<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period __ to __.
Commission File No. 1-10160
UNION PLANTERS CORPORATION
(Exact name of registrant as specified in its charter)
Tennessee 62-0859007
--------- ----------
(State of incorporation) (I.R.S. Employer Identification No.)
7130 Goodlett Farms Parkway, Memphis, Tennessee 38018
----------------------------------------------------------------
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (901) 383-6000
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, 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.
Class Outstanding at October 31, 1994
- ------------------------- -------------------------------
Common stock $5 par value 25,431,252
<PAGE> 2
UNION PLANTERS CORPORATION AND SUBSIDIARIES
FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
INDEX
<TABLE>
<CAPTION>
Page
--------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
a) Consolidated Balance Sheet - September 30, 1994,
September 30, 1993, and December 31, 1993 3
b) Consolidated Statement of Earnings -
Three and Nine Months Ended September 30, 1994 and 1993 4
c) Consolidated Statement of Changes in
Shareholders' Equity - Nine Months Ended
September 30, 1994 5
d) Consolidated Statement of Cash Flows -
Nine Months Ended September 30, 1994 and 1993 6
e) Notes to Unaudited Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 17
Part II. Other Information
Item 1. Legal Proceedings 40
Item 2. Changes in Securities 40
Item 3. Defaults Upon Senior Securities 40
Item 4. Submission of Matters to a Vote of Security Holders 40
Item 5. Other Information 40
Item 6. Exhibits and Reports on Form 8-K 40
Signatures 42
</TABLE>
-2-
<PAGE> 3
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30
-------------------------
DECEMBER 31,
1994 1993 1993
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
ASSETS
<S> <C> <C> <C>
Cash and due from banks $ 276,377 $ 256,983 $ 229,471
Interest-bearing deposits at financial institutions 8,106 36,941 26,647
Federal funds sold and securities purchased
under agreements to resell 83,187 138,377 53,149
Trading account securities, at market 154,556 126,308 153,482
Loans held for resale 7,449 53,081 60,250
Investment securities
Available for sale (Amortized cost September 30, 1994: $2,012,349;
Fair value September 30 and December 31, 1993: $560,044
and $694,952, respectively) 1,990,386 549,035 688,453
Held to maturity (Fair value: $903,419, $2,163,429,
and $2,070,753, respectively) 907,268 2,108,577 2,031,613
Loans 3,781,098 2,983,676 3,109,709
Less: Unearned income (21,417) (17,672) (16,881)
Allowance for losses on loans (88,870) (84,559) (81,604)
----------- ----------- -----------
Net loans 3,670,811 2,881,445 3,011,224
Premises and equipment 156,653 136,753 140,342
Accrued interest receivable 68,878 56,443 52,070
Goodwill and other intangibles 48,913 42,628 40,815
Other assets 122,570 104,958 106,179
----------- ----------- -----------
TOTAL ASSETS $ 7,495,154 $ 6,491,529 $ 6,593,695
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 848,348 $ 760,246 $ 752,610
Certificates of deposit of $100,000 and over 403,713 353,283 345,843
Other interest-bearing 4,653,528 4,356,834 4,373,361
----------- ----------- -----------
TOTAL DEPOSITS 5,905,589 5,470,363 5,471,814
Short-term borrowings 613,489 191,221 244,995
Federal Home Loan Bank advances 190,126 171,110 179,954
Long-term debt 116,956 76,963 117,276
Accrued interest, expenses, and taxes 51,004 45,049 43,827
Other liabilities 32,162 38,095 27,899
----------- ----------- -----------
TOTAL LIABILITIES 6,909,326 5,992,801 6,085,765
----------- ----------- -----------
Commitments and contingent liabilities - - -
Shareholders' equity
Preferred stock
Convertible 87,298 87,298 87,298
Nonconvertible 17,250 17,250 17,250
Common stock, $5 par value; 50,000,000 shares authorized;
25,422,018 issued and outstanding (21,598,421 at
September 30, 1993 and 21,657,253 at December 31, 1993) 127,110 107,991 108,286
Additional paid-in capital 93,958 86,318 87,586
Unrealized gain (loss) on available for sale securities, net of taxes (13,385) - -
Retained earnings 273,597 199,871 207,510
----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY 585,828 498,728 507,930
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,495,154 $ 6,491,529 $ 6,593,695
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 4
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
1994 1993 1994 1993
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
INTEREST INCOME
<S> <C> <C> <C> <C>
Interest and fees on loans $ 79,644 $ 64,526 $ 225,060 $ 190,651
Interest on investment securities
Taxable 33,346 29,865 94,815 94,714
Tax-exempt 6,860 6,233 20,571 17,622
Interest on deposits at financial institutions 97 258 326 1,303
Interest on federal funds sold and securities
purchased under agreements to resell 710 874 2,425 2,993
Interest on trading account securities 2,613 1,535 6,591 4,837
Interest on loans held for resale 144 1,454 1,022 2,663
--------- --------- --------- ---------
Total interest income 123,414 104,745 350,810 314,783
--------- --------- --------- ---------
INTEREST EXPENSE
Interest on deposits 43,081 38,599 124,651 117,555
Interest on short-term borrowings 6,622 1,341 12,437 4,703
Interest on Federal Home Loan Bank advances
and long-term debt 4,630 3,423 12,985 8,657
--------- --------- --------- ---------
Total interest expense 54,333 43,363 150,073 130,915
--------- --------- --------- ---------
NET INTEREST INCOME 69,081 61,382 200,737 183,868
Provision for losses on loans - 1,489 - 9,033
--------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR
LOSSES ON LOANS 69,081 59,893 200,737 174,835
--------- --------- --------- ---------
NONINTEREST INCOME
Service charges on deposit accounts 8,338 7,620 24,327 21,609
Bank card income 1,819 2,038 5,775 5,629
Mortgage servicing income 1,676 1,845 5,032 5,856
Trust service income 1,317 1,299 4,324 4,279
Profits and commissions from trading activities 1,113 2,925 3,954 6,728
Investment securities gains (losses) (8,099) 514 (7,889) 3,952
Other income 7,435 6,004 18,596 18,150
--------- --------- --------- ---------
Total noninterest income 13,599 22,245 54,119 66,203
--------- --------- --------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits 26,801 25,855 79,392 76,350
Net occupancy expense 4,574 4,049 13,603 12,163
Equipment expense 4,671 4,429 13,844 12,651
Other expense 24,705 25,343 71,498 72,637
--------- --------- --------- ---------
Total noninterest expense 60,751 59,676 178,337 173,801
--------- --------- --------- ---------
EARNINGS BEFORE INCOME TAXES AND
ACCOUNTING CHANGES 21,929 22,462 76,519 67,237
Applicable income taxes 6,151 4,455 22,920 19,115
--------- --------- --------- ---------
EARNINGS BEFORE ACCOUNTING CHANGES 15,778 18,007 53,599 48,122
Accounting changes, net of taxes - - - 5,001
--------- --------- --------- ---------
NET EARNINGS $ 15,778 $ 18,007 $ 53,599 $ 53,123
========= ========= ========= =========
EARNINGS PER COMMON SHARE
Earnings before accounting changes
Primary $ 0.53 $ 0.72 $ 1.84 $ 1.94
Fully diluted 0.51 0.67 1.74 1.82
Net earnings
Primary $ 0.53 $ 0.72 $ 1.84 $ 2.17
Fully diluted 0.51 0.67 1.74 2.01
AVERAGE SHARES OUTSTANDING (IN THOUSANDS)
Primary 25,516 21,778 25,472 21,566
Fully diluted 29,994 26,276 29,953 25,713
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 5
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS) ON
AVAILABLE
ADDITIONAL FOR SALE
PREFERRED COMMON PAID-IN SECURITIES, RETAINED
STOCK STOCK CAPITAL NET OF TAXES EARNINGS TOTAL
--------- --------- ---------- ------------ -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 $ 104,548 $ 108,286 $ 87,586 $ - $ 207,510 $ 507,930
Net earnings - - - - 53,599 53,599
Cash dividends
Common Stock, $.65 per share - - - - (14,250) (14,250)
Series B Preferred Stock, $6.00 per share - - - - (264) (264)
Series C Preferred Stock, $1.94 per share - - - - (1,342) (1,342)
Series D Preferred Stock, $1.46 per share - - - - (370) (370)
Series E Preferred Stock, $1.50 per share - - - - (4,662) (4,662)
Pooled banks prior to pooling - - - - (1,529) (1,529)
Common shares issued under employee benefit
plans and dividend reinvestment plan,
net of shares repurchased - 946 6,369 - (2,092) 5,223
Issuance of 3,575,661 shares of Common Stock
for acquisitions (Note 2) - 17,878 4 - 37,022 54,904
Cumulative effect of adoption of SFAS 115
on January 1, 1994 - - - 12,246 - 12,246
Decrease in unrealized gain (loss) on available
for sale securities, net of taxes - - - (25,631) - (25,631)
Other - - (1) - (25) (26)
--------- --------- --------- --------- --------- ---------
BALANCE, SEPTEMBER 30, 1994 $ 104,548 $ 127,110 $ 93,958 $ (13,385) $ 273,597 $ 585,828
========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 6
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1994 1993
---------- ---------
(DOLLARS IN THOUSANDS)
OPERATING ACTIVITIES
<S> <C> <C>
Net earnings $ 53,599 $ 53,123
Reconciliation of net earnings to net cash provided by operating activities
Cumulative effect of accounting changes - (5,001)
Provision for losses on loans and other real estate 179 10,639
Depreciation and amortization 10,881 9,569
Amortization and write-off of intangibles 5,112 8,291
Net accretion of investment securities 3,511 5,745
Net realized (gains) losses on sale of investment securities 7,889 (3,952)
Deferred income tax benefit (590) (1,834)
(Increase) decrease in assets
Trading account securities and loans held for resale 53,448 21,738
Accrued interest receivable and other assets (8,450) 36,122
Decrease in accrued interest, expenses, taxes, and other liabilities (65) (28,184)
Other, net 84 1,187
----------- ---------
Net cash provided by operating activities 125,598 107,443
----------- ---------
INVESTING ACTIVITIES
Net decrease in short-term investments 38,711 64,261
Proceeds from sales and maturities of investment securities available for sale 1,180,409 607,147
Purchases of investment securities available for sale (786,281) (368,367)
Proceeds from sales of investment securities 225 10,214
Proceeds from maturities of investment securities 45,862 707,620
Purchases of investment securities (422,365) (902,729)
Net (increase) decrease in loans (246,373) 54,362
Net cash received from purchases of financial institutions 90,121 72,121
Purchases of premises and equipment, net (13,668) (15,140)
----------- ---------
Net cash (used) provided by investing activities (113,359) 229,489
----------- ---------
FINANCING ACTIVITIES
Net decrease in deposits (286,481) (307,588)
Net increase (decrease) in short-term borrowings 367,821 (117,379)
Proceeds from long-term debt, net 82,565 155,086
Repayment of long-term debt (86,675) (5,784)
Proceeds from issuance of common stock, net 8,301 17,834
Purchase and retirement of common stock, net (3,079) (904)
Cash dividends paid (22,417) (16,273)
----------- ---------
Net cash provided (used) by financing activities 60,035 (275,008)
----------- ---------
Net increase in cash and cash equivalents 72,274 61,924
Cash and cash equivalents at the beginning of the period 282,580 333,436
----------- ---------
Cash and cash equivalents at the end of the period $ 354,854 $ 395,360
=========== =========
SUPPLEMENTAL DISCLOSURES
Cash paid for
Interest $ 144,989 $ 130,849
Taxes 24,292 19,031
Other real estate transferred from loans $ 3,033 $ 6,100
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE> 7
UNION PLANTERS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. PRINCIPLES OF ACCOUNTING
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles. The foregoing financial
statements are unaudited; however, in the opinion of management, all
adjustments, including normal recurring adjustments, necessary for a fair
presentation of the consolidated financial statements have been included.
September 30, 1993 interim consolidated financial statements and financial
information have been restated for 1993 acquisitions consummated subsequent to
September 30 and for BNF BANCORP, Inc. (BNF) which was acquired on September
1, 1994 and which is considered a significant subsidiary, all of which were
accounted for as poolings of interests. Additionally, 1994 first and second
quarter financial statements and financial information have been restated for
third quarter 1994 acquisitions accounted for as poolings of interests.
As discussed in the Corporation's 1993 Annual Report to Shareholders,
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," was adopted effective January 1,
1994.
The accounting policies followed by Union Planters Corporation and its
subsidiaries (the Corporation) for interim financial reporting are consistent
with the accounting policies followed for annual financial reporting except as
noted below. The notes included herein should be read in conjunction with the
notes to the 1993 consolidated financial statements included in the
Corporation's Current Report on Form 8-K dated October 20, 1994 (restated for
the acquisition of BNF). Certain 1993 amounts have been reclassified to be
consistent with the 1994 financial reporting presentation.
NOTE 2. MERGERS AND ACQUISITIONS
POOLINGS OF INTERESTS
During the first nine months of 1994, the Corporation completed six
acquisitions and in 1993 completed four acquisitions, all of which were
accounted for using the pooling of interests method of accounting. The table
below summarizes these acquisitions.
1993 ACQUISITIONS
<TABLE>
<CAPTION>
COMMON TOTAL ASSETS AT TOTAL EQUITY AT
DATE SHARES JANUARY 1, JANUARY 1,
INSTITUTION ACQUIRED ISSUED 1993 1993
- ---------------------------- ---------- -------- --------------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Garrett Bancshares, Inc. (GBI) 5/31/93 613,088 $173.7 $ 4.8
Hogue Holding Company, Inc. (HHC) 9/1/93 219,274 38.5 4.4
Central State Bancorp, Inc. (CSB) 9/1/93 630,355 107.8 10.7
First Financial Services, Inc. (FFS) 10/1/93 447,906 86.0 8.4
--------- ------ -----
1,910,623 $406.0 $28.3
========= ====== =====
</TABLE>
1994 ACQUISITIONS
<TABLE>
<CAPTION>
COMMON TOTAL ASSETS AT TOTAL EQUITY AT
DATE SHARES JANUARY 1, JANUARY 1,
INSTITUTION ACQUIRED ISSUED 1994 1994
- ----------------------------- ---------- -------- --------------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Mid-South Bancorp, Inc. (MSB) 1/1/94 839,542 $184.7 $11.9
First National Bancorp of
Shelbyville, Inc. (FNBS) 3/1/94 974,886 170.0 12.2
Clin-Ark Bancshares, Inc. (CBI) 4/1/94 217,768 50.3 4.2
Liberty Bancshares, Inc. (LBI) 7/1/94 1,223,353 180.2 20.0
Earle Bankshares, Inc. (EBI) 8/1/94 320,112 42.5 6.6
BNF BANCORP, Inc. (BNF) 9/1/94 2,000,329 275.5 30.6
--------- ------ -----
5,575,990 $903.2 $85.5
========= ====== =====
</TABLE>
-7-
<PAGE> 8
The consolidated financial statements for 1993 and 1994 include the
results of the institutions acquired in 1993. The results of institutions
acquired in 1994 are included in the consolidated financial statements for
1994, however prior year amounts have not been restated for these acquisitions
due to immateriality except for BNF which is considered a significant
acquisition. Eliminations have been made for material intercompany transactions
with the pooled companies. Through their respective dates of acquisition, the
1994 acquisitions contributed approximately $12,566,000, $1,590,000, and
$287,000 to 1994 net interest income, noninterest income, and net earnings,
respectively, of the Corporation.
PURCHASE ACQUISITIONS
The Corporation acquired eight institutions in 1993 and four in the first
nine months of 1994 which were accounted for using the purchase method of
accounting. The table below summarizes these acquisitions:
<TABLE>
<CAPTION>
TOTAL ASSETS
DATE PURCHASE RESULTING AT DATE OF
INSTITUTION ACQUIRED CONSIDERATION PRICE INTANGIBLES ACQUISITION
- ------------------------ -------- --------------- -------- ----------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Bank of East Tennessee (BOET) (a) 1/1/93 648,786 Shares of $ 25.3 $ 7.0 $ 231
Series E Preferred Stock
Security Trust Federal Savings
and Loan Association and
SaveTrust Federal Savings Bank
(Security Trust/SaveTrust) 1/1/93 Cash 22.0 3.0 261
First Federal Savings Bank 2/26/93 625,000 Shares of NM (b) - 187
(Maryville) (b) Common Stock
(Conversion/
Acquisition)
First State Bancshares, Inc. 3/12/93 Cash and Common Stock 3.9 .4 34
(FSB) (c) (90,162 Shares)
First Cumberland Bank (FCB) 3/15/93 Cash .2 - 20
Farmers Union Bank 4/1/93 Cash 9.5 4.2 78
(Farmers Union)
Erin Bank & Trust Company 6/1/93 259,736 Shares of 8.3 2.1 43
(Erin) Series E Preferred Stock
Anderson County Bank (ACB) 3/1/94 Cash 2.5 .7 22
Assumption of liabilities and 4/19/94 Cash .4 .4 15
purchase of assets from the
RTC (d)
Tennessee Bancorp, Inc. (TBI) (e) 5/1/94 Cash 13.5 5.4 92
Assumption of liabilities and 9/23/94 Cash 4.4 4.4 54
purchase of assets from the ----- ------
RTC (f)
Total $27.6 $1,037
===== ======
</TABLE>
(a) The Corporation previously held 17.93% of the common stock of BOET ($3.4
million). On January 1, 1993, the Corporation purchased an additional
43.93% of the common stock of BOET in exchange for the Corporation's
Series E Preferred Stock ($11.1 million). Effective May 3, 1993, the
Corporation acquired the remaining common stock of BOET in exchange for
the Corporation's Series E Preferred Stock ($10.8 million).
(b) Maryville was a mutual savings bank which, pursuant to a
merger/conversion, converted to a federal stock charter. All of the stock
of Maryville was acquired by the Corporation in exchange for a capital
contribution equalling approximately $14.1 million derived in part from
the proceeds of a public offering of the Corporation's Common Stock made
in connection with the merger/conversion.
-8-
<PAGE> 9
(c) FSB is the parent company of First State Bank of Fayette County
(Somerville, TN).
(d) Two subsidiaries of the Corporation assumed approximately $14 million of
deposits (including accrued interest) and acquired assets (primarily
loans) from the Resolution Trust Corporation and simultaneously sold
certain loans to a third party.
(e) TBI was the parent company of Tennessee National Bank in Columbia,
Tennessee, whose assets and liabilities at date of acquisition were
transferred to UPNB and later became the assets and liabilities of Union
Planters Bank of Middle Tennessee, N.A.
(f) A subsidiary of the Corporation assumed approximately $54 million of
deposits (including accrued interest) and acquired assets (primarily
loans) from the Resolution Trust Corporation. Certain asset purchase
options remain outstanding.
NM = Not meaningful.
Intangibles are being amortized primarily using the straight line method
over periods ranging from 10 to 15 years. The recording of the acquisition of
Maryville resulted in negative goodwill of approximately $9.4 million, $8.1
million of which was deducted from noncurrent, nonmonetary assets (premises and
equipment, fair value adjustment of loans, prepaid software, and mortgage
servicing rights). The remaining negative goodwill of $1.3 million was recorded
in other liabilities and is being accreted over seven years.
The following unaudited pro forma information summarizes the pro forma
impact of the purchase acquisitions completed during the first nine months of
1994 and the pro forma impact of the purchase acquisitions completed in 1993
assuming consummation of all such transactions on January 1, 1993. The pro
forma information does not include the historical results of the two
acquisitions purchased from the RTC, since they were failed financial
institutions and their historical results would not be representative of future
operating results. The unaudited pro forma results are not necessarily
representative of the actual results that would have occurred or which may
occur in the future.
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA
---------------------------
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1994 1993
--------- --------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net interest income $ 201,848 $ 189,507
Provision for losses on loans 163 (11,918)
Noninterest income 54,186 67,176
Noninterest expense (179,817) (178,967)
--------- ---------
Earnings before income taxes
and accounting changes 76,380 65,798
Applicable income taxes 22,988 19,688
--------- ---------
Earnings before accounting changes 53,392 46,110
Accounting changes, net of taxes - 5,001
--------- ---------
Net earnings $ 53,392 $ 51,111
========= =========
Earnings per common share
Earnings before accounting changes
Primary $ 1.84 $ 1.81
Fully diluted 1.74 1.70
Net earnings
Primary 1.84 2.04
Fully diluted 1.74 1.89
</TABLE>
-9-
<PAGE> 10
The following details the net cash received from purchases of financial
institutions:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------------
1994 1993
--------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Fair value of assets acquired $ 822,169 $ 1,245,602
Liabilities assumed (746,500) (1,148,122)
Issuance of Common Stock (54,905) (30,618)
Issuance of Preferred Stock - (30,127)
Less previous investment - (3,387)
--------- -----------
Cash paid for purchase of other
financial institutions 20,764 33,348
Cash and cash equivalents acquired (110,885) (105,469)
--------- -----------
Net cash received from purchases
of financial institutions $ (90,121) $ (72,121)
========= ===========
</TABLE>
PENDING ACQUISITIONS
The Corporation has entered into definitive agreements pursuant to which
it would acquire the institutions listed below and, subject to receipt of
various approvals and satisfaction of certain contractual conditions precedent
to closing, all are expected to be consummated in 1994.
<TABLE>
<CAPTION>
ANTICIPATED APPROXIMATE
METHOD OF TOTAL
INSTITUTION CONSIDERATION ACCOUNTING ASSETS
- ---------------------------- ----------------- ---------------- ------------
(IN MILLIONS)
<S> <C> <C> <C>
Commercial Bancorp, Inc., Parent Approximately 189,442 Pooling of interests $ 29
Company of The Commercial Bank, shares of Common Stock
Obion, TN (Obion) (a)
Mid South Bancshares, Inc., Parent Approximately 567,000 Pooling of interests 133
Company of Security Bank in shares of Common Stock
Paragould, AR, and Farmers
and Merchants Bank in
Reyno, AR (MSB-ARK) (b)
Grenada Sunburst System Corporation, Approximately 13,793,000 Pooling of Interests 2,511
Parent Company of Sunburst Bank, shares of Common Stock ------
Mississippi, in Grenada, MS; and
Sunburst Bank, in
Baton Rouge, LA (GSSC) (c)
Total $2,673
======
</TABLE>
(a) Acquisition consummated November 1, 1994 and shares to be issued are
subject to change due to cash issued for fractional shares.
(b) This acquisition is expected to be consummated December 1, 1994. The
estimated number of shares to be issued is based upon an assumed market
price of the Corporation's Common Stock of $22.13 per share and the number
of shares is subject to change depending on the market price during the
stipulated pricing period.
(c) The GSSC acquisition is expected to be consummated December 31, 1994.
Regulatory approvals have been received and the acquisition is subject to
receiving approvals of both companies' shareholders and the satisfaction
of certain other contractual closing conditions. The Corporation will
exchange 1.4530 shares of its Common Stock for each share of GSSC
outstanding.
-10-
<PAGE> 11
NOTE 3. LOANS
Loans are summarized by type as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1994 1993
------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Commercial, financial, and agricultural $ 706,003 $ 669,435
Real estate - construction 127,998 88,241
Real estate - mortgage
Secured by 1-4 family 1,538,976 1,106,206
Other mortgage loans 621,437 537,565
Consumer
Credit cards and other related plans 105,375 99,103
Home equity 98,109 89,497
Other consumer 542,250 491,299
Foreign
Government 1,750 2,449
Direct lease financing, net 39,200 25,914
----------- -----------
Total Loans $ 3,781,098 $ 3,109,709
=========== ===========
</TABLE>
Nonperforming loans and loans 90 days or more past due are summarized as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1994 1993
------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Nonaccrual loans $ 15,341 $ 14,646
Restructured loans 1,225 7,525
----------- -----------
Total nonperforming loans $ 16,566 $ 22,171
=========== ===========
Loans 90 days or more past due and not
on nonaccrual status $ 3,982 $ 4,994
=========== ===========
</TABLE>
NOTE 4. ALLOWANCE FOR LOSSES ON LOANS
The changes in the allowance for losses on loans for the nine months ended
September 30, 1994, are summarized as follows (Dollars in thousands):
<TABLE>
<S> <C>
Balance, January 1, 1994 $ 81,604
Provision charged to expense -
Allowances of banks acquired 8,039
Recoveries 8,657
Amounts charged off (9,430)
-----------
Balance, September 30, 1994 $ 88,870
===========
</TABLE>
-11-
<PAGE> 12
NOTE 5. INVESTMENT SECURITIES
The amortized cost and fair values of investment securities are summarized as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
-------------------------------------------------------------
AMORTIZED UNREALIZED FAIR
-----------------------
COST GAINS LOSSES VALUE
----------- -------- -------- -----------
(DOLLARS IN THOUSANDS)
AVAILABLE FOR SALE
<S> <C> <C> <C> <C>
U.S. Government obligations
U.S. Treasury securities $ 676,662 $ 642 $ 5,747 $ 671,557
Securities of U.S. Government agencies
Collateralized mortgage obligations 303,719 339 6,592 297,466
Mortgage-backed securities 793,207 1,801 12,277 782,731
Other 156,939 498 2,106 155,331
Other stocks and securities 81,822 2,102 623 83,301
----------- -------- -------- -----------
Total investment securities
available for sale $ 2,012,349 $ 5,382 $ 27,345 $ 1,990,386
=========== ======== ======== ===========
HELD TO MATURITY
U.S. Government obligations
U.S. Treasury securities $ 434,783 $ 11 $ 4,583 $ 430,211
Securities of U.S. Government agencies
Collateralized mortgage obligations 25,837 32 618 25,251
Other 50 - - 50
----------- -------- -------- -----------
Total U.S. Government obligations 460,670 43 5,201 455,512
Obligations of states and political
subdivisions 446,286 9,501 8,192 447,595
----------- -------- -------- -----------
Total other securities 312 - - 312
----------- -------- -------- -----------
Total investment securities
held to maturity $ 907,268 $ 9,544 $ 13,393 $ 903,419
=========== ======== ======== ===========
</TABLE>
-12-
<PAGE> 13
NOTE 5. INVESTMENT SECURITIES (continued)
<TABLE>
<CAPTION>
DECEMBER 31, 1993
--------------------------------------------------------
UNREALIZED
AMORTIZED ---------------------- FAIR
COST GAINS LOSSES VALUE
---------- -------- ------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
HELD FOR SALE
U.S. Government obligations
U.S. Treasury securities $ 121,240 $ 913 $ 3 $ 122,150
Securities of U.S. Government agencies
Collateralized mortgage obligations 141,853 694 105 142,442
Mortgage-backed securities 310,217 4,250 285 314,182
Other 97,664 1,012 21 98,655
Other stocks and securities 17,479 88 44 17,523
----------- -------- ------- -----------
Total investment securities
held for sale $ 688,453 $ 6,957 $ 458 $ 694,952
=========== ======== ======= ===========
HELD FOR INVESTMENT
U.S. Government obligations
U.S. Treasury securities $ 693,612 $ 7,222 $ 244 $ 700,590
Securities of U.S. Government agencies
Collateralized mortgage obligations 341,645 767 992 341,420
Mortgage-backed securities 358,867 4,305 183 362,989
Other 121,691 1,732 37 123,386
----------- -------- ------- -----------
Total U.S. Government obligations 1,515,815 14,026 1,456 1,528,385
----------- -------- ------- -----------
Obligations of states and political
subdivisions 446,714 27,312 845 473,181
----------- -------- ------- -----------
Other securities
Federal Reserve Bank/Federal Home
Loan Bank stock 26,852 - - 26,852
Collateralized mortgage obligations 39,036 177 114 39,099
Other 3,196 40 - 3,236
----------- -------- ------- -----------
Total other securities 69,084 217 114 69,187
----------- -------- ------- -----------
Total investment securities
held for investment $ 2,031,613 $ 41,555 $ 2,415 $ 2,070,753
=========== ======== ======= ===========
</TABLE>
For the nine-month periods ended September 30, 1994 and 1993, the
Corporation had gross realized gains on investment securities available for
sale of $607,000 and $2,311,000 respectively, and gross realized losses of
$8,590,000 and $16,000, respectively.
Investment securities having a carrying value of approximately $926
million and $598 million at September 30, 1994 and December 31, 1993,
respectively, were pledged to secure public and trust funds on deposit and
securities sold under agreements to repurchase.
As of January 1, 1994, and in connection with the adoption of SFAS No.
115, $1.7 billion of held to maturity securities were transferred to the
available for sale category of securities.
-13-
<PAGE> 14
NOTE 6. OTHER NONINTEREST INCOME AND EXPENSE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1994 1993 1994 1993
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
OTHER NONINTEREST INCOME
VSIBG partnership earnings $ 385 $ 941 $ 1,672 $ 2,854
Credit life insurance commissions 630 789 2,246 2,133
Brokerage fee income 325 321 1,035 1,122
Computer service income 10 102 56 374
Sale of servicing 85 318 673 635
Gain on troubled debt restructuring - - - 901
Favorable litigation settlement 2,200 - 2,200 -
Other 3,800 3,533 10,714 10,131
-------- -------- -------- --------
TOTAL OTHER NONINTEREST INCOME $ 7,435 $ 6,004 $ 18,596 $ 18,150
======== ======== ======== ========
OTHER NONINTEREST EXPENSE
Amortization of mortgage servicing rights $ 459 $ 677 $ 1,309 $ 2,519
FDIC assessments 3,094 3,593 9,943 9,935
Amortization of goodwill and other
intangibles 1,351 1,631 3,942 5,771
Legal fees 772 423 2,006 2,292
Other contracted services 1,617 1,732 4,807 4,912
Advertising and promotion 1,889 1,380 5,364 4,328
Brokerage and clearing fees 673 1,226 2,131 2,998
Postage and carrier 1,471 1,341 4,533 3,945
Stationery and supplies 1,527 1,358 4,605 3,940
Merchant credit card charges 771 1,153 2,757 3,234
Communications 1,155 1,041 3,213 3,167
Other real estate expense - 156 405 2,001
Other personnel services 665 649 1,973 1,747
Federal Reserve fees 378 454 1,285 1,321
Dues, subscriptions, and contributions 537 546 1,656 1,761
Travel 422 455 1,292 1,346
Miscellaneous charge-offs 418 304 1,111 743
Insurance 419 323 1,137 1,113
Servicing foreclosure expense 105 105 315 525
Consultant fees 105 87 836 799
Taxes other than income taxes 528 336 1,463 1,177
Acquisition-related expenses 2,416 - 3,190 1,793
Data processing conversion costs - 3,280 - 3,280
Other 3,933 3,093 12,225 7,990
-------- -------- -------- --------
TOTAL OTHER NONINTEREST EXPENSE $ 24,705 $ 25,343 $ 71,498 $ 72,637
======== ======== ======== ========
</TABLE>
-14-
<PAGE> 15
NOTE 7. INCOME TAXES
Applicable income taxes for the nine months ended September 30, 1994, were
$22.9 million, resulting in an effective tax rate of 30.0%. Applicable income
taxes for the same period in 1993 were $19.1 million, resulting in an effective
tax rate of 28.4%. The tax benefit (expense) applicable to investment
securities gains or losses for the nine months ended September 30, 1994 and
1993 was $3.1 million and ($1.5 million), respectively.
At September 30, 1994, the Corporation had a net deferred tax asset of
$53.6 million recorded in other assets compared to $35.9 million at September
30, 1993, and $39.2 million at December 31, 1993.
Effective January 1, 1994, the Corporation adopted SFAS No. 115
"Accounting for Certain Investments in Debt and Equity Securities." Reference
is made to Note 1 of the Corporation's 1993 Annual Report to Shareholders for
further discussion. The impact of SFAS No. 115 at September 30, 1994 was to
increase the cumulative net deferred tax asset by $8.6 million.
NOTE 8. FEDERAL HOME LOAN BANK ADVANCES
The Corporation's subsidiaries have obtained various advances from the
Federal Home Loan Bank (FHLB) totaling $190.1 million at September 30, 1994,
under Blanket Agreements for Advances and Security Agreements (the Agreements).
The Agreements entitle the Corporation's subsidiaries to borrow funds from the
FHLB to fund mortgage-loan programs and satisfy other funding needs. Interest
rates on the advances vary from fixed rate advances to variable rate advances.
The majority of the advances at September 30, 1994, had variable rates tied to
the three-month LIBOR rate. Maturity dates for the advances range from 1994 to
2014. The value of the collateral (mortgage loans) under the Agreements is
required to be 150% of the advances outstanding, $190.1 million at September
30, 1994.
NOTE 9. SHAREHOLDERS' EQUITY
PREFERRED STOCK
An analysis of the Corporation's Preferred Stock follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1994 1993
------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Preferred stock without par value,
10,000,000 shares authorized
CONVERTIBLE
Series A Preferred Stock,
250,000 shares authorized, none issued $ - $ -
Series B, $8 Nonredeemable, Cumulative,
Convertible Preferred Stock (stated at
liquidation value of $100),
44,000 shares issued and outstanding 4,400 4,400
Series D, 9.5% Redeemable, Cumulative,
Convertible Preferred Stock (stated at
liquidation value of $20.50),
253,655 shares issued and outstanding 5,200 5,200
Series E, 8% Cumulative, Convertible,
Preferred Stock (stated at liquidation value
of $25), 3,107,922 shares issued and outstanding 77,698 77,698
--------- ---------
Total convertible preferred stock 87,298 87,298
NONCONVERTIBLE
Series C, 10 3/8%, Increasing Rate,
Redeemable, Cumulative Preferred Stock
(stated at liquidation value of $25),
690,000 shares issued and outstanding 17,250 17,250
--------- ---------
Total nonconvertible preferred stock 17,250 17,250
--------- ---------
Total preferred stock $ 104,548 $ 104,548
========= =========
</TABLE>
-15-
<PAGE> 16
NOTE 9. SHAREHOLDERS' EQUITY (continued)
The Series C, 10 3/8%, Increasing Rate, Redeemable, Cumulative Preferred
Stock has been called for redemption on October 31, 1994 at par value plus
accrued interest.
NOTE 10. CONTINGENT LIABILITIES
LEGAL PROCEEDINGS
Management is of the opinion that neither the Corporation's financial
position, results of operations, nor liquidity will be materially affected by
the ultimate resolution of any legal proceeding currently pending or
threatened. There were no significant developments during the third quarter in
any pending or threatened actions which would alter such opinion.
The Corporation and/or various subsidiaries are parties to certain pending
or threatened civil actions which are described in Item 3, Part I of the
Corporation's Annual Report on Form 10-K for the year ended December 31, 1993
(1993 10-K), in Note 19 to the Corporation's 1993 consolidated financial
statements (these financial statements became the historical financial
statements of the Corporation on October 20, 1994) filed as Exhibit 99(b) to
the Corporation's Current Report on Form 8-K dated October 20, 1994 (8-K), in
Note 19 to Exhibit 99(c) of the 8-K which contains the restated interim
consolidated financial statements for the six months ended June 30, 1994, and
in Note 10 of the Corporation's quarterly report on Form 10-Q dated March 31,
1994. The fifth paragraph of Item 3, Part 1 of the 1993 10-K, the fourth
paragraph of Note 19 to Exhibit 99(b) and Note 10 to Exhibit 99(c) of the 8-K
describe certain pending litigation against the Corporation's former
broker/dealer subsidiaries and more than 80 other defendants in various
lawsuits consolidated in a Louisiana Federal district court alleging violations
of Federal and other securities laws in connection with the 1986 underwriting
and subsequent sale of $400 million of housing revenue bonds issued by the
Health, Educational, and Housing Facility Board of the City of Memphis,
Tennessee, as well as the underwriting and sale of seven other taxable
municipal bond issues. One of such subsidiaries participated in the
underwriting of the Memphis issue and is a defendant in purported class claims
based on that issue. Several individual actions against these subsidiaries
alleging violations in secondary market sales of such issues have been
consolidated in the litigation. During the third quarter of 1994, most of the
representatives of the plaintiffs in the various class actions agreed in
principle to settle all claims against the underwriting participants. Such
settlement has been given tentative approval by the court, and is subject to a
number of preconditions, including final approval by the court. Notice of the
settlement will be distributed to all members of the putative plaintiff classes
and such class members have been given the right to opt out of the settlement
agreement and continue to pursue claims against the underwriters. A small
number of class members have already indicated their intent to do so. However,
should such opt-out claims reach a certain threshold, the underwriting
defendants may withdraw their settlement offer. Also during the third quarter,
the court denied the class defendants' motion for summary judgment which
asserted that, as a matter of law, plaintiffs could not establish class-based
reliance and therefore class treatment was inappropriate. All of the individual
secondary market suits against the Corporation's subsidiaries that were
consolidated in the litigation have been resolved. The remaining claim asserted
against such subsidiaries is in arbitration and involves a $100,000 par value
sale.
Various other legal proceedings pending against the Corporation and/or its
subsidiaries have arisen in the ordinary course of business.
-16-
<PAGE> 17
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following provides a narrative discussion and analysis of significant
changes in results of operations and financial condition. This discussion
should be read in conjunction with the consolidated financial statements and
related financial analysis set forth in the Corporation's 1993 Annual Report,
the Corporation's Current Report on Form 8-K dated October 20, 1994 (includes
restated 1993 consolidated financial statements and June 30, 1994 unaudited
consolidated financial statements which became the historical financial
statements of the Corporation effective October 20, 1994), and the interim
unaudited consolidated financial statements and notes for the three and nine
months ended September 30, 1994, included in Part I herein, and the other
supplemental financial data included in this discussion.
The following table presents selected financial highlights for the three
and nine months ended September 30, 1994 and 1993.
<TABLE>
<CAPTION>
PERCENTAGE
THREE MONTHS ENDED NINE MONTHS ENDED CHANGE
SEPTEMBER 30, SEPTEMBER 30, -----------------
---------------------- ---------------------- THREE NINE
1994 1993 1994 1993 MONTHS MONTHS
------- ------- -------- ------- ------ ------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Earnings before securities transactions
and accounting changes $ 20,718 $ 17,693 $ 58,419 $ 45,712 17% 28%
Earnings before accounting changes 15,778 18,007 53,599 48,122 (12) 11
Net earnings 15,778 18,007 53,599 53,123 (12) 1
Earnings before securities transactions
and accounting changes
Primary earnings per common share .73 .71 2.03 1.83 3 11
Fully diluted earnings per common share .68 .66 1.91 1.73 3 10
Return on average assets 1.10% 1.07% 1.06% .94%
Return on average common equity 15.03 15.90 14.53 14.27
Earnings before accounting changes:
Primary earnings per common share $ .53 $ .72 $ 1.84 $ 1.94 (26) (5)
Fully diluted earnings per common share .51 .67 1.74 1.82 (24) (4)
Return on average assets .84% 1.09% .97% .99%
Return on average common equity 11.02 16.22 13.18 15.14
Net earnings
Primary earnings per common share $ .53 $ .72 $ 1.84 $ 2.17 (26) (15)
Fully diluted earnings per common share .51 .67 1.74 2.01 (24) (13)
Return on average assets .84% 1.09% .97% 1.09%
Return on average common equity 11.02 16.22 13.18 16.95
Dividends per common share $ .23 $ .18 $ .65 $ .54 28 20
Net interest margin (FTE) 4.15% 4.29% 4.15% 4.35%
Interest rate spread (FTE) 3.65 3.88 3.67 3.94
Book value per common share $ 18.93 $ 18.25 4
</TABLE>
_______________________
Net interest margin = Net interest income as a percentage of average earning
assets
Interest rate spread = Difference in the yield on average earning assets and
the rate on average interest-bearing liabilities
FTE = Fully taxable-equivalent basis
-17-
<PAGE> 18
ACQUISITIONS
During the first nine months of 1994 the Corporation consummated ten
acquisitions. Additionally, one acquisition has been consummated subsequent to
September 30, 1994. The following table presents, at September 30, 1994, the
balances at the respective dates of acquisition for the institutions acquired
through September 30, 1994. Reference is made to Note 2 to the interim
consolidated financial statements and the Corporation's Current Reports on Form
8-K dated January 10, 1994, February 8, 1994, April 14, 1994, May 18, 1994,
August 18, 1994, August 19, 1994, and September 1, 1994 for additional
information regarding the pending and completed acquisitions.
UNION PLANTERS CORPORATION
CONSUMMATED ACQUISITIONS
BALANCES RECORDED AT RESPECTIVE DATES OF ACQUISITION
SEPTEMBER 30, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL IMPACT
MSB (a) FNBS (a) LBI (a) TBI OTHERS (b) ON UPC
--------- ---------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing deposits at
financial institutions $ - $ 1,179 $ 1,025 $ 1,600 $ 21,136 $ 24,940
Loans, net of unearned income 114,234 66,753 123,386 50,631 69,024 424,028
Allowance for losses on loans (2,123) (2,834) (1,287) (787) (1,132) (8,163)
--------- --------- --------- --------- --------- ---------
Net loans 112,111 63,919 122,099 49,844 67,892 415,865
Investment securities 47,572 92,317 27,945 34,027 27,020 228,881
Intangible assets 479 - - 5,464 5,413 11,356
Cash and cash equivalents 16,847 5,490 23,336 2,584 62,628 110,885
Other real estate owned, net 510 66 340 - - 916
Premises and equipment 4,185 2,250 2,238 3,484 2,221 14,378
Other assets 2,979 4,858 3,050 1,865 2,125 14,877
--------- --------- --------- --------- --------- ---------
Total assets $ 184,683 $ 170,079 $ 180,033 $ 98,868 $ 188,435 $ 822,098
========= ========= ========= ========= ========= =========
LIABILITIES
Deposits $ 166,082 $ 153,918 $ 149,242 $ 82,993 $ 168,021 $ 720,256
Other interest-bearing
liabilities 4,670 - 9,907 - 62 14,639
Other liabilities 2,076 3,926 722 2,415 2,283 11,422
--------- --------- --------- --------- --------- ---------
Total liabilities $ 172,828 $ 157,844 $ 159,871 $ 85,408 $ 170,366 $ 746,317
========= ========= ========= ========= ========= =========
Purchase price/capital
contribution/equity at
respective dates of
acquisition for poolings $ 11,855 $ 12,235 $ 20,162 $ 13,460 $ 18,069 $ 75,781
========= ========= ========= ========= ========= =========
</TABLE>
(a) Amounts are as of January 1, 1994, for MSB, FNBS, and LBI which were
accounted for as poolings of interests. Abbreviations for the above
entities are in Note 2 to the financial statements.
(b) Includes ACB and the acquisition from the Resolution Trust Corporation of
certain assets and assumption of certain liabilities of two failed
institutions. Also included are January 1, 1994 amounts for CBI and EBI
which were accounted for as poolings of interest. See Note 2 to the
interim consolidated financial statements for additional information.
-18-
<PAGE> 19
PENDING ACQUISITIONS
The Corporation is continuing its efforts to acquire other financial
institutions in selected markets. Reference is made to Note 2 to the interim
consolidated financial statements for information regarding pending
acquisitions. Negotiations with other institutions are ongoing.
GRENADA SUNBURST SYSTEM CORPORATION PENDING ACQUISITION
On July 1, 1994, the Corporation entered into a definitive agreement to
acquire Grenada Sunburst System Corporation (GSSC) in a tax-free exchange of
shares of the Corporation's Common Stock in a transaction to be accounted for
as a pooling of interests. It is estimated that the Corporation would issue
approximately 13.8 million shares of the Corporation's Common Stock as
consideration for the acquisition.
GSSC is a multi-bank holding company headquartered in Grenada,
Mississippi. It is the third largest financial institution headquartered in
Mississippi. GSSC has total assets of approximately $2.5 billion. The two major
subsidiaries of GSSC are Sunburst Bank, Mississippi, and Sunburst Bank,
Louisiana, with total assets of $2.0 billion and $500 million, respectively.
GSSC operates in 124 locations in 59 counties in Mississippi and Louisiana.
Regulatory approval has been received for the acquisition of GSSC and the
acquisition is expected to be completed by year end 1994, subject to receiving
approval of both companies' shareholders, and the satisfaction of certain other
contractual closing conditions.
GSSC represents a significant acquisition and in management's opinion will
enhance market share and add to the value of the Corporation's banking
franchise. Reference is made to the Corporation's Current Reports on Form 8-K
dated May 19, 1994, as amended; July 1, 1994; July 26, 1994; and September 28,
1994 for pro forma financial information, financial statements of GSSC, and the
text of the definitive agreement.
REORGANIZATION OF UNION PLANTERS NATIONAL BANK (UPNB)
Incidental to a corporate division of UPNB, effective July 1, 1994, the
Corporation formed four new bank subsidiaries: Union Planters Bank of East
Tennessee, National Association; Union Planters Bank of Middle Tennessee,
National Association; Union Planters Bank of Chattanooga, National Association;
and Union Planters Bank of Jackson, National Association (collectively the
Regional Banks). The Corporation injected equity of $101.7 million into the
Regional Banks, substantially all of such funds ($98 million) having been
provided by a dividend from UPNB. Each of the Regional Banks acquired from
UPNB at book value substantially all of the assets and assumed all of the
liabilities of the UPNB branches located in its region. The establishment of
these branches into separate banks will permit a local management team and
board of directors to focus on the needs and opportunities within the local
market and is consistent with the Corporation's community bank philosophy.
UPNB will continue to operate branches in the Memphis, Tennessee area. The
separation of the branches formerly held by UPNB had no material impact on the
consolidated financial condition of the Corporation.
-19-
<PAGE> 20
OPERATING RESULTS - THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1994
The following tables present the contributions to fully diluted earnings
per common share and a summary of the third quarter and year-to-date results
identifying significant noninterest income and expense items. A discussion of
the operating results follows these tables.
UNION PLANTERS CORPORATION
CONTRIBUTIONS TO FULLY DILUTED EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30 EPS
---------------------- INCREASE
1994 1993 (DECREASE)
------ ------ ----------
<S> <C> <C> <C>
Net interest income-FTE $ 7.07 $ 7.53 $ (.46)
Provision for losses on loans - (.35) .35
------ ------ ------
Net interest income after provision
for losses on loans-FTE 7.07 7.18 (.11)
------ ------ ------
Noninterest income
Service charges on deposits .81 .84 (.03)
Bank card income .19 .22 (.03)
Mortgage servicing income .17 .23 (.06)
Trust service income .14 .17 (.03)
Profits and commissions from
trading activities .13 .26 (.13)
Investment securities gains (losses) (.26) .15 (.41)
Other income .63 .70 (.07)
------ ------ ------
Total noninterest income 1.81 2.57 (.76)
------ ------ ------
Noninterest expense
Salaries and benefits 2.65 2.97 .32
Net occupancy expense .45 .47 .02
Equipment expense .46 .49 .03
Other expense 2.39 2.83 .44
------ ------ ------
Total noninterest expense 5.95 6.76 .81
------ ------ ------
Earnings before income taxes and
accounting changes-FTE 2.93 2.99 (.06)
Applicable income taxes-FTE .97 .93 (.04)
------ ------ ------
Earnings before accounting changes 1.96 2.06 (.10)
Accounting changes - .19 (.19)
------ ------ ------
Net earnings 1.96 2.25 (.29)
Less preferred stock dividends .22 .24 .02
------ ------ ------
Fully diluted earnings per common share $ 1.74 $ 2.01 $ (.27)
====== ====== ======
Change in net earnings applicable
to common shares using previous
year average shares outstanding $ .02
Change in average shares outstanding (.29)
------
Change in net earnings $ (.27)
======
FTE = Fully taxable-equivalent basis
</TABLE>
-20-
<PAGE> 21
UNION PLANTERS CORPORATION AND SUBSIDIARIES
EARNINGS COMPARISON
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1994 1993 VARIANCE
--------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net interest income $ 69,081 $ 61,382 $ 7,699
Provision for losses on loans - (1,489) 1,489
Noninterest income 19,498 21,731 (2,233)
Noninterest expense (58,335) (56,051) (2,284)
--------- --------- --------
Operating earnings 30,244 25,573 4,671
Investment securities gains (losses) (8,099) 514 (8,613)
Accelerated amortization of intangibles - (345) 345
Data processing conversion costs - (3,280) 3,280
Expenses related to acquisitions (2,416) - (2,416)
Favorable litigation settlement 2,200 - 2,200
--------- --------- --------
Earnings before income taxes 21,929 22,462 (533)
Taxes (6,151) (7,358) 1,207
Tax benefit due to tax law change - 2,903 (2,903)
--------- --------- --------
Net earnings $ 15,778 $ 18,007 $ (2,229)
========= ========= ========
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1994 1993 VARIANCE
--------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net interest income $ 200,737 $ 183,868 $ 16,869
Provision for losses on loans - (9,033) 9,033
Noninterest income 59,808 61,350 (1,542)
Noninterest expense (175,147) (168,057) (7,864)
--------- --------- --------
Operating earnings 85,398 68,128 16,496
Investment securities gains (losses) (7,889) 3,952 (11,841)
Gain on sale of collateral related to
a troubled debt - 901 (901)
Accelerated amortization of mortgage servicing rights - (500) 500
Accelerated amortization of intangibles - (171) 171
Data processing conversion costs - (3,280) 3,280
Expenses related to acquisitions (3,190) (1,793) (623)
Favorable litigation settlement 2,200 - 2,200
--------- --------- --------
Earnings before income taxes and accounting changes 76,519 67,237 9,282
Taxes (22,920) (21,093) (1,827)
Tax benefit due to tax law change - 1,978 (1,978)
--------- --------- --------
Earnings before accounting changes 53,599 48,122 5,477
Accounting changes
Postretirement/postemployment benefits - (5,925) 5,925
Income taxes - 10,926 (10,926)
--------- --------- --------
Net earnings $ 53,599 $ 53,123 $ 476
========= ========= ========
</TABLE>
-21-
<PAGE> 22
THIRD QUARTER EARNINGS OVERVIEW
For the third quarter of 1994, the Corporation had net earnings of $15.8
million, or $.51 per fully diluted common share, which compares to $18.0
million, or $.67 per fully diluted common share, for the same period in 1993.
Fully diluted earnings per common share for the third quarter are based on 3.7
million more shares than for the same period in 1993, primarily as a result of
shares issued as consideration for acquisitions. The third quarter 1994 results
include investment securities losses of $8.1 million ($4.9 million after tax)
which reflect actions taken by management in the quarter to respond to rising
interest rates. Earnings before investment securities transactions were $20.7
million for the third quarter of 1994 compared to $17.7 million for the third
quarter of 1993, an increase of 17%. The Corporation's returns on average
assets and average common equity based on earnings before securities
transactions were 1.10% and 15.03%, respectively, compared to 1.07% and 15.90%,
respectively, for the same period in 1993.
The Corporation's operating results before securities losses continued to
improve in the third quarter of 1994, due primarily to growth in net interest
income and the decline in the provision for losses on loans due to improved
asset quality. Noninterest expense, excluding the impact of one-time charges
and acquisitions, declined for the quarter. A more detailed review and
discussion of the Corporation's financial condition and results of operations
follows.
EARNINGS ANALYSIS
NET INTEREST INCOME
Net interest income on a fully taxable-equivalent basis (FTE) for the
third quarter of 1994 was $72.7 million, 12% higher than the third quarter of
1993 which was $65.2 million. For the nine months ended September 30, 1994, net
interest income (FTE) was $212 million, 9% higher than the same period in 1993.
The increase in net interest income is primarily related to acquisitions.
Excluding the impact of acquisitions, net interest income increased
approximately $2 million for the third quarter and was level for the nine
months. Partially offsetting the increase was a decline (primarily loans held
for resale, net of cost of funds) of approximately $572,000 and $908,000,
respectively, for the three and nine months ended September 30, 1994 compared
to the same periods in 1993 related to the discontinuance of the Capital
Markets operations which is discussed below (See "EARNINGS ANALYSIS -
Noninterest Income.")
The net interest margin for the third quarter of 1994 was 4.15% compared
to 4.29% for the third quarter of 1993. For the nine months ended September 30,
1994, the net interest margin was 4.15% compared to 4.35% for 1993. The
interest rate spread narrowed for both the three and nine months ended
September 30, 1994 to 3.65% and 3.67%, respectively, compared to 3.88% and
3.94%, respectively, in 1993.
To be consistent with industry practice, in the first quarter of 1994, the
Corporation reclassified certain interchange fees arising from credit card
loans (formerly included in interest income) to bank card income, a component
of noninterest income. For the three and nine months ended September 30, 1994,
these fees totaled $569,000 and $1.7 million, respectively, compared to
$482,000 and $1.3 million, respectively, for the same periods in 1993.
Interest income (FTE) for the three and nine months ended September 30,
1994 totaled $127 million and $362 million, respectively, increases of $18.5
million and $37.3 million, respectively, over the same periods in 1993. The
increase in interest income is primarily attributable to loans which, excluding
the impact of acquisitions, have increased approximately 10% for the nine
months ended September 30, 1994 compared to the same period in 1993 and have
increased approximately 6% over the second quarter of 1994. Interest income on
investment securities increased $4.0 million and $4.3 million, respectively,
for the three and nine months ended September 30, 1994 compared to 1993.
Average investment securities increased approximately $299 million and $293
million for the above periods which increased interest income. The increase was
partially offset by a decline in interest rates in 1993 followed by increasing
interest rates in 1994. The taxable-equivalent yield on earning assets was
7.26% and 7.08%, respectively, for the three and nine months ended September
30, 1994 compared to 7.15% and 7.28%, respectively, for the same periods in
1993.
Interest expense for the three and nine months ended September 30, 1994 was
$54.3 million
-22-
<PAGE> 23
and $150.0 million, respectively, increases of $11.0 million and $19.2 million,
respectively, compared to the same periods in 1993. The increase is primarily
attributable to interest paid on deposit liabilities, short-term borrowings,
and Federal Home Loan Bank advances. For the above periods, average
interest-bearing deposits increased approximately $256 million and $322
million, respectively, with acquisitions accounting for the increase. Average
short-term borrowing increased $383 million and $196 million, respectively.
Federal Home Loan Bank advances increased $32 million and $95 million,
respectively, for the above periods. The average rate paid on interest-bearing
liabilities was 3.61% and 3.41%, respectively, for the three and nine months
ended September 30, 1994 compared to 3.27% and 3.34%, respectively, for the
same periods in 1993.
During 1993, the Corporation entered into certain interest-rate swaps to
reduce the volatility of the Corporation's net interest income. The impact of
these instruments on net interest income for the third quarter of 1994 was to
reduce interest income $16,000 (a decrease in investment securities interest
income of $199,000 and an increase in interest income on loans of $183,000) and
increase interest expense on long-term debt by $49,000. For the nine months
ended September 30, 1994, interest income increased $1.5 million ($142,000
investment securities and $1,326,000 loans) and interest expense decreased
$71,000. Reference is made to the "Financial Condition - Off-Balance Sheet"
discussion below.
Reference is made to the average balance sheet which follows this
discussion for detailed yields and rates on the components of net interest
income.
PROVISION FOR LOSSES ON LOANS
The continued reduction in nonperforming loans and the strong reserve
coverage of nonperforming loans resulted in the Corporation not recording
provisions for losses on loans for the three and nine months ended September
30, 1994. For the same periods in 1993, the Corporation recorded provisions of
$1.5 million and $9.0 million, respectively. Management does not expect to
record any provision for losses on loans for the remainder of 1994 unless a
significant increase in loans should occur or there should be a significant
increase in nonperforming assets, neither of which management expects to occur.
NONINTEREST INCOME
Noninterest income was $13.6 million for the third quarter of 1994, a
decrease of $8.7 million from the same period in 1993, and a $6.4 million
decrease from the second quarter of 1994. For the nine months ended September
30, 1994, noninterest income was $54.1 million, a $12.1 million decrease from
the same period in 1993.
The decrease was due primarily to investment securities losses of $8.1
million and $7.9 million for the three and nine months ended September 30,
1994, respectively, compared to investment securities gains of $514,000 and
$4.0 million, respectively, for the same periods in 1993. The investment
securities losses in the third quarter of 1994 related primarily to
restructuring a portion of the available for sale investment securities
portfolio in response to higher interest rates. It is expected that increased
book yields will result in additional interest income of approximately $8.5
million over the next twelve months due to the sale of approximately $428
million of securities having an average maturity of thirteen months and the
reinvestment in securities having an average maturity of approximately 30
months.
Noninterest income also decreased due to a decline in profits and
commissions from trading activities. Revenues from the SBA loan trading
activities decreased $690,000 and $1.4 million, respectively, for the three and
nine months ended September 30, 1994. For the same periods, revenues from the
Capital Markets' operations declined $1.1 million and $1.4 million,
respectively. The Corporation discontinued the Capital Markets' operations at
the beginning of the second quarter of 1994. For the nine months ended
September 30, 1994, the Capital Markets' operations had total revenues of
$649,000 and total expenses of $955,000 compared to $3.0 million and $2.4
million, respectively, for the same period in 1993. The Corporation has also
discontinued its computer service business which resulted in decreases in
noninterest income of $92,000 and $318,000, respectively, for the two periods.
Mortgage servicing income has also declined $169,000 and $824,000,
respectively, for the two periods, due primarily to the high level of
refinancing activity over the last two years.
The above declines in noninterest income were partially offset by a third
quarter 1994 favorable litigation settlement received by a subsidiary bank of
$2.2 million, and an increase in service charges on deposits accounts of
$718,000 and $2.7 million for the three
-23-
<PAGE> 24
and nine months ended September 30, 1994 as compared to the same periods in
1993, which was primarily related to acquisitions. Noninterest income for the
nine months ended September 30, 1993, included a one-time gain of $901,000
related to a troubled debt restructuring.
Management is continuing to seek and develop sources of noninterest
income, and, as discussed below, has engaged Alex Sheshunoff Management
Services, Inc. to assist in identifying fee income opportunities. It is
expected that some of Sheshunoff's recommendations will be implemented in the
fourth quarter of 1994 which should increase noninterest income.
NONINTEREST EXPENSE
Noninterest expense was $60.8 million for the third quarter of 1994, an
increase of 1.8% from the same period in 1993 and an increase of 1.3% from the
second quarter of 1994. For the nine months ended September 30, 1994,
noninterest expense was $178.3 million, an increase of 2.6% from the same
period in 1993. Acquisitions accounted for approximately $5 million and $15
million, respectively, of the increase in noninterest expense.
Salaries and employee benefits, the largest component of noninterest
expense, were $26.8 million for the third quarter of 1994, an increase of 4%
over the same period in 1993 and an increase of 1% over the second quarter of
1994. For the nine months ended September 30, 1994, salaries and employee
benefits were $79.4 million, an increase of 4% over the same period in 1993.
Acquisitions are the primary source of the increases which were partially
offset by decreases in incentive compensation of $1.4 million and $2.8
million, respectively, for the three and nine months ended September 30, 1994.
Full-time equivalent employees were 4,053 at September 30, 1994 compared to
2,992 for the same period in 1993.
Noninterest expense for the third quarter of 1994 increased $2.4 million
reflecting one-time acquisition-related expenses incidental to acquisitions
completed during the third quarter of 1994. For the nine months ended September
30, 1994, the increase was only $623,000, as similar charges were incurred in
1993. Other significant increases in noninterest expenses for the three and
nine months ended September 30, 1994 compared to 1993 were as follows: (i)
occupancy and equipment expense increased $767,000 and $2.6 million,
respectively, due to acquisitions and an increase in the number of locations
and (ii) advertising and promotion increased $509,000 and $1.0 million,
respectively, due to a marketing campaign by the Corporation's lead bank.
Noninterest expense increases were partially offset by the following
decreases in noninterest expense for the three and nine months ended September
30, 1994 as compared to the same periods in 1993: (i) for both periods in 1993,
noninterest expense included one-time charges of $3.3 million for data
processing conversion costs; (ii) amortization of intangibles declined $498,000
and $3.0 million, respectively, in the 1994 periods primarily due to
accelerated amortization of intangibles in 1993; and (iii) other real estate
expense declined $156,000 and $1.6 million, respectively, primarily due to
improving asset quality.
Noninterest expense increased $771,000 between the second and third
quarters of 1994. Excluding the acquisition-related expenses of $2.4 million
incurred in the third quarter as discussed previously, noninterest expense
declined $1.6 million.
Effective January 1, 1993, the Corporation adopted the provisions of SFAS
Nos. 106 and 112 related to postretirement and postemployment benefits. The
Corporation recorded the cumulative obligation of $9.6 million ($5.9 million
after taxes) for postretirement and postemployment benefits upon adoption,
which is recorded on the consolidated statement of earnings as a change in
accounting principle. The ongoing impact on earnings of the adoption of SFAS
Nos. 106 and 112 is not significantly different from previous practice.
Management is continuing to evaluate programs intended to reduce expenses
while maintaining quality customer service. Reference is made to the "Earnings
Considerations for the Fourth Quarter of 1994" for a discussion of efforts to
reduce expenses in future periods.
TAXES
Applicable income taxes for the nine months ended September 30, 1994 were
$22.9 million, resulting in an effective tax rate of 29.9%, which compares to
$19.1 million, or an effective tax rate of 28.4% for the nine months ended
September 30, 1993. Federal income taxes were provided at statutory rates of
35% for the nine months ended September 30, 1994 and 1993,
-24-
<PAGE> 25
which resulted from a retroactive tax rate increase which did not become
effective until the third quarter of 1993. The increase in the effective rate
for the nine months ended September 30 1994 as compared to the nine months
ended September 30, 1993, is due primarily to a cumulative "catch up" of the
amortization of certain intangible assets which were not deductible prior to
the third quarter of 1993 when a new tax law became effective and to an
increase in nontaxable municipal bond interest. The tax law changes effective
in the third quarter of 1993 resulted in a tax benefit for the three and nine
months ended September 30, 1993 of $2.9 million and $2.0 million, respectively.
These amounts were partially offset by a one percent increase in the federal
statutory tax rate to 35%.
The Corporation adopted SFAS No. 109 effective January 1, 1993 and
recorded a benefit in the first quarter of 1993 of $10.9 million from the
cumulative effect of the accounting change. Additionally, the Corporation
adopted SFAS No. 115 "Accounting for Certain Investments in Debt and Equity
Securities". Reference is made to Note 1 to the consolidated financial
statements in the 1993 Annual Report to Shareholders for further discussion. At
September 30, 1994, the Corporation recorded a deferred tax asset of $8.6
million, the tax effect of the fair market valuation adjustment required by
SFAS No. 115.
EARNINGS CONSIDERATIONS FOR THE FOURTH QUARTER OF 1994
In connection with the Corporation's pending acquisition of GSSC and as
part of both companies' continuing efforts to reduce expenses, both the
Corporation and GSSC have retained the services of Alex Sheshunoff Management
Services, Inc. (ASMS), a nationally recognized consulting firm, to make
recommendations for improving the financial performance of each organization,
and to facilitate the consolidation of the two organizations. Through the study
of each organization, individually and collectively, certain opportunities to
reduce costs and reengineer operations in order to become more efficient have
already been, and more are expected to be, identified. Management of the
Corporation and GSSC expect that there will be a reduction in the number of
employees and branches in each organization regardless of whether the merger is
consummated.
The Corporation and GSSC expect the acquisition of GSSC to close by
December 31, 1994; however, there can be no assurance that will be the case
since the acquisition of GSSC is subject to receiving approval of both
companies' shareholders and the satisfaction of certain other contractual
closing conditions.
Whether or not the acquisition is consummated, the Corporation and GSSC
will each offer voluntary early retirement and voluntary separation programs in
the fourth quarter of 1994 to facilitate the staff reductions. Charges
associated with the early retirement and separation programs, along with other
acquisition-and consolidation-related expenses have been preliminarily
estimated to be between $18 million to $27 million after tax. Management of the
Corporation estimates that charges associated with these items of between $3
million to $6 million after tax will be incurred by the Corporation in the
fourth quarter of 1994 regardless of the status of the merger. The remaining
charges are expected to be incurred in the quarter in which the acquisition of
GSSC is actually consummated. The ranges of charges are based on currently
available information as well as preliminary estimates and are subject to
change. The ranges are provided as a preliminary estimate of the significance
of the charges which may be required and should be viewed accordingly. The
actual charges may vary substantially from the estimated ranges.
In addition to the above charges, the Corporation has undertaken a
marketing program in the fourth quarter of 1994 with a view to increasing the
number of account relationships and the related dollar amount of loans in a
segment of its consumer loan portfolio. A substantial part of the costs of this
program will be incurred during the fourth quarter of 1994 and is expected to
result in a significant increase in loan volume, interest income, and fee
income in 1995 and future periods. Based on current estimates, the cost of this
marketing program is expected to be between $7 million and $9 million after
tax. This range is provided as a preliminary estimate of the significance of
the charges that may be required, and the actual charges may vary substantially
from these estimates.
During the fourth quarter of 1994, the Corporation also has plans to sell
approximately $100 million of securities in the available for sale investment
securities portfolio to increase the asset sensitivity of the balance sheet and
to position the Corporation to fund the anticipated loan volume related to the
marketing program discussed in the previous paragraph. If the sale of these
securities is executed, it is estimated that investment securities losses of
approximately $3.6 million ($2.2 million after tax) would be recognized.
-25-
<PAGE> 26
UNION PLANTERS CORPORATION
CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND INTEREST RATES
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------------------------------
1994 1993
------------------------------------- --------------------------------------
INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
----------- --------- ------ ---------- --------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing deposits at
financial institutions $ 7,729 $ 97 4.98% $ 26,681 $ 258 3.84%
Federal funds sold and securities
purchased under agreements to resell 58,461 710 4.82 124,961 874 2.77
Trading account securities 168,255 2,613 6.16 125,437 1,535 4.85
Loans held for resale 7,290 144 7.84 88,251 1,454 6.54
Investment securities (1) (2) 3,002,134 43,463 5.74 2,703,226 39,487 5.80
Loans, net of unearned income (1) 3,701,598 79,998 8.57 2,955,682 64,913 8.71
----------- --------- ----------- ---------
TOTAL EARNING ASSETS (1) (2) 6,945,467 127,025 7.26 6,024,238 108,521 7.15
--------- ---------
Cash and due from banks 244,800 257,843
Premises and equipment 157,548 136,804
Allowance for losses on loans (89,673) (83,612)
Other assets 217,142 229,179
----------- -----------
TOTAL ASSETS $ 7,475,284 $ 6,564,452
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Money market accounts $ 1,198,749 7,795 2.58% $ 1,331,281 7,924 2.36%
Savings deposits 1,093,004 6,272 2.28 878,720 5,197 2.35
Certificates of Deposit of
$100,000 and over 397,213 3,933 3.93 366,906 3,674 3.97
Other time deposits 2,388,670 25,080 4.17 2,244,674 21,804 3.85
Short-term borrowings
Federal funds purchased and
securities sold under agreements
to repurchase 583,083 6,576 4.47 197,509 1,284 2.58
Other 4,823 46 3.78 7,462 57 3.03
Federal Home Loan Bank advances 190,985 2,414 5.01 158,710 1,520 3.80
Long-term debt
Subordinated capital notes and
debentures 114,770 2,154 7.45 74,292 1,830 9.77
Other 2,224 63 11.24 2,882 73 10.05
----------- --------- ----------- ---------
TOTAL INTEREST-BEARING LIABILITIES 5,973,521 54,333 3.61 5,262,436 43,363 3.27
Demand Deposits 824,239 734,029
----------- --------- ----------- ---------
TOTAL SOURCES OF FUNDS 6,797,760 54,333 5,996,465 43,363
--------- ---------
Other liabilities 85,134 77,174
Unrealized loss on available
for sale securities (487) -
Shareholders' equity 592,877 490,813
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 7,475,284 $ 6,564,452
=========== ===========
NET INTEREST INCOME $ 72,692 $ 65,158
========= =========
INTEREST RATE SPREAD 3.65% 3.88%
===== ====
NET INTEREST MARGIN 4.15% 4.29%
===== ====
____________________________
(1) Taxable-equivalent adjustments:
Loans $ 354 $ 387
Securities 3,257 3,389
--------- ---------
$ 3,611 $ 3,776
========= =========
(2) Yields are calculated on historical cost and exclude the impact of the net unrealized loss on available for sale securities.
</TABLE>
-26-
<PAGE> 27
UNION PLANTERS CORPORATION
CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND INTEREST RATES
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------------------------------
1994 1993
------------------------------------- --------------------------------------
INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
----------- --------- ------ ---------- --------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing deposits at
financial institutions $ 9,150 $ 326 4.76% $ 46,317 $ 1,303 3.76%
Federal funds sold and securities
purchased under agreements to resell 84,772 2,425 3.82 132,278 2,993 3.03
Trading account securities 162,747 6,591 5.41 122,436 4,837 5.28
Loans held for resale 19,945 1,022 6.85 54,400 2,663 6.54
Investment securities (1) (2) 2,995,106 125,524 5.60 2,701,948 121,241 6.00
Loans, net of unearned income (1) 3,560,594 226,049 8.49 2,901,306 191,580 8.83
----------- --------- ----------- ---------
TOTAL EARNING ASSETS (1) (2) 6,832,314 361,937 7.08 5,958,685 324,617 7.28
--------- ---------
Cash and due from banks 269,104 255,114
Premises and equipment 155,529 134,356
Allowance for losses on loans (90,292) (81,353)
Other assets 223,811 226,817
----------- -----------
TOTAL ASSETS $ 7,390,466 $ 6,493,619
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Money market accounts $ 1,282,381 23,434 2.44% $ 1,339,622 23,656 2.36%
Savings deposits 1,086,040 18,479 2.27 846,317 15,618 2.47
Certificates of Deposit of
$100,000 and over 387,703 11,491 3.96 366,950 10,969 4.00
Other time deposits 2,396,816 71,247 3.97 2,277,694 67,312 3.95
Short-term borrowings
Federal funds purchased and
securities sold under agreements
to repurchase 421,294 12,281 3.90 222,837 4,528 2.72
Other 6,149 156 3.39 9,067 175 2.58
Federal Home Loan Bank advances 194,597 6,541 4.49 99,259 2,818 3.80
Long-term debt
Subordinated capital notes and
debentures 114,757 6,242 7.27 74,292 5,489 9.88
Other 2,630 202 10.27 5,244 350 8.92
----------- --------- ----------- ---------
TOTAL INTEREST-BEARING LIABILITIES 5,892,367 150,073 3.41 5,241,282 130,915 3.34
Demand Deposits 829,426 696,812
----------- --------- ----------- ---------
TOTAL SOURCES OF FUNDS 6,721,793 150,073 5,938,094 130,915
--------- ---------
Other liabilities 84,286 88,297
Unrealized gain on available
for sale securities 3,342 -
Shareholders' equity 581,045 467,228
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 7,390,466 $ 6,493,619
=========== ===========
NET INTEREST INCOME $ 211,864 $ 193,702
========= =========
INTEREST RATE SPREAD 3.67% 3.94%
==== ====
NET INTEREST MARGIN 4.15% 4.35%
==== ====
____________________________
(1) Taxable-equivalent adjustments:
Loans $ 989 $ 929
Securities 10,138 8,905
--------- ---------
$ 11,127 $ 9,834
========= =========
(2) Yields are calculated based on historical cost and exclude the impact of the net unrealized gain on available for sale
securities.
</TABLE>
-27-
<PAGE> 28
FINANCIAL CONDITION
The Corporation's total assets grew $1.0 billion to $7.5 billion at
September 30, 1994 compared to September 30, 1993, and increased $901 million
from December 31, 1993 to September 30, 1994 due primarily to acquisitions.
Certain financial information for 1993 and for the first and second quarters of
1994 has been restated to reflect acquisitions accounted for using the pooling
of interests method of accounting (see Note 2 to the consolidated financial
statements). The table at the beginning of this discussion presents the impact
of the 1994 acquisitions on the balance sheet as of the respective dates of
acquisition of the institutions acquired. Average assets for the third quarter
of 1994 were $7.5 billion compared to $6.6 billion for the third quarter of
1993. For the first nine months of 1994 average total assets were $7.4 billion
compared to $6.5 billion for the same period in 1993.
SHORT-TERM INVESTMENTS AND TRADING ACCOUNT SECURITIES
At September 30, 1994, short-term investments and trading account
securities were $253 million. Average money market investments for the three
and nine months ended September 30, 1994 were $242 million and $277 million,
respectively, with average yields of 5.85% and 5.01%, respectively. This
compares to $365 million and $355 million, respectively, with average yields of
4.48% and 4.44%, respectively, for the same periods in 1993. The increase in
yield between the two periods is reflective of the increase in short-term
interest rates over the first half of 1994.
INVESTMENT SECURITIES
The Corporation's investment securities portfolio during the first nine
months of 1994 represented 44% of average earning assets. The portfolio is
invested in high quality marketable assets to provide liquidity, satisfy
pledging requirements, and produce a steady earnings stream. The maturities and
repricing characteristics are selected to achieve an overall matching of assets
and liabilities. The average taxable-equivalent yield of the investment
securities portfolio was 5.74% for the third quarter of 1994 compared to 5.80%
for the same period in 1993. For the first nine months of 1994 the average
yield was 5.60% compared to 6.00% for the same period a year ago. The
difference in the fair value of the investment securities portfolio compared to
its amortized cost has declined from a gain of $45.6 million at December 31,
1993 to a loss of $25.6 million at September 30, 1994, primarily due to the
changing interest rate environment. Reference is made to Note 5 to the interim
consolidated financial statements for a detailed presentation of the components
of the investment securities portfolio.
The REMIC and CMO issues in the investment securities portfolio are 88%
U.S. Government Agency issues; the remaining 12% are readily marketable,
nonagency collateralized mortgage obligations backed by agency-pooled
collateral or whole-loan collateral. All nonagency issues currently held are
rated "AAA" by either Standard & Poors or Moodys. The REMIC and CMO portions of
the investment securities portfolio have approximately 40% in monthly floating
rate issues, the majority being indexed to LIBOR or PRIME. Normal practice is
to purchase at or near par to reduce the risk of premium write-offs on
prepayments.
The Corporation at September 30, 1994 had approximately $24.5 million of
structured notes, which constitutes approximately .85% of the investment
securities portfolio. Structured notes have uncertain cash flows which are
driven by interest rate movements and may expose a company to greater market
risk than traditional medium-term notes. All of the Corporation's investments
of this type are government-agency issues (primarily Federal Home Loan Bank and
Federal National Mortgage Association). The structured notes vary in type but
primarily include step-up bonds and index amortizing notes. The net unrealized
loss in these securities at September 30, 1994 was approximately $790,000. The
market risk associated with the structured notes is not considered material to
the Corporation's financial position, results of operations, or liquidity.
The Corporation adopted SFAS No. 115 "Accounting for Certain Investments
in Debt and Equity Securities" as of January 1, 1994. In adopting SFAS No. 115,
the Corporation chose to initially classify all investment securities, except
obligations of states and political subdivisions, as "Available for Sale"
securities.
-28-
<PAGE> 29
AVAILABLE FOR SALE SECURITIES
Available for sale securities were $2.0 billion at September 30, 1994
compared to $688 million at December 31, 1993. At September 30, 1994, the
portfolio had unrealized gains of $5.4 million and unrealized losses of $27.3
million, which resulted in a net unrealized loss which was recorded as an
adjustment to the carrying value of available for sale securities of $22.0
million ($13.4 million, net of taxes). At December 31, 1993, these securities
had unrealized gains of $7.0 million and unrealized losses of $458,000.
HELD TO MATURITY SECURITIES
Held to maturity securities at September 30, 1994 were $907 million,
consisting primarily of U.S. Treasury securities and obligations of states and
political subdivisions. The held to maturity portfolio as of September 30, 1994
had unrealized gains of $9.5 million and unrealized losses of $13.4 million. At
December 31, 1993, these securities totaled $2.0 billion having unrealized
gains and losses of $41.6 million and $2.4 million, respectively. LOANS
LOANS
Loans at September 30, 1994 were $3.8 billion compared to $3.0 billion and
$3.6 billion at September 30, 1993 and June 30, 1994, respectively. Average
loans for the third quarter of 1994, excluding the impact of acquisitions,
increased 25% over the same quarter in 1993 and 4% over the second quarter of
1994. Average loans represented 52% of the Corporation's earning assets for the
first nine months of 1994 compared to 49% for the same period in 1993. Loan
activity has been increasing as the economy has improved and management expects
this growth to continue. Management started a marketing effort at the end of
the third quarter of 1994 which is intended to increase loan volume. See the
"Earnings Considerations for the Fourth Quarter of 1994."
ALLOWANCE FOR LOSSES ON LOANS
The following table provides a reconciliation of the allowance for losses
on loans (the allowance) at the dates indicated and certain key ratios for the
nine-month periods ended September 30, 1994 and 1993 and for the year ended
December 31, 1993.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------ FOR THE YEAR ENDED
1994 1993 DECEMBER 31, 1993
---------- ---------- -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at the beginning of
the period $ 81,604 $ 65,415 $ 65,415
Provision charged to expense - 9,033 9,743
Allowances of banks acquired (a) 8,039 16,607 16,607
Recoveries 8,657 7,026 8,681
Charge-offs (9,430) (13,522) (18,842)
----------- ----------- -----------
Balance at the end of the period $ 88,870 $ 84,559 $ 81,604
=========== =========== ===========
Loans outstanding at period end $ 3,759,681 $ 2,966,004 $ 3,092,828
=========== =========== ===========
Average loans during the period $ 3,560,594 $ 2,901,306 $ 2,928,635
=========== =========== ===========
Ratios:
Allowance/period end loans 2.36% 2.85% 2.64%
Charge-offs/average loans (b) .35 .62 .64
Recoveries/average loans (b) .32 .32 .29
Net charge-offs (recoveries)/
average loans (b) .03 .30 .35
Provision/average loans (b) NM .31 .33
</TABLE>
(a) At date of acquisition for acquisitions accounted for using the purchase
method of accounting and as of January 1 for acquisitions accounted for
using the pooling of interests method of accounting.
(b) Amounts annualized for September 30, 1994 and 1993
NM = Not meaningful
-29-
<PAGE> 30
The adequacy of the allowance for losses on loans is reviewed quarterly
taking into account current and anticipated economic conditions and the related
impact on specific borrowers and industry groups, historical loan-loss
experience, the level of classified and nonperforming loans, reviews and
evaluations of specific loans, changes in the nature and volume of the loan
portfolio, and results of regulatory examinations. This analysis is performed
on a bank-by-bank basis as well as being evaluated on a consolidated basis.
This same type of analysis is performed by the Corporation in its due diligence
evaluation of potential acquisition candidates.
The allowance at September 30, 1994, was $88.9 million, an increase of
$7.3 million over December 31, 1993, and compared to $84.6 million at September
30, 1993. The increase in the allowance over December 31, 1993 primarily
reflects the allowances of banks acquired which totaled $8.0 million for the
first nine months of 1994.
The Corporation had net recoveries for the third quarter of 1994 of
$519,000 compared to net recoveries of $835,000 for the same quarter a year
ago. Charge-offs were $2.9 million for the third quarter of 1994 compared to
$2.2 million for the same period last year. Recoveries were $3.4 million for
the third quarter of 1994 compared to $2.8 million for the third quarter of
1993.
The improving asset quality has resulted in the Corporation not making a
provision for losses on loans for the first nine months of 1994 and management
does not expect to record a provision for the remainder of 1994. The
Corporation's ratios of allowance for losses on loans to loans and allowance
for losses on loans to nonperforming assets are, compared to its peers, among
the highest in the Southeast.
-30-
<PAGE> 31
NONPERFORMING ASSETS
NONACCRUAL, RESTRUCTURED, AND PAST DUE LOANS AND FORECLOSED PROPERTIES
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------- --------------
1994 1993 1993
-------- -------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Nonaccrual loans $ 15,341 $ 16,682 $ 14,646
Restructured loans 1,225 7,455 7,525
-------- -------- --------
Total nonperforming loans 16,566 24,137 22,171
-------- -------- --------
Foreclosed property
Other real estate owned,
net of reserve for losses 2,983 5,051 4,358
Other foreclosed properties 314 318 438
-------- -------- --------
Total foreclosed properties 3,297 5,369 4,796
-------- -------- --------
Total nonperforming assets $ 19,863 $ 29,506 $ 26,967
======== ======== ========
Loans 90 days or more past due
and not on nonaccrual status $ 3,982 $ 5,581 $ 4,944
======== ======== ========
Nonperforming loans as a
percentage of loans .44% .81% .72%
Nonperforming assets as a
percentage of loans and
foreclosed properties .53 .99 .87
Allowance for losses on loans
as a percentage of
nonperforming loans 536.46 350.33 368.07
Loans 90 days or more past
due and not on nonaccrual
status as a percentage of loans .11 .19 .16
</TABLE>
Nonperforming assets at September 30, 1994 declined $9.6 million from
$29.5 million at September 30, 1993 to $19.9 million at September 30, 1994, and
declined $3.3 million from $23.2 million at June 30, 1994. The significant
decline in nonperforming assets has resulted in a reserve coverage ratio of
nonperforming loans that is among the highest for banks in the Southeast.
-31-
<PAGE> 32
The following table details the composition of nonaccrual loans and loans
90 days or more past due.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
-------------------------------------
NONACCRUAL LOANS 90 DAYS OR MORE
LOANS PAST DUE
---------- ---------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Real estate loans
Construction and land development $ 369 $ 117
Secured by farmland 1,063 24
Secured by 1-4 family residential properties 5,383 1,298
Secured by nonfarm nonresidential properties 3,152 643
Secured multifamily residential properties - 164
-------- -------
Total real estate 9,967 2,246
Commercial, financial, and agricultural loans 4,342 630
Consumer loans 1,032 1,100
Direct lease financing - 6
-------- -------
Total $ 15,341 $ 3,982
======== =======
</TABLE>
The following table details the composition of the Corporation's other
real estate owned, net of the reserve for losses on other real estate of $3.0
million.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
----------------------
(DOLLARS IN THOUSANDS)
Type of Property
- ----------------
<S> <C>
Construction and land development $ 286
Farmland 22
1-4 family residential properties 1,554
Multifamily residential properties 290
Commercial properties 831
-------
Total other real estate owned,
net of the reserve for losses $ 2,983
=======
</TABLE>
POTENTIAL PROBLEM ASSETS
Potential problem assets consist of assets which are generally secured and
not currently considered nonperforming, and include those assets where
information about possible credit problems has caused management to have
serious doubts as to the ability of such borrowers to comply with present
repayment terms. Historically, these assets have been loans which have become
nonperforming. At September 30, 1994, the Corporation had potential problem
assets (all of which were loans) of $6.7 million.
-32-
<PAGE> 33
ASSET LIABILITY MANAGEMENT
The table which follows this discussion presents the Corporation's
interest rate sensitivity analysis at September 30, 1994. The analysis has been
made at a point-in-time and could change significantly on a daily basis. This
analysis alone cannot be used to predict how the Corporation is positioned to
react to changing interest rates. Other factors such as the mix of earning
assets and interest-bearing liabilities, interest rate spreads, and the level
of interest rates impact the Corporation's net interest income.
Balance sheet simulation analysis is conducted to determine the impact on
net interest income for the following twelve months under several interest-rate
scenarios. One such scenario uses current rates at September 30, 1994 and holds
the rates and volumes constant for the simulation. When this projection is
subjected to immediate and parallel shifts in interest rates ("rate shock") of
200 basis points, first rising and then falling, the annual impact of the "rate
shock" at September 30, 1994 on the Corporation's net interest income was a
negative $6.2 million and a positive $1.1 million pretax, respectively, which
is well within the Corporation's policy limits.
OFF-BALANCE-SHEET INSTRUMENTS
The Corporation, on a limited basis, uses off-balance-sheet financial
instruments to manage interest rate risk. Since December 31, 1993, there has
been no significant change in the off-balance-sheet instruments.
During 1993, the Corporation entered into certain interest-rate swaps to
synthetically alter the repricing and maturity characteristics of certain
on-balance sheet assets and liabilities. Other than the variable maturity
feature of the loan swap discussed in footnote (c) to the table below, the
interest rate swaps are straight forward and noncomplex. There has been no
change in the notional amounts outstanding since December 31, 1993. The
Corporation has a policy for its derivative products which has been approved
and is monitored by the Funds Management Committee and the Board of Directors.
The policy establishes individual positions for derivative products not to
exceed $100 million notional amount and that open positions in the aggregate
should not exceed 10% of consolidated total assets. Any exceptions to the
policy must be approved by the Board of Directors. The open positions are
reviewed monthly by the Funds Management Committee to monitor compliance with
established policies. As of September 30, 1994, there are no positions which
would be regarded as an exception to the Corporation's policy.
The Corporation does have risk in the variable-rate loan swaps related to
the possible extension of the maturity in the event of increased interest
rates. As interest rates rise, the Corporation may be placed in a net payor
position for a period of time, not to exceed January, 1999. However, the loans
underlying the swap would also contribute more to net interest income.
Accordingly, the Corporation believes there is minimal risk that these swaps
will have any significant impact on net interest income.
The Corporation entered into the interest-rate swaps described above to
convert specific assets (loans and investment securities) from floating-rate to
fixed-rate instruments and to convert a liability from a fixed rate to a
floating rate. The Corporation is the end-user on all interest rate swaps and
does not act as a dealer in these instruments. A summary of the Corporation's
interest-rate swaps follows:
<TABLE>
<CAPTION>
CURRENT RATES (a) YEAR TO DATE
------------------------- NET INTEREST
BALANCE SHEET NOTIONAL VARIABLE FIXED RATE MATURITY INCOME UNREALIZED
INSTRUMENTS AMOUNT RATE PAID RECEIVED DATE IMPACT (d) LOSS
- --------------- -------- --------- ---------- -------- ------------- ----------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Loans (b) $ 150 4.90% 5.22% 1/96-99 (c) $ 1.3 $ 10.0
Securities 100 4.94 4.44 6/95 .1 1.1
Long-term debt 50 4.75 4.46 5/96 .1 1.7
----- ----- ------
Total $ 300 $ 1.5 $ 12.8
===== ===== ======
</TABLE>
-33-
<PAGE> 34
(a) The variable rates paid are tied to the three-month LIBOR rate for the
loans and six- month LIBOR rate for the investment securities and
long-term debt swaps. The next repricing dates for the variable rates paid
for the loans, investment securities, and long-term debt are January 1995,
December 1994, and November 1994, respectively.
(b) The loan interest-rate swap was entered into to reduce the volatility of
net interest income. At the time the swap was executed, management reduced
the risk associated with stable or further declining interest-rates and
the resultant impact on net interest income.
(c) This interest-rate swap's amortization period may change quarterly based
on changes in the underlying index rate. If the index rate should be less
than or equal to 5.3125% on January 5, 1996, the swap would terminate on
that date. If the index rate should remain at the current rate (5.625%)
through January 5, 1996 and thereafter, the swap would mature $109 million
in January, 1996 and $41 million in April, 1996. The swap maturity has
the potential to extend to January, 1999, in the event the index rate
should be equal to or exceed 8.3125% on January 5, 1996 and for the
remainder of the term of the swap.
(d) Reference is made to the "Earnings Analysis - Net Interest Income"
discussion for a discussion of the impact of these swaps on interest
income and interest expense.
-34-
<PAGE> 35
UNION PLANTERS CORPORATION AND SUBSIDIARIES
RATE-SENSITIVITY ANALYSIS AT SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
INTEREST-SENSITIVE WITHIN
---------------------------------------------------------------------------------------
NON-
0-30 31-90 91-180 181-365 1-2 2-5 OVER INTEREST-
DAYS DAYS DAYS DAYS YEARS YEARS 5 YEARS BEARING TOTAL
------ ------- ------ ------ ------- ------- ------- --------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans and leases $ 722 $ 379 $ 325 $ 478 $ 326 $ 904 $ 630 $ 17 $ 3,781
Investment securities 388 273 280 380 648 617 312 - 2,898
Other earning assets 142 57 54 - - - - - 253
Other assets - - - - - - - 563 563
------- ------- ------- ------- ------- ------- ------- ------- -------
Total assets $ 1,252 $ 709 $ 659 $ 858 $ 974 $ 1,521 $ 942 $ 580 $ 7,495
======= ======= ======= ======= ======= ======= ======= ======= =======
SOURCES OF FUNDS
Money market deposits $ 129 $ 283 $ - $ 306 $ 20 $ 427 $ - $ - $ 1,165
Other savings and time deposits 440 664 558 463 291 1,030 43 - 3,489
Time deposits over $100,000 79 78 83 66 52 43 3 - 404
Short-term borrowings 587 26 - - - - - - 613
Federal Home Loan Bank
advances 100 18 3 15 9 29 16 - 190
Long-term debt - - - - - - 117 - 117
Noninterest-bearing deposits - - - - - - - 848 848
Other liabilities - - - - - - - 83 83
Shareholders' equity - - - - - - - 586 586
------- ------- ------- ------- ------- ------- ------- ------- ------
Total sources of funds $ 1,335 $ 1,069 $ 644 $ 850 $ 372 $ 1,529 $ 179 $ 1,517 $ 7,495
======= ======= ======= ======= ======= ======= ======= ======= =======
Interest rate swaps $ (150) $ (150) $ - $ 100 $ 50 $ 150 $ - $ - $ -
Interest rate sensitivity gap $ (233) $ (510) $ 15 $ 108 $ 652 $ 142 $ 763 $ (937) $ -
Cumulative interest rate
sensitivity gap $ (233) $ (743) $ (728) $ (620) $ 32 $ 174 $ 937 $ - $ -
Cumulative gap as a percentage
of total assets (3%) (10%) (10%) (8%) .4% 2% 13% -% -%
</TABLE>
Management has made the following assumptions in the above analysis:
(a) Assets and liabilities are generally assigned to a period based upon their
earliest repricing period when the repricing is less than the contractual
maturity.
(b) Nonaccrual loans are included in the noninterest-bearing category.
(c) Fixed-rate mortgage loan maturities are based on the principal-prepayment
patterns of comparable mortgage-backed securities.
(d) The scheduled maturities of mortgage-backed securities and CMOs
incorporate principal prepayment of these securities using current and
consensus interest-rate forecasts in conjunction with the latest
three-month historical prepayment schedules.
(e) Securities available for sale are currently treated in the same manner as
comparable securities in the held to maturity portfolio in that they are
scheduled according to the earlier of their contractual maturities or
earliest repricing dates; however, the maturities of callable agencies are
scheduled according to their call dates when valued at a premium or par.
(f) Money-market deposits and savings deposits which have no contractual
maturities are scheduled according to the Corporation's best estimate of
their repricing to changes in market rates. This varies by product type
and market.
(g) If all money-market, NOW, and savings deposits had been included in the
0-30 Days category above, at September 30, 1994, the cumulative gap as a
percentage of earning assets would have been negative (31%), (30%), (30%),
(24%), (15%), and positive 2%, respectively, for the 0-30 Days, 31-90
days, 91-180 Days, 181-365 Days, 1-2 years, and 2-5 years categories.
-35-
<PAGE> 36
LIQUIDITY
The Corporation's core deposit base is its most important and stable
funding source. These deposits, along with short-term assets and investment
securities in the available for sale portfolio, provide liquidity for the
Corporation. The Corporation's deposit base is almost entirely comprised of
"in-market" deposits, as the Corporation has no brokered deposits. Certificates
of deposits of $100,000 or more represent only 7% of total deposits at
September 30, 1994. The following table presents an analysis of the
Corporation's deposits.
<TABLE>
<CAPTION>
AVERAGE DEPOSITS
----------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1994 1993 1994 1993
------- ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Demand deposits $ 824 $ 734 $ 829 $ 697
Money market accounts (a) 1,199 1,331 1,282 1,340
Savings deposits (b) 1,093 879 1,086 846
Other time deposits (c) 2,389 2,245 2,397 2,278
------- ------- ------- -------
Total core deposits 5,505 5,189 5,594 5,161
Certificates of deposit
of $100,000 and over 397 367 388 367
------- ------- ------- -------
Total deposits $ 5,902 $ 5,556 $ 5,982 $ 5,528
======= ======= ======= =======
</TABLE>
(a) Includes money market savings accounts, High Yield accounts, and super NOW
accounts.
(b) Includes regular and premium savings accounts and NOW accounts.
(c) Includes certificates of deposit under $100,000, investment savings
accounts, and other time deposits.
The Corporation's average deposits continued to grow during the first nine
months of 1994 primarily due to acquisitions. Excluding the impact of
acquisitions, average deposits declined approximately $210 million and $149
million, respectively, between the three and nine months ended September 30,
1994 and 1993. The decline was primarily due to the low interest-rate
environment which has resulted in deposits leaving the banking system.
The parent company's source of liquidity is management fees, dividends
from subsidiaries, and working capital. The number of financial institutions
owned by the Corporation provides a diversified base for the payment of
dividends should one or more of the subsidiaries have capital needs and be
unable to pay dividends to the parent company. At September 30, 1994, the
parent company had cash and cash equivalents totaling $92.5 million and had
working capital of approximately $62.6 million. At October 1, 1994, the parent
company could have received dividends from subsidiary banks without prior
regulatory approval of $24.5 million. Additional dividends will be available
depending on the future earnings of subsidiary banks. The amount of dividends
available without regulatory approval has declined from the second quarter of
1994 due to the $98 million special dividend paid by UPNB incidental to the
formation of four Tennessee Regional Banks. See "Reorganization of UPNB" above.
This special dividend is not expected to have a material impact on parent
company liquidity or its ability to pay normal quarterly dividends.
-36-
<PAGE> 37
SHAREHOLDERS' EQUITY
The Corporation's total shareholders' equity increased $78 million from
December 31, 1993 to $586 million at September 30, 1994. The increase was due
primarily to the issuance of Common Stock as consideration for acquisitions
which increased shareholders' equity by $55 million. The balance, $23 million
of the increase, was due primarily to retained net earnings less the adjustment
for net unrealized loss on available for sale securities of $13 million.
Dividends on Common Stock for the first nine months of 1994 totaled $14.3
million, or $.65 per share, while Preferred Stock dividends totaled $6.6
million.
CAPITAL ADEQUACY
The following table presents capital adequacy information regarding the
Corporation and the table on the following page presents the calculation of the
Corporation's risk-based capital and associated ratios.
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------- --------------
1994 1993 1993
-------- -------- --------------
<S> <C> <C> <C>
Capital Adequacy Data
- ---------------------
Total shareholders' equity/total assets
(at period end) 7.82% 7.68% 7.70%
Average shareholders' equity/
average total assets 7.86 7.20 7.31
Tier 1 capital/unweighted assets
(leverage ratio) (a) 7.51 7.13 7.28
Parent company long-term debt/equity 19.59 14.90 22.59
Dividend payout ratio 41.82 31.20 33.66
</TABLE>
____________________
(a) Based on period-end capital and quarterly adjusted average assets
At September 30, 1994, total shareholders' equity was 7.82% of total
assets, and the Tier 1 leverage ratio was 7.51% compared to 7.28% at December
31, 1993 and 7.13% at September 30, 1993. The following table presents the
Corporation's risk-based capital and its Tier 1 and total capital ratios. The
capital ratios improved from September 30, 1993 to September 30, 1994, and
declined slightly from December 31, 1993 to September 30, 1994 due to the
impact of acquisitions. The regulatory capital ratios qualify the Corporation
for the "well-capitalized" regulatory classification.
-37-
<PAGE> 38
RISK-BASED CAPITAL
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
-------------------------- ------------
1994 1993 1993
----------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Tier 1 capital
Shareholders' equity $ 585,828 $ 498,728 $ 507,930
Minority interest in
consolidated subsidiaries 1,588 1,588 1,588
Less goodwill, other intangibles, and
one-half of investment in
unconsolidated subsidiaries (39,997) (32,582) (31,097)
Fair value adjustment to available
for sale securities (gain) loss 13,385 NA NA
Deferred tax asset not qualifying for
regulatory capital (2,491) (2,034) (1,861)
----------- ----------- ----------
Total Tier 1 capital 558,313 465,700 476,560
Tier 2 capital
Allowance for losses on loans (a) 47,590 40,486 39,940
Qualifying long-term debt 74,527 32,000 74,479
Less one-half of investment in
unconsolidated subsidiaries (18) (101) (136)
=========== =========== ===========
Total capital $ 680,412 $ 538,085 $ 590,843
=========== =========== ===========
Risk-weighted assets (b) $ 3,765,918 $ 3,163,112 $ 3,153,549
=========== =========== ===========
Ratios as a percent of end of
period risk-weighted assets
Tier 1 capital 14.83% 14.72% 15.11%
Total capital 18.07 17.01 18.74
</TABLE>
(a) Limited as required by regulatory guidelines.
(b) Based on risk-weighted assets as defined by regulatory guidelines.
NA= Not applicable
REDEMPTION OF SERIES C PREFERRED STOCK
The Corporation called for redemption on October 31, 1994, at par value
plus accrued dividends, its 10 3/8% Increasing Rate, Redeemable, Cumulative
Preferred Stock, Series C. The redemption is not expected to have a significant
impact on the capital ratios or liquidity of the Corporation.
QUARTERLY COMMON STOCK DIVIDEND
On October 27, 1994, the Corporation's Board of Directors declared a
quarterly dividend of $.23 per share on the Corporation's Common Stock
outstanding. The dividend is payable November 18, 1994, to shareholders of
record on November 7, 1994.
IMPACT OF PROPOSED ACCOUNTING STANDARDS
Reference is made to page 48 of the Corporation's 1993 Annual Report to
Shareholders for a discussion of certain proposed accounting standards.
Additionally, the following accounting standards were issued in October, 1994.
-38-
<PAGE> 39
SFAS NO. 118, "ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN - INCOME
RECOGNITION AND DISCLOSURES"
This Statement amends SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," to allow a creditor to use existing methods for
recognizing interest income on an impaired loan. To accomplish this, it
eliminates the provisions in SFAS No. 114 that describe how a creditor should
report income on an impaired loan. The Statement does not change the
requirement that a creditor measure impairment based on the present value of
expected future cash flows discounted at the loan's effective interest rate.
SFAS No. 118 amends the disclosure requirements in SFAS No. 114 to require
information about the recorded investment in certain impaired loans and about
how a creditor recognizes interest income related to those impaired loans. The
Statement is effective concurrent with the effective date of SFAS No. 114, that
is, for financial statements for fiscal years beginning after December 15,
1994. The impact of this Statement has not been quantified but it is not
expected to have a material impact on the Corporation's financial condition or
results of operations.
SFAS NO. 119, "DISCLOSURE ABOUT DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE
OF FINANCIAL INSTRUMENTS"
This Statement requires disclosures about derivative financial instruments
- - futures, forwards, swaps, and option contracts, and other financial
instruments with similar characteristics. It amends existing requirements of
SFAS No. 105, "Disclosure of Information about Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentration of Credit
Risk," and SFAS No. 107, "Disclosures about Fair Value Instruments." The
Statement requires disclosure concerning the amounts, nature, and terms of
derivative financial instruments. For entities that hold or issue derivative
financial instruments for trading purposes, this Statement requires disclosure
of average fair value and of net trading gains or losses. For entities that
hold or issue derivative financial instruments for purposes other than trading,
it requires disclosure about the purposes and about the method of reporting
these instruments in the financial statements. For entities that hold or issue
derivative financial instruments and account for them as hedges of anticipated
transactions, it requires disclosure about the anticipated transaction, the
classes of derivative financial instruments used to hedge those transactions,
the amount of hedging gains and losses deferred, and the transactions or other
events that result in recognition of the deferred gains or losses. SFAS No. 119
is effective for financial statements issued for fiscal years ending after
December 15, 1994.
-39-
<PAGE> 40
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The information called for by this item is incorporated by reference to
Item 3, Part I of the Corporation's Annual Report on Form 10-K for the year
ended December 31, 1993; Note 19 to the Corporation's consolidated financial
statements on page 33 of the 1993 Annual Report to Shareholders; in Note 19 to
the Corporation's 1993 financial statements (these statements became the
historical financial statements on October 20, 1994) filed as Exhibit 99(b) to
the Corporation's Current Report on Form 8-K dated October 20, 1994 (8-K); in
Note 19 to Exhibit 99(c) of the 8-K; in Note 10 to the Corporation's quarterly
report on Form 10-Q dated March 31, 1994; in Note 10 to the Corporation's
consolidated financial statements dated June 30, 1994 included as Exhibit 99(c)
to the Corporation's current report on Form 8-K dated October 20, 1994; and in
Note 10 of the interim unaudited consolidated financial statements in Part I
hereof.
ITEM 2 - CHANGES IN SECURITIES
Pursuant to the terms of the Corporation's Charter of Incorporation,
notice was duly given, during the third quarter, of the redemption in whole of
the Corporation's 10 3/8% Increasing Rate, Redeemable, Cumulative Preferred
Stock, Series C, to be made October 31, 1994, at the Redemption Price of $25.00
plus accrued dividends thereon.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
2 - Agreement and Plan of Reorganization dated July 1,
1994 between Union Planters Corporation and GSSC
Acquisition Company, Inc. and Grenada Sunburst System
Corporation, Sunburst Bank, Mississippi and Sunburst
Bank, Louisiana (filed as Exhibit 2 (a) to the
Corporation's Current Report on Form 8-K dated July
26, 1994).
11 - Computation of Per Share Earnings
27 - Financial Data Schedule (for SEC purposes only)
(b) Reports on Form 8-K:
<TABLE>
<CAPTION>
Date of Current
Report Subject
--------------- ---------------------------
<S> <C>
1. July 1, 1994 Announcement of the signing of a definitive agreement to acquire Grenada Sunburst
System Corporation (GSSC)
2. July 21, 1994 Second quarter 1994 earnings press release
3. July 26, 1994 Definitive agreement to acquire GSSC and audited financial statements and first
quarter interim financial statements for GSSC
4. August 18, 1994 Pro forma financial statements for June 30, 1994
5. August 19, 1994 Interim financial statements dated June 30, 1994 for BNF BANCORP, Inc. and Grenada
Sunburst System Corporation
</TABLE>
-40-
<PAGE> 41
<TABLE>
<CAPTION>
Date of Current
Report Subject
--------------- ---------------------------
<S> <C>
6. September 1, 1994 Acquisition of BNF BANCORP, Inc.
7. September 19, 1994 1993 Supplementary Consolidated Financial Statements and Supplementary Interim
Consolidated Financial Statements dated June 30, 1994, restated for the BNF BANCORP,
Inc. acquisition for 1993 and for BNF BANCORP, Inc. and other recently completed
acquisitions in 1994
8. September 28, 1994 Press Release disclosing certain one-time charges that were expected to be incurred
in the third and fourth quarters of 1994
9. October 20, 1994 Press Release announcing third quarter 1994 operating results and filing the 1993
consolidated financial statements as the historical financial statements of Union
Planters Corporation effective October 20, 1994
</TABLE>
-41-
<PAGE> 42
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNION PLANTERS CORPORATION
------------------------------------
(Registrant)
Date: November 10, 1994
-------------------
By: /s/ Benjamin W. Rawlins, Jr.
------------------------------------
Benjamin W. Rawlins, Jr.
Chairman of the Board and
Chief Executive Officer
By: /s/ John W. Parker
------------------------------------
John W. Parker
Executive Vice President and
Chief Financial Officer
By: /s/ M. Kirk Walters
------------------------------------
M. Kirk Walters
Senior Vice President, Treasurer
and Chief Accounting Officer
-42-
<PAGE> 1
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
<PAGE> 2
EXHIBIT 11
PAGE 1 OF 2
UNION PLANTERS CORPORATION AND SUBSIDIARIES
COMPUTATION OF PRIMARY EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE
Average shares outstanding 25,382,817 21,574,539 25,323,516 21,372,607
Average common share equivalents:
Assumed exercise of options
outstanding 133,145 203,678 148,050 193,699
------------ ------------ ------------ ------------
Primary average shares outstanding 25,515,962 21,778,217 25,471,566 21,566,306
============ ============ ============ ============
Earnings before accounting changes $ 15,778 $ 18,007 $ 53,599 $ 48,122
Less: Preferred stock dividends
Series B (88) (88) (264) (264)
Series C (447) (447) (1,342) (1,342)
Series D (123) (123) (370) (370)
Series E (1,554) (1,554) (4,662) (4,278)
------------ ------------ ------------ ------------
Earnings before accounting changes
applicable to common shares $ 13,566 $ 15,795 $ 46,961 $ 41,868
============ ============ ============ ============
Net earnings $ 15,778 $ 18,007 $ 53,599 $ 53,123
Less: Preferred stock dividends (2,212) (2,212) (6,638) (6,254)
============ ============ ============ ============
Net earnings applicable to common shares $ 13,566 $ 15,795 $ 46,961 $ 46,869
============ ============ ============ ============
Primary Earnings Per Common Share:
Earnings before accounting changes $.53 $.72 $1.84 $1.94
Net earnings .53 .72 1.84 2.17
</TABLE>
<PAGE> 3
EXHIBIT 11
PAGE 2 OF 2
UNION PLANTERS CORPORATION AND SUBSIDIARIES
COMPUTATION OF FULLY DILUTED EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
FULLY DILUTED EARNINGS PER COMMON SHARE
Average shares outstanding 25,382,817 21,574,539 25,323,516 21,372,607
Assumed conversion of options outstanding 133,248 223,620 150,694 217,866
Assumed conversion of preferred stock
outstanding:
Series B 339,768 339,768 339,768 339,768
Series D 253,655 253,655 253,655 253,655
Series E 3,884,902 3,884,902 3,884,902 3,528,745
------------ ------------ ------------ ------------
Fully diluted average shares outstanding 29,994,390 26,276,484 29,952,535 25,712,641
============ ============ ============ ============
Earnings before accounting changes $ 15,778 $ 18,007 $ 53,599 $ 48,122
Less: Series C preferred stock dividends (447) (447) (1,342) (1,342)
------------ ------------ ------------ ------------
Earnings before accounting changes
applicable to common shares $ 15,331 $ 17,560 $ 52,257 $ 46,780
============ ============ ============ ============
Net earnings $ 15,778 $ 18,007 $ 53,599 $ 53,123
Less: Series C preferred stock dividends (447) (447) (1,342) (1,342)
------------ ------------ ------------ ------------
Net earnings applicable to common shares $ 15,331 $ 17,560 $ 52,257 $ 51,781
============ ============ ============ ============
Fully Diluted Earnings Per Common Share:
Earnings before accounting changes $.51 $.67 $1.74 $1.82
Net earnings .51 .67 1.74 2.01
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1994, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 276,377
<INT-BEARING-DEPOSITS> 8,106
<FED-FUNDS-SOLD> 83,187
<TRADING-ASSETS> 162,005
<INVESTMENTS-HELD-FOR-SALE> 1,990,386
<INVESTMENTS-CARRYING> 907,268
<INVESTMENTS-MARKET> 903,419
<LOANS> 3,759,681
<ALLOWANCE> 88,870
<TOTAL-ASSETS> 7,495,154
<DEPOSITS> 5,905,589
<SHORT-TERM> 613,489
<LIABILITIES-OTHER> 83,166
<LONG-TERM> 307,082
<COMMON> 127,110
0
104,548
<OTHER-SE> 354,170
<TOTAL-LIABILITIES-AND-EQUITY> 7,495,154
<INTEREST-LOAN> 225,060
<INTEREST-INVEST> 115,386
<INTEREST-OTHER> 10,364
<INTEREST-TOTAL> 350,810
<INTEREST-DEPOSIT> 124,651
<INTEREST-EXPENSE> 150,073
<INTEREST-INCOME-NET> 200,737
<LOAN-LOSSES> 0
<SECURITIES-GAINS> (7,889)
<EXPENSE-OTHER> 178,337
<INCOME-PRETAX> 76,519
<INCOME-PRE-EXTRAORDINARY> 53,599
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,599
<EPS-PRIMARY> 1.84
<EPS-DILUTED> 1.74
<YIELD-ACTUAL> 7.08
<LOANS-NON> 15,341
<LOANS-PAST> 3,982
<LOANS-TROUBLED> 1,225
<LOANS-PROBLEM> 6,700
<ALLOWANCE-OPEN> 81,604
<CHARGE-OFFS> 9,430
<RECOVERIES> 8,657
<ALLOWANCE-CLOSE> 88,870
<ALLOWANCE-DOMESTIC> 88,870
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
