APPLICATION OF CRITICAL ACCOUNTING POLICIES ACQUISITION OF ACADIANA BANCSHARES, INC. Generally accepted accounting principles are complex and require management to apply significant judgment to various accounting, reporting and disclosure matters. Management must use assumptions and estimates to apply these principles where actual measurement is not possible or practical. The determination of the allowance for loan losses, which represents management’s estimate of probable losses inherent in the Company’s credit portfolio, is based on estimates that involve a higher degree of judgment and complexity than the application of other significant accounting policies. Factors considered in this determination and the process used are described in the section of this discussion entitled “Loans and Asset Quality.” For a further discussion of the allowance for loans losses and the Company’s other significant accounting policies, see Note 1 of the Consolidated Financial Statements. These policies are dependent, in part, upon subjective judgments, assumptions and estimates. Changes in such estimates may have a significant impact on the financial statements. On February 28, 2003, the Company completed its acquisition of Acadiana Bancshares, Inc. (“Acadiana”), holding company of LBA Savings Bank. As consideration the Company issued 981,821 shares of common stock and paid approximately $9.8 million in cash to Acadiana shareholders. In accordance with FAS No. 141, the transaction was accounted for as a purchase. For further information, see Note 2 to the Consolidated Financial Statements and the Company’s Current Report filed on Form 8-K dated February 28, 2003. 33