preparation of
the financial statements, related financial data and other information in this
quarterly report. The financial statements are prepared in accordance with
generally accepted accounting principles and include some amounts that are
necessarily based on management's informed estimates and judgments, with
consideration given to materiality. All financial information contained in this
quarterly report is consistent with that in the financial statements.
Management fulfills its responsibility for the integrity, objectivity,
consistency and fair presentation of the financial statements and financial
information through an accounting system and related internal accounting
controls that are designed to provide reasonable assurance that assets are
safeguarded and that transactions are authorized and recorded in accordance with
established policies and procedures. The concept of reasonable assurance is
based on the recognition that the cost of a system of internal accounting
controls should not exceed the related benefits. As an integral part of the
system of internal accounting controls, Zachary Bancshares, Inc. has a
professional staff who monitors compliance with and assesses the effectiveness
of the system of internal accounting controls and coordinates audit coverage
with the independent public accountants.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with management, and the independent public
accountants to review matters relating to financial reporting, internal
accounting control and the nature, extent and results of the audit effort. The
independent public accountants have direct access to the Audit Committee with or
without management present.
The financial statements, as of December 31, 2001, were examined by Hannis T.
Bourgeois, LLP, independent public accountants, who rendered an independent
professional opinion on the financial statements prepared by management. The
financial statements, as of September 30, 2002, have been reviewed by Hannis T.
Bourgeois, LLP.
Date: November 14, 2002 /s/ J. Larry Bellard
J. Larry Bellard
Treasurer
F-18
INDEPENDENT ACCOUNTANT'S REPORT
November 4, 2002
To the Shareholders and Board of Directors
Zachary Bancshares, Inc. and Subsidiary
Zachary, Louisiana
We have reviewed the accompanying Consolidated Balance Sheets of Zachary
Bancshares, Inc. and Subsidiary as of September 30, 2002 and 2001, and the
related Consolidated Statements of Income for the three and nine month periods
then ended, and the related Consolidated Statement of Changes in Stockholders'
Equity and Cash Flows for the nine month periods then ended.
We previously audited and expressed our unqualified opinion in our report
dated January 9, 2002 on the Consolidated Balance Sheet of Zachary Bancshares,
Inc. and Subsidiary as of December 31, 2001.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of obtaining an understanding of the
system for the preparation of interim financial information, applying analytical
review procedures to financial data, and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope than an
examination in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements for them to
be in conformity with generally accepted accounting principles.
Respectfully submitted,
/s/ HANNIS T. BOURGEOIS, LLP
HANNIS T. BOURGEOIS, LLP
Baton Rouge, Louisiana
F-19
ZACHARY BANCSHARES, INC.
4743 MAIN STREET
ZACHARY, LOUISIANA 70791
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Russell Bankston and Winston E.
Canning, and either of them, with power of substitution, each to be the
attorneys and proxies of the undersigned at the Special Meeting of Shareholders
of Zachary Bancshares, Inc., a Louisiana corporation (the "Company"), to be held
at the main office of Bank of Zachary, located at 4743 Main Street, Zachary,
Louisiana, on Tuesday, March 11, 2003 at 2:30 p.m., and any adjournments
thereof, and to represent and vote, all of the shares of common stock of the
Company held of record by the undersigned on January 31, 2003, granting unto
such attorneys and proxies, and to either of them and to their substitutes full
power and authority to act for and in the name of the undersigned at the Meeting
and all adjournments thereof, if any, as follows:
1. To approve and adopt the Agreement and Plan of Merger by and between
Zachary Bancshares, Inc. and New ZBI, Inc., a wholly-owned subsidiary of the
Company and the merger contemplated thereby.
FOR AGAINST ABSTAIN
2. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
FOR AGAINST ABSTAIN
IF PROPERLY EXECUTED AND RETURNED TO THE COMPANY, THIS PROXY WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE PLAN OF MERGER. THE
PROXIES WILL USE THEIR DISCRETION WITH RESPECT TO ANY OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE MEETING.
The undersigned hereby revokes any and all proxies with respect to such
shares heretofore given by the undersigned. The undersigned also acknowledges
receipt of the Notice of Special Meeting of Shareholders and the Proxy Statement
of the Board of Directors relating to the Meeting.
Please sign your name exactly as it appears on your stock certificate.
When shares are held by two or more persons as co-owners, both or all should
sign. When signing as attorney, executor, administrator, trustee or guardian or
in another fiduciary capacity or representative capacity, please give full title
as such. If a corporation, please sign in full corporate name by president or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY PROMPTLY. ----------------------------------------
Signature
----------------------------------------
DATE: , 2003 Signature if held jointly
---------------------
----------------------------------------
Print Name(s)