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Previous: UNION PLANTERS CORP, 8-K, 1994-01-13 |
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<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
January 10, 1994
Date of Report (Date of earliest event reported)
UNION PLANTERS CORPORATION
(Exact name of registrant as specified in charter)
TENNESSEE 0-6919 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
Union Planters Corporation (the Corporation) has completed twelve
acquisitions through January 1, 1994, and has six probable acquisitions
pending. All of the acquisitions, except one, are individually insignificant
(do not exceed 10% of consolidated pre- tax earnings or total assets). With
the addition of the latest probable acquisitions, the Corporation's aggregate
insignificant acquisitions exceed 20% of the Corporation's total assets at
December 31, 1992. Accordingly, the Corporation is filing the December 31,
1992 audited financial statements and the most recent interim financial
statements for a substantial majority of the aggregate insignificant
acquisitions in accordance with Rule 3-05 of Regulation S-X.
The following tables list the completed and probable acquisitions as of
January 1, 1994. Reference is made to the Corporation's 1992 Annual Report on
Form 10-K, September 30, 1993 Form 10-Q, and Current Reports on Form 8-K dated
September 27, 1993 and October 14, 1993 for additional information.
CONSUMMATED ACQUISITION
<TABLE>
<CAPTION>
Total Assets
Date Purchase Resulting at Date of
Institution Acquired Consideration Price Goodwill Acquisition
- --------------------- -------- --------------------- -------- ---------- ------------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Bank of East Tennessee 01/01/93 Series E Preferred Stock $25.3 $7.0 $231
(BOET) (a)
Security Trust Federal 01/01/93 Cash 22.0 3.0 261
Savings and Loan
Association and
SaveTrust Federal
Savings Bank (Security
Trust/SaveTrust)
First Federal Savings 02/26/93 Common Stock NM (b) Note (c) 187
Bank of Maryville (Conversion/Acquisition-
(Maryville) 625,000 shares)
First State Bancshares, 03/12/93 Cash and Common Stock 3.9 .4 34
Inc. (FSB), Parent
Company of First State
Bank of Fayette County
in Somerville,
Tennessee (Somerville)
First Cumberland Bank 03/15/93 Cash .2 - 20
in Madison, Tennessee
Farmers Union Bank in 04/01/93 Cash 9.5 4.2 78
Ripley, Tennessee
(Farmers Union)
Garrett Bancshares, 05/31/93 Common Stock Pooling of - 174
Inc., Parent Company (613,088 shares) Interests
of Bank of
Goodlettsville in
Goodlettsville,
Tennessee (GBI)
Erin Bank & Trust 06/01/93 Series E Preferred Stock 8.3 2.1 43
Company in Erin,
Tennessee (Erin)
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
Total Assets
Date Purchase Resulting at Date of
Institution Acquired Consideration Price Goodwill Acquisition
- --------------------- -------- --------------------- -------- ---------- ------------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Hogue Holding Company, 09/01/93 Common Stock Pooling of - 34
Inc., Parent Company (219,246 shares) Interests
for Bank of Weiner in
Weiner, Arkansas (HHC)
Central State Bancorp, 09/01/93 Common Stock Pooling of - 109
Inc. Parent Company for (630,350 shares) Interests
Central State Bank in
Lexington, Tennessee
(CSB)
First State Bancshares, 10/01/93 Common Stock Pooling of - 86
Inc., and its subsidiary (447,906 shares) Interests
First State Bank of
Brownsville, Tennessee
Mid-South Bancorp, Inc., 01/01/94 Common Stock Pooling of - 184
Parent Company of Simpson (839,855 shares) Interests
County Bank in Franklin,
Kentucky; Adairville
Banking Company in
Adairville, Kentucky;
General Trust Company in
Nashville, Tennessee; The
Peoples Bank of Elk Valley
in Fayetteville, Tennessee;
and First Citizens Bank
in Franklin, Columbia and
Mt. Pleasant, Tennessee
</TABLE>
(a) The Corporation had previously acquired 17.93% of the common stock of
BOET ($3.4 million), and on January 1, 1993 purchased an additional
43.93% of the common stock of BOET in exchange for 331,741 shares of
the Corporation's Series E Preferred Stock ($11.1 million). Effective
May 3, 1993, the Corporation acquired the remaining outstanding common
stock of BOET for 317,045 shares of the Corporation's Series E
Preferred Stock ($10.8 million).
(b) The Corporation acquired Maryville, a mutual savings bank, which
pursuant to a conversion/acquisition converted to a federal stock
charter, all of the stock of which was acquired by the Corporation in
exchange for a capital contribution equalling approximately $14.1
million derived in part from the proceeds of an offering of the
Corporation's Common Stock made in connection with the
conversion/acquisition.
(c) The recording of the acquisition of Maryville using the purchase
method of accounting 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 amortized over 7 years.
PROBABLE ACQUISITIONS
The probable acquisitions are as follows:
<TABLE>
<CAPTION>
Method of Total
Institution Consideration Accounting Assets
- --------------------------------- ------------- ---------- ------
(In millions)
<S> <C> <C> <C>
Clin-Ark Bancshares, Inc. Parent Approximately Pooling of $ 48
Company for First National Bank 227,768 shares of Interests
of Clinton in Clinton, Arkansas the Corporation's
(Clin-Ark) Common Stock
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
Method of Total
Institution Consideration Accounting Assets
- --------------------------------- ------------- ---------- ------
(In millions)
<S> <C> <C> <C>
Tennessee Bancorp, Inc., Parent Cash equal to Purchase 92
Company of Tennessee National 1.5 times net
Bank in Columbia, Tennessee (TBI) book value at
closing
First National Bancorp of Approximately Pooling of 164
Shelbyville, Inc., Parent Company 910,000 shares Interests
of First National Bank of of the Corporation's
Shelbyville in Shelbyville, Common Stock
Tennessee (FNB)
Andersen County Bank in Cash equal to Purchase 19
Clinton, Tennessee 1.6 times book
value at closing
Liberty Bancshares, Inc., Approximately Pooling of 174
Parent Company of Liberty 635,000 shares Interests
Federal Savings Bank in of the Corporation's
Paris, Tennessee Common Stock
Earle Bancshares, Inc., Approximately Pooling of 40
Parent Company of 365,000 shares Interests
First Southern Bank in of the Corporation's
Earle, Arkansas Common Stock
</TABLE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
23 Accountants' Consents
(a) Consent of Frost & Company to incorporate
their opinion into various registration
statements for benefit plans and dividend
reinvestment plan
(b) Consent of KPMG Peat Marwick to incorporate
their opinion into this Current Report on
Form 8-K and into various registration
statements for benefit plans and dividend
reinvestment plan
99 Additional Exhibits
(a) Tennessee Bancorp, Inc. and Subsidiaries Unaudited
Interim Consolidated Financial Statements dated
September 30, 1993
Page
----
1. Consolidated Balance Sheets as of 1
September 30, 1993 and December 31, 1992
2. Consolidated Statement of Earnings 2
for the Three and Nine Months Ended
September 30, 1993 and 1992
3. Consolidated Statement of Cash 3
Flows for the Nine Months Ended
September 30, 1993 and 1992
4
<PAGE> 5
Page
----
4. Notes to Consolidated Financial 4
Statements
(b) First National Bancorp, Inc. and Subsidiaries
Unaudited Interim Consolidated Financial Statements
for the Nine Months Ended September 30, 1993
Page
----
1. Consolidated Balance Sheet as of 1
September 30, 1993
2. Consolidated Statement of Changes 3
in Stockholders' Equity for the
nine months ended September 30, 1993
3. Consolidated Statements of Income 4
for the Nine Months Ended
September 30, 1993 and 1992
4. Consolidated Statements of Income 6
for the Three Months Ended
September 30, 1993 and 1992
5. Consolidated Statement of Cash 8
Flows for the Nine Months Ended
September 30, 1993 and 1992
6. Notes to Consolidated Financial 9
Statements
(c) Mid-South Bancorp, Inc. Unaudited Interim Consolidated
Financial Statements - September 30, 1993
Page
----
1. Consolidated Balance Sheets as of 1
September 30, 1993 and December 31, 1992
2. Consolidated Statements of Income 2
for the Three and Nine Months Ended
September 30, 1993 and 1992
5
<PAGE> 6
Page
----
3. Consolidated Statements of Cash 3
Flows for the Nine Months Ended
September 30, 1993 and 1992
4. Notes to Consolidated Financial 4
Statements,
(d) Clin-Ark Bankshares, Inc. and Subsidiaries
Consolidated Financial Statements for the Year
Ended December 31, 1992 and Independent
Auditors' Report
Page
----
1. Independent Auditor's Report 1
2. Consolidated Balance Sheet as of 2
December 31, 1992
3. Consolidated Statement of Income 4
for the Year Ended December 31, 1992
4. Consolidated Statement of Changes in 5
Stockholders' Equity for the Year
Ended December 31, 1992
5. Consolidated Statement of Cash 6
Flows for the Year Ended December 31,
1992
6. Notes to Consolidated Financial 7
Statements
(e) Clin-Ark Bankshares, Inc. and Subsidiaries
Unaudited Interim Consolidated Financial Statements
dated September 30, 1993
Page
----
1. Consolidated Balance Sheet as of 1
September 30, 1993
2. Consolidated Statement of Income 3
for the Quarter Ended
September 30, 1993 and 1992
3. Consolidated Statement of Income 4
for the Nine Months Ended
September 30, 1993 and 1992
4. Consolidated Statement of Changes 5
in Stockholders' Equity for the
Nine Months Ended September 30,
1993
5. Consolidated Statement of Cash 6
Flows for the Nine Months Ended
September 30, 1993 and 1992
6
<PAGE> 7
Page
----
6. Notes to Consolidated Financial 7
Statements
(f) Liberty Bancshares, Inc. and Subsidiary
Consolidated Financial Statements
December 31, 1992 and 1991
Page
----
1. Independent Auditor's Report on the 1
Consolidated Financial Statements
2. Consolidated Balance Sheets as of 2
December 31, 1992 and 1991
3. Consolidated Statement of Earnings 3
for the Years Ended December 31,
1992, 1991, and 1990
4. Consolidated Statements of 4
Stockholders' Equity for the
Years Ended December 31, 1992, 1991
and 1990
5. Consolidated Statements of Cash 5
Flows for the Years Ended
December 31, 1992, 1991, and 1990
6. Notes to Consolidated Financial 7
Statements
(g) Liberty Bancshares, Inc. and Subsidiary Unaudited
Interim Consolidated Financial Statements
as of and for the Nine Months Ended September 30, 1993
Page
----
1. Consolidated Balance Sheets as of 1
September 30, 1993 (unaudited) and
December 31, 1992
2. Consolidated Statements of Earnings 2
for the Three and Nine Months
Ended September 30, 1993 and 1992
(unaudited)
3. Consolidated Statements of Stockholders' 4
Equity for the Nine Months Ended
September 30, 1993 and 1992 (unaudited)
4. Consolidated Statements of Cash 5
Flows for the Nine Months Ended
September 30, 1993 and 1992 (unaudited)
5. Notes to Consolidated Financial 7
Statements
7
<PAGE> 8
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: January 10, 1994 /s/M. Kirk Walters
---------------- --------------------------
M. Kirk Walters
Senior Vice President, Treasurer
and Chief Accounting Officer
8
<PAGE> 1
EXHIBIT 23 (A)
Accountants Consent
<PAGE> 2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the registration
statements (No. 33-27814) on Form S-3 and (Nos. 2-87392, 33-23306, 33-35928
and 33-53454) on Form S-8 of Union Planters Corporation of our report dated
February 19, 1993, relating to the consolidated financial statements of
Clin-Ark Bankshares, Inc. as of December 31, 1992, and for the year then ended,
which report appears on page 1 of Exhibit 99 (d) in the Current Report on Form
8-K dated January 10, 1994 of Union Planters Corporation.
Frost & Company
Certified Public Accountants
Little Rock, Arkansas
January 12, 1994
<PAGE> 1
EXHIBIT 23 (B)
Accountants Consent
<PAGE> 2
ACCOUNTANTS' CONSENT
The Board of Directors
Liberty Bancshares, Inc.:
We consent to incorporation by reference in the registration statements (No.
33-27814) on Form S-3 and (Nos. 2-87392, 33-23306, 33-35928 and 33-53454) on
Form S-8 of Union Planters Corporation of our report dated January 25, 1993,
relating to the consolidated balance sheets of Liberty Bancshares, Inc. and
subsidiary as of December 31, 1992 and 1991, and the related consolidated
statements of earning, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1992, which report appears on
page 1 of Exhibit 99 (f) in the Current Report on Form 8-K dated January 10,
1994, of Union Planters Corporation.
KPMG Peat Marwick
Nashville, Tennessee
January 12, 1994
<PAGE> 1
EXHIBIT 99 (A)
Tennessee Bancorp, Inc. and Subsidiaries Unaudited Interim Consolidated
Financial Statements dated September 30, 1993
<PAGE> 2
TENNESSEE BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1993 1992
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and due from banks $ 3,296 $ 3,523
Investment securities, at amortized cost
(market value $33,317 in 1993 and
$29,190 in 1992) 32,402 28,699
Loans receivable, net 52,468 59,791
Bank premises and equipment, net 3,015 2,669
Accrued interest receivable and other assets 2,015 1,992
------- -------
$93,196 $96,674
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits
Non-interest bearing $ 3,933 $ 3,762
Interest-bearing 79,133 83,236
------- -------
Total deposits 83,066 86,998
Other borrowings 600 -
Accrued interest payable and other liabilities 513 989
------- -------
TOTAL LIABILITIES 84,179 87,987
------- -------
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value,
authorized 25,000,000 shares; issued
and outstanding 539,680 shares in 1993;
535,680 shares in 1992 540 536
Additional paid-in capital 4,428 4,401
Retained earnings-substantially restricted 4,049 3,750
------- -------
TOTAL STOCKHOLDERS' EQUITY 9,017 8,687
------- -------
$93,196 $96,674
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 3
TENNESSEE BANCORP, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1993 1992 1993 1992
(UNAUDITED) (UNAUDITED)
--------------------------- -------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 1,135 $ 1,439 $ 3,530 $ 4,401
Interest on investment securities 411 480 1,315 1,511
Other interest income 12 18 20 30
-------- -------- -------- --------
TOTAL INTEREST INCOME 1,558 1,937 4,865 5,942
-------- -------- -------- --------
INTEREST EXPENSE
Interest on deposits 820 1,061 2,556 3,415
Interest on borrowings 5 - 10 4
-------- -------- -------- --------
TOTAL INTEREST EXPENSE 825 1,061 2,566 3,419
-------- -------- -------- --------
NET INTEREST INCOME 733 876 2,299 2,523
Provision for possible loan losses 15 21 57 63
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 718 855 2,242 2,460
NON-INTEREST INCOME
Service charges on deposit accounts 33 37 94 106
Other service charges, commissions and fees 4 9 15 25
Gain on sale of investments 273 62 308 134
Loss on sale of investments - - - (17)
Gain on sale of real estate 8 56 8 56
Other operating income 1 1 3 4
-------- -------- -------- --------
TOTAL NON-INTEREST INCOME 319 165 428 308
-------- -------- -------- --------
NON-INTEREST EXPENSE
Salaries and employee benefits 240 216 727 619
Net occupancy expense 31 54 152 140
Furniture and equipment expense 78 87 171 176
Other operating expense 367 271 854 749
-------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE 716 628 1,904 1,684
-------- -------- -------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES 321 392 766 1,084
Provision for income taxes 120 147 293 407
-------- -------- -------- --------
NET INCOME $ 201 $ 245 $ 473 $ 677
======== ======== ======== ========
EARNINGS PER SHARE $ 0.37 $ 0.44 $ 0.88 $ 1.16
======== ======== ======== ========
Weighted average common stock shares
outstanding 539,680 559,188 538,680 582,804
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
TENNESSEE BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1993 1992
(UNAUDITED) (UNAUDITED)
-------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 473 $ 677
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation 245 200
Provision for possible loan losses 57 63
Gain on the sale of real estate (8) (56)
Gain on the sale of fixed assets - -
Gain on the sale of investments, net of losses (308) (117)
Amortization of deposit base intangibles 66 66
Amortization of premiums on investment securities, net of accretion of discounts 100 93
Decrease in deferred income and fees on loans (46) (71)
(Increase) decrease in accrued interest receivable and other assets (156) (80)
Increase (decrease) in accrued interest payable and other liabilities (476) (21)
-------- --------
TOTAL ADJUSTMENTS (526) 77
-------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (53) 754
-------- --------
INVESTING ACTIVITIES
Purchase of investment securities (16,116) (13,490)
Proceeds from maturities and calls of investments 261 3,000
Proceeds from sale of investments 10,824 6,606
Proceeds from principal reductions on investments 1,536 5,046
Proceeds from sale of fixed assets - -
Proceeds from sale of real estate 75 284
Net decrease in loans 7,312 2,227
Property and equipment purchased (591) (62)
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 3,301 3,611
-------- --------
FINANCING ACTIVITIES
Net increase (decrease) in deposits (3,932) (2,067)
Net increase (decrease) in short-term borrowings 600 (200)
Cash dividends paid (162) (171)
Redemption and retirement of common stock (30) (565)
Exercise of common stock options 49 12
Net cash provided by (used in) financing activities (3,475) (2,991)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (227) 1,374
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,523 1,880
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,296 $ 3,254
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
TENNESSEE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Tennessee Bancorp, Inc. conform to
generally accepted accounting principles and to general practices in the
banking industry. The significant policies are summarized as follows:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements present the accounts of
Tennessee Bancorp, Inc. and its wholly owned subsidiary, Tennessee National
Bank. In the opinion of management, such financial statements reflect all
adjustments which are of a normal recurring nature and necessary to present a
fair statement of results for the interim periods presented. Certain financial
information which is normally included in financial statements prepared in
accordance with generally accepted accounting principles, but which is not
required for interim reporting purposes, has been omitted. The accompanying
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1992. The statements also present
the accounts of Tennessee National Bank's wholly owned subsidiary, Columbia
Service Corporation. Material intercompany accounts and transactions have been
eliminated in consolidation. The results of operations for the interim periods
presented herein are not necessarily indicative of the results of operations to
be expected for the fiscal year ending December 31, 1993.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and interest-bearing deposits with an
original maturity of three months or less.
INVESTMENTS
Investments are stated at cost, adjusted for discounts and premiums which are
amortized to interest income using the level-interest- yield method over the
life of the investment. Mortgage-backed securities, which are included in
investment securities, represent participating interests in pools of long-term
first mortgage loans originated and serviced by the issuers of the securities.
Mortgage-backed securities are carried at unpaid principal balances, adjusted
for unamortized premiums and unearned discounts. Premiums and discounts on
mortgage-backed securities are amortized using the level-interest-yield method
over the remaining period to contractual maturity, adjusted for anticipated
prepayments.
4
<PAGE> 6
TENNESSEE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1993
Investments are carried at amortized cost as it is management's intent and
ability to hold them for investment purposes.
Gains and losses on the sale of investments are recognized upon realization and
determined using the specific identification method.
LOANS RECEIVABLE
Loans receivable are stated at the amount of unpaid principal balances, less
unearned discounts, net deferred loan origination fees and allowance for loan
loss. Consumer loan discounts are recognized over the life of the loan using
methods which approximate the level-interest-yield method.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established by charges to operations based on
management's evaluation of the assets, economic conditions and other factors
considered necessary to maintain the allowance at an adequate level.
5
<PAGE> 7
TENNESSEE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1993
Loans are charged to the allowance account in the period a loss actually occurs
or when a determination is made that a loss is likely to occur. Recoveries on
loans previously charged off are credited to the allowance account in the
period received. Throughout the year, management estimates the likely level of
future losses to determine whether the allowance for loan losses is adequate to
absorb reasonable anticipated losses. Such estimates involve significant
judgments made by management and actual losses could differ significantly. It
is the judgment of management that the allowance for loan losses reflected in
the consolidated balance sheet is adequate to absorb losses which may exist in
the current portfolio.
LOAN ORIGINATION AND COMMITMENT FEES
Loan origination fees and related direct costs are deferred and recognized as
an adjustment of yield on the interest method.
BANK PREMISES AND EQUIPMENT, NET
Bank premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the related assets as follows: buildings, 31 years; furniture and
fixtures, three to ten years; and automobiles, two years.
REAL ESTATE OWNED
Real estate properties acquired through loan foreclosure, which are included in
other assets, are initially recorded at the lower of the related loan balance
(less any specific allowance for loss), or the value at the date of
foreclosure. Costs related to holding property are expensed as incurred.
Total real estate owned was $23,000 at September 30, 1993 and none outstanding
at December 31, 1992.
Valuations are periodically performed by management and the carrying value of
the property is adjusted as deemed necessary.
INTANGIBLE ASSETS
Deposit base intangibles identified in acquisition transactions are amortized
over the estimated remaining lives of the deposits. Total amortization expense
charged to operations amounts to $66,000 for the periods ending September 30,
1993 and 1992.
6
<PAGE> 8
TENNESSEE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1993
EARNINGS PER SHARE
Earnings per share is calculated based upon the weighted average number of
shares outstanding during the period.
RECLASSIFICATIONS
Certain amounts in the prior period financial statements have been restated to
conform to the current year presentation.
2. SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid on deposits and other borrowings during the periods ending
September 30, 1993 and 1992 amounted to $2,549,000 and $3,480,000,
respectively. Income taxes paid during the period ending September 30, 1993
and 1992 amounted to $635,000 and $30,000, respectively.
7
<PAGE> 9
TENNESSEE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1993
3. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Bank makes various commitments to extend
credit which are credit risks that are not reflected in the accompanying
consolidated financial statements. Commitments to extend credit are agreements
to lend to a customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration dates
or other termination clauses and may require payment of a fee. Since many of
these commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
These commitments include various commitments to extend credit and letters of
credit. At September 30, 1993, commitments to extend credit of $1,754,000 and
letters of credit of $2,500 were outstanding. The Bank does not anticipate any
losses as a result of these commitments.
Additionally, the Bank had undistributed loan commitments of approximately
$1,207,000 at September 30, 1993.
4. INCOME TAXES
Effective January 1, 1993, the Bank adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," (FAS 109). Adoption of FAS
109 was not material to the Bank's financial statements and had no effect on
the effective tax rate for the first three quarters of 1993.
Deferred income taxes reflect the net tax effects of (a) temporary differences
between the carrying amounts of assets and the liabilities for financial
reporting purposes and the amounts used for income tax purposes, and (b) any
operating loss and tax credit carryforwards. Deferred tax assets (liabilities)
at December 31, 1992, are comprised of the following:
Depreciation and amortization $ (27,078)
Reserve for loan losses (116,416)
Federal Home Loan Bank stock dividends (102,476)
Deferred loan fees 62,757
----------
Net deferred tax liability $(183,213)
==========
No valuation allowance relative to deferred tax assets was required as of
December 31, 1992 or September 30, 1993. The above net
8
<PAGE> 10
TENNESSEE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1993
deferred tax liability is included in accrued interest and other liabilities on
the accompanying balance sheet.
5. PENDING MERGER
On September 30, 1993, the Registrant and its wholly-owned subsidiary,
Tennessee National Bank (Bank) entered into a definitive agreement with Union
Planters Corporation providing for the merger of the Bank into Union Planters
National Bank. The process of obtaining regulatory and stockholder approval
has begun.
9
<PAGE> 1
EXHIBIT 99 (B)
First National Bancorp, of Shelbyville Inc. and Subsidiaries
Unaudited Interim Consolidated Financial
Statements dated September 30, 1993
<PAGE> 2
CONSOLIDATED BALANCE SHEET (unaudited)
FIRST NATIONAL BANCORP OF SHELBYVILLE, INC. AND SUBSIDIARIES
September 30, 1993
================================================================================
ASSETS
- ------
Cash and due from banks $ 4,600,340
Interest-bearing deposits with banks 1,279,483
Federal funds sold 2,450,000
Securities 89,467,103
Other investments 357,683
Loans 67,089,102
Less: Allowance for loan losses (2,888,971)
Unearned income (53,436)
-------------
Net loans 64,146,695
Premises and equipment, net 2,313,612
Accrued interest receivable 1,879,155
Other real estate 66,852
Deferred income taxes 1,166,515
Other assets 1,468,787
-------------
$169,196,225
=============
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
1
<PAGE> 3
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
DEPOSITS
- --------
Non-interest bearing $ 15,128,405
Certificates of deposit of $100,000 and
over 17,412,727
Other interest bearing 121,379,612
-------------
153,920,744
Deferred compensation payable 584,804
Accrued interest payable 411,644
Provision for state and federal taxes 230,960
Other liabilities 394,634
Commitments and Contingent Liabilities
STOCKHOLDERS' EQUITY
- --------------------
Common Stock, par value $10 per share,
700,000 shares authorized, 130,000
shares issued and outstanding 1,300,000
Additional paid-in capital 4,240,000
Retained earnings 8,113,439
-------------
$169,196,225
=============
2
<PAGE> 4
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
FIRST NATIONAL BANCORP OF SHELBYVILLE, INC. AND SUBSIDIARIES
For the nine months ended September 30, 1993
========================================================================
Additional
Common Paid-in Retained
Stock Capital Earnings
----------- ----------- -----------
Balance January 1, 1993 $1,300,000 $4,240,000 $5,748,356
Net income for the period - - 2,462,583
Dividends, $.75 per share - - (97,500)
----------- ----------- -----------
Balance September 30, 1993 $1,300,000 $4,240,000 $8,113,439
=========== =========== ===========
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
3
<PAGE> 5
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
FIRST NATIONAL BANCORP OF SHELBYVILLE, INC. AND SUBSIDIARIES
For the nine months ended September 30, 1993 and 1992
========================================================================
1993 1992
---- ----
Interest income:
Interest and fees on loans $ 4,746,838 $ 5,915,362
Interest and dividends on investment
securities:
Taxable 3,967,210 3,322,348
Tax-exempt 28,744 35,815
Federal funds sold 90,955 317,773
Interest-bearing deposits at
financial institutions 85,419 135,040
------------- -------------
TOTAL INTEREST INCOME 8,919,166 9,726,338
Interest expense:
Deposits 3,996,280 4,971,181
------------- -------------
NET INTEREST INCOME 4,922,886 4,755,157
Provision for loan losses -0- 381,989
------------- -------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,922,886 4,373,168
Other income:
Service charges on deposit accounts 478,406 552,321
Securities gains 256,328 374,161
Trust Department fees 27,774 46,132
Insurance fees 28,139 41,008
Other service charges, collection
charges and fees 9,550 9,909
Other operating income 76,391 102,416
------------- -------------
TOTAL OTHER INCOME 876,588 1,125,947
Operating expenses:
Salaries and other employee benefits 2,037,990 1,965,534
Occupancy expense 297,920 269,307
Other real estate expense 28,383 20,000
Equipment expense 171,218 170,502
Data processing and computer service 223,094 232,774
Legal and professional 143,916 121,927
FDIC - Comptroller Assessment 325,316 288,642
Other 680,669 547,621
------------- -------------
TOTAL OPERATING EXPENSES 3,908,506 3,616,307
------------- -------------
Earnings before income taxes 1,890,968 1,882,808
4
<PAGE> 6
CONSOLIDATED STATEMENTS OF INCOME (CONT'D) (unaudited)
FIRST NATIONAL BANCORP OF SHELBYVILLE, INC. AND SUBSIDIARIES
For the nine months ended September 30, 1993 and 1992
========================================================================
Federal and state income taxes 710,149 525,615
------------- -------------
Earnings before extraordinary item and
cumulative change in accounting principle 1,180,819 1,357,193
Extraordinary item:
Tax benefit due to loss carryforward -0- 525,000
Cumulative effect of change in accounting
principle 1,281,764 -0-
------------- -------------
NET INCOME $ 2,462,583 1,882,193
============= =============
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
5
<PAGE> 7
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
FIRST NATIONAL BANCORP OF SHELBYVILLE, INC. AND SUBSIDIARIES
For the three months ended September 30, 1993 and 1992
========================================================================
1993 1992
---- ----
Interest income:
Interest and fees on loans $ 1,537,906 $ 1,853,316
Interest and dividends on investment
securities:
Taxable 1,314,233 1,163,937
Tax-exempt 8,478 13,596
Federal funds sold 30,382 82,278
Interest-bearing deposits at
financial institutions 25,891 39,454
------------- -------------
TOTAL INTEREST INCOME 2,916,890 3,152,581
Interest expense:
Deposits 1,326,692 1,528,800
------------- -------------
NET INTEREST INCOME 1,590,198 1,623,781
Provision for loan losses -0- 90,000
------------- -------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,590,198 1,533,781
Other income:
Service charges on deposit accounts 151,455 186,506
Securities gains 90,407 808
Trust Department fees 7,101 18,132
Insurance fees (3,900) 12,768
Other service charges, collection
charges and fees 1,550 2,073
Other operating income 11,385 24,145
------------- -------------
TOTAL OTHER INCOME 257,998 244,432
Operating expenses:
Salaries and other employee benefits 698,288 689,769
Occupancy expense 89,356 94,733
Other real estate expense 4,530 8,250
Equipment expense 60,845 60,329
Data processing and computer service 74,584 76,171
Legal and professional 28,574 24,528
FDIC - Comptroller Assessment 108,708 97,158
Other 241,372 210,758
------------- -------------
TOTAL OPERATING EXPENSES 1,306,257 1,261,696
------------- -------------
Earnings before income taxes 541,939 516,517
Federal and state income taxes 180,414 175,357
------------- -------------
Earnings before extraordinary item 361,525 341,160
6
<PAGE> 8
CONSOLIDATED STATEMENTS OF INCOME (CONT'D) (unaudited)
FIRST NATIONAL BANCORP OF SHELBYVILLE, INC. AND SUBSIDIARIES
For the three months ended September 30, 1993 and 1992
========================================================================
Extraordinary item:
Tax benefit due to loss carryforward -0- 175,000
------------- -------------
NET INCOME $ 361,525 $ 516,160
============= =============
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
7
<PAGE> 9
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
FIRST NATIONAL BANCORP OF SHELBYVILLE, INC. AND SUBSIDIARIES
For the nine months ended September 30, 1993 and 1992
<TABLE>
<CAPTION>
========================================================================
1993 1992
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,462,583 $ 1,882,193
Adjustments to reconcile net income
to net cash provided by
operating activities:
Provision for loan losses -0- 381,989
Provision for depreciation and amortization 128,705 131,727
Change in assets and liabilities:
Decrease(Increase) in interest receivable (398,384) 52,652
Decrease(Increase) in other assets (1,016,267) 367,322
Increase(Decrease) in accrued interest payable (8,334) (209,057)
Increase(Decrease) in other liabilities 359,444 (121,146)
------------ ------------
TOTAL ADJUSTMENTS (934,836) 603,487
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,527,747 2,485,680
Cash flows from investing activities:
Capital expenditures (74,811) (37,072)
Purchases of investment securities, net (10,959,217) (7,154,399)
Net decrease in loans 2,901,896 5,949,427
------------ ------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (8,132,132) (1,242,044)
Cash flows from financing activities:
Proceeds from issuance of common stock -0- 2,040,000
Increase(Decrease) in deposits 3,715,121 (2,334,136)
Increase in other loans payable 3,307 (1,927)
------------ ------------
NET CASH USED BY FINANCING ACTIVITIES 3,718,428 (296,063)
------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (2,885,957) 947,573
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 9,936,297 10,488,105
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,050,340 $11,435,678
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 4,004,614 $ 5,180,238
</TABLE>
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
8
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
FIRST NATIONAL BANCORP OF SHELBYVILLE, INC. AND SUBSIDIARIES
September 30, 1993
========================================================================
NOTE 1 - BASIS OF PRESENTATION
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. The accounting
policies followed by First National Bancorp of Shelbyville, Inc. and its
subsidiaries 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 for the year ended December 31, 1992.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted in accordance with the rules of the Securities and Exchange
Commission.
Effective January 1, 1993, the Bancorp adopted Statement on Financial
Accounting Standards Number 109, "Accounting for Income Taxes" (FASB 109) which
superseded Accounting Principles Board Opinion No. 11, "Accounting for Income
Taxes" (APB 11) which is currently used by the Bancorp. Adoption of FASB 109
resulted in the Bancorp recording previously unrecognized tax benefits totaling
approximately $1,280,000 as of January 1, 1993. As of January 1, 1993, the
gross deferred tax asset was $1,446,000 comprised primarily of the allowance
for loan losses and the gross deferred tax liability was $155,000.
NOTE 2 - PROPOSED MERGER
The Bancorp executed a merger agreement in September 1993 with Union Planters
Corporation. Consummation of the merger is dependent upon the approval of the
shareholders and various regulatory agencies.
9
<PAGE> 1
EXHIBIT 99 (C)
Mid-South Bancorp, Inc. and Subsidiaries
Unaudited Interim Consolidated Financial Statements
dated September 30, 1993
<PAGE> 2
MID-SOUTH BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1993 AND DECEMBER 31, 1992
<TABLE>
<CAPTION>
September 30, 1993 December 31, 1992
<S> <C> <C>
ASSETS
1. Cash and due from banks $6,202,295 $7,612,176
3. Federal funds sold 5,425,668 6,357,797
---------- ----------
Total cash and cash equivalents 11,627,963 13,969,973
2. Interest bearing deposits in other banks 0 52,998
6. Investment securities (Market values September 30, 1993 - $51,013,817;
December 31, 1992 - $59,722,305) (Note 2) 49,505,173 58,972,782
7. Loans, net (Note 3) 113,082,102 101,811,861
8. Premises and equipment (Note 4) 4,377,395 4,438,959
Investment property 80,000 80,000
10. Other assets
(1) Organization costs, net of amortization 72,856 97,290
(2) Other real estate, net of amortization 708,558 2,082,006
Accrued interest receivable 1,644,663 1,676,975
Other receivables 1,408,194 306,716
Future income tax benefit 635,363 79,941
Bond servicing rights, at amortized cost 291,452 326,682
Excess cost over fair value of net assets acquired, at amortized cost 373,247 867,049
Other 293,223 225,481
----------- -----------
11. Total assets $184,100,189 $184,988,713
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
-----------
12. Deposits
(1) Demand deposits - noninterest bearing $19,601,115 $23,745,812
(2) Savings deposits - interest bearing 59,113,529 55,812,890
(3) Time deposits - interest bearing 85,232,740 87,338,540
----------- -----------
Total deposits 163,947,384 166,897,242
13. Short-term borrowings
(1) Securities sold under agreements to repurchase 24,760 50,190
(3) Interest bearing demand notes issued to the U. S. Treasury 701,412 734,724
15. Other liabilities
(1) Income taxes payable 482 69,961
(5) Accounts payable and accrued expenses 1,508,310 1,000,261
Minority interest in consolidated subsidiary 442,184 424,651
16. Long-term debt (Note 4) 4,874,247 3,776,670
----------- -----------
Total liabilities 171,498,779 172,953,699
----------- -----------
Stockholders' Equity
--------------------
21. Common stock, no par, $2.22 stated value; authorized 1,000,000 shares;
395,785 (1993) and 400,785 (1992) shares issued and outstanding
(Note 5) 879,522 890,633
22. Other stockholders' equity 11,721,888 11,144,381
----------- -----------
Total stockholders' equity 12,601,410 12,035,014
----------- -----------
23. Total liabilities and stockholders' equity $184,100,189 $184,988,713
=========== ===========
</TABLE>
1
<PAGE> 3
MID-SOUTH BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1993 AND 1992 AND
NINE MONTHS ENDED SEPTEMBER 30, 1993 AND 1992
<TABLE>
<CAPTION>
Year to Date
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- ---------------
1993 1992 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1. Interest and fees on loans $2,500,986 $2,278,165 $7,290,767 $6,278,398
2. Interest and dividends on investment securities
1. Taxable interest income 655,410 907,488 2,246,462 2,299,610
2. Nontaxable interest income 123,027 108,990 360,022 342,730
4. Other interest income
1. Interest on federal funds sold 43,105 83,298 132,631 232,033
2. Interest on deposits in other banks 146 1,137 982 3,415
--------- --------- ---------- ---------
5. Total interest income 3,322,674 3,379,078 10,030,864 9,156,186
--------- --------- ---------- ---------
6. Interest on deposits
2. Savings deposits 426,403 425,193 1,277,264 1,180,284
3. Time deposits 1,038,493 1,245,745 3,162,756 3,422,189
7. Interest on short-term borrowings 4,813 5,497 18,585 13,591
8. Interest on long-term debt (Note 4) 71,680 65,691 187,455 154,647
--------- --------- ---------- ---------
9. Total interest expense 1,541,389 1,742,126 4,646,060 4,770,711
--------- --------- --------- ---------
10. Net interest income 1,781,285 1,636,952 5,384,804 4,385,475
11. Provision for loan losses 160,000 185,000 497,500 570,000
--------- --------- ---------- ---------
12. Net interest income after provision for loan losses 1,621,285 1,451,952 4,887,304 3,815,475
13. Other income
(a) Commissions and fees from fiduciary activities 77,311 79,983 246,188 260,569
(c) Insurance commissions, fees and premiums 10,086 27,210 37,245 74,397
(d) Fees for other customer services 236,520 263,572 708,366 669,496
(h) Investment securities gains and losses
(identified certificate method) (15,935) 25,574 5,607 35,284
Other income 60,160 19,541 168,014 107,300
--------- --------- ---------- ---------
1,989,427 1,867,832 6,052,724 4,962,521
--------- --------- --------- ---------
14. Other expenses
(a) Salaries and employee benefits 724,399 753,337 2,156,932 1,929,587
(b) Net occupancy expense of premises 224,314 228,021 670,953 548,314
Taxes and licenses 162,532 106,469 414,480 296,929
Stationary and supplies 41,212 52,805 145,825 142,394
Minority interest in net income (loss)
of consolidated subsidiaries 4,782 (5,091) 17,533 (6,012)
Loss on sale of other real estate 221,967 - 221,967 -
Other expenses 402,429 396,964 1,181,648 1,000,669
--------- --------- ---------- ---------
Total other expenses 1,781,635 1,532,505 4,809,338 3,911,881
--------- --------- --------- ---------
15. Income before income tax expense 207,792 335,327 1,243,386 1,050,640
16. Income tax expense (Note 6) 27,062 69,616 296,955 210,148
--------- -------- --------- ---------
Income before accounting change 180,730 265,711 946,431 840,492
Cumulative effect of adoption of SFAS No. 109 0 0 44,412 0
--------- --------- ---------- ---------
20. Net income $180,730 $265,711 $990,843 $840,492
======= ======= ======= =======
21. Earnings per share data (Note 5) $.45 $.66 $2.50 $2.21
=== === ==== ====
</TABLE>
2
<PAGE> 4
MID-SOUTH BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1993 AND 1992
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $990,843 $840,492
Items not requiring (providing) cash:
Minority interest 17,533 (6,012)
Depreciation 355,555 279,485
Amortization of premiums and discounts on investment
and mortgage-backed securities 18,895 (92,815)
Amortization of excess cost over market value of net
assets acquired and servicing rights 54,752 73,846
Deferred income taxes (44,412) -
Provision for loan losses 497,500 570,000
Provision for real estate owned losses 51,408 41,425
Gain on sale of investments (5,607) (35,284)
(Gain) loss on sale of real estate owned 255,715 (34,478)
Changes in:
Accrued interest receivable 32,312 63,828
Other receivables (520,435) (399,082)
Other assets (141,279) (100,808)
Accounts payable and accrued expenses 508,049 73,281
Income taxes payable (52,038) 29,073
--------- ---------
Net cash provided by operating activities 2,018,791 1,302,951
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Net originations of loans (11,943,561) (5,279,121)
Purchase of premises and equipment (446,020) (288,346)
Proceeds from sale of premises 250,000 0
Proceeds from sale of real estate owned 511,102 887,354
Proceeds from sale of investment securities 1,788,675 1,426,010
Proceeds from maturity of investment securities 12,059,864 10,492,794
Purchase of investment securities (4,345,294) (16,089,002)
Cash acquired in the purchase of First Citizens Bank,
net of cash paid 0 2,992,594
Expended for organizational expenses 0 (57,599)
---------- ----------
Net cash provided by (used in) investing activities (2,125,234) (5,915,316)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits, NOW accounts,
and savings deposits (844,058) 6,356,428
Net decrease of time deposits (2,105,800) (583,799)
Dividends paid (324,544) (233,257)
Increase (decrease) in securities sold under agreements to
repurchase (25,430) 78,996
Increase (decrease) in TT&L deposits due U.S. Treasury (33,312) 72,600
Long-term borrowings 1,400,000 1,250,000
Payment on long-term debt (302,423) (50,000)
---------- ---------
Net cash provided by (used in) financing activities (2,235,567) 6,890,968
---------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,342,010) 2,278,603
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 13,969,973 12,171,561
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $11,627,963 $14,450,164
========== ==========
</TABLE>
3
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - CONSOLIDATED STATEMENTS
The financial statements included in this report are prepared on a
consolidated basis. At 12:00 midnight on December 31, 1981, Simpson County
Bank became a totally owned subsidiary of Mid-South Bancorp, Inc. in a reverse
triangular merger. On January 3, 1984, Mid-South Bancorp, Inc. formed and
capitalized Mid-South Credit Insurance Services, Inc., a totally owned
subsidiary. The subsidiary was capitalized by issuance of 100 shares of no par
($10 stated value) common stock. Mid-South Credit Insurance Services, Inc.
acts as agent to write credit life and accident and health insurance for
Simpson County Bank. At 12:00 midnight on October 31, 1985, Adairville Banking
Company became a totally owned subsidiary of Mid-South Bancorp, Inc. by
purchase. On January 29, 1990, Mid-South Bancorp, Inc. formed and capitalized
General Trust Company, a Tennessee trust company and totally owned subsidiary.
This subsidiary purchased the name, assets and business of an existing
Tennessee trust company. General Trust Company is chartered as a state bank,
limited to trust powers only. On June 1, 1990, Mid-South Bancorp, Inc.
acquired approximately 99% of Peoples Bank of Elk Valley by purchase and
capital injection. On June 11, 1992, Mid-South Bancorp, Inc. acquired
approximately 83% of First Citizens Bank by purchase and capital injection.
All intercompany transactions and balances have been eliminated for these
statements.
Note 2 - INVESTMENT SECURITIES
The carrying value and approximate market value of all investment securities
owned at September 30, 1993 and December 31, 1992 are summarized as follows:
<TABLE>
<CAPTION>
9-30-93 12-31-92
------- --------
Category Carrying Value Market Value Carrying Value Market Value
-------- -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 8,669,999 $ 9,007,609 $ 11,311,084 $ 11,458,781
Obligations of other U.S.
Government Agencies
and Corporations 29,436,879 30,176,004 37,351,056 37,768,169
Obligations of States and
Political Subdivisions 8,640,822 9,051,008 7,855,386 8,030,720
Other securities 2,757,473 2,779,196 2,455,256 2,464,635
--------- --------- --------- ---------
$ 49,505,173 $ 51,013,817 $ 58,972,782 $ 59,722,305
========== ========== ========== ==========
</TABLE>
4
<PAGE> 6
Note 3 - LOANS
Unearned discounts and the allowance for loan losses have been deducted from
total loans on the accompanying balance sheets. The components of net loans
follow:
<TABLE>
<CAPTION>
9-30-93 12-31-92
<S> <C> <C>
Total loans $116,247,561 $104,676,197
Less unearned discounts 1,268,604 1,165,599
----------- -----------
114,978,957 103,510,598
Less allowance for loan losses 1,896,855 1,698,737
----------- -----------
Net loans $113,082,102 $101,811,861
=========== ===========
</TABLE>
A summary of certain information with respect to nonaccruing and reduced rate
loans at June 30, 1993 and 1992 follows:
<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
Uncollected principal balance at end of period $1,326,250 $1,763,958
Interest income that would have been recorded
if all such loans were on a current basis
in accordance with their original terms 105,873 140,169
Interest income that was recorded 32,279 47,390
</TABLE>
Note 4 - LONG-TERM DEBT
At September 30, 1993 and December 31, 1992, the Corporation had the
following long-term debt outstanding:
<TABLE>
<CAPTION>
September 30, December 31,
1993 1992
------------ ------------
<S> <C> <C>
Elk Valley Bancshares, Inc., 12% subordinated
debenture; paid in full January 28, 1993. $ 0 $101,670
Hart County Bank and Trust Company, Munford-
ville, Kentucky, note; interest due quarterly;
annual principal payments due each Septem-
ber 30, with final maturity September 30,
1997; interest rate adjusted on and as of
any change in New York prime rate. The
rate at September 30, 1993 was 6.0%. The
loan is secured by all stock of Adairville
Banking Company. 225,000 300,000
</TABLE>
5
<PAGE> 7
Note 4 - LONG-TERM DEBT (Continued)
<TABLE>
<CAPTION>
September 30, December 31,
1993 1992
------------ -------------
<S> <C> <C>
NationsBank, Nashville, Tennessee, note;
interest due quarterly; annual principal
payments due each December 31, with final
maturity December 31, 2001; interest rate
adjusted on and as of any change in New York
prime rate. The rate at September 30, 1993 was 6.0%.
The loan is secured by all stock of General
Trust Company. $625,000 $625,000
First American National Bank, Nashville,
Tennessee, note; interest due quarterly; annual
principal payments due each May 1, beginning
in 1993, with final maturity May 1, 2002;
interest rate adjusted on and as of any change
in First American's "Index Rate." The rate at
Septembe 30, 1993 was 6.0%. The loan is secured by
all common and preferred stock of The Peoples
Bank of Elk Valley owned by Mid-South Bancorp,
Inc. 1,400,000 1,500,000
First American National Bank, Nashville, Tennessee,
note; interest due quarterly; annual principal
payments due each May 1, beginning in 1995, with
final maturity May 1, 2004; interest rate adjusted
on and as of any change in First American's "Index
Rate." The rate at September 30, 1993 was 6.0%. The
loan is secured by all stock of First Citizens Bank
owned by Mid-South Bancorp, Inc. 1,250,000 1,250,000
Federal Home Loan Bank, Cincinnati, Ohio, fixed-rate
notes; principal and interest payments due the
first of each month to amortize the notes by
June 30, 2003. Currently, the monthly payments
total $15,208.71 at an average interest rate of
5.5%. 1,374,247 0
--------- ---------
$4,874,247 $3,776,670
========= =========
</TABLE>
6
<PAGE> 8
Note 5 - DIVIDENDS
The number of shares outstanding at September 30, 1993 and 1992, and
dividends paid for the periods then ended are disclosed below:
<TABLE>
<CAPTION>
September 30,
----------------------------
1993 1992
---- ----
<S> <C> <C>
Shares outstanding 395,785 400,785
======= =======
Quarterly dividends paid per share $ .27 $ .20
=== ===
Total quarterly dividends paid $106,862 $ 80,157
======= ======
</TABLE>
Note 6 - INCOME TAXES
Income taxes included on the accompanying consolidated income statements are
computed based on taxable income as presented on the financial statements.
Note 7 - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
September 30,
--------------------------
1993 1992
---- ----
<S> <C> <C>
Noncash Investing Activities
Unrealized gain (loss) in market value
of equity securities $ 50,097 $ (23,391)
Real estate acquired in settlement of debt $ 175,097 $ 0
Additional Cash Information
Interest paid $4,634,123 $4,993,891
Income taxes paid $ 445,326 $ 153,734
</TABLE>
Note 8 - PRO FORMA DISCLOSURE
In connection with the June 1, 1992 acquisition of First Citizens Bank
accounted for as a purchase, the following pro forma information is provided as
though the companies had combined at the beginning of the period being
reported.
7
<PAGE> 9
Note 8 - PRO FORMA DISCLOSURE (Continued)
<TABLE>
<CAPTION>
September 30,
------------
1992
----
<S> <C>
Total interest and other income $11,614,387
==========
Income before extraordinary items and
cumulative effect of accounting changes $ 768,730
=======
Net income $ 768,730
=======
Earnings per common share $ 1.92
====
</TABLE>
Pro forma data above includes adjustments for additional interest income and
expense related to financing the acquisition. The pro forma results are not
necessarily indicative of what would have occurred had the acquisition actually
been on January 1, 1992, nor are they indicative of future operations.
Note 9 - CONTINGENCIES
Litigation
A number of legal proceedings exist in which the Company and/or its
subsidiaries are either plaintiffs or defendants or both. Most of the lawsuits
where the Company is plaintiff involve loan foreclosure activities. The
Peoples Bank of Elk Valley is defendant in suits claiming misrepresentations
and errors arising out of execution of loans. No estimate of eventual outcome
is currently determinable. Management and outside legal counsel believe that
the Corporation has strong defenses against the claims and intends to
vigorously defend the suits. No provision has been made in the financial
statements for any adverse results as there is no material adverse effect
expected.
Stock Option Agreements
The Company's newly acquired subsidiary, First Citizens Bank, has two stock
option agreements with key employees. Under the agreements, 26,500 shares of
common stock of First Citizens Bank were reserved for issuance upon exercise of
the options. The agreements provide that the option price will be $7.00 per
share. Neither agreement has been exercised to date. The options expire July
30, 1997.
8
<PAGE> 1
EXHIBIT 99 (D)
Clin-Ark Bankshares, Inc. and Subsidiaries
Consolidated Financial Statements dated December 31, 1992
<PAGE> 2
CLIN-ARK BANKSHARES, INC.
DECEMBER 31, 1992
FINANCIAL STATEMENTS
WITH
INDEPENDENT AUDITOR'S REPORT
<PAGE> 3
Independent Auditor's Report
Board of Directors
Clin-Ark Bankshares, Inc.
Clinton, Arkansas
We have audited the accompanying consolidated balance sheet of Clin-Ark
Bankshares, Inc. as of December 31, 1992, and the related consolidated
statements of income, stockholders' equity and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on the
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Clin-Ark Bankshares, Inc. as of December 31, 1992, and the consolidated
results of its operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles.
Frost & Company
Certified Public Accountants
Little Rock, Arkansas
February 19, 1993
1
<PAGE> 4
CLIN-ARK BANKSHARES, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1992
(DOLLAR AMOUNTS IN THOUSANDS)
Assets 1992
------ ----
Cash and due from banks $ 1,856
--------
Interest-bearing time deposits 891
--------
Investment securities
United States Treasury securities 3,677
Securities of United States government
agencies and corporations 3,016
Obligations of state and political subdivisions 414
Other securities 5,937
--------
Total investment securities 13,044
--------
Federal funds sold 1,035
--------
Loans
Loans, net of unearned income 30,645
Reserve for loan losses (304)
--------
Net loans 30,341
--------
Premises and equipment, net of accumulated depreciation 715
--------
Other assets 545
--------
Total assets $48,427
========
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
CLIN-ARK BANKSHARES, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1992
(DOLLAR AMOUNTS IN THOUSANDS)
Liabilities and stockholders' equity 1992
------------------------------------ ----
Deposits
Noninterest - bearing deposits $ 3,905
Interest - bearing deposits 40,663
--------
Total deposits 44,568
--------
Accrued expenses and other liabilities 379
--------
Total liabilities 44,947
--------
Commitments and contingencies (Notes 8, 9, 11 and 13)
Stockholders' equity
Common stock, par value, $1 per share;
authorized, 52,000 shares; issued
and outstanding, 51,442 shares 52
Additional paid-in capital 1,260
Retained earnings 2,194
--------
3,506
Treasury stock, 558 shares at cost (26)
--------
Total stockholders' equity 3,480
--------
Total liabilities and stockholders' equity $48,427
========
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
CLIN-ARK BANKSHARES, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1992
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1992
----
<S> <C>
Interest income
Interest and fees on loans $ 2,701
Interest on Federal funds sold 32
Interest on time deposits 109
Interest and dividends on investment securities
United States Treasury securities 246
Securities of United States government agencies and corporations 219
Obligations of state and political subdivisions 33
Other securities 286
-------
Total interest income 3,626
-------
Interest expense
Interest on deposits 1,661
Interest on Federal funds purchased and securities
sold under repurchase agreements 2
-------
Total interest expense 1,663
-------
Net interest income 1,963
Provision for loan losses (77)
-------
Net interest income after provision for loan losses 1,886
-------
Other operating income
Service charges on deposit accounts 176
Other service charges, commissions and fees 92
Securities gains 76
Other income 102
-------
Total other operating income 446
-------
Other operating expenses
Salaries 491
Pension and other employee benefits 115
Net expense of premises and fixed assets 127
Other 413
-------
Total other operating expenses 1,146
-------
Income before income taxes 1,186
Income taxes 480
-------
Net income $ 706
=======
Primary earnings per share $ 12.96
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
CLIN-ARK BANKSHARES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1992
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained Treasury
Stock Capital Earnings Stock Total
----- ------- -------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance - January 1, 1992 $52 $1,260 $1,488 $(19) $2,781
Purchase of treasury stock - - - (7) (7)
Net income - - 706 - 706
----- ---------- -------- ------- --------
Balance - December 31, 1992 $52 $1,260 $2,194 $(26) $3,480
=== ====== ====== ==== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 8
CLIN-ARK BANKSHARES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1992
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1992
----
<S> <C>
Cash flows from operating activities
Net income $ 706
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Provision for loan losses and losses on other real estate 82
Depreciation and amortization 89
Accretion of bond discounts 152
Gain on sale of investment securities (76)
Change in deferred income tax benefit 18
Loss on sale of equipment (1)
Increase in other assets (54)
Increase in accrued expenses and other liabilities 32
--------
Net cash provided (used) by operating activities 948
--------
Cash flows from investing activities
Proceeds from sale of investment securities 4,853
Proceeds from maturities of investment securities 3,996
Purchase of investment securities (11,362)
Net increase in loans (5,269)
Net decrease in time deposits 3,360
Proceeds from sales of premises and equipment 11
Purchases of premises and equipment (113)
Increase in Federal funds sold (230)
--------
Net cash provided (used) by investing activities (4,754)
--------
Cash flows from financing activities
Increase in deposits 4,287
Purchase of treasury stock (7)
--------
Net cash provided (used) by financing activities 4,280
--------
Net increase in cash and cash equivalents 474
Cash and cash equivalents - beginning of year 1,382
--------
Cash and cash equivalents - end of year $ 1,856
========
Supplemental disclosures
------------------------
Cash paid during the year for:
Interest $ 1,732
Income taxes $ 390
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 9
CLIN-ARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
1. Summary of Significant Accounting Policies
The accounting and reporting policies of Clin-Ark Bankshares,
Inc. ("the Corporation") conform with generally accepted accounting
principles and practices within the banking industry. The policies
that materially affect financial position and the results of
operations are summarized as follows:
a. Basis of presentation - The consolidated financial statements
include the accounts of the Corporation, its wholly owned
subsidiary First National Bank of Clinton and its majority
owned subsidiary, First North Central Insurance, Inc. All
material intercompany accounts and transactions have been
eliminated in consolidation.
b. Investment securities - Investment securities are stated at
cost, adjusted for amortization of premiums and accretion of
discounts computed on the interest method. Although the
quoted market values fluctuate, investment securities are held
for investment purposes and gains and losses are recognized in
the accounts upon realization or at such time that management
determines that a permanent decline in value exists. The
adjusted cost of the specific security is used to compute the
gain or loss on sales of investment securities.
c. Loans - Interest on loans is credited to income based upon the
principal amount outstanding.
d. Reserve for loan losses - For financial reporting purposes,
the reserve for loan losses is established through a provision
for loan losses charged to expense. Loans are charged against
the reserve for loan losses when management believes that the
collectibility of the principal is unlikely. The reserve is
an amount that management believes will be adequate to absorb
possible losses on existing loans that may become
uncollectible, based on evaluations of the collectibility of
loans and prior loan loss experience. The evaluations take
into consideration such factors as changes in the nature and
volume of the loan portfolio, overall portfolio quality,
review of specific problem loans, and current economic
conditions that may affect the borrowers' ability to pay.
Accrual of interest is discontinued on a loan when management
believes, after considering economic and business conditions
and collection efforts, that the borrowers' financial
condition is such that collection of interest is doubtful.
For income tax purposes, loans are charged to expense when
management believes that the collectibility of the principal
is unlikely.
e. Premises and equipment - Premises and equipment are stated at
cost, less accumulated depreciation.
For financial reporting purposes, depreciation is
charged to operating expenses over the estimated useful lives
of the assets and is computed on the straight-line method. For
7
<PAGE> 10
CLIN-ARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
1. Summary of Significant Accounting Policies (cont.)
income tax purposes, depreciation is computed under the
methods prescribed under the applicable tax laws.
f. Income taxes - The Corporation utilizes the liability method
of accounting for deferred income taxes. The liability method
provides for a deferred tax liability (benefit) on the balance
sheet for the temporary differences between financial
statement and tax return income at the tax rates which are in
effect at the date of the financial statements.
g. Real estate acquired through foreclosure - Real estate
acquired through foreclosure is reported at the lower of cost
or estimated realizable value. During 1992, the Corporation
acquired $125,000 of other real estate as a result of
foreclosing on past due loans. At December 31, 1992,
approximately $4,000 of other real estate is included in other
assets.
h. Cash and cash equivalents - For purposes of reporting cash
flows, cash and cash equivalents include cash on hand and
amounts due from banks.
i. Earnings per common share - Primary earnings per share are
computed based on the weighted average number of shares that
would be outstanding plus the shares that would be outstanding
assuming exercise of dilutive stock options which are
considered to be common stock equivalents. The number of
shares that would be issued from the exercise of stock options
has been reduced by the number of shares that could have been
purchased from the proceeds at the average estimated number of
shares used in the computations were $54,461 in 1992. Fully
diluted earnings per share amounts are not presented because
they are not materially dilutive.
2. Investment Securities
At December 31, 1992, the amortized cost and estimated market
values of investment securities were as follows (in thousands):
<TABLE>
<CAPTION>
1992
---------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
United States Treasury
securities $ 3,677 $ 40 $ - $ 3,717
Securities of United States
government agencies and
corporations 3,016 34 2 3,048
</TABLE>
8
<PAGE> 11
CLIN-ARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
2. Investment Securities (cont.)
<TABLE>
<CAPTION>
1992
----------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Obligations of state and
political subdivisions $ 414 $ 10 $12 $ 412
Other securities 5,937 36 10 5,963
--------- ------ ---- ---------
$ 13,044 $120 $24 $13,140
======= ==== === =======
</TABLE>
The amortized cost and estimated market value of investment
securities at December 31, 1992 by contractual maturity are shown
below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
1992
-----------------------------------
Estimated
Amortized Market
Cost Value
---- -----
(in thousands)
<S> <C> <C>
Due in one year or less $ 5,971 $ 5,977
Due after one year through five years 6,495 6,577
Due after five years through ten years 45 46
Due after ten years 533 540
---------- ----------
$ 13,044 $ 13,140
======= =======
</TABLE>
Proceeds from sales and maturities of investments in
investment securities during the year ending December 31, 1992 were
approximately $8,849,000. Gross gains of approximately $76,000 were
realized on the sales.
As required by law, investments carried at approximately
$5,750,000 at December 31, 1992 were pledged to secure public deposits
and for other purposes.
9
<PAGE> 12
CLIN-ARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
3. Loans
The following is a summary of the loan portfolio by principal
regulatory categories at December 31, 1992 (in thousands):
<TABLE>
<CAPTION>
1992
----
<S> <C>
Commercial, financial and agricultural $ 4,534
Real estate - construction 1
Real estate - mortgage 21,844
Other 4,266
--------
Loans, net of unearned income $30,645
=======
Loan maturities as of December 31, 1992 are as follows (in thousands):
Within one year $15,901
One to five years 14,182
After five years 562
---------
Total $30,645
=======
</TABLE>
4. Reserve for Loan Losses
A summary of transactions within the reserve for loan losses
for the year ending December 31, 1992 is as follows (in thousands):
<TABLE>
<CAPTION>
1992
----
<S> <C>
Balance - beginning of year $242
Provision charged to operating expense 77
Recoveries on loans previously charged-off 2
-------
321
Loans charged-off 17
------
Balance - end of year $304
</TABLE>
10
<PAGE> 13
CLIN-ARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
5. Premises and Equipment
A summary of asset classifications and depreciable lives at
December 31, 1992 is as follows (in thousands): Useful Lives
<TABLE>
<CAPTION>
1992 (Years)
---- -------
<S> <C> <C>
Land $ 134
Buildings and improvements 510 15 to 60
Furniture and equipment 397 3 to 15
Automobiles 13 3 to 5
--------
1,054
Accumulated depreciation (339)
-------
$ 715
======
</TABLE>
Depreciation, included in operating expenses, amounted to
approximately 66,000 in 1992.
6. Time Deposits
The remaining maturities of time deposits at December 31, 1992
are as follows (in thousands):
<TABLE>
<S> <C>
Three months or less $ 9,973
Three through six months 7,181
Six through twelve months 4,292
Over twelve months 3,945
---------
Total $25,391
=======
</TABLE>
7. Income Taxes
Income tax expense for the consolidated statement of income
consists of (in thousands):
<TABLE>
<CAPTION>
1992
----
<S> <C>
Current provision $462
Deferred provision 18
------
$480
====
</TABLE>
11
<PAGE> 14
CLIN-ARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
7. Income Taxes (cont.)
The reasons for the difference between the actual tax expense
and tax computed at the statutory Federal income tax rate are as
follows (in thousands):
<TABLE>
<CAPTION>
1992
--------------------------
Amount Percent
------ -------
<S> <C> <C>
Tax on pre-tax income $403 34.0%
State income tax, net of Federal benefit 33 2.8
Interest and other items
exempt from income tax (28) (2.4)
Other 72 6.1
------ ------
$480 40.5%
==== ====
</TABLE>
The sources of timing differences that result in the deferred
income tax benefits and the tax effects of each were as follows (in
thousands):
<TABLE>
<CAPTION>
1992
----
<S> <C>
Provision for loan losses $(24)
Depreciation 1
Writedown of other real estate owned (2)
Increase in unrecognized deferred tax benefit 43
-----
Deferred income tax provision $ 18
====
</TABLE>
In February 1992, the Financial Accounting Standards Board
issued Statements of Financial Accounting Standards No. 109 -
Accounting for Income Taxes. This statement provides for, among other
things, the recognition of a deferred tax liability or asset for the
estimated tax effect attributable to temporary differences and
carryforwards. The valuation of deferred tax assets is reduced, if
necessary, by the amount of any tax benefits that are not expected to
be realized. This statement is effective for fiscal years beginning
after December 15, 1992 although earlier application is allowed. As
of December 31, 1992, the Corporation has not implemented this
statement. Although the estimated benefit has not been quantified,
management believes that the adoption of this statement will have a
favorable impact on the Corporation's financial position.
12
<PAGE> 15
CLIN-ARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
8. Noncompensating Stock Option Agreements
On January 13, 1988, the Corporation granted a director and
officer of the Corporation an option to purchase 3,000 shares of the
Corporation's common stock at a purchase price of $25.00 per share.
The term of the option was for a period of five years from the date of
the grant. On March 26, 1990, an additional option was granted to the
director to purchase up to an additional 2,500 shares of common stock
at a purchase price of $45.00 per share. The term of this option was
also for a period of five years from the date of the grant.
As of December 31, 1992, neither of the above noted option
agreements had been exercised.
In January, 1993, the director exercised the option to
purchase 3,000 shares of the Corporations common stock at a purchase
price of $25.00 per share.
9. Commitments and Contingencies
The Corporation is a party to financial instruments with
off-balance sheet risk in the normal course of business to meet the
financing needs of its customers and to reduce its own exposure to
fluctuation in interest rates. These financial instruments include
commitments to extend credit, standby letters of credit and interest
rate caps and floors written.
The Corporation's exposure to credit loss in the event of
nonperformance by the other party to the financial instruments for
commitments to extend credit is represented by the contractual
notional amount of those instruments. The Corporation has the same
credit policies in making commitments and conditional obligations as
it does for on-balance sheet instruments. For interest rate caps and
floors, the contract or notional amounts do not represent exposure to
credit loss.
Financial instruments, whose contract amount represents credit
risk, consist of commitments to extend credit of approximately
$1,650,000 at December 31, 1992.
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition established
in the contract. Commitments generally have fixed expiration dates or
other termination clauses and may require repayment of a fee. Since
these commitments may expire without being drawn upon, the total
commitment amount does not necessarily represent future cash
requirements. The Corporation evaluates each customer's credit
worthiness on a case- by-case basis. The amount of collateral
obtained, if deemed necessary by the Corporation upon extension of
credit, is based on management's credit evaluation of the counterpart.
Collateral held varies but may include accounts receivable, inventory,
property, plant and equipment, and income-producing commercial
properties.
13
<PAGE> 16
CLIN-ARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
9. Commitments and Contingencies (cont.)
The Corporation grants agribusiness, commercial, mortgage and
consumer loans to customers within its lending region. The
Corporation maintains a loan portfolio with a high concentration of
real estate mortgage loans.
10. Related Party Transactions
Directors, officers and employees were customers of, and had
other transactions with, the Corporation's subsidiaries in the
ordinary course of business. Loan transactions with directors,
officers and employees were made on substantially the same terms as
those prevailing, at the time made, for comparable loans to other
persons and did not involve more than normal risk of collectibility or
present other unfavorable features. Loans to these related parties
amounted to approximately $1,231,000 at December 31, 1992.
11. Employee Benefit Plan
The Corporation offers a profit sharing plan for all eligible
employees. Employer contributions are based upon amounts determined
at the sole discretion of the board of directors. Employees are not
required or permitted to make contributions under the plan. Expenses
relating to Corporation contributions to the plan were approximately
$33,500 during the year ended December 31, 1992.
12. Parent Company Financial Statements
The following are the condensed parent company only balance
sheet as of December 31, 1992 and the parent only condensed statement
of income and cash flows for the year then ended.
14
<PAGE> 17
CLIN-ARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
12. Parent Company Financial Statements (cont.)
Clin-Ark Bankshares, Inc.
Parent Company Only Condensed Balance Sheet
December 31, 1992
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Assets 1992
------ ----
<S> <C> <C>
Cash and cash equivalents $ 1
Land 68
Investments in subsidiary 3,411
-------
$3,480
======
Liabilities and Stockholders' Equity
------------------------------------
Income tax payable to subsidiary $ 1
Stockholders' equity 3,479
-------
$3,480
======
</TABLE>
15
<PAGE> 18
CLIN-ARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
12. Parent Company Financial Statements (cont.)
Clin-Ark Bankshares, Inc.
Parent Company Only Condensed Statement of Income
December 31, 1992
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
1992
----
<S> <C>
Other operating income $ 2
Total operating expenses 7
-------
Operating loss before equity in undistributed
earnings of subsidiary (5)
Equity in undistributed earnings of subsidiary 711
-----
Net income $706
====
</TABLE>
At December 31, 1992, stockholders' equity of First National
Bank of Clinton of approximately $1,557,000 was available for the
payment of dividends to the Corporation without obtaining prior
regulatory approval and while maintaining regulatory capital ratio
requirements.
16
<PAGE> 19
CLIN-ARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
12. Parent Company Financial Statements (cont.)
Clin-Ark Bankshares, Inc.
Parent Company Only Condensed Statements of Cash Flows
December 31, 1992
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
1992
----
<S> <C>
Cash flows from operating activities
Operating loss $ (5)
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Equity in undistributed earnings of subsidiary 711
-----
Net cash provided (used) by operating activities 706
-----
Cash flows from investing activities
Purchase of fixed assets (68)
Increase in investment in subsidiary (632)
-----
Net cash provided (used) by investing activities (700)
-----
Cash flows from financing activities
Purchase of treasury stock (7)
-------
Net cash provided (used) by financing activities (7)
-------
Net decrease in cash and cash equivalents (1)
Cash and cash equivalents - beginning of year 2
-------
Cash and cash equivalents - end of year $ 1
======
Supplemental disclosures
------------------------
Cash paid during the year for:
Interest $ 7
Income taxes $390
</TABLE>
17
<PAGE> 20
CLIN-ARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
13. Merger
On December 16, 1992, the Corporation entered into a letter of
intent with Union Planters Corporation ("UPC"), whereby UPC intends to
acquire the Corporation's outstanding stock in exchange for shares of
UPC. Consummation of this transaction is subject to regulatory and
stockholder approval.
18
<PAGE> 1
EXHIBIT 99 (E)
Clin-Ark Bankshares, Inc. and Subsidiaries
Unaudited Interim Consolidated Financial Statements
dated September 30, 1993
<PAGE> 2
CLIN-ARK BANKSHARES, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1993
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Assets
------
<S> <C>
Cash and due from banks $ 1,687
-------
Interest - bearing time deposits -
-------
Investment securities
United States Treasury Securities 4,628
Securities of United States government
agencies and corporations 2,503
Obligations of state and political subdivisions 442
Other securities 6,390
-------
Total investment securities 13,963
-------
Federal funds sold 425
-------
Loans
Loans, net of unearned income 32,624
Reserve for loan losses (359)
-------
Net loans 32,265
-------
Premises and equipment, net of accumulated depreciation 894
-------
Other assets 599
-------
Total assets $49,833
=======
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
1
<PAGE> 3
CLIN-ARK BANKSHARES, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1993
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Liabilities and stockholders' equity
------------------------------------
<S> <C>
Deposits
Noninterest - bearing deposits $ 4,471
Interest - bearing deposits 41,011
--------
Total deposits 45,482
--------
Accrued expenses and other liabilities 328
--------
Total liabilities 45,810
--------
Stockholders' equity
Common stock, par value, $1 per
share; authorized 55,000 shares;
issued and outstanding, 54,442 55
Additional paid-in capital 1,332
Retained earnings 2,662
--------
4,049
Treasury stock, 558 shares at cost (26)
--------
Total stockholders' equity 4,023
--------
Total liabilities and stockholders' equity $49,833
=======
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
2
<PAGE> 4
CLIN-ARK BANKSHARES, INC.
STATEMENT OF INCOME
FOR THE QUARTERLY PERIODS ENDED SEPTEMBER 30, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(Unaudited)
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Interest income
Interest and fees on loans $ 676 $ 674
Interest on Federal funds sold 20 1
Interest on time deposits - 18
Interest and dividends on investment securities
United States Treasury securities 56 61
Securities of United States government agencies and corporations 34 47
Obligations of state and political subdivisions 5 8
Other securities 59 86
-------- --------
Total interest income 850 895
------- -------
Interest expense
Interest on deposits 355 401
Interest on Federal fund purchased
and securities sold under repurchase agreements - 1
------- -------
Total interest expense 355 402
------- -------
Net interest income 495 493
Provision for loan losses (11) (20)
------- -------
Net interest income after provision for loan losses 484 473
------- -------
Other operating income
Service charges on deposit accounts 51 46
Other service charges, commissions and fees 26 23
Securities gains - 16
Other income 16 19
------- --------
Total other operating income 93 104
------- --------
Other operating expenses
Salaries 143 125
Pension and other employee benefits 35 28
Net expenses of premises and fixed assets 34 33
Other 111 109
-------- --------
Total other operating expenses 323 296
-------- --------
Income before income taxes 254 282
Income taxes 92 107
-------- --------
Net income $ 162 $ 175
======= =======
Primary earnings per share $ 2. 91 $ 3.21
======= =======
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
3
<PAGE> 5
CLIN-ARK BANKSHARES, INC.
STATEMENT OF INCOME
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(Unaudited)
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Interest income
Interest and fees on loans $1,994 $1,992
Interest on Federal funds sold 50 27
Interest on time deposits 2 99
Interest and dividends on investment securities
United States Treasury securities 156 191
Securities of United States government agencies and corporations 105 177
Obligations of state and political subdivisions 17 25
Other securities 210 225
------ -------
Total interest income 2,534 2,736
------- -------
Interest expense
Interest on deposits 1,045 1,292
Interest on Federal fund purchased
and securities sold under repurchase agreements - 2
------- -------
Total interest expense 1,045 1,294
------- -------
Net interest income 1,489 1,442
Provision for loan losses (50) (78)
------- -------
Net interest income after provision for loan losses 1,439 1,364
------- -------
Other operating income
Service charges on deposit accounts 144 127
Other service charges, commissions and fees 73 70
Securities gains 4 65
Other income 61 83
------- --------
Total other operating income 282 345
------- --------
Other operating expenses
Salaries 415 356
Pension and other employee benefits 102 80
Net expenses of premises and fixed assets 97 100
Other 353 308
-------- --------
Total other operating expenses 967 844
-------- --------
Income before income taxes and cumulative effect of accounting change 754 865
Income taxes 295 369
-------- --------
Income before cumulative effect of accounting change 459 496
Cumulative effect of accounting change (note 1) 87 -
-------- ----------
Net income $ 546 $ 496
====== =======
Primary earnings per share:
Income before cumulative effect of accounting change $ 8.28 $ 9.12
====== =======
$ 9.85 $ 9.12
====== =======
Net income
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
4
<PAGE> 6
CLIN-ARK BANKSHARES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1993
(DOLLAR AMOUNTS IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained Treasury
Stock Capital Earnings Stock Total
----- ------- -------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance - January 1, 1992 $52 $1,260 $2,194 $(26) $3,480
Issuance of common stock 3 72 - - 75
Dividends paid - - (78) - (78)
Net income - - 546 - 546
--- ------ ------ ---- ------
Balance - September 30, 1993 $55 $1,332 $2,662 $(26) $4,023
=== ====== ====== ==== ======
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
5
<PAGE> 7
CLIN-ARK BANKSHARES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1993 AND 1992
(DOLLAR AMOUNTS IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Cash lows from operating activities
Net income $ 546 $ 496
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Provision for loan losses and losses on other real estate 50 78
Depreciation and amortization 62 83
Accretion of bond discounts 73 114
Gain on sale of investment securities (4) (65)
Change in deferred tax benefit (87) 18
Loss on sale of equipment - (1)
Increase in other assets 16 (85)
Increase in accrued expenses and liabilities (50) 792
-------- --------
Net cash provided (used) by operating activities 606 1,430
-------- --------
Cash flows from investing activities
Proceeds from sale of investment securities 256 4,076
Proceeds from maturities of investment securities 2,813 3,896
Purchase of investment securities (4,056) (11,210)
Net increase in loans (1,975) (4,794)
Net decrease in time deposits 891 3,261
Proceeds from sales of premises and equipment - 11
Purchases of premises and equipment (225) (113)
Decrease (increase) in Federal funds sold 610 805
-------- --------
Net cash provided (used) by investing activities (1,686) (4,068)
-------- --------
Cash flows from financing activities
Increase in deposits 914 2,573
Proceeds from issuance of common stock 75 -
Payment of dividends (78) -
-------- --------
Net cash provided (used) by financing activities 911 2,573
-------- --------
Net increase in cash and cash equivalents (169) (65)
Cash and cash equivalents - beginning of period 1,856 1,382
-------- --------
Cash and cash equivalents - end of period $1,687 $ 1,317
======== ========
Supplemental disclosures
------------------------
Cash paid during the year for:
Interest $1,027 $ 1,388
Income taxes $ 382 $ 283
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
6
<PAGE> 8
CLIN-ARK BANKSHARES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1993 AND 1992
1. Basis of Presentation
The unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles. In the opinion
of management, the accompanying unaudited financial statements reflect all
adjustments (which include only normal recurring adjustments) necessary to
summarize fairly the financial position of Clin-Ark Bankshares, Inc.
("the Corporation") as of September 30, 1993 and the results of its
operations and changes in its cash flows for the nine months ended
September 30, 1993 and September 30, 1992. The accounting policies
followed by the Corporation for interim financial reporting are consistent
with the accounting policies followed for annual financial reporting,
except as noted below. These financial statements should be read in
conjunction with the corporation's 1992 annual financial statements and
related notes included therein.
Certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted in accordance with the rules of
the Securities and Exchange Commission.
Effective March 31, 1993, the Corporation adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes
("FASB 109") which supercedes Statement of Financial Accounting Standards
No. 96, "Accounting for Income Taxes" (FASB 96) which is currently used by
the Corporation. Adoption of FASB 109 resulted in the Corporation
recording previously unrecognized tax benefits totaling approximately
$87,000. The previously unrecognized tax benefit of $87,000 was
attributable to cumulative differences which existed between reported book
and tax income. The realization of this benefit is dependent on the
Corporation having future taxable income. The disclosures required by
FASB 109 are substantially similar to those previously disclosed under
FASB 96.
2. Dividends
During the nine month period ended September 30, 1993,
dividends of $.72 per share per quarter were declared and paid for the
second and third quarters of 1993.
3. Pending Merger
In April, 1993, the Board of Directors of the Corporation approved an
agreement to merge with another bank holding company whereby the two
parties intend to effectuate the merger of the Corporation with and into
the other bank holding company. The merger, which is to be accounted for
as a pooling of interests, is dependent upon the approval of the
stockholders of the Corporation and various regulatory agencies.
7
<PAGE> 1
EXHIBIT 99 (F)
Liberty Bancshares, Inc. and Subsidiary
Consolidated Financial Statements Dated December 31, 1992
<PAGE> 2
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Liberty Bancshares, Inc.:
We have audited the accompanying consolidated balance sheets of Liberty
Bancshares, Inc. and subsidiary as of December 31, 1992 and 1991, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the years in the three year period ended December 31, 1992.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Liberty Bancshares,
Inc. and subsidiary as of December 31, 1992 and 1991, and the results of their
operations and their cash flows for each of the years in the three year period
ended December 31, 1992, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick
January 25, 1993
Nashville, Tennessee
1
<PAGE> 4
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1992 AND 1991
<TABLE>
<CAPTION>
ASSETS 1992 1991
- ------ ---- ----
<S> <C> <C>
Cash $ 3,577,752 $ 3,121,521
Interest-bearing deposits in other banks 1,664,385 960,615
Federal funds sold 12,925,000 10,125,000
----------- ----------
Total cash and cash equivalents 18,167,137 14,207,136
Securities (notes 2 and 9):
Investment securities (estimated market value of $15,051,938
and $20,784,637 at December 31, 1992 and 1991, respectively) 14,948,790 19,720,814
Mortgage-backed securities held for investment (estimated
market value of $5,944,484 and $11,541,250 at
December 31, 1992 and 1991, respectively) 5,709,230 11,080,529
Securities available for sale (estimated market value of
$8,635,878 at December 31, 1992) 7,832,824 -
Loans receivable, net (notes 3, 4, and 5) 117,220,820 122,178,438
Loans available for sale (market value of $1,786,296 at
December 31, 1992) 1,762,193 -
Accrued interest receivable, net (notes 3 and 6) 1,157,795 1,289,834
Premises and equipment, net (note 8) 2,280,037 2,376,450
Real estate owned, net (note 7) 129,856 575,192
Investment in Federal Home Loan Bank stock, at cost 1,226,300 1,172,800
Other assets 124,607 116,993
Deferred income taxes 109,336 39,536
---------------- ----------------
Total assets $ 170,668,925 $ 172,757,722
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits (note 9) $ 151,274,462 $ 155,213,248
Accrued interest payable 140,165 270,095
Advance payments by borrowers for taxes and insurance 494,945 485,414
Current income taxes (note 10) 54,597 45,146
Accrued expenses and other liabilities 431,886 241,602
Employee Stock Ownership Plan loan payable (note 15) 468,438 634,290
---------------- ----------------
Total liabilities 152,864,493 156,889,795
Stockholders' equity (notes 10, 13, 14, and 15):
Preferred stock of $1.00 par value, authorized 1,000,000
shares, none issued or outstanding - -
Common stock of $1.00 par value, authorized
4,000,000 shares, 634,215 issued and outstanding 634,215 634,215
Additional paid-in capital 5,073,091 5,076,846
Retained earnings - substantially restricted 12,565,564 10,791,156
Employee Stock Ownership Plan borrowings (468,438) (634,290)
---------------- ----------------
Total stockholders' equity 17,804,432 15,867,927
---------------- ----------------
Commitments and contingencies (notes 4, 12, and 15)
Total liabilities and stockholders' equity $ 170,668,925 $ 172,757,722
================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
DECEMBER 31, 1992, 1991, AND 1990
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Interest income:
First mortgage loans $ 8,876,464 $ 9,825,012 $ 9,814,999
Consumer and other loans 2,514,825 2,528,857 2,656,974
Interest and dividends on investments 1,229,693 1,585,584 1,328,435
Mortgage-backed securities 921,799 1,124,560 1,091,926
Federal funds sold 377,384 558,286 1,196,444
Interest on deposits with banks 37,130 167,170 325,968
-------------- --------------- ----------------
Total interest income 13,957,295 15,789,469 16,414,746
Interest expense on deposits (note 9) 7,393,615 10,492,313 11,698,105
Interest expense on long-term ESOP loan
(note 15) 34,449 - -
-------------- --------------- ---------------
Total interest expense 7,428,064 10,492,313 11,698,105
-------------- --------------- ---------------
Net interest income 6,529,231 5,297,156 4,716,641
Provision for loan losses (note 3) (174,155) (200,632) (228,672)
-------------- --------------- ---------------
Net interest income after provision for
loan losses 6,355,076 5,096,524 4,487,969
-------------- --------------- ---------------
Non-interest income (expense):
Gain (loss) on sales of interest-earning assets,
net (note 11) 297,621 5,354 (14,325)
Loan servicing fees 98,845 89,388 99,642
Other loan fees 324,001 282,417 219,501
Service charges 322,145 296,274 316,475
Gain (loss) on sale of real estate owned, net (4,737) 15,417 7,297
Other operating income 111,003 109,011 123,758
-------------- --------------- ----------------
Total non-interest income 1,148,878 797,861 752,348
-------------- --------------- ----------------
General and administrative expenses:
Compensation and benefits (note 12) 1,884,038 1,733,833 1,606,246
Occupancy and equipment 388,631 393,052 416,330
Federal deposit insurance premiums 342,798 343,236 321,751
Provision for losses on real estate owned (note 7) 87,074 10,655 -
Data processing service fees 257,377 262,730 232,284
Stationery and supplies 141,129 129,003 115,725
Other operating expenses 1,049,771 976,187 745,996
-------------- --------------- ----------------
Total general and administrative expenses 4,150,818 3,848,696 3,438,332
-------------- ---------------- ---------------
Earnings before income taxes 3,353,136 2,045,689 1,801,985
Income tax expense (note 10) 1,198,199 732,260 740,974
-------------- --------------- ----------------
Net earnings $ 2,154,937 $ 1,313,429 $ 1,061,011
============== =============== ===============
Earnings per share (note 14) $ 3.40 $ .05 N/A
============== =============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1992, 1991, AND 1990
<TABLE>
<CAPTION>
RETAINED GUARANTEE TOTAL
ADDITIONAL EARNINGS- OF STOCK-
COMMON STOCK PAID-IN SUBSTANTIALLY ESOP HOLDERS'
------------ ---------- ------------- ---------- -------
SHARES AMOUNT CAPITAL RESTRICTED BORROWINGS EQUITY
------ ------ ------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1989 - $ - - $ 8,416,716 - $ 8,416,716
Net earnings for 1990 - - - 1,061,011 - 1,061,011
--------- --------- ----------- ------------- ----------- ------------
Balance at December 31,
1990 - - - 9,477,727 - 9,477,727
Proceeds from issuance
of common stock, net of
conversion expenses of
$631,088 (note 14) 634,215 634,215 5,076,846 - - 5,711,061
ESOP debt guaranteed
(note 15) - - - - (634,290) (634,290)
Net earnings for 1991 - - - 1,313,429 - 1,313,429
--------- --------- ----------- ------------- ----------- ------------
Balance at December 31,
1991 634,215 634,215 5,076,846 10,791,156 (634,290) 15,867,927
Additional conversion
expenses - - (3,755) - - (3,755)
Repayment of principal on
ESOP borrowings - - - - 165,852 165,852
Payment of cash dividends
of $.60 per share - - - (380,529) - (380,529)
Net earnings for 1992 - - - 2,154,937 - 2,154,937
--------- --------- ----------- ------------- ----------- ------------
Balance at December 31,
1992 634,215 $ 634,215 $ 5,073,091 $ 12,565,564 $ (468,438) $ 17,804,432
========= ========= =========== ============= =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 7
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1992, 1991, AND 1990
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,154,937 $ 1,313,429 $ 1,061,011
Adjustments to reconcile net earnings to net cash and
cash equivalents provided by operating activities:
Amortization of deferred loan origination fees (205,556) (93,291) (82,072)
Accretion of discounts on investments and
mortgage-backed securities (24,134) (131,598) (260,081)
Accretion of discounts on loans purchased (123,082) (119,639) (160,704)
Amortization of premium paid on deposits 179,550 179,550 179,550
Provision for loan losses 174,155 200,632 228,672
Provision for losses on real estate owned 87,074 10,655 -
Net (gain) loss on sales of:
First mortgage loans (306,371) (4,119) (3,121)
Investment securities, net 8,750 (1,235) 17,446
Real estate owned, net 4,737 (15,417) (7,297)
Premises and equipment, net (3,887) - -
Depreciation and amortization of premises and equipment 197,120 192,967 254,299
Purchases of securities available for sale (995,000) - -
Proceeds from sales of securities available for sale 986,250 - -
Origination of mortgage loans available for sale (25,489,078) - -
Proceeds from sale of loans available for sale 23,446,395 165,625 293,642
Decrease (increase) in accrued interest receivable 132,039 155,435 288,374
Stock dividends on Federal Home Loan Bank stock (53,500) (73,000) (81,600)
Decrease (increase) in other assets (7,614) (6,336) 402,481
Decrease in accrued interest payable (129,930) (76,156) (410,448)
(Decrease) increase in income taxes payable 9,451 (53,601) 79,626
Decrease in deferred income taxes (69,800) (157,333) (13,000)
(Decrease) increase in accrued expenses and other
liabilities 190,284 29,991 (46,823)
--------------- -------------- -------------
Total adjustments (1,992,147) 203,130 678,944
--------------- -------------- -------------
Net cash and cash equivalents provided
by operating activities 162,790 1,516,559 1,739,955
--------------- -------------- --------------
Cash flows from investing activities:
Net decrease (increase) in loans 5,560,402 (8,615,030) 477,018
Principal payments on mortgage-backed securities 2,864,477 1,171,170 960,871
Purchases of mortgage-backed securities - (967,078) (2,470,673)
Purchases of investment securities (12,629,844) (15,966,211) (9,485,307)
Proceeds from maturities of investment securities 12,100,000 12,075,000 6,845,891
Proceeds from sale of investment securities - 1,009,375 765,236
Proceeds from sales of real estate owned 492,085 277,094 68,216
Decrease in certificates of deposit - 300,000 1,600,000
Proceeds from redemption of Federal Home Loan Bank stock - - 261,500
Purchases of premises and equipment (105,820) (71,708) (438,635)
Proceeds from sale of premises and equipment 9,000 - -
--------------- -------------- -------------
Net cash and cash equivalents provided
(used) by investing activities $ 8,290,300 $ (10,787,388) $ (1,415,883)
--------------- -------------- -------------
</TABLE>
5
<PAGE> 8
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
YEARS ENDED DECEMBER 31, 1992, 1991, AND 1990
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Cash flows from financing activities:
Net proceeds received from the issuance of common
stock $ - $ 5,711,061 $ -
Net increase (decrease) in deposits (4,118,336) 1,068,738 387,344
Payment of additional conversion expenses (3,755) - -
Cash paid for dividends (380,529) - -
Net (decrease) increase in advances from borrowers
for taxes and insurance 9,531 41,729 (29,933)
--------------- -------------- -------------
Net cash and cash equivalents (used)
provided by financing activities (4,493,089) 6,821,528 357,411
--------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents 3,960,001 (2,449,301) 681,483
Cash and cash equivalents at beginning of year 14,207,136 16,656,437 15,974,954
--------------- -------------- -------------
Cash and cash equivalents at end of year $ 18,167,137 $ 14,207,136 $ 16,656,437
=============== ============== =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 2,664,878 $ 3,863,112 $ 4,596,686
Income taxes 1,259,475 943,145 694,842
=============== ============== =============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Foreclosures and in-substance foreclosures of loans
during the year $ 138,560 $ 581,216 $ 3,105,090
Origination of loan to facilitate sale of in-substance
foreclosed loan - 2,685,391 -
Interest credited to deposits 4,679,117 6,394,000 7,129,000
Guarantee (reduction) of ESOP borrowings (165,852) 634,290 -
Investment securities transferred to securities available for sale 7,832,824 - -
=============== ============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 9
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Liberty Bancshares, Inc. was organized in July 1991, for
the purpose of becoming a holding company for Liberty
Federal Savings Bank (the "Bank") as part of the Bank's
conversion from a mutual to a stock institution. The
Bank is a federally chartered stock savings bank. The
following is a description of the more significant
accounting policies that Liberty Bancshares, Inc. and
subsidiary (the "Company") follow in presenting their
consolidated financial statements.
(A) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements
for 1992 and 1991 include the accounts of Liberty
Bancshares, Inc. and Liberty Federal Savings Bank,
its wholly-owned subsidiary. The accounts of the
Bank include Northwest Tennessee Service
Corporation, the Bank's wholly-owned subsidiary.
The consolidated financial statements for periods
prior to 1991 include only the accounts of the Bank
and its subsidiary, as the holding company was not
formed until 1991. All significant intercompany
transactions and balances are eliminated in
consolidation.
(B) CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash
equivalents includes cash, interest-bearing deposits
in other banks, and federal funds sold. Generally
federal funds are sold for one-day periods and
certificates of deposit, included in
interest-bearing deposits in other banks, have
original maturities of three months or less at date
of purchase.
The Company clears items to and from other banks
with the Federal Reserve Bank and therefore the
Federal Reserve requires the Company to maintain an
average balance of $100,000 in an account at the
Federal Reserve Bank at December 31, 1992 and 1991.
(C) SECURITIES
Securities are classified as investment securities
or securities available for sale and primarily
consist of U.S. Treasury securities, obligations of
U.S. Government agencies and mortgage-backed
securities. Mortgage-backed securities are
comprised substantially of participating interests
in pools of long-term first mortgage loans
originated and serviced by the issuers of the
securities.
Management determines the appropriate classification
of securities at the time of purchase and
periodically reviews the classification of
securities within its portfolio to ensure the
appropriate classification. If management has the
intent and the Company has the ability at the time
of purchase to hold securities until maturity or on
a long-term basis, they are classified as
investments and carried at amortized historical
cost. Mortgage-backed securities held for
investment are carried at unpaid principal balances,
adjusted for unamortized premiums and unearned
discounts. Securities to be held for
7
(CONTINUED)
<PAGE> 10
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
indefinite periods of time and not intended to be held
to maturity or on a long-term basis are classified as
available for sale and carried at the lower of
aggregate cost or market. Securities held for
indefinite periods of time include securities that
management intends to use as part of its
asset/liability management strategy and that may be
sold in response to changes in interest rates,
resultant prepayment risk and other factors related to
interest rate and resultant prepayment risk changes.
Premiums and discounts are amortized using the
interest method over the remaining period to
contractual maturity, adjusted for anticipated
prepayments. Gains and losses on the sale of
securities available for sale are determined using the
specific identification method and are included in
other operating income, including adjustments to lower
of aggregate cost or market.
(D) LOANS RECEIVABLE
Loans receivable are recorded at the unpaid principal
balance owed by borrowers less deferrals, unearned
interest, the allowance for loan losses and purchase
discounts. Discounts and premiums on first mortgage
loans are accreted to interest income using the
interest method over the remaining period to
contractual maturity, adjusted for anticipated
prepayments. Unearned income on consumer loans is
recognized over the lives of the loans using methods
that approximate the interest method.
The allowance for loan losses is based upon analyses
of the loans receivable portfolio and is maintained at
a level considered adequate by management to provide
for probable loan losses. The analyses include
management's consideration of such factors as economic
conditions, loan portfolio characteristics, prior loan
loss experiences, and results of reviews of the
portfolio. The allowance is increased by provisions
charged against income and reduced by net charge-offs.
While management believes it has established the
allowance for loan losses in accordance with generally
accepted accounting principles and has taken into
account the views of its regulators and the current
economic environment, there can be no assurance that
in the future the Company's regulators or its economic
environment will not require further increases in the
allowance.
The Company establishes an allowance for uncollectible
interest income for any loan on which collection is
considered doubtful. For mortgage loans greater than
90 days past due, the Company establishes an allowance
for uncollectible interest for any loan in which the
total of the principal balance outstanding, and any
accrued interest related thereto, is greater than 90%
of the appraised value of the underlying collateral.
The recorded investment is then monitored and
additional allowances established as warranted.
Mortgage loans on multi-family and industrial
properties are generally placed on nonaccrual status
when the Company becomes aware that the borrower has
entered bankruptcy proceedings or when they are past
due 90 days as to either principal or interest or when
payment in full of principal or interest is not
expected. The allowance is established by a charge to
interest income equal to all interest previously
accrued. For all other loans, the Company generally
accrues interest on loans past due more than 90 days
without establishing an allowance for uncollectible
interest when management concludes such action is
warranted, such as in the event the loan is
exceptionally well collateralized or the borrower
establishes the temporary nature of the delinquency.
8
(CONTINUED)
<PAGE> 11
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
(E) LOANS AVAILABLE FOR SALE
Mortgage loans originated and available for sale are
carried at the lower of aggregate cost or estimated
market value. Market value is based on investor
commitments, or in the absence of such commitments, on
current investor yield requirements. Net unrealized
losses are recognized in a valuation allowance by
charges to earnings.
As part of this activity, the Company originates and
sells loans with servicing retained. Mortgage loans
serviced for others are not included in the
accompanying consolidated balance sheets and the
amount of loans serviced for others is outlined in
note 3. The Company receives normal servicing fees
and servicing costs are charged to expense as
incurred.
(F) LOAN ORIGINATION AND COMMITMENT FEES AND RELATED COSTS
Loan fees and certain direct loan origination costs
are deferred, and the net fee or cost is recognized in
income using the interest method over the contractual
lives of the loans, adjusted for estimated prepayments
based on the Company's historical prepayment
experience. Commitment fees and costs relating to
commitments whose likelihood of exercise is remote are
recognized over the commitment period on a straight-
line basis. If the commitment is subsequently
exercised during the commitment period, the remaining
unamortized commitment fee at the time of exercise is
recognized over the life of the loan as an adjustment
of yield.
(G) REAL ESTATE OWNED
Real estate properties acquired through loan
foreclosure and loans in substance foreclosed are
initially recorded at the lower of the related loan
balance, less any specific allowance for loss, or
estimated fair value at the date of foreclosure.
Costs relating to development and improvement of
property are capitalized, whereas costs relating to
holding property are expensed. In substance
foreclosed properties are those properties where the
borrower retains title but has little or no remaining
equity in the property considering its fair value;
where repayment can only be expected to come from the
operation or sale of the property; and where the
borrower has effectively abandoned control of the
property or it is doubtful that the borrower will be
able to rebuild equity in the property. Property
acquired by deed in lieu of foreclosure results when a
borrower voluntarily transfers title to the Company in
full settlement of the related debt in an attempt to
avoid foreclosure. Real estate acquired in settlement
of loans is carried at the lower of cost or fair
value.
Valuations are periodically performed by management
and an allowance for losses is established by a charge
to operations if the carrying value of a property
exceeds its estimated fair value.
9
(CONTINUED)
<PAGE> 12
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
(H) INCOME TAXES
Deferred income taxes are recognized for income and
expense items that are reported in different years for
financial reporting purposes and income tax purposes
using the tax rate applicable to the year of the
calculation.
In February 1992, the Financial Accounting Standards
Board (FASB) issued SFAS No. 109, Accounting for
Income Taxes. SFAS No. 109 requires a change from
the deferred method to the asset and liability method
of accounting for income taxes. Under the asset and
liability method, deferred income taxes are recognized
for the tax consequences of "temporary differences" by
applying enacted statutory tax rates applicable to
future years to differences between the financial
statement carrying amounts and the tax basis of
existing assets and liabilities. Under SFAS No. 109,
the effect on deferred taxes of a change in tax rates
is recognized in income in the period that includes
the enactment date. The Company will adopt SFAS No.
109 in the first quarter of 1993. Upon adoption, the
principles of this statement may be applied
retroactively through restatement of previously issued
statements, or on a prospective basis through a
cumulative effect of change in accounting principle.
It is estimated that adoption of SFAS No. 109 will
result in an incremental increase in the net deferred
tax asset of approximately $100,000 to $150,000,
subject to any valuation allowance, the precise amount
of which has not been determined. It is expected that
this amount will be reported separately as the
cumulative effect of a change in accounting principle
in the consolidated statement of earnings for the year
ending December 31, 1993.
(I) PREMISES AND EQUIPMENT
Premises and equipment are carried at cost, less
accumulated depreciation and amortization. These
assets are depreciated using the straight-line method
over the estimated useful lives of the assets for
assets acquired prior to January 1, 1981. Premises
and equipment acquired on or after January 1, 1981 are
depreciated using accelerated methods under the
guidelines of the Internal Revenue Service. The
difference between depreciation calculated using the
accelerated method and that under generally accepted
accounting principles is insignificant.
(J) PREMIUM ON DEPOSITS
Premium on deposits relates to the premium paid on an
acquisition of a branch from another financial
institution. This premium is being amortized to
expense over eight years, the estimated life of the
deposits acquired.
10
(CONTINUED)
<PAGE> 13
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
(K) ESTIMATED FAIR VALUES
Effective for 1992 SFAS No. 107, Disclosures about
Fair Value of Financial Instruments, requires the
Company to disclose the estimated fair value of its
financial instruments. Estimates of the fair value of
financial instruments are presented within the notes
to the consolidated financial statements. Fair value
estimates are made at a point in time, based on
relevant market information and information about the
financial instrument. Accordingly, such estimates
involve uncertainties and matters of judgment and
therefore cannot be determined with precision. The
more significant assumptions used in preparing the
Company's fair value estimates are set forth below.
For cash and due from banks and Federal funds sold,
fair value is estimated to approximate the carrying
amount because they mature within 90 days or less and
do not present unanticipated credit concerns. For
securities, fair values are based on quoted market
prices or dealer quotes, if available; if a quoted
market price is not available, fair value is estimated
using quoted market prices for similar securities.
For most loans, fair value is estimated by discounting
estimated future cash flows using the current rates at
which similar loans would be made to borrowers with
similar credit risk and for similar remaining
maturities. For certain homogeneous categories of
loans, such as residential mortgages, fair value is
estimated using quoted market prices for securities
backed by similar loans, adjusted for differences in
loan characteristics.
Under SFAS No. 107, the fair value of deposits with no
stated maturity, such as demand deposits, NOW
accounts, money market accounts, and regular savings
accounts, is equal to the amount payable on demand at
the reporting date. The fair value of certificates of
deposit and other fixed maturity time deposits is
estimated using the rates currently offered for
deposits of similar remaining maturities.
(2) SECURITIES
The amortized cost and estimated market value of
investment and mortgage-backed securities held for
investment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1992
---------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAIN LOSS VALUE
---- ---- ---- -----
<S> <C> <C> <C> <C>
Investment securities:
U.S. Treasury securities and
obligations of U.S. Government
agencies $ 14,948,790 $ 123,773 $ (20,625) $ 15,051,938
=============== =========== =========== ===============
Mortgage-backed securities:
FHLMC participation certificates $ 5,709,230 $ 235,254 $ - $ 5,944,484
=============== =========== =========== ===============
11
(CONTINUED)
</TABLE>
<PAGE> 14
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
<TABLE>
<CAPTION>
DECEMBER 31, 1991
---------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAIN LOSS VALUE
---- ---- ---- -----
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. Government
agencies $ 19,656,941 $ 380,246 $ - $ 20,037,187
FHLMC common stock 63,873 683,577 - 747,450
--------------- ------------- ----------- ---------------
Total investment securities $ 19,720,814 $ 1,063,823 $ - $ 20,784,637
=============== ============= =========== ===============
Mortgage-backed securities:
FHLMC participation certificates $ 11,080,529 $ 460,721 $ - $ 11,541,250
=============== ============= =========== ===============
</TABLE>
The carrying value and estimated market value of securities available
for sale are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1992
--------------------------------------------------------------
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAIN LOSS VALUE
----- ---- ---- -----
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. Government
agencies $ 5,199,595 $ 1,655 $ (21,250) $ 5,180,000
Mortgage-backed securities:
FHLMC participation certificates 2,569,356 97,622 - 2,666,978
------------- ------------ ----------- -------------
Total debt securities
available for sale 7,768,951 99,277 (21,250) 7,846,978
Marketable equity securities
available for sale:
FHLMC common stock 63,873 725,027 - 788,900
------------- ------------ ----------- -------------
Total securities available
for sale $ 7,832,824 $ 824,304 $ (21,250) $ 8,635,878
============= ============ =========== =============
12
(CONTINUED)
</TABLE>
<PAGE> 15
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
The amortized cost and estimated market value of investment securities at
December 31, 1992, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
---- -----
<S> <C> <C>
U.S. Treasury securities and obligations of U.S. Government
agencies:
Maturing within one year $ 11,205,887 $ 11,293,657
Maturing within one to five years 3,742,903 3,758,281
---------------- ----------------
14,948,790 15,051,938
Mortgage-backed securities 5,709,230 5,545,244
---------------- ----------------
Totals $ 20,658,020 $ 20,597,182
================ ================
</TABLE>
The carrying value and estimated market value of debt securities available for
sale at December 31, 1992, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
ESTIMATED
CARRYING MARKET
VALUE VALUE
----- -----
<S> <C> <C>
U.S. Treasury securities and obligations of U.S. Government
agencies:
Maturing within one to five years $ 3,999,595 $ 3,980,000
Maturing within ten to fifteen years 1,200,000 1,200,000
-------------- --------------
5,199,595 5,180,000
Mortgage-backed securities 2,569,356 2,631,606
--------- --------------
Totals $ 7,768,951 $ 7,811,606
================ ================
Proceeds from sales of investments in debt securities during 1992, 1991, and
1990 were $986,250, $1,009,375, and $765,236, respectively. Gross losses of
$8,750 were realized on sales during 1992, gross gains of $1,235 were realized
on sales during 1991, and gross losses of $17,446 were realized on sales during
1990.
The weighted average interest yield for all mortgage-backed securities was
approximately 9.73% at December 31, 1992 and 10.51% at December 31, 1991.
13
(CONTINUED)
</TABLE>
<PAGE> 16
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
(3) LOANS RECEIVABLE
Loans receivable at December 31, 1992 and 1991, are summarized as follows:
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
First mortgage loans (principally conventional):
Secured by one-to-four family residences $ 75,455,171 $ 87,444,159
Secured by other properties 10,807,112 8,558,666
Construction loans 2,043,750 474,000
Partially guaranteed by VA or insured by FHA 5,841,706 4,914,402
Participation investment in loans purchased 1,566,032 1,683,632
----------------- -----------------
95,713,771 103,074,859
Less:
Undisbursed portion of construction loans (1,709,912) (301,500)
Loans in process (264,368) (319,816)
Unearned discounts (531,860) (662,246)
Unamortized premiums 87,044 95,276
Net deferred loan origination fees (633,359) (653,904)
----------------- -----------------
Total first mortgage loans 92,661,316 101,232,669
----------------- -----------------
Consumer and other loans:
Lines of credit secured by real estate 3,767,196 2,973,882
Floor plan 716,307 949,194
Consumer 16,773,626 12,909,730
Commercial 3,240,199 3,377,900
Share 2,517,757 2,699,728
----------------- -----------------
27,015,085 22,910,434
Less:
Unearned income (1,345,415) (1,006,352)
----------------- -----------------
Total consumer and other loans 25,669,670 21,904,082
----------------- -----------------
Less allowance for loan losses (1,110,166) (958,313)
----------------- -----------------
$ 117,220,820 $ 122,178,438
================= =================
Weighted average contractual yield 8.66% 9.77%
================= =================
The estimated fair value of total loans outstanding at December 31, 1992
was $120,797,000.
The estimated fair value of loans includes credit risk
considerations.
14
(CONTINUED)
</TABLE>
<PAGE> 17
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
Activity in the allowance for loan losses for the years
ended December 31, 1992, 1991, and 1990, is summarized as
follows:
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 958,313 $ 875,569 $ 698,518
Provision charged to income 174,155 200,632 228,672
Charge-offs, net of recoveries (22,302) (117,888) (51,621)
--------------- -------------- ------------
Balance at end of year $ 1,110,166 $ 958,313 $ 875,569
=============== ============== ============
</TABLE>
It is the Bank's policy to net recoveries against
charge-offs. Recoveries amounted to $9,476, $27,794, and
$9,007 for the years ended December 31, 1992, 1991, and
1990, respectively.
The following is a summary of the principal balances of
loans on nonaccrual status, and loans past due ninety
days or more at December 31, 1992 and 1991:
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
Loans on nonaccrual status $ 461,937 $ 439,861
Loans contractually past due 90 days or more:
Mortgage loans:
Residential 376,134 682,343
Commercial - -
Consumer 100,381 174,292
Commercial 132,130 30,900
-------------- --------------
Total loans on nonaccrual and past due $ 1,070,582 $ 1,327,396
============== ==============
</TABLE>
The Bank has established an allowance for uncollectible
interest for loans on nonaccrual status, which is netted
with accrued interest receivable, in the amount of
$26,612 and $12,793 at December 31, 1992 and 1991,
respectively.
During the years ended December 31, 1992 and 1991, gross
interest income of approximately $43,000 and $45,000,
respectively, would have been recorded on loans accounted
for on a nonaccrual basis if the loans had been current
throughout the period. Interest received in cash on
nonaccrual loans and included in income during the years
ended December 31, 1992 and 1991, amounted to
approximately $18,000 and $36,000, respectively.
The amount of loans serviced for the benefit of others is
as follows:
<TABLE>
<S> <C>
December 31, 1992 $ 34,275,134
December 31, 1991 17,423,129
December 31, 1990 20,264,412
==============
15
(CONTINUED)
</TABLE>
<PAGE> 18
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
In the ordinary course of business, the Company makes
loans to directors and executive officers and their
related interests. Such loans were made on substantially
the same terms, including interest and collateral, as
those prevailing at the time for comparable transactions
with other borrowers and did not involve more than the
normal risk of collectibility or present other
unfavorable features. Loans to directors and executive
officers and their related interests are as follows:
Balance at December 31, 1991 $ 1,030,751
Advances 1,009,506
Repayments (880,581)
--------------
Balance at December 31, 1992 $ 1,159,676
==============
(4) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is a party to financial instruments with
off-balance-sheet risk in the normal course of business
to meet the financing needs of its customers and to
reduce its own exposure to fluctuations in interest
rates. These financial instruments include commitments
to extend credit, standby letters of credit, and
financial guarantees. Those instruments involve, to
varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the
consolidated balance sheets. The contract or notional
amounts of those instruments reflect the extent of
involvement the Company has in particular classes of
financial instruments.
The Company's exposure to credit loss in the event of
nonperformance by the other party to the financial
instrument for commitments to extend credit and standby
letters of credit and financial guarantees written is
represented by the contractual notional amount of those
instruments. The Company uses the same credit policies
in making these commitments and conditional obligations
as it does for on-balance sheet instruments.
Available home equity lines of credit were approximately
$2,536,000 at December 31, 1992 and $1,822,000 at
December 31, 1991, with the majority having terms of
fifteen years. At December 31, 1992, outstanding letters
of credit balances were $121,000. Commitments to
originate or purchase loans were $2,483,916 and
$1,170,801 at December 31, 1992 and 1991, respectively.
The commitments to originate loans at December 31, 1992,
were composed of variable rate loans of $868,993 and
fixed rate loans of $1,614,923. The fixed rate loans had
interest rates ranging from 7.00% to 8.50%. There were
commitments to sell loans at December 31, 1992 of
$1,334,243 and $53,500 at December 31, 1991.
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any
condition established in the contract. Commitments
generally have fixed expiration dates or other
termination clauses and may require payment of a fee.
Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements.
The Company evaluates each customer's credit worthiness
on a case-by-case basis. The amount of collateral
obtained if deemed necessary by the Company upon extension
of credit is based on management's credit evaluation of
the borrower. Collateral held varies but may include
property, plant, and equipment and income-producing
commercial properties.
16
(CONTINUED)
<PAGE> 19
Liberty Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1992 and 1991
(5) SIGNIFICANT CONCENTRATIONS OF CREDIT RISK
Substantially all of the Company's business activity is
with customers located within the state of Tennessee. A
majority of the loans are secured by residential or
commercial real estate or other personal property. The
loans are expected to be repaid from cash flow or
proceeds from the sale of selected assets of the
borrowers. The Company grants residential, consumer, and
commercial loans to customers throughout the state of
Tennessee.
(6) ACCRUED INTEREST RECEIVABLE
Accrued interest receivable at December 31, 1992 and
1991, is summarized as follows:
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
Investment securities $ 223,133 $ 312,637
Mortgage-backed securities 116,181 153,071
Loans receivable 818,481 824,126
-------------- --------------
$ 1,157,795 $ 1,289,834
============== ==============
</TABLE>
(7) REAL ESTATE OWNED
The following is a summary of real estate owned at
December 31, 1992 and 1991:
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
Real estate acquired through foreclosure $ 143,157 $ 596,451
Less allowance for possible losses 13,301 21,259
------------ ------------
Real estate owned, net $ 129,856 $ 575,192
============ ============
</TABLE>
At December 31, 1990, the Company's participating
interest in a restructured loan totaling $2,701,530 was
in- substance foreclosed and was classified as real
estate owned. Gross interest income, which would have
been recorded under the original terms of the loan, was
approximately $347,000 for the year ended December 31,
1990. Gross interest income, which would have been
recorded under the restructured terms, was approximately
$243,000 for the same period. Interest included in
income during the year ended December 31, 1990, was
approximately $182,000.
During March 1991, the lenders began foreclosure
proceedings on the property securing the loan, but the
borrowers filed Chapter 11 bankruptcy proceedings which
stayed the foreclosure. On June 5, 1991, the borrowers
sold the underlying collateral to an independent party.
proceeds of the sale were used to repay the existing loan
with no loss to the Company. The Company and the other
participating lender made a new loan, which was at a
lesser amount than the previous loan, to the new owners
to finance the sale of the property. The proceeds from
the sale of the property paid substantially all of the
interest which would have been paid had the loan been
performing throughout the years ended December 31, 1991
and 1990.
<TABLE>
<S> <C>
17
(CONTINUED)
</TABLE>
<PAGE> 20
Liberty Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1992 and 1991
Activity in the allowance for possible losses for real
estate owned for the years ended December 31, 1992, 1991
and 1990 is as follows:
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 21,259 $ 13,588 $ 79,854
Provision charged to income 87,074 10,655 -
Charge-offs, net of recoveries (95,032) (2,984) (66,266)
------------ ----------- ------------
Balance at end of year $ 13,301 $ 21,259 $ 13,588
============ =========== ============
</TABLE>
(8) PREMISES AND EQUIPMENT
Premises and equipment, less accumulated depreciation and
amortization at December 31, 1992 and 1991, are
summarized as follows:
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
Land $ 134,004 $ 134,004
Buildings 2,863,955 2,853,481
Furniture, fixtures, and equipment 1,665,504 1,608,717
Purchased computer software 83,232 83,232
Automobiles 102,482 89,273
---------------- ----------------
4,849,177 4,768,707
Less accumulated depreciation and amortization (2,569,140) (2,392,257)
---------------- ----------------
$ 2,280,037 $ 2,376,450
================ ================
18
(CONTINUED)
</TABLE>
<PAGE> 21
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
(9) DEPOSITS
Deposits at December 31, 1992 and 1991 are summarized as
follows:
<TABLE>
<CAPTION>
1992 1991
---------------------------- ----------------------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C>
Non-interest bearing demand deposits $ 1,730,067 1.2% $ 1,447,043 .9%
NOW accounts at 2.75% in 1992 and
4.25% in 1991 13,636,524 9.0 10,446,966 6.8
Money market at 3.00% in 1992 and
4.0% in 1991 9,654,773 6.4 9,035,045 5.8
Passbook savings at 3.00% in
1992 and 4.50% in 1991 11,682,592 7.7 10,163,242 6.5
-------------- -------- --------------- --------
36,703,956 24.3 31,092,296 20.0
-------------- -------- --------------- --------
Certificates of deposit:
3.01% to 3.50% 18,458,136 12.2 - -
3.51% to 4.00% 38,651,102 25.5 2,188,939 1.4
4.01% to 4.50% 28,183,003 18.6 5,813,222 3.7
4.51% to 5.00% 3,324,318 2.2 12,614,517 8.1
5.01% to 5.50% 2,236,613 1.5 21,968,751 14.1
5.51% to 6.00% 4,268,840 2.8 19,372,893 12.5
6.01% to 6.50% 4,444,031 2.9 24,810,177 16.0
6.51% to 7.00% 4,227,147 2.8 9,972,438 6.4
7.01% to 7.50% 1,515,669 1.0 5,863,495 3.8
7.51% to 8.00% 1,902,042 1.3 8,950,801 5.8
8.01% to 8.50% 3,369,309 2.2 5,999,978 3.9
8.51% to 9.00% 1,778,331 1.2 3,303,036 2.1
9.01% to 9.50% 2,256,831 1.5 3,487,121 2.2
-------------- -------- --------------- --------
114,615,372 75.7 124,345,368 80.0
-------------- -------- --------------- --------
151,319,328 100.0% 155,437,664 100.0%
-------------- ====== --------------- ======
Less premium paid on deposits
of McKenzie Branch 44,866 224,416
-------------- ---------------
$ 151,274,462 $ 155,213,248
============== ===============
Weighted average cost of
deposits 4.13% 6.75%
===== =====
The aggregate amount of jumbo certificates of deposit
with a minimum denomination of $100,000 were $8,670,230
and $9,543,839 at December 31, 1992 and 1991,
respectively.
The Bank's estimated fair value of total deposits was
$152,416,000 at December 31, 1992, which exceeds the
carrying amount of total deposits of $151,274,462 by
$1,141,538.
19
(CONTINUED)
</TABLE>
<PAGE> 22
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
Scheduled maturities of certificates of deposit at December 31, 1992 and 1991,
are as follows:
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
Under 6 months $ 61,939,702 $ 71,493,670
6 months to 12 months 26,353,465 31,788,302
12 months to 24 months 15,674,599 10,691,399
24 months to 36 months 3,698,056 8,968,922
Over 36 months 6,949,550 1,403,075
----------------- -----------------
$ 114,615,372 $ 124,345,368
================= =================
</TABLE>
Interest expense on deposits for the years ended December 31, 1992, 1991, and
1990, is summarized as follows:
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Money market $ 336,481 $ 428,571 $ 488,246
Passbook savings 367,358 474,651 448,819
NOW 327,040 374,256 375,807
Certificates of deposit 6,183,186 9,035,285 10,205,683
Amortization of premium
paid on deposits 179,550 179,550 179,550
-------------- ---------------- ----------------
$ 7,393,615 $ 10,492,313 $ 11,698,105
============== ================ ================
</TABLE>
Certain investment securities with a carrying value of approximately $2,368,000
and $2,907,000 at December 31, 1992 and 1991, respectively, were pledged to
secure certain deposit accounts.
(10) INCOME TAXES
Income tax expense for the years ended December 31, 1992,
1991, and 1990, is summarized as follows:
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Federal:
Current $ 1,118,969 $ 784,381 $ 651,934
Deferred (64,200) (139,776) (13,000)
--------------- -------------- ------------
1,054,769 644,605 638,934
--------------- -------------- ------------
State:
Current 149,030 105,212 102,040
Deferred (5,600) (17,557) -
--------------- -------------- ------------
143,430 87,655 102,040
--------------- -------------- ------------
Total $ 1,198,199 $ 732,260 $ 740,974
=============== ============== ============
20
(CONTINUED)
</TABLE>
<PAGE> 23
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
Deferred income taxes result from timing differences in
the recognition of income and expense for tax and
financial statement purposes. The sources of these
timing differences and their tax effects are as follows:
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Loan fees reported in different periods for tax and
financial statement purposes $ (4,142) $ (137,441) $ (8,310)
Federal Home Loan Bank stock dividends 20,330 27,740 (407)
Mortgage-backed securities discount amortization (97,660) (42,496) (3,807)
Other 11,672 (5,136) (476)
------------ ------------- -----------
Deferred income tax benefit $ (69,800) $ (157,333) $ (13,000)
============= ============== ============
</TABLE>
The actual income tax expense amounts differ from the
"expected" tax expense for the years ended December 31,
1992, 1991, and 1990, as follows:
<TABLE>
<CAPTION>
1992 1991 1990
------------------------- ----------------------- -------------------------
% OF % OF % OF
PRETAX PRETAX PRETAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Computed "expected"
income tax expense $ 1,140,066 34.0% $ 695,534 34.0% $ 612,675 34.0%
Increases (reductions) in
taxes resulting from:
Bad debt deduction (754) - 10,945 .5 96,102 5.3
State income tax, net of
Federal income tax
effect 94,664 2.8 57,852 2.8 67,346 3.7
Accretion of purchase
method adjustments (32,842) (1.0) (27,301) (1.3) (35,380) (2.0)
Other (2,935) (.1) (4,770) (0.2) 231 0.1
------------ -------- ---------- ------- ---------- --------
Total income tax
expense $ 1,198,199 35.7% $ 732,260 35.8% $ 740,974 41.1%
============ ===== ========== ===== ========== =====
The Company is allowed a special bad debt deduction
limited generally to 8% of otherwise taxable income and
subject to certain limitations based on aggregate loans
and savings accounts balances at the end of the year. If
the amounts that qualify as deductions for Federal income
tax purposes are later used for purposes other than for
bad debt losses, they will be subject to Federal income
tax at the then current corporate rate. Retained
earnings at December 31, 1992 and 1991, includes
approximately $2,700,000, for which Federal income tax
has not been provided.
21
(CONTINUED)
</TABLE>
<PAGE> 24
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
(11) GAIN (LOSS) ON SALES OF INTEREST-EARNING ASSETS
Gains and losses on sales of interest-earning assets for
the years ended December 31, 1992, 1991, and 1990, are
summarized as follows:
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Realized gain (loss) on sales of:
Securities held for sale $ (8,750) $ 1,235 $ (17,446)
First mortgage loans, net 306,371 4,119 3,121
------------- --------- ------------
$ 297,621 $ 5,354 $ (14,325)
============= ========= ============
</TABLE>
(12) PENSION PLAN
A trusteed noncontributory pension plan is in effect with
the Financial Institutions Retirement Fund for
substantially all Company employees who have been
employed one year or more and have attained age 21.
There was no pension expense related to this plan during
the years ended December 31, 1992, 1991, and 1990. All
contributions to the fund are commingled with other
employers' contributions and all assets of the fund are
invested on a pooled basis, without allocation to
individual employers or employees. The latest available
computation by an independent actuary indicates that the
value of the assets in the pension fund exceeds the
vested benefits.
(13) STOCKHOLDERS' EQUITY
On December 17, 1991, Liberty Federal Savings Bank
converted from a mutual to a stock form of ownership and
was acquired by Liberty Bancshares, Inc. At the time of
the Bank's conversion, eligible deposit account holders
in the Bank were granted priority in the event of future
liquidation by the establishment of a liquidation account
equal to retained earnings as of December 31, 1990. In
the event of future liquidation, and only in such event,
an eligible deposit account holder who continues to
maintain his deposit account shall be entitled to receive
a distribution from the liquidation account, in the
proportionate amount of the then current adjusted balance
from deposit accounts then held before any liquidations
may be made with respect to capital stock.
The Bank may not declare or pay a cash dividend on or
repurchase any of its stock if the effect would be to
reduce retained earnings of the Bank below either the
amount of the liquidation account or capital
requirements of the OTS. Federal regulations adopted by
the OTS impose certain limitations on the payment of
dividends and other capital distributions, including
stock repurchases, by the Bank. OTS regulations utilize
a tiered approach which permits various levels of
distributions based primarily upon an institution's
capital level. Based upon current OTS regulations and
its capital structure at December 31, 1992, the Bank may
make, without prior OTS approval, capital distributions
during a year in an amount which is the greater of (i) up
to 100% of its net earnings to date during the year
<TABLE>
<S> <C>
22
(CONTINUED)
</TABLE>
<PAGE> 25
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
plus an amount equal to one-half of the amount by which
its total capital-to-assets ratio exceeded its fully
phased-in capital-to-assets ratio at the beginning of the
year or, (ii) 75% of its net income over the most recent
four quarter period. Capital distributions by the Bank
are further subject to 30-day advance written notice to
the OTS.
(14) CONVERSION TO STOCK AND EARNINGS PER SHARE
The sale of 634,215 shares of $1.00 par value common
stock by the Company was consummated in 1991 pursuant to
a plan of conversion of the Bank from a
Federally-chartered mutual savings bank to a
Federally-chartered stock savings bank previously
approved by the members of the Bank. From the proceeds,
$634,215 was allocated to common stock and $5,076,846,
which is net of conversion costs of $631,088, was
allocated to additional paid-in capital.
Earnings per share for the year ended December 31, 1991,
was based upon the number of shares issued at conversion
and the earnings for the period from the date of
conversion, December 17, 1991, to December 31, 1991.
Earnings per share for the year ended December 31, 1992,
were based upon the weighted average number of shares
outstanding during the period, 634,215, and the earnings
for the year ended December 31, 1992.
The Company's charter authorizes 1,000,000 shares of
preferred stock of the Company, of $1.00 par value. The
consideration for the issuance of the shares shall be
paid in full before their issuance and shall not be less
than the par value. The consideration for the shares,
other than cash, shall be determined by the Board of
Directors in accordance with the provisions of the
Tennessee Business Corporation Act. The preferred stock,
and any series of preferred stock, may be redeemable or
convertible. Prior to the issuance of any preferred
stock, and any series of preferred stock, as established
by the Board of Directors, the Company shall file the
articles of amendment to the Company charter with the
Tennessee Secretary of State establishing and designating
the series and fixing and determining the relative rights
and preferences thereof. The Company's charter expressly
vests in the Board of Directors of the Company the
authority to issue the preferred stock in one or more
series and to determine, to the extent permitted by law
prior to the issuance of the preferred stock (or any
series of the preferred stock), the relative rights,
limitations, and preferences of the preferred stock or
any such series.
The purposes for which the Board of Directors of the
Company might issue preferred stock include, among
others, acquisitions and capital formation. In addition,
the issuance of the shares of the preferred stock under
certain circumstances could discourage, or make more
difficult, an attempt to gain control of the Company.
The mere authorization of the preferred stock by itself
does not have any effect upon the rights of present
holders of the Company's common stock. Nevertheless,
future issuances of preferred stock, which the Board of
Directors of the Company could make without stockholder
approval, in all likelihood would impact upon the rights
of the holders of the Company's common stock. Holders of
shares of preferred stock generally are entitled to
receive specified dividends prior to payment of dividends
on shares of common stock and may have voting rights that
are separate from or in conjunction with holders of the
Company's common stock.
<TABLE>
<S> <C>
23
(CONTINUED)
</TABLE>
<PAGE> 26
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
(15) EMPLOYEE STOCK OPTION AND STOCK OWNERSHIP PLANS
In conjunction with the conversion, the Company
established a stock option plan under which a total of
63,421 common shares were reserved for options. The
plan establishes the exercise price of the options at
least equal to the market value of the Company's common
stock on the date of grant. At December 31, 1992 and
1991, a total of 50,740 shares were granted under the
stock option plan. No options were exercised during the
years ended December 31, 1992 and 1991.
Also, in conjunction with converting to a stock ownership
form, the Company established an Employee Stock Ownership
Plan (ESOP), under which the Company will make annual
contributions to a trust for the benefit of eligible
employees. To be eligible, an employee must be 21 years
of age and have completed at least one year of service.
The contributions may be in the form of cash, other
property, or common shares. The plan is noncontributory
and there is no past service liability. The amount of
the annual contribution is at the discretion of the Board
of Directors of the Company. Initially, the ESOP
acquired 63,429 shares of common stock financed by
$634,290 in borrowings by the ESOP. The Board of
Directors intends to contribute to the Plan annually at
least an amount equal to the required principal and
interest payments related to the ESOP loan. The ESOP
loan is payable in quarterly principal and interest
installments beginning March 17, 1992, and maturing
December 17, 2001. Interest accrues at the base rate
charged by the lender. Dividends received on shares held
by the ESOP are used to service a portion of the
principal and interest payments on the borrowing. During
1992, dividends used for debt service totaled $19,029.
The Company contributed $181,272 in 1992 for additional
debt service. Benefit expense is recognized based on the
shares allocated method. This method requires that the
percentage of shares allocated for the period to total
shares purchased be applied to the original principal
balance to calculate the benefit expense which equaled
$63,429 in 1992. No contribution was made in 1991 as the
first loan payment was not due until March 17, 1992. The
principal balance of the ESOP loan was $468,438 and
$634,290 at December 31, 1992 and 1991, respectively. At
December 31, 1992 and 1991, the note is secured by 63,429
of shares acquired by the Trust. On January 6, 1993,
6,343 shares were released by the lender.
Future minimum principal payments of the Employee Stock
Ownership Plan loan are as follows:
1993 $ 63,429
1994 63,429
1995 63,429
1996 63,429
1997 63,429
Thereafter 151,293
------------
$ 468,438
============
The estimated fair value of the ESOP loan approximates
the carrying value due to the interest rate being
variable at the lender's base rate which is the rate
estimated to be currently offered for comparable new
long-term debt.
24
(CONTINUED)
<PAGE> 27
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
(16) PARENT COMPANY ONLY FINANCIAL INFORMATION
Financial information of Liberty Bancshares Inc.
(Parent Company Only) is as follows as of December 31,
1992 and 1991, and for the two years then ended:
BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS 1992 1991
------ ---- ----
<S> <C> <C>
Cash in bank $ 58,635 $ 57,164
Investment in subsidiary 7,456,599 5,687,417
-------------- --------------
Total assets $ 7,515,234 $ 5,744,581
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Employee Stock Ownership Plan loan payable $ 468,438 $ 634,290
-------------- --------------
Stockholders' equity:
Common stock 634,215 634,215
Additional paid-in capital 5,073,091 5,076,846
Retained earnings 1,807,928 33,520
Employee Stock Ownership Plan borrowings (468,438) (634,290)
-------------- --------------
Total stockholders' equity 7,046,796 5,110,291
-------------- --------------
Total liabilities and stockholders' equity $ 7,515,234 $ 5,744,581
============== ==============
STATEMENT OF EARNINGS
Dividends from bank subsidiary $ 382,000 -
Equity in undistributed earnings of subsidiary 1,772,937 33,520
-------------- --------------
Net earnings $ 2,154,937 $ 33,520
STATEMENT OF CASH FLOWS
Cash flows from operating activities:
Net earnings $ 2,154,937 $ 33,520
============== ==============
Adjustments to reconcile net earnings to net cash and
cash equivalents provided by operating activities:
Undistributed earnings of subsidiary (1,772,937) (33,520)
-------------- --------------
Net cash and cash equivalents provided by operating
activities 382,000 -
-------------- --------------
</TABLE>
25
(CONTINUED)
<PAGE> 28
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
<TABLE>
<S> <C> <C>
Net cash used by investing in bank subsidiary - (5,653,897)
-------------- --------------
Cash flows from financing activities:
Cash paid for dividends (380,529) -
Net cash provided by net proceeds received
from the issuance of common stock - 5,711,061
-------------- --------------
Net cash and cash equivalents (used) provided by
financing activities (380,529) 5,711,061
-------------- --------------
Net increase in cash and cash equivalents 1,471 57,164
Cash and cash equivalents at beginning of year 57,164 -
-------------- --------------
Cash and cash equivalents at end of year $ 58,635 $ 57,164
============== ==============
</TABLE>
26
(CONTINUED)
<PAGE> 1
EXHIBIT 99 (G)
Liberty Bancshares, Inc. and Subsidiary
Consolidated Financial Statements dated September 30, 1993
<PAGE> 2
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1993 December 31, 1992
----------------------------------------
(unaudited)
ASSETS
------
<S> <C> <C>
Cash $ 3,670,895 3,577,752
Interest-bearing deposits in other banks 1,147,349 1,664,385
Federal funds sold 10,575,000 12,925,000
-------------------------------
Total cash and cash equivalents 15,393,244 18,167,137
Securities:
Investment securities (estimated market value
of $17,076,391 and $15,051,938 at September 30, 1993,
unaudited, and December 31, 1992, respectively) 17,076,070 14,948,790
Mortgage-backed securities (estimated market value
of $4,038,894 and $5,944,484 at September 30, 1993,
unaudited, and December 31, 1992, respectively) 4,096,215 5,709,230
Securities available for sale (estimated market value
of $7,544,872 and $8,635,878 at September 30, 1993,
unaudited, and December 31, 1992, respectively) 6,750,130 7,832,824
Loans held for sale (estimated market value
of $ 3,722,454 and $1,786,296 at September 30, 1993,
unaudited, and December 31, 1992, respectively) 3,660,500 1,762,193
Loans receivable, net (note 4) 121,393,107 117,220,820
Accrued interest receivable 1,108,355 1,157,795
Premises and equipment, net 2,269,194 2,280,037
Real estate owned, net 373,935 129,856
Federal Home Loan Bank stock, at cost 1,268,000 1,226,300
Deferred income taxes (note 5) 236,486 124,607
Other assets 182,204 109,336
-------------------------------
Total assets $ 173,807.440 170,668,925
===============================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits 152,109,632 151,274,462
Accrued interest payable 179,187 140,165
Advance payments by borrowers for taxes
and insurance 1,038,055 494,945
Income taxes (note 5) 44,232 54,597
Accrued expenses and other liabilities 519,953 431,886
Employee Stock Ownership Plan loan payable 384,712 468,438
-------------------------------
Total liabilities 154,275,771 152,864,493
-------------------------------
Stockholders' equity:
Preferred stock of $1.00 par value, authorized
1,000,000 shares, none issued or outstanding - -
Common stock, $1.00 par value, authorized
4,000,000 shares, 634,215 issued and outstanding 634,215 634,215
Additional paid-in capital 5,073,091 5,073,091
Employee Stock Ownership Plan borrowings (384,712) (468,438)
Retained earnings - substantially restricted 14,209,075 12,565,564
-------------------------------
Total stockholders' equity 19,531,669 17,804,432
-------------------------------
Total liabilities and
stockholders' equity $ 173,807,440 170,668,925
===============================
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 3
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1993 1992 1993 1992
----------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Interest income:
First mortgage loans $ 1,881,674 2,197,390 5,810,726 6,815,686
Consumer and other loans 675,750 629,530 2,002,576 1,872,039
Interest and
dividends on investments 152,552 275,380 550,836 947,160
Interest and dividends on
securities available for sale 93,983 - 317,017 -
Interest on deposits with banks 145,476 102,153 381,347 307,319
Mortgage-backed securities 85,082 223,077 278,789 715,503
---------------------------------------------------------
Total interest income 3,034,517 3,427,530 9,341,291 10,657,707
---------------------------------------------------------
Interest expense on deposits 1,493,966 1,777,067 4,567,719 5,744,241
Interest on borrowed funds 6,044 8,152 19,112 26,980
---------------------------------------------------------
Total interest expense 1,500,010 1,785,219 4,586,831 5,771,221
---------------------------------------------------------
Net interest income 1,534,507 1,642,311 4,754,460 4,886,486
Provision for loan losses (Note 4) 30,000 75,000 135,265 108,276
---------------------------------------------------------
Net interest income after
provision for loan losses 1,504,507 1,567,311 4,619,195 4,778,210
---------------------------------------------------------
Non-interest income (expense):
Gain on sales of
interest-earning assets, net 99,766 112,780 545,450 202,024
Loan servicing fees 34,526 25,356 100,741 71,993
Other loan fees 74,435 87,041 225,311 246,776
Service charges 98,216 86,371 279,962 231,597
Gain (loss) on sale of
real estate owned, net (352) 56 11,387 (4,737)
Other operating income 41,062 31,345 92,450 78,123
---------------------------------------------------------
Total non-interest income 347,653 342,949 1,255,301 825,776
---------------------------------------------------------
General and administrative expenses:
Compensation and benefits 493,101 478,914 1,459,378 1,378,757
Occupancy and equipment 98,633 98,744 289,220 288,066
Federal deposit insurance premiums 86,799 84,576 218,455 258,222
Provision for losses on real estate
acquired through foreclosure - 7,246 - 83,074
Data processing service fees 69,367 66,332 201,886 193,574
Stationery and supplies 44,099 41,662 133,183 107,132
Other operating expenses 279,611 251,168 881,280 787,934
---------------------------------------------------------
Total general and
administrative expenses 1,071,610 1,028,642 3,183,402 3,096,759
---------------------------------------------------------
</TABLE>
2
<PAGE> 4
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF EARNINGS - Continued
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1993 1992 1993 1992
----------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Earnings before income taxes 780,550 881,618 2,691,094 2,507,227
Income tax expense (Note 5) 290,580 320,934 984,468 893,400
-----------------------------------------------------------
Net earnings before cumulative
effect of change in accounting
principle 489,970 560,684 1,706,626 1,613,827
Cumulative effect of change in
accounting principle (Note 5) - - 127,150 -
-----------------------------------------------------------
Net earnings $ 489,970 560,684 1,833,776 1,613,827
===========================================================
Primary and fully diluted earnings
per common share and common
share equivalents:
Earnings before cumulative
effect of change in
accounting principle $ .74 .88 2.59 2.54
Cumulative effect of change
in accounting principle (Note 5) - - .19 -
-----------------------------------------------------------
Net earnings $ .74 .88 2.78 2.54
===========================================================
Average common shares and common
share equivalents outstanding 659,698 634,215 659,698 634,215
===========================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(For the Nine Months Ended September 30, 1992 and 1993)
UNAUDITED
<TABLE>
<CAPTION>
Retained Guarantee Total
Additional earnings- of stock-
Common Stock paid-in substantially ESOP holders'
Shares Amount capital restricted borrowings equity
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991 634,215 $ 634,215 5,076,846 10,791,156 (634,290) 15,867,927
Additional conversion
expenses (note 2) - - (3,754) - - (3,754)
Repayment of principal
on ESOP debt - - - - 149,994 149,994
Net earnings for the nine
months ended September 30, 1992 - - - 1,613,827 - 1,613,827
Payment of cash dividend
of $.30 per share - - - (190,265) - (190,265)
------- -------- --------- ---------- --------- ----------
Balance at September 30, 1992 634,215 $ 634,215 5,073,092 12,214,718 (484,296) 17,437,729
------- -------- --------- ---------- --------- ----------
Balance at December 31, 1992 634,215 $ 634,215 5,073,091 12,565,564 (468,438) 17,804,432
Repayment of principal
on ESOP debt - - - - 83,726 83,726
Net earnings for the nine
months ended September 30, 1993 - - - 1,833,776 - 1,833,776
Payment of cash dividend
of $.30 per share - - - (190,265) - (190,265)
------- -------- --------- ---------- --------- ----------
Balance at September 30, 1993 634,215 $ 634,215 5,073,091 14,209,075 (384,712) 19,531,669
======= ======== ========== ========== ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months
ended September 30
---------------------
1993 1992
---------------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,833,776 1,613,827
Adjustments to reconcile net earnings
to net cash and cash equivalents (used) and
provided by operating activities:
Origination of mortgage loans available for sale (19,397,907) (11,808,750)
Proceeds from sale of loans available for sale 17,806,374 15,589,990
Amortization of deferred loan origination fees (188,289) (130,742)
Amortization of discounts on securities (4,582) (6,814)
Accretion of discounts on loans purchased (101,101) (98,565)
Amortization of premium paid on deposits 44,866 134,663
Provision for loan losses 135,265 108,276
Provision for losses on real estate acquired
through foreclosure - 83,074
Net (gain) loss on sales of:
First mortgage loans (544,825) (202,024)
Real estate owned, net (11,387) 4,737
Securities available for sale (625) -
Depreciation and amortization of premises
and equipment 132,123 124,785
Purchases of securities available for sale (1,468,951) -
Proceeds from sale of securities available for sale 1,691,249 -
Principal payments on securities available for sale 8,126 -
Decrease (increase) in accrued interest receivable 49,440 (67,342)
Stock dividends on Federal Home Loan Bank stock (41,700) (39,800)
Increase in other assets (57,597) (109,040)
(Decrease) increase in accrued interest payable 39,022 (73,558)
Decrease in income taxes payable (10,365) (65,075)
Increase in deferred income taxes (127,150) -
Increase in accrued expenses and
other liabilities 88,817 156,579
------------------------
Total adjustments (1,959,197) 3,600,394
------------------------
Net cash and cash equivalents provided (used)
by operating activities $ (125,421) 5,214,221
========================
</TABLE>
5
<PAGE> 7
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
<TABLE>
<CAPTION>
Nine months
ended September 30,
-------------------
1993 1992
-------------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from investing activities:
Net increase in loans $ (2,545,102) (2,033,443)
Purchase of loans (1,697,046) -
Principal payments on mortgage-backed securities 2,471,790 1,968,170
Purchases of mortgage-backed securities - (995,000)
Purchases of investment securities (19,128,578) (7,729,844)
Proceeds from maturities of investment securities 17,000,000 9,600,000
Proceeds from sale of real estate owned 229,345 463,130
Purchases of premises and equipment (121,280) (76,344)
-----------------------
Net cash and cash equivalents provided (used)
by investing activities (3,790,871) 1,196,669
-----------------------
Cash flows from financing activities:
Net (decrease) increase in deposits 790,304 (4,482,779)
Net increase in advances from borrowers
for taxes and insurance 543,110 549,930
Payment of additional conversion expenses - (3,754)
Net (decrease) increase in FHLB advances (750) 14,667
Cash paid for dividends (190,265) (190,265)
-----------------------
Net cash and cash equivalents provided (used)
by financing activities 1,142,399 (4,112,201)
------------------------
Net increase (decrease) in cash and cash equivalents (2,773,893) 2,298,689
Cash and cash equivalents at beginning of period $ 18,167,137 14,207,136
========================
Cash and cash equivalents at end of period $ 15,393,244 16,505,825
========================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 1,645,522 1,515,293
Income taxes 741,000 853,500
========================
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Foreclosures of loans during the period $ 462,037 26,505
Reduction in Employee Stock Ownership Plan borrowing (83,726) (149,994)
========================
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 8
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PREPARATION
The accompanying consolidated financial statements include the accounts of
Liberty Bancshares, Inc. (the "Company") and Liberty Federal Savings Bank, (the
"Bank") its wholly- owned subsidiary. The accounts of the Bank include
Northwest Tennessee Service Corporation, the Bank's wholly-owned subsidiary.
All material intercompany accounts and transactions have been eliminated.
The unaudited interim consolidated financial statements have been prepared in
accordance with the instructions for Form 10-Q and therefore, do not include
all disclosures necessary for a complete presentation of financial condition,
results of operations and cash flows in conformity with generally accepted
accounting principles. However, all adjustments which are, in the opinion of
management, necessary for the fair presentation of the interim financial
statements have been included. All such adjustments are of a normal and
recurring nature. The results of operations for the nine months ended
September 30, 1993 are not necessarily indicative of the results which may be
expected for the entire year ending December 31, 1993.
NOTE 2 - CONVERSION TO STOCK AND EARNINGS PER SHARE
The sale of 634,215 shares of $1.00 par value common stock by the Company was
consummated on December 17, 1991 pursuant to a plan of conversion of the Bank
from a Federally- chartered mutual savings bank to a Federally-chartered stock
savings bank previously approved by the members of the Bank. From the
proceeds, $634,215 was allocated to common stock and $5,076,846, which is net
of conversion costs of $631,088, was allocated to additional paid-in capital.
Earnings per share were computed based on 659,698 average common shares and
common share equivalents outstanding for the three and nine month periods ended
September 30, 1993. Earnings per share for the three and nine month periods
ended September 30, 1992 were computed based on 634,215 average common shares
outstanding.
NOTE 3 - EMPLOYEE STOCK OPTION AND STOCK OWNERSHIP PLANS
In conjunction with the conversion, the Company established a stock option plan
under which a total of 63,421 common shares are reserved for options. The plan
establishes the exercise price of the options at least equal to the market
value of the Company's common stock on the date of grant. At September 30,
1993, options for 50,740 shares had been granted under the stock option plan.
No options had been exercised as of September 30, 1993.
7
<PAGE> 9
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Also, in conjunction with the conversion, the Bank established an Employee
Stock Ownership Plan (ESOP), under which the Company will make annual
contributions to a trust for the benefit of eligible employees. The
contributions may be in the form of cash, other property, or common shares of
the Company. The amount of the annual contributions is at the discretion of
the Board of Directors of the Company. Initially, the ESOP acquired 63,429
shares of the Company's common stock financed by $634,290 in borrowings by the
ESOP. The loan is payable in quarterly principal and interest installments and
is scheduled to mature on December 17, 2001. Interest will accrue at the base
rate charged by the lender.
8
<PAGE> 10
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - LOANS RECEIVABLE
Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1993 1992
--------------------------------
(unaudited)
<S> <C> <C>
First mortgage loans (principally conventional):
Secured by one-to-four family residences $ 75,052,405 75,455,171
Secured by other properties 11,426,246 10,807,112
Construction loans 1,586,100 2,043,750
Partially guaranteed by VA or insured by FHA 5,986,468 5,841,706
Participation investment in loans purchased 2,941,805 1,566,032
----------------------------
96,993,024 95,713,771
Less:
Undisbursed portion of construction loans (856,772) (1,709,912)
Loans in process (609,012) (264,368)
Unearned discounts (423,830) (531,860)
Unamortized premiums 80,870 87,044
Net deferred loan origination fees (708,189) (633,359)
----------------------------
Total first mortgage loans 94,476,091 92,661,316
-----------------------------
Consumer and other loans:
Lines of credit secured by real estate 3,857,806 3,767,196
Floorplan 839,754 716,307
Consumer 19,119,177 16,773,626
Commercial 3,129,666 3,240,199
Share 2,548,350 2,517,757
----------------------------
29,494,753 27,015,085
Less:
Unearned income (1,408,330) (1,345,415)
------------------------------
Total consumer and other loans 28,086,423 25,669,670
-----------------------------
Less allowance for loan losses (1,169,407) (1,110,166)
------------------------------
Total loan portfolio $ 121,393,107 117,220,820
==============================
Weighted average contractual yield 8.05% 8.66%
------------------------
</TABLE>
9
<PAGE> 11
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - LOANS RECEIVABLE - Continued
The following table sets forth information with respect to the bank's
non-performing loans and other problem assets at the dates indicated.
<TABLE>
<CAPTION>
September 30, December 31,
1993 1992
----------------------------------
(unaudited)
<S> <C> <C>
Loans accounted for on a
non-accrual basis: (1)
Real estate:
Residential $ 107,828 222,568
Commercial 19,517 239,369
Commercial - -
Consumer - -
--------------------------
Total 127,345 461,937
--------------------------
Accruing loans contractually past due
90 days or more:
Real estate:
Residential 362,472 376,134
Commercial - -
Consumer 113,607 100,381
Commercial 30,200 132,130
--------------------------
Total 506,279 608,645
--------------------------
Total of non-accrual and 90 days
past due loans $ 633,624 $ 1,070,582
==========================
Other non-performing assets (2) $ 373,935 $ 129,856
==========================
</TABLE>
(1) The Bank has established an allowance for uncollectible
interest for loans on non- accrual status, which is netted with accrued
interest receivable, in the amount of $4,699 at September 30, 1993
(unaudited) and $26,612 at December 31, 1992, respectively.
(2) Other non-performing assets represents property acquired
by the bank through foreclosure or repossession, in-substance foreclosure,
and other repossessed collateral. This property is carried at the lower
of its fair value less costs to sell or the principal balance of the
related loan.
10
<PAGE> 12
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - LOANS RECEIVABLE - Continued
Activity in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1993 1992
---------------------
(unaudited) (unaudited)
<S> <C> <C>
Balance at beginning of period 1,110,166 958,313
Provision charged to income 135,265 108,276
Charge-offs, net of recoveries (76,024) (13,181)
-----------------------
Balance at end of period 1,169,407 1,053,408
======================
</TABLE>
It is the Bank's policy to net recoveries against charge-offs. Recoveries
amounted to $3,263 and $7,115 for the nine months ended September 30, 1993 and
1992, (unaudited), respectively.
NOTE 5 - INCOME TAXES
Income tax expense is summarized as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1993 1992
------------------------
(unaudited) (unaudited)
<S> <C> <C>
Federal:
Current 872,513 786,454
Deferred - -
--------------------
872,513 786,454
--------------------
State:
Current 111,955 106,946
Deferred - -
--------------------
Total 984,468 893,400
====================
</TABLE>
11
<PAGE> 13
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - INCOME TAXES - Continued
The actual income tax expense amounts differ from the "expected" tax expense of
34% for the nine month period ended September 30, 1993 and 1992 as follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1993 1992
(unaudited) (unaudited)
----------------------------------
% of % of
pretax pretax
Amount income Amount income
-------------------------------------
<S> <C> <C> <C> <C>
Computed "expected" income tax expense $ 915,992 34.0% 852,457 34.0%
Increases (reductions) in
taxes resulting from:
Bad debt deduction (26,737) (1.0) (8,400) (.4)
State income tax, net of
Federal income tax effect 72,771 2.7 70,584 2.8
Accretion of purchase
method adjustments (23,968) (.9) (26,276) (1.0)
Other 46,410 1.8 5,035 .2
-------------------------------------
Total income tax expense 984,468 36.6% 893,400 35.6%
=====================================
</TABLE>
During the first quarter of 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". SFAS No.
109 requires the Company to change its method of accounting for income taxes
from the deferred method to the asset and liability method. Under the asset
and liability method, deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax basis of existing assets and liabilities. Under
SFAS No. 109, the effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date.
The Company elected to apply the statement on a prospective basis through a
cumulative effect of a change in accounting principle. The adoption of SFAS
No. 109 resulted in a favorable net effect on 1993 earnings of $127,150.
12
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