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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission File No. 1-10160
UNION PLANTERS CORPORATION
(Exact name of registrant as specified in its charter)
Tennessee 62-0859007
(State of incorporation) (IRS Employer Identification No.)
7130 Goodlett Farms Parkway, Memphis, Tennessee 38018
(address of principal executive offices and zip code)
Registrant's telephone number, including area code: (901) 383-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Common Stock having a par New York Stock Exchange
value of $5 per share (name of each exchange
(title of class) on which registered)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
8% Cumulative, Convertible Preferred Stock,
Series E having a stated value of $25 per share
(title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirement for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant at February 28, 1995 was approximately $909,444,000.
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE
REGISTRANT'S CLASSES OF COMMON STOCK.
CLASS OUTSTANDING AT FEBRUARY 28, 1995
Common Stock having a par 40,325,357
value of $5 per share
(title of class)
DOCUMENTS INCORPORATED BY REFERENCE
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Part of Form 10-K
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Documents Incorporated into which Incorporated
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1. Certain parts of the Annual Report to Shareholders Items 1, 2, 5, 6, 7, and 8
for the year ended December 31, 1994
2. Certain parts of the Definitive Proxy Statement for Part III
the Annual Shareholders Meeting to be held April 27, 1995
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FORM 10-K CROSS-REFERENCE INDEX
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Page Number
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PART I
Item 1. Business 3
Item 1a. Executive Officers of the Registrant 11
Item 2. Properties 11
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders *
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters 14
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure *
PART III
Item 10. Directors and Executive Officers of the Registrant 14
Item 11. Executive Compensation 14
Item 12. Security Ownership of Certain Beneficial Owners and
Management 14
Item 13. Certain Relationships and Related Transactions 15
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 15
SIGNATURES 16
* Not Applicable
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PART I
ITEM 1. BUSINESS
GENERAL
Union Planters Corporation (the Corporation), a $10.0 billion multi-bank
holding company and savings and loan holding company incorporated in 1971 under
the laws of the state of Tennessee and headquartered in Memphis, Tennessee, is
the second-largest financial institution holding company headquartered in
Tennessee. The Corporation at December 31, 1994 had the largest deposit base of
any Tennessee bank holding company headquartered in Tennessee. The
Corporation's activities are conducted through its two principal banking
subsidiaries, the $2.2 billion Union Planters National Bank (UPNB)
headquartered in Memphis, Tennessee and the $2.0 billion Sunburst Bank,
Mississippi, headquartered in Grenada, Mississippi; 40 other banking
subsidiaries and five savings and loan subsidiaries located in Tennessee,
Mississippi, Arkansas, Louisiana, Alabama, and Kentucky (collectively, banking
subsidiaries). Reference is made to the 1994 Annual Report to Shareholders for
a listing of communities served on page 70, Table 15, and the map on the inside
cover of the report for additional information regarding the size, locations,
and markets served by the Corporation's subsidiaries.
The Corporation, through its subsidiaries, provides a diversified range of
banking and financial services in the communities in which it operates,
including consumer, commercial and corporate lending; retail banking; mortgage
banking; and other ancillary financial services normally furnished by
full-service financial institutions. The Corporation also is engaged in
mortgage servicing; investment management and trust service; the issuance and
servicing of credit and debit cards; and the origination, packaging, and
securitization of loans, primarily the government-guaranteed portions of Small
Business Administration (SBA) loans.
GOVERNMENTAL SUPERVISION AND REGULATION OF FINANCIAL INSTITUTIONS
As a bank holding company, the Corporation is subject to the regulation
and supervision of the Federal Reserve. In addition, as a savings and loan
holding company, the Corporation is registered with the Office of Thrift
Supervision (the "OTS") and is subject to OTS regulations, supervision and
reporting requirements. The Corporation's bank subsidiaries that are national
banking associations are subject to supervision and examination by the Office
of the Comptroller of the Currency (the "Comptroller") and the Federal Deposit
Insurance Corporation (the "FDIC"). State bank subsidiaries of the Corporation
which are members of the Federal Reserve System are subject to supervision and
examination by the Federal Reserve and the state banking authorities of the
states in which they are located. State bank subsidiaries which are not members
of the Federal Reserve System are subject to supervision and examination by the
FDIC and the state banking authorities of the states in which they are located.
The Corporation's savings bank subsidiaries are subject to supervision and
examination by the OTS. The Corporation's banking subsidiaries are subject to
various requirements and restrictions, including requirements to maintain
reserves against deposits, restrictions on the types and amounts of loans and
other extensions of credit that may be granted and the interest that may be
charged thereon, and limitations on the types of investments that may be made
and the types of services that may be offered. Various consumer laws and
regulations also affect the operations of the banks. In addition to the impact
of regulation, the subsidiary banks are affected significantly by the actions
of the Federal Reserve as it attempts to control the money supply and credit
availability in order to influence the economy.
The Bank Holding Company Act of 1956 ("BHCA"), as amended, generally
requires the prior approval of the Federal Reserve where a bank holding company
proposes to acquire direct or indirect ownership or control of more than five
percent of the voting shares of any bank or otherwise to acquire control of a
bank or to merge or consolidate with any other bank holding company. The BHCA
generally prohibits the Federal Reserve from approving an application by a bank
holding company to acquire a bank located in another state before September 29,
1995, unless such an acquisition is specifically authorized by statute of the
state in which the bank to be acquired is located. Tennessee has adopted
reciprocal regional interstate banking legislation permitting Tennessee-based
bank holding companies to acquire banks and bank holding companies in certain
other states and allowing bank holding companies located in certain states
other than Tennessee to acquire banks and bank holding companies located in
Tennessee.
A bank holding company is generally prohibited under the BHCA from
acquiring voting shares of any company which is not a bank, and from engaging
in any activities other than those of banking or of
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managing or controlling banks or furnishing services to, or performing services
for its subsidiaries. An exception to these prohibitions permits a bank
holding company to engage in, or to acquire an interest in a company, such as a
thrift institution, which engages in activities that the Federal Reserve has
determined are so closely related to banking or managing or controlling banks
as to be a proper incident thereto.
CAPITAL ADEQUACY
The Federal Reserve has adopted risk-based capital guidelines for bank
holding companies. The minimum guideline for the ratio of total capital ("Total
Capital") to risk-weighted assets (including certain off-balance-sheet
activities such as standby letters of credit) is eight percent. At least half
of the Total Capital must be composed of "Tier 1 Capital" which consists of
common shareholders' equity, minority interests in the equity accounts of
consolidated subsidiaries, noncumulative perpetual preferred stock and a
limited amount of cumulative perpetual preferred stock, less goodwill ("Tier 1
Capital"). The remainder, which is Tier 2 Capital, may consist of subordinated
debt (or certain other qualifying debt issued prior to March 12, 1988), other
preferred stock and a limited amount of loan loss reserves.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average total assets, less goodwill (the "Leverage
Ratio") of three percent for bank holding companies that meet certain specified
criteria, including those having the highest regulatory rating. All other bank
holding companies generally are required to maintain a Leverage Ratio of at
least three percent plus an additional cushion of 100 to 200 basis points. The
guidelines also provide that bank holding companies experiencing internal
growth or making acquisitions are expected to maintain strong capital positions
substantially above the minimum supervisory levels without significant reliance
on intangible assets. Furthermore, the Federal Reserve has indicated that it
will consider a "tangible Tier 1 capital leverage ratio" (deducting all
intangibles) and other indicia of capital strength in evaluating proposals for
expansion or new activities. The Federal Reserve has not advised the
Corporation of any specific minimum Leverage Ratio applicable to the
Corporation.
The federal bank regulatory agencies have issued various proposals to
amend the risk-based capital guidelines for banks and bank holding companies.
Under one proposal, banks would be required to give explicit consideration to
interest-rate risk as an element of capital adequacy by maintaining capital to
compensate for such risk in an amount measured by the bank's exposure to
interest rate risk in excess of a regulatory threshold. A proposal recently
issued by the Federal Reserve and expected to be joined in by the other bank
regulatory agencies increases the amount of capital required to be carried
against certain long-term derivative contracts; in addition, the proposal
recognizes the effect of certain bilateral netting arrangements in reducing
potential future exposure under these contracts. The Corporation believes that
these changes will not, if adopted, have a material effect on the company's
compliance with capital adequacy requirements.
Failure to meet minimum capital requirements can subject an institution to
a variety of enforcement remedies, including issuance of a capital directive,
the termination of deposit insurance by the FDIC and a prohibition on the
taking of brokered deposits. As described below, under the "Prompt Corrective
Action" regulations, substantial additional restrictions can be imposed upon
FDIC-insured institutions that fail to meet applicable capital requirements.
See "Prompt Corrective Action" below.
At December 31, 1994, the Corporation's total risk based capital ratio was
14.75%, its Tier 1 Capital ratio was 12.22% and its Leverage Ratio was 7.18%.
In addition, each of the Corporation's banking subsidiaries satisfied the
minimum capital requirements applicable to it and had the requisite capital
levels to qualify as a "well-capitalized" institution under the prompt
corrective action provisions discussed below.
PROMPT CORRECTIVE ACTION
The Federal Deposit Insurance Corporation Improvement Act ("FDICIA")
enacted in December 1991 requires the federal banking regulators to take prompt
corrective action in respect of depository institutions that do not meet their
minimum capital requirements. FDICIA establishes five capital tiers: "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized." Under capital regulations,
a bank is defined to be well capitalized if it maintains a Leverage Ratio of at
least five percent, a Tier 1 Capital ratio of at least six percent and a Total
Capital ratio of at least 10% and is not otherwise in a "troubled condition" as
specified by its
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appropriate federal regulatory agency. A bank is defined to be adequately
capitalized if it meets all of its minimum capital requirements as described
above under "Capital Adequacy." In addition, a bank will be considered to be
undercapitalized if it fails to meet any minimum required measure,
significantly undercapitalized if it is significantly below such measure and
critically undercapitalized if it fails to maintain a level of tangible equity
equal to not less than two percent of total assets. A bank may be deemed to be
in a capitalization category that is lower than is indicated by its actual
capital position if it receives an unsatisfactory examination rating.
Regardless of their capital levels, all institutions are restricted from
making any capital distribution or paying any management fees that would cause
the institution to fail to satisfy the minimum levels to be considered
adequately capitalized. An undercapitalized institution is: (i) subject to
increased monitoring by the appropriate federal banking regulator; (ii)
required to submit an acceptable capital restoration plan within 45 days; (iii)
subject to asset growth limits; and (iv) required to obtain prior regulatory
approval for acquisitions, branching and new lines of business. The capital
restoration plan must include a guarantee by the institution's holding company
that the institution will comply with the plan until it has been adequately
capitalized on average for four consecutive quarters. Pursuant to the
guarantee, the institution's holding company would be liable up to the lesser
of five percent of the institution's total assets or the amount necessary to
bring the institution into capital compliance as of the date it failed to
comply with its capital restoration plan. If the controlling bank holding
company should fail to fulfill its obligations under the guarantee and should
file (or should have filed against it) a petition under the federal Bankruptcy
Code, the appropriate federal banking regulator could have a claim as a general
creditor of the bank holding company, and, if the guarantee were deemed to be a
commitment to maintain capital under the federal Bankruptcy Code, the claim
would be entitled to priority in such bankruptcy proceeding over the claims of
third-party creditors of the bank holding company.
The regulatory agencies have discretionary authority to reclassify well
capitalized institutions as adequately capitalized or to impose on adequately
capitalized institutions requirements or actions specified for undercapitalized
institutions if the agency should determine after notice and an opportunity for
hearing that the institution is in an unsafe or unsound condition or is
engaging in an unsafe or unsound practice, which can consist of the receipt of
an unsatisfactory examination rating if the deficiencies cited are not
corrected. A significantly undercapitalized institution, as well as any
undercapitalized institution which should fail to submit an acceptable capital
restoration plan, may be subject to regulatory demands for recapitalization;
broader application of restrictions on transactions with affiliates;
limitations on interest rates paid on deposits, asset growth and other
activities; possible replacement of directors and officers; and restrictions on
capital distributions by any bank holding company controlling the institution.
Any company controlling the institution could also be required to divest the
institution or the institution could be required to divest subsidiaries. The
senior executive officers of a significantly undercapitalized institution may
not receive bonuses or increases in compensation without prior regulatory
approval and the institution is prohibited from making payments of principal or
interest on its subordinated debt. If an institution should become critically
undercapitalized, the institution would be subject to conservatorship or
receivership within 90 days unless periodic determinations are made that
forbearance from such action would better protect the deposit insurance fund.
Unless appropriate findings and certifications are made by the appropriate
federal bank regulatory agencies, a critically undercapitalized institution
must be placed in receivership if it should remain critically undercapitalized
on average during the calendar quarter beginning 270 days after the date it
became critically undercapitalized.
DIVIDEND RESTRICTIONS
The Corporation is a legal entity separate and distinct from its banking
subsidiaries and nonbank subsidiaries. The Corporation's revenues (on a parent
company only basis) result, in significant part, from dividends paid to the
Corporation by its subsidiaries. The right of the Corporation, and
consequently the right of creditors and shareholders of the Corporation, to
participate in any distribution of the assets or earnings of any subsidiary
through the payment of such dividends or otherwise is necessarily subject to
the prior claims of creditors of the subsidiary (including depositors, in the
case of banking subsidiaries), except to the extent that claims of the
Corporation in its capacity as a creditor may be recognized.
There are statutory and regulatory requirements applicable to the payment
of dividends by the Corporation's banking subsidiaries to the Corporation. Each
national banking association subsidiary of the Corporation is required by
federal law to obtain the prior approval of the Comptroller for the payment of
dividends if the total of all dividends declared by the board of directors of
such bank in any year
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would exceed the total of (i) such bank's net profits (as defined and
interpreted by regulation) for that year plus (ii) the retained net profits (as
defined and interpreted by regulation) for the preceding two years, less any
required transfers to surplus. In addition, national banks may only pay
dividends to the extent that their retained net profits (including the portion
transferred to surplus) exceed statutory bad debts (as defined by regulation).
The Corporation's state-chartered bank subsidiaries are subject to similar
restrictions on the payment of dividends by the respective state laws under
which they are organized. Furthermore, as described above under "Prompt
Corrective Action," all depository institutions are prohibited from paying any
dividends, making other distributions or paying any management fees if, after
such payment, the depository institution would fail to satisfy its minimum
capital requirements. In accordance with the specified calculations, at
December 31, 1994, approximately $22 million was available for distribution to
the Corporation without obtaining prior regulatory approval. Future dividends
will primarily depend upon the level of earnings of the subsidiary banks of the
Corporation. It is the policy of the Federal Reserve that bank holding
companies should pay dividends only out of current earnings. Federal banking
regulators also have the authority to prohibit banks and bank holding companies
from paying a dividend if they should deem such payment to be an unsafe or
unsound practice. In addition, it is the position of the Federal Reserve Board
that as a bank holding company, the Corporation is expected to act as a source
of financial strength to each of its subsidiary banks. See "Support of
Subsidiary Banks" below.
SUPPORT OF SUBSIDIARY BANKS
Under Federal Reserve policy, the Corporation is expected to act as a
source of financial strength to its banking subsidiaries and, where required,
to commit resources to support each of such subsidiaries. This support may be
required at times when, absent such Federal Reserve policy, the Corporation may
not be inclined to provide it. Moreover, if one of its subsidiary banks should
become undercapitalized, under FDICIA the Corporation would be required to
guarantee the subsidiary bank's compliance with its capital plan in order for
such plan to be accepted by the federal regulatory authority. See "Prompt
Corrective Action" above.
Under the "cross guarantee" provisions of the Federal Deposit Insurance
Act, any FDIC-insured subsidiary of the Corporation may be held liable for any
loss incurred by, or reasonably expected to be incurred by, the FDIC in
connection with (i) the "default" of any other commonly controlled FDIC-insured
subsidiary or (ii) any assistance provided by the FDIC to any commonly
controlled FDIC- insured subsidiary "in danger of default." "Default" is
defined generally as the appointment of a conservator or receiver and "in
danger of default" is defined generally as the existence of certain conditions
indicating that a default is likely to occur in the absence of regulatory
assistance.
Because it is a bank holding company, any capital loans made by the
Corporation to subsidiary banks are subordinate in right of payment to deposits
and to certain other indebtedness of such subsidiary bank. In the event of a
bank holding company's bankruptcy, any commitment by the bank holding company
to a federal bank regulatory agency to maintain the capital of a subsidiary
bank will be assumed by the bankruptcy trustee and entitled to priority of
payment over the claims of certain other creditors of the bank holding company.
TRANSACTIONS WITH AFFILIATES
Provisions of the Federal Reserve Act impose restrictions on the type,
quantity and quality of transactions between "affiliates" (as defined below) of
an insured bank and the insured bank (including its bank holding company and
its nonbank subsidiaries). The purpose of these restrictions is to prevent
misuse of the resources of an insured institution by its uninsured affiliates.
An exception to most of these restrictions is provided for transactions between
two insured banks that are within the same holding company where the holding
company owns 80% or more of each of these banks (the "sister bank" exception).
The restrictions also do not apply to transactions between an insured bank and
its wholly owned subsidiaries. These restrictions include limitations on the
purchase and sale of assets and extensions of credit by the insured bank to its
holding company or its nonbank subsidiaries. An insured bank and its
subsidiaries are limited in engaging in "covered transactions" with their
nonbank or nonsavings bank affiliates to the following amounts: (i) in the case
of any one such affiliate, the aggregate amount of covered transactions of the
insured bank and its subsidiaries may not exceed 10% of the capital stock and
surplus of the insured bank and (ii) in the case of all affiliates, the
aggregate amount of covered transactions of the insured bank and its
subsidiaries may not exceed 20% of the capital stock and surplus of the bank.
"Covered transactions" are defined by statute to include loans or other
extensions of credit as well as purchases of securities issued by an affiliate;
purchases of assets (unless otherwise exempted
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by the Federal Reserve); the acceptance of securities issued by the affiliate
as collateral for a loan; and the issuance of a guarantee, acceptance or letter
of credit on behalf of an affiliate. Further, provisions of the BHCA, as
amended, prohibit a bank holding company and its subsidiaries from engaging in
certain tie-in arrangements in connection with any extension of credit, lease
or sale of property or furnishing of services. As used herein, "affiliate"
means generally any company that controls the insured bank, a company which is
under common control with the insured bank and a bank subsidiary of the insured
bank.
FDIC INSURANCE ASSESSMENTS
The subsidiary banks of the Corporation are subject to FDIC deposit
insurance assessments. The FDIC has adopted a risk-based premium schedule which
has increased the assessment rates for most FDIC-insured depository
institutions. Under the present schedule, the annual premiums range from $.23
to $.31 for every $100 of deposits. As noted in the following paragraph, there
is a proposal to reduce the minimum annual premium for banks (but not savings
associations) from $.23 to $.04 per $100 of deposits. Each financial
institution is assigned to one of three capital groups -- well capitalized,
adequately capitalized or undercapitalized -- and further assigned to one of
three subgroups within a capital group on the basis of supervisory evaluations
by the institution's primary federal and, if applicable, state supervisors and
on the basis of other information relevant to the institution's financial
condition and the risk posed to the applicable insurance fund. Therefore, the
actual assessment rate applicable to a particular institution will depend in
part upon the risk assessment classification so assigned to the institution by
the FDIC.
The legislation adopted in August 1989 to provide for the resolution of
insolvent savings associations also required the FDIC to establish separate
deposit insurance funds -- the Bank Insurance Fund ("BIF") for banks and the
Savings Association Insurance Fund ("SAIF") for savings associations. The law
also requires the FDIC to set deposit insurance premium assessments at such
levels as will cause BIF and SAIF to reach their "designated reserve ratios" of
1.25 percent of the deposits insured by them within a reasonable period of
time. Because of the low costs of resolving bank insolvencies in the last few
years, BIF is expected to reach its designated reserve ratio within one or two
years at which time the FDIC will be required to lower deposit insurance
assessment rates on banks to those substantially lower levels that will
maintain the balance in BIF in the required relationship to insured bank
deposits. It has been proposed that the annual bank deposit insurance minimum
premium should be reduced from $.23 to $.04 per $100 of deposits. However, the
balance in SAIF is not expected to reach the designated reserve ratio for far
longer than it is expected the BIF to reach its mandated balance, as the law
provides that a significant portion of the costs of resolving past insolvencies
of savings associations must be paid from this source. Accordingly, while the
BIF and SAIF assessment rates are presently the same, it is likely that SAIF
rates will be significantly higher than BIF rates in the future. Since the
Corporation acquired substantial amounts of SAIF-insured deposits from savings
associations during the years from 1989 to the present which cannot be
converted from SAIF to BIF insurance under present law, it may be required to
pay insurance assessments on these acquired deposits at rates significantly
higher than the rates charged by BIF. At December 31, 1994, the Corporation had
approximately $6.4 billion BIF-insured deposits and $1.5 billion SAIF-insured
deposits. While the amount of additional deposit insurance assessments to be
incurred cannot be calculated at this time because the differential likely to
develop between SAIF and BIF is not known, the Corporation does not expect that
such additional deposit insurance costs will have a significant, adverse effect
on its earnings.
OTHER BANKING LEGISLATION
In addition to the matters noted above, FDICIA made other significant
changes to the federal banking laws in 1991. FDICIA instituted certain changes
to the supervisory process, including provisions that mandate certain
regulatory agency actions against undercapitalized institutions within
specified time limits.
Standards for Safety and Soundness. FDICIA requires the federal bank
regulatory agencies to prescribe, by regulation, standards for all insured
depository institutions and depository-institution holding companies relating
to: (i) internal controls, information systems and audit systems; (ii) loan
documentation; (iii) credit underwriting; (iv) interest-rate risk exposure; (v)
asset growth; and (vi) compensation, fees and benefits. Where safety and
soundness is an issue or where a depository institution is subject to a
regulatory order, it is prohibited from entering into or providing employment
contracts, compensation or benefit arrangements, stock option plans, fee
arrangements or other compensatory arrangements that would provide excessive
compensation, fees or benefits or could lead to material
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financial loss, but (subject to certain exceptions) may not prescribe specific
compensation levels or ranges for directors, officers or employees. In
addition, the federal banking regulatory agencies are required to prescribe, by
regulation, standards specifying: (i) maximum classified assets to capital
ratios; (ii) minimum earnings sufficient to absorb losses without impairing
capital; and (iii) to the extent feasible, a minimum ratio of market value to
book value for publicly traded shares of depository institutions and depository
institution holding companies.
Brokered Deposits. The FDIC has adopted regulations governing the receipt
of brokered deposits. Under the regulations, a bank may not lawfully accept,
roll over or renew brokered deposits unless (i) it is well capitalized or (ii)
it is adequately capitalized and receives a waiver from the FDIC. A bank that
may not receive brokered deposits also may not offer "pass-through" insurance
on certain employee benefit accounts. Whether or not it has obtained such a
waiver, an adequately capitalized bank may not pay an interest rate on any
deposits in excess of 75 basis points over certain prevailing market rates
specified by regulation. There are no such restrictions on a bank that is well
capitalized. Because the Corporation's banking subsidiaries at December 31,
1994, had the requisite capital levels to qualify as well capitalized
institutions, the Corporation believes the brokered deposits regulation will
have no material effect on the funding or liquidity of any of its banking
subsidiaries.
Consumer Protection Provisions. FDICIA seeks to encourage enforcement of
existing consumer protection laws and enacted new consumer-oriented provisions
including a requirement of notice to regulators and customers of any proposed
branch closing and provisions intended to encourage the offering of "lifeline"
banking accounts and lending in distressed communities. FDICIA also requires
depository institutions to make additional disclosures to depositors with
respect to the rate of interest paid on and the terms of their deposit
accounts.
Institutional Exposure. FDICIA also requires the Federal Reserve to
prescribe standards which limit the risks posed by an insured institution's
"exposure" to any other depository institution to limit the risks that the
failure of a large depository institution would pose to another insured
depository institution. FDICIA broadly defines "exposure" to include extensions
of credit to the other institution; purchases of, or investments in, securities
issued by the other institution; securities issued by the other institution and
accepted as collateral for an extension of credit to any person; and all
similar transactions which the Federal Reserve has defined by regulation to be
"exposure." The Federal Reserve has promulgated procedures and "benchmark"
standards to limit an insured depository institution's credit and settlement
exposure to each of its correspondent banks.
Miscellaneous. FDICIA also made extensive changes in the applicable rules
regarding audit, examinations and accounting. FDICIA generally requires annual,
on-site, full-scope examinations by each FDIC-insured bank's primary federal
regulator. FDICIA also imposes new responsibilities on management, the
independent audit committee and outside accountants to develop, approve or
attest to reports regarding the effectiveness of internal controls, legal
compliance and off-balance-sheet liabilities and assets.
Depositor Preference. Legislation recently enacted by Congress establishes
a nationwide depositor preference rule in the event of a bank failure. Under
this arrangement, all deposits and certain other claims against a bank,
including the claim of the FDIC as subrogee of insured depositors, would
receive payment in full before any general creditor of the bank would be
entitled to any payment in the event of an insolvency or liquidation of the
bank.
Interstate Banking and Community Development Legislation. In September
1994, legislation was enacted that is expected to have a significant effect in
restructuring the banking industry in the United States. The Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 facilitates the
interstate expansion and consolidation of banking organizations (i) by
permitting bank holding companies that are adequately capitalized and
adequately managed, one year after enactment of the legislation (i.e., after
September 29, 1995), to acquire banks located in states outside their home
states regardless of whether such acquisitions are prohibited under the law of
any state; (ii) by permitting the interstate merger of such banks after June 1,
1997, subject to the right of individual states to "opt in" or to "opt out" of
this authority before that date; (iii) by permitting banks to establish new
branches on an interstate basis provided that such action is specifically
authorized by the law of the host state; (iv) by permitting one year after
enactment of the legislation a bank to engage in certain agency relationships
(receive deposits, renew time deposits, close loans, service loans and receive
payments on loans and other obligations) as agent for any bank or thrift
affiliate, whether the affiliate is located in the same State or a different
State than the agent bank; and (v) by permitting foreign banks to establish,
with approval of the regulators, in the United States branches outside their
home states to the same extent that
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national or state banks located in the home state would be authorized to do so.
One effect of this legislation would be to permit the Corporation to acquire
banks and bank holding companies located in any state and to permit banking
organizations located in any state to acquire banks and bank holding companies
headquartered in Tennessee. Overall, this legislation is likely to have the
effects of increasing consolidation and competition and promoting geographic
diversification in the banking industry.
The Riegle Community Development and Regulatory Improvement Act, also
enacted in September 1994, is intended to (i) increase the flow of loans to
businesses in distressed communities by providing incentives to lenders to
provide credit within those communities; (ii) remove impediments to the
securitization of small business loans; (iii) provide for a reduction in
paperwork and to streamline bank regulation through, for example, the
coordination of examinations in a bank holding company context, a reduction in
the number of currency transaction reports required, improvements to the
National Flood Insurance Program that include enabling lenders to force place
flood insurance; and (iv) increase the level of consumer protection provided to
customers in banking transactions. The Corporation believes that these
provisions of the new law will not have a material effect on its operation.
PERSONNEL
As of February 28, 1995, the Corporation, including all subsidiaries, had
5,360 employees (including 851 part-time employees).
STATISTICAL DISCLOSURES
The statistical information required by Item 1 may be found in the 1994
Annual Report to Shareholders, and, to the extent indicated, is incorporated
herein by reference, as follows:
<TABLE>
<CAPTION>
Page in the Corporation's
1994 Annual Report to
Shareholders*
-------------------------
Guide 3 Disclosure
------------------
<S> <C>
I. Distribution of Assets, Liabilities, and
Shareholders' Equity; Interest Rates and
Interest Differential
A. Average Balance Sheet 27
B. Net Interest Earnings Analysis 27
C. Rate/Volume Analysis 28
II. Investment Portfolio
A. Book Value of Investment Securities 32, 48, 49 and 50
B. Maturities of Investment Securities 49 and 50
C. Investment Securities Concentrations Not applicable
III. Loan Portfolio
A. Types of Loans 29 and 50
B. Maturities and Sensitivity of
Loans to Changes in Interest Rates Follows this table
C. Risk Elements
1. Nonaccrual, Past Due 90 Days
or More, and Restructured Loans 29
2. Potential Problem Loans 20
3. Foreign Outstandings Not significant
4. Loan Concentrations 19
D. Other Interest-Bearing Assets Not significant
IV. Summary of Loan Loss Experience
A. Analysis of Allowance for Loan Losses 30
B. Allocation of the Allowance for Loan Losses 29
</TABLE>
-9-
<PAGE> 10
<TABLE>
<CAPTION>
Page in the Corporation's
1994 Annual Report to
Shareholders*
-------------------------
<S> <C>
V. Deposits
A. Average Balances 27 and 28
B. Maturities of Large Denomination
Certificates of Deposit Follows this table
C. Foreign Deposit Liability Disclosure Not significant
VI. Return on Equity and Assets
A. Return on Assets 9
B. Return on Equity 9
C. Foreign Deposit Liability Disclosure Not significant
D. Equity to Assets Ratio 9
VII. Short-Term Borrowings 51 and 52
*Unless otherwise noted
</TABLE>
The following table presents the maturities and sensitivities of the
Corporation's loans to changes in interest rates at December 31, 1994:
<TABLE>
<CAPTION>
DUE DUE AFTER ONE DUE AFTER
WITHIN BUT WITHIN FIVE
ONE YEAR FIVE YEARS YEARS
-------- ------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Commercial, Financial, and Agricultural $826,537 $349,075 $189,117
Real Estate-Construction 151,060 53,648 20,883
-------- -------- --------
Total $977,597 $402,723 $210,000
======== ======== ========
Fixed Rate $294,796 $ 97,274
======== ========
Variable Rate $107,927 $112,726
======== ========
</TABLE>
The following table presents maturities of certificates of deposit of $100,000
and over and other time deposits of $100,000 and over:
<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------
(DOLLARS IN THOUSANDS)
<S> <C>
Under 3 Months $297,279
3 to 6 Months 131,407
6 to 12 Months 103,207
Over 12 Months 175,443
--------
Total $707,336
========
</TABLE>
-10-
<PAGE> 11
ITEM 1A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following lists the executive officers of the Corporation. Information
regarding the executive officers, their ages, their present positions held with
the Corporation and its subsidiaries, and their principal occupations for the
last five years are as follows:
<TABLE>
<CAPTION>
Position of Executive Officers
Name with the Corporation and UPNB Age
---- ------------------------------ -----
<S> <C> <C>
Benjamin W. Rawlins, Jr. Chairman of the Board and 57
Chief Executive Officer of the Corporation;
Chairman of the Board and
Chief Executive Officer of UPNB
Jackson W. Moore President and Chief Operating Officer 46
of the Corporation
Jack W. Parker Executive Vice President and 48
Chief Financial Officer of the Corporation;
Executive Vice President of UPNB
M. Kirk Walters Senior Vice President, Treasurer, and 54
Chief Accounting Officer of the Corporation;
Senior Vice President of UPNB
James A. Gurley Executive Vice President of the Corporation; 61
Executive Vice President of UPNB
</TABLE>
Mr. Rawlins has been Chairman of the Board of the Corporation and UPNB since
April 1989 and January 1986, respectively. He has also served as Chief
Executive Officer of the Corporation and UPNB since September 1984. Mr. Rawlins
was President of the Corporation from September 1984 until he was elected
Chairman.
Mr. Moore has been President of the Corporation since April 1989. In April
1994, Mr. Moore was elected Chief Operating Officer of the Corporation. He is
also Chairman of PSB Bancshares, Inc. and is a Vice President and Director of
its subsidiary, The Peoples Savings Bank (not an affiliate bank of the
Corporation), located in Clanton, Alabama. He has served on the Boards of the
Corporation and UPNB since 1986.
Mr. Parker has been Executive Vice President and Chief Financial Officer of the
Corporation since March 1990. He has been an Executive Vice President and Chief
Financial Officer of UPNB since March 1990. From 1987 until being elected to
these positions with the Corporation, he was an Executive Vice President of
UPNB and President of the Mortgage Banking Group of UPNB.
Mr. Walters was elected Senior Vice President of the Corporation in November
1990 and has been Chief Accounting Officer since February 1990. He has been
Treasurer of the Corporation since 1985. He was a Vice President of the
Corporation from 1975 until he was elected to his current position. Mr. Walters
has been an officer of UPNB for more than twenty years and is currently a
Senior Vice President.
Mr. Gurley was elected Executive Vice President of the Corporation in November
1990. He was a Vice President of the Corporation from 1980 until he was elected
Executive Vice President. He has been an officer of UPNB for more than twenty
years and is currently an Executive Vice President.
ITEM 2. PROPERTIES
The Corporation's corporate headquarters are located in the company-owned
Union Planters Administrative Center at 7130 Goodlett Farms Parkway, Memphis,
Tennessee, a two-building complex located near the center of Shelby County. In
addition to being the corporate headquarters, it contains approximately 250,000
square feet of space and houses Bank Cards, Mortgage Servicing and Origination,
Funds Management, Data Processing, Operations, Human Resources, Financial,
Legal, Credit and Review, Alternative Investments and Insurance Products.
-11-
<PAGE> 12
UPNB's headquarters is located in a 70,000-square-foot company-owned
building in East Memphis. In addition to being its headquarters, the building
also houses UPNB's Commercial Group, Trust Group, Brokerage Services, Retail
Group Administration and Marketing.
As of March 1, 1995, the Corporation operated 195 banking offices in
Tennessee, 124 in Mississippi, 15 in Louisiana, 34 in Arkansas, 7 in Alabama,
and 5 locations in Kentucky. The majority of these locations are owned. The
subsidiaries also operate 282 twenty-four hour automated teller locations.
There are no material encumbrances on any of the company-owned properties.
ITEM 3. LEGAL PROCEEDINGS
The Corporation and/or various subsidiaries are parties to various pending
civil actions, all of which are being defended vigorously. Based upon present
information, including evaluations of certain actions by outside counsel,
management believes that neither the Corporation's financial position, results
of operations, nor liquidity will be materially affected by the ultimate
resolution of pending or threatened legal proceedings. There were no
significant developments during the fourth quarter of 1994 in any pending or
threatened legal proceedings which would alter such opinion.
UPNB and one of its officers are co-defendants in two civil actions seeking
$29 million (after trebling) filed on or about July 25, 1985 in the U.S.
Bankruptcy Court for the Eastern District of Missouri by the trustee for a
failed grocery and its shareholders purportedly predicated upon an August 1981
$115,000 loan by the First National Bank of Gibson County, Tennessee, later
acquired by UPNB, to finance the shareholders' acquisition of the grocery
business from other defendants unrelated to UPNB. The actions allege that the
defendants subsequently conspired to defraud the plaintiffs of their rights in
the grocery. As this matter has been dormant since UPNB filed a motion for
summary judgment in 1985, and after considering the damage amounts in issue,
management has concluded that this action should be deleted from future
reports.
The Corporation's broker/dealer subsidiaries (now inactive) are among the
more than eighty defendants in various actions brought by purchasers of $400
million in housing revenue bonds issued by the Health, Educational, and Housing
Facility Board of the City of Memphis, Tennessee and by purchasers of bonds
that were part of seven other taxable municipal issues. These actions were
transferred to the United States District Court for the Eastern District of
Louisiana for pretrial proceedings captioned In Re: Taxable Municipal Bond
Securities Litigation, Multi-district Litigation ("MDL") 863. Focusing upon the
fact that the bond sale proceeds were initially invested and remain in
"guaranteed investment contracts" ("GICs") issued by Executive Life Insurance
Company ("ELIC"), whose own investments were allegedly concentrated in
so-called "junk bonds" of declining value, the lawsuits in MDL 863 allege that
the offering materials failed to make adequate disclosures and that the bonds
represented a scheme among the Executive Life organization, Drexel Burnham
Lambert, Inc., and the other defendants to raise money for "junk bond"
purchases, rather than for public purposes. ELIC is in conservatorship,
interest on the bonds is in default, and Drexel is in Chapter 11
reorganization. The complaint for the Memphis issue requests certification of a
plaintiff class including substantially all persons who purchased a Memphis
bond through April 9, 1990, either in the original $400 million Memphis bond
underwriting, in which a broker/dealer subsidiary of the Corporation
participated, or in the secondary market, wherein such subsidiary sold a total
of approximately $120 million par value in Memphis bonds. The class claims in
respect of the Memphis issue seek to impose joint and several liability upon,
among others, numerous defendants who participated in the underwriting,
including such subsidiary. In addition, a number of individual actions naming
the Corporation's broker/dealer subsidiaries have been brought by secondary
market purchasers. The class and individual plaintiffs predicate their claims
upon Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5
promulgated thereunder, the Investment Company Act, the Investment Advisors
Act, common law fraud, negligent misrepresentation, gross and ordinary
negligence, breach of fiduciary duty, the Tennessee Securities Act, and other
laws. For relief, the various complaints seek a declaratory judgment that the
Memphis bonds were void from their inception, rescission of all plaintiffs'
purchases, punitive damages, prejudgment interest, and other relief. On January
28, 1993, the California Supreme Court declined to review a lower court ruling
to the effect that claims to ELIC assets by policyholders, annuitants, and
holders of GICs are to be treated as equal in priority in the distribution of
such assets. While related terms and enforceability are unclear, the
Corporation's broker/dealer subsidiaries have joined in a common defense with
other members of the syndicate which underwrote the bonds the subject of the
litigation. During the third quarter of 1994, most of the representatives of
the plaintiffs in the various class actions agreed in principle to settle all
claims
-12-
<PAGE> 13
against the underwriting participants. Such settlement has been given tentative
approval by the court, and is subject to a number of preconditions, including
final approval by the court. Notice of the settlement will be distributed to
all members of the putative plaintiff classes and such class members have been
given the right to opt out of the settlement agreement and continue to pursue
claims against the underwriters. A small number of class members have already
indicated their intent to do so. However, should such opt-out claims reach a
certain threshold, the underwriting defendants may withdraw their settlement
offer. All of the individual secondary market suits against the Corporation's
subsidiaries that were consolidated in the litigation have been resolved. The
remaining claim asserted against such subsidiaries is in arbitration and
involves a $100,000 par value sale.
On May 30, 1991, in an action originally filed by UPNB in the Circuit
Court of Cook County, Illinois, Chancery Division, seeking to foreclose on a
single parcel of mortgaged residential property, the defendant debtors filed a
counterclaim against UPNB and the Corporation individually and on the purported
behalf of a requested class which would have consisted essentially of all
persons who had a mortgage loan serviced by UPNB at any time during the past
ten years. The counterclaim alleged that UPNB, like other participants in the
mortgage loan industry, engaged in a regular practice of charging mortgage
debtors greater amounts to escrow for estimated property taxes and insurance
than is allowed by law and applicable loan agreements. The counterclaim sought
recovery of all excess charges and/or interest thereon, and other relief. The
class action aspects of this counterclaim have been dismissed, leaving only a
setoff claim by the defendant debtors with respect to the foreclosure. On
February 16, 1993, an action was filed in the Circuit Court of Choctaw County,
Alabama as an individual action and as a purported class action against UPNB
and UPC with theories of recovery and relief requested similar to the Illinois
counterclaim. During the first quarter of 1995, UPNB and the Corporation
entered into a definitive settlement with attorneys for the plaintiffs in both
actions, which settlement agreement would resolve both actions without material
loss. Consummation of the settlement agreement is dependent on certain
contingencies, including court approval and approval of such settlement by a
requisite percentage of the members of the putative plaintiff class, but is
expected to occur in 1995. Based on the damage amounts apparently at issue,
management has concluded that this matter should be deleted from future
reports.
On or about July 10, 1991, UPNB was joined with nine other banks as
defendants in a civil action in the Circuit Court of Shelby County, Tennessee.
The suit as originally filed alleged that the banks unlawfully conspired to fix
the charges for checks drawn on insufficient funds and sought compensatory and
punitive damages of $25 million against each defendant and certification of a
class of plaintiffs comprised of all depositors who have been charged the NSF
fees. The suit was amended on or about July 12, 1991, August 2, 1991, and again
on November 25, 1991 to add plaintiffs and to include claims of unfair and
deceptive trade practices, breach of contract, tortious conduct, violation of
provisions of the UCC, treble damages under the Tennessee Consumer Protection
Act, and usury. The amendments also broadened the class and the claims to seek
recovery for fees charged for deposited third-party checks which were returned
uncollected. In March 1992, the state court proceeding was dismissed;
plaintiffs subsequently appealed the dismissal, and on February 23, 1993, the
Tennessee Court of Appeals affirmed the dismissal of five of the six counts in
the state court action but reversed the dismissal of the count alleging
violation of the contractual duty of good faith and fair dealing, holding that
the plaintiffs met bare minimum pleading requirements to permit that claim to
go forward. During the third quarter of 1993, class certification was granted
by the state court, with the plaintiff class apparently consisting of all
persons in the United States who, in the six years prior to the filing of the
complaint were charged the fees described above. However, on December 17, 1993,
the defendants' motion for summary judgment was granted on the remaining breach
of contract claim. Plaintiffs have appealed that ruling. Further, on May 22,
1992, substantially the same group of plaintiffs filed a civil action in the
U.S. District Court for the Western District of Tennessee against UPNB and
eight other banks, alleging violations of the Sherman Act, the federal
anti-trust statute prohibiting the fixing of prices by competitors, as well as
the Tennessee Consumer Protection Act, requesting certification of a similarly
broad class, and sought injunctive relief and damages for the class members in
amounts, according to the suit, "which are presently undetermined but believed
to be more than $100 million." The complaint also sought treble damages and a
jury trial. On March 19, 1993, the federal court granted defendants' motion to
dismiss the Tennessee Consumer Protection Act claim, but permitted the Sherman
Act claim to remain at that stage of the proceedings. On September 15, 1993,
the defendants filed a motion for summary judgment seeking dismissal of the
Sherman Act claim, which was granted by the court during the first quarter of
1994. The plaintiffs filed a motion for reconsideration, which motion was
denied and plaintiffs appealed to the United States Court of Appeals for the
6th Circuit.
Certain subsidiaries of the Corporation and UPNB were threatened in 1989
with a civil action by the FDIC for the estate of a closed savings association.
If filed, the action would reportedly seek
-13-
<PAGE> 14
compensatory damages of at least $37 million and other relief, including an
injunction against transferring or encumbering any assets until any judgments
were paid, based upon allegations of wrongdoing in the sale of covered call
options to the closed savings association. A tolling and forbearance agreement,
entered into by all parties to the threatened action in 1989, continues in
effect. The FDIC has been furnished information by the Corporation which it
asserts demonstrates the lack of merit in the threatened action and believes
that such action, if nevertheless filed, can be resolved without material loss.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The information required by Item 5 is included in the Corporation's 1994
Annual Report to Shareholders on page 33 under the heading Table 14, "Selected
Quarterly Data," which is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by Item 6 is included in the Corporation's 1994
Annual Report to Shareholders on page 9 under the heading "Selected Financial
Data," and which is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by Item 7 is included in the Corporation's 1994
Annual Report to Shareholders on pages 10-34 under the heading "Management's
Discussion and Analysis of Results of Operations and Financial Condition," and
which is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 is included in the Corporation's 1994
Annual Report to Shareholders on pages 35-69 and on page 33 under the heading
Table 14, "Selected Quarterly Data," and which is incorporated herein by
reference.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 as to the directors of the Corporation
is included under the heading "Proposal I: Election of Directors" on pages 1-5
and under the heading "Director Compensation" on page 5 of the definitive proxy
statement of the Corporation to be used in soliciting the proxies for the
Annual Meeting of shareholders to be held on April 27, 1995 (Proxy Statement)
and which is incorporated herein by reference.
The information concerning "Executive Officers of the Registrant" is
included in Part I (Item 1a) of this Form 10-K in accordance with Instruction 3
to paragraph (b) of Item 401 of Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 as to compensation of directors and
executive officers is included under the heading "Proposal I: Election of
Directors" on pages 1-5 and under the heading "Certain Information as to
Management" on pages 7-14 of the Proxy Statement which is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 as to certain beneficial owners and
management is included under the heading "Proposal I: Election of Directors" on
pages 1-5 of the Proxy Statement which is incorporated herein by reference.
-14-
<PAGE> 15
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 as to transactions and relationships
with certain directors and executive officers of the Corporation and their
associates is included under the heading "Certain Relationships and
Transactions" on page 14 of the Proxy Statement which is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) The following audited consolidated financial statements of Union
Planters Corporation and Subsidiaries, included in the Corporation's
1994 Annual Report to Shareholders, are incorporated herein by
reference in Item 8:
<TABLE>
<CAPTION>
Page in
Annual Report
--------------
<S> <C>
Management's Responsibility for Financial Reporting 35
Report of Independent Accountants 35
Consolidated Balance Sheet -- December 31, 1994 and 1993 36
Consolidated Statement of Earnings -- Years ended
December 31, 1994, 1993, and 1992 37
Consolidated Statement of Changes in Shareholders' Equity --
Years ended December 31, 1994, 1993, and 1992 38
Consolidated Statement of Cash Flows --
Years ended December 31, 1994, 1993, and 1992 39
Notes to Consolidated Financial Statements 40
</TABLE>
(a) (2) All schedules have been omitted, since the required information is
either not applicable, not deemed material, or is included in the
respective consolidated financial statements or in the notes thereto.
(a) (3) Exhibits:
The exhibits listed in the Exhibit Index on pages i and ii, following page
16 of this Form 10-K are filed herewith or are incorporated herein by
reference.
(b) Reports on Form 8-K:
<TABLE>
<CAPTION>
Date of Current Report Subject
---------------------- -------------------------------------------
<S> <C>
October 20, 1994 Press Release announcing third quarter 1994 operating results and filing 1993
consolidated financial statements of Union Planters Corporation effective October
20, 1994
January 13, 1995 Acquisition of Grenada Sunburst System Corporation (GSSC) on December 31, 1994
January 31, 1995 Amendment to January 13, 1995 Current Report on Form 8-K for the GSSC acquisition
to file the unaudited pro forma financial information
</TABLE>
-15-
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
UNION PLANTERS CORPORATION
(Registrant)
By: /s/ Benjamin W. Rawlins, Jr.
---------------------------------------------------
Benjamin W. Rawlins, Jr., Chairman of the Board and
Chief Executive Officer
Date: March 22, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 22nd of March, 1995.
<TABLE>
<S> <C>
/s/ Benjamin W. Rawlins, Jr. /s/ Jack W. Parker
- ----------------------------------------------- ----------------------------------------------
Benjamin W. Rawlins, Jr. Jack W. Parker
Chairman of the Board, Chief Executive Officer, Executive Vice President and
and Director Chief Financial Officer
/s/ Jackson W. Moore /s/ M. Kirk Walters
- ----------------------------------------------- ----------------------------------------------
Jackson W. Moore M. Kirk Walters
President, Chief Operating Officer, Senior Vice President, Treasurer, and
and Director Chief Accounting Officer
/s/ Albert M. Austin
- ----------------------------------------------- ----------------------------------------------
Albert M. Austin Stanley D. Overton
Director Director
/s/ Marvin E. Bruce /s/ Dr. V. Lane Rawlins
- ----------------------------------------------- ----------------------------------------------
Marvin E. Bruce Dr. V. Lane Rawlins
Director Director
/s/ George W. Bryan /s/ Mike P. Sturdivant
- ----------------------------------------------- ----------------------------------------------
George W. Bryan Mike P. Sturdivant
Director Director
/s/ Robert B. Colbert, Jr. /s/ Richard A. Trippeer, Jr.
- ----------------------------------------------- ----------------------------------------------
Robert B. Colbert, Jr. Richard A. Trippeer, Jr.
Director Director
/s/ C. J. Lowrance III
- -----------------------------------------------
C. J. Lowrance III
Director
</TABLE>
-16-
<PAGE> 17
EXHIBIT INDEX
3 (a) Restated Charter of Incorporation, as amended December 17, 1992, of
Union Planters Corporation (incorporated by reference to Exhibit 3(a)
to the Annual Report on Form 10-K dated December 31, 1993)
3 (b) Amended and Restated By-Laws, as amended February 28, 1995, of Union
Planters Corporation (Filed herewith)
4 (a) Rights Agreement, dated January 19, 1989 between Union Planters
Corporation and Union Planters National Bank, including Form of
Rights Certificate (Exhibit A), and a Form Summary of Rights (Exhibit
B) (Incorporated by reference to Exhibit 1 to Union Planters
Corporation's Current Report dated as of January 19, 1989 on Form 8-K
filed February 1, 1989 Commission File No. 0-6919)
4 (b) Indenture dated April 1, 1989 between Union Planters Corporation and
LaSalle National Bank for $34,500,000 of 10 1/8% Subordinated Capital
Debentures due 1999 *
4 (c) Indenture dated October 1, 1992 between Union Planters Corporation
and The First National Bank of Chicago (Trustee) for $40,250,000 of 8
1/2% Subordinated Notes due 2002 ***
4 (d) Subordinated Indenture dated October 15, 1993 between Union Planters
Corporation and The First National Bank of Chicago for $75,000,000 of
6.25% Subordinated Notes due 2003 ****
10 (a) Employment Agreement between Union Planters Corporation and Benjamin
W. Rawlins, Jr. (incorporated by reference to Exhibit 10(a) to the
Annual Report on Form 10-K dated December 31, 1992)
10 (b) Employment Agreement between Union Planters Corporation and Jackson
W. Moore (incorporated by reference to Exhibit 10(c) to the Annual
Report on Form 10-K dated December 31, 1992)
10 (c) Deferred Compensation Agreements between Union Planters Corporation
and certain highly compensated officers (incorporated by reference to
Exhibit 10(g) to the Annual Report on Form 10-K dated December 31,
1989)
10 (d) Union Planters Corporation 1983 Stock Incentive Plan **
10 (e) (1) Amended Union Planters Corporation 1983 Stock Incentive Plan
*****
10 (f) Union Planters Corporation 1992 Stock Incentive Plan (incorporated by
reference to Exhibit 10(g) to the Annual Report on Form 10-K dated
December 31, 1993 filed on March 28, 1994 Commission File No. 1-10160)
10 (g) Deferred Compensation Agreements between Union Planters Corporation
and Union Planters National Bank and certain outside directors
(incorporated by reference to Exhibit 10(m) to the Annual Report on
Form 10-K dated December 31, 1989 filed on March 26, 1990 Commission
File No. 0-6919)
10 (h) Executive Deferred Compensation Agreement between Union Planters
Corporation and certain highly compensated officers (incorporated by
reference to Exhibit 10(n) to the Annual Report on Form 10-K dated
December 31, 1989 filed on March 26, 1990 Commission File No. 0-6919)
11 Computation of Per Share Earnings (Filed herewith)
13 Annual Report to Security Holders (Filed herewith)
21 Subsidiaries of the Registrant (Filed herewith)
-i-
<PAGE> 18
EXHIBIT INDEX (continued)
23 Consent of Price Waterhouse LLP (Filed herewith)
27 Financial Data Schedule (Filed herewith)
* Incorporated by reference to exhibit number 4 filed as part of
Registration Statement No. 33-27784
** Incorporated by reference to exhibit 4(a) filed as part of
Registration Statement No. 33-35928
*** Incorporated by reference to exhibit number 4 filed as part of
Registration Statement No. 33-52434
**** Incorporated by reference to Exhibit Number 4(d) filed as part of
Registration Statement No. 33-50655
***** Incorporated by reference to Exhibit Number 4 filed as part of
Registration Statement No. 33-23306
-ii-
<PAGE> 1
EXHIBIT 3(b)
AMENDED AND RESTATED BYLAWS
OF
UNION PLANTERS CORPORATION
(A TENNESSEE CORPORATION)
_______________________________________
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders of the
Corporation for the election of Directors and for the transaction of such other
business as may come before the meeting shall be held on the fourth Thursday in
April of each year (subsequent to the year 1972) if not a legal holiday, and if
a legal holiday at such time as shall be designated by the Board. If the
annual meeting shall not be held on the day hereinabove provided for, the Board
shall call a special meeting for the election of Directors as soon thereafter
as convenient, and in any event not later than 30 days after said day.
Section 2. Special Meetings. Special meetings of the shareholders,
unless otherwise prescribed by law, may be called for any purpose or purposes
whatsoever at any time by the Chairman of the Board, the President, the
Secretary or the holders of not less than one tenth (1/10) of the shares
entitled to vote at such meeting.
Section 3. Notice of Meeting; Waiver of Notice. Written or printed
notice stating the place, day, hour, purpose or purposes for which the meeting
is called and the person or persons calling the meeting shall be delivered
either personally or by mail or at the direction of the Chairman of the Board,
the President, the Secretary or other person or persons calling the meeting to
each shareholder entitled to vote at the meeting. If mailed, such notice shall
be delivered not less than ten (10) nor more than sixty (60) days before the
date of the meeting and shall be deemed to be delivered when deposited in the
United States Mail addressed to the shareholder at his address as it appears on
the stock transfer records of the Corporation, with postage thereon prepaid.
If delivered personally, such notice shall be delivered not less than five (5)
nor more than sixty (60) days before the date of the meeting and shall be
deemed delivered when actually received by the shareholder. A certificate of
the Secretary or other person giving the notice, or of a transfer agent of the
Corporation, that the notice required by this Section has been given, in the
absence of fraud, shall be prima facie evidence of the facts therein stated.
Whenever the shareholders
-1-
<PAGE> 2
of this Corporation are authorized to take any action after notice or after the
lapse of a prescribed period of time, such action may be taken without notice
and without the lapse of such period of time, if at any time before or after
such action is completed each shareholder entitled to such notice or entitled
to participate in the action to be taken, (or his attorney-in-fact or proxy
holder), shall submit a signed waiver of notice of such requirement. When a
meeting is adjourned to another time or place, it shall not be necessary to
give any notice of the adjourned meeting if the time and place to which the
meeting is adjourned are announced at the meeting at which the adjournment is
taken, and at the adjourned meeting any business may be transacted that might
have been transacted on the original date of the meeting. However, if after
the adjournment the Board shall fix a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given to each shareholder
of record on the new record date entitled to vote at the meeting.
Section 4. Place of Meetings. Meetings of the shareholders may be held
at such place, either within or without the State of Tennessee, as may be set
by the Board. If the Board shall fail to set the place of the meeting, the
meeting shall be held at the principal office of the Corporation.
Section 5. Quorum. At all meetings of the shareholders, the holders of a
majority of the shares of stock of the Corporation entitled to vote, present in
person or by proxy, shall constitute a quorum for the transaction of any
business, except as otherwise provided by statute or by the Charter or these
Bylaws. When a quorum is once present to organize a meeting, it is not broken
by the subsequent withdrawal of any of those present. A meeting may be
adjourned despite the absence of a quorum. The absence from any meeting of
holders of the number of shares of stock of the Corporation in excess of a
majority thereof which may be required by the laws of the State of Tennessee or
other applicable statute, the Charter, or these Bylaws, for action upon any
given matter, shall not prevent action at such meeting upon any other matter or
matters which may properly come before the meeting, if there shall be present
thereat, in person or by proxy, holders of the number of shares of stock of the
Corporation required for action in respect of such other matter or matters.
Section 6. Organization. At each meeting of the shareholders, the
Chairman of the Board or in his absence or inability to act, the Vice chairman,
or in the absence or inability to act of the Chairman of the Board and the Vice
Chairman, the President, shall act as Chairman of the meeting. The Secretary,
or in his absence or inability to act, any person appointed by the Chairman of
the meeting shall act as Secretary of the meeting and keep the minutes thereof.
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Section 7. Order of Business. The order of business at all meetings of
the shareholders shall be as determined by the Chairman of the meeting.
Section 8. Voting; Consent of Shareholders in lieu of Meeting. Except as
otherwise provided by statute or the Charter, each holder of record of shares
of stock of the Corporation having voting power shall be entitled at each
meeting of the shareholders to one vote upon each matter submitted to a vote
for every share of such stock standing in his name on the record of
shareholders of the Corporation:
a. On the date fixed by the Board in accordance with Section 6 of
Article VI hereof as the record date for the determination of the
shareholders who shall be entitled to notice of and to vote at such
meeting; or
b. If such record date shall not have been fixed for the
determination of shareholders entitled to notice of or entitled to vote at
a meeting of shareholders, the date on which notice of the meeting is
mailed shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section, such determination
shall apply to any adjournment thereof.
Every shareholder entitled to vote at a meeting of shareholders or to
express consent or dissent without a meeting may authorize another person or
persons to act for him by proxy. Every proxy must be signed by the shareholder
or his attorney-in-fact. No proxy shall be valid after the expiration of
eleven (11) months from the date thereof unless otherwise provided in the
proxy. Every proxy shall be revocable prior to its use at the pleasure of the
shareholder executing it, except as otherwise provided in this Section or by
law. The authority of the holder of a proxy to act shall not be revoked by the
incompetence or the death of the shareholder who executed the proxy unless,
before the authority is exercised, written notice of an adjudication of such
incompetence or the death of the shareholder who executed the proxy unless,
before the authority is exercised, written notice of an adjudication of such
incompetence or written notice of such death is received by the corporate
officer responsible for maintaining the list of shareholders. A proxy
authorized by a shareholder which is entitled "irrevocable proxy" an which
states it is irrevocable is irrevocable when it is held by one of the following
or a nominee of any of the following:
(a) a pledge;
(b) a person who has purchased or agreed to purchase the shares;
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(c) a person designated by or under an agreement comporting with the
law.
Notwithstanding a provision in a proxy stating that it is irrevocable, the
proxy becomes revocable after the pledge is redeemed or such agreement has
terminated.
A proxy may be revoked notwithstanding a provision making it irrevocable,
by a purchaser of shares without knowledge of the existence of the provision
unless the existence of the proxy and its irrevocability is noted conspicuously
on the face or back of the certificate representing such shares.
Whenever shareholders are required or permitted to take any action by
vote, such action may be taken without a meeting on written consent, setting
forth the action so taken, signed by all of the persons or entities entitled to
vote thereon.
If a vote shall be taken on any question, then unless required by statute,
or determined by the Chairman of the meeting to be advisable, any such vote
need not be by ballot. On a vote by ballot, each ballot shall be signed by the
shareholder voting, or by his proxy, if there be such proxy, and shall state
the number of shares voted.
Section 9. List of Shareholders. A list of shareholders of the
Corporation as of the record date, certified by the officer responsible for the
preparation or by the Corporation's transfer agent, shall be open for
inspection at any meeting of the shareholders. If the right to vote at any
meeting is challenged, the Chairman of the meeting may rely on such list as
evidence of the right of the persons challenged to vote at such meeting.
Section 10. Inspectors of Election. The Board may, in advance of any
meeting of shareholders, appoint two or more inspectors to act at such meeting
or at any adjournment thereof. If the inspectors shall not be so appointed, or
if any of them shall fail to appear or act, the Chairman of the meeting may,
and on request of any shareholder entitled to vote thereat shall, appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence
of a quorum, the validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the results, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the Chairman
of the meeting or any shareholder
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entitled to vote thereat, the inspectors shall make a report in writing of any
challenge, request or matter determined by them, and shall execute a
certificate of the facts found by them. No director or candidate for the
office of director shall act as inspector of an election of directors.
Inspectors need not be shareholders of the Corporation.
Section 11. Examination of Corporate Records by Shareholders. Any person
who shall have been a shareholder of record for at least six (6) months
immediately preceding his demand, or who shall be the holder of record of at
least five percent (5%) of all of the outstanding shares of the Corporation,
upon written demand stating the purpose thereof, shall have the right to
examine, in person, or by agent or attorney, at any reasonable time or times,
for any proper purpose, the Corporation's books and records of account and the
minutes and records of meetings of shareholders, the Board and the Committees o
the Board, and to make extracts therefrom. Notwithstanding the foregoing, upon
proof of proper purpose by a shareholder of the Corporation, irrespective of
the period of time during which such shareholder shall have been a shareholder
of record and irrespective of the percentage of outstanding shares held by him,
a court having equity jurisdiction in Shelby County, Tennessee, may compel the
production for examination by such shareholder of the books, documents and
records of the Corporation. By resolution the Board may adopt further policies
in respect of the right of the shareholders of the Corporation to inspect said
books and records provided that said policies shall not be more restrictive
than the provisions of applicable law at the time.
ARTICLE II
BOARD OF DIRECTORS
Section 1. General Powers. Except as otherwise provided by law or by the
Charter, the business and affairs of the Corporation shall be managed by the
Board of Directors. The Board may exercise all such authority and powers of
the Corporation and do all such lawful acts and things as are not by statute or
the charter directed or required to be exercised or done by the shareholders.
Section 2. Number, Classification, Election, etc. The number of
directors of the corporation shall be twelve (12) who shall be divided into
three classes designated Class I, Class II and Class III as follows:
Class I consists of four (4) directors elected to hold office for a term
expiring at the 1997 Annual Meeting of Shareholders at which their respective
successors are to be elected for a term expiring at the 2000 Annual Meeting;
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Class II consists of four (4) directors elected to hold office for a term
expiring at the 1995 Annual Meeting of Shareholders at which their respective
successors are to be elected for a term expiring at the 1998 Annual Meeting;
and
Class III consists of four (4) directors elected to hold office for a term
expiring at the 1996 Annual Meeting of shareholders at which their respective
successors are to be elected for a term expiring at the 1999 Annual Meeting.
Thereafter, each class of directors shall be elected to hold office for
terms expiring on the third annual meeting succeeding the annual meeting at
which they were last elected. The successor to any director who shall have
been elected by the directors to fill a vacancy on the Board shall serve only
until the next annual meeting of shareholder for a term expiring at the same
time as the terms of the other members of the same class. Notwithstanding the
foregoing, any director whose term shall expire at any annual meeting shall
continue to serve until such time as his successor shall have been duly elected
and shall have qualified unless his position on the Board shall have been
abolished by action taken to reduce the size of the Board prior to said
meeting. No amendment of the Bylaws decreasing the number of directors shall
have the effect of shortening the term of any director. All directors shall be
at least 21 years of age. Mandatory retirement is established at age 70,
except as to persons who were Directors on February 21, 1985, to be effective
at the regular Annual Shareholders Meeting following the 70th birthday.
Directors need not be shareholders of the Corporation or need they be residents
of Tennessee. Except as otherwise provided by law or by the Charter, the
directors shall be elected by written ballot at annual meetings of
shareholders. Article NINTH of the Corporation's Charter, as amended by the
shareholders on April 16, 1981, provides that the number of directors of the
Corporation shall be as provided in these Bylaws from time to time but shall
not be less than 7 nor more than 25 and establishes guidelines for increasing
the number of directors by amendment of the Bylaws by two-thirds vote of the
directors then in office.
Section 3. Place of Meeting. Regular meetings of the Board shall be held
at such place within or without the State of Tennessee as the Board may from
time to time determine. Special meetings may be held at such place in Shelby
County, Tennessee, as may be determined by the person calling said meeting. In
all cases the place of the meeting shall be specified in the notice thereof.
Section 4. Organization Meeting. The Board of Directors shall meet for
the purpose of organization, the election of officers, and the transaction of
other business as soon as practicable after each annual meeting of the
shareholders, on the same day and at the same place where such annual meeting
shall
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be held. Notice of such meeting need not be given if held at said time and
place. Such meeting may be held at any other time or place (within or without
the State of Tennessee) which shall be specified in a notice thereof given as
hereinafter provided in Section 7 of this ARTICLE II.
Section 5. Regular Meetings. Regular meetings of the Board of Directors
of this Corporation shall be held on the fourth Thursday of each month at 9:30
a.m., in the Fourth Floor Executive Conference Room, Union Planters
Administrative Center, 7130 Goodlett Farms Parkway, Memphis, Tennessee. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting which otherwise would be held on that
day shall be held at the same hour on the next succeeding business day. Notice
of regular meetings of the Board need not be given except as otherwise required
by law.
Section 6. Special Meetings. Special meetings of the Board may be called
by the Chairman of the Board, the President, and Executive Vice President, the
Secretary or any three or more Directors of the Corporation.
Section 7. Notice of Meetings. Notice of each special meeting of the
Board (and of each regular meeting for which notice shall be required) shall be
given by the Secretary or by or under the supervision of the persons calling
the meeting as hereinafter provided in this Section 7, in which notice shall be
stated the time and place of the meeting. Notice of each such meeting shall be
delivered to each director, either personally or by telephone, telegraph, cable
or other method of communication, at least 24 hours before the time at which
such meeting is to be held, or by first-class mail, postage prepaid, addressed
to him at his residence or usual place of business, and deposited in the mail
at least two days before the day on which the meeting is to be held. Notice of
any such meeting need not be given to any director who shall, either before or
after the meeting, submit a signed waiver of notice or who shall attend such
meeting (other than for the express purpose of objecting to the transaction of
any business because the meeting is not lawfully called or convened). Neither
the business to be transacted at, nor the purpose of any regular or special
meeting of the Board, need be specified in the notice or waiver of notice of
such meeting unless otherwise required by law of the Bylaws.
Section 8. Quorum and Manner of Acting. A majority of the entire Board
shall be present in person at any meeting of the Board in order to constitute a
quorum for the transaction of business at such meeting, and except as otherwise
expressly required by the Charter, these Bylaws or any applicable statute, the
act of a majority of the directors present at any meeting at which a quorum is
present shall be act of the Board. In the absence of a quorum at any meeting
of the Board, a majority of
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the directors present thereat may adjourn such meeting to another time and
place until a quorum shall be present thereat. Notice of the time and place of
any such adjourned meeting shall be given to the directors who were not present
at the time of the adjournment and, unless such time and place were announced
at the meeting at which the adjournment was taken, to the other directors. At
any adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as originally
called.
Section 9. Organization. At each meeting of the Board, the Chairman of
the Board, or, in his absence or inability to act, the Vice Chairman, or, in
his absence or inability to act, the President, or in his absence or inability
to act, another director chosen by a majority of the directors present shall
act as Chairman of the meeting and preside thereat. The Secretary or, in his
absence or inability to act, any person appointed by the Chairman shall act as
Secretary of the meeting and keep the minutes thereof.
Section 10. Resignations. Any director of the Corporation may resign at
any time by giving written notice of his resignation to the Board or to the
Chairman of the Board, the Vice Chairman or to the President or to the
Secretary of the Corporation. Any such resignation shall take effect at the
time specified therein or, if the time when it shall become effective shall not
be specified therein, immediately upon its receipt; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 11. Vacancies. Newly created directorships resulting from an
increase in the number of directors and vacancies occurring in the Board for
any reason (other than the removal of directors without cause or for cause) may
be filled by vote of a majority of the directors then in office, although less
than a quorum exists. Vacancies occurring on the Board by reason of the
removal of directors without cause or for cause may be filled for the duration
of the term of the class by vote of the shareholders, provided, however, if the
shareholders shall fail to fill a vacancy so created, the vacancy shall be
filled by the directors in the manner specified in the preceding sentence. No
person who has attained the age of seventy (70) years shall be appointed to
fill any vacancy.
Section 12. Removal of Directors. Any or all of the directors of the
Corporation may be removed with or without cause by vote of the holders of
sixty-six and two-thirds percent (66 2/3%) or more of the outstanding shares of
the capital stock of the Corporation entitled to vote generally in the election
of directors.
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Section 13. Action by Written Consent. Any action required or permitted
to be taken at any meeting of the Board of Directors may be taken without a
meeting on written consent, setting forth the action so taken, signed by all of
the directors entitled to vote thereon. The instrument of consent shall be
filed with the minutes of the proceedings of the Board of Directors.
ARTICLE III
EXECUTIVE AND OTHER COMMITTEES
Section 1. Executive Committee. The Board may, by resolution adopted by
a majority of the entire Board, designate an Executive Committee consisting of
five (5) or more of the directors of the Corporation, which Committee shall
have and may exercise all of the authority of the Board of Directors with
respect to all matters other than:
(a) The adoption, amendment or repeal of any Bylaw;
(b) The submission to shareholders of any action requiring
shareholders' authorization;
(c) The filling of vacancies in the Board of Directors or in any
committee thereof;
(d) The declaration of dividends or making of other corporate
distributions;
(e) The issuance of Common Stock, Preferred Stock or any other
obligation of the Corporation exchangeable for or convertible into its
capital stock of any class or any warrant, right or option to acquire the
same; or
(f) the removal or replacement of any officer elected by the Board
or appointed by the Chairman of the Board or President pursuant to
authority conferred upon them or either of them by the Board.
The Board may designate one or more directors as alternate members of the
Executive Committee, who may replace any absent member or members at any
meeting of such committee. The Executive Committee shall serve at the pleasure
of the Board. The Executive Committee shall keep written minutes of its
proceedings and shall report such minutes to the Board. All such proceedings
shall be subject to revision or alteration by the Board; provided, however,
that third parties shall not be prejudiced by such revision or alteration.
Section 2. Other Committees. The Board may, by resolution adopted by a
majority of the entire Board, designate other Committees, each consisting of
three or more of the directors
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of the Corporation, which Committees, except as otherwise proscribed by
statute, shall have and may exercise the authority of the Board to the extent
that such authority shall be conferred by resolutions designating such
Committee or Committees adopted by vote of a majority of the entire Board.
Section 3. General. A majority of any committee may determine its action
and fix the time and place of its meetings, unless the Board shall otherwise
provide. In the absence or disqualification of any member of any committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place and
stead of any such absent or disqualified member. In determining the existence
of a quorum, the Secretary of the Corporation shall not be counted unless he
shall be a director of the Corporation and shall have been duly appointed as a
member of such committee. The Board shall have the power at any time to change
the membership of any committee, to fill all vacancies, to designate alternate
members to replace any absent or disqualified member, or to dissolve any such
committee. Nothing herein shall be deemed to prevent the Board from appointing
one or more committees consisting in whole or in part of persons who are not
directors of the Corporation; provided, however, that no such committee shall
have or may exercise any authority or power of the Board in the management of
the business or affairs of the Corporation.
ARTICLE IV
OFFICERS
Section 1. Number and Qualifications. The officers of the Corporation
shall include the Chairman of the Board, the Vice Chairman, the President, one
or more Executive Vice Presidents, one or more Vice Presidents, the Treasurer
and the Secretary. Any two or more offices may be held by the same person,
except the offices of President and Secretary. Such officers shall be elected
by the Board of Directors each year at the organizational meeting held after
the Annual Meeting of shareholders, each to hold office until the meeting of
the Board following the next Annual Meeting of the shareholders and until his
successor shall have been duly elected and shall have qualified, or until his
death, or until he shall have resigned or have been removed in the manner
provided by law and these Bylaws. The Board may from time to time elect, or
delegate to the Chairman of the Board the power to appoint such other officers
(including one or more Assistant Vice Presidents, one or more Assistant
Treasurers, and one or more Assistant Secretaries) and such agents, as may be
necessary or desirable to carry on the business of the Corporation. Such other
officers and agents shall have such duties and shall
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hold their offices for such terms as may be prescribed by the Board or by the
appointing authority.
Section 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his resignation to the Board, the Chairman
of the Board, the Vice Chairman, the President or the Secretary. Any such
resignation shall take effect at the time specified therein or, if the time
when it shall become effective shall not be specified therein, immediately upon
its receipt; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 3. Removal. Any officer or agent of the Corporation may be
removed, either with or without cause, at any time, by the vote of the majority
of the entire Board at any meeting of the Board, or, except in the case of an
officer or agent elected or appointed by the Board, by the Chairman of the
Board or the President.
Section 4. Vacancies. A vacancy in any office, whether arising from
death, resignation, removal or any other cause, may be filled by the Board at
any regular or special meeting for the unexpired portion of the term of the
office which shall be vacant, in the manner prescribed in these Bylaws for the
regular election or appointment to such office.
Section 5. The Chairman. The Chairman of the Board shall be the Chief
Executive Officer of the Corporation and shall have the general and active
management of the business of the Corporation and shall have general and active
supervision and direction over the business and affairs of the Corporation and
over its several officers, agents and employees, subject, however, to the
control of the Board. He shall, if present, preside at each meeting of the
Shareholders and of the Board. He shall perform all duties incident to the
office of the Chairman of the Board and such other duties as may, from time to
time, be assigned to him by the Board. The Chairman of the Board shall be
authorized to do or cause to be done all things appropriate, including
preparation, execution and filing of any Registration Statements or other
documents to effectuate the registration of the Corporation's securities (when
necessary or desirable) with the Securities and Exchange Commission pursuant to
the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended,
and to effectuate the registration of the Corporation's securities as may be
necessary or desirable pursuant to the securities laws of any state. The
Chairman is also authorized to execute and cause to be filed on behalf of the
Corporation any reports which may be required by the securities laws or other
laws of the United States or of any state pursuant to any regulations adopted
with respect thereto.
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Section 5(a). The Vice Chairman. The Vice Chairman shall have those
duties assigned to him by the Chairman or the Board. In the case of the
absence of the Chairman or his inability to act, the Vice Chairman shall
perform the duties of the Chairman, and when so acting shall have all of the
powers of, and be subject to all the restrictions upon, the Chairman.
Section 6. The President. The President shall have general and active
supervision and direction over the other officers, agents and employees and
shall see that their duties are properly performed, subject, however, to the
control of the Board. Concurrently with the Chairman of the Board, the
president is hereby authorized to do or cause to be done all things
appropriate, including preparation, execution and filing of the registration of
the Corporation's securities (when necessary or desirable) with the Securities
and Exchange Commission pursuant to the Securities Act of 1933 and the
Securities Exchange Act of 1934, as amended, and to effectuate registration of
the Corporation's Securities as may be necessary or desirable pursuant to the
securities laws of any state. The President is also authorized to execute and
cause to be filed on behalf of the Corporation any reports which may be
required by the securities laws or other laws of the United States or any state
or pursuant to any regulations adopted with respect thereto. In the case of
the absence of the Chairman of the Board and the Vice Chairman or their
inability to act, the President shall perform the duties of the Chairman of the
Board, and when so acting, shall have all the powers of, and be subject to all
the restrictions upon, the Chairman of the Board. He shall perform all duties
incident to the office of the Chairman of the Board and such other duties as,
from time to time, may be assigned to him by the Board or these Bylaws.
Section 7. Executive Vice-President. At the request of the Chairman of
the Board, the Vice Chairman and the President, or in the case of their absence
or inability to act, the Executive Vice-President shall perform the duties of
the Chairman of the Board, the Vice Chairman and the President, and when so
acting shall have all the powers of, and be subject to all the restrictions
upon, the Chairman of the Board, the Vice Chairman and the President. The
executive Vice-President shall perform all duties incident to the office of
Executive Vice-President and such other duties as from time to time may be
assigned to him by the Board, the Chairman of the Board, the Vice Chairman, the
President, or by these Bylaws. one Executive Vice-President shall be the chief
financial officer of the Corporation.
Section 8. Vice Presidents. Each Vice-President shall perform all such
duties as from time to time may be assigned to him by the Board, the Chairman
of the Board, the Vice Chairman or the president. Vice-Presidents shall have
seniority based upon length of service as Vice-President. Unless the Board
shall
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otherwise provide, the Senior Vice-President shall perform the duties of the
Executive Vice-President in case of his absence or inability to act, or if an
Executive Vice-President shall not have been appointed by the Board.
Section 9. The Treasurer. The Treasurer shall:
(a) Have charge and custody of, and be responsible for, all the
funds and securities of the Corporation;
(b) Keep full and accurate records of receipts and disbursements in
books belonging to the Corporation.
(c) Cause all monies and other valuables to be deposited to the
credit of the Corporation;
(d) Receive, and give receipts for, monies due and payable to the
Corporation from any source whatsoever;
(e) Disburse the funds of the Corporation and supervise the
investment of its funds as ordered or authorized by the proper vouchers
therefor; and
(f) In general, perform all the duties incident to the office of
Treasurer, and such other duties as from time to time may assigned to him
by the Board, the President, the Vice Chairman or the Chairman of the
Board.
Section 10. The Secretary. The Secretary shall:
(a) Keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board, the committees of the
Board and the shareholders;
(b) See that all notices are duly given in accordance with the
provisions of these Bylaws and as required by law;
(c) Be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation
(unless the seal of the Corporation on such certificates shall be
facsimile as hereinafter provided) and affix and attest the seal to all
other documents to be executed on behalf of the Corporation under its
seal;
(d) See that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly
kept and filed;
(e) In general, perform all the duties incident to the office of
Secretary and such other duties as from time
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to time may be assigned to him by the Board, the Chairman of the Board,
the Vice Chairman or the President.
Section 11. Officers' Bond or Other Security. If required by the Board,
any officer of the Corporation shall give a bond or other security for the
faithful performance of his duties, in such amount and with such surety or
sureties as the Board may require.
ARTICLE V
INDEMNIFICATION
The Corporation does hereby indemnify its directors and officers to the
fullest extent permitted by the laws of the State of Tennessee and by ARTICLE
TWELFTH of its Charter. The Corporation may indemnify any other person to the
extent permitted by the Charter and by applicable law.
ARTICLE VI
SHARES, ETC.
Section 1. Stock Certificates. Each shareholder of the Corporation shall
be entitled upon request to have a certificate in such form conforming to law
as shall be approved by the Board, representing the number of shares of stock
of the Corporation owned by him. The certificates representing shares of stock
shall be signed in the name of the Corporation by the Chairman of the Board or
the President or a Vice-President or an Assistant Vice-President and by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer,
and sealed with the seal of the Corporation (which seal may be a facsimile
engraved or printed); provided, however, that where any such certificate is
countersigned by a transfer agent and/or a registrar (other than the
Corporation or one of its employees), the signatures of the Chairman of the
Board, President, Vice-President, Secretary, or Treasurer upon such
certificates may be facsimiles, engraved or printed. In case any officer who
shall have signed such certificate shall have ceased to be such officer before
such certificates shall be issued, they may nevertheless be issued by the
Corporation with the same effect as if such officer were still in office at the
date of their issue.
Section 2. Books of Account and Record of Shareholders. There shall be
kept correct and complete books and records of account, minutes of the
proceedings of its shareholders, Board of Directors and the committees of the
Board, and of all the business and transactions of the Corporation. There
shall also be kept at the office of its transfer agent or at both, a record
containing the names and addresses of all shareholders of the Corporation, the
number of shares of stock held by each, and the
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dates when they became the owners of record thereof. Such shareholder records
may be in written form, on magnetic tape, disk pack storage, or in any other
form capable of being converted into written form within a reasonable time for
visual inspection.
Section 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only upon
authorization by the registered holder thereof, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary or
with a transfer agent or transfer clerk, and on surrender of the certificate or
certificates for such shares properly endorsed or accompanied by a duly
executed stock transfer power and the payment of all applicable taxes with
respect to the transfer. Except as otherwise provided by law, the Corporation
shall be entitled to recognize the exclusive right of a person in whose name
any share or shares stand on the record of shareholders as the owner of such
shares or shares for all purposes, including, without limitation, the right to
receive dividends or other distributions, and to vote as such owner, and the
Corporation shall not be bound to recognize any equitable or legal claim to or
interest in any such share or shares on the part of any other person. Whenever
any transfers of shares shall be made for collateral security and not
absolutely, and written notice thereof shall be given to the Secretary or to
such transfer agent or transfer clerk, such facts shall be stated in the entry
of the transfer.
Section 4. Regulations. The Board may make such additional rules and
regulations, not inconsistent with applicable law, the Charter or these Bylaws,
as it may deem expedient concerning the issue, transfer, and registration of
certificates for shares of stock of the Corporation. It may appoint one or
more transfer agents or one or more transfer clerks and one or more registrars,
and may require all certificates for shares of stock to bear the signature or
signatures of any of them.
Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificate(s) representing shares of the Corporation shall immediately notify
the Corporation of any loss, destruction or mutilation of such certificate(s),
and the corporation may issue a new certificate or certificates of stock in the
place of any certificate theretofore issued by it which the owner thereof shall
allege to have been lost or destroyed or which shall have been mutilated. As a
condition precedent to the issuance of replacement certificates, such owner or
his legal representative as principal shall give to the Corporation a bond with
"open" (unlimited) penalty and in such form and with such surety or sureties as
the person designated by the Board in his absolute discretion shall determine
to be sufficient to indemnify the Corporation against any claim that may be
made against it on account of the alleged loss or destruction of any such
certificate,
-15-
<PAGE> 16
or the issuance of a new certificate. Any transfer agent which may be
appointed by the Corporation shall be and is hereby designated as the person to
make the determination whether the bond furnished meets the requirements of
this Section 5 unless the Board, by resolution, shall designate some other
person to do so. Anything herein to the contrary notwithstanding, the Board,
in its absolute discretion, may refuse to issue any such new certificate,
except pursuant to legal proceedings under the laws of the State of Tennessee.
Section 6. Fixing of Record Dates. The Board may fix, in advance, a date
not less than ten (10) days prior to the date then fixed for the holding of any
meeting of the shareholders as the time as of which the shareholders entitled
to notice of and to vote at such meeting or whose consent or dissent is
required or may be expressed for any purpose, as the case may be, shall be
determined, and all persons who as holders or record of voting stock at such
time, and no others, shall be entitled to such notice of, and to vote at such
meeting or to express their consent or dissent, as the case may be. The Board
may fix in advance a date not more than sixty (60) days and not less than ten
(10) days prior to the date fixed for the payment of any dividends; or for the
making of any distribution; or for the allotment of rights to subscribe for
securities of the Corporation; or for the delivery of evidences of rights or
evidence of interests arising out of any change, conversion or exchange of
capital stock or other securities; as the record date for the determination of
shareholders entitled to receive any such dividend, distribution, allotment,
rights or interests, and in such case only the shareholders of record at the
time so fixed shall be entitled to receive such dividend, distribution,
allotment, rights or interests.
ARTICLE VII
OFFICES
Section 1. Principal Office. The principal office of the Corporation
shall be at 67 Madison Avenue in the City of Memphis, County of Shelby, and
State of Tennessee, or at such other address as may be fixed by the Board.
Section 2. Other Offices. The Corporation may also have an office or
offices other than said principal office at such place or places, either within
or without the State of Tennessee, as the Board shall from time to time
determine or the business of the Corporation may require.
-16-
<PAGE> 17
ARTICLE VIII
FISCAL YEAR
The fiscal year of the Corporation shall be the calendar year.
ARTICLE IX
SEAL
The form of seal of the Corporation shall be determined by the Board of
Directors.
ARTICLE X
MISCELLANEOUS
Section 1. Reports to Shareholders. The books of account of the
Corporation shall be examined by an independent firm of public accountants at
the close of each annual period of the Corporation and at such other times, if
any, as may be directed by the Board. A report to the shareholders based upon
such examination shall be mailed to each shareholder of the Corporation of
record on such date with respect to each report as may be determined by the
Board, at his address as the same appears on the stock transfer records of the
Corporation. Each such report shall show the assets and liabilities of the
Corporation as of the close of the annual or other period covered by the
report. This report shall also show the Corporation's income and expenses from
the period from the end of the Corporation's preceding fiscal year to the close
of the annual or other period covered by the report any other information which
may be required by law or regulation lawfully adopted and shall set forth such
other matters as the Board or such independent firm of public accountants shall
determine.
Section 2. Selection and Termination of Firm of Independent Public
Accountants. The independent auditors and accountants for the Corporation
shall be selected by the Board at a meeting held within thirty (30) days before
the beginning of the fiscal year and before the Annual Meeting of Shareholders
except that any vacancy occurring between Annual Meetings as a result of the
resignation of the accountants may be filled by the vote of a majority of those
members of the entire Board who are not salaried officers or employees of the
Corporation or of any affiliate of the Corporation. Such selection shall be
submitted for ratification or rejection at the next succeeding Annual Meeting
of Shareholders if such meeting be held, or at the next succeeding Special
Meeting of Shareholders in said fiscal year if the Annual Meeting shall not be
held on the date designated in the Bylaws therefor; provided, however, that a
Special Meeting of Shareholders
-17-
<PAGE> 18
need not be called to ratify or reject the selection by the Board of
independent auditors and accountants in the above manner to fill a vacancy
occurring between Annual Meeting as a result of the resignation of said
auditors and accountants. The employment of such accountants shall be
conditioned upon the right of the Corporation, either by the unanimous vote of
the entire Board of Directors or by vote of a majority of the outstanding
voting securities at any meeting called for the purpose, to terminate such
employment without penalty. If the selection of accountants shall be rejected
by the Shareholders or their employment be terminated by the Shareholders in
the manner provided above, the vacancy so occurring may be filled by the vote
of a majority of the outstanding voting securities either at the meeting at
which the rejection or termination by the Shareholders occurred or, if not so
filled, at a subsequent meeting which shall be called for the purpose.
ARTICLE XI
AMENDMENTS
These Bylaws may be amended or repealed, in whole or in part, or new
Bylaws may be adopted, by the Board of Directors at any meeting thereof by vote
of a majority of the entire Board, unless a greater affirmative vote is
required by the Charter; provided, however, that notice of such meeting shall
have been given as provided in these Bylaws, which notice shall mention that
amendment or repeal of the Bylaws, or the adoption of new Bylaws, is one of the
purposes of the meeting. Any such Bylaws adopted by the Board may be amended
or repealed, or new Bylaws may be adopted by vote of the shareholders of the
Corporation, at any annual or special meeting thereof; provided, however, that
notice of such meeting shall have been given as provided in these Bylaws, which
notice shall mention that amendment or repeal of these Bylaws, or the adoption
of new Bylaws, is one of the purposes of such meeting.
ARTICLE XII
SHAREHOLDER PROPOSALS TO BE PRESENTED
AT ANNUAL MEETINGS
Any proposal of a shareholder which is to be presented at any annual
meeting of shareholders shall be sent so as to be received by the Corporation
at its principal offices not less than one hundred twenty (120) days in advance
of the date of the Corporation's proxy statement issued in connection with the
previous year's annual meeting of shareholders.
Updated February 28, 1995
-18-
<PAGE> 1
<TABLE>
EXHIBIT 11
Page 1 of 2
UNION PLANTERS CORPORATION
COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1994 1993 1992
---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C> <C>
Primary Earnings Per Share
- --------------------------
Computation for Statement of Earnings
- -------------------------------------
Reconciliation of earnings to amounts used
for primary earnings per share:
Net earnings $ 58,608 $ 92,552 $ 63,250
Less: Preferred stock dividends
Series B (352) (352) (352)
Series C (1,491) (1,790) (1,790)
Series D (494) (494) (247)
Series E (6,216) (5,832) (3,777)
---------- ---------- ----------
Net earnings applicable to primary
earnings per share $ 50,055 $ 84,084 $ 57,084
========== ========== ==========
Reconciliation of weighted average number
of shares to amount used in primary earnings
per share computation:
Average shares outstanding 39,920,194 35,123,751 31,764,149
Average common equivalent shares:
Assumed exercise of options 135,144 187,286 145,851
---------- ---------- ----------
Primary average shares outstanding 40,055,338 35,311,037 31,910,000
========== ========== ==========
Primary earnings per share $1.25 $2.38 $1.79
===== ===== =====
</TABLE>
<PAGE> 2
<TABLE>
EXHIBIT 11
Page 2 of 2
UNION PLANTERS CORPORATION
COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1994 1993 1992
---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C> <C>
Fully Diluted Earnings Per Share
- --------------------------------
Computation for Statement of Earnings
- -------------------------------------
Earnings used for fully diluted earnings per share:
Net earnings $ 58,608 $ 92,552 $ 63,250
Less: Preferred stock dividends
Series C (1,491) (1,790) (1,790)
Series D (494) -- --
Series E (6,216) -- --
----------- ----------- -----------
Net earnings applicable to fully
diluted earnings per share $ 50,407 $ 90,762 $ 61,460
=========== =========== ===========
Reconciliation of weighted average number of shares
to amount used in fully diluted earnings
per share computation:
Average shares outstanding 39,920,194 35,123,751 31,764,149
Average common equivalent shares:
Assumed exercise of options 137,121 205,365 163,420
Assumed conversion of preferred stock:
Series B 339,768 339,768 339,768
Series D -- 253,655 127,521
Series E -- 3,618,515 2,359,290
----------- ----------- -----------
Fully diluted average shares outstanding 40,397,083 39,541,054 34,754,148
=========== =========== ===========
Fully diluted earnings per share $1.25 $2.30 $1.77
===== ===== =====
</TABLE>
<PAGE> 1
UNION PLANTERS
CORPORATION
(Logo)
1994
ANNUAL
REPORT
<PAGE> 2
UNION
PLANTERS
CORPORATION
(Logo)
MARKET AREAS SERVED
TENNESSEE, MISSISSIPPI, ARKANSAS,
LOUISIANA, ALABAMA, AND KENTUCKY
(Figure 1 - The inside front cover of Exhibit
13 (Union Planters Corporation's Annual Report
to Shareholders for 1994) contains a map of the
states of Tennessee, Mississippi, Arkansas,
Louisiana, Alabama, and Kentucky showing the
counties where Union Planters Corporation
affiliates have banking locations and the
headquarters for Union Planters Corporation and
Union Planters National Bank.)
<PAGE> 3
UNION PLANTERS CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
DECEMBER 31, 1994 1993 % CHANGE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER
SHARE DATA)
FOR THE YEAR
Earnings before extraordinary item and accounting changes $ 58,608 $ 89,976 (34.9)%
Extraordinary item, net of taxes -- (3,206)
Accounting changes, net of taxes -- 5,782
Net earnings 58,608 92,552 (36.7)
PER COMMON SHARE
Primary
Earnings before extraordinary item and accounting changes $ 1.25 $ 2.31 (45.9)%
Extraordinary item, net of taxes -- (.09)
Accounting changes, net of taxes -- .16
Net earnings 1.25 2.38 (47.5)
Fully diluted
Earnings before extraordinary item and accounting changes 1.25 2.23 (43.9)
Extraordinary item, net of taxes -- (.08)
Accounting changes, net of taxes -- .15
Net earnings 1.25 2.30 (45.7)
Cash dividends .88 .72 22.2
Book value 16.01 16.29 (1.7)
AT YEAR END
Assets $10,015,069 $9,029,893 10.9%
Earning assets 9,132,310 8,341,524 9.5
Loans, net of unearned income 5,949,128 4,653,368 27.8
Allowance for losses on loans 122,089 114,353 6.8
Deposits 8,417,842 7,671,621 9.7
Shareholders' equity 730,707 682,002 7.1
RATIOS
Return on average assets .58% 1.04%
Return on average common equity 7.40 15.55
Net interest income (taxable-equivalent) as a percentage of
average earning assets 4.39 4.44
Allowance for losses on loans as a percentage of loans 2.05 2.46
Nonperforming loans as a percentage of loans .32 .59
Nonperforming assets as a percentage of loans and foreclosed
properties .42 .78
Allowance for losses on loans as a percentage of nonperforming
loans 641 414
Shareholders' equity to assets 7.30 7.55
Leverage ratio 7.18 7.23
Tier 1 capital to risk-weighted assets 12.22 13.58
Total capital to risk-weighted assets 14.75 16.40
- ------------------------------------------------------------------------------------------------------
</TABLE>
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Letter to Shareholders..................................................................... 2
Consolidated Balance Sheet and Statement of Earnings....................................... 3
Economic Outlook........................................................................... 5
Selected Financial Data.................................................................... 9
Management's Discussion and Analysis of Results of Operations and Financial Condition...... 10
Financial Tables........................................................................... 25
Selected Quarterly Data.................................................................... 33
Report of Management....................................................................... 35
Report of Independent Accountants.......................................................... 35
Consolidated Financial Statements.......................................................... 36
Notes to Consolidated Financial Statements................................................. 40
Banks and Communities Served............................................................... 70
Executive Officers and Directors........................................................... 71
Corporate Information...................................................................... 72
</TABLE>
1
<PAGE> 4
TO OUR SHAREHOLDERS
Last year marked a significant increase in the size and value of our
banking franchise. At the end of 1994 total assets reached $10 billion, an
increase of 60% over the previous year, and shareholders' equity reached $731
million. We are pleased to present this annual report and encourage you to
review the financial statements and management's discussion and analysis for
details on our performance and financial condition.
We now serve customers with 380 banking locations in a six-state area.
Total loans grew to $5.9 billion and total deposits reached $8.4 billion, giving
us the largest deposit base of any bank holding company headquartered in
Tennessee.
Acquisitions accounted for the bulk of the asset growth. The largest of
these was Grenada Sunburst System Corporation (GSSC), parent company of the $2.0
billion Sunburst Bank, Mississippi and the $500 million Sunburst Bank,
Louisiana. Grenada is only seventy miles from Memphis and GSSC represents an
excellent fit with Union Planters because of its similar community banking focus
and balanced commercial and consumer lending operations. This acquisition
increased our market share in north Mississippi and expanded bank services to
central and south Mississippi and south Louisiana. Combining these two strong
southeastern banking franchises creates an organization with a market
capitalization exceeding one billion dollars and an equity capital base of $731
million. Our larger size gives us access to more funding sources, improved
profitability opportunities and a broader, more diversified loan portfolio and
deposit base.
In general, the banking industry has excess capacity and competitive forces
are bringing about consolidation and restructuring to lower future costs. Last
fall, we joined the growing list of banks planning to restructure and we
subsequently announced specific planned branch divestitures and staff
reductions. The restructuring plans resulted in significant charges to last
year's fourth quarter. While no one likes large charges, the restructuring will
result in improved profitability this year and in the future.
Also, in the fourth quarter, we recognized the cost of a consumer loan
marketing program that was initiated in the last half of the year. To date, new
loans outstanding under this program are approximately $225 million. In
addition, we took losses on sales of investment securities to improve our book
yields and provide funding for loan growth. In total, we recorded certain
charges for the year of approximately $51 million after tax reducing our 1994
net income to $58.6 million or $1.25 per share, down from $92.6 million or $2.30
per share for 1993. We expect earnings to recover this year as we benefit from
higher investment portfolio yields, a larger consumer loan portfolio and the
restructuring and focus on integrating our recent acquisitions.
As a result of a growing economy and our loan risk management strategies,
our asset quality measures are the best in the Corporation's history. At year
end nonperforming assets were only $25 million or .42% of loans and foreclosed
properties and our allowance for losses on loans was $122.1 million or 2.05% of
loans. While it is not likely that we can improve on these measures, our high
level of reserves should serve us well in any economic slow down.
Economic growth has always been one of the principal determinants of bank
earnings. We have experienced above average economic performance in our
Mid-South market area for the last several years and anticipate a continuation
this year. (Please see the following section.) While we may experience some
further rate increases as the Federal Reserve responds to inflationary concerns,
we do not expect increasing rates to produce any significant impact on our
operating results.
Industry consolidation is likely to continue and we believe the best
performing banks will be those that increase their market share and control
their operating expenses. Our deposit market share now exceeds 25% in 42 of the
105 counties we serve and we will be looking for strategic acquisitions to
further increase market share. Reduction and control of operating expenses will
continue to be our primary focus over the next several years. With our strong
balance sheet, we are well positioned to compete in our market area.
We welcome our new shareholders and invite you to participate in our
automatic dividend reinvestment program which offers a five percent discount and
no brokerage fees on share purchases. Thank you for your support.
Yours very truly,
/s/ Benjamin W. Rawlins, Jr.
- ----------------------------
Benjamin W. Rawlins, Jr.
Chairman and Chief Executive Officer
2
<PAGE> 5
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1993
----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks $ 488,722 $ 363,360
Interest-bearing deposits at financial institutions 10,641 26,675
Federal funds sold and securities purchased under agreements to resell 29,953 78,149
Trading account securities 155,951 153,482
Loans held for resale 24,493 134,206
Investment securities
Available for sale (Amortized cost December 31, 1994: $1,975,897; Fair
value December 31, 1993: $815,360) 1,928,984 808,554
Held to maturity (Fair value: $1,009,969 and $2,542,808, respectively) 1,033,160 2,487,090
Loans 5,980,581 4,679,256
Less: Unearned income (31,453) (25,888)
Allowance for losses on loans (122,089) (114,353)
----------- ----------
Net loans 5,827,039 4,539,015
Premises and equipment 204,136 189,080
Accrued interest receivable 87,509 70,332
Goodwill and other intangibles 50,236 47,293
Other assets 174,245 132,657
----------- ----------
TOTAL ASSETS $10,015,069 $9,029,893
============ ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 1,380,737 $1,172,251
Certificates of deposit of $100,000 and over 559,593 593,381
Other interest-bearing 6,477,512 5,905,989
----------- ----------
Total deposits 8,417,842 7,671,621
Short-term borrowings 415,171 275,537
Federal Home Loan Bank advances 224,103 192,792
Long-term debt 116,848 117,379
Accrued interest, expenses, and taxes 72,211 52,766
Other liabilities 38,187 37,796
----------- ----------
TOTAL LIABILITIES 9,284,362 8,347,891
----------- ----------
Shareholders' equity
Preferred stock
Convertible 87,298 87,298
Nonconvertible -- 17,250
Common stock, $5 par value; 50,000,000 shares authorized; 40,179,474
issued and outstanding (35,447,702 in 1993) 200,897 177,238
Additional paid-in capital 69,204 59,969
Net unrealized gain (loss) on available for sale securities (28,527) --
Retained earnings 401,835 340,247
----------- ----------
TOTAL SHAREHOLDERS' EQUITY 730,707 682,002
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $10,015,069 $9,029,893
============ ==========
</TABLE>
3
<PAGE> 6
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1994 1993 1992
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 460,617 $ 375,567 $ 314,814
Interest on investment securities
Taxable 156,429 151,538 142,663
Tax-exempt 32,406 29,825 22,238
Interest on deposits at financial institutions 718 1,742 4,915
Interest on federal funds sold and securities purchased
under agreements to resell 3,637 5,092 5,250
Interest on trading account securities 9,143 6,194 6,648
Interest on loans held for resale 1,107 7,432 7,250
----------- ----------- -----------
Total interest income 664,057 577,390 503,778
----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits 235,815 213,197 209,035
Interest on short-term borrowings 20,082 7,230 8,040
Interest on Federal Home Loan Bank advances and long-term
debt 19,882 13,253 5,555
----------- ----------- -----------
Total interest expense 275,779 233,680 222,630
----------- ----------- -----------
NET INTEREST INCOME 388,278 343,710 281,148
PROVISION FOR LOSSES ON LOANS 3,636 16,558 27,182
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON
LOANS 384,642 327,152 253,966
NONINTEREST INCOME
Service charges on deposit accounts 52,590 46,532 35,590
Bank card income 10,192 9,749 8,632
Mortgage servicing income 9,095 9,239 9,400
Trust service income 7,889 7,566 6,871
Profits and commissions from trading activities 5,537 11,577 12,252
Investment securities gains (losses) (20,298) 4,495 14,019
Other income 28,557 30,767 25,845
----------- ----------- -----------
Total noninterest income 93,562 119,925 112,609
----------- ----------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits 160,862 150,383 116,764
Net occupancy expense 25,750 23,356 19,401
Equipment expense 26,451 23,986 18,836
Other expense 185,772 121,956 124,463
----------- ----------- -----------
Total noninterest expense 398,835 319,681 279,464
----------- ----------- -----------
EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM, AND
ACCOUNTING CHANGES 79,369 127,396 87,111
Applicable income taxes 20,761 37,420 23,861
----------- ----------- -----------
EARNINGS BEFORE EXTRAORDINARY ITEM AND ACCOUNTING
CHANGES 58,608 89,976 63,250
Extraordinary item -- defeasance of debt, net of taxes -- (3,206) --
Accounting changes, net of taxes -- 5,782 --
----------- ----------- -----------
NET EARNINGS $ 58,608 $ 92,552 $ 63,250
============ ============ ============
EARNINGS PER COMMON SHARE
PRIMARY
Earnings before extraordinary item and accounting changes $ 1.25 $ 2.31 $ 1.79
Extraordinary item -- defeasance of debt, net of taxes -- (.09) --
Accounting changes, net of taxes -- .16 --
----------- ----------- -----------
NET EARNINGS $ 1.25 $ 2.38 $ 1.79
============ ============ ============
FULLY DILUTED
Earnings before extraordinary item and accounting changes $ 1.25 $ 2.23 $ 1.77
Extraordinary item -- defeasance of debt, net of taxes -- (.08) --
Accounting changes, net of taxes -- .15 --
----------- ----------- -----------
NET EARNINGS $ 1.25 $ 2.30 $ 1.77
============ ============ ============
</TABLE>
4
<PAGE> 7
STRONG ECONOMIC EXPANSION SUPPORTS REGION
Union Planters Corporation serves a six-state market area which includes
Tennessee, Mississippi, Eastern Arkansas, Southern Louisiana, Northern Alabama
and Southern Kentucky. Significant contributors to the area's diverse and
growing economy are agriculture, heavy and light manufacturing industry,
outstanding transportation opportunities, natural gas and petroleum production
and refining, chemicals, aerospace and other high-tech industries and the
entertainment industry. The region's spectacular economic success story has only
recently begun to be recognized. Record employment and personal income increases
have elevated the hopes and aspirations of all citizens of the UPC market area.
The long-term economic outlook for the region is more positive than ever
before. For the first time, structural barriers to economic progress are being
removed by the unprecedented growth and prosperity being experienced throughout
the region. Improvements in productivity derived from new investments in plant
and equipment have allowed the region's employers to increase wages and salaries
and still remain competitive in international markets.
- --------------------------------------------------------------------------------
ECONOMIC ACTIVITY IN THE UPC MARKET AREA
- Strong employment growth above national rate
- Income increases above the national rate
- Low unemployment rates in nearly all counties
- Very tight urban labor markets
- Strong, diversified manufacturing base
- Growing export sector
- Agricultural sector remains stable and exports grow
- Casino gaming aids tourism in Mississippi
- New manufacturing capital investments increase worker productivity
- Strong employment growth in service industries
- Low cost of living adds to the area's attractiveness
- Low-tax environments aid the region's growth
- Area's quality of life factors highly ranked nationally
- Pro-business environment and attitudes benefit the region
- Favorable labor relations, wage rates, and working conditions
attract employers
- --------------------------------------------------------------------------------
Strong regional political leadership and conservative financial policies
have kept the tax burden low for both businesses and residents of the region.
Attractive tax rates, competitive packages of economic incentives, abundant and
affordable resources, a central geographic location, and the overall quality of
life have helped make the region attractive for foreign and domestic businesses
interested in developing new facilities.
Unlike other areas of the nation where manufacturing is declining as a
source of employment and income, the UPC market area continues to build and rely
on the substantial economic strength of its manufacturing base. Approximately 30
percent of the region's total product is accounted for by manufacturing. By
comparison, less than 20 percent of the nation's output is a result of
manufacturing. Gains in manufacturing employment have contributed substantially
to the economic recovery of many areas of the region. Over 31 percent of the
region's rural jobs are in manufacturing, and many communities have much higher
manufacturing employment levels. In addition, recent gains in capital-intensive
and high-tech manufacturing employment have offset the losses that have occurred
in low-wage and low-tech clothing and textile firms. As a result, rural and
urban wage and salary increases can be explained, in part, by the transition
taking place in the region's manufacturing base.
5
<PAGE> 8
In Tennessee, the economic expansion has been nothing short of phenomenal.
For example, in November 1993, U.S. News & World Report ranked Tennessee number
7 among the 50 states in economic recovery since 1991. The report cited the auto
industry as helping boost the state's employment rate by 4.4 percent, versus a
national rate of 1.8 percent. Tennessee ranked number 11 in income growth rate
and number 14 in new business growth rate.
And, the state's economy continued to expand in 1994. In April 1994, Dow
Jones ranked Tennessee as the strongest economy in the South. Over the 12-month
period ending in December 1994, employment in Tennessee grew by 80,200 jobs.
Manufacturing added 6,300 new jobs, the trade sector (retail and wholesale)
added 22,100 jobs, and the service sector added 18,200 jobs. Approximately 50
percent of the service jobs were in the business and health services categories.
Between 1989 and 1993, the Tennessee economy created 160,300 new jobs, a gain of
7.4 percent.
In June 1994, the U.S. Department of Commerce listed Tennessee's growth in
personal income as number one among the 50 states. Per capita income in
Tennessee increased from $9,800 to $18,434 during the past decade -- an increase
of 87 percent. Since 1969, constant-dollar per capita income in the state has
grown 10.4 percent annually versus 7.1 percent growth for the nation. In 1969,
Tennessee's per capita income was 76.9 percent of the U.S. average. By 1992,
that percentage had grown to 88.0 percent, a 1.0 percentage point gain every two
years.
In August 1994, Tennessee's unemployment rate was 4.7 percent, the lowest
unemployment rate in the South. Statewide unemployment has ranked below the
national average since July 1991. All of Tennessee's metropolitan areas had
unemployment rates of 4 percent or less at the end of 1994. Strong employment
growth in rural areas has resulted in steady declines in unemployment rates for
those areas.
An October 1994 report issued by the U.S. Department of Commerce indicated
that Tennessee ranked second in the nation in the creation of new jobs since
1991. For example, employers working with the Memphis Area Chamber of Commerce
announced 147 new projects that created 11,141 jobs and $1,114,617,000 in
investments in plant and equipment in the Memphis area since 1990. All of these
projects represented major additions to the economic base of the community.
Among the companies announcing major expansions in 1994 and 1995 were
International Paper, Auto Zone, Federal Express, Northwest Airlines,
Williams-Sonoma, Pfizer, Reebok, and Nissin Foods.
The multimodal distribution networks emanating from Memphis have made it a
leader in recruiting distribution facilities to the city. Federal Express,
headquartered in Memphis, is the nation's largest overnight package delivery
business with over 20,000 employees located in Memphis and over 100,000
worldwide. Federal Express' overnight delivery services have made Memphis the
ideal location for time-sensitive distribution and high-value-added
manufacturing establishments that seek to minimize inventory costs and maximize
customer service.
Similar reports are available for communities throughout the state of
Tennessee. Companies like Martin Marietta Corporation with 15,926 employees in
the Oak Ridge/Knoxville area, Saturn Corporation with 7,573 employees in the
Spring Hill/Nashville area, and Nissan Motor Corporation with 5,820 employees in
the Smyrna/Nashville area are representative of the corporations present in
UPC's region. Levi Strauss & Company, North American Philips Corporation,
Textron, Kroger Company, Henry I. Siegel Company, and E. I. DuPont de Nemours &
Company have numerous production, distribution, and administrative centers
throughout the area. Schering-Plough, Promus, Kellogg, Coors, Sharp, and Smith &
Nephew Richards, are large employers in West Tennessee, while Aluminum Company
of America, Eastman Chemical, and United Parcel Service are large employers in
East Tennessee.
In Nashville, Opryland USA, Inc., with over 8,000 employees, is the largest
single employer. Columbia/HCA Healthcare, Shoney's, Murray Ohio Manufacturing,
United Parcel Service, South Central Bell, and Bridgestone/Firestone USA are all
major contributors to the Nashville economy with over 2,500 employees each.
Similar employment patterns and experiences have occurred in other areas of
UPC's region. In Baton Rouge, key industrial segments reflect the region's
association with petroleum refining and chemical and paper producers. Dow,
Exxon, Uniroyal, BASF Wyndotte, Georgia Pacific, James River, and Ciba-Geigy are
a few of the industrial giants located in the Baton Rouge area.
In Mississippi, both U.S. industrial giants and home-grown industries are
major contributors to the market place. Peavey Electronics in Meridian, McRae's
Department Stores in Jackson, McCarty Farms
6
<PAGE> 9
in Magee, Bill's Dollar Stores in Jackson, and Delta Pride Catfish in Indianola
are a few Mississippi-based employers with from $100 million to over $1.0
billion in sales.
The Mississippi economy has outperformed the nation in many areas. A
November 1994 story in U.S. News & World Report indicated that Mississippi
ranked eighth in terms of overall economic growth from 1991-1994. Mississippi
led all Southern states in the rankings. Tennessee ranked sixteenth, Louisiana
ranked nineteenth, and Arkansas ranked twentieth in economic growth among all
states. Mississippi was ranked eighth in employment growth, fourth in income
growth, and eighth in new business growth.
Mississippi businesses reported a record 1,045,400 jobs in November 1994.
All major industrial groups reported gains except textiles and apparel. Services
accounted for 19,800 new jobs, and manufacturing generated 4,200 new jobs from
November 1993 to 1994.
Nearly all parts of the state have benefited from the gains in employment.
For example, Tupelo in Lee County in northeast Mississippi is the most heavily
industrialized area in the state. With a population of only 31,000, Tupelo has
over 17,000 people employed in manufacturing.
By contrast, Tunica County in the northwest corner of the state (once the
poorest county in the nation) is now the home of seven casinos with 2,000 hotel
rooms and a thriving entertainment industry. Retail sales tripled in Tunica
County in 1994 -- the highest growth rate in the state. Since approved in 1992,
casinos have created 28,000 jobs in Mississippi.
As in other states in the region, agriculture continues to be an important
source of employment and income in Mississippi. Farm production reached a record
$4.51 billion in 1994, up $544 million from 1993. Poultry and eggs accounted for
almost $1.078 billion of the total and was the top agricultural enterprise in
Mississippi in 1994. It surpassed forestry, which recorded production of $1.070
billion. 1994 was also a record year for cotton production, up 40 percent from
1993. Income from cotton was $844 million, up $216 million from 1993.
Historically tied to the agricultural crops of cotton, rice, and soybeans,
Eastern Arkansas' economic base is increasingly diversified and linked to the
future of the manufacturing, service, and retail trade sectors in the region.
Jonesboro is the largest city in the region, the hub of an increasingly vibrant
rural market area.
North Alabama has also been an economic success story. The growth of the
aerospace industry and a critical mass of complementary employers tied to that
industry have created a high-growth, high-tech environment. In addition, the
Tennessee River and the Tennessee-Tombigbee connection to the Gulf provide
waterborne transportation opportunities for many area employers. Decatur,
located on the Tennessee River, is home to plants or operations of Amoco
Chemical, Monsanto Textiles, 3-M Company, Alpo Pet Foods, Con-Agra, and General
Electric.
With the increasingly diverse economy and broad-based economic growth
represented in this region, it is easy to see why the economic outlook for UPC's
market area for 1995 is so bright. Nearly every community has had an increase in
employment and income opportunities. Nearly every industry has increased its
employment levels, capital investments, and output. Whether large or small,
urban or rural, communities and businesses throughout the region have
experienced unprecedented prosperity in the last few years. And, the trend
established recently should set the stage for a stronger, more promising future
for all the region's residents.
Report prepared by Dr. John E. Gnuschke, Director of the Bureau of Business
and Economic Research at The University of Memphis.
7
<PAGE> 10
EMPLOYMENT GROWTH FOR STATE AND MAJOR MARKETS
(1988-1994)
<TABLE>
<CAPTION>
EMPLOYMENT % CHANGE
--------------------- -----------
1988 1994 (1988-1994)
------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Tennessee 2,225 2,562 15.1
Memphis 419 499 19.1
Nashville 504 596 18.3
Knoxville 272 332 22.1
Mississippi 1,048 1,163 11.0
Alabama 1,751 1,933 10.4
Arkansas 1,037 1,162 12.1
Louisiana 1,712 1,811 5.8
Baton Rouge 245 265 8.2
Kentucky 1,575 1,742 10.6
United States 114,222 124,608 9.1
</TABLE>
-----------------------------------------------
Source: Statistical Abstract of the U.S., 1990;
The Labor Market Report, Aug. 1989 and
Jan. 1995; News, U.S. Department of
Labor, Dec. 1994; Employment and
Earnings, U.S. Department of Labor, Dec.
1988 and Nov. 1994.
MAJOR MARKET UNEMPLOYMENT RATES
(NOT SEASONALLY ADJUSTED)
<TABLE>
<CAPTION>
DECEMBER
---------------------
1993 1994
------- -------
<S> <C> <C>
Tennessee 4.6% 3.1%
Memphis 4.4 3.2
Nashville 3.2 2.1
Knoxville 3.8 2.7
Mississippi 5.1 5.4
Alabama 7.0 5.0
Arkansas 6.0 5.1
Louisiana 7.2 7.2
Baton Rouge 6.5 6.5
Kentucky 5.4 4.4
United States 6.0 5.1
</TABLE>
-----------------------------------------------
Source: The Labor Market Report, Feb. 1995;
Mississippi Labor Market Report, Jan.
1995; Alabama Labor Market News, Jan.
1995; Bureau of Labor Statistics
PER CAPITA INCOME FOR METRO AREAS
(1987 DOLLARS)
<TABLE>
<CAPTION>
1970 1980 1990
------- ------- -------
<S> <C> <C> <C>
All metro counties in U.S. $12,080 $14,769 $17,186
Memphis, TN $ 9,592 $12,650 $15,340
% of U.S. 79.4 85.7 89.3
Nashville, TN $10,142 $12,724 $15,964
% of U.S. 84.0 86.2 92.9
Knoxville, TN $ 8,961 $11,804 $14,189
% of U.S. 74.2 80.0 82.6
Jackson, MS $ 9,255 $12,194 $13,413
% of U.S. 76.6 82.6 78.0
Decatur, AL $ 8,701 $10,482 $13,090
% of U.S. 72.0 71.0 76.2
Baton Rouge, LA $ 9,536 $13,668 $13,835
% of U.S. 78.9 92.5 80.5
Craighead Co./Jonesboro, AR $ 8,184 $10,468 $11,860
% of U.S.* 93.9 96.0 95.1
</TABLE>
-----------------------------------------------
* % of non-metro income.
8
<PAGE> 11
UNION PLANTERS CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, (1)
---------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA
Net interest income..................................... $ 388,278 $ 343,710 $ 281,148 $ 233,790 $ 206,529
Provision for losses on loans........................... 3,636 16,558 27,182 34,203 26,304
Investment securities gains (losses).................... (20,298) 4,495 14,019 2,624 83
Other noninterest income................................ 113,860 115,430 98,590 90,697 92,076
Noninterest expense..................................... 398,835 319,681 279,464 238,475 231,733
----------- ---------- ---------- ---------- ----------
Earnings before income taxes, extraordinary item, and
accounting changes.................................... 79,369 127,396 87,111 54,433 40,651
Applicable income taxes................................. 20,761 37,420 23,861 11,537 5,408
----------- ---------- ---------- ---------- ----------
Earnings before extraordinary item and accounting
changes............................................... 58,608 89,976 63,250 42,896 35,243
Extraordinary item -- defeasance of debt, net of
taxes................................................. -- (3,206) -- -- --
Accounting changes, net of taxes........................ -- 5,782 -- -- --
----------- ---------- ---------- ---------- ----------
Net earnings............................................ $ 58,608 $ 92,552 $ 63,250 $ 42,896 $ 35,243
========== ========= ========= ========= =========
PER COMMON SHARE DATA(2)
Primary
Earnings before extraordinary item and accounting
changes............................................. $ 1.25 $ 2.31 $ 1.79 $ 1.32 $ 1.03
Extraordinary item -- defeasance of debt, net of
taxes............................................... -- (.09) -- -- --
Accounting changes, net of taxes...................... -- .16 -- -- --
Net earnings.......................................... 1.25 2.38 1.79 1.32 1.03
Fully diluted
Earnings before extraordinary item and accounting
changes............................................. 1.25 2.23 1.77 1.32 1.03
Extraordinary item -- defeasance of debt, net of
taxes............................................... -- (.08) -- -- --
Accounting changes, net of taxes...................... -- .15 -- -- --
Net earnings.......................................... 1.25 2.30 1.77 1.32 1.03
Cash dividends.......................................... .88 .72 .60 .48 .48
Book value.............................................. 16.01 16.29 14.02 12.77 11.77
BALANCE SHEET DATA (AT PERIOD END)
Total assets............................................ $10,015,069 $9,029,893 $7,493,004 $5,928,496 $6,095,531
Loans, net of unearned income........................... 5,949,128 4,653,368 3,585,769 3,132,924 3,376,435
Allowance for losses on loans........................... 122,089 114,353 89,827 67,989 67,505
Investment securities................................... 2,962,144 3,295,644 2,793,950 1,777,754 1,773,508
Deposits................................................ 8,417,842 7,671,621 6,441,991 5,145,181 5,182,379
Short-term borrowings................................... 415,171 275,537 321,976 222,510 362,364
Long-term debt(3)
Parent company........................................ 114,790 114,729 74,292 38,163 44,662
Subsidiary banks...................................... 226,161 195,442 21,756 10,083 4,469
Total shareholders' equity.............................. 730,707 682,002 529,496 425,970 383,349
Average assets............................................ 10,025,383 8,857,216 6,934,718 5,928,927 6,096,808
Average shareholders' equity.............................. 778,232 639,874 494,529 398,651 386,800
Average shares outstanding (in thousands)
Primary............................................... 40,055 35,311 31,910 31,752 33,738
Fully diluted......................................... 40,397 39,541 34,754 32,105 34,078
PROFITABILITY AND CAPITAL RATIOS
Return on average assets................................ .58% 1.04% .91% .72% .58%
Return on average common equity......................... 7.40 15.55 13.48 10.80 9.12
Net interest income (taxable-equivalent) to average
earning assets(4)..................................... 4.39 4.44 4.62 4.54 4.02
Loans/deposits.......................................... 70.67 60.66 55.66 60.89 65.15
Common and preferred dividend payout ratio.............. 64.68 31.81 35.72 35.66 43.08
Equity/assets (period end).............................. 7.30 7.55 7.07 7.19 6.29
Average shareholders' equity/average total assets....... 7.76 7.22 7.13 6.72 6.34
Leverage ratio(5)....................................... 7.18 7.23 7.11 7.10 6.18
Tier 1 capital to risk-weighted assets(5)............... 12.22 13.58 13.35 11.91 9.98
Total capital to risk-weighted assets(5)................ 14.75 16.40 15.44 14.13 12.09
ASSET QUALITY RATIOS
Allowance/period end loans.............................. 2.05 2.46 2.51 2.17 2.00
Nonperforming loans/total loans......................... .32 .59 1.32 1.09 1.07
Allowance/nonperforming loans........................... 641 414 190 200 187
Nonperforming assets/loans and foreclosed properties.... .42 .78 1.69 1.74 1.81
Provision/average loans................................. .07 .37 .77 1.04 .78
Net charge-offs/average loans........................... .09 .30 .60 1.02 .85
</TABLE>
- ---------------
(1) Reference is made to "Basis of Presentation" in Note 1 to the consolidated
financial statements.
(2) Share and per share amounts have been retroactively restated for material
acquisitions accounted for as poolings of interests.
(3) Long-term debt includes subordinated notes and debentures, obligations under
capital leases, mortgage indebtedness, and notes payable with maturities
greater than one year. Subsidiary banks' long-term debt is primarily FHLB
advances.
(4) Calculation does not include the impact of the unrealized gain or loss on
available for sale investment securities.
(5) The risk-based capital ratios are based upon capital guidelines prescribed
by federal bank regulatory authorities. Under those guidelines, the required
minimum Tier 1 and Total Capital risk-weighted assets ratios are 4% and 8%,
respectively. The required minimum leverage ratio of Tier 1 capital to total
adjusted assets is 3% to 5% (5% for bank holding companies effecting
acquisitions).
9
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
CORPORATE OVERVIEW
Union Planters Corporation (the Corporation), a $10.0 billion multi-bank
and savings and loan holding company incorporated in 1971 under the laws of
Tennessee and headquartered in Memphis, Tennessee, is the second largest
financial institution holding company in Tennessee. At December 31, 1994, the
Corporation had the largest deposit base of any bank holding company
headquartered in Tennessee.
The Corporation's activities are conducted through its two principal
banking subsidiaries, the $2.2 billion Union Planters National Bank (UPNB)
headquartered in Memphis, Tennessee and the $2.0 billion Sunburst Bank,
Mississippi headquartered in Grenada, Mississippi and 40 other banking
subsidiaries and five savings and loan subsidiaries located in Tennessee,
Mississippi, Arkansas, Louisiana, Alabama, and Kentucky. Reference is made to
the listing of Communities Served on page 70, Table 15, and the map on the
inside cover of this report for additional information regarding the size,
locations, and markets served by the Corporation's subsidiaries.
Through its subsidiaries, the Corporation provides a diversified range of
financial services in the communities in which it operates including consumer,
commercial and corporate lending; retail banking; mortgage banking; and other
ancillary financial services traditionally furnished by full-service financial
institutions. The Corporation also is engaged in mortgage servicing; investment
management and trust service; the issuance and servicing of credit and debit
cards; and the origination, packaging, and securitization of loans, primarily
the government-guaranteed portions of Small Business Administration (SBA) loans.
This section of the annual report provides a narrative discussion and
analysis of the Corporation's results of operations and financial condition. The
consolidated financial statements and related notes and the financial tables
which follow this discussion should be considered an integral part of this
analysis.
ACQUISITIONS
Acquisitions have been and are expected to continue to be an important part
of the expansion of the Corporation's business. The Corporation completed four
acquisitions in 1992, twelve in 1993, and thirteen in 1994, adding approximately
$1.6 billion in total assets in 1992, $1.3 billion in total assets in 1993, and
$3.8 billion in 1994.
The Corporation's largest acquisition to date was the acquisition of
Grenada Sunburst System Corporation (GSSC) which was completed December 31,
1994. Prior to its merger into the Corporation, GSSC had been a multi-bank
holding company headquartered in Grenada, Mississippi, having total assets of
approximately $2.5 billion. GSSC was the third-largest financial institution
headquartered in Mississippi. The two major subsidiaries of GSSC were Sunburst
Bank, Mississippi and Sunburst Bank, Louisiana, having total assets of $2.0
billion and $500 million, respectively. Reference is made to Note 2 to the
consolidated financial statements and Table 3 for additional information
concerning the institutions acquired during the last three years.
Management's philosophy has been to provide additional diversification of
the revenue sources and earnings of the Corporation through the acquisition of
well-managed, small- and medium-size financial institutions, allowing them,
where practicable, to remain separate entities and to retain their local
characteristics and boards of directors along with substantial autonomy in their
day-to-day operations in order to grow within their markets without disruption.
Certain larger strategic acquisitions have also been made to enhance the value
of the Corporation's franchise.
This philosophy has made the Corporation an attractive acquiror of
financial institutions. Certain functions such as loan review, audit, payroll,
insurance management, data processing, and investment portfolio management are
centralized or outsourced as appropriate. Management believes that this
philosophy provides its subsidiary institutions with an environment which
promotes high performance.
The Corporation expects to continue to take advantage of the consolidation
of the financial industry as attractive opportunities are presented. Future
acquisitions are primarily expected to be well-managed, in-market institutions
having significant local market share in contiguous markets. The
10
<PAGE> 13
level of acquisition activity is expected to slow in 1995 as management focuses
on the integration of recent acquisitions and completes the reorganization of
its existing operations, including its restructuring as discussed below. Future
acquisitions may entail the payment by the Corporation of consideration in
excess of the book value of the underlying net assets acquired and may result in
the issuance of additional shares of the Corporation's Common and Preferred
Stock or additional indebtedness, which may rank senior to outstanding
subordinated debt, and therefore, could have a dilutive effect on earnings or
book value per share of the Corporation.
REORGANIZATIONS OF BANKING SUBSIDIARIES
As of July 1, 1994, the Corporation internally reorganized UPNB and formed
four new banking subsidiaries: Union Planters Bank of East Tennessee, National
Association; Union Planters Bank of Middle Tennessee, National Association;
Union Planters Bank of Chattanooga, National Association; and Union Planters
Bank of Jackson, National Association (collectively, the Regional Banks). The
Corporation injected equity of $101.7 million into the new Regional Banks, a
majority of the funds ($98 million) having been provided through a dividend from
UPNB. Each of the Regional Banks acquired from UPNB, at book value,
substantially all of the assets and assumed all the liabilities of the UPNB
branches located in its region. The reassignment of these branches to separate
regional banks was intended to permit a local management team and board of
directors to focus on the needs and opportunities within the local market and is
consistent with the Corporation's regional banking philosophy. UPNB continues to
operate branches in the Memphis, Tennessee area. The transfer of branches held
by UPNB had no material impact on the consolidated financial condition, results
of operations, or liquidity of the Corporation.
As part of the integration of GSSC into the Corporation, an internal
reorganization of Sunburst Bank, Mississippi is expected to occur in 1995. This
reorganization is expected to involve the sale and transfer of certain branch
locations of Sunburst Bank, Mississippi among five separate banks (two existing
banks and three new banks). The locations have been selected along geographic
lines among banks headquartered in Clarksdale, New Albany, Grenada, Jackson,
Hattiesburg, and Southaven, Mississippi. The Mississippi reorganization will be
similar to the reorganization of UPNB in 1994. The new banks will carry the name
of Union Planters. Consistent with management's philosophy, each bank will be
managed independently, will have a local board of directors, and certain
functions will be centralized.
Management has also implemented a plan to internally merge and consolidate
certain of its banking subsidiaries in contiguous market areas to improve
operating efficiencies. This plan is expected to reduce the number of banking
subsidiaries from 47 at December 31, 1994 to approximately 30 by year end 1995.
In connection with this plan, certain banks will change their names to Union
Planters and this is expected to enhance efficiencies in marketing their
services. Through March 1, 1995, the number of banks has been reduced to 38.
Finally, management expects to form a specialty banking subsidiary which
will include the following operations of the Corporation: bank card, trust,
mortgage banking, consumer loan company, insurance activities, SBA loan trading
operations, and investment services. This subsidiary will serve all of the
Corporation's banks by providing them with a variety of products and services to
offer to their customers.
Management believes that these reorganizations will enable the Corporation
to improve the efficiencies of its operations and its profitability in the
future. The day-to-day decision-making process will be at the local level which
will facilitate providing better service to customers.
EARNINGS OVERVIEW
Operating Results
The Corporation reported net earnings of $58.6 million in 1994, a 37%
decrease in net earnings from $92.6 million in 1993, compared to $63.3 million
in 1992. Fully diluted earnings per common share were $1.25 in 1994, compared to
$2.30 and $1.77 in 1993 and 1992, respectively. Returns on average assets (ROA)
and average common equity (ROE) were .58% and 7.40%, respectively, in 1994,
versus 1.04% and 15.55%, respectively, in 1993. ROA and ROE in 1992 were .91%
and 13.48%, respectively.
Included in net earnings in 1994 were the following items which reduced
earnings after taxes by approximately $52.0 million: (i) restructuring and other
merger related charges totaling $29.2 million
11
<PAGE> 14
after-tax; (ii) investment securities losses of $13.1 million after-tax; and
(iii) consumer loan marketing program expenses totaling $9.7 million after-tax.
Partially offsetting these items was a $1.3 million after-tax favorable
litigation settlement.
Net earnings for 1993 included a net benefit of $2.6 million, or $.07 per
fully diluted common share, from the cumulative effect of certain accounting
changes partially offset by an extraordinary item related to the in-substance
defeasance of debt. See Notes 9, 15, and 16 to the consolidated financial
statements for additional information regarding these items.
Table 1 presents a summary of the Corporation's consolidated results
identifying certain operating income and expense items (unusual or infrequently
occurring) for each of the last five years. Earnings after taxes and before the
identified items and the extraordinary item and accounting changes in 1993, were
$109.3 million in 1994, compared to $92.9 million and $67.6 million,
respectively, in 1993 and 1992.
Excluding certain operating items identified in Table 1, earnings in 1994
improved compared to 1993 and 1992. The improvement is attributable to continued
growth of net interest income due primarily to acquisitions and a decline in the
provision for losses on loans as asset quality continues to improve. Noninterest
income declined in 1994 due primarily to a decline in profits and commissions
from trading activities. Noninterest expense continued to grow primarily due to
acquisitions.
The following sections describe more fully the significant charges to
operating earnings during 1994. The impact of these charges did not have a
material adverse impact on the liquidity of the Corporation during 1994 and
management expects the Corporation to have sufficient liquidity to meet the
requirements of the restructuring plan described below. Approximately $38
million of the charges discussed below were noncash charges in 1994.
Restructuring Charges
In connection with the acquisition of GSSC, management adopted a specific
plan of restructuring related to its operations in order to facilitate the
consolidation of the two organizations and to improve operating efficiencies and
profitability throughout the Corporation. Management engaged a consulting firm
to assist in identifying performance improvement opportunities and to assist in
restructuring branch operations. During 1994, the Corporation incurred fees and
expenses of approximately $2.2 million related to the services provided by the
consulting firm which is nationally recognized in the banking field.
The restructuring plan included a review of the branch operations of the
Corporation to determine appropriate staffing levels and to determine "best"
practices for branch operations. Individual branch operations were reviewed to
determine whether certain branches should be closed or divested. Additionally,
all sources of fee income were reviewed to identify new opportunities for
additional noninterest income. The net interest margin was also evaluated to
identify potential for improvement. A review was also made of the operations of
the Corporation and GSSC to identify consolidation opportunities and
efficiencies to be gained from the consolidation of the two companies.
Based upon recommendations of the consulting firm and in connection with
the restructuring plan, the Corporation offered to certain employees in the
fourth quarter of 1994 early retirement/voluntary severance plans. The eligible
employees were provided the details of these plans during the quarter and were
required to decide whether to elect one of the plans by mid-December. Three
hundred eighty-eight employees elected to accept the early retirement/voluntary
severance plans which resulted in a pretax charge to earnings of approximately
$12.5 million. Those employees electing to accept these plans have either ceased
their employment as of December 31, 1994 or will leave the Corporation by
mid-1995.
The Plan also included an involuntary severance plan. This plan provides
for the additional reduction of approximately 600 employees through attrition,
changes in systems and work procedures, job consolidation, branch divestitures,
and other specific reductions. Prior to the end of 1994, management communicated
to all employees the Corporation's involuntary severance plan in connection with
the offering of the voluntary plans discussed above. Also, management
specifically identified the locations, job classifications, and total number of
employees to be terminated in connection with the Plan. Management does not
expect any significant changes to this plan which resulted in a pretax charge to
earnings in 1994 of approximately $3.8 million.
12
<PAGE> 15
In connection with the Plan, 38 branch locations have been identified for
closure or divestiture. The branch closures or divestitures are subject to
obtaining regulatory approvals and, barring unforeseen regulatory restrictions,
are expected to occur as soon as possible. Management does not expect any
significant changes to the Plan. During the fourth quarter of 1994, management
accrued $10.5 million (pretax) of branch-closure/divestiture costs related to
the branches identified for closure or divestiture, including write-downs of
properties, costs of lease and vendor contract cancellations, and write-off of
assets.
Management expects that the restructuring of the Corporation's operations
will produce a more efficient organization. The implementation of the Plan will
continue in 1995 and early 1996. Management is devoting significant resources to
completion of the Plan to realize the positive benefits as soon as possible.
Based on the average salaries of the affected employees or positions, management
estimates that the staff reductions associated with its restructuring plan will
result in cost savings of approximately $25 to $30 million annually. Cost
savings resulting from branch closings and divestitures are not expected to be
significant (approximately $1 million to $3 million), since most of the branches
identified for divestiture are older branch locations where book values of
properties and equipment are minimal. Other savings from implementation of the
Plan cannot be quantified at this time.
Merger Related Expenses
In connection with the acquisition of GSSC and several other financial
institutions during 1994, the Corporation incurred acquisition expenses totaling
approximately $14.9 million. These expenses included legal and accounting fees,
financial advisory services, employment contract payments, postretirement
benefit expenses related to the employees of the entities whose acquisitions
were accounted for as poolings of interests who were given credit for prior
service, costs for write-down of data processing equipment and cancellation of
vendor contracts, printing, finders fees, expenses related to employee benefit
plans of acquired entities, and other merger-related expenses.
Consumer Loan Marketing Program
During the fourth quarter of 1994, the Corporation initiated and completed
a consumer loan marketing program intended to increase the number of account
relationships and outstandings in the consumer loan portfolio. The cost of this
program was $14.4 million, $9.7 million after-tax. The program has resulted in
the establishment of approximately 250,000 new account relationships and
approximately $185 million in consumer loans outstanding through the end of
January 1995. Management expects additional increases in both account
relationships and loans in 1995.
Detailed analyses of results of operations and financial condition of the
Corporation follow. Reference is made to the financial tables at the end of this
discussion for additional information regarding the Corporation's financial
condition and results of operations.
EARNINGS ANALYSIS
NET INTEREST INCOME
Net interest income is the single most significant component of the
Corporation's earnings. For purposes of this discussion, net interest income has
been adjusted to a fully-taxable-equivalent basis for certain tax-exempt loans
and investments. Reference is made to Tables 4 and 5 which present the
Corporation's average balance sheet and rate/volume analysis for each of the
three years ended December 31, 1994.
Net interest income for 1994 was $406.3 million, an increase of 13% over
1993. Net interest income was $360.6 million and $293.7 million, respectively,
in 1993 and 1992. The improvement in net interest income for 1994 was primarily
attributable to a higher volume of average earning assets, predominately growth
from acquisitions and some loan growth from existing operations. Loans increased
from existing operations approximately 16% which contributed significantly to
the increase in the loan to deposit ratio from 61% at December 31, 1993 to 71%
at December 31, 1994. The growth in 1993 compared to 1992 was also attributable
to a higher level of average earning assets primarily from acquisitions.
Also contributing to the increase was growth in noninterest-bearing demand
deposits which provided additional investable funds. These deposits increased
15% from 1993 to 1994, and increased
13
<PAGE> 16
35% from 1992 to 1993. Most of the increase is attributable to acquisitions. In
1992 and 1993, the low interest-rate environment caused an increase in
noninterest-bearing demand deposits, as individuals were less concerned with
their balances in these deposits and corporate customers were required to
maintain higher compensating balances because of the low interest credit for
their balances.
The net interest margin was 4.39% in 1994, down from 4.44% in 1993 and
4.62% in 1992. The decline reflects the effects of rising interest rates in 1994
in which earning assets repriced at a slower rate than interest-bearing
liabilities. This is also reflected in the interest-rate spread which was 3.89%
in 1994 compared to 4.00% in 1993 and 4.11% in 1992.
INTEREST INCOME
The following table presents the breakdown of average earning assets for
the last three years.
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Average earning assets (In billions)................................ $9.3 $8.1 $6.4
Comprised of:
Loans............................................................. 58.7% 55.3% 55.6%
Investment securities............................................. 38.5 40.6 38.9
Other earning assets.............................................. 2.8 4.1 5.5
- ---------------
Taxable-equivalent yield on average earning assets.................. 7.37% 7.32% 8.12%
</TABLE>
Taxable-equivalent interest income increased 15% in 1994 to $682.1 million,
as compared to $594.3 million in 1993 and $516.3 million in 1992. The growth in
average earning assets is the reason for the increase, with average loans
accounting for the largest portion of the increase. Most of the growth has
resulted from acquisitions. Average investment securities accounted for most of
the growth in 1992 and 1993, due to the weak loan growth during that period of
time and because in 1992, the Corporation acquired certain deposits of
Metropolitan (see Note 2 to the consolidated financial statements) from the RTC
which provided a significant amount of cash that was invested primarily in
investment securities.
INTEREST EXPENSE
The following table presents the breakdown of average interest-bearing
liabilities for the last three years.
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Average interest-bearing liabilities (In billions).................. $7.9 $7.0 $5.6
Comprised of:
Deposits.......................................................... 89.7% 93.2% 94.3%
Short-term borrowings............................................. 6.0 3.7 4.6
FHLB Advances and long-term debt.................................. 4.3 3.1 1.1
- ---------------
Rate paid on interest-bearing liabilities........................... 3.48% 3.32% 4.01%
</TABLE>
In 1994, interest expense increased 18% to $275.8 million as compared with
$233.7 million and $222.6 million, respectively, in 1993 and 1992. The increase
in interest expense is attributable to an increase in the volume of average
interest-bearing liabilities. Also contributing to the increase was the rising
interest-rate environment in 1994. The increase between 1993 and 1992 is also
related to an increase in the volume of interest-bearing liabilities resulting
primarily from acquisitions which was partially offset by a declining
interest-rate environment.
Net interest income is expected to improve in 1995. Management has
restructured portions of the investment securities portfolio in 1994 in response
to higher interest rates to further improve net interest income and to provide
liquidity for current and anticipated loan growth. Emphasis will continue to be
placed on improvement of net interest income as one of management's primary
goals.
PROVISION FOR LOSSES ON LOANS
The provision for losses on loans (the provision) is the charge to earnings
to increase the allowance for losses on loans to cover potential losses inherent
in the loan portfolio. Management's policy is to maintain the allowance for
losses on loans at a level considered necessary to absorb all estimated losses
inherent in the loan portfolio. Note 1 to the consolidated financial statements
14
<PAGE> 17
describes the methodology used by management to determine the level of the
allowance for losses on loans.
In 1994, the provision was $3.6 million compared to $16.6 million and $27.2
million, respectively, for 1993 and 1992. The decline in the level of the
provision is directly related to the improvement in asset quality and the
decline in the level of nonperforming loans. The level of the provision in the
future is expected to depend primarily on loan growth and the level of net
charge-offs.
NONINTEREST INCOME
The components of noninterest income are presented in Table 1 and in Note
14 to the consolidated financial statements.
Investment Securities Gains and Losses
In 1994, the Corporation recognized investment securities losses of $20.3
million compared to investment securities gains of $4.5 million and $14.0
million, respectively, in 1993 and 1992. During the third quarter of 1994, the
Corporation restructured a portion of the available for sale portfolio in
response to higher interest rates. It is expected that increased book yields
will result in additional interest income of approximately $8.5 million annually
due to the sale of approximately $430 million of securities having an average
maturity of thirteen months and the reinvestment of the proceeds in securities
having an average maturity of approximately 30 months.
During the fourth quarter of 1994, management elected to sell certain
low-yielding available for sale securities totaling approximately $460 million
to fund current and anticipated loan growth and to reduce short-term borrowings.
Also included in securities losses in 1994 is a $2.8 million loss due to an
other-than-temporary impairment in the fair value of certain available for sale
securities which were sold in January 1995. The securities gains in 1993 and
1992 related to restructuring activities within the investment securities
portfolio.
Other Noninterest Income
Excluding investment securities gains and losses and items identified in
Table 1, noninterest income decreased $2.8 million in 1994 to $111.7 million.
This compares to noninterest income of $114.5 million and $95.1 million,
respectively, in 1993 and 1992.
The decline in noninterest income in 1994 is due to a $6.0 million decline
in profits and commissions from trading account activities. This reflects a
decline in revenues from the Corporation's SBA trading and Capital Market
operations and a decline in the activities of Sunburst Financial Group (acquired
by the Corporation as part of the GSSC acquisition).
Management discontinued the Corporation's Capital Market operations in the
second quarter of 1994 in response to a decline in revenues over the preceding
three years. Revenues from this operation were $467,000 in 1994 compared to $2.1
million and $5.5 million, respectively, in 1993 and 1992. For 1994, the
Corporation's Capital Market operations had a loss before taxes of $317,000
compared to earnings before taxes of $474,000 in 1993 and $2.5 million in 1992.
Revenues from the Corporation's SBA trading operations declined $3.2
million to $3.4 million in 1994 and revenues of Sunburst Financial Group
declined $1.2 million to $1.7 million in 1994. This compares to revenues of $6.6
million and $4.6 million in 1993 and 1992, respectively, for the SBA trading
operations. For the same periods, the Sunburst Financial Group had revenues of
$2.9 million and $2.1 million, respectively. The decline in revenue in these
operations is due to lower levels of activity. Revenues from these operations
are volatile and future levels cannot be predicted with any certainty.
Offsetting the declines discussed above was an increase in service charges
on deposit accounts of 13% in 1994 and 31% in 1993. The increase is due to
acquisitions, lower credit rates on corporate demand deposit accounts, and to a
lesser extent, an increase in service fees. Bank card income also has increased
over the last three years, increasing 5% in 1994 and 13% in 1993. Bank card
income represents both cardholder and merchant fees and is an area of emphasis
for the Corporation. Growth is expected in this area in 1995 as a result of the
consumer loan marketing program undertaken in 1994 which has been discussed
above.
15
<PAGE> 18
Trust service income has increased 4% in 1994 to $7.9 million compared to
$7.6 million and $6.9 million, respectively, in 1993 and 1992. Mortgage
servicing income, which had been an area of growth in the past, has declined
over the last three years. Mortgage servicing revenues were $9.4 million in
1992, compared to $9.2 million in 1993 and to $9.1 million in 1994. The decline
in revenue is attributable to the low interest-rate environment over these three
years which resulted in a high level of refinancing activity.
Table 1 presents certain operating income items for the last five years. In
1994 the Corporation made a favorable litigation settlement which contributed
$2.2 million to noninterest income. In 1993 and 1992, noninterest income
included gains from a troubled debt restructuring of $901,000 and $3.5 million,
respectively.
NONINTEREST EXPENSE
The components of noninterest expense are presented in Table 1 and in Note
14 to the consolidated financial statements.
Table 1 identifies certain operating expenses, including the restructuring
and other merger-related expenses and the consumer loan marketing program
discussed above, which totaled $58.2 million in 1994. Expenses in 1993 included
charges attributable to provisions for conversion of data processing systems,
accelerated amortization of intangibles, provisions for litigation settlements,
merger related expenses, and write-offs of intangibles totaling $10.1 million.
Noninterest expense in 1992 included similar expenses totaling $24.5 million.
Noninterest expense, before those certain expenses identified in Table 1,
increased 10% in 1994, to $340.6 million, compared to $309.6 million and $255.0
million, respectively, in 1993 and 1992.
Salaries and employee benefit expenses are the largest component of
noninterest expense and totaled $160.9 million in 1994 compared to $150.4
million and $116.8 million, respectively, in 1993 and 1992. The growth in this
category of expense is attributable mostly to acquisitions. Also contributing to
the increase were regular salary increases and increased benefit costs,
primarily medical costs. Full-time-equivalent employees have increased from
2,539 in 1992 to 3,003 in 1993 and to 5,029 in 1994. As discussed earlier, the
Corporation's restructuring Plan will reduce the total number of employees by
approximately 1,000 by the end of 1995 which is expected to reduce salary and
employee benefit costs by approximately $25 to $30 million annually.
Effective January 1, 1993, the Corporation adopted the provisions of SFAS
Nos. 106 and 112 which changed the accounting for postretirement and
postemployment expense benefits. The Corporation elected to expense, on January
1, 1993, the accumulated postretirement and postemployment obligations of $9.6
million ($5.9 million after taxes) upon adoption, instead of amortizing the
obligations to expense over 20 years as permitted by the new standards. The
ongoing expense related to these standards is not significant. Included in the
merger related expenses discussed above is approximately $2.1 million of expense
related to these benefits due to the Corporation granting employees of acquired
entities, accounted for as poolings of interests, credit for prior service.
Occupancy and equipment expense increased 10% in 1994 to $52.2 million,
following a 24% increase from 1992 to 1993. The increase is related to
acquisitions which increased the number of branch locations being operated by
the Corporation. The increase in expense was limited due to negative goodwill
resulting from the Fidelity acquisition in 1992 which enabled the Corporation to
write down the fixed assets of Fidelity by the amount of negative goodwill which
has resulted in a lower occupancy and equipment expense of approximately $2.3
million annually.
16
<PAGE> 19
Other significant increases or decreases in other noninterest expense are
summarized as follows:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
---------------------------------
1994 VS. 1993 1993 VS. 1992
-------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
FDIC insurance assessment......................................... $ 587 $ 4,402
Advertising and promotion......................................... 2,121 1,704
Stationery and supplies........................................... 2,021 2,105
Postage and other carrier......................................... 1,326 1,808
Amortization of goodwill and other intangibles.................... (1,586) 2,054
Other contracted services......................................... (148) 1,406
Communications.................................................... 532 1,149
Legal fees........................................................ 1,894 (3,972)
Other real estate expense......................................... (2,814) (1,156)
Audit fees........................................................ 1,093 1,130
Other personnel services.......................................... 1,489 386
-------------- --------------
Total................................................... $ 6,515 $ 11,016
========== ==========
</TABLE>
As discussed above, management is committed to improving the profitability
of the Corporation. A major focus will be to reduce noninterest expenses where
practicable and to control future increases. Management's goal is to achieve an
expense ratio (noninterest income excluding investment securities gains or
losses minus noninterest expense divided by average total assets) of 2.00%. The
expense ratio for 1994, excluding certain operating expenses identified in Table
1, was 2.28%. Management believes the plans implemented in 1994 and 1995 will
make it possible for the Corporation to attain this goal.
TAXES
Applicable income taxes consist of provisions for federal and state income
taxes. For 1994, applicable income taxes were $20.8 million compared to $37.4
million (before an extraordinary item and the cumulative effect of accounting
changes), and $23.9 million, respectively, in 1993 and 1992.
Effective tax rates before the extraordinary item and accounting changes
for 1994, 1993, and 1992 were 26.2%, 29.4%, and 27.4%, respectively. The
variances from statutory rates are attributable primarily to tax-exempt income
from investment securities and loans. There were no changes in tax law during
1994 which would impact the tax provision.
During the third quarter of 1993, the Omnibus Budget Reconciliation Act of
1993 was enacted and, among other provisions, increased the corporate federal
income tax rate from 34% to 35% retroactive to January 1, 1993. This legislation
resulted in a $2.6 million reduction in the tax provision for 1993. This
reduction was primarily due to the deduction of previously nondeductible
amortization of certain intangible assets and the impact on the net deferred tax
asset of the increase in the federal tax rate. These benefits were partially
offset by the increase in the federal tax rate for the current year provision.
For additional information regarding the Corporation's effective tax rate
and the composition of its income tax expense for the last three years, see Note
16 to the consolidated financial statements.
The realization of approximately $6.7 million of the net deferred tax asset
of $69.2 million is dependent upon the generation of future taxable income
sufficient to offset future deductions. Management believes that, based upon
historical earnings and anticipated future earnings, normal operations will
continue to generate sufficient future taxable income to realize all of these
benefits. Because income could be generated without requiring changes in the
current operating environment of the Corporation, no extraordinary strategies
are deemed necessary by management to generate sufficient income for purposes of
realizing the net deferred tax asset.
The criteria for the recognition of the net deferred tax asset for
regulatory capital purposes are more stringent than for financial statement
purposes and allow only limited anticipation of future taxable income.
Accordingly, $2.5 million of the Corporation's net deferred tax asset does not
qualify as capital for regulatory purposes. See Table 13 for risk-based capital
calculations.
17
<PAGE> 20
FINANCIAL CONDITION ANALYSIS
At December 31, 1994, the Corporation reported $10.0 billion in total
assets compared to $9.0 billion at the end of 1993. As discussed above, the
consolidated balance sheet has grown significantly due to the Corporation's
acquisition program. Average assets were $10.0 billion in 1994, compared to $8.9
billion and $6.9 billion, respectively, in 1993 and 1992. The following is a
more detailed discussion of the changes in the financial condition of the
Corporation between 1994 and 1993.
INVESTMENT SECURITIES
The Corporation's investment securities portfolio of $2.9 billion at
December 31, 1994, consisted of securities available for sale of $1.9 billion,
which are carried on the consolidated balance sheet at fair value, and
securities held to maturity of $1.0 billion, which are carried at amortized
cost.
As reflected in Note 4 to the consolidated financial statements, the
available for sale securities portfolio at December 31, 1994 had unrealized
gains of $3.0 million and unrealized losses of $50.0 million as compared to $7.3
million and $532,000, respectively, at year end 1993. Investment securities held
to maturity at year end 1994, had unrealized gains of $9.2 million and
unrealized losses of $32.3 million compared to $59.1 million and $3.4 million,
respectively, at year end 1993. The decline in the market values in both of
these portfolios is due primarily to the rising market-interest-rate environment
in 1994.
On January 1, 1994, the Corporation adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (SFAS No. 115), which
specifies the accounting and reporting requirements for all investments in debt
securities and for equity securities that have readily determinable fair values.
Notes 1 and 4 to the consolidated financial statements provide additional
information regarding the adoption of SFAS No. 115.
The adoption of SFAS No. 115 is expected to provide the Corporation with
greater flexibility in managing its interest-rate risk. Available for sale
securities can be sold, if needed, to react to changing interest rates and to
meet the Corporation's funding needs.
U.S. Treasury and government agency obligations represent approximately
77.9% of the investment securities portfolio at December 31, 1994. The
Corporation has some credit risk in the investment securities portfolio, however
management does not consider this risk to be significant.
The REMIC and CMO issues in the investment securities portfolio are 85%
U.S. Government Agency issues; the remaining 15% are readily marketable,
nonagency collateralized mortgage obligations backed by agency-pooled collateral
or whole-loan collateral. All nonagency issues currently held are rated "AAA" by
either Standard & Poors or Moodys. The REMIC and CMO portions of the investment
securities portfolio include approximately 43% in floating-rate issues, the
majority being indexed to LIBOR or PRIME. Normal practice is to purchase
investment securities at or near par value to reduce the risk of premium
write-offs on unexpected prepayments. The limited credit risk in the investment
securities portfolio consists of the holdings of nonagency CMOs, municipal
obligations and corporate stocks, notes and debentures which accounted for 1.7%,
17.5%, and 2.9%, respectively, of the investment securities portfolio at
December 31, 1994.
At December 31, 1994, the Corporation had approximately $26.4 million of
structured notes, which constitutes approximately .89% of its investment
securities portfolio. Structured notes have uncertain cash flows which are
driven by interest-rate movements and may expose a company to greater market
risk than traditional medium-term notes. All of the Corporation's investments of
this type are government agency issues (primarily Federal Home Loan Bank and
Federal National Mortgage Association). The structured notes vary in type but
primarily include step-up bonds and index-amortizing notes. These securities are
carried in the Corporation's available for sale securities portfolio and the
unrealized loss in these securities at December 31, 1994 was approximately $1.5
million. The market risk associated with the structured notes is not considered
material to the Corporation's financial position, results of operations, or
liquidity.
LOANS
At December 31, 1994, loans were $5.9 billion, an increase of $1.3 billion
over December 31, 1993. Excluding the impact of acquisitions, loans increased
approximately $768 million, or approximately
18
<PAGE> 21
16%. Average loans were $5.4 billion in 1994 compared to $4.5 billion and $3.5
billion, respectively, in 1993 and 1992. The Corporation's loan to deposit ratio
was 71% at December 31, 1994 compared to 61% at December 31, 1993.
Table 7 presents the composition of the loan portfolio for each of the last
five years. The loan growth over the last two years has been primarily from
acquisitions. The majority of the growth has been real estate loans secured by
single family residential mortgages which increased 36% to $2.0 billion at
December 31, 1994. Single family residential mortgages comprise a significant
portion of the loan portfolios of the institutions acquired during the last few
years. Additionally, management has emphasized consumer loans, primarily credit
card loans. Credit card and other related plans increased $159 million to $264
million at December 31, 1994 and other consumer loans increased $173 million to
$920 million compared to December 31, 1993.
Management expects slower internal loan growth in 1995. Growth is expected
primarily in consumer loans as a result of the consumer loan marketing program
discussed above and some growth of commercial, financial and agricultural loans
is expected. Real estate lending for single family residential loans is expected
to grow but at a much slower pace because mortgage interest rates have risen
significantly.
ALLOWANCE FOR LOSSES ON LOANS
The allowance for losses on loans (the allowance) at December 31, 1994 was
$122.1 million, or 2.05% of loans, which is an increase of $7.7 million over
December 31, 1993. Management's policy is to maintain the allowance at a level
deemed sufficient to absorb estimated losses in the loan portfolio. The
allowance is reviewed quarterly according to the methodology described in Note 1
to the consolidated financial statements. Tables 8 and 10 present detailed
information regarding the allowance for the last five years.
The major reason for the growth in the allowance in 1994 was the $9.3
million increase in the allowance attributable to acquisitions. Net charge-offs
for the year were $5.2 million or .09% of average loans. This compares to net
charge-offs of $13.6 million or .30% of average loans in 1993. The provision for
losses on loans was $3.6 million in 1994 compared to $16.6 million in 1993. All
of the provision in 1994 had been recorded by GSSC prior to its acquisition by
the Corporation on December 31, 1994.
Gross charge-offs in 1994 were $18.4 million compared to $23.7 million in
1993. The decline related primarily to commercial, financial, and agricultural
loans while there was an increase in real estate loan charge-offs. Recoveries in
1994 were $13.3 million compared to $10.1 million for 1993. The increase in
recoveries is related to commercial, financial, and agricultural and real estate
mortgage loans which experienced heavy charge-offs in prior years.
Because of the significant improvement in the Corporation's asset quality,
management does not expect any significant change in the allowance for losses on
loans. Some increase in the provision for losses on loans is expected as loan
growth occurs. The Corporation's ratios of the allowance to loans and allowance
to nonperforming loans are among the highest in the Southeast.
LOAN CONCENTRATIONS
Management believes that the loan portfolio is adequately diversified. The
Corporation's loan portfolio is spread over six states (Tennessee, Mississippi,
Arkansas, Louisiana, Alabama, and Kentucky) which reduces the risks associated
with changing local economic conditions. At December 31, 1994, the Corporation
had no concentrations of loans to a single industry equaling 10% or more of
total loans.
The Corporation's largest concentration of loans is in single family
residential loans, comprising 34% of the portfolio, which historically have had
low loss experience. Management has also emphasized diversification between
large and smaller-sized loans in an effort to lessen the risks in the portfolio.
At December 31, 1994, the Corporation's largest loan relationship was $17.5
million and there were only 27 loan relationships exceeding $10 million.
NONPERFORMING ASSETS
Nonperforming assets (consisting of nonaccrual and restructured loans,
other real estate, and other foreclosed properties) decreased 31% to $25.0
million, or .42% of loans and foreclosed properties,
19
<PAGE> 22
at December 31, 1994. This compares to $36.4 million, or .78% of loans and
foreclosed properties, at December 31, 1993. The significant decline was
attributable to one restructured loan which was removed from this classification
because it had performed in compliance with its renegotiated terms and has
demonstrated the ability to make payments over a period of time. Nonaccrual
loans declined 7% between 1993 and 1994. The decrease in nonperforming assets
was partially offset by the impact of acquisitions in 1994 which increased
nonperforming assets by approximately $3.8 million.
Foreclosed properties at December 31, 1994 were $6.0 million compared to
$8.8 million at year end 1993. Loans 90 days or more past due represented .10%
of loans at December 31, 1994 compared to .19% at year end 1993.
The improvement in asset quality has resulted in a significant increase in
the allowance coverage of nonperforming loans. At December 31, 1994, the
allowance was 641% of nonperforming loans which makes the coverage of these
loans among the highest in the Southeast. Management expects some increase in
nonperforming assets as loan growth occurs but does not anticipate any
significant increases.
POTENTIAL PROBLEM ASSETS
Potential problem assets consist of assets which are generally secured and
not currently considered nonperforming and include those assets where
information about possible credit problems has caused management to have serious
doubts as to the ability of such borrowers to comply with present repayment
terms. Historically, these assets have been loans that become nonperforming. At
December 31, 1994, the Corporation had potential problem assets (all loans) of
$11.6 million, comprised of 32 loans, the largest being $1.4 million.
OTHER EARNING ASSETS
Other earning assets include interest-bearing deposits at financial
institutions, federal funds sold, securities purchased under agreements to
resell, trading account securities, and loans held for resale. In total, these
assets represented approximately 2% of the Corporation's earning assets at
December 31, 1994 compared to 5% at December 31, 1993. The largest component,
$156 million at December 31, 1994, of other earning assets is trading account
securities, which consist primarily of the government-guaranteed portions of SBA
loans.
The decline in other earning assets between 1993 and 1994 relates
predominately to loans held for resale, an $85 million decline in mortgage loans
held for resale and a $24 million decline resulting from management's decision
to discontinue during 1994 the Capital Market operations which had purchased,
pooled, and securitized portfolios of whole mortgage loans, consumer paper and
other financial instruments. The changes in interest-bearing deposits at
financial institutions, federal funds sold, and securities purchased under
agreements to resell relate primarily to the Corporation's funding needs, since
these assets are used as short-term money market investments.
DEPOSITS
The Corporation's deposit base is its primary source of liquidity. Total
deposits consist of deposits from the communities the Corporation serves with no
out-of-market deposits. Tables 4 and 6 present the average balances and rates
paid on the Corporation's deposits.
Average total deposits increased 9% to $8.3 billion in 1994, primarily due
to acquisitions. This compares to average total deposits of $7.6 billion in
1993. At December 31, 1994, total deposits were $8.4 billion. Excluding the
impact of acquisitions, total deposits decreased approximately $111 million and
$278 million, respectively, in 1994 and 1993.
The composition of average deposits over the last three years was as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Noninterest-bearing demand deposits..................................... 15% 14% 13%
Money market deposits................................................... 18 23 24
Savings deposits........................................................ 21 16 13
Certificates of deposit over $100,000................................... 7 8 8
Other time deposits..................................................... 39 39 42
</TABLE>
20
<PAGE> 23
Growth has occurred in noninterest-bearing demand deposits, primarily
accounts of individuals and businesses. This growth relates to the low
interest-rate environment in which customers are not as concerned about balances
in these accounts because the yields on alternative investments are low and
businesses have been required to offset the lower earning credit rates with
higher balances. This trend is expected to reverse as interest rates rise. The
decline in other time deposits relates to customers seeking alternative
investments in the low interest-rate environment which has resulted in deposits
leaving the banking system.
CAPITAL
Shareholders' equity had a net increase of $49 million in 1994 to $731
million. Shareholders' equity increased $64 million from the issuance of the
Corporation's Common Stock in connection with acquisitions, $21 million from
retained net earnings, and $9 million from Common Stock issued in connection
with benefit plans. Partially offsetting these increases was the unrealized loss
on available for sale securities of $28 million, net of taxes, and the
redemption of the Corporation's Series C Preferred Stock during the fourth
quarter of 1994 which reduced Preferred Stock $17 million. At December 31, 1994,
the ratio of shareholders' equity to total assets was 7.30% compared to 7.55% at
year end 1993.
The key to continued growth and profitability of the Corporation is to
maintain adequate levels of capital. The capital adequacy of a bank holding
company is determined based upon the level of capital as well as asset quality,
liquidity, earnings history, economic conditions, and the level of acquisition
activity. Management's goal is to maintain all its banks in the
"well-capitalized" category for regulatory capital. At year end 1994, the
Corporation and all its subsidiaries were in this category.
In addition to management's capital goals, the Corporation and its
subsidiaries must satisfy the capital guidelines of The Federal Reserve Board
(FRB), the Office of the Comptroller of the Currency (OCC), the Office of Thrift
Supervision (OTS) and various state banking regulatory agencies. These agencies
require the maintenance of minimum amounts of capital based on risk-adjusted
assets such that higher risk assets will have a higher level of capital
supporting them.
The regulatory capital guidelines divide capital into two tiers, Tier 1
capital and Tier 2 capital. Tier 1 capital for the Corporation consists of
shareholders' equity, adding back the unrealized loss on available for sale debt
securities, then deducting goodwill and certain other intangibles and the
disallowed portion of the Corporation's net deferred tax asset. Tier 2 capital
for the Corporation consists of qualifying subordinated debt and a portion of
the allowance for losses on loans. In determining the risk-based capital
requirements, assets are assigned risk weights of zero to 100 percent, depending
upon the regulatory assigned levels of credit risk associated with such assets.
Off-balance-sheet items are included in the calculation of risk-adjusted assets
through conversion factors established by the regulatory agencies.
Table 13 presents the Corporation's risk-based capital computations for the
last three years. At December 31, 1994, the Corporation's Tier 1 and Total
capital to risk-weighted assets ratios were 12.22% and 14.75%, respectively,
compared to 13.58% and 16.40%, respectively, at year end 1993. The regulatory
agencies require "well-capitalized" institutions to have Tier 1 and Total
capital ratios of 6% and 10%, respectively.
In addition to the risk-based capital requirements, the regulatory agencies
have established leverage capital requirements. This ratio is computed by
dividing Tier 1 capital by unadjusted (not risk-weighted) quarterly average
total assets. The Corporation's leverage ratio at December 31, 1994 was 7.18%
compared to 7.23% at year end 1993, and compared to the regulatory guideline of
5% for "well-capitalized" institutions.
The FDIC monitors risk-based capital requirements and requires weaker
institutions to pay higher deposit insurance premiums while allowing
well-capitalized institutions to pay less. The deposit insurance assessments
currently range from 23 cents per $100 of deposits for well-capitalized
institutions to 31 cents for the weakest institutions. These premiums are
currently under review and it is expected that the premium for Bank Insurance
Fund (BIF) institutions will decrease from $.23 to $.04 per $100 of deposits and
the premium for the Savings Association Insurance Fund (SAIF) (fund for savings
and loan associations) will likely remain the same for the foreseeable future.
At December 31, 1994, the Corporation had approximately $6.9 billion BIF insured
deposits and $1.5 billion SAIF insured deposits.
21
<PAGE> 24
LIQUIDITY
Liquidity for the Corporation is a measure of its ability to meet cash flow
requirements for deposit withdrawals, to make new loans and loan commitments,
and to take advantage of attractive investment opportunities. The Corporation's
primary sources of liquidity are its deposit base (discussed previously),
available for sale investment securities, and money market investments.
Liquidity is also achieved through short-term borrowings, borrowings under
available credit lines, and issuance of securities and debt instruments in the
marketplace.
As the parent company, the Corporation's sources of liquidity are
management fees from subsidiaries, dividends from subsidiaries, and working
capital. The number of financial institutions owned by the Corporation provides
the parent company with a diversified base for the source of dividends should
one or more of the subsidiaries have capital needs and be unable to pay
dividends to the parent. At December 31, 1994, the parent company had cash and
cash equivalents of $86 million and had working capital of $78 million. As of
January 1, 1995, the Corporation's banking subsidiaries could have paid
dividends to the parent company without prior regulatory approval of
approximately $22 million. The amount of dividends available without regulatory
approval has declined from December 31, 1993 due to the $98 million special
dividend paid by UPNB incidental to the formation and capitalization of four new
Tennessee banking subsidiaries. See the "Reorganizations of Banking
Subsidiaries" discussion above. Management believes that the parent company has
adequate liquidity to meet its cash needs, including the payment of dividends
and servicing its long-term debt.
ASSET/LIABILITY MANAGEMENT
Asset/liability management is considered to be one of the most important
aspects of the Corporation's efforts to sustain profitability. Management's goal
is to maximize net interest income within acceptable levels of interest-rate
risk and liquidity. To achieve this goal, a proper balance must be maintained
between assets and liabilities with respect to size, maturity, repricing, rate
of return, and degree of risk.
The Corporation's Funds Management Committee oversees the conduct of global
asset/liability management for the Corporation. The Committee reviews the
asset/liability structure and interest-rate sensitivity of each subsidiary and
that of the consolidated Corporation. While the Corporation grants wide latitude
to the management of each subsidiary, it is the policy of the Corporation that
each subsidiary establish policies for the proper conduct of balance sheet
management. These policies contain, at a minimum, limits on interest-rate
sensitivity, guidelines for liquidity maintenance, and capital ratio guidelines.
Table 11 presents the Corporation's interest rate sensitivity analysis at
December 31, 1994. The analysis has been made at a point-in-time and could
change on a daily basis. This analysis alone cannot be used to predict how the
Corporation is positioned to react to changing interest rates. Other factors
such as the mix of earning assets and interest-bearing liabilities,
interest-rate spreads, and the level of interest rates impact the Corporation's
net interest income.
Balance sheet simulation analysis has been conducted to determine the
impact on net interest income for the coming twelve months under several
interest rate scenarios. One such scenario uses rates at December 31, 1994, and
holds the rates and volumes constant for simulation. When this projection is
subjected to immediate and parallel shifts in interest rate ("rate shock") of
200 basis points, first rising and then falling, the annual impact of the "rate
shock" at December 31, 1994 on the Corporation's net interest income was a
negative $9 million and $4 million pretax, respectively, which is within the
Corporation's policy limit of 5% of shareholders' equity.
OFF-BALANCE-SHEET INSTRUMENTS
The Corporation, on a limited basis, uses off-balance-sheet financial
instruments to manage interest-rate risk. Note 17 to the consolidated financial
statements presents the Corporation's off-balance-sheet exposure.
The Corporation entered into certain interest-rate swaps for purposes other
than trading during 1993 to synthetically alter the repricing and maturity
characteristics of certain on-balance sheet assets and liabilities. Other than
the variable maturity feature of the interest-rate swaps related to loans which
is discussed in Note 17 to the consolidated financial statements, the
interest-rate swaps are straight forward and noncomplex. There has been no
change in the notional amounts outstanding since
22
<PAGE> 25
December 31, 1993. At December 31, 1994, the interest-rate swaps outstanding had
a net unrealized loss of $16 million. Reference is made to Note 17 for detailed
information regarding the Corporation's interest rate swaps outstanding.
The Corporation does have risk in the variable-rate loan swaps related to
the possible extension of the maturity in the event of increased interest rates.
As interest rates rise, the Corporation may be placed in a net payor position
for a period of time, not to exceed January 1999. However, the loans underlying
the swaps would also contribute more to net interest income. Accordingly, the
Corporation believes there is minimal risk that these swaps will have any
significant impact on net interest income.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The required disclosures regarding the fair values of financial instruments
are included in Note 18 to the consolidated financial statements along with a
summary of the methods and assumptions used by the Corporation in determining
the fair values. The differences between the fair values and book values are
primarily caused by differences between contractual and market interest rates.
Fair values have varied from period-to-period due to the composition of the
consolidated balance sheet and changes in the interest-rate environment.
Management's opinion is that the information required in the SFAS No. 107
disclosure does not meaningfully reflect the underlying value of the
Corporation. Comparisons of the fair value with other financial institutions may
not be meaningful due to differences in the assumptions and methods used in
determining fair value. Therefore, this information is not used by management to
manage the Corporation and its banking subsidiaries. Other methods, including
the asset/liability management philosophy discussed previously, are used.
FOURTH QUARTER 1994 RESULTS
The Corporation reported a net loss of $16.8 million, or $.47 per share,
for the fourth quarter of 1994, compared to net earnings of $20.7 million, or
$.51 per fully diluted common share, for the same period in 1993. The fourth
quarter results included a $27.2 million after-tax charge related to the GSSC
merger and the restructuring of the operations of the Corporation and a $9.7
million after-tax expense related to a consumer loan marketing program (see
previous discussion). The results also include an after-tax loss of $8.4 million
on available for sale investment securities sold. Earnings (after taxes) before
these charges and the investment securities losses would have been $28.5 million
for the fourth quarter of 1994, compared to $24.5 million for the same period in
1993.
Net interest income for the fourth quarter of 1994 improved $14.4 million
over the same period in 1993 to $100.4 million. The improvement is primarily
attributable to acquisitions. The net interest margin for the quarter was 4.47%
compared to 4.35% for the fourth quarter of 1993. The margin was improved by
loan growth (acquisitions and core loan growth) of $1.3 billion, or 28% between
1993 and 1994. During the fourth quarter of 1994, management elected to sell
certain low-yielding securities to fund current and anticipated loan growth and
to reduce short-term borrowings. This resulted in the sale of approximately $460
million of securities at an after-tax loss of approximately $8.4 million.
Noninterest income for the fourth quarter of 1994, excluding investment
securities losses, was $27.5 million compared to $29.2 million for the same
period in 1993. The decline was primarily attributable to a decline in profits
and commissions from trading activities. The previously discussed charges
together with charges arising from acquisitions significantly impacted
noninterest expense for the fourth quarter of 1994. For the fourth quarter of
1994, noninterest expense was $143.3 million compared to $79.6 million for the
same period in 1993.
DIVIDENDS
The Corporation paid cash dividends on its Common Stock outstanding
totaling $20.1 million, or $.88 per share, in 1994 compared to $13.0 million, or
$.72 per share, in 1993. Dividends totaling $8.6 million were paid on the
Corporation's Preferred Stock outstanding, compared to $8.5 million in 1993. The
Preferred Stock dividends are expected to decline in 1995 due to the redemption
of the Series C Preferred Stock in the fourth quarter of 1994 and management's
plan to call for redemption which would be expected to result in conversion of
the Series D Preferred Stock in mid-year 1995. Dividends on these series of
preferred stock were $1.5 million and $494,000, respectively, in 1994. If
23
<PAGE> 26
additional shares of Series E Preferred Stock are issued in connection with
acquisitions (see Note 2 to the consolidated financial statements), the expected
decline in dividends would be partially offset.
The only current contractual restriction on the Corporation's ability to
pay dividends is a line of credit agreement which limits dividends to 60% of the
previous year's net earnings, as originally reported. The lower level of
earnings in 1994 as a result of the significant charges incurred and the current
dividend levels will require the Corporation to obtain a waiver of this
requirement in 1995 and management expects that such a waiver will be granted.
CAPITAL EXPENDITURES
In the normal course of business, the Corporation replaces furniture and
equipment and builds new branch locations to better serve its customers. In
addition, the Corporation evaluates opportunities to improve productivity and
control risk through technology investments. The amount of these planned
expenditures in 1995 is not considered significant.
IMPACT OF PROPOSED ACCOUNTING STANDARDS
In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan" (which takes effect for fiscal years beginning after
December 15, 1994) as amended by SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan -- Income Recognition and Disclosures" issued in October
1994. SFAS No. 114 prescribes a valuation methodology for impaired loans as
defined by the standard. Generally, a loan is considered impaired if management
believes that it is probable that all amounts due will not be collected
according to the contractual terms as stipulated in the loan agreement. An
impaired loan must be valued using the present value of expected future cash
flows discounted at the loan's effective interest rate, the loan's observable
market price, or fair value of the loan's underlying collateral. The Corporation
expects to adopt SFAS No. 114 prospectively in 1995. It is anticipated that the
adoption of SFAS No. 114 will not have a material effect on the Corporation's
financial condition, results of operations or liquidity.
24
<PAGE> 27
TABLE 1. SUMMARY OF CONSOLIDATED RESULTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest income..................................... $ 664,057 $ 577,390 $ 503,778 $ 512,887 $ 551,091
Interest expense.................................... (275,779) (233,680) (222,630) (279,097) (344,562)
--------- --------- --------- --------- ---------
NET INTEREST INCOME................................. 388,278 343,710 281,148 233,790 206,529
PROVISION FOR LOSSES ON LOANS....................... (3,636) (16,558) (27,182) (34,203) (26,304)
--------- --------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON
LOANS............................................. 384,642 327,152 253,966 199,587 180,225
--------- --------- --------- --------- ---------
NONINTEREST INCOME
Service charges on deposit accounts............... 52,590 46,532 35,590 33,626 29,344
Bank card income.................................. 10,192 9,749 8,632 7,684 7,008
Mortgage servicing income......................... 9,095 9,239 9,400 8,047 7,593
Trust service income.............................. 7,889 7,566 6,871 6,809 6,713
Profits and commissions from trading activities... 5,537 11,577 12,252 15,467 24,394
Other income...................................... 26,357 29,866 22,332 19,064 17,024
--------- --------- --------- --------- ---------
Total noninterest income.................... 111,660 114,529 95,077 90,697 92,076
--------- --------- --------- --------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits.................... 160,862 150,383 116,764 108,490 113,500
Net occupancy expense............................. 25,750 23,356 19,401 16,772 18,035
Equipment expense................................. 26,451 23,986 18,836 16,796 17,237
Other expense..................................... 127,535 111,825 99,964 83,796 82,564
--------- --------- --------- --------- ---------
Total noninterest expense................... 340,598 309,550 254,965 225,854 231,336
--------- --------- --------- --------- ---------
155,704 132,131 94,078 64,430 40,965
OTHER OPERATING ITEMS
Investment securities gains (losses).............. (20,298) 4,495 14,019 2,624 83
Restructuring charges and other merger related
expenses........................................ (43,791) (2,113) -- -- --
Consumer loan marketing program expenses.......... (14,446) -- -- -- --
Gain on sale of collateral related to a troubled
debt............................................ -- 901 3,513 -- --
Write-off of intangibles.......................... -- (1,209) -- (1,053) --
Accelerated amortization of mortgage
servicing rights................................ -- (500) (8,200) -- --
Accelerated amortization of other intangibles..... -- (1,385) (1,649) -- --
Provisions for conversion of data processing
systems......................................... -- (4,424) -- -- --
Provisions for abandoned property................. -- -- (5,200) (1,643) (272)
Provisions for litigation settlements............. -- (500) (9,450) (9,925) (125)
Favorable litigation settlement................... 2,200 -- -- -- --
--------- --------- --------- --------- ---------
EARNINGS BEFORE TAXES, EXTRAORDINARY ITEM,
AND ACCOUNTING CHANGES...................... 79,369 127,396 87,111 54,433 40,651
Taxes............................................... (20,761) (37,420) (23,861) (11,537) (5,408)
--------- --------- --------- --------- ---------
EARNINGS BEFORE EXTRAORDINARY ITEM AND
ACCOUNTING CHANGES.......................... 58,608 89,976 63,250 42,896 35,243
Extraordinary item -- defeasance of debt, net of
taxes............................................. -- (3,206) -- -- --
Accounting changes
Postretirement/postemployment benefits............ -- (5,907) -- -- --
Income taxes...................................... -- 11,689 -- -- --
--------- --------- --------- --------- ---------
NET EARNINGS................................ $ 58,608 $ 92,552 $ 63,250 $ 42,896 $ 35,243
========= ========= ========= ========= =========
</TABLE>
25
<PAGE> 28
TABLE 2. CONTRIBUTION TO FULLY DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net interest income-FTE................................................. $ 10.06 $ 9.12 $ 8.45 $ 7.64 $ 6.42
Provision for losses on loans........................................... (0.09) (0.42) (0.78) (1.07) (0.77)
------- ------- ------- ------- -------
Net interest income after provision for losses on loans-FTE............. 9.97 8.70 7.67 6.57 5.65
------- ------- ------- ------- -------
Noninterest income
Service charges on deposits........................................... 1.30 1.18 1.02 1.05 0.86
Bank card income...................................................... 0.25 0.25 0.25 0.24 0.21
Mortgage servicing income............................................. 0.22 0.23 0.27 0.25 0.22
Trust service income.................................................. 0.20 0.19 0.20 0.21 0.20
Profits and commissions from trading activities....................... 0.14 0.29 0.35 0.48 0.72
Investment securities gains (losses).................................. (0.50) 0.11 0.40 0.08 --
Other income.......................................................... 0.70 0.78 0.75 0.60 0.49
------- ------- ------- ------- -------
Total noninterest income........................................ 2.31 3.03 3.24 2.91 2.70
------- ------- ------- ------- -------
Noninterest expense
Salaries and employee benefits........................................ (4.44) (3.80) (3.36) (3.38) (3.33)
Net occupancy expense................................................. (0.64) (0.59) (0.56) (0.52) (0.53)
Equipment expense..................................................... (0.65) (0.61) (0.54) (0.52) (0.51)
Other expense......................................................... (4.14) (3.08) (3.58) (3.00) (2.43)
------- ------- ------- ------- -------
Total noninterest expense....................................... (9.87) (8.08) (8.04) (7.42) (6.80)
------- ------- ------- ------- -------
Earnings before income taxes-FTE, extraordinary item, and
accounting changes............................................ 2.41 3.65 2.87 2.06 1.55
Applicable income taxes-FTE............................................. (0.96) (1.37) (1.05) (0.72) (0.52)
------- ------- ------- ------- -------
Earnings before extraordinary item and accounting changes....... 1.45 2.28 1.82 1.34 1.03
Extraordinary item and accounting changes, net of taxes................. -- 0.07 -- -- --
Preferred stock dividends............................................... (0.20) (0.05) (0.05) (0.02) --
------- ------- ------- ------- -------
Net earnings.................................................... $ 1.25 $ 2.30 $ 1.77 $ 1.32 $ 1.03
======= ======= ======= ======= =======
Change in net earnings applicable to fully diluted earnings per share
using previous year average shares outstanding........................ $ (1.02) $ 0.84 $ 0.60 $ 0.21 $ 1.49
Change in average shares outstanding.................................... (0.03) (0.31) (0.15) 0.08 (0.01)
------- ------- ------- ------- -------
Change in net earnings.......................................... $ (1.05) $ 0.53 $ 0.45 $ 0.29 $ 1.48
======= ======= ======= ======= =======
Average fully diluted shares (in thousands)............................. 40,397 39,541 34,754 32,105 34,078
======= ======= ======= ======= =======
</TABLE>
- ---------------
FTE -- Fully taxable equivalent
TABLE 3. ACQUISITIONS -- BALANCES AT RESPECTIVE DATES OF ACQUISITION(1)
<TABLE>
<CAPTION>
1994
---------------------------------------------
1992 1993(2) GSSC(2) BNF OTHERS TOTAL
---------- ---------- ---------- -------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing deposits at financial
institutions................................... $ -- $ 16,998 $ 996 $ -- $ 31,712 $ 32,708
Loans, net of unearned income.................... 578,913 649,153 1,737,970 173,885 538,712 2,450,567
Allowance for losses on loans.................... (15,669) (16,607) (33,068) (1,744) (9,376) (44,188)
---------- ---------- ---------- -------- -------- ----------
Net loans...................................... 563,244 632,546 1,704,902 172,141 529,336 2,406,379
Investment securities............................ 290,143 422,187 518,506 94,301 272,376 885,183
Intangible assets................................ 19,668 18,188 7,960 -- 11,897 19,857
Cash and cash equivalents........................ 669,712 119,424 166,123 2,162 92,848 261,133
Other real estate owned, net..................... 7,501 3,371 2,945 -- 1,554 4,499
Premises and equipment........................... 9,716 27,797 42,247 5,200 18,403 65,850
Other assets..................................... 29,469 19,178 74,292 2,588 18,649 95,529
---------- ---------- ---------- -------- -------- ----------
TOTAL ASSETS................................... $1,589,453 $1,259,689 $2,517,971 $276,392 $976,775 $3,771,138
========= ========= ========= ======== ======== =========
LIABILITIES
Deposits......................................... $1,457,112 $1,111,644 $2,259,813 $228,481 $857,674 $3,345,968
Other interest-bearing liabilities............... 360 18,903 56,286 15,000 20,677 91,963
Other liabilities................................ 23,013 17,575 28,150 3,276 13,410 44,836
---------- ---------- ---------- -------- -------- ----------
TOTAL LIABILITIES.............................. $1,480,485 $1,148,122 $2,344,249 $246,757 $891,761 $3,482,767
========= ========= ========= ======== ======== =========
PURCHASE PRICE/CAPITAL CONTRIBUTION/EQUITY AT
RESPECTIVE DATES OF ACQUISITION FOR POOLINGS..... $ 108,968 $ 111,567 $ 173,722 $ 29,635 $ 85,014 $ 288,371
========= ========= ========= ======== ======== =========
</TABLE>
- ---------------
(1) Amounts are balances of the institutions acquired at their respective dates
of acquisition except for certain poolings of interest which were not
considered material and whose balances are as of January 1 of the year they
were acquired. (See Note 2 to the consolidated financial statements for
additional information.)
(2) GSSC acquired Eastover Bank for Savings in 1993. The balances acquired are
included in the amounts for GSSC and are not included in the 1993 balances
above.
26
<PAGE> 29
TABLE 4. AVERAGE BALANCE SHEET AND AVERAGE INTEREST RATES
<TABLE>
<CAPTION>
YEAR-TO-DATE DECEMBER 31,
------------------------------------------------------------------------------------------
1994 1993 1992
----------------------------- ---------------------------- ----------------------------
INTEREST FTE INTEREST FTE INTEREST FTE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
----------- -------- ------ ---------- -------- ------ ---------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing deposits at
financial institutions........... $ 13,225 $ 718 5.43 % $ 46,724 $ 1,742 3.73% $ 101,851 $ 4,915 4.83 %
Federal funds sold and securities
purchased under agreements to
resell........................... 87,735 3,637 4.15 160,894 5,092 3.16 141,159 5,250 3.72
Trading account securities......... 161,634 9,143 5.66 121,412 6,194 5.10 105,116 6,648 6.32
Investment securities (1) and (2)
Taxable securities............... 3,037,857 156,429 5.15 2,834,599 152,031 5.36 2,154,533 143,173 6.65
Tax-exempt securities............ 523,617 48,924 9.34 466,075 44,939 9.64 321,865 33,007 10.25
----------- -------- ---------- -------- ---------- --------
Total investment
securities................. 3,561,474 205,353 5.77 3,300,674 196,970 5.97 2,476,398 176,180 7.11
Loans, net of unearned income (1),
(3), and (4)..................... 5,426,880 463,227 8.54 4,492,943 384,297 8.55 3,532,480 323,311 9.15
----------- -------- ---------- -------- ---------- --------
Total earning assets (1),
(2), and (3)............... 9,250,948 682,078 7.37 8,122,647 594,295 7.32 6,357,004 516,304 8.12
-------- -------- --------
Cash and due from banks............ 408,506 385,990 307,334
Premises and equipment............. 211,011 183,749 135,114
Allowance for losses on loans...... (124,400) (112,775) (86,199)
Other assets....................... 279,318 277,605 221,465
----------- ---------- ----------
Total assets................. $10,025,383 $8,857,216 $6,934,718
========== ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Money market accounts.............. $ 1,471,733 36,453 2.48 $1,762,708 41,400 2.35 $1,449,987 42,349 2.92
Savings deposits................... 1,762,406 40,798 2.31 1,185,810 28,599 2.41 765,875 21,744 2.84
Certificates of deposit of $100,000
and over......................... 551,615 22,131 4.01 602,533 22,175 3.68 509,054 22,758 4.47
Other time deposits................ 3,317,570 136,433 4.11 3,011,095 121,023 4.02 2,509,570 122,184 4.87
Short-term borrowings
Federal funds purchased and
securities sold under
agreements to repurchase....... 466,905 19,841 4.25 254,499 6,926 2.72 244,626 7,729 3.16
Other............................ 7,125 241 3.38 9,107 304 3.34 8,578 311 3.63
Federal Home Loan Bank advances.... 217,587 10,847 4.99 131,246 5,363 4.09 15,254 667 4.37
Long-term debt
Subordinated capital notes and
debentures..................... 116,272 8,547 7.35 81,126 7,447 9.18 41,311 4,340 10.51
Other............................ 4,740 488 10.30 4,623 443 9.58 6,341 548 8.64
----------- -------- ---------- -------- ---------- --------
Total interest-bearing
liabilities................ 7,915,953 275,779 3.48 7,042,747 233,680 3.32 5,550,596 222,630 4.01
Noninterest-bearing demand
deposits........................... 1,226,289 -- 1,066,909 -- 790,733 --
----------- -------- ---------- -------- ---------- --------
Total sources of funds....... 9,142,242 275,779 8,109,656 233,680 6,341,329 222,630
-------- -------- --------
Other liabilities.................... 104,909 107,686 98,860
Shareholders' equity................. 778,232 639,874 494,529
----------- ---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY....... $10,025,383 $8,857,216 $6,934,718
========== ========= =========
NET INTEREST INCOME(1)............... $406,299 $360,615 $293,674
======== ======== ========
INTEREST RATE SPREAD(1).............. 3.89 % 4.00% 4.11 %
====== ====== ======
NET INTEREST MARGIN(1)............... 4.39 % 4.44% 4.62 %
====== ====== ======
TAXABLE-EQUIVALENT ADJUSTMENTS
Loans.............................. $ 1,503 $ 1,298 $ 1,247
Securities......................... 16,518 15,607 11,279
-------- -------- --------
Total........................ $ 18,021 $ 16,905 $ 12,526
======== ======== ========
</TABLE>
- ---------------
(1) Taxable-equivalent yields are calculated assuming 35%, 35%, and 34% income
tax rates in 1994, 1993, and 1992, respectively. State taxes are calculated
at 6% without any tax-exempt exclusion.
(2) Yields are calculated on historical cost and exclude the impact of the
unrealized gain (loss) on available for sale securities.
(3) Includes loan fees, immaterial in amount, in both interest income and the
calculation of the yield on loans.
(4) Including loans on nonaccrual status.
27
<PAGE> 30
TABLE 5. ANALYSIS OF VOLUME AND RATE CHANGES
<TABLE>
<CAPTION>
1994 VERSUS 1993 1993 VERSUS 1992
------------------------------- -------------------------------
INCREASE INCREASE
(DECREASE) (DECREASE)
DUE TO CHANGE DUE TO CHANGE
IN:(1) IN:(1)
------------------ TOTAL ------------------ TOTAL
AVERAGE AVERAGE INCREASE AVERAGE AVERAGE INCREASE
VOLUME RATE (DECREASE) VOLUME RATE (DECREASE)
------- -------- ---------- ------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits at financial
institutions..................................... $(1,597) $ 573 $ (1,024) $(2,234) $ (939) $ (3,173)
Federal funds sold and securities purchased under
agreements to resell............................. (2,742) 1,287 (1,455) 681 (839) (158)
Trading account securities......................... 2,220 729 2,949 941 (1,395) (454)
Investment securities
Taxable securities............................... 10,622 (6,224) 4,398 39,781 (30,923) 8,858
Tax-exempt securities............................ 5,410 (1,425) 3,985 14,009 (2,077) 11,932
------- -------- ---------- ------- -------- ----------
Total investment securities.................... 16,032 (7,649) 8,383 53,790 (33,000) 20,790
------- -------- ---------- ------- -------- ----------
Loans.............................................. 79,721 (791) 78,930 83,269 (22,283) 60,986
------- -------- ---------- ------- -------- ----------
TOTAL INTEREST INCOME.......................... 93,634 (5,851) 87,783 136,447 (58,456) 77,991
------- -------- ---------- ------- -------- ----------
INTEREST EXPENSE
Money market accounts.............................. (7,114) 2,167 (4,947) 8,196 (9,145) (949)
Savings deposits................................... 13,391 (1,192) 12,199 10,515 (3,660) 6,855
Certificates of deposit of $100,000 and over....... (1,956) 1,912 (44) 3,802 (4,385) (583)
Other time deposits................................ 12,551 2,859 15,410 22,143 (23,304) (1,161)
Federal funds purchased and securities sold under
agreements to repurchase......................... 7,720 5,195 12,915 302 (1,105) (803)
Other short-term borrowings........................ (67) 4 (63) 19 (26) (7)
Federal Home Loan Bank advances.................... 4,110 1,374 5,484 4,743 (47) 4,696
Subordinated capital notes and debentures.......... 2,787 (1,687) 1,100 3,716 (609) 3,107
Other long-term debt............................... 11 34 45 (160) 55 (105)
------- -------- ---------- ------- -------- ----------
TOTAL INTEREST EXPENSE......................... 31,433 10,666 42,099 53,276 (42,226) 11,050
------- -------- ---------- ------- -------- ----------
CHANGE IN NET INTEREST INCOME........................ $62,201 $(16,517) $ 45,684 $83,171 $(16,230) $ 66,941
======= ======== ========== ======= ======== ==========
PERCENTAGE INCREASE IN NET INTEREST INCOME OVER PRIOR
PERIOD............................................. 12.67% 22.79%
========== ==========
</TABLE>
- ---------------
(1) The change due to both rate and volume has been allocated to change due to
volume and change due to rate in proportion to the relationship of the
absolute dollar amounts of the change in each.
TABLE 6. AVERAGE DEPOSITS(1)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Noninterest-bearing demand................................. $1,226,289 $1,066,909 $ 790,733 $ 669,720 $ 657,018
Money market(2)............................................ 1,471,733 1,762,708 1,449,987 1,166,033 1,113,533
Savings(3)................................................. 1,762,406 1,185,810 765,875 584,126 533,860
Other time(4).............................................. 3,317,570 3,011,095 2,509,570 2,134,329 2,072,364
---------- ---------- ---------- ---------- ----------
TOTAL AVERAGE CORE DEPOSITS............................ 7,777,998 7,026,522 5,516,165 4,554,208 4,376,775
Certificates of deposit of $100,000 and over............... 551,615 602,533 509,054 556,435 649,094
---------- ---------- ---------- ---------- ----------
TOTAL AVERAGE DEPOSITS................................. $8,329,613 $7,629,055 $6,025,219 $5,110,643 $5,025,869
========= ========= ========= ========= =========
</TABLE>
- ---------------
(1) Table 4 presents the average rate paid on the above deposit categories for
the three years ended December 31, 1994.
(2) Includes money market savings accounts and super NOW accounts.
(3) Includes regular savings accounts, NOW accounts and premium savings
accounts.
(4) Includes certificates of deposit of less than $100,000, investment savings
deposits, IRA's, and Christmas Club accounts.
28
<PAGE> 31
TABLE 7. COMPOSITION OF THE LOAN PORTFOLIO
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial, financial, and agricultural.................. $1,364,729 $1,152,159 $ 939,824 $ 934,072 $1,139,067
Real estate -- construction.............................. 225,591 160,633 99,443 85,807 105,264
Real estate -- mortgage
Secured by 1-4 family residential...................... 2,035,290 1,495,878 1,158,108 842,918 844,019
Other mortgage loans................................... 990,779 875,112 654,864 550,809 500,734
Home equity.............................................. 140,305 117,475 109,217 74,440 67,507
Consumer
Credit cards and other related plans................... 263,927 105,333 76,608 68,425 82,616
Other consumer loans................................... 919,618 746,752 552,573 571,442 640,371
Direct lease financing................................... 40,342 25,914 16,493 32,768 36,477
---------- ---------- ---------- ---------- ----------
TOTAL LOANS........................................ 5,980,581 4,679,256 3,607,130 3,160,681 3,416,055
Less: Unearned income.................................. 31,453 25,888 21,361 27,757 39,620
---------- ---------- ---------- ---------- ----------
TOTAL LOANS, NET OF UNEARNED INCOME................ $5,949,128 $4,653,368 $3,585,769 $3,132,924 $3,376,435
========= ========= ========= ========= =========
</TABLE>
TABLE 8. ALLOCATION OF THE ALLOWANCE FOR LOSSES ON LOANS BY CATEGORY OF LOANS
AND THE PERCENTAGE OF LOANS BY CATEGORY TO TOTAL LOANS OUTSTANDING
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
--------------------- --------------------- -------------------- -------------------- --------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
OF LOANS TO OF LOANS TO OF LOANS TO OF LOANS TO OF LOANS TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
-------- ----------- -------- ----------- ------- ----------- ------- ----------- ------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial,
financial, and
agricultural.... $ 37,229 22% $ 48,637 25% $38,818 26% $27,661 29% $29,940 33%
Real estate --
construction.... 4,924 4 3,068 3 1,762 3 3,347 3 2,005 3
Real estate --
mortgage........ 47,117 51 43,662 51 34,003 50 21,594 44 20,433 40
Consumer.......... 32,291 22 18,461 21 14,914 20 14,832 23 14,638 23
Direct lease
financing....... 528 1 525 -- 330 1 555 1 489 1
-------- --- -------- --- ------- --- ------- --- ------- ---
Total....... $122,089 100% $114,353 100% $89,827 100% $67,989 100% $67,505 100%
======== ========== ======== ========== ======= ========== ======= ========== ======= ==========
</TABLE>
- ---------------
Note: The allocation of the allowance is presented based in part on evaluations
of specific loans, past history, and economic conditions within specific
industries or geographic areas. Since all of these factors are subject to
change, the current allocation of the allowance is not necessarily
indicative of the breakdown of future losses.
TABLE 9. NONACCRUAL, RESTRUCTURED, AND PAST DUE LOANS AND FORECLOSED PROPERTIES
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans................................................ $17,476 $18,846 $44,067 $30,439 $30,881
Restructured loans.............................................. 1,564 8,778 3,154 3,606 5,273
------- ------- ------- ------- -------
Total nonperforming loans............................... 19,040 27,624 47,221 34,045 36,154
------- ------- ------- ------- -------
Foreclosed property
Other real estate owned, net.................................. 5,434 8,054 13,327 20,322 25,026
Other foreclosed properties................................... 559 761 434 444 545
------- ------- ------- ------- -------
Total foreclosed properties............................. 5,993 8,815 13,761 20,766 25,571
------- ------- ------- ------- -------
Total nonperforming assets.............................. $25,033 $36,439 $60,982 $54,811 $61,725
======= ======= ======= ======= =======
Loans 90 days or more past due and not on nonaccrual status..... $ 5,874 $ 9,070 $ 5,256 $ 6,549 $14,118
======= ======= ======= ======= =======
Nonperforming loans as a percentage of loans.................... .32% .59% 1.32% 1.09% 1.07%
Nonperforming assets as a percentage of loans plus foreclosed
properties.................................................... .42 .78 1.69 1.74 1.81
Allowance for losses on loans as a percentage of
nonperforming loans........................................... 641 414 190 200 187
Loans 90 days or more past due and not on nonaccrual status as a
percentage of loans........................................... .10 .19 .15 .21 .42
</TABLE>
29
<PAGE> 32
TABLE 10. ALLOWANCE FOR LOSSES ON LOANS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period......................... $ 114,353 $ 89,827 $ 67,989 $ 67,505 $ 62,108
Loans charged off
Commercial, financial, and agricultural.............. 5,323 11,830 22,577 23,297 23,413
Real estate-construction............................. 248 65 411 759 1,533
Real estate-mortgage................................. 3,834 2,885 4,547 4,379 3,963
Consumer............................................. 9,033 8,883 9,006 14,699 9,917
Direct lease financing............................... 1 9 20 75 129
---------- ---------- ---------- ---------- ----------
Total charge-offs.............................. 18,439 23,672 36,561 43,209 38,955
---------- ---------- ---------- ---------- ----------
Recoveries on loans previously charged off
Commercial, financial, and agricultural.............. 6,454 4,962 10,663 5,525 5,646
Real estate-construction............................. 72 59 108 63 195
Real estate-mortgage................................. 2,756 688 487 567 604
Consumer............................................. 3,882 4,323 4,195 3,181 3,994
Direct lease financing............................... 123 39 86 154 21
---------- ---------- ---------- ---------- ----------
Total recoveries............................... 13,287 10,071 15,539 9,490 10,460
---------- ---------- ---------- ---------- ----------
Net charge-offs........................................ 5,152 13,601 21,022 33,719 28,495
Provision charged to expense........................... 3,636 16,558 27,182 34,203 26,304
Increase due to acquisitions........................... 9,252 21,569 15,678 -- 7,588
---------- ---------- ---------- ---------- ----------
Balance at end of period............................... $ 122,089 $ 114,353 $ 89,827 $ 67,989 $ 67,505
========= ========= ========= ========= =========
Loans, net of unearned income, at end of period........ $5,949,128 $4,653,368 $3,585,769 $3,132,924 $3,376,435
========= ========= ========= ========= =========
Average loans, net of unearned income, during period... $5,426,880 $4,492,943 $3,532,480 $3,294,623 $3,368,971
========= ========= ========= ========= =========
Ratios:
Allowance at end of period to loans, net of unearned
income............................................. 2.05% 2.46% 2.51% 2.17% 2.00%
Allowance at end of period to average loans, net of
unearned income.................................... 2.25 2.55 2.54 2.06 2.00
Net charge-offs to average loans, net of
unearned income.................................... .09 .30 .60 1.02 .85
</TABLE>
30
<PAGE> 33
TABLE 11. RATE SENSITIVITY ANALYSIS AT DECEMBER 31, 1994
<TABLE>
<CAPTION>
INTEREST-SENSITIVE WITHIN
--------------------------------------------------------------------------------
0-30 31-90 91-180 181-365 1-2 2-5 OVER NONINTEREST-
DAYS(B) DAYS DAYS DAYS YEARS YEARS 5 YEARS BEARING TOTAL
------- ------ ------ ------- ------ ------ ------- ------------ -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans and leases........... $1,637 $ 512 $552 $ 771 $ 469 $1,346 $ 675 $ 19 $ 5,981
Investment securities...... 459 235 335 393 581 637 322 -- 2,962
Other earning assets....... 111 105 2 1 1 1 -- -- 221
Other assets............... -- -- -- -- -- -- -- 851 851
------- ------ ------ ------- ------ ------ ------- ------------ -------
TOTAL ASSETS....... $2,207 $ 852 $889 $ 1,165 $1,051 $1,984 $ 997 $ 870 $10,015
====== ====== ===== ====== ====== ====== ====== ========= =======
SOURCES OF FUNDS
Money market deposits...... $ 82 $ 370 $ -- $ 383 $ -- $ 549 $ -- $ -- $ 1,384
Other savings and time
deposits................ 585 1,170 662 640 372 1,639 25 -- 5,093
Time deposits over
$100,000................ 107 109 113 83 79 67 2 -- 560
Short-term
borrowings.............. 413 2 -- -- -- -- -- -- 415
Federal Home Loan Bank
advances................ 101 27 10 17 15 34 20 -- 224
Long-term debt............. -- -- -- -- -- -- 117 -- 117
Noninterest-bearing
deposits................ -- -- -- -- -- -- -- 1,381 1,381
Other liabilities.......... -- -- -- -- -- -- -- 110 110
Shareholders' equity....... -- -- -- -- -- -- -- 731 731
------- ------ ------ ------- ------ ------ ------- ------------ -------
TOTAL SOURCES OF
FUNDS............ $1,288 $1,678 $785 $ 1,123 $ 466 $2,289 $ 164 $ 2,222 $10,015
====== ====== ===== ====== ====== ====== ====== ========= =======
INTEREST RATE SWAPS.......... $ (150 ) $ (10) $(50) $ 0 $ 50 $ 160 $ 0 $ 0
INTEREST RATE SENSITIVITY
GAP........................ 769 (836) 54 42 635 (145) 833 (1,352)
CUMULATIVE INTEREST RATE
SENSITIVITY GAP............ 769 (67) (13) 29 664 519 1,352 0
CUMULATIVE GAP AS A
PERCENTAGE OF TOTAL
ASSETS..................... 8 % (1)% 0% 0% 7% 5% 13% 0%
</TABLE>
- ---------------
MANAGEMENT HAS MADE THE FOLLOWING ASSUMPTIONS IN THE ABOVE ANALYSIS:
(a) Assets and liabilities are generally assigned to a period based upon their
earliest repricing period when the repricing is less than the contractual
maturity.
(b) Nonaccrual loans are included in the noninterest-bearing category.
(c) Fixed-rate mortgage loan maturities are based on the principal-prepayment
patterns of comparable mortgage-backed securities.
(d) The scheduled maturities of mortgage-backed securities and CMOs incorporate
principal prepayments of these securities using current and consensus
interest rate forecasts in conjunction with the latest three month
historical prepayment schedules.
(e) Investment securities available for sale are currently treated in the same
manner as comparable securities in the investment securities held to
maturity portfolio in that they are scheduled according to the earlier of
their contractual maturities or earliest repricing dates; however, the
maturities of callable agency securities are scheduled according to their
call dates when valued at a premium to par.
(f) Money market deposits and savings deposits that have no contractual
maturities are scheduled according to the Corporation's best estimate of
their repricing sensitivity to changes in market rates. This varies by
product type and market.
(g) If all money market, NOW and savings deposits had been included in the 0-30
Days category above, the cumulative gap as a percentage of total assets
would have been negative (23%), (22%), (22%), (17%), (11%), and positive 5%,
respectively, for the 0-30 Days, 31-90 Days, 91-180 Days, 181-365 Days, 1-2
Years, and 2-5 Years categories at December 31, 1994.
31
<PAGE> 34
TABLE 12. INVESTMENT SECURITIES AND OTHER EARNING ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1994 1993 1992
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
U.S. Government obligations
U.S. Treasury............................................ $ 927,754 $ 919,482 $ 760,152
U.S. Government Agencies................................. 1,379,105 1,703,469 1,535,319
---------- ---------- ----------
Total U.S. Government obligations................ 2,306,859 2,622,951 2,295,471
Obligations of state and political subdivisions............ 519,134 519,919 377,673
Other investment securities................................ 136,151 152,774 120,806
---------- ---------- ----------
Total investment securities...................... 2,962,144 3,295,644 2,793,950
Interest-bearing deposits at financial institutions........ 10,641 26,675 104,234
Federal funds sold and securities purchased under resale
agreements............................................... 29,953 78,149 92,354
Trading account securities................................. 155,951 153,482 109,584
Loans held for resale...................................... 24,493 134,206 154,615
---------- ---------- ----------
Total investment securities and money market
assets......................................... $3,183,182 $3,688,156 $3,254,737
========= ========= =========
</TABLE>
TABLE 13. RISK-BASED CAPITAL
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1994 1993 1992
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
TIER 1 CAPITAL
Shareholders' equity..................................... $ 730,707 $ 682,002 $ 529,496
Minority interest in consolidated subsidiaries........... 1,088 1,588 1,588
Less goodwill and one-half of investment in
unconsolidated subsidiaries........................... (38,138) (33,049) (10,741)
Less disallowed deferred tax asset....................... (2,494) (1,861) --
Add unrealized loss on available for sale securities..... 28,527 -- --
---------- ---------- ----------
TOTAL TIER 1 CAPITAL............................. 719,690 648,680 520,343
TIER 2 CAPITAL
Allowance for losses on loans............................ 74,204 60,397 49,656
Qualifying long-term debt................................ 74,540 74,479 32,000
Less one-half of investment in unconsolidated
subsidiaries.......................................... (18) (136) (147)
---------- ---------- ----------
TOTAL CAPITAL.................................... $ 868,416 $ 783,420 $ 601,852
========= ========= =========
RISK-WEIGHTED ASSETS....................................... $5,888,361 $4,775,858 $3,897,154
========= ========= =========
RATIOS
Equity to assets......................................... 7.30% 7.55% 7.07%
Leverage ratio........................................... 7.18 7.23 7.11
Tier 1 capital to risk-weighted assets................... 12.22 13.58 13.35
Total capital to risk-weighted assets.................... 14.75 16.40 15.44
</TABLE>
- ---------------
Regulatory minimums for institutions considered "well-capitalized" are 5%, 6%,
and 10% for the leverage, Tier 1 capital to risk-weighted assets, and Total
capital to risk-weighted assets ratios, respectively. As of December 31, 1994,
all of the Corporation's banking subsidiaries were considered "well-capitalized"
for FDIC deposit insurance assessments.
32
<PAGE> 35
TABLE 14. SELECTED QUARTERLY DATA
<TABLE>
<CAPTION>
1994 QUARTERS ENDED(1) AND(2)
------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
-------- -------- ------------ ----------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net interest income.................... $ 91,464 $ 97,064 $ 99,310 $ 100,440 $ 388,278
Provision for losses on loans.......... (815) (985) (991) (845) (3,636)
Investment securities gains (losses)... 105 169 (8,111) (12,461) (20,298)
Noninterest income..................... 28,314 28,075 30,000 27,471 113,860
Noninterest expense.................... (82,727) (86,136) (86,706) (143,266) (398,835)
-------- -------- ------------ ----------- ---------
Earnings (loss) before income taxes.... 36,341 38,187 33,502 (28,661) 79,369
Applicable income taxes (benefit)...... 10,954 11,935 9,768 (11,896) 20,761
-------- -------- ------------ ----------- ---------
Net earnings (loss).................... $ 25,387 $ 26,252 $ 23,734 $ (16,765) $ 58,608
======== ======== ========== ========== =========
PER COMMON SHARE DATA
Net earnings (loss)
Primary........................... $ .58 $ .60 $ .54 $ (.47) $ 1.25
Fully diluted..................... .56 .58 .52 (.47) 1.25
Dividends............................ .21 .21 .23 .23 .88
UPC COMMON STOCK DATA (3)
High trading price................... $ 26.25 $ 28.75 $ 26.00 $ 24.50 $ 28.75
Low trading price.................... 23.13 24.75 23.50 19.63 19.63
Closing price........................ 24.88 26.75 24.50 20.88 20.88
Trading volume (in thousands) (4).... 1,878 1,791 2,565 2,886 9,120
</TABLE>
<TABLE>
<CAPTION>
1993 QUARTERS ENDED(1) AND(2)
------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
-------- -------- ------------ ----------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net interest income.................... $ 82,982 $ 87,667 $ 87,069 $ 85,992 $ 343,710
Provision for losses on loans.......... (4,930) (6,554) (3,049) (2,025) (16,558)
Investment securities gains............ 669 2,467 685 674 4,495
Noninterest income..................... 26,580 29,416 30,212 29,222 115,430
Noninterest expense.................... (76,503) (80,988) (82,565) (79,625) (319,681)
-------- -------- ------------ ----------- ---------
Earnings before income taxes,
extraordinary item, and accounting
changes.............................. 28,798 32,008 32,352 34,238 127,396
Applicable income taxes................ 9,146 10,328 7,625 10,321 37,420
-------- -------- ------------ ----------- ---------
Earnings before extraordinary item and
accounting changes................... 19,652 21,680 24,727 23,917 89,976
Extraordinary item, net of taxes....... -- -- -- (3,206) (3,206)
Accounting changes, net of taxes....... 5,782 -- -- -- 5,782
-------- -------- ------------ ----------- ---------
Net earnings...................... $ 25,434 $ 21,680 $ 24,727 $ 20,711 $ 92,552
======== ======== ========== ========== =========
PER COMMON SHARE DATA
Earnings before extraordinary item
and accounting changes
Primary........................... $ .52 $ .55 $ .63 $ .61 $ 2.31
Fully diluted..................... .50 .53 .61 .59 2.23
Net earnings
Primary........................... .68 .55 .63 .52 2.38
Fully diluted..................... .65 .53 .61 .51 2.30
Dividends............................ .18 .18 .18 .18 .72
UPC COMMON STOCK DATA(3)
High trading price................... $ 29.13 $ 29.25 $ 30.00 $ 28.75 $ 30.00
Low trading price.................... 22.50 22.63 25.00 23.63 22.50
Closing price........................ 29.00 25.75 29.00 25.13 25.13
Trading volume (in thousands)(4)..... 3,059 1,926 2,008 2,800 9,793
</TABLE>
- ---------------
(1) Certain quarterly amounts have been reclassified to conform with current
financial reporting presentation.
(2) Quarterly amounts for 1994 have been restated for all 1994 acquisitions
accounted for using the pooling of interests method of accounting. In
addition, quarterly amounts for 1993 have been restated only for the 1994
acquisitions of BNF BANCORP, Inc. and Grenada Sunburst System Corporation
both of which were considered significant acquisitions.
(3) Union Planters Corporation's Common Stock is listed on the New York Stock
Exchange (NYSE) and is traded under the symbol UPC. All share prices
represent closing prices as reported by the NYSE. There were approximately
13,700 holders of the Corporation's Common Stock as of December 31, 1994.
(4) Trading volume represents the total volume for the period shown as reported
by NYSE.
33
<PAGE> 36
TABLE 15. UNION PLANTERS CORPORATION'S BANKING SUBSIDIARIES
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------------------------
ASSETS LOANS DEPOSITS EQUITY
------ ------ -------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
TENNESSEE
Union Planters National Bank................................. $2,165 $1,094 $1,322 $167.3
Union Planters Bank of Middle Tennessee, N.A................. 929 463 859 61.2
Union Planters Bank of Jackson, N.A.......................... 274 157 253 15.5
Union Planters Bank of East Tennessee, N.A................... 258 169 237 19.5
Union Planters Bank of West Tennessee........................ 207 105 187 14.4
First Federal Savings Bank in Maryville...................... 172 104 160 10.2
Liberty Federal Savings Bank in Paris........................ 172 120 148 14.2
Bank of Goodlettsville....................................... 171 100 154 11.0
First National Bank of Shelbyville........................... 162 71 145 13.5
The First National Bank of Crossville........................ 162 72 148 10.5
Citizens Bank in Cookeville.................................. 154 91 142 10.8
Bank of Roane County in Harriman............................. 134 90 117 8.5
Union Planters Bank of Chattanooga, N.A...................... 131 74 117 11.9
Central State Bank in Lexington.............................. 107 63 99 6.8
First State Bank of Brownsville.............................. 99 44 86 5.3
Security Trust Federal Savings and Loan Association.......... 99 58 73 7.4
Bank of East Tennessee in Morristown......................... 89 32 77 7.3
Bank of Commerce in Woodbury................................. 77 44 67 6.2
Dekalb County Bank & Trust Company in Alexandria............. 74 42 65 5.6
Farmers Union Bank in Ripley................................. 63 37 54 8.1
Citizens Bank & Trust Company in Wartburg.................... 61 34 55 4.1
First Citizens Bank of Hohenwald............................. 56 36 46 4.2
Bank of Trenton and Trust Company............................ 44 22 40 2.6
Union Planters Bank, FSB in Dyersburg........................ 40 24 29 2.4
Erin Bank & Trust Company.................................... 37 15 33 4.2
First State Bank of Fayette County in Somerville............. 31 15 29 2.2
The Commercial Bank of Obion................................. 29 10 25 3.7
Peoples Bank of Elk Valley in Fayetteville................... 26 17 23 2.3
Pickett County Bank and Trust Company in Byrdstown........... 24 15 21 1.5
Cumberland City Bank......................................... 22 14 20 1.8
------ ------ -------- ------
Total Tennessee.................................... $6,069 $3,232 $4,831 $444.2
====== ====== ====== ======
MISSISSIPPI
Sunburst Bank, Mississippi................................... $2,013 $1,416 $1,807 $134.3
United Southern Bank of Clarksdale........................... 335 179 289 26.5
First National Bank in New Albany............................ 149 94 134 12.2
------ ------ -------- ------
Total Mississippi.................................. $2,497 $1,689 $2,230 $173.0
====== ====== ====== ======
ARKANSAS
Mercantile Bank in Jonesboro................................. $ 248 $ 187 $ 214 $ 22.0
Security Bank in Paragould................................... 112 65 102 8.2
First State Bank of Newport.................................. 55 29 48 5.7
First National Bank in Clinton............................... 53 41 48 3.8
First Southern Bank in Earle................................. 41 19 38 2.4
Searcy County Bank in Marshall............................... 35 20 31 3.3
Bank of Weiner............................................... 31 18 28 2.5
Mercantile Bank in Mammoth Spring............................ 30 20 27 2.6
Mercantile Bank in Hardy..................................... 29 21 24 2.0
The Bank of Rector........................................... 28 14 25 2.5
Farmers & Merchants Bank in Pocahontas....................... 18 11 17 1.3
------ ------ -------- ------
Total Arkansas..................................... $ 680 $ 445 $ 602 $ 56.3
====== ====== ====== ======
LOUISIANA
Sunburst Bank, Louisiana..................................... $ 502 $ 322 $ 454 $ 37.0
====== ====== ====== ======
ALABAMA
BANKFIRST in Decatur......................................... $ 273 $ 185 $ 231 $ 20.6
====== ====== ====== ======
KENTUCKY
Simpson County Bank in Franklin.............................. $ 110 $ 79 $ 102 $ 6.7
====== ====== ====== ======
</TABLE>
34
<PAGE> 37
REPORT OF MANAGEMENT
The accompanying financial statements and related financial information in
this annual report were prepared by the management of Union Planters Corporation
in accordance with generally accepted accounting principles and, where
appropriate, reflect management's best estimates and judgment. Management is
responsible for the integrity, objectivity, consistency, and fair presentation
of the financial statements and all financial information contained in this
annual report.
Management maintains and depends upon internal accounting systems and
related systems of internal controls. The internal control systems are designed
to ensure that transactions are properly authorized and recorded in the
Corporation's financial records and to safeguard the Corporation's assets from
material loss or misuse. The Corporation utilizes internal monitoring mechanisms
and an extensive external audit to monitor compliance with, and assess the
effectiveness of, the system of internal accounting controls. Management
believes the Corporation's system of internal accounting control provides
reasonable assurance that the Corporation's assets are safeguarded and that its
financial records are reliable.
The Audit Committee of the Board of Directors meets periodically with
representatives of the Corporation's independent accountants and management to
review accounting policies, control procedures, and audit and regulatory
examination reports. The independent accountants have free access to the
Committee, with and without the presence of management, to discuss the results
of their audit work and their evaluation of the adequacy of internal controls
and the quality of financial reporting.
The financial statements have been audited by Price Waterhouse LLP,
independent accountants, who were engaged to express an opinion as to the
fairness of presentation of such financial statements.
<TABLE>
<S> <C>
/s/ Benjamin W. Rawlins, Jr. /s/ Jack W. Parker
- ---------------------------- ----------------------------
Benjamin W. Rawlins, Jr. Jack W. Parker
Chairman of the Board and Executive Vice President and
Chief Executive Officer Chief Financial Officer
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Union Planters Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of earnings, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Union Planters Corporation and its subsidiaries at December 31, 1994 and 1993,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Corporation's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, the
Corporation changed its methods of accounting for investment securities in 1994
and for postretirement benefits, postemployment benefits and income taxes in
1993.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Memphis, Tennessee
January 26, 1995
35
<PAGE> 38
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1993
----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks.................................................... $ 488,722 $ 363,360
Interest-bearing deposits at financial institutions........................ 10,641 26,675
Federal funds sold and securities purchased under agreements to resell..... 29,953 78,149
Trading account securities................................................. 155,951 153,482
Loans held for resale...................................................... 24,493 134,206
Investment securities
Available for sale (Amortized cost December 31, 1994: $1,975,897; Fair
value December 31, 1993: $815,360)...................................... 1,928,984 808,554
Held to maturity (Fair value: $1,009,969 and $2,542,808, respectively)... 1,033,160 2,487,090
Loans...................................................................... 5,980,581 4,679,256
Less: Unearned income.................................................... (31,453) (25,888)
Allowance for losses on loans....................................... (122,089) (114,353)
----------- ----------
Net loans........................................................... 5,827,039 4,539,015
Premises and equipment..................................................... 204,136 189,080
Accrued interest receivable................................................ 87,509 70,332
Goodwill and other intangibles............................................. 50,236 47,293
Other assets............................................................... 174,245 132,657
----------- ----------
TOTAL ASSETS........................................................ $10,015,069 $9,029,893
============ ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing...................................................... $ 1,380,737 $1,172,251
Certificates of deposit of $100,000 and over............................. 559,593 593,381
Other interest-bearing................................................... 6,477,512 5,905,989
----------- ----------
Total deposits...................................................... 8,417,842 7,671,621
Short-term borrowings...................................................... 415,171 275,537
Federal Home Loan Bank advances............................................ 224,103 192,792
Long-term debt............................................................. 116,848 117,379
Accrued interest, expenses, and taxes...................................... 72,211 52,766
Other liabilities.......................................................... 38,187 37,796
----------- ----------
TOTAL LIABILITIES................................................... 9,284,362 8,347,891
----------- ----------
Commitments and contingent liabilities (Notes 7, 15, 17, and 19)........... -- --
Shareholders' equity
Preferred stock (Note 10)
Convertible............................................................ 87,298 87,298
Nonconvertible......................................................... -- 17,250
Common stock, $5 par value; 50,000,000 shares authorized; 40,179,474
issued and outstanding (35,447,702 in 1993)............................. 200,897 177,238
Additional paid-in capital............................................... 69,204 59,969
Net unrealized gain (loss) on available for sale securities.............. (28,527) --
Retained earnings........................................................ 401,835 340,247
----------- ----------
TOTAL SHAREHOLDERS' EQUITY.......................................... 730,707 682,002
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.......................... $10,015,069 $9,029,893
============ ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE> 39
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1994 1993 1992
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans.................................. $ 460,617 $ 375,567 $ 314,814
Interest on investment securities
Taxable................................................... 156,429 151,538 142,663
Tax-exempt................................................ 32,406 29,825 22,238
Interest on deposits at financial institutions.............. 718 1,742 4,915
Interest on federal funds sold and securities purchased
under agreements to resell................................ 3,637 5,092 5,250
Interest on trading account securities...................... 9,143 6,194 6,648
Interest on loans held for resale........................... 1,107 7,432 7,250
----------- ----------- -----------
Total interest income................................ 664,057 577,390 503,778
----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits........................................ 235,815 213,197 209,035
Interest on short-term borrowings........................... 20,082 7,230 8,040
Interest on Federal Home Loan Bank advances and long-term
debt...................................................... 19,882 13,253 5,555
----------- ----------- -----------
Total interest expense............................... 275,779 233,680 222,630
----------- ----------- -----------
NET INTEREST INCOME.................................. 388,278 343,710 281,148
PROVISION FOR LOSSES ON LOANS................................. 3,636 16,558 27,182
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON
LOANS.............................................. 384,642 327,152 253,966
NONINTEREST INCOME
Service charges on deposit accounts......................... 52,590 46,532 35,590
Bank card income............................................ 10,192 9,749 8,632
Mortgage servicing income................................... 9,095 9,239 9,400
Trust service income........................................ 7,889 7,566 6,871
Profits and commissions from trading activities............. 5,537 11,577 12,252
Investment securities gains (losses)........................ (20,298) 4,495 14,019
Other income................................................ 28,557 30,767 25,845
----------- ----------- -----------
Total noninterest income............................. 93,562 119,925 112,609
----------- ----------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits.............................. 160,862 150,383 116,764
Net occupancy expense....................................... 25,750 23,356 19,401
Equipment expense........................................... 26,451 23,986 18,836
Other expense............................................... 185,772 121,956 124,463
----------- ----------- -----------
Total noninterest expense............................ 398,835 319,681 279,464
----------- ----------- -----------
EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM, AND
ACCOUNTING CHANGES................................. 79,369 127,396 87,111
Applicable income taxes 20,761 37,420 23,861
----------- ----------- -----------
EARNINGS BEFORE EXTRAORDINARY ITEM AND ACCOUNTING
CHANGES............................................ 58,608 89,976 63,250
Extraordinary item -- defeasance of debt, net of taxes........ -- (3,206) --
Accounting changes, net of taxes.............................. -- 5,782 --
----------- ----------- -----------
NET EARNINGS......................................... $ 58,608 $ 92,552 $ 63,250
============ ============ ============
NET EARNINGS APPLICABLE TO COMMON SHARES............. $ 50,055 $ 84,084 $ 57,084
============ ============ ============
EARNINGS PER COMMON SHARE
PRIMARY
Earnings before extraordinary item and accounting
changes................................................. $ 1.25 $ 2.31 $ 1.79
Extraordinary item -- defeasance of debt, net of taxes.... -- (.09) --
Accounting changes, net of taxes.......................... -- .16 --
----------- ----------- -----------
NET EARNINGS......................................... $ 1.25 $ 2.38 $ 1.79
============ ============ ============
FULLY DILUTED
Earnings before extraordinary item and accounting
changes................................................. $ 1.25 $ 2.23 $ 1.77
Extraordinary item -- defeasance of debt, net of taxes.... -- (.08) --
Accounting changes, net of taxes.......................... -- .15 --
----------- ----------- -----------
NET EARNINGS......................................... $ 1.25 $ 2.30 $ 1.77
============ ============ ============
AVERAGE SHARES OUTSTANDING
Primary..................................................... 40,055,338 35,311,037 31,910,000
Fully diluted............................................... 40,397,383 39,541,054 34,754,148
</TABLE>
The accompanying notes are an integral part of these financial statements.
37
<PAGE> 40
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN
(LOSS) ON
ADDITIONAL AVAILABLE
PREFERRED COMMON PAID-IN FOR SALE RETAINED
STOCK STOCK CAPITAL SECURITIES EARNINGS TOTAL
--------- -------- ---------- ------------ -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1992........................ $ 21,650 $ 92,636 $ 59,593 $ -- $120,430 $294,309
Effect of merger with:
Grenada Sunburst System Corporation......... -- 65,711 (33,711) -- 99,661 131,661
Net earnings.................................. -- -- -- -- 63,250 63,250
Cash dividends
Common Stock, $.60 per share................ -- -- -- -- (9,965) (9,965)
Series B Preferred Stock, $8.00 per share... -- -- -- -- (352) (352)
Series C Preferred Stock, $2.59 per share... -- -- -- -- (1,790) (1,790)
Series D Preferred Stock, $ .97 per share... -- -- -- -- (247) (247)
Series E Preferred Stock, $1.72 per share... -- -- -- -- (3,777) (3,777)
Pooled institutions prior to pooling........ -- -- -- -- (6,463) (6,463)
Common shares issued under employee benefit
plans and dividend reinvestment plan, net of
shares repurchased.......................... -- 1,309 4,738 -- (2,522) 3,525
Sale of 2,200,000 shares of Series E Preferred
Stock, net of issuance costs................ 55,000 -- (2,650) -- -- 52,350
Issuance of 253,655 shares of Series D
Preferred Stock for an acquisition (Note
2).......................................... 5,200 -- -- -- -- 5,200
Net change in unrealized depreciation on
marketable equity securities................ -- -- -- -- 1,795 1,795
--------- -------- ---------- ------------ -------- --------
BALANCE, DECEMBER 31, 1992...................... 81,850 159,656 27,970 -- 260,020 529,496
Net earnings.................................. -- -- -- -- 92,552 92,552
Cash dividends
Common Stock, $.72 per share................ -- -- -- -- (13,015) (13,015)
Series B Preferred Stock, $8.00 per share... -- -- -- -- (352) (352)
Series C Preferred Stock, $2.59 per share... -- -- -- -- (1,790) (1,790)
Series D Preferred Stock, $1.95 per share... -- -- -- -- (494) (494)
Series E Preferred Stock, $2.00 per share... -- -- -- -- (5,832) (5,832)
Pooled institutions prior to pooling........ -- -- -- -- (7,957) (7,957)
Common shares issued under employee benefit
plans and dividend reinvestment plan, net of
shares repurchased.......................... -- 1,260 5,852 -- (1,892) 5,220
Issuance of 2,638,652 shares of Common Stock
for acquisitions (Note 2)................... -- 13,193 8,302 -- 18,296 39,791
Issuance of 908,522 shares of Series E
Preferred Stock for acquisitions (Note 2)... 22,713 -- 7,274 -- -- 29,987
Issuance of 625,000 shares of Common Stock
related to the conversion/acquisition of
First Federal Savings Bank of Maryville,
(Note 2).................................... -- 3,125 10,561 -- -- 13,686
Net change in unrealized depreciation on
marketable equity securities................ -- -- -- -- 656 656
Other......................................... (15) 4 10 -- 55 54
--------- -------- ---------- ------------ -------- --------
BALANCE, DECEMBER 31, 1993...................... 104,548 177,238 59,969 -- 340,247 682,002
Net earnings.................................. -- -- -- -- 58,608 58,608
Cash dividends
Common Stock, $.88 per share................ -- -- -- -- (20,144) (20,144)
Series B Preferred Stock, $8.00 per share... -- -- -- -- (352) (352)
Series C Preferred Stock, $2.16 per share... -- -- -- -- (1,491) (1,491)
Series D Preferred Stock, $1.95 per share... -- -- -- -- (494) (494)
Series E Preferred Stock, $2.00 per share... -- -- -- -- (6,216) (6,216)
Pooled institutions prior to pooling........ -- -- -- -- (9,212) (9,212)
Common shares issued under employee benefit
plans and dividend reinvestment plan, net of
shares repurchased.......................... -- 1,973 9,623 -- (2,063) 9,533
Issuance of 4,337,167 shares of Common Stock
for acquisitions (Note 2)................... -- 21,686 (388) -- 42,952 64,250
Redemption of Series C Preferred Stock........ (17,250) -- -- -- -- (17,250)
Cumulative effect of adoption of SFAS No. 115
on January 1, 1994.......................... -- -- -- 11,978 -- 11,978
Change in unrealized gain (loss) on available
for sale securities, net of taxes........... -- -- -- (40,505) -- (40,505)
--------- -------- ---------- ------------ -------- --------
BALANCE, DECEMBER 31, 1994...................... $ 87,298 $200,897 $ 69,204 $(28,527) $401,835 $730,707
======== ======== ========= =========== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
38
<PAGE> 41
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1994 1993 1992
--------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings..................................................... $ 58,608 $ 92,552 $ 63,250
Reconciliation of net earnings to net cash provided (used) by
operating activities:
Cumulative effect of accounting changes, net of taxes.......... -- (5,782) --
Provision for losses on loans and other real estate............ 4,466 19,219 30,998
Depreciation and amortization.................................. 20,307 17,719 14,450
Amortization and write-off of intangibles...................... 8,785 11,634 17,320
Provisions for abandoned property.............................. -- -- 5,200
Provisions for litigation settlements.......................... -- 500 9,450
Provisions for conversion of data processing systems........... -- 4,424 --
Provisions for restructuring charges........................... 24,264 -- --
Provisions for other merger-related expenses................... 14,012 -- --
Net amortization of investment securities...................... 3,689 5,756 1,311
Net realized losses (gains) on sale of investment securities... 17,498 (4,495) (14,019)
Write-down of securities available for sale.................... 2,800 -- --
Deferred income tax expense (benefit).......................... 5,233 65 (10,205)
(Increase) decrease in assets
Trading account securities and loans held for resale......... 108,965 (23,854) (114,306)
Accrued interest receivable and other assets................. (25,552) 44,087 14,126
Decrease in accrued interest, expenses, taxes, and other
liabilities.................................................. (23,598) (45,406) (22,211)
Other, net..................................................... 896 (5,758) 3,031
--------- ----------- -----------
Net cash provided (used) by operating activities............. 220,373 110,661 (1,605)
--------- ----------- -----------
INVESTING ACTIVITIES
Net decrease in short-term investments........................... 42,943 94,517 73,626
Proceeds from sales of securities available for sale............. 869,723 450,102 322,349
Proceeds from maturities and calls of securities available for
sale........................................................... 914,226 353,504 28,446
Purchases of securities available for sale....................... (866,666) (675,424) (158,585)
Proceeds from sales of securities held to maturity............... 225 28,742 118,352
Proceeds from maturities and calls of securities held to
maturity....................................................... 218,352 1,301,785 739,943
Purchases of securities held to maturity......................... (599,730) (1,418,241) (1,765,715)
Net decrease (increase) in loans................................. (767,524) (195,004) 103,195
Net cash received from purchases of financial institutions....... 72,084 108,043 568,758
Purchases of premises and equipment, net......................... (23,903) (26,768) (20,433)
--------- ----------- -----------
Net cash (used) provided by investing activities............. (140,270) 21,256 9,936
--------- ----------- -----------
FINANCING ACTIVITIES
Net decrease in deposits......................................... (111,453) (278,221) (160,302)
Net (decrease) increase in short-term borrowings................. 137,596 (58,727) 99,266
Proceeds from FHLB advances and long-term debt, net.............. 76,059 241,061 51,581
Repayment and defeasance of FHLB advances and long-term debt..... (63,917) (43,591) (5,179)
Redemption of preferred stock.................................... (17,250) -- --
Proceeds from issuance of preferred stock, net................... -- -- 52,350
Proceeds from issuance of common stock, net...................... 12,696 19,720 7,808
Purchase and retirement of common stock, net..................... (3,163) (1,786) (4,311)
Cash dividends paid.............................................. (38,208) (29,137) (21,778)
--------- ----------- -----------
Net cash (used) provided by financing activities............. (7,640) (150,681) 19,435
--------- ----------- -----------
Net increase (decrease) in cash and cash equivalents............... 72,463 (18,764) 27,766
Cash and cash equivalents at the beginning of the period........... 441,469 460,233 432,467
--------- ----------- -----------
Cash and cash equivalents at the end of the period................. $ 513,932 $ 441,469 $ 460,233
========== ============ ============
SUPPLEMENTAL DISCLOSURES
Cash paid for
Interest....................................................... $ 269,941 $ 231,591 $ 277,492
Taxes.......................................................... 56,875 38,590 30,345
Loans transferred to other real estate through foreclosure....... 5,503 9,484 10,095
Unrealized loss on securities available for sale................. (46,913) -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
39
<PAGE> 42
UNION PLANTERS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Union Planters Corporation (the
Corporation) and its subsidiaries conform with generally accepted accounting
principles and general practices within the financial services industry. The
following is a summary of the more significant accounting policies of the
Corporation.
BASIS OF CONSOLIDATION. The consolidated financial statements include the
accounts of the Corporation and its subsidiaries after elimination of
significant intercompany accounts and transactions.
BASIS OF PRESENTATION. Prior period consolidated financial statements are
restated to include the accounts of material acquisitions accounted for using
the pooling of interests method of accounting. Business combinations accounted
for as purchases are included in the consolidated financial statements from the
respective dates of acquisition. Assets and liabilities of financial
institutions accounted for as purchases are adjusted to their fair values as of
the dates of acquisition.
Certain 1992 and 1993 amounts have been reclassified to conform with 1994
financial reporting presentation.
STATEMENT OF CASH FLOWS. Cash and cash equivalents include cash and due from
banks and federal funds sold. Federal funds sold in the amounts of $25,210,000,
$78,109,000, and $92,354,000 at December 31, 1994, 1993, and 1992, respectively,
are included in cash and cash equivalents.
TRADING ACCOUNT SECURITIES. Trading account securities are stated at fair value
and consist primarily of securities backed by the government-guaranteed portion
of Small Business Administration (SBA) loans. Gains and losses on sales and fair
value adjustments related to these securities are included in profits and
commissions from trading activities.
INVESTMENT SECURITIES. The Corporation adopted Statement of Financial
Accounting Standard No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS No. 115) on January 1, 1994. Management reviewed the
securities portfolio and classified securities as either held to maturity or
available for sale. In determining such classifications, securities expected to
be held to maturity were classified in the amortized historical cost portfolio.
Available for sale securities are carried at fair value with unrealized gains
and losses included in shareholders' equity on an after-tax basis. As a result
of adoption, the Corporation initially reclassified $1.6 billion in securities
to the available for sale category and recorded a $12.0 million increase in
shareholders' equity incidental thereto.
Prior to the adoption of SFAS No. 115, management determined the
appropriate classification of securities at the time of purchase. If management
had the intent and the Corporation had the ability at the time of purchase to
hold the securities until maturity, they were classified as held for investment
and carried at amortized historical cost. Securities purchased and intended to
be held for indefinite periods of time and not intended to be held to maturity
were classified as held for sale and carried at the lower of aggregate cost or
market value.
Investment transactions are recorded on a trade-date basis. Realized gains
and losses resulting from the sale of securities and other than temporary
impairments in value of securities are reported in noninterest income. Gains and
losses on the sales of investment securities are computed by the specific
identification method.
LOANS HELD FOR RESALE. Loans held for resale include mortgage and other loans
and are carried at the lower of cost or market.
LOANS. Loans are stated at the principal amount outstanding. Interest income on
loans is accrued using constant yield methods, except for unearned income which
is recorded as income using a method which approximates the interest method.
Loan origination fees and direct loan origination costs are deferred and
recognized over the life of the related loans as adjustments to interest income.
NONPERFORMING LOANS. Nonperforming loans consist of nonaccrual loans and
renegotiated loans which have been restructured in accordance with the criteria
set forth in SFAS No. 15 "Accounting by Debtors and Creditors for Troubled Debt
Restructurings." Loans, other than installment and mortgage loans, are generally
placed on nonaccrual status and interest is not recorded if, in management's
40
<PAGE> 43
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
opinion, payment in full of principal or interest is not expected or when
payment of principal or interest is more than 90 days past due, unless it is
both well-secured and in the process of collection. Upon the occurrence of an
adverse change in the account status (e.g., loan is past due, filing of
bankruptcy or wage earner, repossession of collateral, foreclosure, or death of
the borrower), installment and mortgage loans (including accrued interest) are
written down to the net realizable value of the underlying collateral. Such
loans are reviewed periodically for further write-downs until fully liquidated.
Income recognized on revolving credit loans is discontinued upon the occurrence
of an adverse change and the loans are fully charged off if no payment is
received for 180 days.
In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan" (which takes effect for fiscal years beginning after
December 31, 1994) as amended by SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan -- Income Recognition and Disclosures" issued in October
1994. SFAS No. 114 prescribes a valuation methodology for impaired loans as
defined by the standard. Generally, a loan is considered impaired if management
believes that it is probable that all amounts due will not be collected
according to the contractual terms stipulated in the loan agreement. An impaired
loan must be valued using the present value of expected future cash flows
discounted at the loan's effective interest rate, the loans observable market
price, or fair value of the loan's underlying collateral. The Corporation
expects to adopt SFAS No. 114 prospectively in 1995. It is anticipated that the
adoption of SFAS No. 114 will not have a material effect on the Corporation's
financial condition, results of operations, or liquidity.
ALLOWANCE FOR LOSSES ON LOANS. The allowance for losses on loans represents
management's estimate of potential losses inherent in the existing loan
portfolio. The allowance for losses on loans is increased by the provision for
losses on loans charged to expense and reduced by loans charged off, net of
recoveries. The provision for losses on loans is determined based on
management's assessment of several factors: current and anticipated economic
conditions and the related impact on specific borrowers and industry groups,
historical loan loss experience, the level of classified and nonperforming
loans, reviews and evaluations of specific loans, changes in the nature and
volume of the loan portfolio, and the results of regulatory examinations. In
evaluating the adequacy of the allowance, management makes certain estimates and
assumptions which are susceptible to change in the near term. While management
uses available information to recognize losses on loans, future additions to the
allowance may be necessary based on changes in economic conditions.
PREMISES AND EQUIPMENT. Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation expense is computed
using the straight-line method and is charged to operating expense over the
estimated useful lives of the assets. Leasehold improvements are amortized using
the straight-line method over the shorter of the initial term of the respective
lease or the estimated useful life of the improvement.
Costs of major additions and improvements are capitalized. Interest expense
incurred on funds expended on major construction projects is capitalized as a
cost of such projects during the construction period. Expenditures for
maintenance and repairs are charged to operations as incurred.
GOODWILL AND OTHER INTANGIBLES. The unamortized costs in excess of the fair
value of acquired net tangible assets are included in goodwill and other
intangibles. Identifiable intangibles, except for premiums on purchased deposits
which are amortized on a straight-line method over ten years, are amortized over
the estimated periods benefitted. The remaining costs (goodwill) are generally
amortized on a straight-line basis over 15 years. For acquisitions where the
fair value of net assets acquired exceeds the purchase price, the resulting
negative goodwill is allocated proportionally to noncurrent, nonmonetary assets.
Management periodically evaluates whether events or circumstances have
occurred that would result in impairment in the value or life of goodwill or
other intangibles. Management considers an intangible to be potentially impaired
if internally generated management reports for respective business units show a
net loss before amortization of intangibles. The recoverability of the asset is
then evaluated using undiscounted historical and future earnings projections.
Core deposit intangibles are reviewed periodically to determine performance
versus expected "run-off" and adjustments in the amortization of these core
deposit intangibles are made accordingly.
MORTGAGE SERVICING RIGHTS. Mortgage servicing rights represent the cost of
mortgage servicing purchased from others. These costs are amortized in
proportion to, and over the period of, estimated
41
<PAGE> 44
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
net servicing income based on the historical and projected prepayments of the
underlying loans. At December 31, 1994 and 1993, mortgage servicing rights were
$4,947,000 and $4,298,000, respectively, and is included in other assets.
OTHER REAL ESTATE. Property acquired through foreclosure is stated at the lower
of the recorded amount of the loan or the estimated net realizable value reduced
by estimated selling costs. When a reduction of the recorded amount to the net
realizable value is required at the time of foreclosure, the difference is
charged to the allowance for losses on loans. Any subsequent reduction is
charged to other real estate expense and a valuation reserve is established for
the potential declines in appraised values. Other real estate is recorded net of
the valuation reserve. Revenues and expenses associated with operating or
disposing of other real estate are recorded in the period in which they are
incurred. At December 31, 1994 and 1993, other real estate totaled $5,434,000
and $8,054,000, respectively, and is included in other assets.
EMPLOYEE BENEFIT PLANS. The Corporation sponsors two qualified employee benefit
plans for substantially all employees of the Corporation and its subsidiaries.
One is a 401(k) plan with matching employer contributions based on length of
service. Employer contributions, provided through a Flexible Benefits Plan, may
also be directed to the 401(k) plan at the election of the employee. The second
is a noncontributory employee stock ownership plan, which is funded by
discretionary employer contributions approved by the Board of Directors. All
costs of the plans are expensed as incurred. Benefit plans of acquired companies
are terminated at the date of acquisition.
In accordance with SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" and SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," postretirement and postemployment benefits are charged
to expense during the years that the employee renders service. The Corporation
elected to recognize the accumulated postretirement and postemployment benefit
obligations upon adoption of SFAS Nos. 106 and 112 on January 1, 1993, which
approximated $8.3 million ($5.1 million after tax) and $1.3 million ($807,000
after tax), respectively.
INCOME TAXES. The Corporation files a consolidated federal income tax return
with its subsidiaries, with the exception of credit life insurance subsidiaries
which file separate returns. State income taxes are computed on either a
separate company or consolidated basis depending upon state laws. The
Corporation and its subsidiaries file a consolidated state return for all
business in the state of Tennessee.
Income tax expense is based on income reported for financial accounting
purposes, and includes deferred taxes resulting from the recognition of certain
transactions in different periods for tax reporting purposes in accordance with
SFAS No. 109, "Accounting for Income Taxes" (SFAS No. 109).
Effective January 1, 1993, the Corporation adopted the provisions of SFAS
No. 109 and recorded a tax benefit for the cumulative effect of the accounting
change of $11.7 million. Effective January 1, 1994, the Corporation adopted SFAS
No. 115, the impact of which at December 31, 1994, was to increase the
cumulative net deferred tax asset by $18.4 million.
INTEREST-RATE SWAPS. The Corporation uses interest-rate swaps for purposes
other than trading as part of its asset/liability management activities. The
Corporation's activities are all end-user related.
Interest-rate swaps are entered into in order to synthetically alter the
repricing and maturity characteristics of certain on-balance-sheet assets and
liabilities. The net differential to be paid or received on the interest-rate
swap is recognized as a yield adjustment to the related asset or liability over
the life of the swap agreement. If the instrument being synthetically altered is
disposed of, the swap agreement is marked to market. Thereafter, the
interest-rate swap is accounted for in the consolidated financial statements at
its fair value with any unrealized gains and losses recognized in the period
incurred. If the interest-rate swap agreement is terminated, the gain or loss is
deferred and amortized over the remaining life of the related asset or
liability.
EARNINGS PER SHARE. Primary earnings per common share is adjusted for all
preferred stock dividends. Primary earnings per common share is computed based
on the weighted average common shares outstanding and common stock equivalents
which would arise from the assumed exercise of outstanding stock options unless
their effect would be antidilutive. Fully diluted earnings per common share is
computed using the weighted average common shares and equivalents. Common stock
equivalents are increased by the assumed conversion of convertible preferred
stock into common stock as if converted
42
<PAGE> 45
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
at the beginning of the period unless the effect would be antidilutive. Earnings
for fully diluted earnings per common share are adjusted for preferred stock
dividends on nonconvertible preferred stock.
NOTE 2. MERGERS, ACQUISITIONS, AND REORGANIZATIONS
CONSUMMATED ACQUISITIONS
Poolings of Interests
The Corporation consummated nine acquisitions in 1994 and four acquisitions
in 1993 which were accounted for using the pooling of interests method of
accounting. The tables below summarize the acquisitions accounted for as
poolings of interests that were considered immaterial to the Corporation;
therefore, prior year amounts with respect to these acquisitions have not been
restated.
1994 ACQUISITIONS
<TABLE>
<CAPTION>
COMMON TOTAL ASSETS AT TOTAL EQUITY AT
DATE SHARES JANUARY 1, JANUARY 1,
INSTITUTION ACQUIRED ISSUED 1994 1994
- ----------------------------------------------- -------- --------- ---------------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Mid-South Bancorp, Inc......................... 1/1/94 839,542 $184.7 $11.9
First National Bancorp of Shelbyville, Inc..... 3/1/94 974,886 170.0 12.2
Clin-Ark Bancshares, Inc....................... 4/1/94 217,768 50.3 4.2
Liberty Bancshares, Inc........................ 7/1/94 1,223,353 180.1 20.0
Earle Bankshares, Inc.......................... 8/1/94 320,112 42.5 6.6
Commercial Bancorp, Inc........................ 11/1/94 189,391 28.6 3.7
Mid South Bancshares, Inc...................... 12/1/94 572,115 126.0 5.6
--------- ------- ------
Total................................ 4,337,167 $782.2 $64.2
======== =========== ===========
</TABLE>
1993 ACQUISITIONS
<TABLE>
<CAPTION>
COMMON TOTAL ASSETS AT TOTAL EQUITY AT
DATE SHARES JANUARY 1, JANUARY 1,
INSTITUTION ACQUIRED ISSUED 1993 1993
- ----------------------------------------------- -------- --------- ---------------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Garrett Bancshares, Inc........................ 5/31/93 613,088 $173.7 $ 4.8
Hogue Holding Company, Inc..................... 9/1/93 219,274 38.5 4.4
Central State Bancorp, Inc..................... 9/1/93 630,355 107.8 10.7
First Financial Services, Inc.................. 10/1/93 447,906 86.0 8.4
--------- ------- ------
Total................................ 1,910,623 $406.0 $28.3
======== =========== ===========
</TABLE>
Eliminations have been made for material intercompany transactions with the
above pooled companies. The 1994 acquisitions contributed approximately $11.1
million, $2.0 million, and $1.8 million to 1994 net interest income, noninterest
income, and net earnings, respectively, of the Corporation through their
respective dates of acquisition. The 1993 acquisitions listed in the table above
contributed approximately $10.1 million, $1.5 million, and $2.1 million to 1993
net interest income, noninterest income, and net earnings, respectively, of the
Corporation through their respective dates of acquisition.
The acquisitions of Grenada Sunburst System Corporation (GSSC) and BNF
BANCORP, Inc. (BNF) were accounted for using the pooling of interests method of
accounting and were considered material to the Corporation. Financial
information for all periods has been restated for these acquisitions.
Eliminations have been made for material intercompany transactions. The tables
below summarize these two acquisitions.
<TABLE>
<CAPTION>
AT DATE OF
ACQUISITION
COMMON -------------------
DATE SHARES TOTAL TOTAL
INSTITUTION ACQUIRED ISSUED ASSETS EQUITY
- ------------------------------------------------ -------- ---------- -------- ------
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C> <C>
GSSC............................................ 12/31/94 13,776,357 $2,518.0 $173.7
BNF............................................. 9/1/94 2,000,329 276.4 29.6
---------- -------- ------
Total.................................... 15,776,686 $2,794.4 $203.3
========= ======= ======
</TABLE>
43
<PAGE> 46
NOTE 2. MERGERS, ACQUISITIONS, AND REORGANIZATIONS (CONTINUED)
The following table summarizes the impact of the GSSC acquisition on the
Corporation's net interest income, noninterest income, and earnings before
extraordinary item and accounting changes. The impact of the BNF acquisition for
1993 and 1992 has been reported in the Corporation's previously restated 1993
consolidated financial statements. The BNF acquisition for the period January 1,
1994 to acquisition date contributed $7.0 million and $779,000, respectively, to
net interest income and noninterest income and decreased net earnings
approximately $410,000.
<TABLE>
<CAPTION>
EARNINGS BEFORE
EXTRAORDINARY
ITEM AND
NET INTEREST NONINTEREST ACCOUNTING
INCOME (1) INCOME (1) CHANGES
------------ ----------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
1994
Union Planters......................................... $274,558 $ 63,513 $44,859
GSSC................................................... 113,720 30,049 13,749
------------ ----------- ---------------
Union Planters pooled............................... $388,278 $ 93,562 $58,608
========= ========= ============
1993
Union Planters......................................... $242,669 $ 89,090 $65,364
GSSC................................................... 101,041 30,835 24,612
------------ ----------- ---------------
Union Planters pooled............................... $343,710 $ 119,925 $89,976
========= ========= ============
1992
Union Planters......................................... $199,392 $ 87,274 $45,023
GSSC................................................... 81,756 25,335 18,227
------------ ----------- ---------------
Union Planters pooled............................... $281,148 $ 112,609 $63,250
========= ========= ============
</TABLE>
- ---------------
(1) To be consistent with industry practice, net interest income for the
Corporation has been restated to reflect the reclassification of certain
fees arising from credit card loans to noninterest income. The amounts
reclassified for the years ended December 31, 1993 and 1992 were $3.1
million and $2.8 million, respectively, which compared to $4.1 million in
1994.
44
<PAGE> 47
NOTE 2. MERGERS, ACQUISITIONS, AND REORGANIZATIONS (CONTINUED)
Purchase Acquisitions
The Corporation acquired four institutions in 1992, eight institutions in
1993, and four institutions in 1994 in transactions which were accounted for as
purchases. The table below summarizes these acquisitions:
<TABLE>
<CAPTION>
TOTAL ASSETS
DATE PURCHASE RESULTING AT DATE OF
INSTITUTION ACQUIRED CONSIDERATION PRICE INTANGIBLES ACQUISITION
- -------------------------------- -------- --------------------- -------- ----------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Metropolitan Federal Savings and
Loan Association
(Metropolitan)(a) and (j)..... 3/27/92 Cash $ 16.5 $16.5 $ 603
Fidelity Bancshares, Inc.
(Fidelity)(j)................. 3/30/92 Cash 77.4 -- 821
Southeastern Bancshares, Inc.
(SBI)(b)...................... 7/1/92 253,655 Shares of 5.2 1.1 77
Series D Preferred
Stock
Bank of Commerce................ 11/1/92 Cash 9.9 2.1 89
Bank of East Tennessee
(BOET)(c)..................... 1/1/93 648,786 Shares of 25.3 7.0 231
Series E Preferred
Stock
Security Trust Federal Savings
and Loan Association and
SaveTrust Federal Savings
Bank.......................... 1/1/93 Cash 22.0 3.0 261
First Federal Savings Bank(d)... 2/26/93 625,000 Shares of NM(d) -- 187
Common Stock
(Conversion/
Acquisition)
Eastover Bank for Savings
(Eastover)(e)................. 3/1/93 637,867 Shares of 10.9 1.7 416
Common Stock and Cash
First State Bancshares, Inc.
(FSB)(f)...................... 3/12/93 Cash and Common Stock 3.9 .4 34
(90,162 Shares)
First Cumberland Bank(j)........ 3/15/93 Cash .2 -- 20
Farmers Union Bank.............. 4/1/93 Cash 9.5 4.2 78
Erin Bank & Trust Company....... 6/1/93 259,736 Shares of 8.3 2.1 43
Series E Preferred
Stock
Anderson County Bank............ 3/1/94 Cash 2.5 .7 22
Security Federal Savings and
Loan Association(g)........... 4/19/94 Cash .4 .4 15
Tennessee Bancorp, Inc.
(TBI)(h)...................... 5/1/94 Cash 13.5 5.9 99
Cherokee Valley Federal Savings
Association(i)................ 9/23/94 Cash 4.4 4.4 59
----------- ------------
Total.................
$49.5 $3,055
======== =========
</TABLE>
- ---------------
(a) The Corporation, through UPNB, assumed approximately $585 million in insured
deposit liabilities of the former Metropolitan Federal Savings and Loan
Association. The purchase and assumption transaction was facilitated through
the Resolution Trust Corporation (RTC) which declared UPNB the successful
bidder. UPNB also acquired approximately $82 million in assets and received
cash from the RTC totaling approximately $487 million.
(b) SBI is the parent company of DeKalb County Bank and Trust Company.
(c) The Corporation previously held 17.93% of the common stock of BOET ($3.4
million). On January 1, 1993, the Corporation purchased an additional 43.93%
of the common stock of BOET in exchange for the Corporation's Series E
Preferred Stock ($11.1 million). Effective May 3, 1993, the Corporation
acquired the remaining common stock of BOET in exchange for the
Corporation's Series E Preferred Stock ($10.8 million).
(d) Maryville was a mutual savings bank which, pursuant to a
conversion/acquisition, converted to a federal stock charter. All of the
stock of Maryville was acquired by the Corporation in exchange for a capital
contribution totaling approximately
45
<PAGE> 48
NOTE 2. MERGERS, ACQUISITIONS, AND REORGANIZATIONS (CONTINUED)
$14.1 million derived in part from the proceeds of a public offering of the
Corporation's Common Stock made in connection with the
conversion/acquisition.
(e) Eastover was acquired by GSSC through its wholly-owned Mississippi banking
subsidiary, Sunburst Bank, Mississippi.
(f) FSB is the parent company of First State Bank of Fayette County.
(g) Two subsidiaries of the Corporation assumed approximately $14 million of
deposits and acquired assets (primarily loans) of the former Security
Federal Savings and Loan Association from the RTC and simultaneously sold
certain loans to a third party.
(h) TBI was the parent company of Tennessee National Bank in Columbia,
Tennessee, whose assets and liabilities at date of acquisition were
transferred to UPNB and later became part of the assets and liabilities of
Union Planters Bank of Middle Tennessee, N.A.
(i) A subsidiary of the Corporation assumed approximately $54 million of
deposits and acquired assets (primarily loans) of the former Cherokee Valley
Federal Savings Association from the RTC. Subsequently, certain asset
purchase options were exercised resulting in the assumption of three
branches and approximately $26.5 million in loans.
(j) Combined with UPNB.
NM -- Not meaningful.
Intangibles are being amortized primarily using the straight-line method
over periods ranging from 7 to 15 years. The recording of the acquisition of
Maryville resulted in negative goodwill of approximately $9.4 million, $8.1
million of which was deducted from noncurrent, nonmonetary assets (premises and
equipment, fair value adjustment of loans, prepaid software, and mortgage
servicing rights). The remaining negative goodwill of $1.3 million was recorded
in other liabilities and is being accreted over seven years.
The following unaudited pro forma information summarizes the pro forma
impact of the acquisitions completed during 1994 and 1993 which were accounted
for as purchases assuming consummation of all such transactions on January 1,
1993. The pro forma information does not include the historical results of the
acquisitions purchased from the RTC, since they were failed financial
institutions and their historical results would not be representative of future
operating results. The unaudited pro forma results are not necessarily
representative of the actual results that would have occurred or which may occur
in the future.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1994 1993
--------- ---------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net interest income................................................ $ 389,245 $ 355,313
Provision for losses on loans...................................... (3,473) (19,547)
Noninterest income................................................. 93,629 122,272
Noninterest expense................................................ (400,446) (330,644)
--------- ---------
Earnings before income taxes, extraordinary item, and accounting
changes.......................................................... 78,955 127,394
Applicable income taxes............................................ 20,667 37,824
--------- ---------
Earnings before extraordinary item and accounting changes.......... 58,288 89,570
Extraordinary item and accounting changes, net of taxes............ -- 2,618
--------- ---------
Net earnings....................................................... $ 58,288 $ 92,188
========= =========
Earnings per common share
Earnings before extraordinary item and accounting changes
Primary....................................................... $ 1.24 $ 2.24
Fully diluted................................................. 1.24 2.17
Net earnings
Primary....................................................... 1.24 2.32
Fully diluted................................................. 1.24 2.24
</TABLE>
46
<PAGE> 49
NOTE 2. MERGERS, ACQUISITIONS, AND REORGANIZATIONS (CONTINUED)
The following details the net cash received from acquisitions of financial
institutions which were accounted for using the purchase method of accounting
and from acquisitions which were accounted for as poolings of interests and
considered immaterial to the Corporation:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1994 1993 1992
--------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Fair value of assets acquired........................ $ 976,775 $ 1,663,791 $ 1,589,453
Liabilities assumed.................................. (891,761) (1,557,038) (1,480,485)
Issuance of Common Stock............................. (64,250) (39,791) --
Issuance of Preferred Stock.......................... -- (30,127) (5,200)
Less previous investment in entities acquired........ -- (3,387) (3,173)
--------- ----------- -----------
Cash paid for purchases of financial institutions.... 20,764 33,448 100,595
Cash and cash equivalents acquired................... (92,848) (141,491) (669,353)
--------- ----------- -----------
Net cash received from purchases of financial
institutions.................................. $ (72,084) $ (108,043) $ (568,758)
========= ========== ==========
</TABLE>
REORGANIZATION OF UNION PLANTERS NATIONAL BANK (UPNB)
During 1994, the Corporation internally reorganized UPNB into five national
bank subsidiaries. This reorganization and the resulting transfer of certain
branches held by UPNB into four newly-organized banks had no material impact on
the consolidated financial condition, results of operations or liquidity of the
Corporation.
PENDING ACQUISITIONS
The Corporation has signed definitive agreements pursuant to which it would
acquire the entities listed below and, subject to various approvals and
satisfaction of certain contractual conditions precedent, all are expected to be
consummated in the third quarter of 1995.
<TABLE>
<CAPTION>
ANTICIPATED APPROXIMATE
METHOD OF TOTAL
INSTITUTION CONSIDERATION ACCOUNTING ASSETS
- --------------------------------------------- ----------------------- ------------ -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
First Bancshares of Eastern Arkansas, Parent Approximately $9.3 Purchase $ 55
Company of First National Bank in West million
Memphis, AR
First Bancshares of N.E. Arkansas, Parent Approximately $9.3 Purchase 58
Company of First National Bank of million
Osceola, AR
Planters Bank & Trust Co. in Forrest City, AR Common Stock Pooling of 52
Approximately Interests
341,000 shares
First State Bancorp, Inc., Parent Company of Series E Preferred Purchase 130
----------
First Exchange Bank, Tiptonville, TN Stock Approximately
407,000 shares
Total $ 295
==========
</TABLE>
NOTE 3. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Corporation's banking subsidiaries are required to maintain
noninterest-bearing average reserve balances with the Federal Reserve Bank.
Average balances required to be maintained for such purposes during 1994 and
1993 were $77 million and $63 million, respectively.
47
<PAGE> 50
NOTE 4. INVESTMENT SECURITIES
The amortized cost and fair values of investment securities are summarized
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-------------------------------------------
UNREALIZED
AMORTIZED ----------------- FAIR
COST GAINS LOSSES VALUE
---------- ------- ------- ----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
AVAILABLE FOR SALE SECURITIES
U.S. Government obligations
U.S. Treasury...................................... $ 484,414 $ 745 $ 9,302 $ 475,857
U.S. Government agencies
Collateralized mortgage obligations............. 325,084 33 11,221 313,896
Mortgage-backed................................. 816,683 1,061 22,669 795,075
Other........................................... 211,922 189 4,426 207,685
---------- ------- ------- ----------
Total U.S. Government obligations............. 1,838,103 2,028 47,618 1,792,513
Other stocks and securities.......................... 137,794 1,018 2,341 136,471
---------- ------- ------- ----------
Total available for sale securities........... $1,975,897 $ 3,046 $49,959 $1,928,984
========= ======= ======= =========
HELD TO MATURITY SECURITIES
U.S. Government obligations
U.S. Treasury...................................... $ 451,897 $ 40 $13,250 $ 438,687
U.S. Government agencies........................... 62,449 15 3,881 58,583
---------- ------- ------- ----------
Total U.S. Government obligations............. 514,346 55 17,131 497,270
Obligations of states and political subdivisions..... 518,583 9,097 15,212 512,468
Other................................................ 231 -- -- 231
---------- ------- ------- ----------
Total held to maturity securities............. $1,033,160 $ 9,152 $32,343 $1,009,969
========= ======= ======= =========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1993
------------------------------------------
UNREALIZED
AMORTIZED ---------------- FAIR
COST GAINS LOSSES VALUE
---------- ------- ------ ----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
HELD FOR SALE SECURITIES
U.S. Government obligations
U.S. Treasury....................................... $ 121,240 $ 913 $ 3 $ 122,150
U.S. Government agencies
Collateralized mortgage obligations.............. 141,853 694 105 142,442
Mortgage-backed.................................. 369,378 4,579 355 373,602
Other............................................ 128,904 1,064 25 129,943
---------- ------- ------ ----------
Total U.S. Government obligations.............. 761,375 7,250 488 768,137
Other stocks and securities........................... 47,179 88 44 47,223
---------- ------- ------ ----------
Total held for sale securities................. $ 808,554 $ 7,338 $ 532 $ 815,360
========= ======= ====== =========
HELD FOR INVESTMENT SECURITIES
U.S. Government obligations
U.S. Treasury....................................... $ 798,242 $ 9,458 $ 327 $ 807,373
U.S. Government agencies
Collateralized mortgage obligations.............. 446,274 1,700 1,277 446,697
Mortgage-backed.................................. 421,770 7,030 273 428,527
Other............................................ 195,290 2,253 450 197,093
---------- ------- ------ ----------
Total U.S. Government obligations.............. 1,861,576 20,441 2,327 1,879,690
Obligations of states and political subdivisions...... 519,919 36,867 948 555,838
Other securities
Federal Reserve Bank/Federal Home Loan Bank
stock............................................ 33,435 -- -- 33,435
Collateralized mortgage obligations................. 39,036 177 114 39,099
Other............................................... 33,124 1,624 2 34,746
---------- ------- ------ ----------
Total other securities......................... 105,595 1,801 116 107,280
---------- ------- ------ ----------
Total held for investment securities........... $2,487,090 $59,109 $3,391 $2,542,808
========= ======= ====== =========
</TABLE>
48
<PAGE> 51
NOTE 4. INVESTMENT SECURITIES (CONTINUED)
For the year ended December 31, 1994, the Corporation had gross realized
gains of $1,158,000 and gross realized losses of $18,768,000, respectively, on
available for sale securities. Included in 1994 securities losses is a $1.7
million loss due to an other-than-temporary impairment in the fair value of
certain available for sale securities which were sold in January, 1995. Also
included in securities losses in 1994 is a $1.1 million loss which represents
the recognition of the unrealized loss on an interest-rate swap related to the
securities sold. In addition, for the years ended December 31, 1993 and 1992,
the Corporation had gross realized gains of $6,064,000 and $15,932,000,
respectively, and gross realized losses of $1,569,000 and $1,913,000,
respectively, on all investment securities.
Investment securities having a carrying value of approximately $1.017
billion and $953 million at December 31, 1994 and 1993, respectively, were
pledged to secure public and trust funds on deposit and securities sold under
agreements to repurchase.
On January 1, 1994, and in connection with the adoption of SFAS No. 115,
$1.6 billion of securities were transferred to the available for sale category
of securities. In addition, approximately $446 million (fair value approximately
$436 million) of securities were transferred to available for sale securities
related to financial institutions acquired in 1994 in order to maintain the
Corporation's existing interest-rate-risk position and credit-risk policies.
During 1993, the Corporation transferred approximately $333 million of
securities in the held for investment category to the held for sale category.
The transfers were made because of regulatory concerns regarding certain
securities, the restructure of the portfolios of certain financial institutions
acquired, and in anticipation of the adoption of SFAS No. 115.
Approximately $225,000 of held to maturity securities sold in 1994 related
to the sale of deposits and certain assets of a wholly-owned banking subsidiary
and that subsidiary's subsequent liquidation.
The maturities and weighted average yields of investment securities as of
December 31, 1994 are as follows:
<TABLE>
<CAPTION>
MATURING
---------------------------------------------------------------------------
AFTER ONE BUT
WITHIN ONE WITHIN FIVE AFTER FIVE BUT
YEAR YEARS WITHIN TEN YEARS AFTER TEN YEARS
---------------- ---------------- ---------------- ------------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
-------- ----- -------- ----- -------- ----- ---------- -----
(TAXABLE-EQUIVALENT BASIS/DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVAILABLE FOR SALE SECURITIES
U.S. Government obligations
U.S. Treasury...................... $159,168 4.96% $320,275 5.75 % $ 150 7.75 % $ 4,821 9.00 %
U.S. Government agencies
Collateralized mortgage
obligations.................... 2,890 5.27 35,310 6.01 35,556 6.16 251,328 6.43
Mortgage-backed.................. 4,409 6.36 54,226 6.98 36,166 7.78 721,882 5.68
Other............................ 56,264 5.66 89,739 5.24 5,243 6.94 60,676 6.65
-------- -------- -------- ----------
Total U.S. Government
obligations.................... 222,731 5.17 499,550 5.81 77,115 6.98 1,038,707 5.93
Obligations of states and political
subdivisions....................... 100 6.73 356 7.29 -- -- 103 9.35
Other stocks and securities
Federal Reserve Bank and Federal
Home Loan Bank stock............. -- -- -- -- -- -- 43,387 6.16
Bonds, notes, and debentures....... 728 7.30 7,443 8.91 100 7.50 -- --
Collateralized mortgage
obligations...................... 24 10.24 5,249 6.34 30,609 6.37 16,321 6.57
Other.............................. 28,201 5.99 35 5.50 -- -- 5,138 8.31
-------- -------- -------- ----------
Total other stocks and
securities..................... 28,953 6.02 12,727 7.83 30,709 6.37 64,846 6.43
-------- -------- -------- ----------
Total available for sale
securities..................... $251,784 5.27% $512,633 5.86 % $107,824 6.80 % $1,103,656 5.96 %
========= ========= ========= ==========
HELD TO MATURITY SECURITIES
U.S. Government obligations
U.S. Treasury...................... $ 1,013 4.26% $450,884 6.13 % $ -- -- % $ -- -- %
U.S. Government agencies........... 1,550 5.39 53,371 4.73 7,499 6.34 29 7.14
-------- -------- -------- ----------
Total U.S. Government
obligations.................... 2,563 4.94 504,255 5.98 7,499 6.34 29 7.14
Obligations of states and political
subdivisions....................... 39,494 9.94 108,831 9.32 80,016 9.15 290,242 9.18
Other................................ 15 5.50 35 5.50 -- -- 181 8.63
-------- -------- -------- ----------
Total held to maturity
securities..................... $ 42,072 9.63% $613,121 6.57 % $ 87,515 8.91 % $ 290,452 9.18 %
========= ========= ========= ==========
</TABLE>
The weighted average yields are calculated by dividing the sum of the
individual security yield weights (effective yield times book value) by the
total book value of the securities. The taxable-
49
<PAGE> 52
NOTE 4. INVESTMENT SECURITIES (CONTINUED)
equivalent yield gives effect to the disallowance of interest expense for
federal income tax purposes related to certain tax-exempt securities. The
contractual maturities of mortgage-backed securities and collateralized mortgage
obligations have not been adjusted for prepayments and generally represent
obligations which are expected to have principal-weighted average lives of five
years or less or are variable rate instruments.
The amortized cost and fair value of debt securities at December 31, 1994
by contractual maturities are shown below. Expected maturities of
mortgage-backed and related securities will differ from contractual maturities
because some borrowers have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
--------------------------- ---------------------------
AMORTIZED COST FAIR VALUE AMORTIZED COST FAIR VALUE
-------------- ---------- -------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Maturing
Within one year........................ $ 223,584 $ 222,226 $ 42,072 $ 42,462
After one but within five years........ 512,633 499,781 613,121 598,477
After five but within ten years........ 107,824 103,564 87,515 87,523
After ten years........................ 1,056,231 1,027,453 290,452 281,507
-------------- ---------- -------------- ----------
1,900,272 1,853,024 1,033,160 1,009,969
Equity securities...................... 75,625 75,960 -- --
-------------- ---------- -------------- ----------
Total.......................... $1,975,897 $1,928,984 $1,033,160 $1,009,969
============ ========= ============ =========
</TABLE>
NOTE 5. LOANS
Loans are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1993
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Commercial, financial, and agricultural............................. $1,364,729 $1,152,159
Real estate -- construction......................................... 225,591 160,633
Real estate -- mortgage
Secured by 1-4 family residential................................. 2,035,290 1,495,878
Other mortgage.................................................... 990,779 875,112
Home equity......................................................... 140,305 117,475
Consumer
Credit cards and other plans...................................... 263,927 105,333
Other consumer.................................................... 919,618 746,752
Direct lease financing.............................................. 40,342 25,914
---------- ----------
Total loans.................................................... $5,980,581 $4,679,256
========= =========
</TABLE>
Nonperforming loans are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Nonaccrual loans......................................................... $17,476 $18,846
Restructured loans....................................................... 1,564 8,778
------- -------
Total............................................................... $19,040 $27,624
======= =======
</TABLE>
Total interest earned on nonaccrual and restructured loans in 1994 and 1993
was $511,000 and $1.4 million, respectively. Interest income that would have
been earned under the original terms of these loans in 1994 and 1993 was $1.5
million and $2.2 million, respectively. There were no significant outstanding
commitments to lend additional funds related to the above restructured loans at
December 31, 1994.
Certain of the Corporation's bank subsidiaries, principally UPNB, have
granted loans to the Corporation's directors, executive officers, and their
affiliates. These loans were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
50
<PAGE> 53
NOTE 5. LOANS (CONTINUED)
transactions with unrelated persons and do not involve more than normal risks of
collectability. The aggregate dollar amount of these loans was $26.9 million and
$33.1 million at December 31, 1994 and 1993, respectively. During 1994, $106.9
million of new loans and advances under credit lines were made to directors,
executive officers, and their affiliates; repayments totaled approximately
$103.8 million. Additionally, the balance at December 31, 1993 was reduced by
$9.3 million for loans related to individuals who are no longer directors of the
Corporation.
NOTE 6. ALLOWANCE FOR LOSSES ON LOANS
The changes in the allowance for losses on loans are summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance, January 1......................................... $114,353 $ 89,827 $ 67,989
Increases due to acquisitions............................ 9,252 21,569 15,678
Provision for losses on loans............................ 3,636 16,558 27,182
Recoveries of loans previously charged off............... 13,287 10,071 15,539
Loans charged off........................................ (18,439) (23,672) (36,561)
-------- -------- --------
Balance, December 31....................................... $122,089 $114,353 $ 89,827
======== ======== ========
</TABLE>
NOTE 7. PREMISES AND EQUIPMENT, LEASED ASSETS, AND LEASE COMMITMENTS
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Land................................................................... $ 42,143 $ 36,795
Buildings and improvements............................................. 154,070 130,911
Leasehold improvements................................................. 10,242 7,266
Equipment.............................................................. 129,646 111,265
Construction in progress............................................... 3,316 16,660
-------- --------
339,417 302,897
Less accumulated depreciation and amortization......................... 135,281 113,817
-------- --------
Total premises and equipment......................................... $204,136 $189,080
======== ========
</TABLE>
At December 31, 1994, the above amounts included properties, carried at the
lower of cost or fair value, having a net book value of $6.8 million which were
held for sale, principally branch locations identified for closure or
divestiture in connection with the Corporation's restructuring plan (see Note
13).
Rental expense, net of sublease rental income, under all operating leases
totaled $7.9 million in 1994, $9.0 million in 1993, and $6.7 million in 1992. At
December 31, 1994, minimum future rental commitments under noncancellable
operating leases were as follows:
<TABLE>
<CAPTION>
OPERATING LEASES
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
1995..................................................................... $ 6,379
1996..................................................................... 4,953
1997..................................................................... 3,639
1998..................................................................... 2,883
1999..................................................................... 2,684
Later years.............................................................. 10,874
----------
Total minimum lease payments........................................... $ 31,412
=================
</TABLE>
NOTE 8. SHORT-TERM BORROWINGS
Short-term borrowings include federal funds purchased and securities sold
under agreements to repurchase, commercial paper, and other short-term
borrowings. Federal funds purchased arise from
51
<PAGE> 54
NOTE 8. SHORT-TERM BORROWINGS (CONTINUED)
the Corporation's market activity with its correspondent banks and generally
mature in one business day. Securities sold under agreements to repurchase are
secured by U.S. government and agency securities. Short-term borrowings are
summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Year-end balance
Federal funds purchased and securities sold under
agreements to repurchase.............................. $411,789 $264,573 $313,466
Commercial paper......................................... 2,951 10,941 8,325
Other short-term borrowings.............................. 431 23 185
-------- -------- --------
Total short-term borrowings........................... $415,171 $275,537 $321,976
======== ======== ========
Federal funds purchased and securities sold under
agreements to repurchase
Daily average balance.................................... $466,905 $254,499 $244,626
Weighted average interest rate........................... 4.25% 2.72% 3.16%
Maximum outstanding at any month end..................... $703,996 $338,176 $341,186
Weighted average interest rate at December 31............ 5.45% 2.84% 2.95%
</TABLE>
NOTE 9. FEDERAL HOME LOAN BANK ADVANCES AND LONG-TERM DEBT
FEDERAL HOME LOAN BANK (FHLB) ADVANCES
The Corporation's banking and thrift subsidiaries had outstanding advances
from the FHLB of $224.1 million and $192.8 million at December 31, 1994 and
1993, respectively, under Blanket Agreements for Advances and Security
Agreements (the "Agreements"). The Agreements entitle the Corporation's
subsidiaries to borrow funds from the FHLB to fund mortgage loan programs and to
satisfy certain other funding needs. Of the amounts borrowed at December 31,
1994, $139 million were at variable rates and $85 million were at fixed rates
with interest rates ranging from 4.13% to 9.00% and maturities ranging from 1995
to 2014. At December 31, 1994, FHLB advances that mature within one year, one to
five years, and after five years were $31.9 million, $45.3 million, and $146.9
million, respectively. The value of collateral (primarily mortgage loans) under
the Agreements generally must be 150% of the $224.1 million outstanding at
December 31, 1994, and at that date the Corporation had an adequate amount of
loans to satisfy collateral requirements. The Corporation entered into a $10
million ("notional amount") interest-rate swap to convert a portion of the FHLB
advances from fixed-rate to floating-rate debt (see Note 17).
LONG-TERM DEBT
The Corporation's long-term debt is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
6.25% Subordinated Notes due 2003.................................... $ 74,540 $ 74,479
8 1/2% Subordinated Notes due 2002................................... 40,250 40,250
Obligations under capital leases..................................... 1,818 2,294
Other long-term debt................................................. 240 356
-------- --------
Total long-term debt............................................ $116,848 $117,379
======== ========
</TABLE>
In October 1993, the Corporation effected a shelf registration of $150
million of the Corporation's subordinated debt securities. On November 2, 1993,
the Corporation issued in a public offering thereunder $75 million of 6.25%
Subordinated Capital Notes due 2003 (6.25% Notes) at 99.305%. Interest on the
6.25% Notes is payable semiannually on May 1 and November 1. The 6.25% Notes are
not redeemable prior to maturity and will mature on November 1, 2003. The 6.25%
Notes are subordinated to all present and future senior indebtedness of the
Corporation and payment may be accelerated only in the case of the bankruptcy of
the Corporation. The 6.25% Notes qualify as Tier 2 capital under regulatory
risk-based capital guidelines. The Corporation also entered into an interest-
52
<PAGE> 55
NOTE 9. FEDERAL HOME LOAN BANK ADVANCES AND LONG-TERM DEBT (CONTINUED)
rate swap agreement with a notional amount of $50 million to convert a portion
of this fixed-rate debt to a floating LIBOR rate for two and one-half years.
In October 1992, the Corporation completed a public offering of $40.25
million of 8 1/2% Subordinated Notes (8 1/2% Notes). The 8 1/2% Notes mature on
October 1, 2002, and interest is payable quarterly. The 8 1/2% Notes are
unsecured debt obligations of the Corporation and are subordinated in right of
payment to all senior indebtedness of the Corporation. The Corporation, at its
option, may redeem the 8 1/2% Notes on or after October 1, 1997, at par value
plus accrued interest, upon 30 days notice. The Corporation is obligated to
repay 100% of the principal amount plus accrued interest, up to an aggregate
amount of $1 million, of 8 1/2% Notes tendered for prepayment by the personal
representatives of deceased holders in any one year. The 8 1/2% Notes do not
qualify for Tier 2 capital.
The Corporation issued 10 1/8% Subordinated Capital Debentures (10 1/8%
Debentures) in a public offering in 1989. In November 1993, the Corporation used
approximately $39 million of the net proceeds of the 6.25% Notes to in-substance
defease the 10 1/8% Debentures. Direct obligations of the U.S. Government were
purchased and placed in an irrevocable trust which provides cash flows matching
the principal and interest debt service requirements to retire the 10 1/8%
Debentures on April 1, 1996. This transaction resulted in an extraordinary loss
in the fourth quarter of 1993 of $5.2 million ($3.2 million net of taxes). At
December 31, 1994 and 1993, the outstanding balance of the 10 1/8% Debentures
totaled $34 million which is not reflected in the accompanying consolidated
balance sheet.
Annual principal repayment requirements for long-term debt for the years
1995 through 1999 are $613,000, $297,000, $633,000, $297,000, and $119,000,
respectively.
The ability of the Corporation to service its long-term debt obligations is
dependent upon the future profitability of its banking subsidiaries and their
ability to pay dividends to the Corporation (see Note 12).
Line of Credit
In June 1993, the Corporation entered into an unsecured $25 million credit
agreement which expires May 31, 1996. No borrowings were outstanding at December
31, 1994 and 1993. The line of credit is for working capital purposes and as a
commercial paper backup. The credit agreement contains performance measurements
and restrictive covenants relating to dividends, acquisitions, sale of assets,
and indebtedness which the Corporation must meet. The Corporation's dividends
are restricted to no more than 60% of consolidated net earnings for the
preceding fiscal year. Accordingly, the Corporation will be required to obtain a
waiver of the dividend restriction during 1995 and management expects that such
a waiver will be granted.
53
<PAGE> 56
NOTE 10. SHAREHOLDERS' EQUITY
PREFERRED STOCK
The Corporation's preferred stock is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
PREFERRED STOCK, WITHOUT PAR VALUE, 10,000,000 SHARES AUTHORIZED:
CONVERTIBLE
Series A Preferred Stock, 250,000 shares authorized,
none issued.................................................... $ -- $ --
Series B, $8.00 Nonredeemable, Cumulative, Convertible Preferred
Stock (stated at liquidation value of $100 per share), 44,000
shares issued
and outstanding................................................ 4,400 4,400
Series D, 9.5% Redeemable, Cumulative, Convertible Preferred Stock
(stated at liquidation value of $20.50 per share), 253,655
shares issued and outstanding.................................. 5,200 5,200
Series E, 8% Cumulative, Convertible Preferred Stock (stated at
liquidation value of $25 per share), 3,107,922 shares issued
and outstanding................................................ 77,698 77,698
------- --------
Total convertible preferred stock......................... 87,298 87,298
NONCONVERTIBLE
Series C, 10 3/8% Increasing Rate, Redeemable, Cumulative
Preferred Stock (stated at liquidation value of $25 per share),
no shares issued and outstanding at December 31, 1994; 690,000
shares issued and outstanding at December 31, 1993............. -- 17,250
------- --------
Total preferred stock..................................... $87,298 $104,548
======= ========
</TABLE>
SERIES A PREFERRED STOCK (SHARE PURCHASE RIGHTS PLAN). In 1989, the Board of
Directors of the Corporation adopted a Share Purchase Rights Plan and
distributed a dividend of one Preferred Share Purchase Right (Right) for each
outstanding share of the Corporation's $5 par value Common Stock and for each
share issued thereafter. The Rights are generally designed to deter coercive
takeover tactics and to encourage all persons interested in acquiring control of
the Corporation to deal with each shareholder on a fair and equal basis. Each
Right trades in tandem with its respective share of common stock until the
occurrence of certain events, in which case it would separate from the common
stock and entitle the registered holder, subject to the terms of the Rights
Agreement, to purchase certain equity securities at a price below their market
value. The Corporation has authorized 250,000 shares of Series A Preferred Stock
for issuance under the Share Purchase Rights Plan, none of which have been
issued.
SERIES B PREFERRED STOCK. The Corporation issued 44,000 shares of $8.00
Nonredeemable, Cumulative, Convertible Preferred Stock, Series B (Series B
Preferred Stock), in a private transaction in connection with the acquisition of
Steiner Bank in 1989. Such shares bear a dividend rate of $8.00 per share per
annum; dividends are cumulative and are payable quarterly. The holders of shares
of Series B Preferred Stock have the right, at their option, after November 30,
1994, to convert each share into 7.722 shares (339,768 shares in total) of the
Corporation's Common Stock. As of December 31, 1994, no shares had been
converted. The Series B Preferred Stock is not subject to any sinking fund
provisions and has no preemptive rights. Holders of Series B Preferred Stock
have no voting rights except as may be required by law and in certain other
limited circumstances.
SERIES D PREFERRED STOCK. In July 1992, in connection with the acquisition of
Southeastern Bancshares, Inc. (see Note 2), the Corporation issued 253,655
shares of 9.5% Redeemable, Cumulative, Convertible Preferred Stock, Series D
(Series D Preferred Stock) in a private offering. Such shares have no par value
but have a stated value of $20.50 per share on which dividends accrue at 9.5%
per annum. Dividends are cumulative and payable quarterly. Such shares have a
liquidation preference of $20.50 per share plus unpaid dividends accrued thereon
and, at the Corporation's option, with the prior approval of the Federal
Reserve, are subject to redemption by the Corporation at any time and from time
to time on or after July 1, 1995. At any time prior to redemption, each share of
Series D
54
<PAGE> 57
NOTE 10. SHAREHOLDERS' EQUITY (CONTINUED)
Preferred Stock is convertible at the option of the holder into one share of the
Corporation's Common Stock. Holders of the Series D Preferred Stock have no
voting rights except as may be required by law and in certain other limited
circumstances. Management intends to call for redemption the Series D Preferred
Stock on July 1, 1995. It is expected that the holders thereof would convert
their Series D shares to shares of the Corporation's Common Stock unless the
price of the Corporation's Common Stock falls below $20.50.
SERIES E PREFERRED STOCK. In February 1992, the Corporation completed a public
offering of 2,200,000 shares of 8% Cumulative, Convertible Preferred Stock,
Series E (Series E Preferred Stock). Such shares have a stated value of $25 per
share, on which dividends accrue at a rate of 8% per annum; dividends are
cumulative and are payable quarterly. The Series E Preferred Stock is not
subject to any sinking fund provisions and has no preemptive rights. Such shares
have a liquidation preference of $25 per share plus unpaid dividends accrued
thereon, and with the prior approval of the Federal Reserve, may be redeemed by
the Corporation in whole or in part at any time after March 31, 1997 at $25.00
per share. At any time prior to redemption, each share of Series E Preferred
Stock is convertible, at the option of the holder, into 1.25 shares of the
Corporation's Common Stock. Holders of Series E Preferred Stock have no voting
rights except for those provided by law and in certain other limited
circumstances.
On January 1, 1993, the Corporation acquired an additional 43.93% of BOET
in exchange for 331,741 shares of the Corporation's Series E Preferred Stock.
The Corporation acquired the remaining outstanding stock of BOET on May 3, 1993
in exchange for an additional 317,045 shares of Series E Preferred Stock. The
Corporation also acquired Erin Bank & Trust Company in exchange for 259,736
shares of Series E Preferred Stock on June 1, 1993. See Note 2 for additional
information regarding these acquisitions.
SERIES C PREFERRED STOCK. In August 1991, the Corporation completed a public
offering of 690,000 shares of 10 3/8% Increasing Rate, Redeemable, Cumulative
Preferred Stock, Series C (Series C Preferred Stock). Dividends were cumulative
and payable quarterly at a rate of $.648 per quarter. On October 31, 1994, the
Corporation redeemed all outstanding Series C Preferred Stock at $25 per share
plus all dividends accrued and unpaid to that date.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Dividend Reinvestment and Stock Purchase Plan (the Plan) authorizes the
issuance of 1,000,000 shares, including an increase of 500,000 shares by the
Corporation's Board of Directors on January 26, 1995, of authorized but
previously unissued Common Stock to shareholders who choose to invest all or a
portion of their cash dividends or make optional cash purchases. On certain
investment dates, shares may be purchased with reinvested dividends and optional
cash payments at a price of 95% and 100%, respectively, of their fair market
value, without brokerage commissions. Shares issued under this Plan totaled
116,678, 68,188, and 93,407 shares in 1994, 1993, and 1992, respectively.
55
<PAGE> 58
NOTE 11. UNION PLANTERS CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
ASSETS
Noninterest-bearing cash in subsidiary bank.......................... $ 990 $ 799
Demand note receivable from subsidiary bank.......................... 84,932 101,356
Advances to and receivable from subsidiaries......................... 5,981 2,955
Investment securities available for sale............................. 1,854 1,324
Investment in banking subsidiaries................................... 686,798 644,581
Investment in savings and loan subsidiaries.......................... 59,007 58,476
Investment in nonbank subsidiaries................................... 7,139 2,817
Premises and equipment............................................... 4,955 161
Other assets......................................................... 23,476 6,322
-------- --------
TOTAL ASSETS...................................................... $875,132 $818,791
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Commercial paper..................................................... $ 2,951 $ 10,941
Long-term debt....................................................... 114,790 114,729
Loans from and payables to subsidiary banks.......................... 13,695 362
Other liabilities.................................................... 12,989 10,757
Shareholders' equity................................................. 730,707 682,002
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........................ $875,132 $818,791
======== ========
</TABLE>
CONDENSED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INCOME
Dividends from bank subsidiaries (Note 12)............... $145,950 $ 25,893 $ 20,656
Dividends from savings and loan subsidiaries............. 18,594 2,199 --
Management fees from subsidiaries........................ 18,508 7,198 5,902
Interest from subsidiaries............................... 3,913 1,358 1,523
Interest and dividends on investments, loans, and
interest-bearing deposits............................. 29 62 279
Investment securities gains (losses)..................... (71) -- 38
Other income............................................. 1,634 1,283 43
-------- -------- --------
Total income.......................................... 188,557 37,993 28,441
-------- -------- --------
EXPENSES
Interest expense
Short-term borrowings................................. 159 235 334
Long-term debt........................................ 8,503 7,447 4,504
Salaries and employee benefits........................... 11,185 6,029 4,973
Occupancy and equipment expense.......................... 4,947 924 851
Legal fees and provision for litigation settlements...... 1,092 321 3,924
Other expense............................................ 11,155 4,439 3,055
-------- -------- --------
Total expenses........................................ 37,041 19,395 17,641
-------- -------- --------
EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM,
ACCOUNTING CHANGES, AND EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARIES............................ 151,516 18,598 10,800
Tax benefit................................................ (4,847) (4,092) (2,271)
-------- -------- --------
EARNINGS BEFORE EXTRAORDINARY ITEM, ACCOUNTING
CHANGES, AND EQUITY IN UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES........................................ 156,363 22,690 13,071
Extraordinary item-defeasance of debt, net of taxes........ -- (3,206) --
Accounting changes, net of taxes........................... -- 2,479 --
-------- -------- --------
EARNINGS BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES........................................ 156,363 21,963 13,071
Equity in undistributed earnings of subsidiaries........... (97,755) 70,589 50,179
-------- -------- --------
NET EARNINGS.......................................... $ 58,608 $ 92,552 $ 63,250
======== ======== ========
</TABLE>
56
<PAGE> 59
NOTE 11. UNION PLANTERS CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION
(CONTINUED)
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
--------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings............................................ $ 58,608 $ 92,552 $ 63,250
Equity in undistributed (earnings) of subsidiaries...... 97,755 (70,589) (50,179)
Cumulative effect of accounting changes................. -- (2,479) --
Provision for deferred income taxes..................... 239 (1,898) --
Other, net.............................................. (15,133) 3,908 3,268
--------- -------- --------
Net cash provided by operating activities............ 141,469 21,494 16,339
--------- -------- --------
INVESTING ACTIVITIES
Net decrease in short-term investments.................. -- -- 15,000
Proceeds from sales of available for sale securities.... 197 123 4,710
Net increase in investment in and receivables from
subsidiaries......................................... (119,921) (16,916) (48,624)
Purchases of premises and equipment..................... (5,156) -- (211)
--------- -------- --------
Net cash used in investing activities................ (124,880) (16,793) (29,125)
--------- -------- --------
FINANCING ACTIVITIES
Net (decrease) increase in commercial paper............. (7,990) 2,616 (3,141)
Proceeds from issuance of long-term debt, net........... -- 73,641 38,850
Repayment and defeasance of long-term debt.............. -- (34,042) (4,121)
Net proceeds from loans and payables to subsidiaries.... 13,333 -- (1,947)
Proceeds from issuance of preferred stock, net.......... -- -- 52,350
Redemption of preferred stock........................... (17,250) -- --
Proceeds from issuance of common stock, net............. 11,245 19,611 7,673
Purchases and retirement of common stock, net........... (3,164) (1,786) (4,311)
Cash dividends paid..................................... (28,996) (21,180) (15,315)
--------- -------- --------
Net cash (used) provided by financing activities..... (32,822) 38,860 70,038
--------- -------- --------
Net (decrease) increase in cash and cash equivalents...... (16,233) 43,561 57,252
Cash and cash equivalents at the beginning of the year.... 102,155 58,594 1,342
--------- -------- --------
Cash and cash equivalents at the end of the year.......... $ 85,922 $102,155 $ 58,594
========= ======== ========
</TABLE>
- ---------------
Noncash Investing Activities. See Note 2 regarding acquisitions in 1994, 1993,
and 1992.
NOTE 12. RESTRICTIONS ON DIVIDENDS AND LOANS FROM SUBSIDIARIES
The amount of dividends which the Corporation's subsidiaries may pay is
limited by applicable laws and regulations. For the subsidiary national banks,
prior regulatory approval is required if dividends declared in any year would
exceed net earnings of the current year (as defined under the National Bank Act)
plus retained net profits for the preceding two years. The payment of dividends
by state-chartered bank subsidiaries is regulated by applicable laws in Alabama,
Arkansas, Louisiana, Mississippi, Kentucky, and Tennessee and the regulations of
the Federal Deposit Insurance Corporation (FDIC). The payment of dividends by
savings and loan subsidiaries is subject to the regulations of the Office of
Thrift Supervision (OTS).
The Corporation has adopted for its state-chartered bank subsidiaries
internal dividend policies that have received approval from the various state
banking commissioners, subject to restrictions. The current policy for Alabama,
Arkansas, and Mississippi subsidiary banks requires a minimum ratio of 7%
tangible equity capital (equity less goodwill and other intangibles) to tangible
assets and paying dividends only equal to the excess without prior approval. The
internal policy adopted for Tennessee banks requires a 6% tangible equity
capital to tangible assets ratio and a 7% tangible primary capital (tangible
equity plus the allowance for losses on loans) to tangible assets ratio be
maintained by the subsidiaries. The policy approved for the Corporation's
Kentucky operations is the same as for Tennessee except that Kentucky requires
the use of Tier 1 capital instead of tangible equity and
57
<PAGE> 60
NOTE 12. RESTRICTIONS ON DIVIDENDS AND LOANS FROM SUBSIDIARIES (CONTINUED)
average quarterly assets instead of period end assets. The Corporation has not
received from Louisiana approval of its internal policy.
At January 1, 1995, the banking subsidiaries could have paid dividends to
the Corporation aggregating $22 million without prior regulatory approval.
Future dividends will be dependent on the level of earnings of the subsidiary
financial institutions.
UPNB requested permission and received approval in 1994 to pay a special
dividend in connection with the reorganization of UPNB into five separately
chartered banks (Note 2). The special dividend of $98 million was paid on July
1, 1994. This dividend substantially reduced the amounts available to the
Corporation as dividends from the Corporation's subsidiaries without obtaining
prior regulatory approval.
The Corporation's banking subsidiaries are limited by federal law in the
amount of credit which they may extend to their nonbank affiliates, including
the Corporation. Loans to a single nonbank affiliate may not exceed 10%, and
loans to all nonbank affiliates may not exceed 20% of an individual bank's net
assets plus its allowance for losses on loans. Such loans must be collateralized
by assets having market values of 100% to 130% of the loan amount depending on
the nature of the collateral. The law imposes no restrictions upon extensions of
credit between FDIC-insured banks which are wholly-owned subsidiaries of the
Corporation.
NOTE 13. RESTRUCTURING AND MERGER RELATED CHARGES
RESTRUCTURING CHARGES
In the fourth quarter of 1994, the Corporation adopted and began
implementation of a specific formal restructuring plan to improve operating
efficiencies and profitability throughout the Corporation. The plan provides for
the reduction of the number of employees in all subsidiaries of the Corporation
through specific voluntary and involuntary separation plans, the closure or
divestiture of certain branches of the banking subsidiaries, and the
consolidation of certain of the Corporation's subsidiary banks and branches
operating in the same or adjacent geographic locations. Management engaged a
nationally recognized consulting firm in 1994 to assist in identifying
performance improvement opportunities and to assist in restructuring branch
operations. The Corporation incurred fees and expenses of approximately $2.2
million in 1994 related to the services provided by the consulting firm.
The Corporation's plan includes a reduction in total staff of approximately
20% throughout its six-state operating region. These reductions will come from
all levels and functions of the Corporation. The voluntary early retirement and
voluntary separation plans were offered to eligible employees during the fourth
quarter of 1994. Three hundred eighty-eight eligible employees elected by mid-
December to accept these plans resulting in charges of $12.5 million. Additional
reductions of approximately 600 employees will be achieved through attrition,
changes in systems and work procedures, job consolidation, branch divestitures,
and other specific reductions. These reductions will be facilitated by an
involuntary separation plan which the Corporation communicated to all employees
in connection with the offering of the voluntary plans discussed above. A charge
of $3.8 million was recorded for expected involuntary separations in connection
with the plan. All amounts accrued are expected to be paid out by mid-1995 for
the voluntary plans and by the end of 1995 for the involuntary plan.
The Corporation also identified 38 branch locations for closure or
divestiture. These branch closings and divestitures are expected to be completed
in 1995 barring any unforeseen regulatory restrictions. Charges associated with
these divestitures totaled $10.5 million in 1994.
58
<PAGE> 61
NOTE 13. RESTRUCTURING AND MERGER RELATED CHARGES (CONTINUED)
The following table provides a reconciliation of the restructuring charges
and the remaining liabilities and reserves at December 31, 1994:
<TABLE>
<CAPTION>
RESTRUCTURING RESERVES
------------------------------------------------
EMPLOYEE ASSET
SEVERANCE WRITE-DOWNS OTHER TOTAL
--------- ----------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Restructuring charge............................. $16,262(a) $10,478 $2,189 $28,929
Less: Cash payments.............................. (3,830) -- (835) (4,665)
Noncash items.............................. -- (1,144) -- (1,144)
--------- ----------- ------ -------
Balance at December 31, 1994..................... $12,432 $ 9,334 $1,354 $23,120
======== ========== ====== =======
</TABLE>
- ---------------
(a) Includes special termination medical benefits of approximately $2.6 million
reserved for eligible employees under the voluntary early retirement plan.
MERGER RELATED CHARGES
Incidental to the acquisition of GSSC and several other acquisitions during
1994, the Corporation incurred certain expenses related to the mergers totaling
approximately $14.9 million. These expenses included legal and accounting fees,
financial advisory services, employment contract payments, postretirement and
postemployment benefit expense related to the employees of entities which were
acquired in transactions accounted for as poolings of interests and who were
given credit for prior service, costs for write-down of data processing
equipment and cancellation of vendor contracts, printing, finders fees, expenses
related to employee benefit plans of acquired entities, and other merger related
expenses.
59
<PAGE> 62
NOTE 14. OTHER NONINTEREST INCOME AND EXPENSE
The major components of other noninterest income and expense are summarized
as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OTHER NONINTEREST INCOME
Credit life insurance commissions.......................... $ 4,221 $ 3,906 $ 3,342
Customer ATM usage fees.................................... 2,719 1,580 965
Litigation settlement...................................... 2,200 -- --
VSIBG partnership earnings................................. 1,819 3,652 3,920
Brokerage fee income....................................... 1,356 1,520 1,288
Sale of servicing.......................................... 854 1,035 639
Gain on troubled debt restructuring........................ -- 901 3,513
Other...................................................... 15,388 18,173 12,178
-------- -------- --------
Total other noninterest income.......................... $ 28,557 $ 30,767 $ 25,845
======== ======== ========
OTHER NONINTEREST EXPENSE
Restructuring and other merger-related expenses(a)
Salaries and benefits................................... $ 16,262 $ -- $ --
Consultant fees......................................... 2,189 -- --
Asset writedowns........................................ 10,478 -- --
Other merger related expenses........................... 14,862 2,113 --
FDIC insurance assessments................................. 18,466 17,879 13,477
Consumer loan marketing program............................ 14,446 -- --
Advertising and promotion.................................. 10,959 8,838 7,134
Stationery and supplies.................................... 10,101 8,080 5,975
Postage and other carrier.................................. 9,194 7,868 6,060
Amortization of goodwill and other intangibles............. 6,684 8,270 6,216
Other contracted services.................................. 6,639 6,787 5,381
Communications............................................. 6,377 5,845 4,696
Legal fees................................................. 5,163 3,269 7,241
Other personnel services................................... 3,993 2,504 2,118
Dues, subscriptions, and contributions..................... 3,808 3,632 2,751
Merchant credit card charges............................... 3,568 4,611 3,929
Audit fees................................................. 3,467 2,374 1,244
Taxes other than income taxes.............................. 3,407 3,231 2,243
Brokerage and clearing fees................................ 2,969 4,414 4,009
Insurance.................................................. 2,594 2,020 1,768
Miscellaneous charge-offs.................................. 2,498 1,520 1,300
Travel..................................................... 2,232 2,284 1,827
Amortization and write-offs of mortgage servicing
rights(b)............................................... 2,101 3,364 11,104
Federal Reserve fees....................................... 1,671 1,740 1,733
Consultant fees............................................ 1,358 876 871
Other real estate expense.................................. 774 3,588 4,744
Provisions for litigation settlements...................... -- 500 9,450
Provisions for abandoned property.......................... -- -- 5,200
Provisions for conversion of data processing systems(c).... -- 4,424 --
Other...................................................... 19,512 11,925 13,992
-------- -------- --------
Total other noninterest expense......................... $185,772 $121,956 $124,463
======== ======== ========
</TABLE>
- ---------------
(a) See Note 13.
(b) 1992 includes $8.2 million of accelerated amortization of purchased mortgage
servicing rights due to accelerated prepayments of the underlying mortgage
loans.
(c) During 1993, the Corporation entered into a contract for conversion of the
software systems used by its subsidiaries to a common system. A provision of
$4.4 million was recorded for the write-off of existing systems contracts as
well as conversion costs.
60
<PAGE> 63
NOTE 15. EMPLOYEE BENEFIT PLANS
401(K) RETIREMENT SAVINGS PLAN. The Corporation's 401(k) Retirement Savings
Plan (401(k) Plan) is available to employees having one or more years of service
who work in excess of 1,000 hours a year. Employees may voluntarily contribute 1
to 16 percent of their gross compensation on a pretax basis up to a maximum of
$9,240 in 1994, subject to certain Internal Revenue Service restrictions (amount
may change from year to year based on the cost of living index), and the
Corporation makes a matching contribution of 50 to 100 percent of the amounts
contributed by the employee depending upon his or her eligible years of service.
The Corporation's matching contribution is limited to employee contributions of
up to 6% of their compensation. The Corporation's Flexible Benefit Plan allows
employees to allocate a portion of their available benefit dollars to the 401(k)
Plan as additional employer contributions. The Corporation's contributions to
the 401(k) Plan for 1994, 1993, and 1992 were $2.0 million, $1.8 million, and
$1.6 million, respectively.
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST. The Employee Stock Ownership Plan and
Trust (ESOP) is noncontributory and covers employees having one or more years of
service who work in excess of 1,000 hours a year. The amounts of contributions
to the ESOP are determined annually at the discretion of the Board of Directors
and were $2 million, $2 million, and $1.6 million for 1994, 1993, and 1992,
respectively. At December 31, 1994, the ESOP held 1,134,390 shares of the
Corporation's Common Stock, all of which were allocated to participants.
STOCK INCENTIVE PLANS. Certain employees and directors of the Corporation and
its subsidiaries are eligible to receive options or restricted stock grants
under the 1992 Stock Incentive Plan (1992 Plan). A maximum of 1,600,000 shares
of the Corporation's Common Stock may be issued through the exercise of
nonstatutory or incentive stock options and as restricted stock awards. The
option price is the fair market value of the Corporation's shares at the date of
grant. Options granted generally become exercisable in installments of 20% to
33 1/3% each year beginning one year from date of grant. The 1992 Plan replaced
the 1983 Stock Incentive Plan which had essentially the same provisions as the
1992 Plan. The 1983 Plan expired March 9, 1993; however, options issued through
that date continue to be outstanding and exercisable under the terms of the
grants. Additional information, with respect to the number of shares of the
Corporation's Common Stock which are subject to stock options issued under the
1983 and 1992 Plans, is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
---------------------
1994 1993
-------- --------
<S> <C> <C>
Options
Outstanding, beginning of year....................................... 587,610 479,419
Granted.............................................................. 243,172 287,532
Exercised............................................................ (190,628) (165,104)
Canceled or surrendered.............................................. (30,122) (14,237)
-------- --------
Outstanding, end of year............................................. 610,032 587,610
======== ========
Options becoming exercisable during the year........................... 182,344 237,730
======== ========
Options exercisable at end of year..................................... 412,142 432,310
======== ========
</TABLE>
Exercise prices ranged from $6.88 to $28.13 in 1994 and from $6.88 to
$28.00 in 1993.
Prior to its acquisition, BNF had options to acquire 121,487 shares of its
common stock outstanding at December 31, 1993. The options for employees were
granted in 1986 and 1992 under two separate plans and options for directors were
granted under a single plan in 1992. Exercise prices ranged from $6.35 to $11.79
during 1993. During 1994, 71,737 options were exercised prior to the
consummation of the merger. The remaining 49,750 options of BNF were converted
to 53,627 equivalent options to acquire shares of Common Stock of the
Corporation as part of the acquisition at exercise prices ranging from $6.35 to
$11.79. Subsequent to the acquisition, options were exercised to acquire 3,100
shares.
Prior to its acquisition, GSSC had options outstanding and exercisable
which were issued in February, 1993 and December, 1994 in connection with a
three-year incentive compensation plan to eligible executive officers at
exercise prices ranging from $22.375 to $29.875. Incidental to the acquisition,
these options were converted to 97,319 equivalent options to acquire shares of
the Corporation's Common Stock as part of the acquisition at exercise prices
ranging from $15.40 to $20.56.
61
<PAGE> 64
NOTE 15. EMPLOYEE BENEFIT PLANS (CONTINUED)
RETIREE HEALTH CARE AND LIFE INSURANCE. The Corporation provides certain health
care and life insurance benefits to retired employees who had completed twenty
years of unbroken full-time service immediately prior to retirement and who have
attained age 60 or more. Health care benefits are provided partially through an
insurance company (for retirees age 65 or more) and partially through direct
payment of claims. Prior to January 1, 1993, health care premiums and claims and
life insurance benefits ($2,500 per claim) were recognized as expense when paid.
In 1992, retiree health care and life insurance costs were $390,000.
Effective January 1, 1993, the Corporation adopted SFAS No. 106 which
requires that retiree health care and life insurance benefits be charged to
expense during the years in which the employee renders service. The Corporation
elected to recognize the accumulated benefit obligation in the first quarter of
1993 which approximated $8.3 million ($5.1 million after tax).
The following table reflects the Corporation's net periodic postretirement
benefit costs for 1994 and 1993 which were determined assuming a discount rate
of 7% for 1994 and 8% for 1993 and an expected return on plan assets of 5%:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
----- -----
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Service cost........................................................ $ 198 $ 170
Interest cost of accumulated postretirement benefit obligation...... 713 682
Amortization of unrecognized net loss............................... 84 --
Return on Plan assets............................................... (286) (220)
----- -----
Total..................................................... $ 709 $ 632
===== =====
</TABLE>
The following table sets forth the Plans' funded status and the amounts
reported in the Corporation's consolidated balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Fair value of Plan assets................................................ $ 9,114 $ 5,757
------- -------
Accumulated postretirement benefit obligation (APBO):
Retirees............................................................... 10,524 7,061
Fully eligible plan participants....................................... 160 181
Other active plan participants......................................... 2,810 3,357
------- -------
Total APBO..................................................... 13,494 10,599
------- -------
APBO in excess of Plan assets.................................. $(4,380) $(4,842)
======= =======
Reconciliation of fund's status to reported amounts:
Accrued liability included in balance sheet, including unfunded portion
of transition obligation............................................ $(4,477) $(3,190)
Unrecognized net gain (loss)........................................... 97 (1,652)
------- -------
APBO in excess of Plan assets.................................. $(4,380) $(4,842)
======= =======
</TABLE>
The assumed discount rate used to measure the APBO was 8% at December 31,
1994 and 7% at December 31, 1993. The weighted average health care cost trend
rate in 1994 was 12%, gradually declining to an ultimate projected rate in 2001
of 5%. A one percentage point increase in the assumed health care cost trend
rates for each future year would increase the aggregate of the service and
interest cost components of the 1994 net periodic postretirement benefit cost by
$96,000 and would have increased the APBO as of December 31, 1994 by $788,000.
The Corporation has established a Voluntary Employees' Beneficiary
Association Trust (VEBA) and through December 31, 1994, had made contributions
into the VEBA of $9.0 million, the maximum amount deductible for federal income
tax purposes. The VEBA is expected to earn 5% on trust assets consisting of
short-term tax-free municipal securities. Additional contributions will be made
to the VEBA by the Corporation annually which will be the source of funding for
future postretirement benefits.
62
<PAGE> 65
NOTE 15. EMPLOYEE BENEFIT PLANS (CONTINUED)
POSTEMPLOYMENT BENEFITS. The Corporation also adopted SFAS No. 112 as of
January 1, 1993, which requires that such costs be charged to expense over the
employees' relevant service period. The Corporation's analysis determined this
liability to be $1.3 million ($807,000 net of tax benefit) at January 1, 1993,
consisting primarily of postemployment medical claims and related administrative
expenses in excess of expected premiums to be paid by employees. The liability
amount was adjusted to $600,000 at December 31, 1993 and to $300,000 at December
31, 1994, due to a significant decrease in claims. The liability amount will be
reviewed annually and adjusted as management should deem necessary based on
actual experience. Annual expenses for these benefits are not expected to vary
significantly from the amounts which have previously been expensed as incurred.
ACQUIRED INSTITUTIONS. Certain of the financial institutions acquired have
sponsored various employee benefit and retirement plans which were terminated at
acquisition. Such plans have been or are in the process of being liquidated and
the employees now participate in the Corporation's benefit and retirement plans.
Any liabilities related to the liquidation of the plans have been recorded at
December 31, 1994.
NOTE 16. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1994 1993 1992
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current tax expense
Federal......................................................... $12,994 $30,821 $28,763
State........................................................... 2,534 6,534 5,303
------- ------- -------
Total current tax expense.................................... 15,528 37,355 34,066
------- ------- -------
Deferred tax expense (benefit)
Federal......................................................... 4,280 (12,911) (10,230)
State........................................................... 953 (4,397) 25
------- ------- -------
Total deferred tax expense (benefit)......................... 5,233 (17,308) (10,205)
------- ------- -------
Total income tax expense................................ $20,761 $20,047 $23,861
======= ======= =======
</TABLE>
For 1993, income tax expense (benefit) included in the financial statements
is summarized as follows (Dollars in thousands):
<TABLE>
<S> <C>
Applicable income taxes.................................................... $37,420
Tax benefit related to extraordinary item.................................. (2,040)
Tax benefit related to the cumulative effect of changes in accounting
methods.................................................................. (15,333)
-------
Total income tax expense......................................... $20,047
=======
</TABLE>
63
<PAGE> 66
NOTE 16. INCOME TAXES (CONTINUED)
Deferred tax assets/liabilities are comprised of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1994 1993
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Deferred tax assets
Losses on loans and other real estate.................................. $41,104 $39,946
Provisions for litigation settlements.................................. 602 1,349
Postretirement and postemployment benefits............................. 1,329 1,478
Amortization of intangibles............................................ 2,171 1,547
Net operating loss carryforwards for tax purposes...................... 2,241 2,352
Depreciation........................................................... 1,678 3,129
Deferred compensation plans............................................ 5,030 3,495
Debt defeasance........................................................ 1,130 2,023
Unrealized loss on securities.......................................... 18,385 --
Restructuring costs.................................................... 4,932 --
Other deferred items................................................... 11,907 6,160
------- -------
Total deferred tax assets...................................... 90,509 61,479
------- -------
Deferred tax liabilities
Book over tax basis in purchased loans................................. 6,849 9,950
Stock basis difference................................................. 1,937 1,649
Prepaid expenses....................................................... 2,679 411
Other deferred items................................................... 9,858 1,122
------- -------
Total deferred tax liabilities................................. 21,323 13,132
------- -------
Net deferred tax asset......................................... $69,186 $48,347
======= =======
</TABLE>
The change in the deferred tax asset during the year is a result of the
adoption of SFAS No. 115, which created a deferred tax asset of $18.4 million
(see Note 1); the addition of deferred tax assets of acquired companies; and
current period deferred tax expense of $5,233,000. The realization of a portion
of the deferred tax asset is based upon management's conclusion that future
operating profits will generate sufficient taxable income to utilize the related
deductions and loss carryforwards. Net operating loss carryforwards of
approximately $6.3 million are available to offset future taxable income,
subject to certain statutory limitations, and expire in the years 2001 to 2006.
Income tax expense as a percentage of earnings before income taxes is
reconciled with the statutory federal income tax rate of 35% for 1994 and 1993
and 34% for 1992 as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1994 1993 1992
-------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax..................................... $ 27,779 $ 44,590 $29,618
State income taxes, net of federal tax benefit.............. 2,267 4,370 3,516
Tax-exempt interest, net.................................... (11,410) (11,368) (7,958)
Amortization of goodwill.................................... 1,532 1,466 1,711
Alternative minimum tax provision (credit) in excess of
regular tax............................................... -- -- (914)
Other, net.................................................. 593 (1,638) (2,112)
-------- -------- -------
Applicable income tax............................. $ 20,761 $ 37,420 $23,861
======== ======== =======
</TABLE>
Income tax expense (benefit) applicable to securities transactions was
($7.1) million for 1994, $1.8 million for 1993, and $5.5 million for 1992.
Retained earnings at December 31, 1994 and 1993 includes approximately
$7,450,000 representing bad debt deductions of thrifts for which no deferred
taxes have been provided. These amounts represent an allocation of income to bad
debt deductions for tax purposes only. Reduction of amounts so allocated for
purposes other than tax bad debt losses or adjustments arising from carryback of
net operating losses would create income for tax purposes only, which would be
subject to the then
64
<PAGE> 67
NOTE 16. INCOME TAXES (CONTINUED)
current corporate income tax rate. The unrecorded deferred income tax liability
on this amount was approximately $2,790,000 at December 31, 1994 and 1993.
Effective January 1, 1993, the Corporation adopted SFAS No. 109. The
cumulative tax effect of this change in accounting method increased net earnings
$11.7 million in 1993. Reference is made to Note 1 for further discussion of
accounting changes.
NOTE 17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business, the Corporation becomes a party to
various types of financial instruments in order to meet the financing needs of
its customers and to reduce its exposure to fluctuations in interest rates.
These instruments involve, to varying degrees, elements of credit and interest
rate risk which are not reflected in the accompanying consolidated financial
statements. For these instruments, the exposure to credit loss is limited to the
contractual amount of the instrument. The Corporation follows the same credit
policies in making commitments and contractual obligations as it does for
on-balance-sheet instruments. The following table presents the contractual
amounts of these types of instruments.
<TABLE>
<CAPTION>
CONTRACT AMOUNT
DECEMBER 31,
-------------------
1994 1993
---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C>
FINANCIAL INSTRUMENTS WHOSE CONTRACT AMOUNTS REPRESENT CREDIT RISK
Commitments to extend credit (excluding credit card plans)......... $906 $642
Commitments to extend credit under credit card plans............... 975 207
Standby, commercial, and similar letters of credit................. 65 51
</TABLE>
Commitments to extend credit are legally binding agreements to lend to
customers for specific purposes, at stipulated rates, with fixed expiration and
review dates if the conditions in the agreement are met, and may require payment
of a fee. Since many of the commitments normally expire without being drawn
upon, the total commitment amounts do not necessarily represent future cash
requirements. Collateral held, if any, varies but may include accounts
receivable, inventory, property, plant and equipment, income producing
properties, or securities. Loan commitments having an original maturity of one
year or less or which are unconditionally cancelable totaled $1.7 billion and
loan commitments having a maturity over one year which are not cancelable
totaled $168 million.
Letters of credit are conditional commitments issued by the Corporation to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The Corporation in some cases holds
various types of collateral to support those commitments for which collateral is
deemed necessary. The outstanding letters of credit expire between 1995 and
2004.
Other off-balance-sheet instruments entered into are forward contracts,
interest-rate swap agreements, and commitments to purchase or sell when-issued
securities. The following table presents the notional amounts of these types of
instruments.
<TABLE>
<CAPTION>
NOTIONAL AMOUNT
DECEMBER 31,
-------------------
1994 1993
---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C>
FINANCIAL INSTRUMENTS WHOSE NOTIONAL CONTRACT AMOUNTS EXCEED THE AMOUNTS
OF ACTUAL CREDIT RISK
Forward contracts.................................................. $ 28 $ 38
Interest-rate swap agreements...................................... 310 316
When-issued securities
Commitments to sell.............................................. 41 56
Commitments to purchase.......................................... 33 87
</TABLE>
Forward contracts are contracts for delayed delivery of securities or money
market instruments in which the seller agrees to make delivery at a specified
future date of a specified instrument, at a specified price or yield. Risks
arise from the possible inability of the counterparties to meet the terms of
their contracts and from market movements in securities values and interest
rates. The Corporation
65
<PAGE> 68
NOTE 17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED)
as seller utilizes short-term forward commitments to deliver mortgages to
protect the Corporation against rate changes which could impact the value of
mortgage originations to be securitized or otherwise sold to investors. Such
commitments to deliver mortgages generally have maturities of 90 days or less.
An interest-rate swap generally involves the exchange of floating for
fixed-rate interest payment streams on a specified notional principal amount for
an agreed upon period of time without the exchange of the underlying principal
amounts. Notional principal amounts often are used to express the volume of
these transactions, however the amounts potentially subject to credit risk would
be much smaller. The Corporation's credit risk involves the possible default of
the counterparty.
The Corporation has a policy for its use of derivative products for
purposes other than trading, including interest-rate swaps, which has been
approved and is monitored by the Funds Management Committee and the Board of
Directors. The policy establishes individual positions for derivative products
not to exceed $100 million notional amount and that open positions in the
aggregate shall not exceed 10% of consolidated total assets. Any exceptions to
the policy must be approved by the Board of Directors. The open positions are
reviewed monthly by the Funds Management Committee to monitor compliance with
established policies. As of December 31, 1994, there are no positions which
would be regarded as an exception under the Corporation's policy.
The Corporation entered into the following interest-rate swap agreements to
synthetically alter the repricing and maturity characteristics of certain
on-balance sheet assets and liabilities. The Corporation receives fixed-rate
payments and pays variable-rate payments. The interest-rate swaps were intended
to convert specific assets (loans and investment securities) from floating-rate
to fixed-rate instruments and to convert certain long-term debt from a
fixed-rate to a floating-rate. The Corporation is the end-user on all
interest-rate swaps and does not act as a dealer in these instruments. A summary
of the Corporation's interest-rate swaps at December 31, 1994 follows:
<TABLE>
<CAPTION>
CURRENT RATES(a) 1994
------------------- YEAR-TO-DATE
NOTIONAL VARIABLE FIXED NET INTEREST UNREALIZED
AMOUNT RATE RATE MATURITY INCOME GAIN
BALANCE SHEET INSTRUMENTS ------------- PAID RECEIVED DATE IMPACT (LOSS)
- -------------------------------- -------- -------- -------- ------------ ----------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Loans(b)........................ $ 150 5.50% 5.22% 1/96-99 (c) $1.1 $(14.2)
Securities...................... 100 6.66 4.44 6/95 (.1) --(d)
Long-term debt debentures....... 50 6.04 4.46 5/96 (.1) (2.1)
Long-term debt FHLB advances.... 10 6.38 9.13 3/98 .5 .3
------ ----- ----------
Total................. $ 310 $1.4 $(16.0)
========== ========= ========
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) The variable rates paid are tied to the three-month LIBOR rate for the loans and the FHLB advance swaps and
the six- month LIBOR rate for the investment securities and the debentures swaps. The next repricing dates for
the variable rates paid for the loans, long-term debt debentures, and long-term debt FHLB advances are January
1995, May 1995, and March 1995, respectively. The securities swap will not reprice prior to maturity. These
variable rates may change significantly in the future due to changes in the financial markets and interest
rates.
(b) The loan interest-rate swap was entered into to reduce the volatility of net interest income. At the time the
swap was executed, management reduced the risk associated with stable or further declining interest rates and
the resultant impact on net interest income.
(c) This interest-rate swap's amortization period may change quarterly based on changes in the underlying index
rate. If the index rate should be less than or equal to 5.3125% on January 5, 1996, the swap would terminate
on that date. If the index rate should remain at the current rate (6.25% as of January 26, 1995) through
January 5, 1996 and thereafter, the swap would mature at a rate of $26 million each quarter beginning July 5,
1996 through April 7, 1997. The swap maturity has the potential to extend to January 1999 in the event the
index rate should be equal to or exceed 8.3125% on January 5, 1996 and for the remainder of the term of the
swap.
(d) Management sold the securities related to this interest-rate swap in January 1995 (see Note 4). At December
31, 1994, the Corporation recognized a $1.1 million loss on this interest-rate swap.
</TABLE>
When-issued securities are commitments to either purchase or sell
securities when, as and if they are issued. The trades are contingent upon the
actual issuance of the security. These transactions represent conditional
commitments made by the Corporation and risk arises from the possible inability
of the counterparties to meet the terms of their contracts and from market
movements in securities values and interest rates.
66
<PAGE> 69
NOTE 17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED)
In the normal course of business, the Corporation sells mortgage loans and
makes certain limited representations and warranties to the purchaser.
Management does not expect any significant losses to arise from these
representations and warranties which are normally given in the business.
CONCENTRATIONS OF CREDIT RISK. Through its subsidiary banks in Tennessee,
Mississippi, Arkansas, Louisiana, Alabama, and Kentucky, the Corporation grants
commercial, agricultural, residential, and consumer loans to customers
throughout those states. The amount and percentage of total loans outstanding by
the state in which the subsidiaries were headquartered at December 31, 1994 were
as follows: Tennessee $3.2 billion (54%), Mississippi $1.7 billion (28%),
Arkansas $445 million (8%), Louisiana $322 million (6%), Alabama $185 million
(3%), and Kentucky $79 million (1%). Although the Corporation has a diversified
loan portfolio, the ability of its debtors to honor their contracts is to some
extent dependent upon economic conditions found throughout the above states and
the surrounding areas.
NOTE 18. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values and fair values of the Corporation's financial
instruments are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
----------------------- -----------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and short-term investments........... $ 529,316 $ 529,316 $ 468,184 $ 468,184
Trading account securities................ 155,951 155,951 153,482 153,482
Loans held for resale..................... 24,493 24,493 134,206 134,206
Investment securities -- available for
sale................................... 1,928,984 1,928,984 808,554 815,360
Investment securities -- held to
maturity............................... 1,033,160 1,009,969 2,487,090 2,542,808
Net loans................................. 5,827,039 5,661,671 4,539,015 4,608,060
FINANCIAL LIABILITIES
Demand deposits........................... 4,549,495 4,549,495 4,109,301 4,109,301
Time deposits............................. 3,868,347 3,843,989 3,562,320 3,596,072
Short-term borrowings..................... 415,171 415,171 275,537 275,537
Federal Home Loan Bank advances........... 224,103 218,353 192,792 192,703
Long-term debt, excluding capital lease
obligations............................ 115,030 102,205 115,085 115,085
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Forward contracts......................... -- (37) -- 190
When-issued securities
Commitments to sell.................... -- -- -- 4
Commitments to purchase................ -- -- -- --
Interest-rate swaps....................... (1,455) (17,127) (133) 1,772
</TABLE>
The following methods and assumptions were used by the Corporation in
estimating the fair value for financial instruments:
CASH AND SHORT-TERM INVESTMENTS. The carrying amount for cash and
short-term investments approximates the fair value of the assets. Included in
this classification are cash and due from banks (nonearning assets), federal
funds sold, securities purchased under agreements to resell, and interest-
bearing deposits at financial institutions.
INVESTMENT SECURITIES. Fair values of these instruments are based on
quoted market prices, where available. If quoted market prices are not
available, fair values are based on the quoted values of similar instruments.
TRADING ACCOUNT SECURITIES. These instruments are carried in the
consolidated balance sheet at values which approximate their fair values based
on quoted market prices of similar instruments.
LOANS HELD FOR RESALE. These instruments are carried in the consolidated
balance sheet at the lower of cost or market. The fair values of these
instruments are based on subsequent liquidation values of the instruments which
did not result in any significant gains or losses.
67
<PAGE> 70
NOTE 18. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
LOANS. The fair values of loans are estimated using discounted cash flow
analyses and using interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality and risk.
DEMAND DEPOSITS. The fair values of these instruments (i.e., checking
accounts, savings accounts, money market deposit accounts, and NOW accounts)
are, by definition, equal to the amount payable on demand at the reporting date
(i.e., their carrying amount).
TIME DEPOSITS. The fair values of time deposits (i.e., certificates of
deposit, IRAs, investment savings, etc.) are estimated using a discounted cash
flow calculation that applies interest rates currently being offered on these
instruments to a schedule of aggregated expected monthly maturities on time
deposits.
SHORT-TERM BORROWINGS. The carrying amount of short-term borrowings (i.e.,
federal funds purchased, securities sold under agreements to repurchase,
commercial paper, and other short-term borrowings) approximates their fair
values.
FEDERAL HOME LOAN BANK ADVANCES. The fair value of these advances is
estimated using discounted cash flow analyses and using the FHLB-quoted rates of
borrowing for advances with similar terms.
LONG-TERM DEBT. The fair value of long-term debt is based on quoted market
prices for the Corporation's publicly traded debt.
OFF-BALANCE-SHEET FINANCING INSTRUMENTS. Fair values of off-balance-sheet
instruments are based on current settlement values (forward contracts), quoted
market prices (interest-rate swaps), and current market values for when-issued
securities. The fair value of interest-rate swaps represents the gross
unrealized gain (loss) in these contracts. The fair value of commitments to
extend credit and letters of credit (see Note 17) are not presented, since
management believes the fair value to be insignificant, as the instruments are
expected to expire unused and the fees charged on such instruments are not
significant.
NOTE 19. CONTINGENT LIABILITIES
The Corporation and/or various subsidiaries are parties to various pending
civil actions, all of which are being defended vigorously. Additionally, the
Corporation and/or its subsidiaries are parties to various legal proceedings
that have arisen in the ordinary course of business. Management is of the
opinion, based on present information, including evaluations of outside counsel,
that neither the Corporation's financial position, results of operations, nor
liquidity will be materially affected by the ultimate resolution of such pending
or threatened legal proceedings.
The Corporation's former broker/dealer subsidiaries are among the more than
80 defendants in various lawsuits consolidated in a Louisiana federal district
court alleging violations of Federal and other securities laws in connection
with the 1986 underwriting and subsequent sale of $400 million of housing
revenue bonds issued by the Health, Educational, and Housing Facility Board of
the City of Memphis, Tennessee, as well as the underwriting and sale of seven
other taxable municipal bond issues. Substantially all of the proceeds of the
sale of these bonds had been placed in guaranteed investment contracts with
Executive Life Insurance Company. The bonds were rated AAA by Standard & Poors
at the time of issuance, and maintained such rating until January 1990, when the
bonds were downgraded. The market price of the bonds has since declined
significantly. One of such subsidiaries participated in the underwriting of the
Memphis issue and is a defendant in purported class claims based on that issue.
Several individual actions against these subsidiaries alleging violations in
secondary market sales of such issues have been consolidated in the litigation.
During the third quarter of 1994, most of the representatives of the plaintiffs
in the various class actions agreed in principle to settle all claims against
the underwriting participants. Such settlement has been given tentative approval
by the court, and is subject to a number of preconditions, including final
approval by the court. Notice of the settlement will be distributed to all
members of the putative plaintiff classes and such class members have been given
the right to opt out of the settlement agreement and continue to pursue claims
against the underwriters. A small number of class members have already indicated
their intent to do so. However, should such opt-out claims reach a certain
threshold, the underwriting defendants may withdraw their settlement offer. All
of the individual secondary market suits against
68
<PAGE> 71
NOTE 19. CONTINGENT LIABILITIES (CONTINUED)
the Corporation's subsidiaries that were consolidated in the litigation have
been resolved. The remaining claim asserted against such subsidiaries is in
arbitration and involves a $100,000 par value sale.
Certain subsidiaries of the Corporation were threatened in 1989 with a
civil action by the FDIC for the estate of a closed savings association. If
filed, the action would reportedly seek compensatory damages of at least $37
million, and other relief including an injunction against transferring or
encumbering any assets until any judgments were paid, based upon allegations of
wrongdoing in the sale of covered call options to the closed savings
association. An agreement between all parties to the threatened action providing
for the forbearance of the filing of such action and the tolling of applicable
statutes of limitation, entered into in 1989, continues in effect. The
Corporation has furnished the FDIC with information assertedly demonstrating the
lack of merit in the threatened action and believes that such action, if
nevertheless filed, can be resolved without material loss.
69
<PAGE> 72
UNION PLANTERS CORPORATION
BANKS AND COMMUNITIES SERVED
<TABLE>
<CAPTION>
OFFICES
-------
<S> <C>
TENNESSEE
UNION PLANTERS NATIONAL BANK
Bartlett, Collierville, Cordova, Germantown,
Memphis......................................... 34
UNION PLANTERS BANK OF MIDDLE TENNESSEE, N.A.
Antioch, Brentwood, Columbia, Dickson,
Eagleville, Franklin, Gallatin, Goodlettsville,
Hendersonville, Lebanon, Lewisburg, Madison, Mt.
Juliet, Mt. Pleasant, Murfreesboro, Nashville,
and Smyrna...................................... 31
UNION PLANTERS BANK OF EAST TENNESSEE, N.A.*
Alcoa, Clinton, Greenback, Knoxville, Maryville,
Oak Ridge, and Townsend......................... 19
UNION PLANTERS BANK OF JACKSON, N.A.
Jackson and Milan............................... 10
UNION PLANTERS BANK OF WEST TENNESSEE*
Dyersburg, Gibson, Humboldt, Martin, Rutherford,
Trenton, Union City, and Yorkville.............. 13
UNION PLANTERS BANK OF THE TENNESSEE VALLEY*
Harriman, Kingston, Lenoir City, Oliver Springs,
Rockwood, Sunbright, and Wartburg............... 8
FIRST NATIONAL BANK OF SHELBYVILLE*
Fayetteville, Monteagle, Shelbyville, and Tracy
City............................................ 8
LIBERTY FEDERAL SAVINGS BANK
Camden, Huntington, McKenzie, Paris, and
Waverly......................................... 6
BANK OF GOODLETTSVILLE
Goodlettsville, Springfield, and White House.... 4
THE FIRST NATIONAL BANK OF CROSSVILLE
Crossville and Fairfield Glade.................. 5
CITIZENS BANK IN COOKEVILLE
Algood, Baxter, Cookeville, and Monterey........ 6
UNION PLANTERS BANK OF CHATTANOOGA, N.A.
Chattanooga, Cleveland, and East Ridge.......... 8
CENTRAL STATE BANK
Jackson and Lexington........................... 4
FIRST STATE BANK
Brownsville and Stanton......................... 4
SECURITY TRUST FEDERAL SAVINGS AND LOAN ASSOCIATION
Clinton, Greeneville, Kingston, Knoxville,
Morristown, and Oak Ridge....................... 7
BANK OF EAST TENNESSEE
Morristown and Talbott.......................... 5
BANK OF COMMERCE IN WOODBURY
Auburntown and Woodbury......................... 3
DEKALB COUNTY BANK & TRUST COMPANY
Alexandria, Celina, Dowelltown, and
Smithville...................................... 5
FARMERS UNION BANK
Ripley.......................................... 3
FIRST CITIZENS BANK OF HOHENWALD.................... 3
<CAPTION>
OFFICES
-------
<S> <C>
UNION PLANTERS BANK, FSB
Dyersburg and Newbern........................... 3
ERIN BANK & TRUST COMPANY........................... 1
FIRST STATE BANK OF FAYETTE COUNTY IN SOMERVILLE.... 1
THE COMMERCIAL BANK OF OBION........................ 2
PICKETT COUNTY BANK AND TRUST COMPANY IN BYRDSTOWN.. 1
CUMBERLAND CITY BANK................................ 1
MISSISSIPPI
SUNBURST BANK
Ackerman, Baldwyn, Bassfield, Bay St. Louis,
Biloxi, Calhoun City, Charleston, Cleveland,
Clinton, Collins, Collinsville, Columbus,
Crystal Springs, Decatur, Derma, Ellisville,
Eupora, Forest, Greenville, Greenwood, Grenada,
Gulfport, Hattiesburg, Hazlehurst, Houston, Itta
Bena, Jackson, Kosciusko, Laurel, Leland,
Louisville, Meridian, Moorhead, Moss Point,
Mount Olive, Newton, Ocean Springs, Oxford,
Pascagoula, Pearl, Petal, Philadelphia,
Prentiss, Ridgeland, Shaw, Southaven, Sumner,
Terry, Tupelo, Union, Water Valley, West Point,
and Winona...................................... 100
UNITED SOUTHERN BANK
Batesville, Clarksdale, Drew, Friars Point,
Lambert, Lula, Olive Branch, Oxford, Pope, and
Sledge.......................................... 15
FIRST NATIONAL BANK IN NEW ALBANY
Ashland, Blue Mountain, Hickory Flat, New
Albany, Ripley, and Tupelo...................... 9
ARKANSAS
UNION PLANTERS BANK OF NORTHEAST ARKANSAS*
Bono, Brookland, Fisher, Hardy, Jonesboro,
Mammoth Spring, Newport, Rector, Sidney,
Tuckerman, and Weiner........................... 18
SECURITY BANK
Marmaduke and Paragould......................... 4
FIRST NATIONAL BANK
Bee Branch, Clinton, Fairfield Bay, and Mountain
View............................................ 4
FIRST SOUTHERN BANK
Crawfordsville, Earle, and Marion............... 3
SEARCY COUNTY BANK
Leslie and Marshall............................. 2
FARMERS & MERCHANTS BANK
Maynard, Pocahontas, and Reyno.................. 3
LOUISIANA
SUNBURST BANK OF BATON ROUGE........................ 15
ALABAMA
BANKFIRST, A FEDERAL SAVINGS BANK
Athens, Decatur, Hartselle, and Moulton......... 7
KENTUCKY
SIMPSON COUNTY BANK
Adairville and Franklin......................... 5
-------
TOTAL............................................... 380
======
</TABLE>
- ---------------
The above schedule reflects banks merged and names changed through March 1,
1995. Those banks for which names have changed or which were merged with other
banks are identified with an "*."
70
<PAGE> 73
UNION PLANTERS CORPORATION
EXECUTIVE OFFICERS
BENJAMIN W. RAWLINS, JR.
Chairman and Chief Executive Officer
JACKSON W. MOORE
President and Chief Operating Officer
JACK W. PARKER
Executive Vice President and
Chief Financial Officer
JAMES A. GURLEY
Executive Vice President
M. KIRK WALTERS
Senior Vice President, Treasurer,
and Chief Accounting Officer
BOARD OF DIRECTORS
ALBERT M. AUSTIN
Chairman of the Board
Cannon, Austin and Cannon, Inc.
MARVIN E. BRUCE
Chairman of the Board
(Retired)
TBC Corporation
GEORGE W. BRYAN
Senior Vice President
Sara Lee Corporation
ROBERT B. COLBERT, JR.
Chairman of the Board
(Retired)
Signal Apparel Co., Inc.
C. J. LOWRANCE III
President
Lowrance Brothers & Co., Inc.
JACKSON W. MOORE
President and Chief Operating Officer
Union Planters Corporation
STANLEY D. OVERTON
Chairman of the Board
Union Planters Bank of
Middle Tennessee, N.A.
BENJAMIN W. RAWLINS, JR.
Chairman of the Board and
Chief Executive Officer
Union Planters Corporation
Union Planters National Bank
DR. V. LANE RAWLINS
President
The University of Memphis
MIKE P. STURDIVANT
President
Due West Gin Co., Inc.
RICHARD A. TRIPPEER, JR.
President
R. A. Trippeer, Inc.
71
<PAGE> 74
CORPORATE INFORMATION
ANNUAL MEETING
Thursday, April 27, 1995 at 10:00 a.m.
Union Planters Administrative Center
Assembly Room C
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
CORPORATE OFFICES
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
CORPORATE MAILING ADDRESS
P. O. Box 387
Memphis, Tennessee 38147
TRANSFER AGENT AND REGISTRAR
Union Planters National Bank
Corporate Trust Operations
6200 Poplar Avenue, Suite 300
Memphis, Tennessee 38119
(901) 383-6960
DIVIDEND PAYING AGENT
Union Planters National Bank
Corporate Trust Operations
6200 Poplar Avenue, Suite 300
Memphis, Tennessee 38119
(901) 383-6960
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
STOCK AND OPTION LISTINGS
Common
NYSE Symbol: UPC
Wall Street Journal: UnPlantr
Series E Convertible Preferred
NASDAQ NMS Symbol: UPCPO
Wall Street Journal: UnPlantr pfE
Options
Philadelphia Stock Exchange
FOR FINANCIAL INFORMATION, CONTACT
Jack W. Parker
Executive Vice President and
Chief Financial Officer
(901) 383-6781
FORM 10-K
Copies of the Corporation's
Annual Report on Form 10-K
as filed with the Securities
and Exchange Commission are
available on request by
calling the Legal Division at
(901) 383-6584.
DIVIDEND REINVESTMENT AND
STOCK PURCHASE PLAN
The Plan allows Union Planters
shareholders to reinvest their
dividends in Union Planters
common stock at a 5% discount
from market. No brokerage
commissions or service charges
are paid by shareholders.
The Plan also permits those
participating in the Plan to
buy additional shares
with optional cash payments
and no brokerage commissions.
Full details are available
by calling (901) 383-6960 or
writing Union Planters
Corporate Trust Operations.
The Corporation's banking
subsidiaries are members of the
FDIC and are Equal Housing
Lenders. UPC and its subsidiaries
are Equal Opportunity Employers.
72
<PAGE> 75
UNION PLANTERS CORPORATION
P. O. BOX 387
MEMPHIS, TENNESSEE 38147
<PAGE> 1
EXHIBIT 21
PAGE 1 OF 3
SUBSIDIARIES OF THE REGISTRANT
UNION PLANTERS CORPORATION, Registrant,
A registered bank holding company and savings and loan holding company
<TABLE>
<CAPTION>
State or Percentage
Jurisdiction of Voting
Name of Registrant Under Laws of Securities
and Subsidiaries Which Organized Owned
- ------------------ --------------- ---------
<S> <C> <C>
Union Planters Corporation (Registrant) Tennessee
Union Planters National Bank (a) United States 99.93%(1)
Chickasaw Capital Corporation (b) Tennessee 100.00%
Investment Group Mortgage Corporation (b) and (g) Tennessee 100.00%
Tennessee Bancorp, Inc. (b), (g), and (ee) Tennessee 100.00%
Union Planters Bank of Chattanooga, National Association (a) United States 100.00%
Union Planters Bank of Middle Tennessee, National Association (a) United States 100.00%
Union Planters Bank of East Tennessee, National Association (a) United States 100.00%
Foothills Financial Services (c) Tennessee 100.00%
Union Planters Bank of Jackson, National Association (a) United States 100.00%
Union Planters Investment Bankers Corporation (a) and (g) Tennessee 100.00%
Union Planters Investment Bankers Group, Inc. (d) and (g) Tennessee 100.00%
UMIC, Inc. (d) and (g) Tennessee 100.00%
UMIC Securities Corporation (d) and (g) Tennessee 100.00%
Union Planters Bank of the Tennessee Valley (a) Tennessee 100.00%
First National Bank of Crossville (a) United States 100.00%
Union Planters Bank of West Tennessee (a) Tennessee 100.00%
Summit Insurance, Inc. (e) Tennessee 100.00%
Southeastern Bancshares, Inc. (a) Tennessee 100.00%
DeKalb County Bank & Trust Company (f) Tennessee 100.00%
First Citizens Bank of Hohenwald (a) Tennessee 100.00%
Citizens Bank, Cookeville, Tennessee (a) Tennessee 100.00%
Pickett County Bank and Trust Company (a) Tennessee 100.00%
United Southern Bank (a) Mississippi 100.00%
First National Bank, New Albany, MS (a) United States 100.00%
Cumberland City Bank (a) Tennessee 100.00%
Planters Life Insurance Company (a) Arizona 100.00%
North Arkansas Bancshares, Inc. (a) Arkansas 100.00%
Union Planters Bank of Northeast Arkansas (h) Arkansas 100.00%
Searcy County Bank (h) Arkansas 100.00%
First National Bank (h) United States 100.00%
First North Central Insurance, Inc. (i) and (g) Arkansas 100.00%
First Southern Bank (a) Arkansas 100.00%
Southwestern Investment Company (a) Tennessee 100.00%
Union Planters-Great American Acquisition Tennessee 100.00%
Corporation (a) and (g)
Bank of East Tennessee (a) Tennessee 100.00%
Southeastern Credit Life Insurance Company (j) Arizona 100.00%
Security Trust Federal Savings and Loan Association (a) United States 100.00%
S.T. Service Corporation (k), (g), and (ee) Tennessee 100.00%
Commerce Capital Corporation (k), (g), and (ee) Tennessee 100.00%
Union Planters Bank, FSB (a) United States 100.00%
First Service Corporation (l) and (g) Tennessee 100.00%
Northwest Tennessee Savings and Loan Association,
Inc. (l), (g), and (ee) Tennessee 100.00%
NWT Service Corporation (m), (g), and (ee) Tennessee 100.00%
First State Bancshares, Inc. (a) and (ff) Tennessee 100.00%
First State Bank of Fayette County (n) Tennessee 100.00%
First Cumberland Bank (a) and (g) Tennessee 100.00%
Farmers Union Bank (a) Tennessee 100.00%
</TABLE>
<PAGE> 2
EXHIBIT 21
PAGE 2 OF 3
SUBSIDIARIES OF THE REGISTRANT (continued)
UNION PLANTERS CORPORATION, Registrant,
A registered bank holding company and savings and loan holding company
<TABLE>
<CAPTION>
State or Percentage
Jurisdiction of Voting
Name of Registrant Under Laws of Securities
and Subsidiaries Which Organized Owned
- ------------------ --------------- ---------
<S> <C> <C>
Garrett Bancshares, Inc. (a) Tennessee 100.00%
Bank of Goodlettsville (o) Tennessee 100.00%
Erin Bank & Trust Company (a) Tennessee 100.00%
First Financial Services, Inc. (a) Tennessee 100.00%
First State Bank (p) Tennessee 100.00%
First State Leasing, Inc. (q) and (g) Tennessee 100.00%
Bank of Commerce, Woodbury, Tennessee (a) Tennessee 100.00%
Bancom Services, Inc. (r) and (g) Tennessee 100.00%
Central State Bancorp, Inc. (a) Tennessee 100.00%
Central State Bank (s) Tennessee 100.00%
Mid-South Bancorp, Inc. (a) Kentucky 100.00%
Simpson County Bank (t) Kentucky 100.00%
General Trust Company (t) and (g) Tennessee 100.00%
First National Bancorp of Shelbyville (a) Tennessee 100.00%
First National Bank of Shelbyville (u) United States 100.00%
Liberty Bancshares, Inc. (a) Tennessee 100.00%
Liberty Federal Savings Bank (v) United States 100.00%
Northwest Tennessee Service Corporation (w) Tennessee 100.00%
BNF Bancorp, Inc. (a) Delaware 100.00%
BANKFIRST, a federal savings bank (x) United States 100.00%
Sunbelt Financial Services, Inc. (y) Alabama 100.00%
The Commercial Bancorp, Inc. (a) Tennessee 100.00%
The Commercial Bank (z) Tennessee 100.00%
Mid South Bancshares, Inc. (a) Arkansas 100.00%
Security Bank (aa) Arkansas 100.00%
Farmers and Merchants Bank (aa) Arkansas 100.00%
Farmers & Merchants Development Corp. (bb) Arkansas 100.00%
Sunburst Bank, Mississippi (a) Mississippi 100.00%
Sunburst Mortgage Corporation (cc) Mississippi 100.00%
Sunburst Financial Services, Inc. (cc) Mississippi 100.00%
System Properties, Inc. (cc) Mississippi 100.00%
Sunburst Building, Inc. (cc) Mississippi 100.00%
Sunburst Bank, Louisiana (a) Louisiana 100.00%
Capbanc Leasing Corporation (dd) Louisiana 100.00%
Capital Equity Corporation (dd) Louisiana 100.00%
Collection Accounts (dd) Louisiana 100.00%
Mainstreet Development Corporation (dd) Louisiana 100.00%
Sunburst Financial Group, Inc. (a) Delaware 100.00%
HFB Acquisition Company, Inc. (a) and (g) Tennessee 100.00%
Union Planters-FAC Acquisition Company (a) and (g) Tennessee 100.00%
</TABLE>
________________________
(1) Balance held by Directors of the Bank as director's qualifying shares
(a) Subsidiary of Union Planters Corporation
(b) Subsidiary of Union Planters National Bank
(c) Subsidiary of Union Planters Bank of East Tennessee, N.A.
(d) Subsidiary of Union Planters Investment Bankers Corporation
(e) Subsidiary of Union Planters Bank of West Tennessee
<PAGE> 3
EXHIBIT 21
PAGE 3 OF 3
SUBSIDIARIES OF THE REGISTRANT (continued)
UNION PLANTERS CORPORATION, Registrant,
A registered bank holding company and savings and loan holding company
(f) Subsidiary of Southeastern Bancshares, Inc.
(g) Inactive subsidiary
(h) Subsidiary of North Arkansas Bancshares, Inc.
(i) Subsidiary of First National Bank
(j) Subsidiary of Bank of East Tennessee
(k) Subsidiary of Security Trust Federal Savings and Loan Association
(l) Subsidiary of Union Planters Bank, FSB
(m) Subsidiary of Northwest Tennessee Savings and Loan Association, Inc.
(n) Subsidiary of First State Bancshares, Inc.
(o) Subsidiary of Garrett Bancshares, Inc.
(p) Subsidiary of First Financial Services, Inc.
(q) Subsidiary of First State Bank
(r) Subsidiary of Bank of Commerce
(s) Subsidiary of Central State Bancorp, Inc.
(t) Subsidiary of Mid-South Bancorp, Inc.
(u) Subsidiary of First National Bancorp of Shelbyville
(v) Subsidiary of Liberty Bancshares, Inc.
(w) Subsidiary of Liberty Federal Savings Bank
(x) Subsidiary of BNF Bancorp, Inc.
(y) Subsidiary of BANKFIRST, a federal savings bank
(z) Subsidiary of The Commercial Bancorp, Inc.
(aa) Subsidiary of Mid South Bancshares, Inc.
(bb) Subsidiary of Farmers and Merchants Bank
(cc) Subsidiary of Sunburst Bank, Mississippi
(dd) Subsidiary of Sunburst Bank, Louisiana
(ee) Charter in process of being surrendered
(ff) Charter in process of being sold
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby 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 26, 1995 appearing on page 35 of the
Annual Report to Shareholders which is incorporated in this Annual Report on
Form 10-K.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Memphis, Tennessee
March 22, 1995
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 488,722
<INT-BEARING-DEPOSITS> 10,641
<FED-FUNDS-SOLD> 29,953
<TRADING-ASSETS> 155,951
<INVESTMENTS-HELD-FOR-SALE> 1,928,984
<INVESTMENTS-CARRYING> 1,033,160
<INVESTMENTS-MARKET> 1,009,969
<LOANS> 5,949,128
<ALLOWANCE> 122,089
<TOTAL-ASSETS> 10,015,069
<DEPOSITS> 8,417,842
<SHORT-TERM> 415,171
<LIABILITIES-OTHER> 110,398
<LONG-TERM> 340,951
<COMMON> 200,897
0
87,298
<OTHER-SE> 442,512
<TOTAL-LIABILITIES-AND-EQUITY> 10,015,069
<INTEREST-LOAN> 461,724
<INTEREST-INVEST> 188,835
<INTEREST-OTHER> 13,498
<INTEREST-TOTAL> 664,057
<INTEREST-DEPOSIT> 235,815
<INTEREST-EXPENSE> 275,779
<INTEREST-INCOME-NET> 388,278
<LOAN-LOSSES> 3,636
<SECURITIES-GAINS> (20,298)
<EXPENSE-OTHER> 398,835
<INCOME-PRETAX> 79,369
<INCOME-PRE-EXTRAORDINARY> 58,608
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,608
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.25
<YIELD-ACTUAL> 4.39
<LOANS-NON> 17,476
<LOANS-PAST> 5,874
<LOANS-TROUBLED> 1,564
<LOANS-PROBLEM> 11,600
<ALLOWANCE-OPEN> 114,353
<CHARGE-OFFS> 18,439
<RECOVERIES> 13,287
<ALLOWANCE-CLOSE> 122,089
<ALLOWANCE-DOMESTIC> 122,089
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
