<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
October 20, 1994
------------------
Date of Report (Date of earliest event reported)
UNION PLANTERS CORPORATION
--------------------------------------------------
(Exact name of registrant as specified in charter)
TENNESSEE 0-10160 62-0859007
- ------------------------ ------------- --------------------
(State of incorporation) (Commission (I.R.S. Employer
File Number) Identification No.)
UNION PLANTERS ADMINISTRATIVE CENTER
7130 GOODLETT FARMS PARKWAY
MEMPHIS, TENNESSEE 38018
----------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (901) 383-6000
Not Applicable
-------------------------------------------------------------
(Former name or former address, if changed since last report).
<PAGE> 2
ITEM 5. OTHER EVENTS
THIRD QUARTER EARNINGS RELEASE
On October 20, 1994, Union Planters Corporation (the Corporation)
announced operating results for the third quarter of 1994. A copy of the
Corporation's press release announcing the results is attached as Exhibit 99 (a)
and is incorporated by reference herein.
FINANCIAL STATEMENTS RESTATED FOR RECENTLY COMPLETED ACQUISITIONS
On September 1, 1994, the Corporation completed the acquisition of BNF
BANCORP, Inc. in a transaction accounted for as a pooling of interests.
Reference is made to the Corporation's Current Reports on Form 8-K dated
February 8, 1994, April 14, 1994, May 18, 1994, August 18, 1994, August 19,
1994, and September 1, 1994 for additional information regarding this
acquisition. Reference should also be made to the Corporation's Current
Reports on Form 8-K dated July 1, 1994, July 26, 1994, August 18, 1994, August
19, 1994, and September 28, 1994 and the Quarterly Report on Form 10-Q dated
June 30, 1994 which discuss the Corporation's pending acquisition of Grenada
Sunburst System Corporation (GSSC) and certain charges in the third quarter of
1994 and the possibility of significant charges in the fourth quarter of 1994
and future cost savings related to GSSC, other pending acquisitions and
possible internal and acquisiton-related reorganizations of the Corporation.
The acquisition of BNF is considered significant to the Corporation's
financial statements. The Corporation's 1993 audited consolidated financial
statements and June 30, 1994 unaudited interim consolidated financial
statements which are attached as Exhibits 99 (b) and (c) have been restated for
the BNF acquisition and became the historical financial statements of the
Corporation on October 20, 1994.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS
(c) Exhibits
23 Consent of Experts and Counsel
(a) Consent of Price Waterhouse LLP
99 Additional Exhibits
(a) Union Planters Corporation Press Release Dated October 20, 1994
(b) Union Planters Corporation's 1993 Consolidated Financial
Statements
<TABLE>
<CAPTION>
Page
------
<S> <C>
1. Consolidated Balance Sheet as of
December 31, 1993 and 1992 1
2. Consolidated Statement of Earnings for
the three years ended December 31, 1993 2
</TABLE>
-2-
<PAGE> 3
<TABLE>
<CAPTION>
Page
------
<S> <C>
3. Consolidated Statement of Changes in
Shareholders' Equity for the three years
ended December 31, 1993 3
4. Consolidated Statement of Cash Flows for
the three years ended December 31, 1993 4
5. Notes to Consolidated Financial Statements 5
7. Report of Independent Accountants 40
Page
------
(c) Union Planters Corporation's Interim Consolidated
Financial Statements Dated June 30, 1994 (Unaudited)
1. Consolidated Balance Sheet as of
June 30, 1994 and 1993 and December 31, 1993 1
2. Consolidated Statement of Earnings for
the Three and Six Months Ended June 30, 1994
and 1993 2
3. Consolidated Statement of Changes in
Shareholders' Equity for the Six Months
Ended June 30, 1994 3
4. Consolidated Statement of Cash Flows for
the Six Months Ended June 30, 1994 and 1993 4
5. Notes to Unaudited Interim Consolidated
Financial Statements 5
</TABLE>
-3-
<PAGE> 4
SIGNATURE
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 hereunto duly authorized.
Union Planters Corporation
--------------------------
Registrant
Date: October 20, 1994 /s/ M. Kirk Walters
--------------------------------
M. Kirk Walters
Senior Vice President, Treasurer
and Chief Accounting Officer
-4-
<PAGE> 1
EXHIBIT 23 (A)
CONSENT OF PRICE WATERHOUSE LLP
<PAGE> 2
EXHIBIT 23 (A)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the previously filed
Registration Statements on Form S-3 (No. 33-27814) and Form S-8 (Nos. 2-87392,
33-23306, 33-35928, 33-53454, and 33-55257) of Union Planters Corporation of
our report dated September 8, 1994, which appears in this Current Report on
Form 8-K dated October 20, 1994 of Union Planters Corporation.
Price Waterhouse LLP
Memphis, Tennessee
October 20, 1994
<PAGE> 1
Exhibit 99 (a)
Union Planters Corporation Press Release Dated October 20, 1994
Announcing Third Quarter 1994 Operating Results
<PAGE> 2
Jack W. Parker, CFO October 20, 1994
(901) 383-6781
FOR IMMEDIATE RELEASE:
UNION PLANTERS CORPORATION ANNOUNCES THIRD QUARTER EARNINGS
MEMPHIS, TENNESSEE -- Union Planters Corporation today announced net earnings
for the third quarter of 1994 of $15.8 million, or $.51 per fully diluted
common share. This compares to net earnings for the same period a year ago of
$18.0 million, or $.67 per fully diluted common share. Earnings before
investment securities transactions were $20.7 million for the third quarter of
1994 versus $17.7 million for the same quarter in 1993, an increase of 17%.
For the first nine months of 1994, Union Planters reported net earnings of
$53.6 million, or $1.74 per fully diluted common share which compares to $53.1
million, or $2.01 per fully diluted common share, for the same period in 1993.
Earnings before investment securities transactions and accounting changes for
the first nine months of 1994 were $58.4 million, or $1.91 per fully diluted
common share, versus $45.7 million, or $1.73 per fully diluted common share,
for the same period in 1993. Returns on average assets and average common
equity, based on earnings before investment securities transactions and
accounting changes, for the first nine months of 1994 were 1.06% and 14.53%,
respectively, compared to .94% and 14.27%, respectively, for the same period in
1993.
-1-
<PAGE> 3
Net earnings for the third quarter of 1994 include investment securities
losses of $4.9 million after tax, or $.17 per fully diluted common share,
primarily related to restructuring a portion of the available for sale
investment securities portfolio in light of higher interest rates. Book yields
were increased approximately $5.2 million after tax on an annualized basis by
the sale of $428 million of securities with an average maturity of thirteen
months and the reinvestment in securities with an average maturity of
approximately 30 months.
Additionally, third quarter earnings include expenses of $1.5 million after
tax related to acquisitions completed during the quarter. Partially offsetting
these charges was a $1.3 million after tax favorable litigation settlement
received by a subsidiary bank. Earnings for the third quarter of 1993 included
a tax benefit of approximately $2.9 million related to tax law changes
effective in that quarter.
Net interest income for the third quarter of 1994 increased to $69.1 million
compared to $61.4 million for the same quarter in 1993. The net interest margin
for the third quarter of 1994 was 4.15% compared to 4.29% for the same quarter
in 1993. Excluding the impact of acquisitions, average loans for the third
quarter of 1994 increased approximately $343 million, or 15%, over the same
period in 1993.
Asset quality improvements continued in the third quarter of 1994.
Nonperforming assets at September 30, 1994 were $19.9 million, or .53% of loans
and foreclosed properties. For the same
-2-
<PAGE> 4
period in 1993, nonperforming assets were $29.5 million, or .99% of loans and
foreclosed properties. As a result of these improvements, Union Planters did
not make a provision for losses on loans for the quarter. The provision for
losses on loans for the third quarter of 1993 was $1.5 million. The allowance
for losses on loans was $88.9 million at September 30, 1994, or 2.36% of loans.
Noninterest income for the third quarter of 1994, excluding investment
securities losses, was $21.7 million, which was level with the same quarter in
1993. Noninterest expenses for the third quarter of 1994 were $60.8 million
compared to $59.7 million for the same quarter in 1993. Noninterest income and
expenses for 1994 were affected by the acquisition-related expenses and the
favorable litigation settlement discussed above. Noninterest expenses for the
third quarter of 1993 included a $3.3 million charge for costs to convert Union
Planters' subsidiaries to a common data processing system.
As of September 30, 1994, Union Planters had total assets of $7.5 billion,
total loans of $3.8 billion, total deposits of $5.9 billion, and total
shareholders' equity of $586 million. Shareholders' equity to total assets and
the leverage ratio were 7.82% and 7.51%, respectively, at September 30, 1994.
Financial information for the three and nine months ended September 30, 1994,
has been restated to include the following acquisitions: $180 million Liberty
Federal Savings Bank in Paris, Tennessee; $40 million First Southern Bank in
Earle, Arkansas; and $280 million BANKFIRST in Decatur, Alabama, all of which
were
-3-
<PAGE> 5
completed during the quarter and accounted for as poolings of interests.
Financial information for 1993 has been restated for the BANKFIRST acquisition.
Union Planters Corporation, headquartered in Memphis, Tennessee, is a $7.5
billion multi-bank holding company, the second largest holding company
headquartered in Tennessee. Union Planters has 30 banks in Tennessee with 189
locations; nine banks in Arkansas with 24 locations; two banks in Mississippi
with 25 locations; one bank in Alabama with seven locations; and one bank in
Kentucky with five locations.
-End-
(Two Page Financial Attachment Follows)
<PAGE> 6
UNION PLANTERS CORPORATION
FINANCIAL HIGHLIGHTS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDEd
SEPTEMBER 30, SEPTEMBER 30,
1994 1993 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME STATEMENT AMOUNTS
Net interest income
Actual $ 69,081 $ 61,382 $ 200,737 $ 183,868
Taxable-equivalent basis 72,692 65,158 211,864 193,702
Provision for losses on loans - 1,489 - 9,033
Noninterest income
Investment securities gains (losses) (8,099) 514 (7,889) 3,952
Other 21,698 21,731 62,008 62,251
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 - - - 5,001
Net earnings 15,778 18,007 53,599 53,123
Earnings before investment securities gains (losses)
and accounting changes 20,718 17,693 58,419 45,712
- ---------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE DATA
Earnings before investment securities gains (losses)
and accounting changes - primary $ .73 $ .71 $ 2.03 $ 1.83
- fully diluted .68 .66 1.91 1.73
Earnings before accounting changes - primary .53 .72 1.84 1.94
- fully diluted .51 .67 1.74 1.82
Net earnings - primary .53 .72 1.84 2.17
- fully diluted .51 .67 1.74 2.01
Cash dividends .23 .18 .65 .54
Book value 18.93 18.25
- ---------------------------------------------------------------------------------------------------------------------------
BALANCES AT END OF PERIOD
Loans, net of unearned income $ 3,759,681 $ 2,966,004
Allowance for losses on loans 88,870 84,559
Nonperforming assets
Nonaccrual loans 15,341 16,682
Restructured loans 1,225 7,455
Foreclosed properties 3,297 5,369
Loans 90 days past due 3,982 5,581
Investment securities
Held to maturity - Amortized cost 907,268 2,108,577
- Fair value 903,419 2,163,429
Available for sale - Amortized cost 2,012,349 549,035
- Fair value 1,990,386 560,044
Total assets 7,495,154 6,491,529
Total deposits 5,905,589 5,470,363
Total shareholders' equity 585,828 498,728
Total common equity 481,280 394,180
Unrealized loss on available for sale securities, net of taxes 13,385 -
Tier 1 capital (1) 558,313 465,700
===========================================================================================================================
</TABLE>
<PAGE> 7
UNION PLANTERS CORPORATION
FINANCIAL HIGHLIGHTS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDed
SEPTEMBER 30, SEPTEMBER 30,
1994 1993 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVERAGE BALANCES
Loans, net of unearned income $ 3,701,598 $ 2,955,682 $ 3,560,594 $ 2,901,306
Investment securities (1) 3,002,134 2,703,226 2,995,106 2,701,948
Earning assets (1) 6,945,467 6,024,238 6,832,314 5,958,685
Total assets 7,475,284 6,564,452 7,390,466 6,493,619
Total deposits 5,901,875 5,555,610 5,982,366 5,527,395
Interest-bearing liabilities 5,973,521 5,262,436 5,892,367 5,241,282
Demand deposits 824,239 734,029 829,426 696,812
Shareholders' equity (1) 592,877 490,813 581,045 467,228
Common equity (1) 488,329 386,265 476,497 369,804
- ---------------------------------------------------------------------------------------------------------------------------
OTHER SUPPLEMENTAL INFORMATION
Return on average assets
Earnings before investment securities gains (losses)
and accounting changes 1.10 % 1.07 % 1.06 % .94 %
Earnings before accounting changes .84 % 1.09 % .97 % .99 %
Net earnings .84 % 1.09 % .97 % 1.09 %
Return on average common equity (1)
Earnings before investment securities gains (losses)
and accounting changes 15.03 % 15.90 % 14.53 % 14.27 %
Earnings before accounting changes 11.02 % 16.22 % 13.18 % 15.14 %
Net earnings 11.02 % 16.22 % 13.18 % 16.95 %
Allowance for losses on loans to
loans (end of period) 2.36 % 2.85 %
Nonperforming loans to loans .44 % .81 %
Nonperforming assets to loans and ORE .53 % .99 %
Net charge-offs (recoveries) of loans $ (519) $ (835) $ 773 $ 6,496
Net charge-offs (recoveries) as a percentage of
average loans (.06)% (.11)% .03 % .30 %
Common shares outstanding (end of
period, in thousands) 25,422 21,598
Weighted average shares outstanding
(in thousands)
Primary 25,516 21,778 25,472 21,566
Fully diluted 29,994 26,276 29,953 25,713
Yield on earning assets (taxable-equivalent
basis) 7.26 % 7.15 % 7.08 % 7.28 %
Rate on interest-bearing liabilities 3.61 % 3.27 % 3.41 % 3.34 %
Interest rate spread (taxable-equivalent
basis) 3.65 % 3.88 % 3.67 % 3.94 %
Net interest income as a percentage of
average earning assets (taxable-equivalent
basis) 4.15 % 4.29 % 4.15 % 4.35 %
Shareholders' equity to assets 7.82 % 7.68 %
Leverage ratio (1) 7.51 % 7.13 %
</TABLE>
(1) Excludes the impact of the fair value adjustment for available for sale
securities.
<PAGE> 1
EXHIBIT 99 (B)
UNION PLANTERS CORPORATION
1993 CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 2
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1992
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 229,471 $ 241,082
Interest-bearing deposits at financial institutions . . . . . . . . . . . . . 26,647 84,204
Federal funds sold and securities purchased under agreements
to resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,149 92,354
Trading account securities, at market . . . . . . . . . . . . . . . . . . . . 153,482 109,584
Loans held for resale . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,250 91,543
Investment securities
Held for sale (Market value: $694,952 and $485,581, respectively) . . . . . 688,453 476,664
Held for investment (Market value: $2,070,753 and $1,853,307, respectively) 2,031,613 1,817,901
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,109,709 2,399,531
Less: Unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,881) (15,701)
Allowance for losses on loans . . . . . . . . . . . . . . . . . . . . (81,604) (65,415)
---------- ----------
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,011,224 2,318,415
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,342 103,385
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . 52,070 46,046
Goodwill and other intangibles . . . . . . . . . . . . . . . . . . . . . . . . 40,815 32,663
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,179 108,547
---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,593,695 $5,522,388
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 752,610 $ 630,414
Certificates of deposit of $100,000 and over . . . . . . . . . . . . . . . . 345,843 298,100
Other interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,373,361 3,736,906
---------- ---------
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,471,814 4,665,420
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244,995 296,312
Federal Home Loan Bank advances . . . . . . . . . . . . . . . . . . . . . . . 179,954 15,000
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,276 77,156
Accrued interest, expenses, and taxes . . . . . . . . . . . . . . . . . . . . 43,827 47,165
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,899 37,577
---------- ----------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,085,765 5,138,630
---------- ----------
Commitments and contingent liabilities (Notes 7, 15, 17, and 19) . . . . . . . -- --
Shareholders' equity
Preferred stock (Note 10)
Convertible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,298 64,600
Nonconvertible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,250 17,250
Common stock, $5 par value; 50,000,000 shares authorized; 21,657,253 issued
and outstanding (18,789,087 in 1992) . . . . . . . . . . . . . . . . . . . . 108,286 93,945
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 87,586 61,681
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207,510 146,282
---------- ----------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . . . . 507,930 383,758
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . $6,593,695 $5,522,388
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 3
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1993 1992 1991
------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans . . . . . . . . . . . . . . . . . . $ 254,259 $ 212,225 $ 227,667
Interest on investment securities
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,502 113,256 86,226
Tax-exempt . . . . . . . . . . . . . . . . . . . . . . . . . 24,448 16,148 13,354
Interest on deposits at financial institutions . . . . . . . . 1,634 3,999 7,525
Interest on federal funds sold and securities purchased
under agreements to resell . . . . . . . . . . . . . . . . . 4,602 4,280 6,606
Interest on trading account securities . . . . . . . . . . . . 6,194 6,648 5,419
Interest on loans held for resale . . . . . . . . . . . . . . 3,336 3,561 4,784
----------- ----------- -----------
Total interest income . . . . . . . . . . . . . . . . . . . 416,975 360,117 351,581
----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits . . . . . . . . . . . . . . . . . . . . . 154,487 147,132 173,295
Interest on short-term borrowings . . . . . . . . . . . . . . 6,287 6,942 12,809
Interest on Federal Home Loan Bank advances and long-term
debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,358 5,489 5,004
----------- ----------- -----------
Total interest expense . . . . . . . . . . . . . . . . . . 173,132 159,563 191,108
----------- ----------- -----------
NET INTEREST INCOME . . . . . . . . . . . . . . . . . . . . 243,843 200,554 160,473
PROVISION FOR LOSSES ON LOANS . . . . . . . . . . . . . . . . . 9,743 19,194 25,281
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON LOANS . . 234,100 181,360 135,192
----------- ----------- -----------
NONINTEREST INCOME
Service charges on deposit accounts . . . . . . . . . . . . . 29,274 21,335 19,868
Profits and commissions from trading activities . . . . . . . 8,720 10,168 14,707
Investment securities gains . . . . . . . . . . . . . . . . . 4,732 13,363 3,391
Other income . . . . . . . . . . . . . . . . . . . . . . . . . 45,190 41,246 34,115
----------- ----------- -----------
Total noninterest income . . . . . . . . . . . . . . . . . 87,916 86,112 72,081
----------- ----------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits . . . . . . . . . . . . . . . . 101,650 77,245 71,953
Net occupancy expense . . . . . . . . . . . . . . . . . . . . 16,256 13,509 10,901
Equipment expense . . . . . . . . . . . . . . . . . . . . . . 16,679 12,875 11,346
Other expense . . . . . . . . . . . . . . . . . . . . . . . . 95,734 101,209 75,401
----------- ------------ -----------
Total noninterest expense . . . . . . . . . . . . . . . . . 230,319 204,838 169,601
----------- ----------- -----------
EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY
ITEM, AND ACCOUNTING CHANGES . . . . . . . . . . . . . . . 91,697 62,634 37,672
Applicable income taxes . . . . . . . . . . . . . . . . . . . . 26,333 17,611 7,538
----------- ----------- -----------
EARNINGS BEFORE EXTRAORDINARY ITEM AND ACCOUNTING
CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . 65,364 45,023 30,134
Extraordinary item --defeasance of debt, net of taxes . . . . . (3,206) -- --
Accounting changes, net of taxes . . . . . . . . . . . . . . . 5,001 -- --
----------- ----------- -----------
NET EARNINGS . . . . . . . . . . . . . . . . . . . . . . . $ 67,159 $ 45,023 $ 30,134
=========== =========== ===========
EARNINGS PER COMMON SHARE
PRIMARY
Earnings before extraordinary item and accounting changes . . $ 2.63 $ 2.07 $ 1.56
Extraordinary item -- defeasance of debt, net of taxes . . . (.15) -- --
Accounting changes, net of taxes . . . . . . . . . . . . . . .23 -- --
----------- ----------- -----------
NET EARNINGS . . . . . . . . . . . . . . . . . . . . . . . $ 2.71 $ 2.07 $ 1.56
=========== =========== ===========
FULLY DILUTED
Earnings before extraordinary item and accounting changes . . $ 2.46 $ 2.00 $ 1.55
Extraordinary item -- defeasance of debt, net of taxes . . . (.12) -- --
Accounting changes, net of taxes . . . . . . . . . . . . . . .19 -- --
----------- ----------- -----------
NET EARNINGS . . . . . . . . . . . . . . . . . . . . . . . $ 2.53 $ 2.00 $ 1.55
=========== =========== ===========
AVERAGE SHARES OUTSTANDING
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,622,151 18,764,931 18,632,386
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . 25,852,168 21,609,079 18,985,911
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 4
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED COMMON PAID-IN RETAINED
STOCK STOCK CAPITAL EARNINGS TOTAL
--------- ------ ------- -------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1991 . . . . . . . . . $ 4,400 $ 85,456 $ 61,002 $ 86,177 $237,035
Effect of merger with BNF BANCORP, Inc. . . -- 10,001 937 12,087 23,025
------- -------- -------- -------- --------
RESTATED BALANCE, JANUARY 1, 1991 . . . . . 4,400 95,457 61,939 98,264 260,060
Net earnings . . . . . . . . . . . . . . . -- -- -- 30,134 30,134
Cash dividends
Common, $.48 per share . . . . . . . . . -- -- -- (7,985) (7,985)
Series B Preferred, $8.00 per share . . . -- -- -- (352) (352)
Series C Preferred, $ .96 per share . . . -- -- -- (661) (661)
Pooled institutions prior to pooling . . -- -- -- (876) (876)
Purchase and retirement of 713,000
common shares . . . . . . . . . . . . . -- (3,565) (2,538) (670) (6,773)
Common shares issued under employee
benefit plans and dividend
reinvestment plan, net of shares
repurchased . . . . . . . . . . . . . . -- 744 1,032 (940) 836
Sale of 690,000 shares of Series C Preferred
Stock, net of issuance costs . . . . . 17,250 -- (840) -- 16,410
Net change in unrealized depreciation on
marketable equity securities . . . . . -- -- -- 3,516 3,516
------ ------- ------- ------- -------
BALANCE, DECEMBER 31, 1991 . . . . . . . . 21,650 92,636 59,593 120,430 294,309
Net earnings . . . . . . . . . . . . . . . -- -- -- 45,023 45,023
Cash dividends
Common, $.60 per share . . . . . . . . . -- -- -- (9,965) (9,965)
Series B Preferred, $8.00 per share . . . -- -- -- (352) (352)
Series C Preferred, $2.59 per share . . . -- -- -- (1,790) (1,790)
Series D Preferred, $ .97 per share . . . -- -- -- (247) (247)
Series E Preferred, $1.72 per share . . . -- -- -- (3,777) (3,777)
Pooled institutions prior to pooling . . -- -- -- (1,035) (1,035)
Common shares issued under employee
benefit plans and dividend reinvestment
plan, net of shares repurchased . . . . -- 1,309 4,738 (2,550) 3,497
Sale of 2,200,000 shares of Series E
Preferred Stock, net of issuance
costs . . . . . . . . . . . . . . . . . 55,000 -- (2,650) -- 52,350
Issuance of 253,655 shares of Series D
Preferred Stock for the purchase
of Southeastern Bancshares, Inc. . . . . 5,200 -- -- -- 5,200
Net change in unrealized depreciation
on marketable equity securities . . . . -- -- -- 545 545
------ ------ ------ ------- -------
BALANCE, DECEMBER 31, 1992 . . . . . . . . 81,850 93,945 61,681 146,282 383,758
Net earnings . . . . . . . . . . . . . . . -- -- -- 67,159 67,159
Cash dividends
Common, $.72 per share . . . . . . . . . -- -- -- (13,015) (13,015)
Series B Preferred, $8.00 per share . . . -- -- -- (352) (352)
Series C Preferred, $2.59 per share . . . -- -- -- (1,790) (1,790)
Series D Preferred, $1.95 per share . . . -- -- -- (494) (494)
Series E Preferred, $2.00 per share . . . -- -- -- (5,832) (5,832)
Pooled institutions prior to pooling . . -- -- -- (1,122) (1,122)
Common shares issued under employee
benefit plans and dividend reinvestment
plan, net of shares repurchased . . . . -- 1,208 5,742 (1,949) 5,001
Issuance of 2,000,785 shares of Common
Stock for acquisitions (Note 2) . . . . -- 10,004 2,318 18,296 30,618
Issuance of 908,522 shares of Series
E Preferred Stock for acquisitions,
net of issuance costs of $140,000
(Note 2) . . . . . . . . . . . . . . . . 22,713 -- 7,274 -- 29,987
Issuance of 625,000 shares of Common
Stock related to the conversion/acquisition
of First Federal Savings Bank of Maryville,
net of issuance costs of $564,000
(Note 2) . . . . . . . . . . . . . . . . -- 3,125 10,561 -- 13,686
Net change in unrealized depreciation
on marketable equity securities . . . . -- -- -- 272 272
Other . . . . . . . . . . . . . . . . . . (15) 4 10 55 54
--------- ------- ------- -------- --------
BALANCE, DECEMBER 31, 1993 . . . . . . . . $104,548 $108,286 $87,586 $207,510 $507,930
======== ======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 5
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1993 1992 1991
------------ ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 67,159 $ 45,023 $ 30,134
Reconciliation of net earnings to net cash provided by
operating activities
Cumulative effect of accounting changes, net of taxes . . . . . (5,001) -- --
Provision for losses on loans and other real estate . . . . . . 11,448 21,959 26,579
Depreciation and amortization . . . . . . . . . . . . . . . . . 12,808 10,257 8,623
Amortization and write-off of intangibles . . . . . . . . . . . 10,517 16,422 6,272
Provisions for abandoned property . . . . . . . . . . . . . . . -- 5,200 1,643
Provisions for litigation settlements . . . . . . . . . . . . . -- 9,000 7,600
Provisions for conversion of data processing systems . . . . . . 4,424 -- --
Net amortization (accretion) of investment securities . . . . . 7,134 4,118 (2,328)
Net realized gains on sale of investment securities . . . . . . (4,618) (13,363) (4,994)
Write-downs of investment securities . . . . . . . . . . . . . . -- -- 1,603
Proceeds from sales and maturities of investment securities
held for sale . . . . . . . . . . . . . . . . . . . . . . . . 794,918 350,795 --
Purchases of investment securities held for sale . . . . . . . . (594,583) (128,885) --
Deferred income tax benefit . . . . . . . . . . . . . . . . . . (525) (7,349) (3,750)
(Increase) decrease in assets
Trading account securities and loans held for
resale . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,787) (78,599) (68,604)
Accrued interest receivable and other assets . . . . . . . . . 38,340 770 67,678
Decrease in accrued interest, expenses, taxes, and other
liabilities . . . . . . . . . . . . . . . . . . . . . . . . . (44,268) (18,444) (41,106)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,391 2,433 (515)
----------- ----------- -----------
Net cash provided by operating activities . . . . . . . . . . . 286,357 219,337 28,835
----------- ----------- ---------
INVESTING ACTIVITIES
Net decrease (increase) in short-term investments . . . . . . . . 74,515 51,102 (39,185)
Proceeds from sales of investment securities . . . . . . . . . . . 18,182 94,187 231,891
Proceeds from maturities of investment securities . . . . . . . . 1,051,566 474,389 268,977
Purchases of investment securities . . . . . . . . . . . . . . . . (1,278,929) (1,546,591) (507,868)
Net decrease (increase) in loans . . . . . . . . . . . . . . . . . (77,317) 232,740 177,037
Net cash received from purchases of financial
institutions (Note 2) . . . . . . . . . . . . . . . . . . . . . 72,121 568,758 --
Purchases of premises and equipment, net . . . . . . . . . . . . . (22,575) (17,749) (30,078)
----------- ----------- ---------
Net cash provided (used) by investing activities . . . . . . . (162,437) (143,164) 100,774
----------- ----------- ---------
FINANCING ACTIVITIES
Net decrease in deposits . . . . . . . . . . . . . . . . . . . . . (305,249) (214,991) (121,232)
Net (decrease) increase in short-term borrowings . . . . . . . . . (63,605) 98,441 (80,499)
Proceeds from Federal Home Loan Bank advances and long-term
debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 241,061 47,850 9,000
Repayment and defeasance of long-term debt . . . . . . . . . . . . (42,615) (5,179) (9,680)
Proceeds from issuance of preferred stock, net . . . . . . . . . . -- 52,350 16,410
Proceeds from issuance of common stock, net . . . . . . . . . . . 19,720 7,808 3,295
Purchase and retirement of common stock, net . . . . . . . . . . . (1,786) (4,311) (9,232)
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . (22,302) (16,350) (9,533)
----------- ----------- ---------
Net cash used by financing activities . . . . . . . . . . . . . (174,776) (34,382) (201,471)
----------- ----------- ---------
Net increase (decrease) in cash and cash equivalents . . . . . . . (50,856) 41,791 (71,862)
Cash and cash equivalents at the beginning of the period . . . . . 333,436 291,645 363,507
----------- ----------- ---------
Cash and cash equivalents at the end of the period . . . . . . . . $ 282,580 $ 333,436 $ 291,645
=========== =========== =========
SUPPLEMENTAL DISCLOSURES
Cash paid for
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . $172,383 $161,108 $192,352
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,552 22,595 13,467
Loans transferred to other real estate through foreclosure . . . . 7,294 6,178 16,036
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 6
UNION PLANTERS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Union Planters Corporation
(the Corporation) and its subsidiaries conform with generally accepted
accounting principles and general practices within the financial services
industry. The following is a summary of the more significant accounting
policies of the Corporation.
BASIS OF CONSOLIDATION. The consolidated financial statements include the
accounts of the Corporation and its subsidiaries after elimination of
significant intercompany accounts and transactions. The Corporation's
principal subsidiary is Union Planters National Bank (UPNB).
BASIS OF PRESENTATION. Prior period financial statements are restated to
include the accounts of material acquisitions accounted for using the pooling
of interests method of accounting. Business combinations accounted for as
purchases are included in the consolidated financial statements from the
respective dates of acquisition. Assets and liabilities of banks accounted for
as purchases are adjusted to their fair market values at the dates of
acquisition. Certain 1991 and 1992 amounts have been reclassified to conform
with 1993 financial reporting presentation.
STATEMENT OF CASH FLOWS. Cash and cash equivalents include cash and due from
banks and federal funds sold. Federal funds sold in the amounts of
$53,109,000, $92,354,000, and $59,570,000 at December 31, 1993, 1992, and 1991,
respectively, are included in cash and cash equivalents.
TRADING ACCOUNT SECURITIES. Trading account securities are stated at market and
consist primarily of securities backed by the government- guaranteed portion of
Small Business Administration (SBA) loans. Gains and losses on sales and
market value adjustments related to these securities are included in profits
and commissions from trading activities.
INVESTMENT SECURITIES
HELD FOR SALE. Investment securities held for sale consist of both debt and
equity securities that may be sold in response to, or in anticipation of,
changes in interest rates, prepayment risk, liquidity considerations, and other
factors. These securities are carried at the lower of aggregate cost, adjusted
for amortization of premiums and accretion of discounts, or market value
(LOCOM). Unrealized net valuation adjustments, if any, are included in
investment securities gains and losses.
5
<PAGE> 7
HELD FOR INVESTMENT. Investment securities carried at amortized cost consist of
securities which management has the intent and ability to hold to maturity.
These securities are stated at cost, adjusted for amortization of premium and
accretion of discount, which are recognized as adjustments to interest income.
Gains and losses on securities are recorded when realized on a specific
identity basis or when, in the opinion of management, an unrealized loss is
other than temporary in nature.
All investment securities transactions are recorded using a method
which approximates trade-date accounting. Collateralized Mortgage Obligations
(CMO) and Mortgage-Backed Securities (MBS) represent a significant portion of
the investment securities portfolio. Premiums and discounts on CMO and MBS are
analyzed in relation to the corresponding prepayments rate, both historical and
estimated, using a method which approximates the effective yield method.
Effective January 1, 1994, the Corporation adopted Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". This statement requires that
securities be classified as either held to maturity securities, which are
reported at amortized cost; trading securities, which are reported at fair
value, with unrealized gains and losses included in earnings; or available for
sale securities, which are reported at fair value, with unrealized gains and
losses excluded from earnings and reported as a separate component of
shareholders' equity.
In connection with the adoption of this statement, the Corporation
transferred all of the securities currently in the held for investment
category, except for obligations of states and political subdivisions, to the
available for sale category. Had SFAS No. 115 been adopted at December 31,
1993, shareholders' equity would have increased by approximately $11.7 million.
There was no impact on earnings upon the adoption of this statement.
LOANS. Loans are stated at the principal amount outstanding except for loans
held for resale which are stated at the lower of cost or market. Interest
income on loans is accrued using constant yield methods, except for unearned
income which is recorded as income using a method which approximates the
interest method. Loan origination fees and direct loan origination costs are
deferred and recognized over the life of the related loans as adjustments to
interest income.
NONPERFORMING LOANS. Nonperforming loans consist of nonaccrual loans and
renegotiated loans which have been restructured in accordance with the criteria
set forth in SFAS No. 15 "Accounting by Debtors and Creditors for Troubled Debt
Restructurings". Loans, other than installment and mortgage loans, are
generally placed on nonaccrual status and interest is not recorded if, in
management's opinion, payment in full of principal or interest is not expected
or when payment of principal or interest is more than 90 days past due, unless
it is both well-secured and in the process of collection. Upon adverse change
in the account status (e.g., loan is past due, filing of bankruptcy or wage
earner, repossession of collateral, foreclosure, or death of the borrower),
installment and
6
<PAGE> 8
mortgage loans (including accrued interest) are written down to the net
realizable value of the underlying collateral. Such loans are reviewed
periodically for further write-downs until fully liquidated. Income recognized
on revolving credit loans is discontinued upon adverse change, and the loans
are fully charged off if no payment is received in 180 days.
ALLOWANCE FOR LOSSES ON LOANS. The allowance for losses on loans represents
management's estimate of potential losses inherent in the existing loan
portfolio. The allowance for losses on loans is increased by the provision for
losses on loans charged to expense and reduced by loans charged off, net of
recoveries. The provision for losses on loans is determined based on
management's assessment of several factors: 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 the results of regulatory examinations.
PREMISES AND EQUIPMENT. Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation provisions are
computed using the straight-line method and are charged to operating expense
over the estimated useful lives of the assets. Leasehold improvements are
amortized using the straight-line method over the shorter of the initial term
of the respective lease or the estimated useful life of the improvement.
Costs of major additions and improvements are capitalized. Interest
expense incurred on funds expended on major construction projects is
capitalized as a cost of such projects during the construction period.
Expenditures for maintenance and repairs are charged to operations as incurred.
GOODWILL AND OTHER INTANGIBLES. The unamortized costs in excess of the fair
market value of acquired net tangible assets are included in goodwill and other
intangibles. Identifiable intangibles, including premiums on purchased
deposits and assets, are amortized over the estimated periods benefited. The
remaining costs (goodwill) are generally amortized on a straight-line basis
over 15 years. For acquisitions where the fair market value of net assets
acquired exceeds the purchase price, the resulting negative goodwill is
allocated proportionally to noncurrent, nonmonetary assets.
MORTGAGE SERVICING RIGHTS. Mortgage servicing rights represent the cost of
mortgage servicing purchased from others. These costs are amortized in
proportion to, and over the period of, estimated net servicing income based on
the historical and projected prepayments of the underlying loans. At December
31, 1993 and 1992, mortgage servicing rights were $3,584,000 and $4,917,000,
respectively.
7
<PAGE> 9
OTHER REAL ESTATE. Property acquired through foreclosure is stated at the lower
of the recorded amount of the loan or the estimated net realizable value,
reduced by estimated selling costs. When a reduction of the recorded amount to
the net realizable value is required at the time of foreclosure, the difference
is charged to the allowance for losses on loans. Any subsequent reduction is
charged to other real estate expense, and a valuation reserve is established
for the potential declines in appraised values. Other real estate is recorded
net of the valuation reserve. Revenues and expenses associated with operating
or disposing of other real estate are recorded in the period in which they are
incurred. At December 31, 1993 and 1992, other real estate totaled $4,362,000
and $6,642,000, respectively.
EMPLOYEE BENEFIT PLANS. The Corporation sponsors two qualified employee
benefit plans for substantially all employees of the Corporation and its
subsidiaries. One is a 401K plan with matching employer contributions based on
length of service. Employer contributions, provided through a Flexible
Benefits Plan, may also be directed to the 401K plan at the election of the
employee. The second is a noncontributory employee stock ownership plan, which
is funded by discretionary employer contributions approved by the Board of
Directors. All costs of the plans are expensed as incurred.
Effective January 1, 1993, the Corporation adopted the provisions of
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" and SFAS No. 112, "Employers' Accounting for Postemployment
Benefits". These standards require that the expected costs of postretirement
and postemployment benefits be charged to expense during the years that the
employee renders service which is a change from the previous policy of
recognizing these costs on a cash basis. The Corporation elected to recognize
the accumulated postretirement and postemployment benefit obligation upon
adoption which approximated $8.3 million ($5.1 million after tax) and $1.3
million ($807,000 after tax), respectively.
INCOME TAXES. The Corporation files a consolidated federal income tax return
with its subsidiaries, with the exception of credit life insurance subsidiaries
which file separate returns. State income taxes are computed on either a
separate company basis or consolidated basis depending upon state laws. The
Corporation and its subsidiaries file a consolidated state return for all
business in the state of Tennessee.
Income tax expense is based on income reported for financial
accounting purposes, and includes deferred taxes resulting from the recognition
of certain transactions in different periods for tax reporting purposes in
accordance with SFAS No. 109, "Accounting for Income Taxes."
Effective January 1, 1993, the Corporation adopted the provisions of
SFAS No. 109 and recorded the cumulative effect of the accounting change of
$10.9 million.
8
<PAGE> 10
INTEREST RATE SWAP AGREEMENTS. Interest rate swap agreements are used as part
of the Corporation's interest rate risk management strategy by hedging
on-balance-sheet financial instruments. The Corporation activities are
exclusively end-user related. To qualify as a hedge the following criteria
must be met: (i) the asset or liability to be hedged exposes the institution,
as a whole, to interest rate risk; (ii) the interest rate swap acts to reduce
the interest rate risk by moving the institution closer to being insensitive to
interest rate changes; and (iii) the interest rate swap is designated and
effective as a hedge. Fees related to swap agreements are amortized on the
interest method over the life of the swap. If the instrument being hedged is
disposed of, the swap agreement is marked to market with any resulting gain or
loss included in the determination of the gain or loss from the disposition.
If the interest rate swap agreement is terminated, the gain or loss is deferred
and amortized over the remaining life of the specific hedged asset or
liability.
EARNINGS PER SHARE. Primary earnings per common share are adjusted for all
preferred stock dividends. Primary earnings per common share is computed based
on the weighted average common shares outstanding and common stock equivalents
arising from the assumed exercise of outstanding stock options, unless their
effect would be antidilutive. Fully diluted earnings per common share is
computed using the weighted average common shares and equivalents. Common
stock equivalents are increased by the assumed conversion of convertible
preferred stock into common stock as if converted at the beginning of the
period, unless the effect would be antidilutive. Earnings for fully diluted
earnings per common share are adjusted for preferred stock dividends on
nonconvertible preferred stock.
NOTE 2. MERGERS AND ACQUISITIONS
CONSUMMATED ACQUISITIONS
POOLINGS OF INTERESTS
During 1993, the Corporation consummated four acquisitions which were
accounted for using the pooling of interests method of accounting. The table
below summarizes the acquisitions.
<TABLE>
<CAPTION>
TOTAL ASSETS AT TOTAL EQUITY
DATE SHARES JANUARY 1, AT
INSTITUTION ACQUIRED ISSUED 1993 JANUARY 1, 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>
9
<PAGE> 11
The consolidated financial statements for 1993 include the results of
operations of the above entities. Prior year amounts have not been restated
due to immateriality. Eliminations have been made for material intercompany
transactions with the pooled companies. During 1993, the above pooled
institutions contributed approximately $10.1 million, $1.5 million, and $2.1
million to net interest income, noninterest income and net earnings,
respectively, of the Corporation through their respective dates of acquisition.
ACQUISITION OF BNF BANCORP, INC. (BNF)
On September 1, 1994, the Corporation completed the acquisition of
BNF, the parent company for BANKFIRST, a federal savings bank located in
Decatur, Alabama. The Corporation issued 2,000,329 shares of its Common Stock
in the acquisition, and the total assets of BNF at the date of acquisition were
$278 million. These consolidated financial statements have been restated for
this acquisition and represent the historical financial statements of the
Corporation.
The following table summarizes the impact of the BNF acquisition on
the Corporation's previously reported net interest income, noninterest income
and earnings before extraordinary item and accounting changes.
<TABLE>
<CAPTION>
EARNINGS BEFORE
EXTRAORDINARY
ITEM AND
NET INTEREST NONINTEREST ACCOUNTING
INCOME (1) INCOME (1) CHANGES
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
1993
- ----
Union Planters . . . . . . . . . . . . . . . . . . . . . $232,667 $86,737 $61,268
BNF . . . . . . . . . . . . . . . . . . . . . . . . . . 11,176 1,179 4,096
-------- ------- -------
Union Planters pooled . . . . . . . . . . . . . . . . $243,843 $87,916 $65,364
======== ======= =======
1992
- ----
Union Planters . . . . . . . . . . . . . . . . . . . . . $189,453 $84,957 $41,439
BNF . . . . . . . . . . . . . . . . . . . . . . . . . . 11,101 1,155 3,584
-------- ------- -------
Union Planters pooled . . . . . . . . . . . . . . . . $200,554 $86,112 $45,023
======== ======= =======
1991
- ----
Union Planters . . . . . . . . . . . . . . . . . . . . . $152,015 $71,150 $27,508
BNF . . . . . . . . . . . . . . . . . . . . . . . . . . 8,458 931 2,626
------- ------- -------
Union Planters pooled . . . . . . . . . . . . . . . . $160,473 $72,081 $30,134
======== ======= =======
</TABLE>
(1) To be consistent with industry practice, net interest income for Union
Planters has been restated to reflect the reclassification of certain
interchange fees arising from credit card loans to noninterest income.
The amounts reclassified for the years ended December 31, 1993, 1992, and
1991 were $1,938,000, $1,684,000, and $1,540,000, respectively.
10
<PAGE> 12
PURCHASE ACQUISITIONS
The Corporation acquired four institutions in 1992 and eight
institutions in 1993 that were accounted for as purchases. The table below
summarizes the acquisitions:
<TABLE>
<CAPTION>
TOTAL ASSETS
DATE PURCHASE RESULTING AT DATE OF
INSTITUTION ACQUIRED CONSIDERATION PRICE INTANGIBLE ACQUISITION
----------- -------- --------------- -------- ---------- ------------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Metropolitan Federal Savings and
Loan Association
(Metropolitan)(a) and (f) . . . . . . . . 3/27/92 Cash $16.5 $16.5 $603
Fidelity Bancshares, Inc.
(Fidelity)(f) . . . . . . . . . . . . . . 3/30/92 Cash 77.4 -- 822
Southeastern Bancshares, Inc. . . . . . . .
(SBI)(b) . . . . . . . . . . . . . . . . 7/1/92 253,655 Shares 5.2 1.1 77
of Series D
Preferred Stock
Bank of Commerce (BOC) . . . . . . . . . . 11/1/92 Cash 9.9 2.1 89
Bank of East Tennessee
(BOET)(c) . . . . . . . . . . . . . . . . 1/1/93 648,786 Shares 25.3 7.0 231
of 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
(Maryville)(d) . . . . . . . . . . . . . 2/26/93 625,000 Shares NM(d) -- 187
of Common Stock
(Conversion/
Acquisition)
First State Bancshares, Inc.
(FSB)(e) . . . . . . . . . . . . . . . . 3/12/93 Cash and Common 3.9 .4 34
Stock (90,162
shares)
First Cumberland Bank . . . . . . . . . . . 3/15/93 Cash .2 -- 20
Farmers Union Bank (Farmers
Union) . . . . . . . . . . . . . . . . . 4/1/93 Cash 9.5 4.2 78
Erin Bank & Trust
Company (Erin) . . . . . . . . . . . . . 6/1/93 259,736 Shares 8.3 2.1 43
of Series E
Preferred Stock
</TABLE>
(a) The Corporation, through UPNB, assumed approximately $585 million in
insured deposit liabilities (including accrued interest payable) of
the former Metropolitan Federal Savings and Loan Association. The
purchase and assumption transaction was facilitated through the
Resolution Trust Corporation (RTC) which declared UPNB the successful
bidder. UPNB also acquired approximately $82 million in assets and
received cash from the RTC totaling approximately $487 million.
(b) SBI is the parent company of DeKalb County Bank and Trust Company
(DeKalb).
(c) 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 outstanding common
stock of BOET in exchange for the Corporation's Series E Preferred
Stock ($10.8 million).
(d) Maryville was a mutual savings bank which, pursuant to a
conversion/acquisition, 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 conversion/acquisition.
(e) FSB is the parent company of First State Bank of Fayette County
(Somerville).
(f) Merged into UPNB.
NM -- Not meaningful.
Intangibles are being amortized primarily using the straight line
method over periods ranging from 10 to 15 years. The amortization for the
Metropolitan intangibles was accelerated in both 1992 and 1993 due to
unexpected deposit run-off. The fair market value of the net assets of
Fidelity at the date of acquisition exceeded the purchase price resulting in
negative goodwill of approximately $16 million which was deducted from the
noncurrent, nonmonetary assets (primarily premises and equipment) of Fidelity.
The recording of the acquisition of Maryville
11
<PAGE> 13
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 effect of
the above described acquisitions assuming consummation of each transaction on
January 1, 1992. The unaudited pro forma results are not necessarily
representative of the actual results that would have occurred or which may
occur in the future had the transactions been effected on January 1, 1992. The
pro forma information does not include the historical results of Metropolitan
since it was a failed financial institution.
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA
YEARS ENDED DECEMBER 31,
-------------------------
1993 1992
---------- ---------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 246,475 $ 237,829
Provision for losses on loans . . . . . . . . . . . . . . . . . . . . . . . . . (12,562) (36,279)
Noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,295 99,785
Noninterest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (232,756) (249,082)
--------- ---------
Earnings before income taxes, extraordinary item, and accounting
changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,452 52,253
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26,526) (17,309)
--------- ---------
Earnings before extraordinary item and accounting changes . . . . . . . . . . . 62,926 34,944
Extraordinary item and accounting changes, net of taxes . . . . . . . . . . . . 1,795 --
--------- ---------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 64,721 $ 34,944
========= =========
Earnings per common share before extraordinary item and accounting
changes
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.49 $ 1.37
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.33 1.37
Net earnings
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.57 1.37
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.40 1.37
</TABLE>
The following details the net cash received from purchases of
financial institutions:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1993 1992
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Fair value of assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,245,602 $ 1,589,540
Liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,148,122) (1,480,572)
Issuance of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,618) --
Issuance of Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . (30,127) (5,200)
Less previous investment in entities acquired . . . . . . . . . . . . . . . . . (3,387) (3,173)
----------- -----------
Cash paid for purchases of other financial institutions . . . . . . . . . . . . 33,348 100,595
Cash and cash equivalents acquired . . . . . . . . . . . . . . . . . . . . . . (105,469) (669,353)
----------- -----------
Net cash received from purchases of financial
institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (72,121) $ (568,758)
=========== ===========
</TABLE>
12
<PAGE> 14
SUBSEQUENT ACQUISITIONS
The Corporation has acquired the following entities during 1994:
<TABLE>
<CAPTION>
APPROXIMATE
DATE METHOD OF TOTAL
INSTITUTION ACQUIRED CONSIDERATION ACCOUNTING ASSETS
----------- -------- ------------- ---------- ------
(Millions)
<S> <C> <C> <C> <C>
Mid-South Bancorp, Inc., Parent Company of 1/1/94 839,542 shares of Pooling of $ 185
Simpson County Bank in Franklin, Kentucky; Common Stock Interests
Adairville Banking Company in Adairville,
Kentucky; General Trust Company in
Nashville, Tennessee; First Citizens
Bank in Franklin, Columbia, and Mt.
Pleasant, Tennessee
First National Bancorp of Shelbyville, Inc., 3/1/94 974,886 shares of Pooling of 170
Parent Company of First National Bank of Common Stock Interests
Shelbyville in Shelbyville,
Tennessee (FNB)
Anderson County Bank in Clinton, Tennessee 3/1/94 $2.5 million in cash Purchase 19
(ACB)
Clin-Ark Bancshares, Inc., Parent Company of 4/1/94 217,768 shares of Pooling of 50
First National Bank of Clinton in Clinton, Common Stock Interests
Arkansas (CBI)
Assumption of liabilities and purchase of 4/19/94 $.4 million in cash Purchase 15
assets from the RTC (a)
Tennessee Bancorp, Inc., Parent Company of 5/1/94 $13.5 million in cash Purchase 92
Tennessee National Bank in Columbia,
Tennessee (TBI)
Liberty Bancshares, Inc., Parent Company of 7/1/94 1,223,353 shares of Pooling of 170
Liberty Federal Savings Bank in Paris, Common Stock Interests
Tennessee (LBI)
Earle Bankshares, Inc., Parent Company of 8/1/94 320,112 shares of Pooling of 40
First Southern Bank in Earle, Common Stock Interests
Arkansas (EBI)
</TABLE>
(a) 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.
SALES OF BRANCHES
In the third quarter of 1993, the Corporation sold four of the
Kentucky branches (three in Paducah and one in Clinton) of its subsidiary,
Security Trust. The Corporation has also entered into a definitive agreement
to sell the two remaining Kentucky branches of Security Trust. The sales
involved approximately $105 million of deposits, approximately $3 million of
loans, and approximately $1 million of premises and equipment. The
transactions are not considered significant to the Corporation's balance sheet
or operating results and are expected to result in a reduction of Security
Trust's goodwill and purchased mortgage servicing rights.
SUBSEQUENT SALE
Effective September 1, 1994, the Corporation sold all the deposits and
certain loans of Steiner Bank, an approximately $24 million bank subsidiary
located in Birmingham, Alabama. The gain resulting from the sale is not
significant to the Corporation's results of operations. Subsequent to the
sale, the remaining
13
<PAGE> 15
assets and liabilities of Steiner Bank were transferred to the Corporation, and
Steiner Bank ceased its operations.
SUBSEQUENT REORGANIZATION OF UNION PLANTERS NATIONAL BANK (UPNB)
Incidental to a corporate reorganization of UPNB, as of 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 in the
Regional Banks with a majority of the funds ($98 million) having been provided
by a dividend from UPNB (Note 12). 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 held by UPNB had no material impact on the
consolidated financial condition or results of operations of the Corporation.
PENDING ACQUISITIONS
The Corporation has signed definitive agreements pursuant to which it
would acquire the entities listed below, and subject to various approvals and
satisfaction of certain contractual conditions precedent. The number of shares
of Common Stock to be issued in connection with these acquisitions is subject
to change depending on the market price of the Corporation's Common Stock
during the stipulated pricing periods. The shares below are based on an
assumed market price of $25.25.
<TABLE>
<CAPTION>
ANTICIPATED APPROXIMATE
METHOD OF TOTAL
INSTITUTION CONSIDERATION ACCOUNTING ASSETS
----------- ------------- ---------- ------
(Millions)
<S> <C> <C> <C>
Commercial Bancorp, Inc., Parent Company of Approximately Pooling of $ 29
The Commercial Bank in Obion, Tennessee 185,000 shares of Interests
Common Stock
Grenada Sunburst System Corporation (GSSC), Approximately Pooling of 2,466
Parent Company of Sunburst Bank in Grenada, 13,500,000 shares of Interests
Mississippi and Sunburst Bank in Common Stock
Baton Rouge, Louisiana
Mid South Bancshares, Inc., Parent Company of Approximately Pooling of 130
Security Bank in Paragould, Arkansas and 523,000 shares of Interests
Farmers & Merchants Bank in Reyno, Common Stock
Arkansas
</TABLE>
NOTE 3. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Corporation's banking subsidiaries are required to maintain
noninterest-bearing average reserve balances with the Federal Reserve Bank.
Average balances required to be maintained for such purposes during 1993 and
1992 were $41 million and $33 million, respectively.
14
<PAGE> 16
NOTE 4. INVESTMENT SECURITIES
The carrying values and market values of investment securities are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1993
----------------------------------------------
UNREALIZED
CARRYING --------------------- MARKET
VALUE 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>
<TABLE>
<CAPTION>
DECEMBER 31, 1992
----------------------------------------------
UNREALIZED
CARRYING --------------------- MARKET
VALUE GAINS LOSSES VALUE
---------- --------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
HELD FOR SALE
U.S. Government obligations
U.S. Treasury securities . . . . . . . . . . . . . . $ 51,196 $ 362 $ 69 $ 51,489
Securities of U.S. Government agencies
Collateralized mortgage obligations . . . . . . . . . 108,676 1,642 28 110,290
Mortgage-backed securities . . . . . . . . . . . . . 258,117 7,121 -- 265,238
Other . . . . . . . . . . . . . . . . . . . . . . . . 53,337 4 102 53,239
Other stocks and securities . . . . . . . . . . . . . . 5,338 -- 13 5,325
---------- ------- ------ ----------
Total investment securities held for sale . . . . . $ 476,664 $ 9,129 $ 212 $ 485,581
========== ======= ====== ==========
HELD FOR INVESTMENT
U.S. Government obligations
U.S. Treasury securities . . . . . . . . . . . . . . $ 603,635 $10,711 $ 62 $ 614,284
Securities of U.S. Government agencies
Collateralized mortgage obligations . . . . . . . . . 573,918 5,173 378 578,713
Mortgage-backed securities . . . . . . . . . . . . . 241,921 4,724 131 246,514
Other . . . . . . . . . . . . . . . . . . . . . . . . 66,912 839 53 67,698
---------- ------- ------ ----------
Total U.S. Government obligations . . . . . . . . . 1,486,386 21,447 624 1,507,209
---------- ------- ------ ----------
Obligations of states and political subdivisions . . . 294,507 15,265 909 308,863
---------- ------- ------ ----------
Other securities
Federal Reserve Bank/Federal Home Loan
Bank stock . . . . . . . . . . . . . . . . . . . . . 13,402 -- -- 13,402
Collateralized mortgage obligations . . . . . . . . . 20,699 299 95 20,903
Other . . . . . . . . . . . . . . . . . . . . . . . . 2,907 28 5 2,930
---------- ------- ------ ----------
Total other securities . . . . . . . . . . . . . . . 37,008 327 100 37,235
---------- ------- ------ ----------
Total investment securities held for investment . . $1,817,901 $37,039 $1,633 $1,853,307
========== ======= ====== ==========
</TABLE>
For the years ended December 31, 1993 and 1992, the Corporation had
gross realized gains of $5,205,000 and $13,788,000, respectively, and gross
realized losses of $473,000 and $425,000, respectively.
15
<PAGE> 17
Investment securities having a carrying value of approximately $598
million and $512 million at December 31, 1993 and 1992, respectively, were
pledged to secure public and trust funds on deposit and securities sold under
agreements to repurchase.
During 1993, the Corporation transferred $315 million of securities
held for investment to the held for sale portfolio. The transfers were made
because of regulatory concerns regarding certain securities, the restructure of
the portfolios of certain financial institutions acquired, and in anticipation
of the adoption of SFAS No. 115.
PORTFOLIO RESTRUCTURING SUBSEQUENT TO DECEMBER 31, 1993
During the third quarter of 1994, the Corporation restructured a
portion of its available for sale investment securities portfolio which is
expected to result in net investment securities losses of approximately $8.1
million (approximately $4.9 million after tax). The losses expected to be
incurred have already been recognized on the Corporation's balance sheet as
a reduction of shareholders' equity under SFAS No. 115, adopted January 1,
1994. The restructuring was done to increase the book yields in the
investment portfolio, and the increased future earnings are expected to offset
the losses over a shorter time period than the original maturity of the
securities being sold.
16
<PAGE> 18
The maturities and weighted yields of investment securities as of
December 31, 1993 are as follows:
<TABLE>
<CAPTION>
MATURING
-----------------------------------------------------------------------------
WITHIN ONE AFTER ONE BUT AFTER FIVE BUT
YEAR WITHIN FIVE YEARS WITHIN TEN YEARS AFTER TEN YEARS
---------------- ----------------- ---------------- ---------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------ ----- ------ ----- ------ ----- ------ -----
(TAXABLE EQUIVALENT BASIS/DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HELD FOR SALE
U.S. Government obligations
U.S. Treasury securities $ 4,514 6.26% $116,463 4.53% $ 263 6.40% $ -- --%
Securities of U.S.
Government agencies
Collateralized mortgage
obligations . . . -- -- -- -- -- -- 141,853 4.95
Mortgage-backed securities -- -- 31,228 7.43 23,143 6.40 255,846 5.35
Other . . . . . . . 8,989 4.63 30,971 5.62 9,161 6.38 48,543 4.50
-------- -------- -------- --------
Total U.S. Government
obligations . . 13,503 5.18 178,662 5.23 32,567 6.40 446,242 5.12
Other stocks and securities 383 3.20 -- -- 8,636 6.21 8,460 3.88
-------- -------- -------- --------
Total investment
securities held for
sale . . . . . $ 13,886 5.12% $178,662 5.23% $ 41,203 6.36% $454,702 5.11%
======== ======== ======== ========
HELD FOR INVESTMENT
U.S. Government obligations
U.S. Treasury securities $238,601 4.99% $454,511 4.70% $ 500 7.58% $ -- --%
Securities of U.S.
Government agencies
Collateralized mortgage
obligations . . . -- -- 33,209 5.56 67,411 5.26 241,025 5.22
Mortgage-backed securities 1,549 4.90 20,344 7.32 12,339 8.57 324,635 4.84
Other . . . . . . . 29,093 4.90 69,363 5.49 6,057 6.75 17,178 4.98
-------- -------- -------- --------
Total U.S. Government
obligations . . 269,243 4.98 577,427 4.93 86,307 5.85 582,838 5.00
-------- -------- -------- --------
Obligations of states and
political subdivisions 23,493 8.59 94,931 9.85 58,688 9.54 269,602 9.00
-------- -------- -------- --------
Other securities
Federal Reserve Bank/Federal
Home Loan Bank stock -- -- -- -- -- -- 26,852 4.80
Collateralized mortgage
obligations . . . . 68 10.25 27 10.25 27,234 6.27 11,707 7.00
Other . . . . . . . 1,960 6.81 631 6.04 205 8.40 400 9.60
-------- -------- -------- --------
Total other securities 2,028 6.93 658 6.22 27,439 6.28 38,959 5.52
-------- -------- -------- --------
Total investment
securities at
amortized cost . $294,764 5.28% $673,016 5.63% $172,434 7.18% $891,399 6.23%
======== ======== ======== ========
</TABLE>
The weighted average yields are calculated by dividing the sum of the
individual security yield weights (effective yield times book value) by the
total book value of the securities. The taxable-equivalent yield gives effect
to the disallowance of interest expense, for federal income tax purposes,
related to certain tax-free securities. The maturities of mortgage-backed
securities and collateralized mortgage obligations have not been adjusted for
prepayments, and generally represent obligations which are expected to have
principal weighted averages of five years or less or are variable rate
instruments.
17
<PAGE> 19
NOTE 5. LOANS
Loans are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1992
---------- ----------
(Dollars in thousands)
<S> <C>
Commercial, financial, and agricultural . . . . . . . . . . . . . . . . . . . . $ 669,435 $ 551,184
Real estate -- construction . . . . . . . . . . . . . . . . . . . . . . . . . . 88,241 58,264
Real estate -- mortgage
Secured by 1-4 family residential . . . . . . . . . . . . . . . . . . . . . . 1,106,206 840,056
Other mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 537,565 406,210
Home equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,497 86,362
Consumer
Credit cards and other plans . . . . . . . . . . . . . . . . . . . . . . . . . 99,103 71,115
Other consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491,299 367,867
Foreign government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,449 1,980
Direct lease financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,914 16,493
---------- ----------
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,109,709 $2,399,531
========== ==========
Nonperforming loans are summarized as follows:
DECEMBER 31,
----------------------
1993 1992
---------- ----------
(Dollars in thousands)
Nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,646 $ 36,698
Restructured loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,525 1,351
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,171 $ 38,049
========== ==========
</TABLE>
In the fourth quarter of 1992, UPNB consummated the restructuring of a
troubled loan to another financial institution. UPNB had previously received
certain notes, equity securities, and other rights from the borrower in
exchange for a nonaccrual and partially charged-off loan. Subsequently, UPNB
liquidated the notes and equity securities and exercised contractual rights
which resulted in a recovery of $7 million in principal previously charged-off
and realized pretax gains of approximately $901,000 and $3.5 million in 1993
and 1992, respectively.
Total interest earned on nonaccrual and restructured loans in 1993 and
1992 was $1,238,000 and $2,233,000, respectively. Interest income that would
have been earned under the original terms of these loans in 1993 and 1992 was
$1,947,000 and $2,695,000, respectively. There were no significant outstanding
commitments related to the above restructured loans at December 31, 1993.
Certain of the Corporation's bank subsidiaries, principally UPNB, have
granted loans to the Corporation's directors, executive officers, and their
affiliates. These loans were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with unrelated persons and do not involve more than normal risks
of collectibility. The aggregate dollar amount of these loans was $33,065,000
and $35,145,000 at December 31, 1993 and 1992, respectively. During 1993,
$141,144,000 of new loans and advances under credit lines were made to
directors, executive officers, and their affiliates; repayments totaled
approximately $143,224,000.
18
<PAGE> 20
NOTE 6. ALLOWANCE FOR LOSSES ON LOANS
The changes in the allowance for losses on loans are summarized as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance, January 1 . . . . . . . . . . . . . . . . . . . . . . . . $ 65,415 $ 48,442 $ 51,181
Increase due to acquisitions . . . . . . . . . . . . . . . . . . . 16,607 15,678 --
Provision for losses on loans . . . . . . . . . . . . . . . . . . 9,743 19,194 25,281
Recoveries of loans previously charged off . . . . . . . . . . . . 8,681 14,212 7,496
Loans charged off . . . . . . . . . . . . . . . . . . . . . . . . (18,842) (32,111) (35,516)
-------- -------- --------
Balance, December 31 . . . . . . . . . . . . . . . . . . . . . . . $ 81,604 $ 65,415 $ 48,442
======== ======== ========
</TABLE>
NOTE 7. PREMISES AND EQUIPMENT, LEASED ASSETS, AND LEASE COMMITMENTS
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1992
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,786 $ 20,610
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . 93,428 80,793
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,266 5,027
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,068 62,509
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,301 4,331
-------- --------
219,849 173,270
Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . 79,507 69,885
-------- --------
Total premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . $140,342 $103,385
======== ========
</TABLE>
Included in the above is approximately $14.2 million related to a new
headquarters building for UPNB. The total project cost is estimated to be
approximately $17.6 million, including land, construction costs, furniture,
fixtures and equipment, and site improvements.
A summary of rent expense for operating leases is summarized as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1993 1992 1991
------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Operating lease rent expense . . . . . . . . . . . . . . . . . . . . . . . $6,773 $4,822 $4,532
Less sublease rental income . . . . . . . . . . . . . . . . . . . . . . . . 389 310 200
------ ------ ------
Net rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,384 $4,512 $4,332
====== ====== ======
</TABLE>
At December 31, 1993, minimum future rental commitments for leases
which are being accounted for as operating leases were as follows:
<TABLE>
<CAPTION>
OPERATING
LEASES
------------------------
(DOLLARS IN THOUSANDS)
<S> <C>
1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,660
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,932
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,372
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,051
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,729
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,251
-------
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . $25,995
=======
</TABLE>
19
<PAGE> 21
NOTE 8. SHORT-TERM BORROWINGS
Short-term borrowings are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1993 1992 1991
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Year-end balance
Federal funds purchased and securities sold under agreements
to repurchase . . . . . . . . . . . . . . . . . . . . . . . . . $234,031 $287,802 $185,898
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . 10,941 8,325 11,466
Other short-term borrowings . . . . . . . . . . . . . . . . . . . 23 185 146
-------- -------- --------
Total short-term borrowings . . . . . . . . . . . . . . . . . . . $244,995 $296,312 $197,510
======== ======== ========
Federal funds purchased and securities sold under agreements
to repurchase
Daily average balance . . . . . . . . . . . . . . . . . . . . . . $222,136 $211,662 $235,662
Weighted average interest rate . . . . . . . . . . . . . . . . . 2.69% 3.13% 5.21%
Maximum outstanding at any month end . . . . . . . . . . . . . . $277,833 $287,802 $299,098
Weighted average interest rate at December 31 . . . . . . . . . . 2.83% 2.96% 3.90%
</TABLE>
NOTE 9. FEDERAL HOME LOAN BANK ADVANCES AND LONG-TERM DEBT
FEDERAL HOME LOAN BANK (FHLB) ADVANCES
The Corporation's banking and thrift subsidiaries obtained in 1993
various advances from the FHLB totaling $180.0 million at December 31, 1993,
under Blanket Agreements for Advances and Security Agreements (the Agreements).
Advances from the FHLB totaled $15.0 million at December 31, 1992. The
Agreements entitle the Corporation's subsidiaries to borrow funds from the FHLB
to fund mortgage loan programs and satisfy other funding needs. Of the amounts
borrowed at December 31, 1993, $136 million were at variable rates and $44
million were at fixed rates with interest rates ranging from 3.2% to 8.0% and
maturities ranging from 1997 to 2017. At December 31, 1993, FHLB advances that
mature within one year, one to five years, and after five years were $14.1
million, $33.0 million, and $132.9 million, respectively. The value of
collateral (primarily mortgage loans) under the Agreements must be 150% of the
$180.0 million outstanding at December 31, 1993.
LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1992
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
6.25% Subordinated Notes due 2003 . . . . . . . . . . . . . . . . . . . . . . . $ 74,479 $ --
8 1/2% Subordinated Notes due 2002 . . . . . . . . . . . . . . . . . . . . . . 40,250 40,250
10 1/8% Subordinated Capital Debentures due 1999 . . . . . . . . . . . . . . . -- 34,042
Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . . . 2,294 2,684
Mortgage indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 --
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 180
-------- -------
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $117,276 $77,156
======== =======
</TABLE>
In October 1993, the Corporation filed a shelf registration statement
for $150 million of the Corporation's subordinated debt securities. On
November 2, 1993, the Corporation issued $75 million of 6.25% Subordinated
Capital Notes due 2003 (6.25% Notes) at 99.305%. Interest on the 6.25% Notes
is payable semiannually on May 1 and November 1. The 6.25% Notes are not
redeemable prior to maturity and will mature on November 1, 2003. The 6.25%
Notes are
20
<PAGE> 22
subordinated to all present and future senior indebtedness of the Corporation
and payment may be accelerated only in the case of the bankruptcy of the
Corporation. Debt issuance costs of $838,000 are included in other assets and
are being amortized over a ten year life. The 6.25% Notes qualify for Tier 2
capital under regulatory risk-based capital guidelines. The Corporation also
entered into an interest rate swap agreement with a notional amount of $50
million to convert a portion of its fixed-rate debt to a floating LIBOR rate
for two and one-half years.
In October 1992, the Corporation completed a public offering of $40.25
million of 8 1/2% Subordinated Notes (8 1/2% Notes). The 8 1/2% Notes mature
on October 1, 2002, and interest is payable quarterly. Debt issuance costs of
$1.2 million and $1.4 million, respectively, at December 31, 1993 and 1992 are
included in other assets and are being amortized over a seven-year life. The 8
1/2% Notes are unsecured debt obligations of the Corporation and are
subordinated in right of payment to all senior indebtedness of the Corporation.
The Corporation, at its option, may redeem the 8 1/2% Notes on or after October
1, 1997, at par value plus accrued interest, upon 30 days notice. The
Corporation is obligated to repay 100% of the principal amount plus accrued
interest, up to an aggregate amount of $1 million, of 8 1/2% Notes tendered for
prepayment by the personal representatives of deceased holders in any one year.
The 10 1/8% Subordinated Capital Debentures (10 1/8% Debentures) were
issued in a public offering in 1989. In November 1993, the Corporation used
approximately $39 million of the net proceeds of the 6.25% Notes to
in-substance defease the 10 1/8% Debentures. Direct obligations of the U.S.
Government were purchased and placed in an irrevocable trust which provides
cash flows matching the principal and interest debt service required to retire
the 10 1/8% Debentures. At December 31, 1993, the outstanding balance of the
10 1/8% Debentures totaled $34 million which is not reflected in the
accompanying financial statements. This transaction resulted in an
extraordinary loss in the fourth quarter of 1993 of $5.2 million ($3.2 million
net of taxes).
Annual principal repayment requirements for long-term debt for the
years 1994 through 1998 are $628,000, $466,000, $305,000, $273,000, and
$296,000, respectively.
LINE OF CREDIT
In June 1993, the Corporation entered into an unsecured $25 million
credit agreement which expires May 31, 1996. No borrowings were outstanding at
December 31, 1993. The line of credit is for working capital purposes and as a
commercial paper backup. The credit agreement contains performance
measurements and restrictive covenants relating to dividends, acquisitions,
sale of assets, and indebtedness which the Corporation must meet. The
Corporation's dividends are restricted to no more than 60% of consolidated net
earnings for the preceding fiscal year.
21
<PAGE> 23
NOTE 10. SHAREHOLDERS' EQUITY
PREFERRED STOCK
The Corporation's preferred stock is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1992
-------- --------
(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, $8.00 Nonredeemable, Cumulative, Convertible Preferred Stock
(stated at liquidation value of $100 per share), 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 per share), 253,655 shares issued
and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,200 5,200
Series E, 8% Cumulative, Convertible Preferred Stock (stated at liquidation
value of $25 per share), 3,107,922 and 2,200,000 shares issued and
outstanding at December 31, 1993 and 1992, respectively . . . . . . . . . . 77,698 55,000
-------- -------
Total convertible preferred stock . . . . . . . . . . . . . . . . . . . . . 87,298 64,600
-------- -------
NONCONVERTIBLE
Series C, 10 3/8% Increasing Rate, Redeemable, Cumulative Preferred Stock
(stated at liquidation value of $25 per share), 690,000 shares issued
and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,250 17,250
-------- -------
Total nonconvertible preferred stock . . . . . . . . . . . . . . . . . . . 17,250 17,250
-------- -------
Total preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . $104,548 $81,850
======== =======
</TABLE>
SERIES A PREFERRED STOCK (SHARE PURCHASE RIGHTS PLAN). In 1989, the
Board of Directors of the Corporation adopted a Share Purchase Rights Plan and
distributed a dividend of one Preferred Share Purchase Right (Right) for each
outstanding share of the Corporation's $5 par value Common Stock and for each
share issued thereafter. The Rights are generally designed to deter coercive
takeover tactics and to encourage all persons interested in acquiring control
of the Corporation to deal with each shareholder on a fair and equal basis.
Each Right trades in tandem with its respective share of common stock until the
occurrence of certain events, in which case it would separate from the common
stock and entitle the registered holder, subject to the terms of the Rights
Agreement, to purchase certain equity securities at a price below their market
value. The Corporation has authorized 250,000 shares of Series A Preferred
Stock for issuance under the Share Purchase Rights Plan, none of which have
been issued.
SERIES B PREFERRED STOCK. The Corporation issued 44,000 shares of
$8.00 Nonredeemable, Cumulative, Convertible Preferred Stock, Series B (Series
B Preferred Stock), $100 per share liquidation value, in a private transaction
in connection with the acquisition of Steiner Bank in 1989. Such shares bear a
dividend rate of $8.00 per share per annum; dividends are cumulative and are
payable quarterly. The holders of shares of Series B Preferred Stock have the
right, at their option, after November 30, 1994, (and in limited circumstances
prior thereto) to convert each share into 7.722 shares (339,768 shares in
total) of the Corporation's Common Stock. The Series B Preferred Stock is not
subject to any sinking fund provisions and has no preemptive rights. Holders
of Series B Preferred Stock have no voting rights except as may be required by
law and in certain other limited circumstances.
22
<PAGE> 24
SERIES D PREFERRED STOCK. In July 1992, in connection with the
acquisition of SBI (see Note 2), the Corporation issued 253,655 shares of 9.5%
Redeemable, Cumulative, Convertible Preferred Stock, Series D (Series D
Preferred Stock) in a private offering. Such shares have no par value but have
a stated value of $20.50 per share on which dividends accrue at 9.5% per annum.
Dividends are cumulative and payable quarterly. Such shares have a liquidation
preference of $20.50 per share plus unpaid dividends accrued thereon and, at
the Corporation's option, with the prior approval of the Federal Reserve, are
subject to redemption by the Corporation at any time and from time to time on
or after July 1, 1995. At any time prior to redemption, each share of Series D
Preferred Stock is convertible at the option of the holder into one share of
the Corporation's Common Stock. Holders of the Series D Preferred Stock have
no voting rights except as may be required by law and in certain other limited
circumstances.
SERIES E PREFERRED STOCK. In February 1992, the Corporation completed
a public offering of 2,200,000 shares of 8% Cumulative, Convertible Preferred
Stock, Series E (Series E Preferred Stock). Such shares have a stated value of
$25 per share, on which dividends accrue at a rate of 8% per annum; dividends
are cumulative and are payable quarterly. The Series E Preferred Stock is not
subject to any sinking fund provisions and has no preemptive rights. Such
shares have a liquidation preference of $25 per share plus unpaid dividends
accrued thereon, and with the prior approval of the Federal Reserve, may be
redeemed by the Corporation in whole or in part at any time after March 31,
1997 at $25.00 per share. At any time prior to redemption, each share of
Series E Preferred Stock is convertible, at the option of the holder, into 1.25
shares of the Corporation's Common Stock. Holders of Series E Preferred Stock
have no voting rights except for those provided by law and in certain other
limited circumstances.
On January 1, 1993, the Corporation acquired an additional 43.93% of
Bank of East Tennessee (BOET) in exchange for 331,741 shares of the
Corporation's Series E Preferred Stock. The Corporation acquired the remaining
outstanding stock of BOET on May 3, 1993 in exchange for an additional 317,045
shares of Series E Preferred Stock. The Corporation also acquired Erin Bank &
Trust Company in exchange for 259,736 shares of Series E Preferred Stock on
June 1, 1993. See Note 2 for additional information regarding these
acquisitions.
SERIES C PREFERRED STOCK. In August 1991, the Corporation completed a
public offering of 690,000 shares of 10 3/8% Increasing Rate, Redeemable,
Cumulative Preferred Stock, Series C (Series C Preferred Stock). The Series C
Preferred Stock has a stated value of $25 per share. Dividends are cumulative
and payable quarterly at a rate of $.648 per quarter increasing to $.680
beginning November 1, 1994, to $.711 beginning November 1, 1995, and to $.742
beginning November 1, 1996. The Series C Preferred Stock is not convertible,
is not subject to any sinking fund provisions, and has no preemptive rights.
On or after October 31, 1994, the Corporation may, with the prior approval of
the Federal Reserve, redeem any or all outstanding Series C Preferred Stock at
$25 per
23
<PAGE> 25
share plus all dividends accrued and unpaid to the date fixed for redemption.
Holders of the Series C Preferred Stock have no voting rights except as may be
required by law and except in certain other limited circumstances.
The Corporation plans to redeem all of the outstanding Series C
Preferred Stock on October 31, 1994. Approval from the Federal Reserve has
been received to redeem the stock.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Dividend Reinvestment and Stock Purchase Plan (the Plan)
authorizes the issuance of 500,000 shares of authorized but previously unissued
common stock to shareholders who choose to invest all or a portion of their
cash dividends or make optional cash purchases. On certain investment dates,
shares may be purchased with reinvested dividends and optional cash payments at
a price of 95% and 100%, respectively, of their fair market value, without
brokerage commissions. Shares issued under this Plan totaled 68,188, 93,407,
and 95,029 shares in 1993, 1992, and 1991, respectively.
SUBSCRIPTION AGREEMENT
In 1987, the Corporation entered into an agreement with Santa Cruz
Resources, Inc. (SCR) under which SCR would acquire up to 21% of the
Corporation's Common Shares. SCR ultimately acquired 2,963,000 of the
Corporation's common shares. The agreement imposed several restrictions on
SCR. During 1990 and 1991, the Corporation repurchased 2.7 million of the
shares and released SCR from the agreement.
NOTE 11. UNION PLANTERS CORPORATION (PARENT COMPANY ONLY) FINANCIAL
INFORMATION
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1992
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Noninterest-bearing cash in subsidiary bank . . . . . . . . . . . . . . . $ 799 $ 623
Demand note receivable from subsidiary bank . . . . . . . . . . . . . . . 101,356 57,971
Advances to and receivable from subsidiaries . . . . . . . . . . . . . . . 2,955 9,221
Investment securities held for sale . . . . . . . . . . . . . . . . . . . 1,324 4,834
Investment in Union Planters National Bank . . . . . . . . . . . . . . . . 251,583 216,024
Investment in other banking subsidiaries . . . . . . . . . . . . . . . . . 218,926 159,210
Investment in savings and loan subsidiaries . . . . . . . . . . . . . . . 58,476 27,547
Investment in nonbank subsidiaries . . . . . . . . . . . . . . . . . . . . 2,817 (2,802)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,483 8,067
--------- --------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 644,719 $480,695
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,941 $ 8,325
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,729 74,292
Loans from and payables to subsidiary banks . . . . . . . . . . . . . . . 362 53
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,757 14,267
Shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 507,930 383,758
--------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . $ 644,719 $480,695
========= ========
</TABLE>
24
<PAGE> 26
NOTE 11. UNION PLANTERS CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION
(CONTINUED)
CONDENSED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1993 1992 1991
------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INCOME
Dividends from banking subsidiaries . . . . . . . . . . $28,092 $20,656 $21,335
Management fees from subsidiaries . . . . . . . . . . . 7,198 5,902 5,682
Interest from banking subsidiaries . . . . . . . . . . . 1,358 1,523 791
Interest and dividends on investments, loans, and
interest-bearing deposits . . . . . . . . . . . . . . . 62 279 319
Investment securities gains (losses) . . . . . . . . . . -- 38 (1,603)
Other income . . . . . . . . . . . . . . . . . . . . . . 1,283 43 266
------- ------- -------
Total income . . . . . . . . . . . . . . . . . . . . . 37,993 28,441 26,790
------- ------- -------
EXPENSES
Interest expense
Short-term borrowings . . . . . . . . . . . . . . . . . 235 306 375
Long-term debt . . . . . . . . . . . . . . . . . . . . 7,447 4,504 4,539
Loan from bank subsidiary . . . . . . . . . . . . . . . -- 28 172
Salaries and employee benefits . . . . . . . . . . . . . 6,029 4,973 5,264
Legal fees and provision for litigation settlements . . 321 3,924 (1,457)
Other expense . . . . . . . . . . . . . . . . . . . . . 5,363 3,906 2,742
------- ------- -------
Total expenses . . . . . . . . . . . . . . . . . . . . 19,395 17,641 11,635
------- ------- -------
EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM,
ACCOUNTING CHANGES, AND UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . 18,598 10,800 15,155
Tax benefit . . . . . . . . . . . . . . . . . . . . . . . (4,092) (2,271) (2,885)
------- ------- -------
EARNINGS BEFORE EXTRAORDINARY ITEM, ACCOUNTING CHANGES,
AND UNDISTRIBUTED EARNINGS OF SUBSIDIARIES . . . . . . 22,690 13,071 18,040
Extraordinary item-defeasance of debt, net of taxes . . . (3,206) -- --
Accounting changes, net of taxes . . . . . . . . . . . . 2,479 -- --
------- ------- -------
EARNINGS BEFORE UNDISTRIBUTED EARNINGS OF SUBSIDIARIES 21,963 13,071 18,040
Undistributed earnings of subsidiaries . . . . . . . . . 45,196 31,952 12,094
------- ------- --------
NET EARNINGS . . . . . . . . . . . . . . . . . . . . . $67,159 $45,023 $30,134
======= ======= =======
</TABLE>
25
<PAGE> 27
NOTE 11. UNION PLANTERS CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION
(CONTINUED)
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1993 1992 1991
------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings . . . . . . . . . . . . . . . . . . . . . . $ 67,159 $ 45,023 $ 30,134
Equity in undistributed earnings of subsidiaries . . . . (45,196) (31,952) (12,094)
Cumulative effect of accounting changes . . . . . . . . (2,479) -- --
Write-down of investment securities . . . . . . . . . . -- -- 1,603
Deferred income tax benefit . . . . . . . . . . . . . . (1,898) -- (167)
Other, net . . . . . . . . . . . . . . . . . . . . . . . 3,908 3,268 (581)
-------- -------- --------
Net cash provided by operating activities . . . . . . . 21,494 16,339 18,895
-------- -------- --------
INVESTING ACTIVITIES
Net decrease (increase) in short-term investments . . . -- 15,000 (11,223)
Proceeds from sales of investment securities . . . . . . 123 4,710 41
Net increase in investment in and receivables from
subsidiaries . . . . . . . . . . . . . . . . . . . . . (16,916) (48,624) (6,243)
Purchases of premises and equipment . . . . . . . . . . -- (211) (29)
-------- -------- --------
Net cash used in investing activities . . . . . . . . . (16,793) (29,125) (17,454)
-------- -------- --------
FINANCING ACTIVITIES
Net increase (decrease) in commercial paper . . . . . . 2,616 (3,141) 4,163
Proceeds from issuance of long-term debt, net . . . . . 73,641 38,850 3,000
Repayment and defeasance of long-term debt . . . . . . . (34,042) (4,121) (9,499)
Net loan from bank subsidiary . . . . . . . . . . . . . -- (1,947) --
Proceeds from issuance of preferred stock, net . . . . . -- 52,350 16,410
Proceeds from issuance of common stock, net . . . . . . 19,611 7,673 3,275
Purchases and retirement of common stock, net . . . . . (1,786) (4,311) (9,232)
Cash dividends paid . . . . . . . . . . . . . . . . . . (21,180) (15,315) (8,657)
-------- -------- -------
Net cash provided (used) by financing activities . . . 38,860 70,038 (540)
-------- -------- -------
Net increase in cash and cash equivalents . . . . . . . . 43,561 57,252 901
Cash and cash equivalents at the beginning of the year . 58,594 1,342 441
-------- -------- -------
Cash and cash equivalents at the end of the year . . . . $102,155 $ 58,594 $ 1,342
======== ======== =======
</TABLE>
Non-Cash Investing Activities. See Note 2 regarding acquisitions in 1993 and
1992.
NOTE 12. RESTRICTIONS ON DIVIDENDS AND LOANS FROM SUBSIDIARIES
The amount of dividends which the Corporation's subsidiaries may pay
is limited by applicable laws and regulations. For the subsidiary national
banks, regulatory approval is required if dividends declared in any year exceed
net earnings of the current year (as defined under the National Bank Act) plus
retained net profits for the preceding two years. The payment of dividends by
state bank subsidiaries is regulated by applicable laws in Alabama, Arkansas,
Mississippi, Kentucky, and Tennessee and the regulations of the Federal Deposit
Insurance Corporation (FDIC). The payment of dividends by savings and loan
subsidiaries (see Note 2) is subject to the regulations of the Office of Thrift
Supervision (OTS).
The Corporation has adopted for its state-chartered bank subsidiaries
internal dividend policies that have received approval from the various state
banking commissioners, subject to restrictions. The current policy for
Alabama, Arkansas, and Mississippi subsidiary banks requires a minimum ratio of
7% tangible equity capital (equity less goodwill and other intangibles) to
tangible assets and paying dividends only equal to the excess without prior
approval. The internal policy adopted for Tennessee banks requires a 6%
tangible equity capital to tangible assets ratio and a 7% tangible primary
capital (tangible equity plus the allowance for losses on loans) to tangible
assets ratio be
26
<PAGE> 28
maintained by the subsidiaries. The policy approved for the Corporation's
Kentucky operations is the same as Tennessee, except Kentucky requires the use
of Tier 1 capital instead of tangible equity and average quarterly assets
instead of period end assets.
At January 1, 1994, the banking subsidiaries could have paid dividends
to the Corporation aggregating $86.2 million, excluding the MSB acquisition
consummated January 1, 1994, without prior regulatory approval. The actual
amount of dividends paid will be limited to a lesser amount by management in
order to maintain compliance with capital guidelines and to maintain strong
capital positions in each of the banking subsidiaries. Future dividends will
be dependent on the level of earnings of the subsidiary financial institutions.
Subsequent to December 31, 1993 and in connection with the
"Reorganization of UPNB" (Note 2), UPNB requested permission and received
approval to pay a special dividend incidental to the formation of four new
banks. The special dividend of $98 million was paid on July 1, 1994. This
dividend substantially reduced the amounts available to the Corporation as
dividends from the Corporation's subsidiaries.
The Corporation's banking subsidiaries are limited by Federal law in
the amount of credit which they may extend to their affiliates, including the
Corporation. Loans to a single affiliate may not exceed 10%, and loans to all
affiliates may not exceed 20% of an individual bank's net assets plus its
allowance for losses on loans. Such loans must be collateralized by assets
having market values of 100% to 130% of the loan amount depending on the nature
of the collateral.
NOTE 13. SIGNIFICANT OPERATING BUSINESS LINES
The Corporation is primarily engaged in the commercial and retail
banking business. Broker/dealer operations formerly constituted a significant
portion of the Corporation's business.
In the fourth quarter of 1990, the broker/dealer operations, formerly
conducted by Union Planters Investment Bankers Corporation and its subsidiaries
(UPIBC), were restructured, and on January 2, 1991, the Corporation became a
limited partner in Vining-Sparks IBG, Limited Partnership (VSIBG) with
Vining-Sparks Securities, Inc. (VSS). VSIBG engages in securities
broker/dealer activities of the types formerly carried on by VSS and UPIBC.
The Corporation transferred the Capital Markets and SBA Loan Trading Operations
of UPIBC to UPNB, and they now function as part of UPNB's banking operations.
The broker/dealer operations are now limited to the Corporation's passive
investment in VSIBG which is included in other assets at $5.5 million and $5.2
million, respectively, at December 31, 1993 and 1992. The Corporation's
proportionate share of earnings (29%) from VSIBG is included in other
noninterest income.
In 1992 and 1991, UPIBC incurred litigation expenses and provided for
litigation settlements totaling $8.6 million and
27
<PAGE> 29
$11.3 million, respectively, arising from its restructured operations. A
significant portion of that litigation has now been settled.
Revenues from the broker/dealer operations were $3.6 million, $3.9
million, and $2.0 million, respectively, in 1993, 1992, and 1991. In 1993, the
broker/dealer operations had pretax earnings of $3.4 million compared to pretax
losses of $4.7 million and $9.3 million, respectively, in 1992 and 1991.
Subsequent to December 31, 1993, following a continued decline in
revenues in 1994 in the Capital Markets Operations, management decided to
discontinue these operations at the beginning of the second quarter of 1994.
The discontinuance is not expected to have a significant impact on future
operating results of the Corporation.
NOTE 14. OTHER NONINTEREST INCOME AND EXPENSE
The major components of other noninterest income and expense are
summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1993 1992 1991
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OTHER NONINTEREST INCOME
Mortgage servicing income . . . . . . . . . . . . . . . . . . . . $ 7,630 $ 8,534 $ 7,604
Merchant credit card fees . . . . . . . . . . . . . . . . . . . . 7,879 6,980 5,953
Trust service income . . . . . . . . . . . . . . . . . . . . . . . 5,661 5,079 5,278
VSIBG partnership earnings . . . . . . . . . . . . . . . . . . . . 3,652 3,920 2,031
Credit life insurance commissions . . . . . . . . . . . . . . . . 2,832 2,542 2,386
Brokerage fee income . . . . . . . . . . . . . . . . . . . . . . . 1,520 1,288 977
Sale of servicing . . . . . . . . . . . . . . . . . . . . . . . . 1,035 639 941
Gain on troubled debt restructuring (Note 5) . . . . . . . . . . . 901 3,513 --
Computer service income . . . . . . . . . . . . . . . . . . . . . 482 786 1,217
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,598 7,965 7,728
------- ------- -------
Total other noninterest income . . . . . . . . . . . . . . . . . $45,190 $41,246 $34,115
======= ======= =======
OTHER NONINTEREST EXPENSE
FDIC insurance assessments . . . . . . . . . . . . . . . . . . . . $13,118 $9,589 $7,232
Amortization of goodwill and other intangibles . . . . . . . . . . 7,318 5,351 3,478
Other contracted services . . . . . . . . . . . . . . . . . . . . 6,537 5,042 4,556
Advertising and promotion . . . . . . . . . . . . . . . . . . . . 5,944 5,281 4,396
Postage and carrier . . . . . . . . . . . . . . . . . . . . . . . 5,282 4,126 3,803
Stationery and supplies . . . . . . . . . . . . . . . . . . . . . 5,307 4,107 3,701
Merchant credit card charges . . . . . . . . . . . . . . . . . . . 4,611 3,929 3,130
Provisions for conversion of data processing systems(a) . . . . . 4,424 -- --
Communications . . . . . . . . . . . . . . . . . . . . . . . . . . 4,226 3,454 2,907
Brokerage and clearing fees . . . . . . . . . . . . . . . . . . . 3,942 3,815 3,974
Amortization and write-offs of mortgage servicing rights(b) . . . 3,199 11,071 2,794
Other personnel services . . . . . . . . . . . . . . . . . . . . . 2,504 2,118 1,232
Merger related expenses(c) . . . . . . . . . . . . . . . . . . . . 2,113 -- --
Dues, subscriptions, and contributions . . . . . . . . . . . . . . 2,405 1,711 1,729
Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,307 5,213 4,263
Other real estate expense . . . . . . . . . . . . . . . . . . . . 2,284 3,309 2,351
Travel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,791 1,394 1,587
Federal Reserve fees . . . . . . . . . . . . . . . . . . . . . . . 1,740 1,733 1,678
Taxes other than income taxes . . . . . . . . . . . . . . . . . . 1,526 866 873
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,383 1,103 1,013
Miscellaneous charge-offs . . . . . . . . . . . . . . . . . . . . 1,206 1,112 760
Provisions for litigation settlements . . . . . . . . . . . . . . -- 9,000 7,600
Provisions for abandoned property . . . . . . . . . . . . . . . . -- 5,200 1,643
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,567 12,685 10,701
------- -------- -------
Total other noninterest expense . . . . . . . . . . . . . . . . . $95,734 $101,209 $75,401
======= ======== =======
</TABLE>
(a) During 1993, the Corporation entered into a contract for
conversion of the software systems used by its subsidiaries to a
common system. A provision of $4.4 million was recorded for the
write-off of existing systems contracts as well as conversion
costs.
(b) In 1992, includes $8.2 million of accelerated amortization of
purchased mortgage servicing rights due to accelerated prepayments
of the underlying mortgage loans.
(c) One-time expenses related to acquisitions (primarily termination
of an acquired pension plan).
28
<PAGE> 30
NOTE 15. EMPLOYEE BENEFIT PLANS
401K RETIREMENT SAVINGS PLAN. The Corporation's 401K Retirement Savings Plan
(401K Plan) is available to employees having one or more years of service who
work in excess of 1,000 hours a year. Employees may voluntarily contribute 1
to 16 percent of their gross compensation on a pretax basis up to a maximum of
$8,994 in 1993, subject to certain Internal Revenue Service restrictions
(amount may change from year to year based on cost of living index), and the
Corporation makes a matching contribution of 50 to 100 percent of the amounts
contributed by the employee depending upon his or her eligible years of
service. The Corporation's matching contribution is limited to employee
contributions of up to 6% of their compensation. The Corporation's Flexible
Benefit Program allows employees to allocate a portion of their available
benefit dollars to the 401K Plan as additional employer contributions. The
Corporation's contributions to the 401K Plan for 1993, 1992, and 1991 were $1.8
million, $1.6 million, and $1.5 million, respectively.
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST. The Employee Stock Ownership Plan and
Trust (ESOP) is noncontributory and covers employees having one or more years
of service who work in excess of 1,000 hours a year. The amounts of
contributions to the ESOP are determined annually by the Board of Directors,
and were $2 million, $1.6 million, and $1.6 million for 1993, 1992, and 1991,
respectively. At December 31, 1993, the ESOP held 1,068,469 shares of the
Corporation's Common Stock, all of which was allocated to participants.
STOCK INCENTIVE PLANS. Certain employees and directors of the Corporation and
its subsidiaries are eligible to receive options or restricted stock grants
under the 1992 Stock Incentive Plan (1992 Plan). A maximum of 1,600,000 shares
of the Corporation's Common Stock may be issued through the exercise of
nonstatutory or incentive stock options and as restricted stock awards. The
option price is the fair market value of the shares at the date of grant.
Options granted generally become exercisable in installments of 20% each year
beginning one year from date of grant. The 1992 Plan replaced the 1983 Stock
Incentive Plan which had essentially the same provisions as the 1992 Plan. The
1983 Plan expired March 9, 1993; however, options issued through that date
continue to be outstanding and exercisable under the terms of the grants.
Additional information, with respect to stock options issued under the 1983 and
1992 Plans, is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1993 1992
-------- --------
<S> <C> <C>
Options
Outstanding, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . 479,419 627,878
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287,532 206,756
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (165,104) (337,030)
Cancelled or surrendered . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,237) (18,185)
------- -------
Outstanding, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . 587,610 479,419
======= =======
Options becoming exercisable during the year . . . . . . . . . . . . . . . . . 237,730 289,716
======= =======
Options exercisable at end of year . . . . . . . . . . . . . . . . . . . . . . 432,310 369,139
======= =======
</TABLE>
29
<PAGE> 31
Exercise prices ranged from $6.88 to $28.00 in 1993 and from $6.88 to
$24.00 in 1992.
Prior to pooling, BNF BANCORP, Inc. had outstanding options of 121,487
and 127,237 at December 31, 1993 and 1992, respectively. The options for
employees were granted in 1986 and 1992 under two separate plans, and options
for directors were granted under a single plan in 1992. Options exercisable
were 117,688 and 102,863 at December 31, 1993 and 1992, respectively. Exercise
prices ranged from $6.35 to $11.79 during 1993 and 1992. During 1994, 71,737
options were exercised prior to the consummation of the merger. The remaining
49,750 options of BNF were converted to 53,630 equivalent options of the
Corporation as part of the acquisition.
RETIREE HEALTH CARE AND LIFE INSURANCE. The Corporation provides certain
health care and life insurance benefits to retired employees who have completed
twenty years of unbroken full-time service immediately prior to retirement and
who have attained age 60 or more. Health care benefits are provided partially
through an insurance company (for retirees age 65 or more) and partially
through direct payment of claims. Prior to January 1, 1993, health care
premiums and claims and life insurance benefits ($2,500 per claim) were
recognized as expense when paid. In 1992 and 1991, retiree health care and
life insurance costs were $390,000 and $336,000, respectively.
Effective January 1, 1993, the Corporation adopted SFAS No. 106 which
requires that retiree health care and life insurance benefits be charged to
expense during the years in which the employee renders service. The
Corporation elected to recognize the accumulated benefit obligation in the
first quarter of 1993 which approximated $8.3 million ($5.1 million after tax).
The current expense for 1993 was $632,000.
Postretirement benefit cost (in thousands) for 1993 was determined
assuming a discount rate of 8% and an expected return on plan assets of 5%:
<TABLE>
<S> <C>
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 170
Interest cost of accumulated postretirement benefit obligation . . . . . . . . . . . . . . 682
Return on Plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (220)
-----
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 632
=====
</TABLE>
The following table sets forth the Plans' funded status and the amounts
reported in the Corporation's consolidated balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 1,
1993 1993
--------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Fair value of Plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,757 $ 4,200
Accumulated postretirement benefit obligation (APBO):
Retirees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,061 6,149
Fully eligible plan participants . . . . . . . . . . . . . . . . . . . . . . . 181 211
Other active plan participants . . . . . . . . . . . . . . . . . . . . . . . . 3,357 2,047
------- -------
Total APBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,599 8,407
------- -------
APBO in excess of Plan assets . . . . . . . . . . . . . . . . . . . . . . . $(4,842) $(4,207)
======= =======
Reconciliation of fund's status to reported amounts:
Accrued liability included in balance sheet, including unfunded
portion of transition obligation . . . . . . . . . . . . . . . . . . . . . . $(3,190) $(4,207)
Unrecognized net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,652) --
------- -------
APBO in excess of Plan assets . . . . . . . . . . . . . . . . . . . . . . . $(4,842) $(4,207)
======= =======
</TABLE>
30
<PAGE> 32
The assumed discount rate used to measure the APBO was 7% at December
31, 1993 and 8% at January 1, 1993. The weighted average health care cost
trend rate in 1993 is 13%, gradually declining to an ultimate rate in 2001 of
5%. A one percentage point increase in the assumed health care cost trend
rates for each future year would have increased the aggregate of the service
and interest cost components of the 1993 net periodic postretirement benefit
cost by $109,000 and would have increased the APBO as of December 31, 1993 by
$858,000.
The Corporation established a Voluntary Employees Beneficiary
Association (VEBA) and through December 31, 1993, has made contributions into
such VEBA of $5.7 million, the maximum amount deductible for federal income tax
purposes. The VEBA is expected to earn 5% on trust assets consisting of U.S.
Government obligations, bank obligations, commercial instruments, and
repurchase agreements secured by U.S. Treasury obligations. Additional
contributions will be made to the VEBA annually which will be the source of
funding for future postretirement benefits.
POSTEMPLOYMENT BENEFITS. The Corporation also adopted SFAS No. 112 as of
January 1, 1993, which requires that such costs be charged to expense over the
relevant service period. The Corporation's analysis determined this liability
to be $1.3 million ($807,000 net of tax benefit thereon) at January 1, 1993,
consisting primarily of postemployment medical claims and related
administrative expenses in excess of expected premiums to be paid by employees.
The liability amount was adjusted to $600,000 at December 31, 1993, due to a
significant decrease in 1993 claims. The liability amount will be reviewed
annually and adjusted as management may deem necessary based on actual
experience. Annual expenses for these benefits are not expected to vary
significantly from the amounts which have previously been expensed as incurred.
ACQUIRED INSTITUTIONS. Certain of the financial institutions acquired sponsor
various employee benefit and retirement plans. Such plans have been or are in
the process of being terminated and the employees now participate in the
aforementioned Corporation plans. At December 31, 1993, certain institutions
acquired in 1993 still have outstanding plans, including defined benefit
pension plans, 401K plans and ESOPs. The liabilities, if any, for such
terminations have been recorded as of December 31, 1993.
31
<PAGE> 33
NOTE 16. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1993 1992 1991
-------- ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current tax expense (benefit)
Federal . . . . . . . . . . . . . . . . . . . . . . . . $ 20,186 $20,881 $11,256
State . . . . . . . . . . . . . . . . . . . . . . . . . 5,331 3,829 85
-------- --------- ------
Total current tax expense . . . . . . . . . . . . . . . 25,517 24,710 11,341
-------- ------- -------
Deferred tax benefit
Federal . . . . . . . . . . . . . . . . . . . . . . . . (11,579) (7,099) (3,803)
State . . . . . . . . . . . . . . . . . . . . . . . . . (4,197) -- --
-------- ------- -------
Total deferred tax benefit . . . . . . . . . . . . . . (15,776) (7,099) (3,803)
-------- ------- -------
Total income tax expense . . . . . . . . . . . . . . $ 9,741 $17,611 $ 7,538
======== ======= =======
</TABLE>
For 1993, income tax expense (benefit) included in the financial
statements is summarized as follows (in thousands):
<TABLE>
<S> <C>
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,333
Tax benefit related to extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . (2,040)
Tax benefit related to the cumulative effect of changes in accounting
methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,552)
--------
Total income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,741
=======
</TABLE>
Deferred tax assets/liabilities are comprised of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------
1993 1992
---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax assets
Losses on loans and other real estate . . . . . . . . . . . . . . . . . . . . $27,022 $20,491
Provisions for litigation settlements . . . . . . . . . . . . . . . . . . . . 1,349 3,427
Postretirement and postemployment benefits . . . . . . . . . . . . . . . . . . 1,478 --
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . 1,547 27
Net operating loss carryforwards for tax purposes . . . . . . . . . . . . . . 2,094 --
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,129 2,022
Debt defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,023 --
Unrecognized tax benefits . . . . . . . . . . . . . . . . . . . . . . . . . . -- (8,666)
Other deferred items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,901 9,110
------- -------
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . 47,543 26,411
Deferred tax liabilities
Other deferred items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,356) (6,105)
------- -------
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . $39,187 $20,306
======= =======
</TABLE>
The change in the deferred tax asset during the year is a result of
the changes in methods of accounting discussed in Note 1, the addition of
deferred tax assets of acquired companies, and current period deferred tax
expense of $816,000, which includes $805,000 deferred tax benefit attributable
to the increase in the federal income tax rate and $1,520,000 deferred tax
benefit from legislated changes in the treatment of intangible assets. The
realization of a portion of the deferred tax asset is based upon management's
conclusion that future operating profits will generate sufficient taxable
income to offset the related deductions and loss carryforwards.
32
<PAGE> 34
Income tax expense as a percent of earnings before income taxes is
reconciled with the statutory federal income tax rate of 35% for 1993 and 34%
for 1992 and 1991 as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax . . . . . . . . . . . . . . . . . . . . . . $32,095 $21,296 $12,808
State income taxes, net of net operating loss carryovers and
federal tax benefit . . . . . . . . . . . . . . . . . . . . . . . 3,652 2,543 66
Separate subsidiary company prior year losses utilized . . . . . . -- (226) (294)
Tax-exempt interest, net . . . . . . . . . . . . . . . . . . . . . (9,403) (5,825) (5,134)
Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . 1,466 1,626 1,170
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,477) (1,803) (1,078)
------- ------- -------
Applicable income tax . . . . . . . . . . . . . . . . . . . . . $26,333 $17,611 $ 7,538
======= ======= =======
</TABLE>
Income tax expense applicable to securities transactions was $1.8
million for 1993, $5.2 million for 1992, and $1.9 million for 1991.
Effective January 1, 1993, the Corporation adopted SFAS No. 109. The
impact of the cumulative tax effect of this change in accounting method was
$10.9 million. Reference is made to Note 1 for further discussion of
accounting changes.
NOTE 17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business, the Corporation is a party to
various types of financial instruments in order to meet the financing needs of
its customers and to reduce its own exposure to fluctuations in interest rates.
These instruments involve, to varying degrees, elements of credit and interest
rate risk and are not reflected in the accompanying consolidated financial
statements. For certain instruments, the exposure to credit loss is limited to
the contractual amount of the instrument. The following table presents the
contractual amounts of this type of instrument.
<TABLE>
<CAPTION>
CONTRACT AMOUNT
DECEMBER 31,
------------------
1993 1992
------ -------
(DOLLARS IN MILLIONS)
<S> <C> <C>
FINANCIAL INSTRUMENTS WHOSE CONTRACT AMOUNTS REPRESENT CREDIT RISK
Commitments to extend credit (excluding credit card plans) . . . . . . . . . $483 $402
Commitments to extend credit under credit card plans . . . . . . . . . . . . 207 152
Standby, commercial, and similar letters of credit . . . . . . . . . . . . . 26 37
</TABLE>
Commitments to extend credit are legally binding agreements to lend to
customers for specific purposes, at specific rates, with fixed expiration and
review dates if the conditions in the agreement are met. Since many of the
commitments normally expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Corporation
subjects such activity to the same credit quality and monitoring controls as
its lending activities. Collateral held, if any, varies but may include
accounts receivable, inventory, property, plant and equipment, income producing
properties, or securities.
33
<PAGE> 35
Letters of credit are conditional commitments issued by the
Corporation to guarantee the performance of a customer to a third party. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. The Corporation in
some cases holds various types of collateral to support those commitments for
which collateral is deemed necessary.
Other off-balance-sheet instruments entered into are forward and
futures contracts, interest rate swap agreements, and commitments to purchase
or sell when-issued securities. The following table presents the notional
amounts of these types of instruments.
<TABLE>
<CAPTION>
NOTIONAL AMOUNT
DECEMBER 31,
----------------
1993 1992
---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C>
FINANCIAL INSTRUMENTS WHOSE NOTIONAL CONTRACT AMOUNTS EXCEED THE AMOUNTS
OF ACTUAL CREDIT RISK
Forward and futures contracts $ 38 $20
Interest rate swap agreements 300 --
When-issued securities
Commitments to sell 56 44
Commitments to purchase 87 73
</TABLE>
Forward contracts are contracts for delayed delivery of securities or
money market instruments in which the seller agrees to make delivery at a
specified future date of a specified instrument, at a specified price or yield.
Risks arise from the possible inability of the counterparties to meet the terms
of their contracts and from movements in securities values and interest rates.
The Corporation utilizes short-term forward commitments to deliver mortgages to
protect the Corporation against rate changes which could impact the value of
mortgage originations to be securitized or otherwise sold to investors. Such
commitments to deliver mortgages generally have maturities of 90 days or less.
An interest rate swap generally involves the exchange of fixed for
floating rate interest payment streams on a specified notional principal amount
of assets or liabilities for an agreed upon period of time without the exchange
of the underlying principal amounts. Notional principal amounts often are used
to express the volume of these transactions, but the amounts potentially
subject to credit risk are much smaller. During the fourth quarter of 1993,
the Corporation entered into the following interest rate swap agreements which
are used to manage its interest-rate risk. The Corporation receives fixed rate
payments and pays variable rate payments.
The Corporation has a policy for its derivative products, including
interest rate swaps, 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 will 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
34
<PAGE> 36
monthly by the Funds Management Committee to determine compliance with
established policies. As of September 1, 1994, there are no positions which
would be regarded as an exception under the Corporation's policy.
The Corporation entered into the interest-rate swaps 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>
DECEMBER 31, 1993(A)
---------------------------------------------------------------------
GROSS
NOTIONAL VARIABLE RATE FIXED RATE UNREALIZED MATURITY
INSTRUMENT HEDGED AMOUNT PAID RECEIVED GAIN (LOSS) DATE
----------------- ------------- ------------ ---------- ----------- --------
(IN MILLIONS) (In thousands)
<S> <C> <C> <C> <C> <C>
Commercial loans . . . . . . . . . . $150 3.31% 5.21% $ (70) 1/96-99(b)
Investment securities . . . . . . . . 100 3.50 4.44 482 6/95
Long-term debt . . . . . . . . . . . 50 3.56 4.46 (135) 5/96
---- -----
Total . . . . . . . . . . . . . . $300 $ 277
==== =====
</TABLE>
(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 variable rates are based on specific indices specified by
the applicable contracts. The next repricing dates for the variable rates
paid for the loans, investment securities and long-term debt are July 1994,
December 1994, and November 1994, respectively.
(b) If the LIBOR rate at January 5, 1996 should be equal to or less than
5.3125%, these swaps will mature on January 5, 1996.
When-issued securities are commitments to either purchase or sell
securities that have not yet been issued. The trades are contingent upon the
actual issuance of the security. These transactions represent conditional
commitments made by the Corporation, and risk arises from the possible
inability of the counterparties to meet the terms of their contracts and from
movements in securities values and interest rates.
As part of its mortgage banking operations, the Corporation services
residential real estate loans. In its capacity as servicer of these loans, the
Corporation is responsible for foreclosure and the related costs of
foreclosure. These costs are expensed as incurred and are shown as servicing
foreclosure expense in other noninterest expense.
In the normal course of business, the Corporation sells mortgage loans
and makes certain limited representations and warranties to the purchaser.
Management does not expect any significant losses to arise from these
representations and warranties.
CONCENTRATIONS OF CREDIT RISK. Through its subsidiary banks in
Tennessee, Arkansas, Mississippi, and Alabama, the Corporation grants
commercial, agricultural, residential, and consumer loans to customers
throughout those states. The amount and percentage of total loans outstanding
by the state in which the subsidiaries were headquartered at December 31, 1993
were as follows: Tennessee $2.4 billion (77%), Arkansas $281 million (9%),
Mississippi $254 million (8%), and Alabama $170 million (6%). Although the
Corporation has
35
<PAGE> 37
a diversified loan portfolio, the ability of its debtors to honor their
contracts is to some extent dependent upon economic conditions found throughout
the above states and the surrounding areas.
NOTE 18. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values and fair values of the Corporation's financial
instruments are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1992
------------------------- -------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and cash equivalents . . . . . . . . . . $ 282,580 $ 282,580 $ 333,436 $ 333,436
Interest-bearing deposits at financial
institutions . . . . . . . . . . . . . . . . 26,647 26,647 84,204 84,231
Trading account securities . . . . . . . . . . 153,482 153,482 109,584 109,584
Loans held for sale . . . . . . . . . . . . . 60,250 60,250 91,543 91,543
Investment securities . . . . . . . . . . . . 2,720,066 2,765,705 2,294,565 2,338,888
Net loans . . . . . . . . . . . . . . . . . . 3,011,224 3,065,270 2,318,415 2,347,810
FINANCIAL LIABILITIES
Demand deposits . . . . . . . . . . . . . . . 2,916,374 2,916,374 2,365,027 2,365,027
Time deposits . . . . . . . . . . . . . . . . 2,555,440 2,580,708 2,300,393 2,313,781
Short-term borrowings . . . . . . . . . . . . 244,995 244,995 296,312 296,312
Federal Home Loan Bank advances . . . . . . . 179,954 179,865 15,000 15,052
Long-term debt, excluding capital lease
obligations . . . . . . . . . . . . . . . . 114,982 114,982 74,472 74,731
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Forward and futures contracts . . . . . . . . -- 190 -- 14
When-issued securities
Commitments to sell . . . . . . . . . . . . . -- 4 -- --
Commitments to purchase . . . . . . . . . . . -- -- -- --
Interest rate swaps . . . . . . . . . . . . . -- 277 -- --
</TABLE>
The following methods and assumptions were used by the Corporation in
estimating the fair value for financial instruments:
CASH AND CASH EQUIVALENTS. The carrying amount for cash and cash
equivalents approximates the fair value of the assets.
INTEREST-BEARING DEPOSITS AT FINANCIAL INSTITUTIONS AND INVESTMENT
SECURITIES. Fair values of these instruments are based on quoted market
prices, where available. If quoted market prices are not available, fair
values are based on the quoted values of similar instruments.
TRADING ACCOUNT SECURITIES. These instruments are carried in the
consolidated balance sheet at values which approximate their fair value based
on quoted market prices of similar instruments.
LOANS HELD FOR SALE. These instruments are carried in the
consolidated balance sheet at the lower of cost or market. The fair value of
these instruments is based on subsequent liquidation values of the instruments
which did not result in any significant gains or losses.
LOANS. The fair values of loans are estimated using discounted cash
flow analyses, and using interest rates currently
36
<PAGE> 38
being offered for loans with similar terms to borrowers of similar credit
quality and risk.
DEMAND DEPOSITS. The fair values of these instruments (i.e., checking
accounts, savings accounts, money market deposit accounts, and NOW accounts)
are, by definition, equal to the amount payable on demand at the reporting date
(i.e., their carrying amount).
TIME DEPOSITS. The fair values of time deposits (i.e., certificates
of deposit, IRAs, investment savings, etc.) are estimated using a discounted
cash flow calculation that applies interest rates currently being offered on
these instruments to a schedule of aggregated expected monthly maturities on
time deposits.
SHORT-TERM BORROWINGS. The carrying amount of short-term borrowings
(i.e., federal funds purchased, securities sold under agreements to repurchase,
commercial paper, and other short-term borrowings) approximates their fair
values.
FEDERAL HOME LOAN BANK ADVANCES. The fair value of these advances is
estimated using discounted cash flow analyses, and using the FHLB quoted rates
of borrowing for advances with similar terms.
LONG-TERM DEBT. The fair value of long-term debt is based on quoted
market prices for the Corporation's publicly traded debt.
OFF-BALANCE-SHEET FINANCING INSTRUMENTS. Fair values of
off-balance-sheet instruments are based on current settlement values (forward
contracts); quoted market prices (interest rate swaps); and current market
values for when-issued securities. The fair value of interest rate swaps
represents the gross unrealized gain in these contracts. The fair value of
commitments to extend credit and letters of credit (see Note 17) are not
presented, since management believes the fair value to be insignificant as the
instruments are expected to expire unused and the fees charged on such
instruments are not significant.
NOTE 19. CONTINGENT LIABILITIES
The Corporation and/or various subsidiaries are parties to various
pending civil actions, all of which are being defended vigorously, and which
are described below. Additionally, the Corporation and/or its subsidiaries are
parties to various legal proceedings that have arisen in the ordinary course of
business. Management is of the opinion, based upon present information,
including evaluations of outside counsel, that neither the Corporation's
financial position, results of operations, nor liquidity will be materially
affected by the ultimate resolution of any of the pending or threatened legal
proceedings.
In 1988, the Corporation rescinded and terminated a purported
agreement for the acquisition of a Louisiana bank holding company, Great
American Corporation (GAC). The Corporation and a subsidiary were made parties
to several civil actions relating to the failed
37
<PAGE> 39
acquisition. In the second quarter of 1993 consummation of the settlement of
all pending civil actions involving the Corporation and a subsidiary arising
from the attempted acquisition of GAC was effected. The costs of such
settlement did not exceed amounts previously reserved for such purpose.
UPNB, a member of the MasterCard and VISA organizations, was a
co-defendant or cross-claim defendant in two related civil actions arising out
of its previous utilization of a third party, Electronic Transaction Network,
Inc.(E-Net), to solicit and assist in the administration of credit card
transaction processing arrangements with several thousand consumer merchants
located throughout the United States. During the third quarter of 1993, a
definitive agreement was entered into for the settlement of all pending
litigation against UPNB in connection with its former relationship with E-Net,
without the payment of any sum by UPNB.
The Corporation's former broker/dealer subsidiaries are among the more
than 80 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. Substantially all of the
proceeds of the sale of these bonds were placed in guaranteed investment
contracts with Executive Life Insurance Company. The bonds were rated AAA by
Standard & Poors at the time of issuance, and maintained such rating until
January, 1990, when the bonds were downgraded. The market price of the bonds
has since declined significantly. 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. All of the individual
secondary market suits against the Corporation's subsidiaries that were
consolidated in the litigation have been resolved or are subject to agreements
to settle. The remaining claim asserted against such subsidiaries is in
arbitration and involves a $100,000 par value sale.
Certain subsidiaries of the Corporation were threatened in 1989 with a
civil action by the FDIC for the estate of a closed savings association. If
filed, the action would reportedly seek
38
<PAGE> 40
compensatory damages of at least $37 million, and other relief including an
injunction against transferring or encumbering any assets until any judgments
have been paid, based upon allegations of wrongdoing in the sale of covered
call options to the closed savings association. An agreement between all
parties to the threatened action providing for the forebearance of the filing
of such action and the tolling of applicable statutes of limitation, entered
into in 1989, continues in effect. The Corporation has furnished the FDIC with
information assertedly demonstrating the lack of merit in the threatened action
and believes that such action, if nevertheless filed, can be resolved without
material loss.
39
<PAGE> 41
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Union Planters Corporation
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of earnings, of changes in shareholders' equity
and of cash flows present fairly, in all material respects, the financial
position of Union Planters Corporation and its subsidiaries at December 31,
1993 and 1992, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1993 in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Corporation's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, in
1993 the Corporation adopted three new accounting standards that changed its
method of accounting for postretirement benefits, postemployment benefits and
income taxes.
PRICE WATERHOUSE LLP
Memphis, Tennessee
September 8, 1994
40
<PAGE> 1
EXHIBIT 99 (C)
UNION PLANTERS CORPORATION
INTERIM CONSOLIDATED FINANCIAL STATEMENTS DATED JUNE 30, 1994
(UNAUDITED)
<PAGE> 2
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
--------------------------- DECEMBER 31,
1994 1993 1993
----------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 294,565 $ 250,072 $ 229,471
Interest-bearing deposits at financial institutions 10,689 37,729 26,647
Federal funds sold and securities purchased
under agreements to resell 42,128 118,224 53,149
Trading account securities, at market 148,204 101,115 153,482
Loans held for resale 9,974 82,369 60,250
Investment securities
Available for sale (Amortized cost June 30, 1994: $2,488,014;
Fair value June 30, 1993 and December 31, 1993: $538,866
and $694,952, respectively) 2,465,523 519,122 688,453
Held to maturity (Fair value: $579,017, $2,219,250 and
$2,070,753, respectively) 570,614 2,252,246 2,031,613
Loans 3,660,272 2,958,901 3,109,709
Less: Unearned income (20,828) (18,671) (16,881)
Allowance for losses on loans (88,476) (81,237) (81,604)
----------- ----------- ------------
Net loans 3,550,968 2,858,993 3,011,224
Premises and equipment 158,553 135,637 140,342
Accrued interest receivable 62,415 53,426 52,070
Goodwill and other intangibles 45,193 46,240 40,815
Other assets 109,080 132,078 106,179
----------- ----------- ------------
TOTAL ASSETS $ 7,467,906 $ 6,587,251 $ 6,593,695
=========== =========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 832,603 $ 726,192 $ 752,610
Certificates of deposit of $100,000 and over 382,311 356,527 345,843
Other interest-bearing 4,774,964 4,505,123 4,373,361
----------- ----------- ------------
TOTAL DEPOSITS 5,989,878 5,587,842 5,471,814
Short-term borrowings 506,516 208,710 244,995
Federal Home Loan Bank advances 193,399 141,969 179,954
Long-term debt 117,049 77,090 117,276
Accrued interest, expenses, and taxes 49,392 43,999 43,827
Other liabilities 35,932 41,859 27,899
----------- ----------- ------------
TOTAL LIABILITIES 6,892,166 6,101,469 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;
25,357,816 issued and outstanding (21,552,590 at
June 30, 1993 and 21,657,253 at December 31, 1993) 126,788 107,762 108,286
Additional paid-in capital 92,369 84,386 87,586
Net unrealized appreciation on securities
available for sale (13,760) - -
Retained earnings 265,795 189,086 207,510
----------- ----------- ------------
TOTAL SHAREHOLDERS' EQUITY 575,740 485,782 507,930
----------- ----------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,467,906 $ 6,587,251 $ 6,593,695
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-1-
<PAGE> 3
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 74,530 $ 64,057 $ 145,416 $ 126,125
Interest on investment securities
Taxable 32,299 32,316 61,469 64,849
Tax-exempt 6,844 6,152 13,711 11,389
Interest on deposits at financial institutions 100 346 229 1,045
Interest on federal funds sold and securities
purchased under agreements to resell 650 1,065 1,715 2,119
Interest on trading account securities 2,219 1,703 3,978 3,302
Interest on loans held for resale 274 663 878 1,209
----------- ----------- ----------- -----------
Total interest income 116,916 106,302 227,396 210,038
----------- ----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits 41,137 39,662 81,570 78,956
Interest on short-term borrowings 4,386 1,582 6,270 3,362
Interest on Federal Home Loan Bank advances
and long-term debt 3,900 3,011 7,900 5,234
----------- ----------- ----------- -----------
Total interest expense 49,423 44,255 95,740 87,552
----------- ----------- ----------- -----------
NET INTEREST INCOME 67,493 62,047 131,656 122,486
Provision for losses on loans - 4,699 - 7,544
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
LOSSES ON LOANS 67,493 57,348 131,656 114,942
----------- ----------- ----------- -----------
NONINTEREST INCOME
Service charges on deposit accounts 8,119 7,360 15,989 13,989
Bank card income 1,924 1,812 3,956 3,591
Mortgage servicing income 1,708 1,959 3,356 4,011
Trust service income 1,452 1,477 3,007 2,980
Profits and commissions from trading activities 1,352 2,170 2,841 3,803
Investment securities gains 91 2,548 210 3,438
Other income 5,321 6,561 11,161 12,146
----------- ----------- ----------- -----------
Total noninterest income 19,967 23,887 40,520 43,958
----------- ----------- ----------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits 26,442 26,272 52,591 50,495
Net occupancy expense 4,489 4,105 9,029 8,114
Equipment expense 4,578 4,109 9,173 8,222
Other expense 24,471 23,506 46,793 47,294
----------- ----------- ----------- -----------
Total noninterest expense 59,980 57,992 117,586 114,125
----------- ----------- ----------- -----------
EARNINGS BEFORE INCOME TAXES AND
ACCOUNTING CHANGES 27,480 23,243 54,590 44,775
Applicable income taxes 8,709 7,650 16,769 14,660
----------- ----------- ----------- -----------
EARNINGS BEFORE ACCOUNTING CHANGES 18,771 15,593 37,821 30,115
ACCOUNTING CHANGES, NET OF TAXES - - - 5,001
----------- ----------- ----------- -----------
NET EARNINGS $ 18,771 $ 15,593 $ 37,821 $ 35,116
=========== =========== =========== ===========
EARNINGS PER COMMON SHARE
Earnings before accounting changes
Primary $ .65 $ .62 $ 1.31 $ 1.22
Fully diluted .61 .59 1.23 1.15
Net earnings
Primary $ .65 $ .62 $ 1.31 $ 1.45
Fully diluted .61 .59 1.23 1.35
AVERAGE COMMON SHARES OUTSTANDING (IN THOUSANDS)
Primary 25,490 21,716 25,449 21,459
Fully diluted 29,974 25,839 29,931 25,426
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE> 4
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
NET
UNREALIZED
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 - - - - 37,821 37,821
Cash dividends
Common Stock, $.42 per share - - - - (8,876) (8,876)
Series B Preferred Stock, $4.00 per share - - - - (176) (176)
Series C Preferred Stock, $1.30 per share - - - - (895) (895)
Series D Preferred Stock, $ .97 per share - - - - (247) (247)
Series E Preferred Stock, $1.00 per share - - - - (3,108) (3,108)
Pooled institutions prior to pooling - - - - (1,162) (1,162)
Common shares issued under employee benefit
plans and dividend reinvestment plan,
net of shares repurchased - 624 4,779 - (2,081) 3,322
Issuance of 3,575,661 shares of Common
Stock for acquisitions (Note 2) - 17,878 4 - 37,021 54,903
Net unrealized loss on securities
available for sale, net of taxes - - - (13,760) - (13,760)
Other - - - - (12) (12)
--------- --------- --------- --------- --------- ---------
BALANCE, JUNE 30, 1994 $ 104,548 $ 126,788 $ 92,369 $ (13,760) $ 265,795 $ 575,740
========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 5
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------
1994 1993
--------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 37,823 $ 35,116
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 288 9,078
Depreciation and amortization 7,237 6,316
Amortization and write-off of intangibles 3,350 5,979
Net amortization of investment securities 3,209 3,961
Net realized gains on sale of investment securities (213) (3,438)
Deferred income taxes (benefit) 621 (2,530)
Decrease in assets
Trading account securities and loans held for resale 52,890 20,173
Accrued interest receivable and other assets 9,928 10,906
Increase (decrease) in accrued interest, expenses, taxes, and other liabilities 2,041 (26,051)
Other, net 26 860
--------- ---------
Net cash provided by operating activities 117,200 55,369
--------- ---------
INVESTING ACTIVITIES
Net decrease in short-term investments 18,288 63,473
Proceeds from sales and maturities of investment securities available for sale 553,432 446,423
Purchases of investment securities available for sale (625,801) (246,938)
Proceeds from sales of investment securities 8,169 6,360
Proceeds from maturities of investment securities 42,943 466,753
Purchases of investment securities (90,165) (731,207)
Net (increase) decrease in loans (121,591) 76,558
Net cash received from purchases of financial institutions 62,389 72,121
Purchases of premises and equipment, net (10,973) (10,768)
--------- ---------
Net cash (used) provided by investing activities (163,309) 142,775
--------- ---------
FINANCING ACTIVITIES
Net decrease in deposits (148,398) (189,101)
Net increase (decrease) in short-term borrowings 260,848 (99,890)
Proceeds from long-term debt 10,449 124,714
Repayment of long-term debt (11,196) (4,553)
Proceeds from issuance of common stock, net 6,047 16,183
Purchase and retirement of common stock, net (3,063) (151)
Cash dividends paid (14,465) (10,486)
--------- ---------
Net cash provided (used) by financing activities 100,222 (163,284)
--------- ---------
Net increase in cash and cash equivalents 54,113 34,860
Cash and cash equivalents at the beginning of the period 282,580 333,436
--------- ---------
Cash and cash equivalents at the end of the period $ 336,693 $ 368,296
========= =========
SUPPLEMENTAL DISCLOSURES
Cash paid for
Interest $ 91,400 $ 85,646
Taxes 12,075 13,991
Other real estate transferred from loans $ 1,695 $ 5,379
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 6
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. June
30, 1993 interim financial statements and financial information have been
restated for 1993 acquisitions subsequent to June 30 accounted for as poolings
of interests. Additionally, 1994 first quarter financial statements and
financial information have been restated for second 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 consolidated financial statements included in the Corporation's
1993 Annual Report to Shareholders. 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 six months of 1994, the Corporation completed three
acquisitions and in 1993 completed four acquisitions which were accounted for
using the pooling of interests method of accounting. The table below summarizes
these acquisitions.
1993 ACQUISITIONS
<TABLE>
<CAPTION>
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>
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
--------- ------ -----
2,032,196 $405.0 $28.3
========= ====== =====
</TABLE>
-5-
<PAGE> 7
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 due to immateriality.
Eliminations have been made for material intercompany transactions with the
pooled companies. The 1994 acquisitions contributed approximately $1,550,000,
$232,000, and $402,000 to 1994 net interest income, noninterest income, and net
earnings, respectively, of the Corporation through their respective dates of
acquisition.
PURCHASE ACQUISITIONS
The Corporation acquired eight institutions in 1993 and two in the first
six 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 3.9 .4 34
(FSB) (c) Stock (90,162 Shares)
First Cumberland Bank (FCB) (d) 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 (e) .7 22
Assumption of liabilities and 4/19/94 Cash .4 .4 15
purchase of assets from the
RTC (f)
Tennessee Bancorp, Inc. (TBI) (d) (g) 5/1/94 Cash 13.5 5.4 92
------ -----
Total $ 23.2 $ 983
====== =====
</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 conversion
acquisition, 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 conversion/acquisition.
-6-
<PAGE> 8
(c) FSB is the parent company of First State Bank of Fayette County
(Somerville).
(d) Assets and liabilities at date of acquisition were transferred to UPNB.
(e) Subject to adjustment.
(f) 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.
(g) TBI is the parent company of Tennessee National Bank in Columbia,
Tennessee.
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 six 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
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
---------------------------
SIX MONTHS ENDED
JUNE 30,
---------------------------
1994 1993
--------- --------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net interest income $ 132,757 $ 127,059
Provision for losses on loans 163 (10,428)
Noninterest income 40,587 44,570
Noninterest expense (119,055) (118,189)
--------- ---------
Earnings before income taxes
and accounting changes 54,452 43,012
Applicable income taxes 16,833 15,044
--------- ---------
Earnings before accounting changes 37,619 27,968
Accounting changes, net of taxes - 5,001
--------- ---------
Net earnings $ 37,619 $ 32,969
========= =========
Earnings per common share
Earnings before accounting changes
Primary $ 1.30 $ .99
Fully diluted 1.23 .98
Net earnings
Primary 1.30 1.21
Fully diluted 1.23 1.16
</TABLE>
-7-
<PAGE> 9
The following details the net cash received from purchases of financial
institutions:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
1994 1993
------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Fair value of assets acquired $ 763,743 $ 1,245,602
Liabilities assumed (692,448) (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 16,390 33,348
Cash and cash equivalents acquired (78,779) (105,469)
---------- ----------
Net cash received from purchases
of financial institutions $ (62,389) $ (72,121)
========== ===========
</TABLE>
ACQUISITIONS SUBSEQUENT TO JUNE 30, 1994
The Corporation has completed three acquisitions subsequent to June 30,
1994: Liberty Bancshares, Inc. (LBI), the parent company of Liberty Federal
Savings Bank located in Paris, Tennessee; Earle Bankshares, Inc. (EBI), the
parent company of First Southern Bank located in Earle, Arkansas; and BNF
BANCORP, Inc. (BNF), the parent company of BANKFIRST, a federal savings bank
located in Decatur, Alabama.
These unaudited consolidated financial statements have been restated for
1994 for all three of these acquisitions and represent the historical financial
statements of the Corporation. In addition, because BNF is considered a
significant acquisition, the 1993 financial statements have been restated for
BNF's results.
The following table summarizes the impact of the subsequent acquisitions
on the Corporation's previously reported shares issued and outstanding, net
interest income, noninterest income, and earnings before extraordinary item and
accounting changes.
<TABLE>
<CAPTION>
EARNINGS BEFORE
EXTRAORDINARY
ISSUED AND ITEM AND
SIX MONTHS ENDED ACQUISITION OUTSTANDING NET INTEREST NONINTEREST ACCOUNTING
JUNE 30, 1994 DATE SHARES INCOME INCOME CHANGES
- ---------------- ----------- ----------- ------------ ----------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Union Planters 21,814,022 $122,225 $39,315 $35,885
LBI 7/1/94 1,223,353 3,345 394 119
EBI 8/1/94 320,112 909 164 200
BNF 9/1/94 2,000,329 5,177 647 1,617
---------- -------- ------- -------
Union Planters pooled 25,357,816 $131,656 $40,520 $37,821
========== ======== ======= =======
SIX MONTHS ENDED
JUNE 30, 1993
- ----------------
Union Planters 19,552,261 $116,784 $43,446 $28,049
BNF 2,000,329 5,702 512 2,066
---------- -------- ------- -------
Union Planters pooled 21,552,590 $122,486 $43,958 $30,115
========== ======== ======= =======
</TABLE>
-8-
<PAGE> 10
SUBSEQUENT SALE
Effective September 1, 1994, the Corporation sold all the deposits and
certain loans of Steiner Bank, an approximately $24 million bank subsidiary
located in Birmingham, Alabama. The gain resulting from the sale is not
significant to the Corporation's results of operations. Subsequent to the
sale, the remaining assets and liabilities of Steiner Bank were merged with the
Corporation, and Steiner Bank ceased its operations.
PENDING ACQUISITIONS
The Corporation has signed 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, all are
expected to be consummated in 1994. The number of shares of Common Stock to be
issued in connection with these acquisitions is subject to change depending on
the market price of the Corporation's Common Stock during the stipulated
pricing periods. The shares below are based on an assumed current market price
of $25.25.
<TABLE>
<CAPTION>
ANTICIPATED APPROXIMATE
METHOD OF TOTAL
INSTITUTION CONSIDERATION ACCOUNTING ASSETS
- ---------------------------- ---------------- --------------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Grenada Sunburst System Corporation, Approximately 13,500,000 Pooling of Interests $2,466
Parent Company of Sunburst Bank, shares of Common Stock
Mississippi, in Grenada, MS; and
Sunburst Bank, in
Baton Rouge, LA (GSSC)
Mid South Bancshares, Inc., Parent Approximately 523,000 Pooling of interests 130
Company of Security Bank in shares of Common Stock
Paragould, AR, and Farmers
and Merchants Bank in
Reyno, AR (MSB-ARK)
Commercial Bancorp, Inc., Parent Approximately 185,000 Pooling of interests 29
Company of The Commercial Bank, shares of Common Stock ------
Obion, TN (Obion)
Total $2,625
======
</TABLE>
-9-
<PAGE> 11
NOTE 3. LOANS
Loans are summarized by type as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Commercial, financial, and agricultural $ 696,245 $ 669,435
Real estate - construction 108,492 88,241
Real estate - mortgage
Secured by 1-4 family 1,438,490 1,106,206
Other mortgage loans 625,699 537,565
Consumer
Credit cards and other related plans 100,700 99,103
Home equity 94,328 89,497
Other consumer 558,404 491,299
Foreign
Government 1,933 2,449
Direct lease financing, net 35,981 25,914
----------- -----------
Total Loans $ 3,660,272 $ 3,109,709
=========== ===========
</TABLE>
Nonperforming loans and loans 90 days or more past due are summarized as
follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Nonaccrual loans $ 17,709 $ 14,646
Restructured loans 1,425 7,525
----------- -----------
Total nonperforming loans $ 19,134 $ 22,171
=========== ===========
Loans 90 days or more past due and not
on nonaccrual status $ 4,621 $ 4,944
=========== ===========
</TABLE>
NOTE 4. ALLOWANCE FOR LOSSES ON LOANS
The changes in the allowance for losses on loans for the six months ended June
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 8,164
Recoveries 5,221
Amounts charged off (6,513)
-----------
Balance, June 30, 1994 $ 88,476
===========
</TABLE>
-10-
<PAGE> 12
NOTE 5. INVESTMENT SECURITIES
The amortized cost and fair value of investment securities are summarized as
follows:
<TABLE>
<CAPTION>
JUNE 30, 1994
----------------------------------------------------------
UNREALIZED
AMORTIZED ----------------------- FAIR
COST GAINS LOSSES VALUE
---------- -------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Government obligations
U.S. Treasury securities $ 1,063,126 $ 1,438 $ 11,280 $ 1,053,284
Securities of U.S. Government agencies
Collateralized mortgage obligations 322,542 200 6,231 316,511
Mortgage-backed securities 831,505 3,571 8,587 826,489
Other 192,091 584 1,972 190,703
Other stocks and securities 78,750 1,002 1,216 78,536
----------- -------- -------- -----------
Total investment securities
available for sale $ 2,488,014 $ 6,795 $ 29,286 $ 2,465,523
=========== ======== ======== ===========
HELD TO MATURITY
U.S. Government obligations
U.S. Treasury securities $ 92,852 $ 237 $ 1,429 $ 91,660
Securities of U.S. Government agencies
Collateralized mortgage obligations 16,869 164 189 16,844
Other 6,346 71 36 6,381
----------- -------- -------- -----------
Total U.S. Government obligations 116,067 472 1,654 114,885
Obligations of states and political
subdivisions 451,477 14,072 4,487 461,062
----------- -------- -------- -----------
Total other securities 3,070 - - 3,070
----------- -------- -------- -----------
Total investment securities
held to maturity $ 570,614 $ 14,544 $ 6,141 $ 579,017
=========== ======== ======== ===========
</TABLE>
-11-
<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
Bonds, notes, and debentures 1,896 10 - 1,906
Collateralized mortgage obligations 39,036 177 114 39,099
Other 1,300 30 - 1,330
---------- -------- ------- -----------
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 six-month periods ended June 30, 1994 and 1993, the Corporation
had gross realized gains on investment securities available for sale of
$581,000 and $2,311,000, respectively, and gross realized losses of $432,000
and $16,000, respectively. For investment securities held to maturity, gross
realized gains for the six months ended June 30, 1994 and 1993 were $63,000 and
$1,220,000, respectively, and gross realized losses of $2,000 and $77,000,
respectively. In the first six months of 1994, the gross realized gains and
losses for held to maturity securities resulted from "calls" of securities
prior to scheduled maturity.
Investment securities having a carrying value of approximately $885
million and $598 million at June 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.
-12-
<PAGE> 14
NOTE 6. OTHER NONINTEREST INCOME AND EXPENSE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -----------------
1994 1993 1994 1993
------- ------ ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
OTHER NONINTEREST INCOME
VSIBG partnership earnings $ 581 $ 1,033 $ 1,287 $ 1,913
Credit life insurance commissions 821 690 1,616 1,344
Brokerage fee income 334 401 710 801
Computer service income 11 122 46 272
Sale of servicing 370 279 588 317
Gain on troubled debt restructuring - 901 - 901
Other 3,207 3,135 6,914 6,598
------- ------- ------- -------
TOTAL OTHER NONINTEREST INCOME $ 5,324 $ 6,561 $11,161 $12,146
======= ======= ======= =======
OTHER NONINTEREST EXPENSE
Amortization of mortgage
servicing rights $ 453 $ 673 $ 850 $ 1,842
FDIC assessments 3,439 3,197 6,849 6,342
Amortization of goodwill and
other intangibles 1,339 1,481 2,591 4,140
Legal fees 774 934 1,234 1,869
Other contracted services 1,572 1,588 3,190 3,180
Advertising and promotion 2,213 1,527 3,475 2,948
Brokerage and clearing fees 700 885 1,458 1,772
Postage and carrier 1,544 1,281 3,062 2,604
Stationery and supplies 1,604 1,348 3,078 2,582
Merchant credit card charges 893 1,064 1,986 2,081
Communications 1,032 1,062 2,058 2,126
Other real estate expense 294 814 405 1,845
Other personnel services 687 528 1,308 1,098
Federal Reserve fees 472 444 907 867
Dues, subscriptions, and
contributions 584 570 1,119 1,215
Travel 448 507 870 891
Miscellaneous charge-offs 409 253 693 439
Insurance 332 389 718 790
Servicing foreclosure expense 105 210 210 420
Consultant fees 484 403 731 712
Taxes other than income taxes 437 423 935 841
Acquisition-related expenses - 1,793 - 1,793
Other 4,656 2,132 9,066 4,897
------- ------- ------- -------
TOTAL OTHER NONINTEREST EXPENSE $24,471 $23,506 $46,793 $47,294
======= ======= ======= =======
</TABLE>
-13-
<PAGE> 15
NOTE 7. INCOME TAXES
Applicable income taxes for the six months ended June 30, 1994, were $16.8
million, resulting in an effective tax rate of 30.7%. Applicable income taxes
for the same period in 1993 were $14.7 million, resulting in an effective tax
rate of 32.7%. The tax expense applicable to investment securities gains for
the six months ended June 30, 1994 and 1993 was $82,000 and $1,305,000,
respectively.
At June 30, 1994, the Corporation had a net deferred tax asset of $50.8
million recorded in other assets compared to $35.6 million at June 30, 1993,
and $39.6 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 June 30, 1994 was to increase
the cumulative net deferred tax asset by $8.7 million.
NOTE 8. FEDERAL HOME LOAN BANK (FHLB) ADVANCES
The Corporation's subsidiaries have obtained various advances from the
Federal Home Loan Bank (FHLB) totaling $193.4 million at June 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 June 30, 1994, had variable rates tied to the
three-month LIBOR rate. Maturity dates for the advances range from 1994 to
2014. Collateral (mortgage loans) under the Agreements must be 150% of the
advances outstanding, $193.4 million at June 30, 1994.
NOTE 9. SHAREHOLDERS' EQUITY
PREFERRED STOCK
An analysis of the Corporation's Preferred Stock follows:
<TABLE>
<CAPTION>
JUNE 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>
-14-
<PAGE> 16
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 pending or threatened legal proceedings. There were
no developments during the second quarter of 1994 in any pending or threatened
legal proceedings 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(10-K), in 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 supplementary financial statements filed as Exhibit 99(a) to
the Corporation's Current Report on Form 8-K dated September 19, 1994, and in
Note 10 to the Corporation's quarterly report on Form 10-Q dated March 31,
1994(10-Q). The fifth paragraph of Item 3, Part I of the 10-K describes
certain pending litigation against more than 80 defendants, including the
Corporation's former broker/dealer subsidiaries (now inactive), alleging
violations of Federal and other securities laws in connection with the
underwriting and sale of certain bond issues, substantially all of the proceeds
of which were placed in guaranteed investment contracts issued by Executive
Life Insurance Company. One of such subsidiaries participated in the
underwriting of one of the issues and is a defendant in purported class claims
based on that issue. Several individual actions against these subsidiaries
alleging violations in secondary market sales 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. All of the individual secondary market suits
against the Corporation's subsidiaries that were consolidated in the litigation
have been resolved or are subject to agreements to settle. The remaining claim
asserted against such subsidiaries is in arbitration and involves a $100,000
par value sale. Note 10 to the 10-Q describes certain pending litigation in the
U. S. District Court for the Western District of Tennessee against UPNB and
eight other banks alleging violations of the Sherman Act. During the second
quarter of 1994 the plaintiffs' motion for reconsideration of the court's
granting of the defendants' motion for summary judgment on the Sherman Act
claim was denied, and plaintiffs appealed to the United States Court of Appeals
for the 6th Circuit.
-15-
