Item 1: Business
Peoples Bancshares of Pointe Coupee Parish, Inc. (the Corporation) was incorporated under the laws of the State of Louisiana in 1983. On December 9, 1983, Peoples Bank and Trust Company (the Bank) was reorganized as a subsidiary of the Corporation. Prior to December 9, 1983, the corporation had no activity. The Corporation is currently engaged, through its subsidiary, in banking and related business. The Bank is the Corporation's principal asset and primary source of income.
The Bank
The Bank incorporated under the State Banking Laws in 1979 and received its charter on March 31, 1980. It is in the business of gathering funds by accepting checking, savings, and other time-deposit accounts and reemploying these by making loans and investing in securities and other interest bearing assets. The Bank is a full service commercial bank. Some of the major services which it provides include checking, NOW accounts, money market investments, money market checking, savings and other time deposits of various types, loans for business, agriculture, real estate, personal use, home improvement, automobile, and a variety of other types of loans and services including letters of credit, safe deposit rental, bank money orders, cashiers checks, credit cards, and wire transfers.
The State of Louisiana and various agencies of Parish (County) Government deposits public funds with the Bank. As of December 31, 1998, $1,767,884 were on deposit representing 5.32% of total deposits outstanding. Of this total, $1,670,211 represented demand deposits and $97,673 were time deposits. The weighted average interest rate on these deposits was 4.43%. The maturity of these deposits range from fifteen days to twelve months.
The Bank's general and primary market area is in Pointe Coupee Parish which has apopulation of approximately 25,000. Population of Pointe Coupee has experienced little growth since inception of the bank.
The Bank faces keen competition from three other banks operating in nine locations throughout the parish. At present time, Peoples Bank has approximately the same asset base as Guaranty Bank. The largest bank in the parish as of December 31, 1998 was Regions Bank of Alabama, New Roads Branch, which had in excess of $30 billion in assets nationwide. Regions Bank of Alabama acquired the former Bank of New Roads in August of 1994, and it operated as a separate bank until the summer of 1995, at which time it was merged into the Regions Bank of Louisiana system. Regions Bank of Louisiana was merged into Regions Bank of Alabama during 1998. The other banks operating in Pointe Coupee are Guaranty Bank and Trust Company which had total assets of approximately $41 million as of December 31, 1998 and Cottonport Bank, which opened a branch in 1998 with assets of approximately $135 million on December 31, 1998. Additional competition for deposits and loans comes from banks and non-banks (credit unions, brokerage houses, etc.) in Baton Rouge, the capital city of Louisiana, which is 35 miles from New Roads.
Supervision and Regulation
The Bank is subject to regulation and regular examinations by the State Banking Department and by the Federal Deposit Insurance Corporation. Applicable regulations relate to reserves, investments, loans, issuance of securities, establishment of branches and aspects of its operations.
The Corporation is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended (the Act), and is thereby 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 the Corporation 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 its activities. The activities that may be engaged in by the Corporation and its subsidiary are limited by the Act to those so closely related 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 to produce benefits to the public, such as greater convenience, increased competition or gains in efficiency that out-weigh 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 trust or a 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 insurance agent or broker with respect to certain kinds of insurance, 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 checks 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 judgement the activity or subsidiaries would be unsound.
Under the Act 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.
The Board of Directors of the Corporation has no present plans or intentions to cause the Corporation to engage in any substantial business activity which would be permitted under the Louisiana Act but which is not permitted to the Bank; however, a significant reason for formation of the one-bank holding company is to take advantage of the additional flexibility afforded by that structure if the Board of Directors of the Corporation concludes that such action would be in the best interest of stockholders.
With certain exceptions, the Bank is restricted by Sections 22 and 23A of the Federal Reserve Act and Section 18(j) of the Federal Deposit Insurance Corporation Act from extending credit or making loans to or investments in the Corporation.
Statistical Information
The following tables contain additional information concerning the business and operations of the Registrant and its subsidiary and should be read in conjunction with the Consolidated Financial Statements of the Registrant and Management's Discussion and Analysis of Operations.
I. Distribution of Assets, Liabilities and Stockholders' Equity Interest Rates and Interest Differential
Non-performing Loans and Other Problem Assets
It is managements policy to discontinue accrual of interest on loans where there is reasonable doubt as to collectibility. The policy to place loans on non-accrual status is to normally discontinue accrual of interest when the loan is delinquent 90 days or more, or where circumstances indicate that collection of principal or interest is doubtful, unless the obligation is secured (1) by mortgage on real estate or pledge of securities that have a realizable value sufficient to pay the debt in full; or (2) by guarantee of a financially responsible party. The following tables presents the non-performing loans and other problem assets at December 31, 1997 and 1998. Assets acquired through the default of loans are recorded at the lower of the outstanding loan amount or fair market value of the assets acquired at the time of foreclosure. Reductions from outstanding loan amounts to fair market value are charged against the reserve for possible loan losses. Subsequent adjustments to market valuations are charged to operating expense.
The effect of non-accruing loans on interest income for 1998 was $9,467. The effect of restructured loans on interest income for 1998 was $751.
At December 31, 1998, there were no commitments to lend additional funds to debtors whose loans were considered to be non-performing.
All loans listed above are subject to constant attention by management and their progress is reviewed monthly.
At the present time, management does not track loan concentrations by Particular industries, but rather by the grouping of types of loan, i.e., Agriculture, Real Estate, Consumer and Commercial. As we are located in an Agricultural area, this industry comprises the largest sector, but we attempt to avoid any undue concentration in any particular sector.
IV. Summary of Loan Loss Experience
In determining the adequacy of the loan loss reserves, management uses the following formulas: 100% of loans classified loss, 50% of doubtful loans, 5% of substandard loans, 0% of savings loans and government guaranteed loans and 1.5% of all other loan types. This analysis is performed on a quarterly basis.
Included in deposits are approximately $4,266,000 and $4,205,000 of certificates of deposit in excess of $100,000 at December 31, 1998 and 1997, respectively.
ITEM 2:
ITEM 2: Properties
The main office of the Corporation and Bank are presently located in a two-story office building on State Highway 3131, New Roads, Louisiana. The bank owns one branch located on State Highway 78, Livonia, Louisiana, which is approximately 13 miles from the main office. Additionally, in 1994 the bank purchased from its Other Real Estate portfolio the property directly behind the bank for $75,000. This property was formerly an insurance building and lot. It was acquired in an exchange of properties from Farm Bureau Insurance. All locations are owned free of any mortgages or liens.
ITEM 3:
ITEM 3: Legal Proceedings
There is no threatened or pending litigation against the Corporation, the Bank, or its officers.
ITEM 4:
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 fiscal year covered by this report.
PART II
ITEM 5:
ITEM 5: Market Price Dividends on the Registrant's Common Equity and Related Stockholder Matters
The primary market area for the Corporation stock is Pointe Coupee Parish with Peoples Bank and Trust Company acting as registrar and transfer agent. There were approximately 575 shareholders of record as of December 31, 1998. The stock of the Corporation is not listed on any security exchange.
Due to lack of an active trading market, the Corporation does not have available information to furnish a high and low sales price on the range of bid and asked quotations for its stock. Based on limited inquiries by management, it is believed that less than 3,000 shares traded in 1998. There can be no assurance that the limited inquiries adequately reflect the marketability of the stock.
In March 1998 Peoples Bancshares declared a special dividend of $.50 per share to all stockholders of record as of March 31, 1998, totaling $154,289. Additionally, In December of 1998, Peoples Bancshares declared a dividend of $.35 per share to all stockholders of record as of November 30, 1998, totaling $108,002.
Management, will for the foreseeable future, approach the payment of dividends on an annual basis and according to the profitability of the bank in that particular year, as well as considering the long-term capital needs of the bank in the future.
ITEM 7:
ITEM 7: Management Discussion and Analysis of Financial Condition and Results of Operation
Peoples Bancshares of Pointe Coupee Parish, Inc., (Bancshares) is a one bank holding company whose sole subsidiary is Peoples Bank and Trust Company of Pointe Coupee Parish, Inc., (the Bank). All items discussed below are attributable to the activities of the Bank unless otherwise stated. This section should be read in conjunction with the consolidated financial statements and related notes and the tables presented in an earlier section of this report.
Year 2000 Compliance
As of year end 1998, Peoples Bank has been examined twice by the F.D.I.C. regarding its Y2K readiness and testing and has been deemed as being in compliance. The Y2K initiative is being managed by a team of internal staff. The team activities are designed to ensure that there is no adverse effect on the Companys core business operations and that transactions with customers, suppliers and financial institutions are fully supported. Our estimates are that we will spend approximately $40,000 on new software, wiring and related costs. While we believe our planning efforts are adequate to address Y2K concerns, there can be no guarantees that the systems of other companies on which our systems and operations rely will be converted on a timely basis and will not have a material effect on the Company. The costs of Y2K initiatives is not expected to be material to the results of operation or financial position.
Merger Discussions
	In January of 1999, Peoples Bancshares signed a Letter of Intent to merge with Great Guaranty Bancshares. The new company would be named Peoples Guaranty Bancshares and the new bank would be called Peoples Guaranty Bank. This announcement happened subsequent to the audit report date. The Letter of Intent is conditioned on signing a definitive agreement and if successful, the pending merger would be expected to be complete in the last quarter of 1999.
FINANCIAL REVIEW
Summary
Bancshares consolidated net income for 1998 was $922,533. This represents a Return on Average Assets of 2.27%, which we believe is a good return. This is in comparison to 2.32% for 1997 and 2.34% in 1996.
Several factors contributed to this continued success. The most important factors were: 1) good interest rate margins; 2) a low level of classified assets; and 3) elimination of loan loss provisions.
In 1998, charge-offs were $38,571 as compared to $66,830 in 1997, while at the same time we reduced the reserve by $46,000.00 loan losses and recovered $89,784. Provisions for 1997 were $-0- and recoveries were $50,966.
The prospects for 1999 remain encouraging. The bank continues to note financial stability and deem our reserves as adequate. As a result, the projections for income are good. Additionally, Peoples Bank is deemed to be a well capitalized institution within the guidelines of the FDIC.
However, we still remain conservative in our view of the economy and current management will maintain that philosophy throughout 1999.
Other Income and Expenses
Other Income, excluding loan related income, decreased $115,029 or 18.43% in 1998 as compared to 1997. The decrease was due to a difference from a one time sale of other real estate in 1997, but was equal to other income in 1996.
Other expenses, excluding interest expense increased by $36,094 or 2.44% in 1998 as compared to 1997. Salaries and employee benefits decreased $20,483 or 2.42%.
Income Taxes
Bancshares files a consolidated federal income tax return. Deferred income taxes are Pro vided using the liability method on items of income or expenses recognized in different time periods for financial statement and income tax purposes.
Statement of Condition
Total deposits as of December 31, 1998 increased $236,689 or .72% as compared to year end 1997. Non-interest bearing deposits increased $643,694 or 10.18% and interest bearing deposits decreased $407,005 or 1.53%. Total loans excluding loan reserves increased $986,684 or 3.51% and investment securities decreased $2,109,117 or 29.32%. The increase in loans was concentrated primarily in agricultural equipment and consumer related loans. The increase in loans along with the increase in federal funds sold accounted for the decrease in the investment portfolio.
Liquidity Management
The purpose of liquidity management is to assure the corporation's ability, at an acceptable cost, to raise funds to support asset growth, meet deposit withdrawals, and otherwise operate the Corporation on a continuing basis. The overall liquidity position of the bank is insured by acquisition of additional funds in the form of time deposits, borrowings such as Federal Funds and the sale of maturing of investments.
In management's opinion, there are no known trends, commitments or uncertainties that will or should have a material effect on deposits or the liquidity position. Additionally, no trends or events were cited by the regulatory authorities.
Capital Adequacy
The management of capital is a continuous process which consists of providing capital for the current position and the anticipated future growth of the Corporation. The purposes of capital are to serve as a source of funds, protect depositors against losses, and provide a measure of reassurance to the public that the community's needs will continue to be served. Since capital serves a multiplicity of purposes, the evaluation of capital adequacy cannot be made solely in terms of total capital or related ratios.
Traditionally, the source of additional capital has been retained earnings. However, in the mid 1980's retained earnings were not providing the needed capital. However, due to strong earnings from 1990 - 1998, and large recoveries of charged-off loans, our capital ratio is at an acceptable level. As such, retained earnings should provide the needed capital. Additionally, we will concentrate on the following to provide for our capital needs:
1. Increase non-interest income and reduce non-interest expenses 2. Maintain an adequate interest rate spread 3. Actively pursue previous charged-off loans for recoveries 4. Manage our growth rate
Furthermore, the prospects for 1999 continue to be encouraging. Our capital base continued to grow in 1998; our loan loss reserve is adequate; our net income was extremely good with a Return on Average Assets of 2.27%; loan delinquencies continued to be manageable; and classified assets have remained at a manageable level.
ECONOMIC CONDITIONS
Current economic conditions are slightly above average compared to the previous (5) five years, but are certainly not great. Our asset/liability management strategy helped produced good margins in 1998. However, our strategies remain conservative; therefore, we are positioned as interest rates continue to fluctuate.
Item 8:
Item 8: Financial Statements (following on next pages)
Item 9:
Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
PART III
Item 10:
Item 10: Directors and Executive Officers
Directors of Bancshares are identified in the following table:
Type of Percent Name Stock Amount of Principal Occupation Age Ownership Owned Total
Joseph Jefferson David 79 Direct 30,638 9.929
Stephen P. David 41 Direct 4,035 1.308 President and CEO of Peoples Indirect 19,477 6.312 Bancshares of Pointe Coupee & Peoples Bank & Trust Company
Frank Ned Foti 63 Direct 24,561 7.959
C. E. Hebert, III 55 Direct 5,588 1.811
Junies W. Hurst 87 Direct 3,888 1.260
Clyde Walker Kimball 57 Direct 5,014 1.625
Camille N. Laborde 71 Direct 5,028 1.629
Norris A. Melancon, Jr. 71 Direct 20,491 6.640
Thomas W. Montgomery, III 59 Direct 3,588 1.163
Joseph Major Thibaut 45 Direct 600 .194 Indirect 1,000 .324
All Directors and Principal Direct 103,431 33.519 Officers as a Unit (10 Persons) Indirect 20,477 6.636
MANAGEMENT OF THE BANK AND BANCSHARES
Employees
On December 31, 1998, there were twenty full time employees. This includes the officers of the Corporation and Bank listed below:
Executive Officers
Name Age Position Currently Held
Stephen P. David 41 President and CEO of Peoples Bancshares and Peoples Bank and Trust Company
Joyce A. York 51 Vice President and Cashier of 	 Peoples Bank
R. Blain Houston 26 Loan Officer of Peoples Bank
Robin Cashio 48 Branch Manager of Peoples Bank
Kenneth R. Ramagos 43 Assistant Vice - President and Loan Officer of Peoples Bank
Melissa Laborde 35 Loan Review Officer of Peoples Bank
Julie Perrault 38 Administrative Assistant
Mary Posey 40 Loan Collections Officer
Annie LeBlanc 65 Customer Account Officer
Ms. York has been with Peoples Bank since inception. Mr. David was elected an officer of the Bank in December of 1983.
Stephen P. David, Director, CEO, and President of Bancshares and the Bank, age 41. Mr. David joined the Bank on August 3, 1981 and has held many positions, including, Loan Officer; Assistant Vice President; Senior Loan Officer; Senior Vice-President and Assistant Secretary to the Board of Directors prior to being named to his current post on February 1, 1990.
Bancshares was formed in 1983 and became the Bank's sole shareholder on December 27, 1983, at which time all directors of the Bank became directors of Bancshares. Dates prior to that time reflects service as a Director of the Bank.
Joseph Jefferson David is the father of Stephen P. David.
Item 11:
Item 11: Executive Compensation
a) Remuneration of Directors and Officers:
All Executive Officers (President David & Vice President York) had direct cash compensation of $190,732, $181,400, and $162,900 excluding board fees, but including bonuses in 1998, 1997, and 1996, respectively.
On September 17, 1981, the Board of Directors of the Bank approved a profit sharing plan which conforms to the Internal Revenue Code, Section 401(a). All employees who have been employed by the Bank or a period of six months or more; who are 25 years of age; and who have at least 1,000 hours of service annually may participate in the profit sharing plan. No contributions were made to the plan in 1998.
In January 1990 the Board of Directors approved a 401(k) savings plan which conforms to the Internal Revenue Code. All employees who have been employed by the bank for a period of six months or more were eligible to participate in the plan. Contributions by the bank in 1998 totaled $13,307. The accrued amount at year end totaled $474,828.
The Bank has a deferred compensation plan available to its directors. At present only one director is participating. Upon retirement, the Bank will pay the director his deferred compensation plus interest, which accrues at the "low Wall Street rate", in 15 equal annual installments beginning the month after retirement. Upon pre-retirement death, the bank will pay his designated beneficiaries the greater of $8,400 a year for 15 years or his deferred compensation and accrued interest. The bank is the owner and beneficiary of an insurance policy on the life of the director.
The Bank also maintains a supplemental executive retirement plan with its president. Upon retirement, the president will receive $25,000 per year for 20 years, beginning immediately. The bank is the owner and beneficiary of an insurance policy on the life of the president. If employment is terminated "without cause" prior to retirement, the bank will pay the president his accrued benefit, which is based on the number of months of completed service since January, 1996.
The Board of Directors of Bancshares held twelve (12) regular scheduled meetings during 1998. The Board of Directors of the Bank held twelve (12) regularly scheduled meetings. The Bank has a personnel committee which met one (1) times during 1998, and a loan committee which met twenty-four (24) times during the year. The Board of Directors held no special meeting during 1998. The Bank also has an audit committee and executive committee which did not meet during 1998.
The Board of Directors of Bancshares and the Bank do not have a nomination committee.
Directors of Bancshares receive no remuneration for serving in that capacity. Each director of the Bank received a fee of $500 for each regular board meeting. Members of each committee receive $75.00 per meeting attended.
Item 12:
Item 12: Security Ownership of Certain Beneficial Owners and Management
As of March 31, 1999, Peoples Bancshares had authorized 1,000,000 shares of common stock and of this amount, 308,577 shares were outstanding. Additionally, as of this date, Peoples Bancshares had authorized but unissued 500,000 shares of Series A Preferred stock and 500,000 shares of Series B Preferred stock.
As of March 31, 1999 the management of Bancshares knew of no other person or group that owned 5% or more of the outstanding stock of Bancshares other than Mr. N. A. Melancon, Jr., with 20,491 shares representing 6.640%; Mr. Frank N. Foti with 24,561 shares representing 7.959%; Mr. J. Jeff David with 30,638 shares representing 9.929% and William C. David* with 19,477 shares representing 6.312%.
*William C. David has granted a Proxy Authority to his brother, Stephen P. David.
Item 13:
Item 13: Certain Relationships & Related Transactions
b) Transactions with Management:
From time to time the Bank has extended credit to its Officers and Directors and to businesses in which Officers and Directors own an interest; and the Bank intends to continue this policy because of the deposits, business and the income that these activities generate for the Bank. Such loans are made only with the approval of the Board of Directors.
At no time in 1998 did these transactions exceed 10% of the equity capital, except for those matters noted below.
All directors and officers as a group had total loans outstanding at year end 1998 and 1997 of $1,382,362 and $1,213,533 respectively.
PART IV
Item 14:
Item 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A. (1) Financial Statements
The financial statements are listed under Part II, Item 8 of this Report
(2) Financial Statement Schedules
The financial statement schedules are listed under Part II, Item 8 of this Report.
B. Reports on Form 8-K
None
C. Exhibits
None
Signatures
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the under signed, thereunto duly authorized.
PEOPLES BANCSHARES OF POINTE COUPEE PARISH, INC.
By:_________________________________ Joseph M. Thibaut, Sr. Chairman
Pursuant to the Requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
________________________________ ______________________________ Joseph Jefferson David Clyde Walker Kimball Director Director
________________________________ ______________________________ Frank Ned Foti Camille N. LaBorde Director Director
________________________________ ______________________________ Norris A. Melancon, Jr. C. E. Hebert, III Director Director and Secretary
________________________________ ______________________________ Stephen P. David Junies W. Hurst President/CEO and Director Director
________________________________ ______________________________ Thomas W. Montgomery, III Joseph Major Thibaut Director Director
	C O N T E N T S
	
Independent Auditors' Report
Consolidated Statements of Financial Condition December 31, 1998 and 1997	
Consolidated Statements of Operations and Comprehensive Income Years ended December 31, 1998, 1997, and 1996	
Consolidated Statements of Changes in Stockholders' Equity Years ended December 31, 1998, 1997, and 1996	
Consolidated Statements of Cash Flows Years ended December 31, 1998, 1997, and 1996	
Notes to Consolidated Financial Statements	
	INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Peoples Bancshares of Pointe Coupee Parish, Inc. New Roads, Louisiana
We have audited the accompanying consolidated statements of financial condition of Peoples Bancshares of Pointe Coupee Parish, Inc. and Subsidiary as of December 31, 1998 and 1997, and the related consolidated statements of operations and comprehensive income, changes in stockholders' equity and cash flows for each of the years during the three year period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Peoples Bancshares of Pointe Coupee Parish, Inc. and Subsidiary as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the years during the three year period ended December 31, 1998, in conformity with generally accepted accounting principles.
Postlethwaite and Netterville Baton Rouge, Louisiana January 26, 1999
1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Peoples Bancshares of Pointe Coupee Parish, Inc. (Bancshares) and its subsidiary conform to generally accepted accounting principles and to the prevailing practices within the banking industry. A summary of significant accounting policies is as follows:
Basis of presentation
The consolidated financial statements include the accounts of Bancshares and its wholly owned subsidiary, Peoples Bank and Trust Company (the Bank). All significant intercompany accounts and transactions have been eliminated in consolidation.
Nature of operations
Substantially all of the assets, liabilities, and operations presented in the consolidated financial statements are attributable to Peoples Bank and Trust Company. The Bank provides a variety of banking services to individuals and businesses primarily in and around Pointe Coupee Parish, Louisiana. Its primary deposit products are demand deposits, savings deposits, and certificates of deposits, and its primary lending products are agriculture, commercial business, real estate, and consumer loans.
Use of 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 these 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 Banks 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 and the agricultural industry.
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.
Investment securities
The Bank's investments in securities are classified in two categories and accounted for as follows:
? Securities to be held-to-maturity. Bonds, notes, and debentures for which the Bank has the positive intent and ability to hold to maturity are reported at cost, adjusted for premiums and discounts which are recognized in interest income using the interest method, over the period to maturity.
? Securities available-for-sale. Available-for-sale securities consist of bonds, notes, and debentures that are available to meet the Bank's operating needs. These securities are reported at fair value as determined by quoted market prices.
Unrealized holding gains and losses, net of tax, on available-for-sale securities are reported as a net amount in other comprehensive income.
Gains and losses on the sale of investment securities are determined using the specific-identification method. Realized gains (losses) on the sales and maturities of available-for-sale securities are classified as non-interest income and reported as a reclassification adjustment in other comprehensive income.
1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Loans receivable
Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.
The accrual of interest on impaired loans is discontinued when, in management's opinion, the borrower may be unable to meet payments as they become due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received.
The allowance for loan losses is increased by charges to income and decreased by charge-offs (net of recoveries). Management's periodic evaluation of the adequacy of the allowance is based on the Bank's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral, and current economic conditions.
Foreclosed real estate
Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at fair value at the date of foreclosure, establishing a new cost basis. After foreclosure, valuations are periodically performed by management, and the real estate is subsequently carried at the lower of carrying amount or fair value, less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in loss on foreclosed real estate.
Bank premises and equipment
Land is carried at cost. Bank premises and equipment are stated at cost less accumulated depreciation, which is computed using straight-line and accelerated methods over the estimated useful lives of the assets, which range from 3 to 30 years.
Income taxes
Provisions for income taxes are based on taxes payable or refundable for the current year (after exclusion of non-taxable income such as interest on state and municipal securities) and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as prescribed in SFAS No. 109, Accounting for Income Taxes. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.
Net Income per share
Net income per share of common stock has been computed on the basis of the weighted average number of shares of common stock outstanding.
Comprehensive income
Comprehensive income is the change in stockholders equity during the period from transactions and other events and circumstances from non-owner sources. Comprehensive income includes the change in unrealized gains (losses), net of taxes, on available-for-sale securities during the period.
Cash and cash equivalents
For purposes of presentation in the consolidated statements of cash flows, cash and cash equivalents are defined as those amounts included in the balance sheet caption "Cash and due from banks."
1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Off-balance sheet financial instruments
In the ordinary course of business, the Bank has entered into off-balance sheet financial instruments consisting of commitments to extend credit, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded in the financial statements when they are funded or related fees are incurred or received.
Fair values of financial instruments
Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures about Fair Value of Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of Bancshares.
The following methods and assumptions were used by Bancshares in estimating its fair value disclosures for financial instruments:
Cash and cash equivalents - the carrying amounts of cash and cash equivalents approximate their fair values.
Interest-bearing deposits in other banks - fair values for interest-bearing deposits in other banks are estimated using a discounted cash flow analysis that applies interest rates currently being offered on certificates to a schedule of aggregated contractual maturities on such time deposits.
The following methods and assumptions were used by Bancshares in estimating its fair value disclosures for financial instruments:
Investment securities - fair values for investment securities are based on quoted market prices, where applicable. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.
Loans receivable - for variable-rate loans that reprice frequently and have no significant change in credit risk, fair values are based on carrying values. Fair values for certain mortgage loans (i.e., one-to-four family residential), credit card loans, and other consumer loans are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. Fair values for commercial real estate and commercial loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for impaired loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.
Deposit liabilities - the fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.
Short-term borrowings - the carrying amounts of other short-term borrowings maturing within 90 days approximate their fair values. Fair values of other short-term borrowings are estimated using discounted cash flow analyses based on the incremental borrowing rates for similar types of borrowing arrangements.
Accrued interest - the carrying amounts of accrued interest approximate their fair values.
Off-balance sheet instruments - fair values for off-balance sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing.
1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reclassification
Certain amounts in the 1997 and 1996 consolidated financial statements have been reclassified to conform with the current year presentation.
2.	INVESTMENT SECURITIES
Debt and equity securities have been classified in the consolidated statements of financial condition according to managements intent. Securities classified as available-for-sale consisted of the following:
The amortized costs and estimated market values of debt securities at December 31, 1998, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
2.	INVESTMENT SECURITIES (continued)
Investment securities with carrying values of approximately $2,110,000 and $5,280,000 at December 31, 1998 and 1997, respectively, were pledged to secure public deposits and for other purposes as required or permitted by law.
3.	LOANS
Impairment of loans having recorded investments of $192,894 at December 31, 1998 and $451,630 at December 31, 1997 has been recognized in conformity with SFAS No. 114, Accounting by Creditors for Impairment of a Loan, as amended by SFAS No. 118. The average recorded investment in impaired loans during 1998 and 1997 was approximately $320,000 and $460,000, respectively. The total allowances for loan losses related to these loans was $22,500 at both December 31, 1998 and 1997.
Interest income on impaired loans, which is recognized when cash payments are received, totaled approximately $8,300, $10,000, and $12,000 during the years ended December 31, 1998, 1997, and 1996, respectively.
The Bank transferred approximately $187,468 and $22,156 of real estate acquired in settlements of loans to other real estate owned and other assets during the years ended December 31, 1998 and 1997, respectively.
	The Bank is not committed to lend additional funds to debtors whose loans have been modified.
4.	BANK PREMISES AND EQUIPMENT
5.	DEPOSITS
Included in deposits are approximately $4,266,000 and $4,205,000 of certificates of deposit in excess of $100,000 at December 31, 1998 and 1997, respectively. Interest expense on such deposits was approximately $198,000, $200,000, and $187,000 during the years ended December 31, 1998, 1997, and 1996, respectively.
6.	OTHER BORROWED FUNDS
The Bank established a line-of-credit with the Federal Home Loan Bank (FHLB) during 1998 to provide an additional source of operating capital. The current advances, which totaled $628,000 at December 31, 1998, bore interest at 5.275% and were completely repaid on January 11, 1999.
This line of credit is secured by $351,000 of FHLB stock owned by the Bank and all wholly-owned residential (1-4 units) first mortgage loans.
7.		INCOME TAXES
The source and tax effect of items reconciling income tax expense to the amount computed by applying the federal income tax rates in effect to income before income tax expense for the years ended December 31, 1998, 1997, and 1996 were as follows:
	
8.	EMPLOYEE BENEFITS
The Bank maintains a 401(k) savings plan for which the majority of its employees are eligible. The employer contributes to the plan based on the discretion of the Board of Directors. The Bank matches 50% of employee contributions up to 6% of each employee's salary. The Bank recognized expenses relating to this plan of approximately $13,300, $13,800, and $11,600 during the years ended December 31, 1998, 1997, and 1996, respectively.
The Bank maintains a deferred compensation agreement with a director. Upon retirement, the Bank will pay the director his deferred compensation plus interest. The Bank is the owner and beneficiary of several insurance policies covering the life of this director.
The Bank also maintains a supplemental executive retirement plan agreement with its president. Upon retirement, or in the event of death, the president, or his designated beneficiary, will receive the benefit over 20 years. The Bank is the owner and beneficiary of an insurance policy covering the life of the president. If employment is terminated "without cause" prior to retirement, the Bank will pay the president his accrued benefit, which is based on the number of months of completed service since January, 1996.
9.		FINANCIAL 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 standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial. condition. The contract or notional amounts of these instruments reflect the extent of the Bank's involvement in particular classes of financial instruments.
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 standby letters of credit is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for financial instruments recorded on its balance sheet.
	Unless noted otherwise, the Bank does not require collateral or other security to support financial instruments with credit risk.
Commitments to Extend Credit
Commitments to extend credit are agreements to lend to a customer, as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Bank upon extension of credit, is based on management's credit evaluation of the counterparty. Collateral held varies but may include accounts receivable; inventory; property, plant and equipment; and income-producing commercial properties. At December 31, 1998, unfunded loan commitments totaled approximately $2,800,000.
Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. At December 31, 1998, commitments under standby letters of credit totaled approximately $457,000. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Because these instruments have fixed maturity dates, they do not generally present any significant liquidity risk to the Bank.
The Bank has not been required to perform on any financial guarantees during the past three years. The Bank did not incur any losses on such commitments during either 1998, 1997, or 1996.
10.		RELATED PARTY TRANSACTIONS
11.	RESTRICTIONS OF RETAINED EARNINGS
The Bank, as a state chartered Bank, is subject to the dividend restrictions set forth by the Commissioner. Under such restrictions, the Bank may not, without the prior approval of the Commissioner, declare dividends in excess of the sum of the current year's retained net earnings (as defined) plus the retained net earnings (as defined) from the prior year. At December 31, 1998, the Bank could not declare any additional dividends without the approval of the Commissioner.
12.		REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions, by regulators that, if undertaken, could have a direct material effect on the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table on the following page) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 1998, that the Bank meets all capital adequacy requirements to which it is subject.
The most recent notification from the Office of Financial Institutions (as of June 30, 1997) categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To remain as well capitalized the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table below (on the following page). There are no conditions or events since that notification that management believes have changed the institution's category.
13. SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
Most of the Bank's business activity is with customers located within Pointe Coupee Parish. Investments in state and municipal securities involve governmental entities within the Bank's market area. As of December 31, 1998, the Bank's receivables from, guarantees of, and obligations from agriculture loans made to sugar cane, cotton, and wheat farmers were considered a concentration. These loans are generally secured by assets or farm crops, and a large majority of these loans are 90% guaranteed by the Farm Service Agency. The loans are expected to be repaid from cash flow or proceeds from the sale of crops. Loan losses arising from lending transactions with farmers compare favorably with the Bank's loan loss experience on its loan portfolio as a whole.
The distribution of commitments to extend credit approximates the distribution of loans outstanding. Commercial and standby letters of credit were granted primarily to commercial borrowers.
	The contractual amounts of credit-related financial instruments such as commitments to extend credit, and letters of credit represent the amounts of potential accounting loss should the contract be fully drawn upon, the customer default, and the value of any existing collateral become worthless.
14.		SUPPLEMENTAL EXPENSE ITEMS