<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
August 21, 1995 (August 21, 1995)
------------------------------------------------
Date of Report (Date of earliest event reported)
UNION PLANTERS CORPORATION
--------------------------------------------------
(Exact name of registrant as specified in charter)
TENNESSEE 0-10160 62-0859007
- ------------------------ ------------- -------------------
(State of incorporation) (Commission (I.R.S. Employer
File Number) Identification No.)
UNION PLANTERS ADMINISTRATIVE CENTER
7130 GOODLETT FARMS PARKWAY
MEMPHIS, TENNESSEE 38018
----------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (901) 383-6000
----------------
Not Applicable
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 5. OTHER INFORMATION
Union Planters Corporation (the Corporation) has entered into a definitive
agreement to acquire Capital Bancorporation, Inc. (Capital). This acquisition
is considered probable and meets the test for a significant subsidiary. Item 7
below presents the unaudited interim consolidated financial statements as of
and for the three and six months ended June 30, 1995 and 1994 and the
consolidated financial statements for the years ended December 31, 1994 and
1993. Reference is also made to the Corporation's Current Report on Form 8-K
dated June 20, 1995, which contains the Agreement and Plan of Reorganization
dated June 20, 1995 (as amended and restated June 22, 1995).
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS, AND EXHIBITS
(c) Exhibits
23 Consents of Experts and Counsel
(a) Consent of KPMG Peat Marwick LLP
99 Additional Exhibits
(a) Capital Bancorporation, Inc. and Subsidiaries Unaudited
Interim Consolidated Financial Statements as of and for
the Three and Six Months Ended June 30, 1995 and 1994
<TABLE>
<CAPTION>
Page
--------
<S> <C>
1. Consolidated Balance Sheets, June 30, 1995 1
and December 31, 1994
2. Consolidated Statements of Income, Three Months 2
and Six Months Ended June 30, 1995 and 1994
3. Consolidated Statements of Cash Flows, 3
Six Months Ended June 30, 1995 and 1994
4. Notes to Consolidated Financial Statements 4
(b) Capital Bancorporation, Inc. and Subsidiaries Consolidated
Financial Statements for the Years Ended December 31, 1994
and 1993
1. Independent Auditors' Report 1
2. Consolidated Balance Sheets, December 31, 1994 and 2
December 31, 1993
3. Consolidated Statements of Income, Years Ended 3
December 31, 1994, 1993, and 1992
4. Consolidated Statements of Changes in Stockholders' 4
Equity, Years Ended December 31, 1994, 1993, and 1992
5. Consolidated Statements of Cash Flows, 5
Years Ended December 31, 1994, 1993, and 1992
6. Notes to Consolidated Financial Statements, 6
December 31, 1994, 1993, and 1992
</TABLE>
-2-
<PAGE> 3
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: August 21, 1995 /s/ M. Kirk Walters
---------------------- ------------------------------------
M. Kirk Walters
Senior Vice President, Treasurer,
and Chief Accounting Officer
-3-
<PAGE> 1
EXHIBIT 23 (a)
Consent of KPMG Peat Marwick LLP
<PAGE> 2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Capital Bancorporation, Inc.:
We consent to the incorporation by reference in the previously filed
registration statements on Form S-3 (nos. 33-27814 and 33-50655) and Form S-8
(nos. 2-87392, 33-23306, 33-35928, 33-53454, and 33-55257) of Union Planters
Corporation of our report dated January 17, 1995, with respect to the
consolidated balance sheets of Capital Bancorporation, Inc. and subsidiaries as
of December 31, 1994 and 1993, and the related consolidated statements of
income, changes in stockholders' equity, and cash flows for each of the years
in the three-year period ended December 31, 1994, which report appears in the
Form 8-K of Union Planters Corporation dated August 21, 1995.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
August 21, 1995
<PAGE> 1
EXHIBIT 99 (A)
Capital Bancorporation, Inc. and Subsidiaries Unaudited Interim Consolidated
Financial Statements as of and for the three and six months ended June 30, 1995
and 1994
<PAGE> 2
<TABLE>
<CAPTION>
PARTI - FINANCIAL INFORMATION Capital Bancorporation, Inc. and Subsidiaries
Consolidated Balance Sheets
Item 1. Financial Statements June 30, 1995 and December 31, 1994
(Dollars in thousands, except per share data)
(Prior year periods restated due to pooling-of-interests)
(unaudited)
June 30, December 31,
1995 1994
ASSETS: -------- ------------
<S> <C> <C>
Cash and due from banks $ 27,905 35,736
Interest-bearing deposits 4,111 233
Investment securities, at amortized cost (estimated market
value of $97,892 and $111,148 at June 30, 1995 and
December 31, 1994, respectively) 97,644 113,008
Securities available for sale, at estimated market value 17,774 8,958
Federal funds sold 73,725 4,225
Loans 856,658 776,068
Less:
Unearned interest 1,898 2,211
Allowance for possible loan losses 13,702 11,877
---------- -------
Loans, net 841,058 761,980
Premises and equipment, net 27,713 25,761
Accrued interest receivable 7,981 6,531
Intangible assets 11,157 8,403
Other assets 6,265 5,116
---------- -------
Total assets $1,115,333 969,951
========== =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Demand deposits $ 100,841 104,202
Savings deposits and interest-bearing transaction accounts 212,139 213,996
Time deposits of $100 or more 113,176 93,508
Time deposits less than $100 548,913 423,617
---------- -------
Total deposits 975,069 835,323
Short-term borrowings 27,106 34,839
Federal Home Loan Bank advances 6,984 5,000
Notes payable 20,200 14,850
Convertible subordinated capital notes 207 207
Other liabilities 7,452 5,292
---------- -------
Total liabilities 1,037,018 895,511
---------- -------
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value, 200,000 shares authorized:
Series C (10.00% at June 30, 1995 and 9.75% at December 31, 1994)
increasing rate, redeemable, cumulative, perpetual preferred
stock $500 stated value and redemption value per share; issued
and outstanding 27,600 shares 13,800 13,800
Common stock, $.10 par value; 6,500,000 shares authorized; issued
and outstanding 3,073,382 and 3,033,668 shares at June 30, 1995
and December 31, 1994, respectively 307 303
Surplus 36,053 35,384
Retained earnings 28,273 25,111
Net unrealized loss on securities available for sale (118) (158)
---------- -------
Total stockholders' equity 78,315 74,440
---------- -------
Total liabilities and stockholders' equity $1,115,333 969,951
========== =======
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 3
<TABLE>
<CAPTION>
Capital Bancorporation, Inc. and Subsidiaries
Consolidated Statements of Income
Three Months and Six Months Ended June 30, 1995 and 1994
(Dollars in thousands, except per share data)
(Prior year periods restated due to pooling-of-interests)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1995 1994 1995 1994
--------------------------- -------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $17,718 13,795 34,515 26,354
Interest on investment securities:
Taxable 1,289 1,175 2,683 2,455
Tax-exempt 124 148 250 308
Interest on securities available for sale:
Taxable 126 197 261 333
Tax-exempt 3 3 6 7
Interest on Federal funds sold 884 147 1,096 418
Other interest income 2 1 5 11
------ ------ ------ ------
Total interest income 20,146 15,466 38,816 29,886
------ ------ ------ ------
INTEREST EXPENSE:
Interest on deposits 9,949 6,245 18,245 12,313
Interest on short-term borrowings 322 331 713 610
Interest on notes payable 282 265 561 509
------ ----- ------ ------
Total interest expense 10,553 6,841 19,519 13,432
------ ----- ------ ------
Net interest income 9,593 8,625 19,297 16,454
Provision for possible loan losses 316 128 852 303
------ ----- ------ ------
Net interest income after provision
for possible loan losses 9,277 8,497 18,445 16,151
------ ----- ------ ------
NONINTEREST INCOME:
Service charges on deposits 936 711 1,783 1,436
Gains on sales of securities
available for sale - - - -
Gains on sales of loans 240 343 476 762
Other 1,034 689 1,955 1,512
----- ----- ----- -----
Total noninterest income 2,210 1,743 4,214 3,710
----- ----- ----- -----
NONINTEREST EXPENSE:
Salaries and employee benefits 3,783 3,643 7,517 7,228
Occupancy 613 556 1,224 1,098
Equipment 604 506 1,171 1,040
FDIC assessments 467 424 933 849
Amortization of intangible assets 239 248 485 410
Other 1,769 1,864 3,428 3,468
----- ----- ------ ------
Total noninterest expense 7,475 7,241 14,758 14,093
----- ----- ------ ------
Income before applicable income
tax expense 4,012 2,999 7,901 5,768
Applicable income tax expense 1,582 1,160 2,964 2,162
----- ----- ----- -----
Net income 2,430 1,839 4,937 3,606
Preferred stock dividends 339 336 676 672
----- ----- ----- -----
Net income available to common
stockholders $2,091 1,503 4,261 2,934
====== ===== ===== =====
Earnings per common and common
equivalent share $ 0.65 0.49 1.33 0.95
Weighted average common and common
equivalent shares outstanding 3,225,538 3,089,908 3,194,572 3,083,872
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
<TABLE>
<CAPTION>
CAPITAL BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
For the Six Months Ended June 30, 1995 and 1994
(Dollars in thousands)
(Prior year periods restated due to pooling-of-interest)
(unaudited)
June 30
----------------------
1995 1994
----------------------
<S> <C> <C>
Cash flows from operating activities:
Net income .................................................... $ 4,937 3,606
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................... 1,535 1,874
Provision for possible loan losses .......................... 852 303
Stock dividends received .................................... - -
Gain on sale of premises and equipment ...................... (16) -
(Increase) decrease in taxes receivable...................... (198) 101
Increase in accrued interest receivable ..................... (797) (755)
Increase in accrued interest payable ........................ 1,159 256
Originations of loans for sale .............................. (32,284) (43,218)
Proceeds from sale of loans ................................. 32,760 43,980
Gain on sale of loans ....................................... (476) (762)
Other operating activities, net ............................. 684 172
-------- -------
Net cash provided by operating activities ..................... 8,156 5,557
-------- -------
Cash flows from investing activities:
(Increase) decrease in interest-bearing deposits .............. (960) 1,671
Principal payments received and proceeds from:
Maturities of investment securities ......................... 74,123 34,280
Maturities of securities available for sale ................. 540 1,940
Purchases of investment securities ............................ (58,648) (24,037)
Purchases of securities available for sale..................... (96) -
Net increase in loans to customers ............................ (19,633) (79,531)
Recoveries of loans previously charged off .................... 336 326
Decrease in cash and cash equivalents from purchase of
subsidiary, net of cash received of $364 .................... (6,493) -
Purchases of premises and equipment ........................... (949) (3,849)
Proceeds from sale of premises and equipment .................. 16 1
-------- -------
Net cash used in investing activities ......................... (11,764) (69,199)
-------- -------
Cash flows from financing activities:
Net increase in deposits ....................................... 73,759 23,848
Net increase (decrease) in short-term borrowings ............... (12,733) 11,628
Proceeds from notes payable .................................... 20,200 -
Payments on notes payable ...................................... (14,850) (1,650)
Proceeds from issuance of common stock to
Employee Stock Ownership Plan.................................. 322 -
Proceeds from exercise of common stock warrants and options..... 351 16
Dividends paid on common stock ................................. (1,100) (901)
Dividends paid on preferred stock .............................. (672) (672)
-------- -------
Net cash provided by financing activities ...................... 65,277 32,269
-------- -------
Net increase (decrease) in cash and cash equivalents ......... 61,669 (31,373)
Cash and cash equivalents at beginning of period ............... 39,961 71,573
-------- -------
Cash and cash equivalents at end of period ..................... $101,630 40,200
======== =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest on deposits and borrowed funds .................... $ 18,076 13,177
Income taxes ............................................... 3,143 2,123
Non cash activity during the period for:
Transfer of loans to foreclosed property ................... 338 352
Loans charged off .......................................... 764 593
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
Capital Bancorporation, Inc.
Notes to Consolidated Financial Statements
1. Basis of Financial Statement Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. They do not include all information and footnotes required by
generally accepted accounting principles for complete financial statements.
However, except as disclosed herein, there has been no material change in the
information disclosed in the notes to consolidated financial statements included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1994. In the opinion of management, all adjustments, consisting of normal
recurring accruals considered necessary for a fair presentation have been
included. Operating results for the three months and six months ended June 30,
1995 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1995.
On August 31, 1994 the Company acquired Bank of South County located in St.
Louis, Missouri in a transaction accounted for as a pooling-of-interests.
Accordingly, prior period financial statements have been restated as if the
combining entities had been consolidated for all periods.
2. On June 30, 1995 the Company acquired all of the issued and outstanding
capital stock of Home Federal Savings and Loan Association ("Home Federal"), a
federally chartered stock savings association, which has three banking
locations in Jonesboro, Arkansas and a loan production office in Paragould,
Arkansas. At June 30, 1995 Home Federal had total assets of $81,762,000, total
deposits of $65,986,000, total loans, net of unearned interest, of $62,371,000,
and equity capital of $7,857,000. The name of the institution was changed to
Capital Bank, a Federal Savings Bank.
Under the terms of the agreement, the aggregate cash purchase price was
$6,856,879. The acquisition was financed through debt provided by an
unaffiliated lender and was accounted for utilizing the purchase method of
accounting.
3. On June 20, 1995, Union Planters Corporation ("UPC") and Capital
Bancorporation, Inc. entered into a definitive Agreement and Plan of
Reorganization (which was subsequently amended on June 22, 1995) pursuant to
which UPC is to acquire all of the issued and outstanding stock of Capital.
Each share of Capital's common stock issued and outstanding on the date of
closing is to be exchanged for 1.185 shares of UPC common stock. The
transaction is expected to be completed during the first quarter of 1996, and
is subject to the approval of the Company's common stockholders, regulatory
approval, and the satisfaction of certain normal contractual closing
conditions.
4
<PAGE> 1
EXHIBIT 99 (B)
Capital Bancorporation, Inc. and Subsidiaries Consolidated Financial Statements
for the years ended December 31, 1994 and 1993
<PAGE> 2
Independent Auditors' Report
(LOGO) KPMG Peat Marwick LLP
THE BOARD OF DIRECTORS AND STOCKHOLDERS
CAPITAL BANCORPORATION, INC.:
We have audited the accompanying consolidated balance sheets of Capital
Bancorporation, Inc. and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1994. 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 Capital
Bancorporation, Inc. and subsidiaries at December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994 in conformity with generally accepted
accounting principles.
As discussed in notes 1 and 5 to the consolidated financial statements,
the Company changed its method of accounting for investments in debt and
marketable equity securities to adopt the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities", at
January 1, 1994.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
January 17, 1995
1
<PAGE> 3
CAPITAL BANCORPORATION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1994 and 1993
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
ASSETS: 1994 1993
-------- --------
<S> <C> <C>
Cash and due from banks (note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $35,736 27,548
Interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233 1,872
Investment securities, at amortized cost (estimated market value of $111,148
and $123,419 at December 31, 1994 and 1993, respectively) (note 4) . . . . . . . . . . . . . 113,008 121,983
Securities available for sale (estimated market value of $13,479 at December 31, 1993) (note 5) 8,958 13,454
Federal funds sold (note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,225 44,025
Loans (notes 7 and 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 776,068 651,835
Less:
Unearned interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,211 2,211
Allowance for possible loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,877 11,146
-------- -------
Loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 761,980 638,478
Premises and equipment, net (note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,761 22,254
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,531 5,398
Intangible assets (note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,403 9,131
Other assets (note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,116 5,908
-------- -------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $969,951 890,051
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Demand deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $104,202 103,709
Savings deposits and interest-bearing transaction accounts . . . . . . . . . . . . . . . . . . 213,996 244,408
Time deposits of $100 or more . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,508 73,100
Time deposits less than $100 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423,617 352,922
-------- -------
Total deposits (note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 835,323 774,139
Short-term borrowings (notes 9 and 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,839 24,877
Notes payable (notes 10 and 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,850 16,500
Convertible subordinated capital notes (notes 11 and 13) . . . . . . . . . . . . . . . . . . . 207 207
Guaranteed loan of Employee Stock Ownership Plan (note 15) . . . . . . . . . . . . . . . . . . -- 120
Other liabilities (note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,292 4,366
-------- -------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 895,511 820,209
-------- -------
Financial instruments with off-balance-sheet risk (notes 13 and 16) . . . . . . . . . . . . . . -- --
Contingent liabilities (note 17) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value, 200,000 shares authorized:
Series C 9.75% increasing rate, redeemable, cumulative perpetual preferred stock,
$500 stated value and redemption value per share; issued and outstanding 27,600
shares (note 18) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,800 13,800
Common stock, $.10 par value; 6,500,000 shares authorized; issued and outstanding
3,033,668 and 2,989,303 shares at December 31, 1994 and 1993, respectively (note 19) . . . . 303 299
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,384 34,753
Retained earnings (note 20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,111 21,110
Less guaranteed loan of Employee Stock Ownership Plan (note 15) . . . . . . . . . . . . . . . . -- (120)
Net unrealized loss on securities available for sale . . . . . . . . . . . . . . . . . . . . . (158) --
-------- -------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,440 69,842
-------- -------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . . . . $969,951 890,051
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
CAPITAL BANCORPORATION, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST INCOME: 1994 1993 1992
------- ------ ------
<S> <C> <C> <C>
Interest and fees on loans (note 7) . . . . . . . . . . . . . . . . . . . $56,881 50,406 44,134
Interest on investment securities:
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,962 5,401 4,640
Tax-exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 580 672 608
Interest on securities available for sale:
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 621 464 --
Tax-exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 10 --
Interest on Federal funds sold . . . . . . . . . . . . . . . . . . . . . 835 1,083 979
Other interest income . . . . . . . . . . . . . . . . . . . . . . . . . . 16 120 70
------- ------ ------
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . 63,908 58,156 50,431
------- ------ ------
INTEREST EXPENSE:
Interest on savings deposits and interest-bearing transaction accounts . 6,089 5,975 4,831
Interest on time deposits of $100 or more . . . . . . . . . . . . . . . . 3,234 2,995 3,526
Interest on time deposits less than $100 . . . . . . . . . . . . . . . . 17,434 15,852 16,678
Interest on short-term borrowings . . . . . . . . . . . . . . . . . . . . 1,218 973 1,046
Interest on notes payable . . . . . . . . . . . . . . . . . . . . . . . . 1,078 1,019 268
Interest on convertible subordinated capital notes . . . . . . . . . . . 19 19 19
------- ------ ------
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . 29,072 26,833 26,368
------- ------ ------
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . 34,836 31,323 24,063
Provision for possible loan losses (note 7) . . . . . . . . . . . . . . . . . . . . 1,258 1,392 1,889
------- ------ ------
Net interest income after provision for possible loan losses . . . . . 33,578 29,931 22,174
------- ------ ------
NONINTEREST INCOME:
Service charges on deposits . . . . . . . . . . . . . . . . . . . . . . . 2,962 2,958 2,160
Securities gains, net (notes 4 and 5) . . . . . . . . . . . . . . . . . . -- 11 --
Gains on sale of mortgage loans. . . . . . . . . . . . . . . . . . . . . . 1,102 2,210 1,234
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,179 2,458 1,522
------- ------ ------
Total noninterest income . . . . . . . . . . . . . . . . . . . . . . . 7,243 7,637 4,916
------- ------ ------
NONINTEREST EXPENSE:
Salaries and employee benefits (note 15) . . . . . . . . . . . . . . . . . 14,356 13,328 9,005
Occupancy (note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,291 2,037 1,392
Equipment (note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,247 2,003 1,495
FDIC assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,737 1,700 1,261
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . 912 925 562
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,319 6,776 4,486
------- ------ ------
Total noninterest expense . . . . . . . . . . . . . . . . . . . . . . . 28,862 26,769 18,201
------- ------ ------
Income before applicable income tax expense . . . . . . . . . . . . . . 11,959 10,799 8,889
Applicable income tax expense (note 12) . . . . . . . . . . . . . . . . . . . . . . 4,706 3,748 3,187
------- ------ ------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,253 7,051 5,702
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,345 1,345 717
------- ------ ------
Net income available to common stockholders . . . . . . . . . . . . . . $ 5,908 5,706 4,985
======= ====== ======
Net income per common and common equivalent share (based on weighted average
common and common equivalent shares outstanding of 3,109,925, 3,040,548,
and 2,997,940 for the years ended December 31, 1994, 1993, and 1992,
respectively). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.90 1.88 1.66
======= ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
CAPITAL BACORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Preferred
Stock Common Retained
Series C Stock Surplus Earnings
--------- ------ ------- ---------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991 . . . . . . . . . . . . . . . . . $ -- 299 35,602 13,737
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- -- 5,702
Issuance of 27,600 shares of Series C preferred stock . . . . . 13,800 -- (858) --
Common stock dividends, Capital Bancorporation, Inc.
$.60 per share . . . . . . . . . . . . . . . . . . . . . . -- -- -- (1,545)
Common stock dividends, pooled companies
prior to acquisition . . . . . . . . . . . . . . . . . . . -- -- -- (50)
Series C preferred stock dividends, $26.00 per share . . . . . -- -- -- (717)
Reduction in guaranteed loan of Employee
Stock Ownership Plan . . . . . . . . . . . . . . . . . . . -- -- -- --
------- ---- ------ ------
BALANCE AT DECEMBER 31, 1992 . . . . . . . . . . . . . . . . . 13,800 299 34,744 17,127
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- -- 7,051
Exercise of common stock warrants . . . . . . . . . . . . . . . -- -- 9 --
Common stock dividends, Capital Bancorporation, Inc.
$.65 per share . . . . . . . . . . . . . . . . . . . . . . -- -- -- (1,673)
Common stock dividends, pooled companies
prior to acquisition . . . . . . . . . . . . . . . . . . . -- -- -- (50)
Series C preferred stock dividends, $48.75 per share . . . . . -- -- -- (1,345)
Reduction in guaranteed loan of Employee
Stock Ownership Plan . . . . . . . . . . . . . . . . . . . -- -- -- --
------- ---- ------ ------
BALANCE AT DECEMBER 31, 1993 . . . . . . . . . . . . . . . . . 13,800 299 34,753 21,110
Effect of change in accounting principle . . . . . . . . . . . -- -- -- --
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- -- 7,253
Payment of cash for fractional shares . . . . . . . . . . . . . -- -- (2) --
Exercise of common stock warrants . . . . . . . . . . . . . . . -- 1 167 --
Exercise of common stock options . . . . . . . . . . . . . . . -- 2 223 --
Issuance of 11,000 shares of common stock to
Employee Stock Ownership Plan . . . . . . . . . . . . . . -- 1 243 --
Common stock dividends Capital Bancorporation,
Inc. $.69 per share . . . . . . . . . . . . . . . . . . . -- -- -- (1,857)
Common stock dividends, pooled companies
prior to acquisition . . . . . . . . . . . . . . . . . . . -- -- -- (50)
Series C preferred stock dividends, $48.75 per share . . . . . -- -- -- (1,345)
Reduction in guaranteed loan of Employee
Stock Ownership Plan . . . . . . . . . . . . . . . . . . . -- -- -- --
Unrealized loss on securities available for sale . . . . . . . -- -- -- --
------- ---- ------ ------
BALANCE AT DECEMBER 31, 1994 . . . . . . . . . . . . . . . . . $13,000 303 35,384 25,111
======= ==== ====== ======
<CAPTION>
Guaranteed Loan
of Employee Net Unrealized Loss
Stock Ownership on Securities
Plan Available for Sale Total
------------------- ------------------ -----
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991 . . . . . . . . . . . . . . . . . (480) -- 49,158
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 5,702
Issuance of 27,600 shares of Series C preferred stock . . . . . -- -- 12,942
Common stock dividends, Capital Bancorporation, Inc.
$.60 per share . . . . . . . . . . . . . . . . . . . . . . -- -- (1,545)
Common stock dividends, pooled companies
prior to acquisition . . . . . . . . . . . . . . . . . . . -- -- (50)
Series C preferred stock dividends, $26.00 per share . . . . . -- -- (717)
Reduction in guaranteed loan of Employee
Stock Ownership Plan . . . . . . . . . . . . . . . . . . . 120 -- 120
---- ---- ------
BALANCE AT DECEMBER 31, 1992 . . . . . . . . . . . . . . . . . (360) -- 65,610
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 7,051
Exercise of common stock warrants . . . . . . . . . . . . . . . -- -- 9
Common stock dividends, Capital Bancorporation, Inc.
$.65 per share . . . . . . . . . . . . . . . . . . . . . . -- -- (1,673)
Common stock dividends, pooled companies
prior to acquisition . . . . . . . . . . . . . . . . . . . -- -- (50)
Series C preferred stock dividends, $48.75 per share . . . . . -- -- (1,345)
Reduction in guaranteed loan of Employee
Stock Ownership Plan . . . . . . . . . . . . . . . . . . . 240 -- 240
---- ---- ------
BALANCE AT DECEMBER 31, 1993 . . . . . . . . . . . . . . . . . (120) -- 69,842
Effect of change in accounting principle . . . . . . . . . . . -- 17 17
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 7,253
Payment of cash for fractional shares . . . . . . . . . . . . . -- -- (2)
Exercise of common stock warrants . . . . . . . . . . . . . . . -- -- 168
Exercise of common stock options . . . . . . . . . . . . . . . -- -- 225
Issuance of 11,000 shares of common stock to
Employee Stock Ownership Plan . . . . . . . . . . . . . . -- -- 244
Common stock dividends Capital Bancorporation,
Inc. $.69 per share . . . . . . . . . . . . . . . . . . . -- -- (1,857)
Common stock dividends, pooled companies
prior to acquisition . . . . . . . . . . . . . . . . . . . -- -- (50)
Series C preferred stock dividends, $48.75 per share . . . . . -- -- (1,345)
Reduction in guaranteed loan of Employee
Stock Ownership Plan . . . . . . . . . . . . . . . . . . . 120 -- 120
Unrealized loss on securities available for sale . . . . . . . -- (175) (175)
---- ---- ------
BALANCE AT DECEMBER 31, 1994 . . . . . . . . . . . . . . . . . -- (158) 74,440
==== ==== ======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
CAPITAL BANCORPORATION, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993 1992
--------- -------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,253 7,051 5,702
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,848 4,072 2,767
Provision for possible loan losses . . . . . . . . . . . . . . . . . . . . . . . . . 1,258 1,392 1,889
Provision for deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . (242) (407) (845)
Gain on sales of securities available for sale . . . . . . . . . . . . . . . . . . . -- (11) --
Stock dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (89) --
(Gain) loss on sale of premises and equipment . . . . . . . . . . . . . . . . . . . (3) 6 (45)
(Increase) decrease in taxes receivable . . . . . . . . . . . . . . . . . . . . . . 185 (459) 314
(Increase) decrease in accrued interest receivable . . . . . . . . . . . . . . . . . (1,133) 223 524
Increase (decrease) in accrued interest payable . . . . . . . . . . . . . . . . . . 619 (403) (1,243)
Proceeds from sale of mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . 66,632 127,572 73,357
Origination of mortgage loans for sale . . . . . . . . . . . . . . . . . . . . . . . (65,530) (125,362) (72,385)
Gain on sale of mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,102) (2,210) (1,234)
Other operating activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . 1,763 1,653 49
--------- -------- -------
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . 13,548 13,028 8,850
--------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in interest-bearing deposits . . . . . . . . . . . . . . . . . . . 1,639 1,170 (2,948)
Principal payments received and proceeds from:
Sales of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 100
Sales of securities available for sale . . . . . . . . . . . . . . . . . . . . . . . -- 12,898 --
Maturities of investment securities . . . . . . . . . . . . . . . . . . . . . . . . 63,779 75,580 63,154
Maturities of securities available for sale . . . . . . . . . . . . . . . . . . . . 2,941 3,999 --
Purchases of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . (54,287) (82,652) (69,617)
Purchases of securities available for sale . . . . . . . . . . . . . . . . . . . . . . (54) (4,629) --
Net increase in loans to customers . . . . . . . . . . . . . . . . . . . . . . . . . . (125,757) (45,196) (18,356)
Recoveries of loans previously charged off . . . . . . . . . . . . . . . . . . . . . . 427 657 373
Decrease in cash and cash equivalents from purchase of subsidiary, net of
cash paid of $17,304 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- (10,667)
Purchase of premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . (5,748) (4,078) (935)
Proceeds from sale of premises and equipment . . . . . . . . . . . . . . . . . . . . . 20 22 175
--------- -------- -------
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . (117,040) (42,229) (38,721)
--------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,184 44,939 22,462
Net increase (decrease) in short-term borrowings . . . . . . . . . . . . . . . . . . . 14,963 3,401 (882)
Proceeds from notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 16,500
Payments on notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,650) -- (8,500)
Proceeds from issuance of common stock to Employee Stock Ownership Plan . . . . . . . . 244 -- --
Proceeds from exercise of common stock warrants . . . . . . . . . . . . . . . . . . . . 168 9 --
Proceeds from exercise of common stock options . . . . . . . . . . . . . . . . . . . . 225 -- --
Payments for fractional shares in a pooling-of-interests acquisition . . . . . . . . . (2) -- --
Proceeds from issuance of preferred stock . . . . . . . . . . . . . . . . . . . . . . . -- -- 12,942
Dividends paid on common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,907) (1,723) (1,595)
Dividends paid on preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,345) (1,345) (605)
--------- -------- -------
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . 71,880 45,281 40,322
--------- -------- -------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . (31,612) 16,080 10,451
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . 71,573 55,493 45,042
--------- -------- -------
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . $ 39,961 71,573 55,493
========= ======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -
CASH PAID DURING THE YEAR FOR:
Interest on deposits and borrowed funds . . . . . . . . . . . . . . . . . . . . . . . . $ 28,453 27,236 27,611
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,843 4,233 3,703
NONCASH ACTIVITY DURING THE YEAR FOR:
Transfer of loans to foreclosed property . . . . . . . . . . . . . . . . . . . . . . . 570 1,875 774
Loans charged off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 954 1,358 1,557
========= ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993, and 1992
(Dollars in thousands, except per share data)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Capital Bancorporation, Inc. (the "Company") provides a full range of
banking services to individual and corporate customers through its subsidiary
banks located in central, eastern, southeastern, and southwestern Missouri. The
Company is subject to competition from other financial institutions.
Additionally, the Company and its banking subsidiaries are subject to the
regulations of certain federal and state agencies and undergo periodic
examinations by those regulatory agencies.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements of the Company have been prepared in
conformity with generally accepted accounting principles and conform to
predominant practices within the banking industry. In preparing the
consolidated financial statements, management is required to make estimates and
assumptions which may significantly affect the reported amounts of assets and
liabilities as of the date of the balance sheet and the results of operations.
Estimates which are particularly susceptible to significant change in the
near-term relate to the determination of the allowance for possible loan losses
and the valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans. The more significant accounting policies used by the
Company in the consolidated financial statements are summarized below.
The acquisition of Bank of South County on August 31, 1994 was accounted
for utilizing the pooling-of-interests method of accounting, and, accordingly,
its results of operations have been included in the Company's results of
operations as if the transaction had taken place on the first day of each
presented period.
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Capital Bank of Cape Girardeau County (the
"Cape Girardeau Bank"), Cape Girardeau, Missouri, Maryland Avenue
Bancorporation, Inc., a one-bank holding company which owns Capital Bank and
Trust (the "St. Louis Bank"), St. Louis, Missouri, Century State Bancshares,
Inc., a one-bank holding company which owns Capital Bank of Columbia, (the
"Columbia Bank"), Columbia, Missouri, Capital Bank of Sikeston (the "Sikeston
Bank"), Sikeston, Missouri, Capital Bank of Perryville, National Association
(the "Perryville Bank"), Perryville, Missouri, and Capital Bank of Southwest
Missouri (the "Springfield Bank"), Ozark, Missouri (collectively the
"Subsidiary Banks"). All significant intercompany balances and transactions
have been eliminated.
INVESTMENT SECURITIES AND SECURITIES AVAILABLE FOR SALE
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"). SFAS 115 addresses the accounting and
reporting for investments in equity securities that have readily determinable
fair values, and all investments in debt securities. Under SFAS 115, the
Company is required to classify debt and equity securities into one of three
categories:
HELD-TO-MATURITY - includes debt securities which the Company has the
positive intent and ability to hold until maturity.
TRADING SECURITIES - includes debt and equity securities purchased and held
principally for the purpose of selling them in the near term.
AVAILABLE-FOR-SALE - includes debt and equity securities not classified as
held-to-maturity or trading, i.e., investments which the Company has no present
plans to sell in the near-term but may be sold in the future under different
circumstances.
The Company classified its portfolio as held-to-maturity and
available-for-sale with no securities classified as trading. Debt securities
classified as held-to-maturity are measured at amortized cost, with the
amortization of premiums and accretion of discounts recorded using methods
approximating the interest method. Unrealized holding gains and losses for
trading securities (for which no securities were so designated at January 1,
1994) are to be included in earnings, while such gains and losses for
available-for-sale securities are to be excluded from earnings and reported as
a net amount in a separate component of stockholders' equity until realized.
Unrealized holding gains and losses for held-to-maturity securities are to be
excluded from earnings and stockholders' equity. For available-for-sale
securities, gains or losses realized are included in other noninterest income
upon sale, based on the amortized cost of the individual security sold. All
previous fair value adjustments included in the separate component of
stockholders' equity are reversed upon sale.
Prior to January 1, 1994, investments in debt securities were stated at
cost, adjusted for amortization of premiums and accretion of discounts.
Mortgage-backed securities were carried at their outstanding principal balance,
adjusted for amortization of premiums and accretion of discounts considering
the level of current and anticipated repayments. Amortization and accretion
was recorded us-
6
<PAGE> 8
ing a method which approximates the interest method. Investments in equity
securities were carried at the lower of aggregate cost or market value. Gains
or losses were recognized upon realization and are shown separately in the
consolidated statements of income and the cost of the securities sold was based
on a specific identification method.
LOANS
Loans held for portfolio are carried at cost, adjusted for amortization of
premiums and accretion of discounts using a method which approximates the level
yield method. Loans held for portfolio are stated at cost as the Company has
the ability and it is management's intention to hold them until maturity.
MORTGAGE BANKING OPERATIONS
The Company provides long-term financing of one- to four-family residential
real estate by originating variable and fixed rate loans. Generally, fixed rate
loans are sold into the secondary market without recourse. Upon receipt of an
application for a real estate loan, the Company determines whether the loan
will be sold into the secondary market or retained in the Company's loan
portfolio. For loans to be sold into the secondary market, the Company
generally locks into an interest rate with the secondary market purchaser at
the same time the Company locks into an interest rate with the customer. This
practice eliminates the Company's exposure to interest rate fluctuations. Upon
disbursement of the loan proceeds to the customer, the loan is delivered to the
secondary market purchaser. Sales proceeds are generally received three to
fifteen days later. By following these procedures, no loans held for sale are
included in the Subsidiary Banks' loan portfolios at any point in time, except
those for which the sales proceeds have not yet been received. However, such
amount is not material to the Company's consolidated balance sheets.
LOAN INCOME
Interest income on commercial, real estate, and certain consumer loans is
recognized monthly using the interest method. Interest on other consumer loans
is recognized using the sum-of-the-digits method, which approximates the
interest method. The accrual of interest on loans is discontinued when payment
of principal or interest is in doubt. Interest income on nonaccrual loans is
recognized only to the extent payments are received. Loans are returned to
accrual status when management expects full collection of principal and
interest.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is increased by provisions charged
to operations and is available to absorb loan losses. Management utilizes a
systematic, documented approach in determining the appropriate level of the
allowance for possible loan losses.
Management's approach, which provides for general and specific allowances,
is based on current economic conditions, past loss and collection experience,
risk characteristics of the portfolio, assessment of collateral values obtained
from independent appraisals for significant properties, and such other factors
which in management's judgment deserve current recognition in estimating
possible loan losses.
Management believes the allowance for possible loan losses is adequate to
absorb losses in the loan portfolio. While management uses available
information to recognize losses on loans, future additions to the allowance may
be necessary based on changes in economic conditions. In addition, various
regulatory agencies, as an integral part of the examination process,
periodically review the Subsidiary Banks' allowance for possible loan losses.
Such agencies may require the Subsidiary Banks to increase the allowance for
possible loan losses based on their assessment of information available to them
at the time of their examinations.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation of premises and equipment is provided over the estimated useful
lives of the respective assets on the straight-line method.
Expenditures for major renewals and betterments of premises and equipment
are capitalized, and those for maintenance and repairs are expensed as
incurred.
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED
Excess of cost over fair value of net assets acquired is amortized on
accelerated and straight-line methods over periods not exceeding 15 years.
FORECLOSED PROPERTY
Foreclosed property comprises real properties acquired in partial or total
satisfaction of problem loans. The properties are recorded at fair value less
applicable selling costs at the date acquired. Fair value for significant
properties is determined by obtaining independent appraisals. Losses arising at
the time of acquisition of such properties are charged against the allowance
for possible loan losses. Subsequent write-downs that may be required to the
carrying value of these properties are charged to current period operations.
Gains and losses realized from the sale of foreclosed property are included in
other operating income. Foreclosed property in the amounts of $1,283 and $2,140
at December 31, 1994 and 1993, respectively, is included in other assets in the
consolidated balance sheets.
INCOME TAXES
The Company and its subsidiaries file consolidated Federal income tax
returns. Applicable income taxes are computed based on reported income and
expenses, adjusted for permanent differences between reported income and
taxable income. Temporary differences exist between income and expense
recognition for financial reporting and tax purposes.
7
<PAGE> 9
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109") and
has reported the cumulative effect of the changes in the method of accounting
for income taxes in the 1993 consolidated statement of income. The objective of
the asset and liability method under SFAS 109 is to establish deferred tax
assets and liabilities for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and liabilities at
enacted tax rates expected to be in effect when such amounts are realized or
settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. The adoption of SFAS 109 did not have a material effect on the
results of operations of the Company and, accordingly, the cumulative
adjustment was included in applicable income tax expense for the first quarter
of 1993.
Pursuant to the deferred method under APB Opinion 11, which was applied in
1992 and prior years, deferred income taxes were recognized for income and
expense items that are reported in different years for financial reporting and
tax purposes using the tax rate applicable for the year of the calculation.
Under the deferred method, deferred taxes are not adjusted for subsequent
changes in tax rates.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For purposes of the consolidated statements of cash flows, cash and cash
equivalents is defined as cash and due from banks and Federal funds sold.
FINANCIAL INSTRUMENTS
For purposes of information included in note 16 regarding disclosures about
financial instruments, financial instruments are defined as cash, evidence of
an ownership interest in an entity, or a contract that both:
(a) Imposes on one entity a contractual obligation to deliver cash or another
financial instrument to a second entity or to exchange other financial
instruments on potentially unfavorable terms with the second entity; and
(b) Conveys to that second entity a contractual right to receive cash or
another financial instrument from the first entity or to exchange other
financial instruments on potentially favorable terms with the first entity.
During October 1994, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments"
("SFAS 119"). SFAS 119 requires disclosures about the amounts, nature, and
terms of derivative financial instruments that are not subject to Statement of
Financial Accounting Standards No. 105, "Disclosure of Information about
Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments
with Concentrations of Credit Risk," because they do not result in
off-balance-sheet risk of accounting loss. SFAS 119 requires that a distinction
be made between financial instruments held or issued for trading purposes and
financial instruments held or issued for purposes other than trading.
SFAS 119 is effective for financial statements issued for fiscal years
ending after December 15, 1994. The Company implemented SFAS 119 on December
31, 1994, which resulted in no effect on the consolidated financial statements
other than the additional disclosure requirement presented in note 16.
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income per common and common equivalent share is computed by dividing
net income less preferred stock dividends by the weighted average number of
common shares and common stock equivalents outstanding, when dilutive, in each
year. The common stock equivalents consist of warrants and common stock
options.
RECLASSIFICATIONS
Certain 1993 and 1992 amounts have been reclassified to conform with 1994
classifications and format.
(2) BUSINESS COMBINATIONS
On August 31, 1994, the Company acquired Bank of South County with assets
totaling $65,138. A total of 432,346 shares of Company common stock was issued
in the transaction which was accounted for as a pooling-of-interests.
Net income and net income per share for the Company and Bank of South
County prior to restatement were as follows:
<TABLE>
<CAPTION>
Year ended
----------
1993 1992
---- ----
(Dollars in thousands,
except per share data)
<S> <C> <C>
Company
Net income . . . . . . . . . . . . . . . $6,735 $5,353
Net income per common and
common equivalent share . . . . . . . 2.06 1.80
Bank of South County
Net income . . . . . . . . . . . . . . . 316 349
Net income per common and
common equivalent share . . . . . . . 3.16 3.49
</TABLE>
On December 30, 1992, the Company purchased all of the outstanding shares
of the Springfield Bank for cash (including acquisition costs) of $17,424. The
Springfield Bank is a Missouri chartered bank headquartered in Ozark, Missouri,
a suburb of Springfield, Missouri. The Springfield Bank has a total of ten
locations of which four are in Springfield, two are in Ozark, and four are in
Branson, Missouri. The source of cash for the acquisition was the issuance and
sale by the Company of depositary shares representing fractional interests in
the Company's Series C preferred stock and borrowings from an unaffiliated
bank.
8
<PAGE> 10
This acquisition was accounted for as a purchase and, accordingly, the
Springfield Bank's results of operations have been included in the consolidated
financial statements subsequent to the acquisition date. The purchase price has
been allocated to the net assets acquired based on their fair value, with the
excess recorded as cost in excess of net assets at the date of acquisition. The
estimated fair value of the net assets at the acquisition date were as follows:
<TABLE>
<S> <C>
Cash and cash equivalents . . . . . . . . . . . . . . $ 6,637
Investments in debt securities . . . . . . . . . . . . 48,887
Loans, net . . . . . . . . . . . . . . . . . . . . . . 106,924
Other assets . . . . . . . . . . . . . . . . . . . . . 6,469
--------
Total assets . . . . . . . . . . . . . . . . . . . 168,917
--------
Deposits . . . . . . . . . . . . . . . . . . . . . . . 153,932
Other liabilities . . . . . . . . . . . . . . . . . . 1,055
--------
Total liabilities . . . . . . . . . . . . . . . . 154,987
--------
Net assets acquired . . . . . . . . . . . . . . . . . 13,930
Cost of acquisition . . . . . . . . . . . . . . . . . 17,424
--------
Excess of cost over fair value
of net assets acquired . . . . . . . . . . . . . . $ 3,494
========
</TABLE>
Following is an unaudited pro forma summary of the consolidated results of
operations for the year ended December 31, 1992, assuming the purchase of the
Springfield Bank had taken place on January 1, 1992. The pro forma consolidated
results of operations are not necessarily indicative of the Company's
consolidated results of operations as they may be in the future or as they
might have been if the transaction had occurred on January 1, 1992.
<TABLE>
<S> <C>
Interest income . . . . . . . . . . . . . . . . . . . $63,043
Interest expense . . . . . . . . . . . . . . . . . . . 33,190
-------
Net interest income . . . . . . . . . . . . . . . 29,853
Provision for possible loan losses . . . . . . . . . . 3,106
-------
Net interest income
after provision for
possible loan losses . . . . . . . . . . . . . 26,747
Noninterest income . . . . . . . . . . . . . . . . . . 6,135
Noninterest expense . . . . . . . . . . . . . . . . . 25,030
-------
Income before applicable
income tax expense . . . . . . . . . . . . . . 7,852
Applicable income tax expense . . . . . . . . . . . . 2,636
-------
Net income . . . . . . . . . . . . . . . . . . . . $ 5,216
=======
Net income per common and
common equivalent share . . . . . . . . . . . . . $ 1.29
=======
</TABLE>
(3) CASH AND DUE FROM BANKS
The Subsidiary Banks are required to maintain certain daily reserve
balances on hand in accordance with regulatory requirements. The reserve
balance maintained in accordance with such requirements at December 31, 1994
and 1993 was $4,413 and $5,085, respectively.
(4) INVESTMENT SECURITIES
The amortized cost and estimated market values of investment securities at
December 31, 1994 and 1993 follow. The estimated market value of investment
securities, except certain state and municipal securities, are estimated based
on bid prices published in financial newspapers or bid quotations received from
securities dealers. The estimated market values of certain state and municipal
securities are not readily available through market sources other than dealer
quotations, so fair value estimates are based on quoted market prices of
similar instruments, adjusted for differences between the quoted instruments
being valued.
<TABLE>
<CAPTION>
1994
----------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities . . . . . . . $ 47,270 1 (699) 46,572
Securities of U.S. Government
corporations and agencies . . . . . 49,607 180 (1,063) 48,724
Obligations of states and
political subdivisions . . . . . . 9,813 19 (173) 9,659
Other securities . . . . . . . . . . . 6,318 1 (126) 6,193
-------- --- ------ -------
TOTALS . . . . . . . . . . . . . . $113,008 201 (2,061) 111,148
======== === ====== =======
</TABLE>
<TABLE>
<CAPTION>
1993
----------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities . . . . . . . $ 44,304 197 (22) 44,479
Securities of U.S. Government
corporations and agencies . . . . . 58,064 962 (77) 58,949
Obligations of states and
political subdivisions . . . . . . 10,653 282 (20) 10,915
Other securities . . . . . . . . . . . 8,962 117 (3) 9,076
-------- ----- ---- -------
Totals . . . . . . . . . . . . . . $121,983 1,558 (122) 123,419
======== ===== ==== =======
</TABLE>
The amortized cost and estimated market value of investment securities at
December 31, 1994 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>
Due in one year or less . . . . . . . . . . $58,548 58,002
Due after one year through five years . . . 32,266 31,653
Due after five years through ten years . . 738 705
Due after ten years . . . . . . . . . . . . 2,044 1,954
-------- -------
Subtotals . . . . . . . . . . . . . . . 93,596 92,314
Mortgage-backed securities . . . . . . . . 19,412 18,834
-------- -------
Totals . . . . . . . . . . . . . . . . . $113,008 111,148
======== =======
</TABLE>
9
<PAGE> 11
There were no sales of investment securities during 1994 and 1993. Proceeds
from the sales of investment securities during 1992 were $100. No gain or loss
was realized on such sales in 1992.
Debt securities having an amortized cost of approximately $69,726 and
$69,053 at December 31, 1994 and 1993, respectively, were pledged to secure
public funds and for other purposes as required or permitted by law.
(5) SECURITIES AVAILABLE FOR SALE
The Company adopted SFAS 115 as of January 1, 1994, which resulted in a
change in classification of investment securities of $15,489 from held to
maturity to available for sale; the establishment of a market valuation account
of $25 to increase the recorded balance of the related securities to their fair
value on that date; a deferred income tax liability of $8; and a net increase
of $17 recorded as a separate component of stockholders' equity. As of December
31, 1994, the market valuation account reflected a net decline in value of $238
resulting in a deferred tax benefit of $80 and a net unrealized loss on
securities available for sale of $158.
A summary of securities available for sale at December 31, 1994 and 1993 is
as follows:
<TABLE>
<CAPTION>
1994
----------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities . . . . . . . $ 200 -- (3) 197
Securities of U.S. Government
corporations and agencies . . . . . 6,663 17 (251) 6,429
Obligations of states and
political subdivisions . . . . . . 220 1 (2) 219
Other securities . . . . . . . . . . . 2,113 -- -- 2,113
------ -- ---- -----
TOTALS . . . . . . . . . . . . . . $9,196 18 (256) 8,958
====== == ==== =====
</TABLE>
<TABLE>
<CAPTION>
1993
----------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities . . . . . . . $ 4,409 8 -- 4,417
Securities of U.S. Government
corporations and agencies . . . . . 8,050 24 (15) 8,059
Obligations of states and
political subdivisions . . . . . . 571 5 -- 576
Other securities . . . . . . . . . . . 424 3 -- 427
------- -- --- ------
Totals . . . . . . . . . . . . . . $13,454 40 (15) 13,479
======= == === ======
</TABLE>
The amortized cost and estimated market value of securities available for
sale at December 31, 1994 by contractual maturity, are shown in the following
table. 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>
Due in one year or less . . . . . . . . . . $ 600 591
Due after one year through five years . . . 3,426 3,270
Due after five years through ten years . . -- --
------ -----
Subtotals . . . . . . . . . . . . . . . 4,026 3,861
Equity securities . . . . . . . . . . . . . 2,103 2,103
Mortgage-backed securities . . . . . . . . 3,067 2,994
------ -----
TOTALS . . . . . . . . . . . . . . . . . $9,196 8,958
====== =====
</TABLE>
There were no sales of securities available for sale during 1994 or 1992.
Proceeds from the sale of securities available for sale during 1993 were
$12,898. Gross gains of $26 and gross losses of $15 were realized from these
sales.
The estimated market values of securities available for sale are based on
bid prices published in financial newspapers or bid quotations received from
securities dealers.
Certain of the Subsidiary Banks are required to or have chosen to invest in
the Federal Home Loan Bank ("FHLB") or the Federal Reserve Bank ("FRB"). These
investments are recorded at cost, which represents the estimated market value.
The total investment in FHLB and FRB stock was $2,064 and $2,023 at December
31, 1994 and 1993, respectively.
(6) FEDERAL FUNDS SOLD
A summary of the counterparties to which the Company has Federal funds sold
and the amounts thereof which are considered to be at risk due to their
unsecured nature at December 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
The Boatmen's National Bank of St. Louis . $2,750 35,375
United Missouri Bank of Kansas City, N.A. 1,475 650
United Missouri Bank of St. Louis, N.A. . -- 1,000
Mercantile Bank of St. Louis, N.A. . . . . -- 7,000
------ ------
Totals . . . . . . . . . . . . . . . . $4,225 44,025
====== ======
</TABLE>
All Federal funds sold mature on the following business day. Federal funds
sold to United Missouri Bank of Kansas City, N.A. and United Missouri Bank of
St. Louis, N.A. are sold as agent rather than as principal.
10
<PAGE> 12
(7) LOANS
The composition of the loan portfolio at December 31, 1994 and 1993 is as
follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Commercial, agricultural, and other . . . $147,143 127,301
Real estate:
Construction . . . . . . . . . . . . . 66,128 42,574
Mortgage . . . . . . . . . . . . . . . 477,529 406,413
Consumer . . . . . . . . . . . . . . . . . 85,268 75,547
-------- -------
Totals . . . . . . . . . . . . . . . . $776,068 651,835
======== =======
</TABLE>
Transactions in the allowance for possible loan losses for the years ended
December 31, 1994, 1993, and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year . . . . $11,146 10,455 6,750
Allowance balance of subsidiaries
acquired at date of acquisition . -- -- 3,000
Provision charged to
operating expenses . . . . . . . 1,258 1,392 1,889
Loans charged off . . . . . . . . . (954) (1,358) (1,557)
Recoveries on loans
previously charged off . . . . . 427 657 373
------- ------ ------
Net loan charge-offs . . . . . . . . (527) (701) (1,184)
------- ------ ------
Balance at end of year . . . . . . . $11,877 11,146 10,455
======= ====== ======
</TABLE>
Included in real estate mortgage loans at December 31, 1994 and 1993 are
$223,976 and $197,891, respectively, of residential real estate mortgage loans.
These loans are to individuals and are secured by real estate in the markets
the Subsidiary Banks serve. The ability of these borrowers to honor their
contractual obligations is dependent upon the local economy and its effect on
the real estate market.
Included in loans at December 31, 1994 and 1993 are $76,447 and $53,867,
respectively, of loans to individuals and businesses which are directly
dependent on the tourism and entertainment industry in the Branson, Missouri
area.
Included in loans at December 31, 1994 and 1993 are $2,056 and $2,048,
respectively, of loans on which interest is not being accrued. If interest on
these loans had been accrued, such income would have been $178 and $201 for the
years ended December 31, 1994 and 1993, respectively. The amounts recognized as
interest income on these loans were $62 and $70 for the years ended December
31, 1994 and 1993, respectively.
Certain executive officers and directors of the Company and the Subsidiary
Banks and certain corporations in which executive officers and directors had
substantial beneficial interest incurred indebtedness, in the form of loans, as
customers in the aggregate amounts of $45,503 and $42,575 at December 31, 1994
and 1993, respectively. These loans were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other customers and did not involve more than the
normal risk of collectibility. In addition, the Subsidiary Banks had
commitments to extend credit to these related parties in the amount of $7,153
at December 31, 1994.
The following is a summary of activity of loans to executive officers and
directors of the Company and the Subsidiary Banks for the year ended December
31, 1994.
<TABLE>
<S> <C>
Balance, December 31, 1993 . . . . . . . . $42,575
New loans made . . . . . . . . . . . . . . 32,165
Payments received . . . . . . . . . . . . (29,515)
Other . . . . . . . . . . . . . . . . . . 278
-------
BALANCE, DECEMBER 31, 1994 . . . . . . . . $45,503
=======
</TABLE>
Certain of the Subsidiary Banks provide long-term financing of one- to
four-family residential real estate by originating variable rate and fixed rate
loans. Generally, fixed rate loans are sold into the secondary market without
recourse, with $65,530 and $125,362 sold during 1994 and 1993, respectively.
Servicing of the loans is generally retained by the Subsidiary Banks. At
December 31, 1994, 1993, and 1992, the Subsidiary Banks serviced approximately
3,900, 3,800, and 3,100 loans which were owned by others aggregating $180,000,
$169,000, and $119,000, respectively. Servicing fees received on loans
serviced for others and included in other noninterest income were $498, $338,
and $350 in 1994, 1993, and 1992, respectively.
The Columbia Bank originates and sells residential real estate loans
insured by the Federal Housing Authority ("FHA Loans") or guaranteed by the
Veterans' Administration ("VA Loans") to unaffiliated institutions. Servicing
of such loans is also sold to the unaffiliated institutions. Under the terms of
the sale agreement, all FHA Loans and VA Loans which become 90 days delinquent
within the first nine payments due the unaffiliated institutions are to be
repurchased by the Columbia Bank. At December 31, 1994, the amount of such
loans which have not had nine scheduled payments and would be subject to
repurchase if they became delinquent was $12,315. No loans have been
repurchased by the Columbia Bank since the program began in 1992.
11
<PAGE> 13
(8) PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31, 1994 and 1993 is as
follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . $ 4,448 3,765
Banking house . . . . . . . . . . . . . . 19,548 16,638
Furniture, fixtures, and equipment . . . . 14,295 13,258
------- ------
38,291 33,661
Less accumulated depreciation . . . . . . 12,530 11,407
------- ------
Totals . . . . . . . . . . . . . . . . $25,761 22,254
======= ======
</TABLE>
Depreciation charged to occupancy and equipment expense for the years ended
December 31, 1994, 1993, and 1992 was $2,047, $1,923, and $1,502, respectively.
The Company leases certain premises and equipment under operating lease
agreements which expire at various dates through 2013, with certain lease
agreements containing renewal options. Minimum rental commitments under all
leases for each of the next five years and in the aggregate are as follows:
<TABLE>
<S> <C>
1995 . . . . . . . . . . . . . . . . . . . $ 776
1996 . . . . . . . . . . . . . . . . . . . 723
1997 . . . . . . . . . . . . . . . . . . . 388
1998 . . . . . . . . . . . . . . . . . . . 347
1999 . . . . . . . . . . . . . . . . . . . 332
Thereafter . . . . . . . . . . . . . . . . 1,844
------
Total . . . . . . . . . . . . . . . . . $4,410
======
</TABLE>
Total rent expense charged to operations amounted to $739, $672, and $331
for the years ended December 31, 1994, 1993, and 1992, respectively.
(9) SHORT-TERM BORROWINGS
A summary of short-term borrowings at December 31, 1994 and 1993 is as
follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Securities sold under
agreements to repurchase . . . . . . . $29,814 23,527
Federal funds purchased . . . . . . . . . 5,025 1,350
Federal Home Loan Bank borrowings . . . . 5,000 --
------- ------
Totals . . . . . . . . . . . . . . . . $39,839 24,877
======= ======
</TABLE>
The weighted average interest rates, average balances, and maximum
month-end amounts outstanding for short-term borrowings at and for the years
ended December 31, 1994, 1993, and 1992 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Securities sold under agreements
to repurchase:
Average rate . . . . . . . . . 3.9% 4.4% 5.2%
Average balance . . . . . . . . $25,867 $21,444 $19,804
Maximum amount outstanding
at any month-end . . . . . . 38,772 33,806 31,634
======= ======= =======
Federal funds purchased:
Average rate . . . . . . . . . 5.0% 3.2% 3.4%
Average balance . . . . . . . . $ 3,508 $ 972 $ 622
Maximum amount outstanding
at any month-end . . . . . . 13,100 3,875 1,300
======= ======= =======
Federal Home Loan Bank borrowings:
Average rate . . . . . . . . . 5.1% -- --
Average balance . . . . . . . . $ 517 $ -- $ --
Maximum amount outstanding
at any month-end . . . . . . 5,000 -- --
======= ======= =======
Total:
Average rate . . . . . . . . . . 4.1% 4.4% 5.1%
Average rate at end of year . . . 4.7% 3.1% 4.6%
Maximum amount outstanding
at any month-end . . . . . . . $41,494 $36,215 $32,784
======= ======= =======
</TABLE>
(10) NOTES PAYABLE
Notes payable at December 31, 1994 and 1993 consists of a term loan with
balances of $14,850 and $16,500, respectively.
The term loan provides for interest payments quarterly. In accordance with
the term loan agreement, the term loan bore interest at the lending bank's
fluctuating base rate until November 14, 1994, when the terms were modified to
provide an interest rate of the lending bank's fluctuating base rate or the
LIBOR rate quoted from time to time by the lending bank for terms of one, two,
or three months, in all cases plus two percent. Principal is payable in ten
equal annual installments. The first payment was made on February 28, 1994 and
the remaining payments are due annually at June 30 of each subsequent year
beginning June 30, 1995. Common stock of the Banks with a combined book value
at December 31, 1994 of $80,843 is pledged to secure the term loan. The term
loan contains various restrictions and limitations with respect to the Company,
including incurring additional debt, maintenance of certain financial ratios,
restrictions on dividends on common stock, and maintenance of the levels of
consolidated total stockholders' equity equal to or greater than $50,000
through 1997 and equal to or greater than $60,000 thereafter.
The average interest rates on notes payable for the years ended December
31, 1994, 1993, and 1992 were 7.1%, 6.1%, and 6.5%, respectively.
12
<PAGE> 14
(11) CONVERTIBLE SUBORDINATED CAPITAL NOTES
The convertible subordinated capital notes (the "Notes") bear interest
at 9% payable semiannually and are due June 30, 1997. The Notes are convertible
into common stock at the option of the holder prior to maturity at $20 per
share. The Notes are exchangeable at maturity for shares of common stock having
an aggregate market value equal to the principal amount of the Notes.
Alternatively, to the extent qualified funds, as defined, are available, the
Company will pay the Notes in cash at maturity. The Notes are subordinate to
senior indebtedness, as defined, of the Company.
(12) INCOME TAXES
As discussed in note 1, the Company adopted SFAS 109 effective January
1, 1993. The cumulative effect of this change in accounting for income taxes of
$21 was determined as of January 1, 1993. Prior years' consolidated financial
statements have not been restated to apply the provisions of SFAS 109.
The components of income tax expense (benefit) for the years ended
December 31, 1994, 1993, and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ----- -----
<S> <C> <C> <C>
Current income tax expense:
Federal . . . . . . . . . . . . . . . . . $4,434 4,024 3,634
State . . . . . . . . . . . . . . . . . . 514 131 398
Deferred income tax benefit . . . . . . . . . (242) (407) (845)
------ ----- -----
Applicable income tax expense . . . . . . $4,706 3,748 3,187
====== ===== =====
</TABLE>
A reconciliation of expected income tax expense to Federal income tax
expense computed by applying the Federal statutory rate of 34% to income before
applicable income tax expense, for the years ended December 31, 1994, 1993, and
1992 to reported income tax expense, is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ----- -----
<S> <C> <C> <C>
Income tax expense at
statutory rate . . . . . . . . . . . . . $4,066 3,671 3,022
Increase (reduction) in income
taxes resulting from:
Tax exempt income . . . . . . . . . . . . (290) (380) (368)
Amortization of intangibles . . . . . . . 297 314 209
State income taxes, net of . . . . . . .
Federal income tax benefit . . . . . . 339 86 263
Cumulative effect of
adopting SFAS 109 . . . . . . . . . . -- (21) --
Other, net . . . . . . . . . . . . . . . 294 78 61
------ ----- -----
Applicable income tax expense . . . . . . . . $4,706 3,748 3,187
====== ===== =====
</TABLE>
The significant components of deferred income tax benefit attributable
to income from continuing operations for the years ended December 31, 1994 and
1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
----- ----
<S> <C> <C>
Provision for possible loan losses
for financial reporting purposes
greater than for tax purposes . . . . . . . . . . . . $(164) (365)
Other, net . . . . . . . . . . . . . . . . . . . . . . . (78) (42)
----- ----
Deferred income tax benefit . . . . . . . . . . . . . $(242) (407)
===== ====
</TABLE>
For the year ended December 31, 1992, deferred income tax benefit
resulting from timing differences in the recognition of income and expense for
income tax and financial reporting purposes is as follows:
<TABLE>
<CAPTION>
1992
-----
<S> <C>
Provision for possible loan losses for financial
reporting purposes greater than for tax purposes . . . . . . . $(397)
Loan discount accretion for tax reporting purposes
greater than for financial reporting purposes . . . . . . . . . (386)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . (62)
-----
Deferred income tax benefit . . . . . . . . . . . . . . . . . . $(845)
=====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
------ -----
<S> <C> <C>
Deferred tax assets:
Loans, principally due to allowance for
possible loan losses . . . . . . . . . . . . . . . $4,401 4,104
Investments in debt and equity securities -
SFAS 115 . . . . . . . . . . . . . . . . . . . . . 80 --
Other . . . . . . . . . . . . . . . . . . . . . . . . 274 248
------ -----
Total deferred tax assets . . . . . . . . . . . . . 4,755 4,352
------ -----
Deferred tax liabilities:
Investment securities, principally
due to discount accretion . . . . . . . . . . . . 83 73
Premises and equipment, basis differences . . . . . . 1,754 1,704
Intangible assets . . . . . . . . . . . . . . . . . . 364 274
Loan discount, reporting differences . . . . . . . . 221 294
Other . . . . . . . . . . . . . . . . . . . . . . . . 129 125
------ -----
Total deferred tax liabilities . . . . . . . . . . 2,551 2,470
------ -----
Net deferred tax asset . . . . . . . . . . . . . . $2,204 1,882
====== =====
</TABLE>
Pursuant to SFAS 109, a valuation allowance would be provided on
deferred tax assets when it is more likely than not that some portion of the
assets will not be realized. The Company has not established a valuation
allowance as of December 31, 1994 and 1993, due to management's belief that all
criteria for recognition have been met, including the existence of a history of
taxes paid sufficient to support the realization of the deferred tax assets.
13
<PAGE> 15
(13) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments" ("SFAS 107"), requires the Company
to disclose estimated fair values for its financial instruments. A financial
instrument is defined as cash or a contract that both imposes on one entity a
contractual obligation to deliver cash or another financial instrument to a
second entity and conveys to that second entity a contractual right to receive
cash or another financial instrument from the first entity. Fair value
estimates, methods, and assumptions are set forth below for the Company's
financial instruments, other than investment securities and securities
available for sale, which information is included in notes 4 and 5,
respectively.
LOANS
Fair values are estimated for portfolios of loans with similar
financial characteristics. Loans are segregated by type such as commercial,
commercial real estate, residential mortgage, real estate-construction, and
other consumer. Each loan category is further segmented into performing and
nonperforming categories.
The fair value of performing loans, except residential mortgage loans,
is calculated by discounting scheduled cash flows through the estimated
maturity using estimated market discount rates. The estimated market discount
rates used were generally based on the prime rates at December 31, 1994 and
1993 adjusted to reflect the credit risk inherent in the particular loan type
as well as interest rate risk for fixed rate long-term loans. The estimate of
maturity is based on the Company's historical experience with repayments for
each loan classification, modified, as required, by an estimate of the effect
of current economic and lending conditions. For performing residential mortgage
loans, fair value is estimated by discounting contractual cash flows adjusted
for prepayment estimates using discount rates based on secondary market sources
adjusted to reflect differences in servicing and credit costs.
Fair value for significant nonperforming real estate loans is based on
recent external appraisals of the collateral which secures the loan. For other
loan types, fair value is determined based on management's judgment of the
value of the underlying collateral, if any, and financial guarantees, or
estimated cash flows are discounted using a rate commensurate with the risk
associated with the estimated cash flows. Assumptions regarding credit risk,
cash flows, and discount rates are judgmentally determined using available
market information and specific borrower information.
The following table presents information for loans at December 31, 1994 and
1993.
<TABLE>
<CAPTION>
1994 1993
------------------------------ ------------------------------
Average Average
Carrying Historical Estimated Carrying Historical Estimated
Amount Yield Fair Value Amount Yield Fair Value
-------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial, agricultural, and other . . $141,793 8.92% $143,327 $122,141 7.06% $124,867
Real estate:
Residential . . . . . . . . . . . . . . . . . . 223,476 7.62% 223,203 197,224 7.14% 198,186
Commercial . . . . . . . . . . . . . . . . . . 249,703 8.76% 250,551 205,013 7.53% 207,056
Construction . . . . . . . . . . . . . . . . . 65,251 8.94% 65,462 42,046 7.27% 42,349
Consumer . . . . . . . . . . . . . . . . . . . . . 81,757 9.10% 81,872 72,054 9.39% 73,543
-------- -------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . $761,980 $764,415 $638,478 $646,001
======== ======== ======== ========
</TABLE>
DEPOSIT LIABILITIES
Under SFAS 107, the fair value of deposits with no stated maturity,
such as noninterest-bearing demand deposits and savings and interest-bearing
transaction accounts, is equal to the amount payable on demand as of December
31, 1994 and 1993. The fair value of time deposits is based on the discounted
value of contractual cash flows. The discount rate is estimated using the rates
currently offered for deposits of similar remaining maturities. The carrying
amounts and estimated fair value for deposit liabilities at December 31, 1994
and 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
-------------------- --------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Noninterest-bearing
demand deposits . . . . . . . $104,202 104,202 103,709 103,709
Savings and interest-
bearing transaction
accounts . . . . . . . . . . 213,996 213,996 244,408 244,408
Time deposits:
Maturing in one
year or less . . . . . . . 360,969 362,028 277,388 278,433
Maturing between
one and five years . . . . 155,856 161,410 148,383 150,976
Maturing beyond
five years . . . . . . . . 300 301 251 271
-------- ------- ------- -------
Total deposits . . . . . . $835,323 841,937 774,139 777,797
======== ======= ======= =======
</TABLE>
14
<PAGE> 16
SHORT-TERM BORROWINGS, NOTES PAYABLE, AND CONVERTIBLE SUBORDINATED CAPITAL
NOTES
Due to the extremely short-term nature of the Company's short-term
borrowings, the fair value of short-term borrowings approximates their book
value. The note payable is at a rate which floats with either the prime rate or
LIBOR and was negotiated in an arm's length transaction with an unaffiliated
lender. Therefore, the fair value of the note payable equals book value. The
fair value of the convertible subordinated capital notes is $205 and $220 at
December 31, 1994 and 1993, respectively, based on an estimated discount rate
equal to 1% over the prime rate at December 31, 1994 and 1993.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The fair value of commitments to extend credit and standby letters of
credit are estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements, the
likelihood of the counterparties drawing on such financial instruments, and the
present creditworthiness of such counterparties. The Company believes such
commitments have been made on terms which are competitive in the markets in
which it operates.
LIMITATIONS
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a particular
financial instrument. Because no market exists for a significant portion of the
Company's financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing financial instruments
without attempting to estimate the value of anticipated future business and the
value of assets and liabilities that are not considered financial instruments.
For example, the Company has a trust department that contributes net fee income
annually. The trust department is not considered a financial instrument, and
its value has not been incorporated into the fair value estimates. Other
significant assets and liabilities that are not considered financial assets or
liabilities include the mortgage banking operation, brokerage network, prepaid
tax assets, premises and equipment, and goodwill. In addition, the tax
ramifications related to the realization of the unrealized gains and losses can
have a significant effect on fair value estimates and have not been considered
in many of the estimates.
(14) CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
CONDENSED BALANCE SHEETS
December 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
------- ------
<S> <C> <C>
ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . $ 4,358 2,251
Securities available for sale . . . . . . . . . . . . 11 2,007
Investment in subsidiaries . . . . . . . . . . . . . 85,092 82,397
Premises and equipment, net . . . . . . . . . . . . . 1,064 1,115
Other assets . . . . . . . . . . . . . . . . . . . . 573 530
------- ------
Total assets . . . . . . . . . . . . . . . . . . . $91,098 88,300
======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Notes payable . . . . . . . . . . . . . . . . . . . . $15,497 17,175
Other liabilities . . . . . . . . . . . . . . . . . . 1,161 1,283
------- ------
Total liabilities . . . . . . . . . . . . . . . . 16,658 18,458
Stockholders' equity . . . . . . . . . . . . . . . . 74,440 69,842
------- ------
Total liabilities and stockholders' equity . . . $91,098 88,300
======= ======
</TABLE>
15
<PAGE> 17
CONDENSED STATEMENTS OF INCOME
Years ended December 31, 1994, 1993, and 1992
<TABLE>
<CAPTION>
1994 1993 1992
------- ------ -------
<S> <C> <C> <C>
INCOME:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14 82 56
Dividends received from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 5,650 3,950 2,613
Service fees from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,026 2,661 2,055
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363 31 8
------- ------ -------
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,053 6,724 4,732
------- ------ -------
EXPENSES:
Salaries and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,822 1,602 1,150
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,133 1,071 323
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,916 1,282 1,072
Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 76 76
------- ------ -------
Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,947 4,031 2,621
------- ------ -------
Income before income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . 4,106 2,693 2,111
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342 171 89
Excess of equity in net income of subsidiaries over dividends received . . . . . . . . . . 2,805 4,187 3,502
------- ------ -------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,253 7,051 5,702
======= ====== =======
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31, 1994, 1993, and 1992
1994 1993 1992
------- ------ -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,253 7,051 5,702
Adjustments to reconcile net income to net cash provided by operating activities:
Excess of equity in net income of subsidiaries over dividends received . . . . . . . (2,805) (4,187) (3,502)
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 236 159
Loss on sale of equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 6 --
------- ------ -------
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . 4,670 3,106 2,359
------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital contributions to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . -- -- (2,000)
Cash used for purchase of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . -- (908) (17,304)
Proceeds from maturities of investment securities . . . . . . . . . . . . . . . . . . . 2,000 -- 8,020
Purchase of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- (9,998)
Purchase of securities available for sale . . . . . . . . . . . . . . . . . . . . . . . (13) -- --
Purchase of premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . (45) (118) (62)
Proceeds from the sale of equipment to subsidiaries . . . . . . . . . . . . . . . . . . -- 1 --
Other investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (87) 110 (216)
------- ------ -------
Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . 1,855 (915) (21,560)
------- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 16,500
Payments on notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,650) -- (8,500)
Payments on notes payable due to subsidiaries . . . . . . . . . . . . . . . . . . . . . (27) (27) (27)
Proceeds from issuance of common stock to Employee Stock Ownership Plan . . . . . . . . 244 -- --
Proceeds from exercise of common stock warrants . . . . . . . . . . . . . . . . . . . . 168 9 --
Proceeds from exercise of common stock options . . . . . . . . . . . . . . . . . . . . 52 -- --
Payments for fractional shares in pooling-of-interests acquisition . . . . . . . . . . (2) -- --
Proceeds from issuance of preferred stock . . . . . . . . . . . . . . . . . . . . . . . -- -- 12,942
Dividends paid on common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,857) (1,723) (1,595)
Dividends paid on preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,345) (1,345) (605)
Other financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 580 278
------- ------ -------
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . (4,418) (2,506) 18,993
------- ------ -------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . 2,107 (315) (208)
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . 2,251 2,566 2,774
------- ------ -------
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . $ 4,358 2,251 2,566
======= ====== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -
CASH PAID (RECEIVED) DURING THE YEAR FOR:
Interest on notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,132 1,077 326
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (279) (493) (173)
======= ====== =======
</TABLE>
16
<PAGE> 18
(15) EMPLOYEE BENEFITS
The Company has an Employee Stock Ownership Plan ("ESOP") to provide
additional retirement benefits to substantially all employees. Contributions
under the plan amounted to $289, $254, and $164 for the years ended December
31, 1994, 1993, and 1992, respectively. At December 31, 1994, 59,507 shares of
the Company's common stock were owned by the ESOP.
On December 14, 1990, the ESOP obtained a $600 loan from an unaffiliated
lender, which borrowing was guaranteed by the Company, and used the proceeds to
purchase 34,284 shares of Company stock. The ESOP loan was for a term of five
years with principal payable in five equal installments and bore interest at
the lender's fluctuating corporate base rate plus 1/2% payable quarterly. The
ESOP loan was secured by the shares of common stock purchased by the ESOP,
which stock was released to the ESOP as the ESOP loan was amortized. The ESOP
loan was recorded as a liability of the Company and as a reduction of
stockholders' equity. The balance of the ESOP loan at December 31, 1993 was
$120. On January 13, 1994, the final payment of $120 was made.
The Company has a defined contribution 401(k) plan to provide additional
retirement benefits to substantially all employees. Contributions under the
401(k) plan amounted to $233, $211, and $153 for the years ended December 31,
1994, 1993, and 1992, respectively.
(16) 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.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements of
credit risk in excess of the amount recognized in the consolidated balance
sheets. The contractual 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 is represented by the contractual amount of those
instruments. The Company uses the same credit policies in making commitments
and conditional obligations as it does for on-balance-sheet instruments.
Financial instruments whose contractual amounts represent credit risk as of
December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
--------- -------
<S> <C> <C>
Commitments to extend credit . . . . . . . . . . . $ 99,605 103,609
Standby letters of credit . . . . . . . . . . . . . 8,165 10,470
--------- -------
Total off-balance-sheet
financial instruments . . . . . . . . . . . . $107,770 114,079
========= =======
</TABLE>
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. Standby
letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Commitments and
standby letters of credit generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments and letters of credit are expected to expire without being drawn
upon, the total commitment and letter of credit amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
creditworthiness 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 counterparty. Collateral held varies but
may include accounts receivable, inventory, property, plant, and equipment,
investment securities, deposits of financial institutions, residential real
estate, and income-producing commercial properties.
Fixed rate loan commitments, as defined in SFAS 119, are considered
derivative financial instruments. Of the total commitments to extend credit at
December 31, 1994, approximately $21,676 represent fixed rate loan commitments.
(17) CONTINGENT LIABILITIES
During the normal course of business, various legal claims have arisen
which, in the opinion of management, will not result in any material liability
to the Company or the Subsidiary Banks.
(18) REDEEMABLE PREFERRED STOCK
On June 12, 1992, the Company issued 27,600 shares of Series C preferred
stock (represented by 690,000 depositary shares, each representing a 1/25th
interest in the Series C preferred stock), par value $1 per share and stated
value $500 per share, for $20 per depositary share in a public offering. The
Series C preferred stock is cumulative and perpetual and bears a rate of 9.75%
payable quarterly, which rate will increase .25% annually beginning June 1,
1995 through June 1, 1997, at which time the stock will reach its maximum rate
of 10.50%. On or after June 1, 1995, the Series C preferred stock will be
redeemable at the option of the Company and with the prior written consent of
the Board of Governors of the Federal Reserve System, at $500 per share plus
accrued and unpaid dividends to the redemption date.
(19) STOCK WARRANTS AND OPTIONS
During 1990 and 1989, the Company issued 225,738 and 208,709 warrants,
respectively, to purchase shares of the Company's common stock at $18.50 per
share through December 31, 1994, subject to adjustment pursuant to antidilution
rights.
In June 1991 the Company determined, in connection with a public offering of
common stock, to offer to exchange new warrants to the holders of its
outstanding warrants. The terms of the new warrants are identical to the terms
of the outstanding warrants except that each new warrant represents the right
to purchase one share of
17
<PAGE> 19
common stock at a price of $16.50, subject to adjustment pursuant to
antidilution rights, through expiration of the new warrants on December 31,
1995. Of the outstanding warrants, 390,937 were exchanged for these new
warrants.
During 1994, 10,184 warrants were exercised, leaving 380,153 warrants
outstanding. During 1993, 600 warrants were exercised. No warrants were
exercised during 1992. Such warrants carry no voting or other rights as
stockholders of the Company.
On August 31, 1994, in connection with the acquisition of the Bank of South
County, the Company issued 23,314 incentive stock options under the Capital
Bancorporation, Inc. 1990 Stock Option Plan ("Stock Option Plan"), replacing
the outstanding incentive stock options held by certain Bank of South County
officers and employees under the Bank of South County Stock Option Plan. Of
these options, 21,656 have an exercise price of $9.65 while 1,658 have an
exercise price of $10.86, both of which reflect the exercise prices of the Bank
of South County options adjusted for the conversion ratio specified in the
merger agreement. Subsequent to August 31, 1994, 5,285 of the options were
exercised. At December 31, 1994, 18,029 remain outstanding with an exercise
price of $9.65.
During 1994, 66,000 incentive stock options were issued by the Company under
the Stock Option Plan to various officers of the Company and Subsidiary Banks.
Of these options, 22,000 were exercisable at December 31, 1994, 22,000 will be
exercisable on and after December 31, 1995, and 22,000 will be exercisable on
and after December 31, 1996, all at an exercise price of $24.50.
(20) DIVIDEND LIMITATIONS
The Company's ability to pay dividends on its outstanding common stock is
limited under the terms of the term loan to the extent that it may not declare
or pay dividends on common stock in excess of 45% of net income per common
share.
The Subsidiary Banks' dividends are the principal source of funds for
payment of dividends by the Company to its stockholders. The Subsidiary Banks
are subject to regulation by regulatory authorities which require the
maintenance of minimum capital requirements and limit banks from paying
dividends by a statutory formula. Additionally, in connection with the
acquisition of a thrift in 1990, the Subsidiary Banks made commitments to
regulatory authorities as to the level of capital to be maintained. On July
16, 1992 the Board of Directors of the St. Louis Bank entered into an agreement
with the Division of Finance of the State of Missouri ("Missouri Division") and
the FDIC which, among other things, required the St. Louis Bank to obtain prior
written approval of the Missouri Division and the FDIC in order to declare or
pay any dividend. The agreement was terminated June 10, 1993, subsequent to an
exam by the Missouri Division, thus eliminating the related restrictions on
dividends at the St. Louis Bank. During 1992, the St. Louis Bank contributed
less than 3% of the dividends received by the Company from the Subsidiary
Banks. At December 31, 1994, the Subsidiary Banks are permitted to pay,
without prior approval, dividends in the amount of $12,259.
(21) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Following is a summary of unaudited quarterly financial information for each
of the years in the two-year period ended December 31, 1994.
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------ ------- ------- -------
1994
----------------------------------------
<S> <C> <C> <C> <C>
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . $14,420 15,466 16,454 17,568
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . 6,591 6,841 7,542 8,098
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . 7,829 8,625 8,912 9,470
Provision for possible
loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 128 543 412
Income before applicable
income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,769 2,999 2,544 3,647
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,767 1,839 1,457 2,190
Net income per common share . . . . . . . . . . . . . . . . . . . . . . 0.46 0.49 0.36 0.59
======= ====== ====== ======
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------ ------- ------- -------
1993
----------------------------------------
<S> <C> <C> <C> <C>
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . $14,706 14,417 14,564 14,469
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . 6,993 6,691 6,543 6,606
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . 7,713 7,726 8,021 7,863
Provision for possible
loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 400 439 221
Income before applicable
income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,597 2,597 2,935 2,670
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,674 1,731 1,892 1,754
Net income per common share . . . . . . . . . . . . . . . . . . . . . . 0.44 0.46 0.51 0.46
======= ====== ====== ======
</TABLE>
As discussed in note 2, the Company acquired Bank of South County on August
31, 1994 in a transaction accounted for as a pooling-of-interests, requiring
the restatement of all previously reported 1994 and 1993 interim period
results.
The effect of the pooling-of-interests transaction on all quarters of 1993
and the first and second quarters of 1994 are as follows:
<TABLE>
<CAPTION>
1993 Quarter ended 1994 Quarter ended
----------------------------------------- -------------------
March 31 June 30 Sept 30 Dec 31 March 31 June 30
-------- ------- ------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net income as originally reported . . . . . . . . . . . . $1,581 1,690 1,773 1,691 1,627 1,713
Effect of pooling-of-interests of acquired institution . 93 41 119 63 140 126
------ ----- ----- ----- ----- -----
Net income as restated . . . . . . . . . . . . . . . . . $1,674 1,731 1,892 1,754 1,767 1,839
====== ===== ===== ===== ===== =====
</TABLE>
18
