<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the transition period ___ to ___.
Commission File No. 1-10160
---------
UNION PLANTERS CORPORATION
(Exact name of registrant as specified in its charter)
Tennessee 62-0859007
- ------------------------ ---------------------------------
(State of incorporation) (IRS Employer Identification No.)
7130 Goodlett Farms Parkway, Memphis, Tennessee 38018
------------------------------------------------------------------
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (901) 383-6000
------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding at July 31, 1996
- ------------------------- ------------------------------
Common stock $5 par value 46,129,307
<PAGE> 2
UNION PLANTERS CORPORATION AND SUBSIDIARIES
FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1996
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
a) Consolidated Balance Sheet - June 30, 1996,
June 30, 1995, and December 31, 1995 3
b) Consolidated Statement of Earnings -
Three and Six Months Ended June 30, 1996 and 1995 4
c) Consolidated Statement of Changes in
Shareholders' Equity - Six Months Ended
June 30, 1996 5
d) Consolidated Statement of Cash Flows -
Six Months Ended June 30, 1996 and 1995 6
e) Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 30
Item 2. Changes in Securities 30
Item 3. Defaults Upon Senior Securities 30
Item 4. Submission of Matters to a Vote of Security Holders 30
Item 5. Other Information 30
Item 6. Exhibits and Reports on Form 8-K 31
Signatures 32
</TABLE>
2
<PAGE> 3
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
------------------------- DECEMBER 31,
1996 1995 1995
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 465,555 $ 468,297 $ 432,949
Interest-bearing deposits at financial institutions 4,962 35,692 13,571
Federal funds sold and securities purchased
under agreements to resell 61,918 142,626 356,655
Trading account assets 134,528 210,775 121,927
Loans held for resale 68,046 59,384 68,819
Investment securities
Available for sale (Amortized cost: $3,049,657; $1,531,222;
and $2,740,143, respectively) 3,053,759 1,532,593 2,774,890
Held to maturity (Fair value: $1,130,005 at June 30, 1995) - 1,106,952 -
Loans 7,201,771 6,992,918 7,100,051
Less: Unearned income (31,899) (32,316) (30,198)
Allowance for losses on loans (136,255) (132,884) (133,487)
----------- ----------- -----------
Net loans 7,033,617 6,827,718 6,936,366
Premises and equipment 229,124 228,219 228,272
Accrued interest receivable 103,009 91,783 100,686
Goodwill and other intangibles 60,610 58,124 58,535
Other assets 152,497 159,319 184,446
----------- ----------- -----------
TOTAL ASSETS $11,367,625 $10,921,482 $11,277,116
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 1,392,856 $ 1,359,373 $ 1,420,358
Certificates of deposit of $100,000 and over 749,833 700,218 754,434
Other interest-bearing 7,201,204 7,231,738 7,272,944
----------- ----------- -----------
Total deposits 9,343,893 9,291,329 9,447,736
Short-term borrowings 421,061 167,540 241,023
Federal Home Loan Bank advances 258,269 298,614 268,892
Long-term debt 214,875 142,200 216,366
Accrued interest, expenses, and taxes 83,349 82,663 90,754
Other liabilities 38,570 42,070 46,014
----------- ----------- -----------
TOTAL LIABILITIES 10,360,017 10,024,416 10,310,785
----------- ----------- -----------
Commitments and contingent liabilities - - -
Shareholders' equity
Preferred stock
Convertible 87,233 87,299 91,810
Nonconvertible - 13,800 -
Common stock, $5 par value; 100,000,000 shares authorized;
46,120,313 issued and outstanding (44,543,272 at
June 30, 1995 and 45,447,031 at December 31, 1995) 230,602 222,716 227,235
Additional paid-in capital 123,962 94,870 111,348
Net unrealized gain on available for sale securities 2,489 664 21,366
Retained earnings 563,322 477,717 514,572
----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY 1,007,608 897,066 966,331
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $11,367,625 $10,921,482 $11,277,116
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1996 1995 1996 1995
-------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $163,219 $157,292 $327,252 $306,250
Interest on investment securities
Taxable 39,247 34,534 74,982 71,338
Tax-exempt 7,441 7,950 14,991 16,064
Interest on deposits at financial institutions 41 645 98 960
Interest on federal funds sold and securities
purchased under agreements to resell 1,322 2,753 6,140 3,596
Interest on trading account assets 2,728 3,269 5,115 6,005
Interest on loans held for resale 1,411 1,034 2,838 1,356
-------- -------- -------- --------
Total interest income 215,409 207,477 431,416 405,569
-------- -------- -------- --------
INTEREST EXPENSE
Interest on deposits 87,259 86,591 177,253 164,537
Interest on short-term borrowings 3,729 2,941 6,663 7,762
Interest on Federal Home Loan Bank advances
and long-term debt 7,578 7,220 15,184 13,706
-------- -------- -------- --------
Total interest expense 98,566 96,752 199,100 186,005
-------- -------- -------- --------
NET INTEREST INCOME 116,843 110,725 232,316 219,564
Provision for losses on loans 7,870 2,316 15,851 4,538
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR
LOSSES ON LOANS 108,973 108,409 216,465 215,026
-------- -------- -------- --------
NONINTEREST INCOME
Service charges on deposit accounts 17,470 18,649 34,111 35,847
Bankcard income 5,128 5,015 10,287 9,771
Mortgage servicing income 2,429 2,087 4,872 4,400
Trust service income 3,482 2,037 5,772 4,111
Profits and commissions from trading activities 897 3,422 3,104 5,036
Investment securities gains (losses) 6 18 66 (3)
Other income 11,861 8,397 23,258 16,542
-------- -------- -------- --------
Total noninterest income 41,273 39,625 81,470 75,704
-------- -------- -------- --------
NONINTEREST EXPENSE
Salaries and employee benefits 42,378 43,148 85,806 86,405
Net occupancy expense 6,749 6,695 13,565 13,629
Equipment expense 7,131 8,068 14,391 15,601
Other expense 32,952 35,795 64,600 68,736
-------- -------- -------- --------
Total noninterest expense 89,210 93,706 178,362 184,371
-------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES 61,036 54,328 119,573 106,359
Applicable income taxes 20,393 17,877 39,786 34,251
-------- -------- -------- --------
NET EARNINGS $ 40,643 $ 36,451 $ 79,787 $ 72,108
======== ======== ======== ========
NET EARNINGS APPLICABLE TO COMMON SHARES $ 38,938 $ 34,428 $ 76,246 $ 67,983
======== ======== ======== ========
EARNINGS PER COMMON SHARE
Primary $ .84 $ .77 $ 1.66 $ 1.52
Fully diluted .80 .73 1.58 1.45
AVERAGE COMMON SHARES OUTSTANDING (IN THOUSANDS)
Primary 46,128 44,780 45,940 44,648
Fully diluted 50,603 49,280 50,533 49,138
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
NET UNREALIZED
GAIN 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, 1996 $91,810 $227,235 $111,348 $ 21,366 $514,572 $ 966,331
Net earnings - - - - 79,787 79,787
Cash dividends
Common Stock, $.54 per share - - - - (24,713) (24,713)
Series B Preferred Stock, $1.02 per share - - - - (45) (45)
Series E Preferred Stock, $1.00 per share - - - - (3,496) (3,496)
Conversion of Series B Preferred Stock
to Common Stock (4,400) 1,699 2,701 - - -
Conversion of Series E Preferred Stock
to Common Stock (177) 44 133 - - -
Conversion of Subordinated Convertible
Notes to Common Stock - 4 8 - - 12
Common shares issued under employee
benefit plans and dividend
reinvestment plan, net
of shares repurchased - 1,623 9,769 - (2,768) 8,624
Change in net unrealized gain on
available for sale securities,
net of taxes - - - (18,877) - (18,877)
Other - (3) 3 - (15) (15)
------- -------- -------- -------- -------- ----------
BALANCE, JUNE 30, 1996 $87,233 $230,602 $123,962 $ 2,489 $563,322 $1,007,608
======= ======== ======== ======== ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------
1996 1995
----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 79,787 $ 72,108
Reconciliation of net earnings to net cash provided by operating activities:
Provision for losses on loans and other real estate 16,065 4,755
Depreciation and amortization 11,584 11,754
Amortization of intangibles 4,114 4,255
Net accretion of investment securities (4,746) (73)
Net realized gains on sales of investment securities (66) (3)
Deferred income tax benefit (750) (2,310)
(Increase) decrease in assets
Trading account assets and loans held for resale (11,828) (88,327)
Accrued interest receivable and other assets 47,115 11,288
(Decrease) increase in accrued interest, expenses, taxes, and other liabilities (17,895) 8,057
Other, net 175 517
----------- ---------
Net cash provided by operating activities 123,555 22,021
----------- ---------
INVESTING ACTIVITIES
Net decrease (increase) in short-term investments 8,609 (16,058)
Proceeds from sales of available for sale securities 13,536 318,822
Proceeds from maturities, calls, and prepayments of available for sale securities 1,106,803 250,450
Purchases of available for sale securities (1,384,628) (89,636)
Proceeds from maturities, calls, and prepayments of held to maturity securities - 104,718
Purchases of held to maturity securities - (60,022)
Net increase in loans (69,963) (161,548)
Net cash received from purchases of financial institutions 11,297 2,568
Sales of premises and equipment 3,862 6,802
Purchases of premises and equipment (13,278) (14,122)
----------- ---------
Net cash (used) provided by investing activities (323,762) 341,974
----------- ---------
FINANCING ACTIVITIES
Net decrease in deposits (210,130) (80,012)
Net increase (decrease) in short-term borrowings 172,038 (287,470)
Proceeds from FHLB advances and long-term debt 48,007 146,811
Repayment of FHLB advances and long-term debt (52,166) (69,566)
Proceeds from issuance of common stock, net 12,313 8,440
Purchase and retirement of common stock, net (3,689) (485)
Cash dividends paid (28,297) (24,683)
----------- ---------
Net cash used by financing activities (61,924) (306,965)
----------- ---------
Net (decrease) increase in cash and cash equivalents (262,131) 57,030
Cash and cash equivalents at the beginning of the period 789,604 553,893
----------- ---------
Cash and cash equivalents at the end of the period $ 527,473 $ 610,923
=========== =========
SUPPLEMENTAL DISCLOSURES
Purchases of other financial institutions:
Fair value of assets acquired $ 129,526 $ 139,808
Liabilities assumed (109,476) (126,302)
Common stock issued - (6,649)
----------- ---------
Cash paid for the purchase of other financial institutions 20,050 6,857
Cash and cash equivalents acquired (31,347) (9,425)
----------- ---------
Net cash received from purchases of financial institutions $ (11,297) $ (2,568)
=========== =========
Cash paid for
Interest $ 205,257 $ 175,883
Taxes 38,826 17,699
Unrealized gain on available for sale securities 4,102 1,371
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
UNION PLANTERS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. PRINCIPLES OF ACCOUNTING
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles. The foregoing financial
statements are unaudited; however, in the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the consolidated financial condition, results of operations,
and cash flows for the interim periods have been included.
The accounting policies followed by Union Planters Corporation and its
subsidiaries (the Corporation) for interim financial reporting are consistent
with the accounting policies followed for annual financial reporting except as
noted below. The notes included herein should be read in conjunction with the
notes to the consolidated financial statements included in the Corporation's
1995 Annual Report to Shareholders, a copy of which is Exhibit 13 to the
Corporation's Annual Report on Form 10-K for the year ended December 31, 1995
(1995 10-K). Certain 1995 amounts have been reclassified to be consistent with
the 1996 financial reporting presentation. Operating results for the six months
ended June 30, 1996 are not necessarily indicative of the results that may be
expected for the year.
NOTE 2. ACQUISITIONS
Reference is made to the Corporation's Current Reports on Form 8-K dated
March 8, 1996, April 1, 1996, May 21, 1996, and May 22, 1996 for additional
information regarding consummated and pending acquisitions.
CONSUMMATED ACQUISITIONS
On January 2, 1996, the Corporation acquired First Bancshares of Eastern
Arkansas, Inc., and First Bancshares of N.E. Arkansas, Inc., for total cash
consideration of $20.1 million, resulting in total intangibles of $5.6 million.
Total assets of the institutions at the date of acquisition were $122 million.
Reference is made to Note 2 of the consolidated financial statements on
pages 41 through 43 of the Corporation's Annual Report to Shareholders for
information regarding acquisitions completed in 1995.
PENDING ACQUISITIONS
The Corporation has signed definitive agreements pursuant to which it
would acquire the following institutions. The amount of consideration to be
delivered by the Corporation and method of accounting are based on currently
available information and are subject to change based on the terms of the
definitive agreements. The closing of each of these transactions is subject to
obtaining shareholder and regulatory approvals and the satisfaction of a number
of other contractual conditions. All of these transactions are expected to be
completed in the fourth quarter of 1996.
7
<PAGE> 8
<TABLE>
<CAPTION>
ANTICIPATED APPROXIMATE
APPROXIMATE METHOD OF TOTAL ASSETS
INSTITUTION CONSIDERATION (1) ACCOUNTING AT JUNE 30, 1996
- ------------------------- ----------------------------- -------------------- --------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Eastern National Bank, in Cash, Notes, and Stock (2) Purchase $ 286
Miami, Florida (ENB)
Valley Federal Savings Bank in 435,000 shares of Common Stock Pooling of Interests 118
Sheffield, Alabama
Franklin Financial Group, Inc. 738,000 shares of Common Stock Pooling of Interests 138
in Morristown, Tennessee and its
subsidiary, Franklin Federal
Savings Bank
Leader Financial Corporation 16,600,000 shares of Common Stock Pooling of Interests 3,211
in Memphis, Tennessee and its
subsidiary, Leader Federal Bank
for Savings
BancAlabama, Inc. in Huntsville, 415,000 shares of Common Stock Pooling of Interests 99
Alabama and its subsidiary,
BankAlabama-Huntsville
Financial Bancshares, Inc. in 1,220,000 shares of Common Stock Purchase 324
St. Louis, Missouri and its
subsidiaries: First Financial
Bank of St. Louis, Missouri;
Citizens First Financial Bank in
Dexter, Missouri; First Financial
Bank of Southeast Missouri in
Sikeston, Missouri; First Financial
Bank of Mississippi County in
East Prairie, Missouri; and First
Financial Bank of Ste. Genevieve,
Missouri ------
TOTAL $4,176
======
</TABLE>
- ----------------------
(1) Includes estimated shares to be issued for outstanding stock options of the
institutions to be acquired.
(2) Includes cash in the amount of $4.5 million, Union Planters Corporation
Promissory Notes in the face amount of up to $14.5 million, and up to
317,458 shares of Series E Preferred Stock. It is expected that this
acquisition will be completed on or before December 31, 1996, provided
that disputes between ENB's shareholders and agencies of the Republic of
Venezuela and others pending in the United States District Court for the
Southern District of Florida shall have been resolved to the satisfaction
of the Corporation by that date.
NOTE 3. LOANS
Loans are summarized by type as follows:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------- DECEMBER 31,
1996 1995 1995
---------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Commercial, financial, and agricultural $1,436,794 $1,469,283 $1,450,050
Real estate - construction 329,778 303,540 322,701
Real estate - mortgage
Secured by 1-4 family residential 2,347,106 2,295,796 2,320,168
Other mortgage loans 1,333,228 1,323,831 1,283,937
Home equity 168,098 172,701 167,223
Consumer
Credit cards and related plans 388,410 361,619 387,445
Other consumer 1,136,595 1,016,926 1,108,127
Direct lease financing 61,762 49,222 60,400
---------- ---------- ----------
TOTAL LOANS $7,201,771 $6,992,918 $7,100,051
========== ========== ==========
</TABLE>
8
<PAGE> 9
Nonperforming loans are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Nonaccrual loans $37,196 $32,847
Restructured loans 1,150 1,330
------- -------
Total nonperforming loans $38,346 $34,177
======= =======
</TABLE>
NOTE 4. ALLOWANCE FOR LOSSES ON LOANS
The changes in the allowance for losses on loans for the three and six
months ended June 30, 1996, are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1996
------------------ ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Beginning balance $136,277 $133,487
Increases due to acquisitions - 615
Provision charged to expense 7,870 15,851
Recoveries 2,760 6,237
Amounts charged off (10,652) (19,935)
-------- --------
Balance, June 30, 1996 $136,255 $136,255
======== ========
</TABLE>
On January 1, 1995, the Corporation adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan," as amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan -- Income Recognition and Disclosures." As
of June 30, 1996, the amount of the Corporation's impaired loans and
disclosures related thereto was not material.
NOTE 5. INVESTMENT SECURITIES
The amortized cost and fair value of investment securities (all are
classified as available for sale securities) are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------------------
UNREALIZED
AMORTIZED --------------------- FAIR
COST GAINS LOSSES VALUE
---------- ------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Government obligations
U.S. Treasury $1,006,387 $ 2,578 $ 4,700 $1,004,265
U.S. Government agencies
Collateralized mortgage obligations 209,922 580 1,626 208,876
Mortgage-backed 520,857 4,586 4,927 520,516
Other 716,448 875 5,567 711,756
---------- ------- ------- ----------
Total U.S. Government obligations 2,453,614 8,619 16,820 2,445,413
Obligations of states and political subdivisions 483,076 16,459 4,170 495,365
Other stocks and securities 112,967 123 109 112,981
---------- ------- ------- ----------
TOTAL AVAILABLE FOR SALE SECURITIES $3,049,657 $25,201 $21,099 $3,053,759
========== ======= ======= ==========
<CAPTION>
DECEMBER 31, 1995
----------------------------------------------------
UNREALIZED
AMORTIZED --------------------- FAIR
COST GAINS LOSSES VALUE
---------- ------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Government obligations
U.S. Treasury $ 825,107 $ 8,300 $ 346 $ 833,061
U.S. Government agencies
Collateralized mortgage obligations 166,109 578 782 165,905
Mortgage-backed 582,310 6,746 1,436 587,620
Other 573,250 2,159 960 574,449
---------- ------- ------- ----------
Total U.S. Government obligations 2,146,776 17,783 3,524 2,161,035
Obligations of states and political subdivisions 490,676 22,833 2,481 511,028
Other stocks and securities 102,691 225 89 102,827
---------- ------- ------- ----------
TOTAL AVAILABLE FOR SALE SECURITIES $2,740,143 $40,841 $ 6,094 $2,774,890
========== ======= ======= ==========
</TABLE>
9
<PAGE> 10
Investment securities having a carrying value of approximately $1.1
billion at both June 30, 1996 and December 31, 1995, respectively, were pledged
to secure public and trust funds on deposit, FHLB advances, and securities sold
under agreements to repurchase.
The following table presents the gross realized gains and losses on
einvestment securities for the six months ended June 30, 1996 and 1995. The
gains and losses on held to maturity securities for 1995 resulted from calls of
securities.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------------------------
REALIZED GAINS REALIZED LOSSES
------------------ ---------------------
1996 1995 1996 1995
------ ------ ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Available for sale securities $ 71 $2,089 $ (5) $(2,156)
Held to maturity securities - 65 - (1)
------ ------ ------ -------
Total $ 71 $2,154 $ (5) $(2,157)
====== ====== ====== =======
</TABLE>
NOTE 6. OTHER NONINTEREST INCOME AND EXPENSE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ----------------------
1996 1995 1996 1995
------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
OTHER NONINTEREST INCOME
Credit life insurance commissions $ 1,265 $ 1,245 $ 2,453 $ 2,458
Sale of mortgage servicing 221 167 583 264
Customer ATM usage fees 843 852 1,619 1,617
VSIBG partnership earnings 742 512 1,905 653
Brokerage fee income 780 359 1,413 717
Other 8,010 5,262 15,285 10,833
------- ------- ------- -------
TOTAL OTHER NONINTEREST INCOME $11,861 $ 8,397 $23,258 $16,542
======= ======= ======= =======
OTHER NONINTEREST EXPENSE
FDIC insurance assessments $ 1,012 $ 5,185 $ 2,091 $10,087
Stationery and supplies 2,970 2,815 6,217 5,498
Advertising and promotion 2,621 2,538 5,174 4,997
Postage and other carrier 2,782 2,785 5,599 5,548
Other contracted services 2,377 1,671 4,710 3,514
Communications 2,470 1,808 4,782 3,506
Amortization of goodwill and other intangibles 2,050 1,839 4,114 3,664
Brokerage and clearing fees 799 1,839 2,076 2,704
Other personnel services 1,672 1,212 3,292 2,438
Miscellaneous charge-offs 1,637 1,079 3,020 1,570
Merchant credit card charges 1,330 1,095 2,388 1,994
Legal fees 1,200 846 2,038 1,715
Dues, subscriptions, and contributions 754 944 1,546 1,923
Taxes other than income taxes 1,039 710 1,945 1,662
Travel 873 798 1,612 1,476
Audit fees 674 605 1,139 1,380
Insurance 461 491 952 992
Consultant fees 562 903 968 1,501
Federal Reserve fees 577 417 1,146 816
Amortization of mortgage servicing rights 422 419 778 691
Other real estate expense 223 110 367 397
Other 4,447 5,686 8,646 10,663
------- ------- ------- -------
TOTAL OTHER NONINTEREST EXPENSE $32,952 $35,795 $64,600 $68,736
======= ======= ======= =======
</TABLE>
10
<PAGE> 11
NOTE 7. INCOME TAXES
Applicable income taxes for the six months ended June 30, 1996, were $39.8
million, resulting in an effective tax rate of 33.3%. Applicable income taxes
for the same period in 1995 were $34.3 million, resulting in an effective tax
rate of 32.2%. The tax expense (benefit) applicable to investment securities
gains (losses) for the six months ended June 30, 1996 and 1995 was $25,598 and
($429,000), respectively. The increase in the effective rate for the second
quarter of 1996, as compared to the same period in 1995, is due primarily to
the increase in taxable earnings for the period.
At June 30, 1996, the Corporation had a net deferred tax asset of $51.7
million compared to $39.1 million at December 31, 1995. The net deferred tax
asset for the two periods included a deferred tax liability related to the net
unrealized gain on available for sale securities of $1.6 million and $13.4
million, respectively, which accounted for most of the change in the net
deferred tax asset. Management continues to believe that, based upon historical
earnings, normal operations will continue to generate sufficient taxable income
to realize the portion of the deferred tax asset that is dependent upon the
generation of future taxable income.
NOTE 8. FEDERAL HOME LOAN BANK ADVANCES AND LONG-TERM DEBT
FEDERAL HOME LOAN BANK (FHLB) ADVANCES
Certain of the Corporation's banking and thrift subsidiaries had
outstanding obligations to the FHLB aggregating $258.3 million at June 30, 1996
under Blanket Agreements for Advances and Security Agreements (the
"Agreements"). The Agreements entitle these subsidiaries to borrow funds from
the FHLB to fund mortgage loan programs and to satisfy certain other funding
needs. Of the amounts outstanding at June 30, 1996, $186.0 million were at
variable rates and $72.3 million were at fixed rates with interest rates
ranging from 3.25% to 9.0% and maturities ranging from three months to 29
years. At June 30, 1996, FHLB advances that have remaining maturities within
one year, one to five years, and after five years were $66.7 million, $152.7
million, and $38.9 million, respectively. The value of the mortgage-backed
securities and mortgage loans pledged under the Agreements generally must be
maintained at not less than 115% and 150%, respectively, of the advances
outstanding. At June 30, 1996, the Corporation had an adequate amount of
mortgage-backed securities and loans to satisfy the collateral requirements.
NOTE 9. SHAREHOLDERS' EQUITY
PREFERRED STOCK
The Corporation's outstanding preferred stock, all of which is convertible
into shares of the Corporation's Common Stock, is summarized as follows:
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Preferred stock, without par value,
10,000,000 shares authorized
Series A Preferred Stock,
250,000 shares authorized, none issued $ - $ -
Series B, $8 Nonredeemable, Cumulative,
Convertible Preferred Stock
(stated at liquidation value of $100 per share),
no shares issued and outstanding - 4,400
Series E, 8% Cumulative, Convertible, Preferred Stock
(stated at liquidation value of $25 per share),
3,489,336 shares issued and outstanding 87,233 87,410
------- -------
TOTAL PREFERRED STOCK $87,233 $91,810
======= =======
</TABLE>
On April 30, 1996, all of the Series B Preferred Stock was converted into
339,765 shares of the Corporation's Common Stock.
On July 18, 1996, the Board of Directors increased the number of
authorized shares of Series A Preferred Stock from 250,000 to 750,000.
11
<PAGE> 12
NOTE 10. CONTINGENT LIABILITIES
CONTINGENT LIABILITIES
The Corporation and/or various subsidiaries are parties to certain pending
or threatened civil actions which are described in Item 3, Part I of the
Corporation's 1995 10-K, in Note 19 to the Corporation's consolidated financial
statements found on pages 62 and 63 of the 1995 Annual Report to Shareholders
(1995 Annual Report), which is Exhibit 13 to the Corporation's 1995 10-K, and
in Note 10 of the Corporation's quarterly report on Form 10-Q dated March 31,
1996. Various other legal proceedings pending against the Corporation and/or
its subsidiaries have arisen in the ordinary course of business.
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 in any of the pending or threatened
actions which affected such opinions during the second quarter of 1996.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following provides a narrative discussion and analysis of significant
changes in the Corporation's results of operations and financial condition.
This discussion should be read in conjunction with the consolidated financial
statements and related financial analysis set forth in the Corporation's 1995
Annual Report, the Corporation's Quarterly Report on Form 10-Q dated March 31,
1996, the Corporation's interim unaudited financial statements and notes for
the three and six months ended June 30, 1996, included in Part I hereof, and
the other supplemental financial data included in this discussion.
Certain of the information included in this discussion contains
forward-looking statements and information that are based on management's
belief as well as certain assumptions made by, and information currently
available to management. When used in this discussion, the words "anticipate,"
"project," "expect," and similar expressions are intended to identify
forward-looking statements. Although management of the Corporation believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Such statements are subject to certain risks, uncertainties, and
assumptions. Should one or more of these risks materialize, or should such
underlying assumptions prove to be incorrect, actual results may vary
materially from those anticipated, estimated, projected or expected. Among key
factors that may have a direct bearing on the Corporation's operating results
(particularly described in, but not limited to, the discussions under the
headings "Earnings Considerations Related to Pending Acquisitions" and "Special
Regulatory Assessment") are fluctuations in the economy; the actions taken by
the Federal Reserve for the purpose of managing the economy; the Corporation's
ability to achieve the anticipated cost and savings related to pending
acquisitions; the ability of the Corporation to achieve the anticipated revenue
enhancements; the assimilation of the acquired operations into the
Corporation's culture, including the ability to instill the Corporation's
credit culture and approach to operating efficiencies into the acquired
operations; the continued growth of the markets in which the Corporation
operates consistently with recent historical experience; the absence of
undisclosed material contingencies related to the acquired operations,
including asset quality and litigation contingencies; the enactment of federal
legislation impacting the operations of the Corporation; and the Corporation's
ability to expand into new markets and to maintain profit margins in the face
of pricing pressure.
12
<PAGE> 13
The following table presents selected financial highlights for the three
and six months ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
PERCENTAGE
THREE MONTHS ENDED SIX MONTHS ENDED CHANGE
JUNE 30, JUNE 30, --------------------
------------------------ ----------------------- THREE SIX
1996 1995 1996 1995 MONTHS MONTHS
------- ------- ------- ------- ------ ------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net earnings $40,643 $36,451 $79,787 $72,108 12% 11%
Primary earnings per common share .84 .77 1.66 1.52 9 9
Fully diluted earnings per common share .80 .73 1.58 1.45 10 9
Return on average assets 1.45% 1.35% 1.42% 1.34%
Return on average common equity 17.44 17.88 17.40 18.01
Dividends per common share $ .27 $ .25 $ .54 $ .48 8 13
Net interest margin (FTE) 4.65% 4.60% 4.63% 4.58%
Interest rate spread (FTE) 3.95 3.90 3.93 3.92
Expense ratio 1.75 2.01 1.75 2.02
Efficiency ratio 55.40 60.61 55.62 60.66
Book value per common share $ 19.96 $ 17.87 12
Shareholders' equity to total assets 8.86% 8.21%
Leverage ratio 8.49 7.88
</TABLE>
- ---------------------------
Certain line items in the above table are defined as follows:
Net interest margin -- Net interest income as a percentage of average earning
assets
Interest rate spread -- Difference in the yield on average earning assets and
the rate on average interest-bearing liabilities
Expense ratio -- Operating net noninterest expense [noninterest expense minus
noninterest income, excluding significant nonrecurring revenues/expenses and
investment securities gains (losses)] divided by average assets
Efficiency ratio -- Operating noninterest expense (excluding significant
nonrecurring expenses) divided by net interest income (FTE) plus noninterest
income, excluding significant nonrecurring revenues and investment securities
gains (losses)
FTE -- Fully taxable-equivalent basis
13
<PAGE> 14
OPERATING RESULTS -- THREE AND SIX MONTHS ENDED JUNE 30, 1996
The following table presents the contributions to fully diluted earnings
per common share. A discussion of the operating results follows this table.
UNION PLANTERS CORPORATION
CONTRIBUTIONS TO FULLY DILUTED EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, EPS
-------------------- INCREASE
1996 1995 (DECREASE)
------ ------ ----------
<S> <C> <C> <C>
Net interest income-FTE $4.76 $4.64 $.12
Provision for losses on loans (.31) (.09) (.22)
----- ----- ----
Net interest income after provision
for losses on loans-FTE 4.45 4.55 (.10)
----- ----- ----
Noninterest income
Service charges on deposit accounts .68 .73 (.05)
Bank card income .20 .20 -
Mortgage servicing income .10 .09 .01
Trust service income .11 .08 03
Profits and commissions from trading activities .06 .10 (.04)
Investment securities gains - - -
Other income .46 .34 .12
----- ----- ----
Total noninterest income 1.61 1.54 .07
----- ----- ----
Noninterest expense
Salaries and employee benefits 1.70 1.76 .06
Net occupancy expense .27 .28 .01
Equipment expense .28 .32 .04
Other expense 1.28 1.40 .12
----- ----- ----
Total noninterest expense 3.53 3.76 .23
----- ----- ----
Earnings before income taxes-FTE 2.53 2.33 .20
Applicable income taxes-FTE .95 .87 (.08)
----- ----- ----
Net earnings 1.58 1.46 .12
Less preferred stock dividends - .01 .01
----- ----- ----
Fully diluted earnings per share $1.58 $1.45 $.13
===== ===== ====
Change in net earnings applicable to common shares
using previous year average shares outstanding $.17
Change in average shares outstanding (.04)
----
Change in net earnings $.13
====
</TABLE>
- --------------------------------
FTE - Fully taxable-equivalent basis
14
<PAGE> 15
SECOND QUARTER EARNINGS OVERVIEW
For the second quarter of 1996, the Corporation reported record earnings
of $40.6 million, or $.80 per fully diluted common share. This represents a 12%
increase compared to net earnings for the same period in 1995 of $36.5 million,
or $.73 per fully diluted common share. Returns on average assets and average
common equity for the second quarter of 1996 were 1.45% and 17.44%,
respectively, which compares to 1.35% and 17.88% for the same period in 1995.
Net earnings for the six months ended June 30, 1996 were $79.8 million, or
$1.58 per fully diluted common share. This compares to net earnings of $72.1
million, or $1.45 per fully diluted common share, for the same period in 1995.
The improvement in net earnings for the second quarter of 1996 is
attributable to increases in both net interest income of $6.1 million and
noninterest income of $1.6 million, while noninterest expense decreased $4.5
million. Partially offsetting these items was an increase in the provision for
losses on loans of $5.6 million. The following is a more complete discussion
and analysis of the operating results for the three and six months ended June
30, 1996 compared to the same periods in 1995.
EARNINGS ANALYSIS
NET INTEREST INCOME
Net interest income (FTE) for the second quarter of 1996 was $121.0
million, a 5% increase over the second quarter of 1995 which was $115.0 million
and up 1% from the first quarter of 1996 which was $119.5 million. For the
first half of 1996, net interest income was $240.5 million compared to $228.2
million for the same period in 1995. The improvement is attributable to the
growth of average earning assets, primarily loan and investment securities, and
higher yields on loans, partially offset by a higher level of average
interest-bearing liabilities and higher rates paid on these liabilities.
Reference is made to the Corporation's average balance sheet and analysis of
volume and rate changes which follow this discussion for additional information
regarding the changes in net interest income.
The net interest margin for the second quarter of 1996 was 4.65% which
compares to 4.60% for the same quarter last year and 4.61% for the first
quarter of 1996. The net interest margin for the first half of 1996 was 4.63%,
five basis points higher than the net interest margin for the same period in
1995. The interest rate spread increased to 3.95% for the second quarter of
1996 from 3.90% for the same period a year ago and compared to 3.91% for the
first quarter of 1996.
INTEREST INCOME
The following table presents a breakdown of average earning assets for the
three and six months ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1996 1995 1996 1995
------ ------ ------ ------
(DOLLARS IN BILLIONS)
<S> <C> <C> <C> <C>
Average earning assets $10.5 $10.0 $10.4 $10.0
Comprised of:
Loans 69% 69% 69% 68%
Investment securities 29 27 28 29
Other earning assets 2 4 3 3
- -------------------------------
Fully taxable-equivalent yield on
average earning assets 8.44% 8.47% 8.46% 8.32%
</TABLE>
15
<PAGE> 16
Fully taxable-equivalent interest income for the second quarter of 1996
increased 4% compared to the same period in 1995 and was level with the first
quarter of 1996. The increase for the second quarter of 1996 was due to the
growth of average earning assets, primarily loans and investment securities,
which increased interest income approximately $8.8 million. Partially
offsetting this increase was a three-basis-point decline in the average yield
on earning assets of approximately $1.0 million. Average loans for the second
quarter of 1996 increased 4% over the same period in 1995 and were level with
the first quarter of 1996. Investment securities increased 11% for the same
period. For the quarter, the mix of average earning assets remained constant
with a slight increase in investment securities.
For the first half of 1996, fully-taxable interest income increased 6%
compared to the same period in 1995. The increase was attributable to growth of
average earning assets, principally loans, which accounted for approximately
$17.9 million of the increase and a 14-basis-point increase in the average
yield on earning assets which accounted for $7.5 million of the change. For the
first half of 1996, the mix of average earning assets remained constant.
INTEREST EXPENSE
The following table presents a breakdown of average interest-bearing
liabilities for the three and six months ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
(DOLLARS IN BILLIONS)
<S> <C> <C> <C> <C>
Average interest-bearing liabilities $8.8 $8.5 $8.8 $8.5
Comprised of:
Deposits 91% 92% 92% 92%
Short-term borrowings 4 3 3 3
FHLB advances and long-term debt 5 5 5 5
- -----------------
Rates paid on average interest-bearing liabilities 4.49% 4.57% 4.53% 4.40%
</TABLE>
Interest expense increased 2% in the second quarter of 1996 compared to
the same period in 1995 and decreased 2% from the first quarter of 1996. The
increase in interest expense for the second quarter of 1996 is attributable to
growth of average interest-bearing liabilities which accounted for
approximately $3.5 million of the increase. Partially offsetting this increase
was an eight-basis-point decline in the average rate paid on interest bearing
liabilities, or approximately $1.7 million.
For the six months ended June 30, 1996, interest expense increased 7%
compared to the same period in 1995. The increase was due to an increase in
average interest-bearing liabilities which accounted for approximately $7.0
million of the increase and a 13-basis-point increase in the average rate paid
on these liabilities which accounted for approximately $6.1 million of the
increase. Most of the increase in the level of interest-bearing liabilities
related to interest-bearing deposits.
The Corporation's interest-rate swaps decreased net interest income for
the three and six months ended June 30, 1996 by approximately $135,000 and
$490,000, respectively, compared to a decrease of approximately $668,000 and
$1.2 million, respectively, for the same periods in 1995. During the second
quarter of 1996, all of the Corporation's interest-rate swaps matured.
PROVISION FOR LOSSES ON LOANS
The provision for losses on loans for the second quarter of 1996 was $7.9
million, or .44% of average loans on an annualized basis, compared to $2.3
million, or .13% of average loans, for the same period in 1995 and $8.0
million, or .45% of average loans, for the first quarter of 1996. For the six
months ended June 30, 1996, the provision for losses on loans was $15.9 million
compared to $4.5 million for the same period in 1995. The increase in the
provision over 1995 relates primarily to the significant growth of the credit
card portfolio over the past two years in connection with consumer loan
marketing efforts. Management expects the provision for losses
16
<PAGE> 17
on loans to remain at the current levels for the remainder of 1996; however,
there can be no assurance this will be the case.
NONINTEREST INCOME
Noninterest income for the second quarter of 1996 was $41.3 million, an
increase of 4% over the same period in 1995, and an increase of 3% compared to
the first quarter of 1996. For the first half of 1996, noninterest income was
$81.5 million compared to $75.7 million for the same period in 1995. The major
components of noninterest income are presented on the face of the statement of
earnings and in Note 6 to the unaudited interim consolidated financial
statements.
For the second quarter and first half of 1996, noninterest income included
a one-time increase in trust service income of approximately $1.3 million. The
fees arose from a court award of several years of fees related to a subsidiary
bank which acted as trustee for certain trust accounts that were involved in
litigation which has now been resolved. These fees were the primary reason for
the increase in noninterest income for the second quarter of 1996 compared to
the same period in 1995 and the first quarter of 1996.
For the first half of 1996, noninterest income increased $4.5 million in
addition to the trust fees described above. The significant items increasing
revenues for the period were earnings from the Corporation's 29% limited
partnership investment in VSIBG of $1.3 million, increased revenues from the
Corporation's mortgage origination and servicing operations of $1.8 million,
brokerage fee income from the Corporation's discount brokerage operations of
$696,000, commissions from the sales of annuities of $699,000, and bank card
income of $516,000. Partially offsetting these items were declines in profits
and commissions from the Corporation's SBA trading operations which decreased
$1.3 million for the first half of 1996 ($2.2 million for the second quarter of
1996) compared to 1995 due to unfavorable market conditions and service charges
on deposit accounts which decreased $1.7 million.
NONINTEREST EXPENSE
Noninterest expense for the second quarter of 1996 decreased $4.5 million
to $89.2 million which compares to $93.7 million for the second quarter of 1995
and was level with the first quarter of 1996. The major components of
noninterest expense are detailed on the face of the statement of earnings and
in Note 6 to the unaudited interim consolidated financial statements.
The decrease in noninterest expenses for the second quarter of 1996 and
the first half of the year compared to the same periods in 1995 relates to
decreases in FDIC insurance assessments of $4.2 million and $8.0 million,
respectively. The decline in assessments relates to lower assessments for Bank
Insurance Fund (BIF) deposits. The majority of the current assessment relates
to Savings Association Insurance Fund (SAIF) deposits which should remain at
the current level for the remainder of 1996. See the discussion below
regarding "Special Regulatory Assessments."
Salaries and employee benefits expense, the largest component of
noninterest expense, decreased $770,000 and $599,000, respectively, for the
three and six months ended June 30, 1996 compared to 1995. The lack of growth
relates primarily to the reduction in the number of employees as a result of
the Corporation's 1994 restructuring plan. The reductions achieved have been
partially offset by acquisitions, and the growth of certain operations. At
June 30, 1996, the Corporation had 5,075 full-time-equivalent employees
compared to 5,287 at June 30, 1995 and 5,107 at March 31, 1996.
EARNINGS CONSIDERATIONS RELATED TO PENDING ACQUISITIONS
It is expected that the Corporation or the institutions acquired by it
(Note 2 to the unaudited interim consolidated financial statements) will incur
charges arising from such acquisitions and from the assimilation of those
institutions into the Corporation's organization. The majority of the charges
are expected to relate to the Leader Financial Corporation (Leader Federal)
acquisition. Anticipated charges would normally arise from charges such as, but
not limited to, legal and accounting fees, financial advisory fees, consulting
fees, payment of contractual benefits triggered by a change of control, early
retirement and involuntary separation and related benefits, costs associated
with elimination of duplicate facilities and branch consolidations, data
processing charges, cancellation of vendor contracts, the potential for
additional provisions for losses on loans and similar costs which normally
arise from the consolidation of operational activities.
17
<PAGE> 18
Aggregate charges expected to arise from the Corporation's six pending
acquisitions have been preliminarily estimated to be in the range of $17
million to $22 million after taxes, which does not include a potential
after-tax charge of approximately $6.0 million for the recapture of Leader
Federal's thrift bad debt reserve which, under existing law, would be triggered
by the merger of Leader Federal Bank for Savings into the Corporation's
principal subsidiary, Union Planters National Bank (UPNB), and certain other
banking subsidiaries. Legislation passed by both the House and Senate on August
2, 1996 and awaiting signature by the President of the United States as of
August 8, 1996 would substantially decrease the federal income taxes associated
with a recapture of a thrift institution's bad debt reserve. There is no
assurance that such pending legislation will be signed into law by the
President. Should the President veto the bad debt legislation, the Corporation
may still merge Leader Federal Bank for Savings into UPNB, thereby triggering a
recapture of Leader Federal Bank for Savings' bad debt reserve and incurring an
expense of approximately $6.0 million, should it be determined that the cost
savings associated with the consolidation of Leader Federal Bank for Savings'
and UPNB's banking operations would exceed the tax expense. The Corporation is
unable to predict if or when such bad debt reserve recapture legislation will
be signed into law. In addition, the range of potential charges set forth above
does not take into account any potential assessments for recapitalization of
the SAIF Insurance Fund discussed below. To the extent that the Corporation's
recognition of these acquisition-related charges is contingent upon
consummation of a particular transaction, those charges would be recognized in
the period in which such transaction closes. This range of potential charges is
based on currently available information as well as preliminary estimates and
is subject to change. The range is provided as a preliminary estimate of the
significant charges which may in the aggregate be required and should be viewed
accordingly.
SPECIAL REGULATORY ASSESSMENT
The Corporation's 1995 Annual Report, on page 10, provides a discussion of
several bills that were under consideration by the Congress which would have
resulted in a one-time assessment. The purpose of the legislation is to provide
additional financing for the SAIF Insurance Fund and to provide for interest
payments on the Financing Corporation (FICO) bonds issued in connection with
earlier Congressional efforts to support the then failing thrift industry. The
proposals are under strong criticism from the banking industry and, as of July
31, 1996, the proposed legislation had not passed and, based on currently
available information, management does not expect it to pass in 1996. The
Corporation does expect some form of legislation to be passed in the near
future relative to the recapitalization of the SAIF Insurance Fund.
A common feature of these proposals is a one-time special assessment of
from 70 to 85 basis points on all deposits insured by the SAIF ($0.70 to $0.85
per $100 of covered deposits) (SAIF-Insured Deposits). Not all SAIF-Insured
Deposits will be subject to the assessment at the 70 to 85 basis point level.
Those SAIF-Insured Deposits which have been acquired by banks in so-called
Oakar transactions (Oakar deposits) may be assessed at a lower rate (one
proposal suggests 20% lower.) In addition to the special assessment on
SAIF-Insured Deposits, the proposals also contemplate annual assessments on
deposits which are insured by the BIF (BIF Deposits). The assessment on BIF
Deposits would be for the purpose of paying interest on the FICO bonds until
they mature in 2017. It is unknown at this time what the assessment level will
be on the BIF Deposits, but it is believed the assessment will be approximately
2.4 basis points ($0.024 per $100 of covered deposits). The proposals generally
provide that such assessments will reduce the paying institution's taxable
income.
At June 30, 1996, the Corporation's banking subsidiaries had approximately
$1.3 billion in SAIF-Insured Deposits, approximately $1.0 billion of which are
Oakar Deposits. Assuming a one-time assessment of $.70 to $.85 per $100 of
SAIF-Insured Deposits, the estimated after tax impact would be approximately
$5.8 million to $7.0 million. The Corporation's pending acquisitions had
SAIF-Insured Deposits totaling approximately $1.8 billion (Leader Federal $1.6
billion and other pending acquisitions $217 million) at June 30, 1996, which
would increase the after tax range of charges approximately $7.7 million to
$9.3 million assuming the acquisitions are consummated. Should the proposed
legislation be adopted at the levels indicated, the Corporation's subsidiaries
would be required to take significant charges in relation to these special
assessments.
18
<PAGE> 19
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND INTEREST RATES
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-------------------------------------------------------------------------------
1996 1995
------------------------------------ -------------------------------------
INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
---------- -------- ------ ----------- --------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing deposits at
financial institutions $ 3,816 $ 41 4.32% $ 40,051 $ 645 6.46%
Federal funds sold and securities
purchased under agreements to resell 103,492 1,322 5.14 182,916 2,753 6.04
Trading account assets 146,745 2,728 7.48 170,514 3,269 7.69
Investment securities (2)
Taxable securities 2,534,086 39,247 6.23 2,206,076 34,534 6.28
Tax-exempt securities (1) 478,838 11,069 9.30 512,448 11,748 9.20
----------- -------- ----------- --------
Total investment securities 3,012,924 50,316 6.72 2,718,524 46,282 6.83
Loans, net of unearned income (1) 7,201,759 165,181 9.22 6,911,210 158,792 9.22
----------- -------- ----------- --------
TOTAL EARNING ASSETS (1) AND (2) 10,468,736 219,588 8.44 10,023,215 211,741 8.47
-------- --------
Cash and due from banks 430,674 430,599
Premises and equipment 229,284 225,036
Allowance for losses on loans (137,833) (136,164)
Other assets 304,877 278,749
----------- -----------
TOTAL ASSETS $11,295,738 $10,821,435
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Money market accounts $ 1,497,711 $ 11,677 3.14% $ 1,407,822 $ 10,970 3.13%
Savings deposits 1,779,514 11,013 2.49 1,782,591 12,268 2.76
Certificates of deposit of
$100,000 and over 766,983 11,285 5.92 692,637 9,357 5.42
Other time deposits 4,000,497 53,284 5.36 3,971,099 53,996 5.45
Short-term borrowings 310,101 3,729 4.84 214,588 2,941 5.50
Federal Home Loan Bank advances 257,093 3,581 5.60 299,433 4,559 6.11
Long-term debt
Subordinated capital notes and
debentures 213,993 3,957 7.44 115,016 2,337 8.15
Other 1,780 40 9.04 15,897 324 8.17
----------- -------- ----------- --------
TOTAL INTEREST-BEARING LIABILITIES 8,827,672 98,566 4.49 8,499,083 96,752 4.57
-------- --------
Noninterest-bearing demand deposits 1,351,321 1,319,006
----------- -----------
TOTAL SOURCES OF FUNDS 10,178,993 9,818,089
Other liabilities 129,967 129,715
Shareholders' equity 986,778 873,631
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $11,295,738 $10,821,435
=========== ===========
NET INTEREST INCOME $121,022 $114,989
======== ========
INTEREST RATE SPREAD 3.95% 3.90%
==== ====
NET INTEREST MARGIN 4.65% 4.60%
==== ====
- -----------------------------
(1) Taxable-equivalent adjustments:
Loans $ 551 $ 466
Investment securities 3,628 3,798
-------- --------
$ 4,179 $ 4,264
======== ========
(2) Yields are calculated on historical cost and exclude the impact of the net unrealized gain (loss) on available
for sale securities.
</TABLE>
19
<PAGE> 20
UNION PLANTERS CORPORATION AND SUBSIDIARIES
ANALYSIS OF VOLUME AND RATE CHANGES
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1996 VERSUS 1995
-------------------------------------------
INCREASE
(DECREASE)
DUE TO CHANGE IN: (1)
------------------------
AVERAGE AVERAGE INCREASE
VOLUME (2) RATE (2) (DECREASE)
---------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits at
financial institutions $ (442) $ (162) $ (604)
Federal funds sold and securities
purchased under agreements to resell (1,066) (365) (1,431)
Trading account assets (451) (90) (541)
Investment securities (FTE) 4,816 (782) 4,034
Loans, net of unearned income (FTE) 6,241 148 6,389
-------
TOTAL INTEREST INCOME 8,833 (986) 7,847
-------
INTEREST EXPENSE
Money market accounts 672 35 707
Savings deposits (22) (1,233) (1,255)
Certificates of deposit of
$100,000 and over 1,038 890 1,928
Other time deposits 354 (1,066) (712)
Short-term borrowings 1,176 (388) 788
Long-term debt 909 (551) 358
-------
TOTAL INTEREST EXPENSE 3,502 (1,688) 1,814
-------
CHANGE IN NET INTEREST INCOME $ 6,033
=======
PERCENTAGE INCREASE IN NET INTEREST
INCOME OVER PRIOR PERIOD 5.25%
=======
</TABLE>
- -------------------------
FTE - Fully taxable-equivalent
(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.
(2) Variances are computed on a line-by-line basis and are nonadditive.
20
<PAGE> 21
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND INTEREST RATES
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------------------------------------------------------
1996 1995
------------------------------------ -------------------------------------
INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
---------- -------- ------ ----------- --------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing deposits at
financial institutions $ 3,744 $ 98 5.26% $ 30,051 $ 960 6.44%
Federal funds sold and securities
purchased under agreements to resell 222,890 6,140 5.54 120,454 3,596 6.02
Trading account assets 133,849 5,115 7.68 167,469 6,005 7.23
Investment securities (2)
Taxable 2,420,332 74,982 6.23 2,345,381 71,338 6.13
Tax-exempt(1) 482,527 22,137 9.23 517,502 23,776 9.26
----------- -------- ----------- --------
Total investment securities 2,902,859 97,119 6.73 2,862,883 95,114 6.70
Loans, net of unearned income (1) 7,184,875 331,153 9.27 6,858,215 308,547 9.07
----------- -------- ----------- --------
TOTAL EARNING ASSETS (1) and (2) 10,448,217 439,625 8.46 10,039,072 414,222 8.32
-------- --------
Cash and due from banks 425,362 429,832
Premises and equipment 230,273 227,160
Allowance for losses on loans (137,365) (136,629)
Other assets 319,258 278,159
----------- -----------
TOTAL ASSETS $11,285,745 $10,837,594
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Money market accounts $ 1,483,224 $ 23,274 3.16% $ 1,445,247 $ 22,353 3.12%
Savings deposits 1,804,991 22,561 2.51 1,803,629 24,103 2.69
Certificates of deposit of
$100,000 and over 764,021 22,209 5.85 678,457 17,459 5.19
Other time deposits 4,037,244 109,209 5.44 3,905,076 100,622 5.20
Short-term borrowings 268,538 6,663 4.99 288,294 7,762 5.43
Federal Home Loan Bank advances 258,380 7,130 5.55 277,544 8,422 6.12
Long-term debt
Subordinated capital notes and
debentures 214,207 7,975 7.49 115,009 4,643 8.14
Other 1,842 79 8.62 15,761 641 8.20
----------- -------- ----------- --------
TOTAL INTEREST-BEARING LIABILITIES 8,832,447 199,100 4.53 8,529,017 186,005 4.40
Noninterest-bearing demand deposits 1,347,236 -------- 1,326,943 --------
----------- -----------
TOTAL SOURCES OF FUNDS 10,179,683 9,855,960
Other liabilities 134,424 119,422
Shareholders' equity 971,638 862,212
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $11,285,745 $10,837,594
=========== ===========
NET INTEREST INCOME $240,525 $228,217
======== ========
INTEREST RATE SPREAD 3.93% 3.92%
==== ====
NET INTEREST MARGIN 4.63% 4.58%
==== ====
- ---------------------------
(1) Taxable-equivalent adjustments:
Loans $ 1,063 $ 941
Investment securities 7,146 7,712
-------- --------
$ 8,209 $ 8,653
======== ========
(2) Yields are calculated based on historical cost and exclude the impact of the net unrealized gain (loss) on available for sale
securities.
</TABLE>
21
<PAGE> 22
UNION PLANTERS CORPORATION AND SUBSIDIARIES
ANALYSIS OF VOLUME AND RATE CHANGES
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1996 VERSUS 1995
-------------------------------------------
INCREASE
(DECREASE)
DUE TO CHANGE IN: (1)
------------------------
AVERAGE AVERAGE INCREASE
VOLUME (2) RATE (2) (DECREASE)
---------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits at
financial institutions $ (713) $ (149) $ (862)
Federal funds sold and securities
purchased under agreements to resell 2,589 (45) 2,544
Trading account assets (966) 76 (890)
Investment securities (FTE) 1,538 467 2,005
Loans, net of unearned income (FTE) 15,546 7,060 22,606
-------
TOTAL INTEREST INCOME 17,909 7,494 25,403
-------
INTEREST EXPENSE
Money market accounts 637 284 921
Savings deposits 1 (1,543) (1,542)
Certificates of deposit of
$100,000 and over 2,372 2,378 4,750
Other time deposits 3,600 4,987 8,587
Short-term borrowings (504) (595) (1,099)
Long-term debt 2,278 (800) 1,478
-------
TOTAL INTEREST EXPENSE 7,022 6,073 13,095
-------
CHANGE IN NET INTEREST INCOME $12,308
=======
PERCENTAGE INCREASE IN NET INTEREST
INCOME OVER PRIOR PERIOD 5.39%
=======
</TABLE>
- -----------------------
FTE - Fully taxable-equivalent
(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.
(2) Variances are computed on a line-by-line basis and are nonadditive.
22
<PAGE> 23
FINANCIAL CONDITION
The Corporation's total assets were $11.4 billion at June 30, 1996
compared to $10.9 billion at June 30, 1995, and $11.3 billion at December 31,
1995. Average assets for both the three and six months ended June 30, 1996 were
$11.3 billion, compared to $10.8 billion for both periods in 1995.
INVESTMENT SECURITIES
The Corporation's investment securities portfolio of $3.1 billion at June
30, 1996 consisted entirely of available for sale securities which are carried
on the balance sheet at fair value. This compares to investment securities of
$2.8 billion at December 31, 1995. At June 30, 1996, and December 31, 1995,
these securities had net unrealized gains of $4.1 million and $34.7 million,
respectively. Reference is made to Note 5 to the interim financial statements
which provides the composition of the investment portfolio at June 30, 1996 and
December 31, 1995.
U.S. Treasury and U.S. Government agency obligations represented
approximately 80% of the investment securities portfolio at June 30, 1996. The
Corporation has some credit risk in the investment portfolio; however,
management does not consider that risk to be significant.
The REMIC and CMO issues in the investment securities portfolio are 96% U.
S. Government agencies issues; the remaining 4% are readily marketable,
collateralized mortgage obligations backed by agency-pooled collateral or
whole-loan collateral. All nonagency issues held are currently rated "AAA" by
either Standard & Poors or Moodys. The REMIC and CMO portions of the investment
securities portfolio include approximately 53% 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 risk of premium write-offs
on unexpected prepayments. The limited credit risk in the investment securities
portfolio consists of the holdings of (i) municipal securities; (ii) nonagency
CMOs and mortgage-backed securities; and (iii) corporate stocks, debentures and
mutual funds which accounted for 16%, 1%, and 3%, respectively, of the
investment securities portfolio at June 30, 1996.
At June 30, 1996, the Corporation had approximately $93 million of
structured notes, which constituted approximately 3% of the investment
securities portfolio. Structured notes have uncertain cash flows which are
driven by interest-rate movements and may expose a company to greater market
risk than traditional medium-term notes. All of the Corporation's investments
of this type are government agency issues (primarily Federal Home Loan Bank and
Federal National Mortgage Association). The structured notes vary in type but
primarily include step-up bonds, floating-rate notes, and index-amortizing
notes. These securities are carried in the Corporation's available for sale
securities portfolio at fair value. The unrealized loss in these securities at
June 30, 1996 was approximately $1.1 million. The market risk associated with
the structured notes is not considered material to the Corporation's financial
position, results of operations, or liquidity and involves no credit risk.
LOANS
Loans at June 30, 1996 were $7.2 billion compared to $7.0 billion and $7.1
billion at June 30, 1995 and December 31, 1995, respectively. Average loans for
the second quarter of 1996 were $7.2 billion, a 4% increase over the $6.9
billion for the second quarter of 1995. For the first half of 1996, average
loans were $7.2 billion compared to $6.9 billion for the same period in 1995.
Note 3 to the interim financial statements presents the composition of the loan
portfolio. Acquisitions accounted for approximately $180 million of the
increase between the second quarter of 1996 and 1995 and had no impact on the
change between the first quarter and second quarter of 1996.
The growth of loans between June 30, 1996 and 1995 is attributable to
consumer loans which increased approximately $146 million (approximately $27
million related to credit card loans), loans secured by 1-4 family residential
mortgages which increased approximately $51 million, and real estate
construction loans which increased approximately $26 million. The growth in
these categories of loans was partially offset by a net decrease in the other
loan categories of approximately $14 million. Growth of residential real estate
loans has slowed due to higher interest rates. Additionally, credit card loan
growth has been at a slower pace than was the case in 1995 and 1994. The net
decline in other loans relates primarily to commercial, financial, and
agricultural loans which decreased approximately $32 million between June 30,
1996 and 1995.
23
<PAGE> 24
ALLOWANCE FOR LOSSES ON LOANS
The following table provides a reconciliation of the allowance for losses
on loans (the allowance) at the dates indicated and certain key ratios for the
six-month periods ended June 30, 1996 and 1995 and for the year ended December
31, 1995.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------
JUNE 30, FOR THE YEAR ENDED
1996 1995 DECEMBER 31, 1995
---------- ---------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at the beginning of the period $ 133,487 $ 133,966 $ 133,966
Recoveries on loans previously charged off
Credit cards and related plans 646 163 526
Other consumer loans 2,159 2,257 4,060
Loans secured by real estate 1,539 1,575 2,416
Commercial, financial, and agricultural 1,893 2,815 5,188
---------- ---------- ----------
Total recoveries 6,237 6,810 12,190
---------- ---------- ----------
Loans charged off
Credit cards and related plans 8,085 2,241 12,088
Other consumer loans 7,299 5,590 11,742
Loans secured by real estate 1,225 3,335 5,598
Commercial, financial, and agricultural 3,326 3,151 8,234
---------- ---------- ----------
Total charge-offs 19,935 14,317 37,662
---------- ---------- ----------
Net charge-offs (13,698) (7,507) (25,472)
Provision charged to expense 15,851 4,538 22,231
Allowances of banks acquired (1) 615 1,887 2,762
---------- ---------- ----------
Balance at end of period $ 136,255 $ 132,884 $ 133,487
========== ========== ==========
Loans, net of unearned income,
at end of period $7,169,872 $6,960,602 $7,069,853
========== ========== ==========
Average loans, net of unearned income,
during period $7,184,875 $6,858,215 $6,990,400
========== ========== ==========
Ratios:
Allowance at end of period to loans,
net of unearned income 1.90% 1.91% 1.89%
Charge-offs to average loans,
net of unearned income (2) .56 .42 .54
Recoveries to average loans,
net of unearned income (2) .18 .20 .18
Net charge-offs to average loans,
net of unearned income (2) .38 .22 .36
Provision to average loans,
net of unearned income(2) .44 .13 .32
</TABLE>
- --------------------
(1) At date of acquisition for acquisitions accounted for using the purchase
method of accounting and as of January 1 for acquisitions accounted for
using the pooling of interests method of accounting
(2) Amounts annualized for June 30, 1996 and 1995
The allowance at June 30, 1996 was $136.3 million, an increase of $2.8
million over December 31, 1995, and compared to $132.9 million at June 30,
1995. The provision for losses on loans exceeded net charge-offs for the first
half of 1996 by $2.2 million which accounted for most of the increase from
December 31, 1995, while the allowances of banks acquired accounted for the
remainder. Net charge-offs for the second quarter of 1996 were $7.9 million
compared to $5.8 million for the first quarter of 1996 and $6.2 million for the
second quarter of 1995. Management believes that the allowance is sufficient to
absorb estimated losses inherent in the loan portfolio at June 30, 1996.
Net charge-offs of credit cards for the first half of 1996 were $7.4
million, an increase of $5.4 million over the same period in 1995 which
accounted for most of the increase in net charge-offs. Net charge-offs of these
loans are expected to be in a range of approximately $5.5 to $6.5
24
<PAGE> 25
million per quarter for the remainder of 1996. No other significant increases
in charge-offs are expected.
NONPERFORMING ASSETS
NONACCRUAL, RESTRUCTURED, AND PAST DUE LOANS AND FORECLOSED PROPERTIES
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------- ------------
1996 1995 1995
------- ------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Nonaccrual loans $37,196 $30,910 $32,847
Restructured loans 1,150 1,986 1,330
------- ------- -------
Total nonperforming loans 38,346 32,896 34,177
------- ------- -------
Foreclosed property
Other real estate owned, net 6,356 6,603 6,561
Other foreclosed properties 562 448 1,138
------- ------- -------
Total foreclosed properties 6,918 7,051 7,699
------- ------- -------
Total nonperforming assets $45,264 $39,947 $41,876
======= ======= =======
Loans 90 days or more past due
and not on nonaccrual status $19,522 $12,466 $18,317
======= ======= =======
- -----------------------
Nonperforming loans as a
percentage of loans .53% .47% .48%
Nonperforming assets as a
percentage of loans plus
foreclosed properties .63 .57 .59
Allowance for losses on loans
as a percentage of
nonperforming loans 355 404 391
Loans 90 days or more past
due and not on nonaccrual
status as a percentage of loans .27 .18 .26
</TABLE>
A breakdown of nonaccrual loans and loans 90 days or more past due and not
on nonaccrual status is as follows:
<TABLE>
<CAPTION>
LOANS 90 DAYS
NONACCRUAL LOANS OR MORE PAST DUE
------------------------- -------------------------
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
LOAN TYPE 1996 1995 1996 1995
- ---------------------------------------- -------- ------------ -------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Secured by single family residential $14,148 $12,149 $ 3,208 $ 5,084
Secured by nonfarm nonresidential 5,194 5,037 1,124 383
Other real estate 2,961 4,578 237 560
Commercial, financial, and agricultural,
including direct lease financing 11,176 7,848 2,908 2,468
Credit cards and related plans 33 15 8,074 5,269
Other consumer 3,684 3,220 3,971 4,553
------- ------- ------- -------
TOTAL $37,196 $32,847 $19,522 $18,317
======= ======= ======= =======
</TABLE>
25
<PAGE> 26
The Corporation's asset-quality indicators are currently at acceptable
levels, in management's opinion. Nonperforming assets increased $3.4 million
from December 31, 1995 and $3.3 million from March 31, 1996. Most of the
increase from December 31, 1995 relates to nonaccrual loans, primarily
commercial, financial, and agricultural loans which increased approximately
$3.3 million and single family residential loans which increased approximately
$2.0 million. These increases were offset by a decline in other real estate
loans of $1.6 million and by small decreases in restructured loans and other
real estate owned. Loans 90 days or more past due and still accruing interest
increased $1.2 million over December 31, 1995 and were down slightly from the
first quarter of 1996. The increase relates primarily to credit card loans. No
significant increases are expected in nonperforming assets in 1996 but there
will likely be a gradual increase as the loan portfolio continues to grow.
POTENTIAL PROBLEM ASSETS
Potential problem assets consist of assets which are generally secured and
not currently considered nonperforming, but where information about possible
credit problems has caused management to have serious doubts as to the ability
of the borrowers to comply in the future with present repayment terms.
Historically, these assets have been loans that become nonperforming. At June
30, 1996, the Corporation had potential problem assets (all of which were
loans) aggregating $19.4 million.
OFF-BALANCE-SHEET INSTRUMENTS
As of June 30, 1996, all of the Corporation's interest-rate swaps had
matured. A summary of the impact of the swaps on net interest income and the
balance at year end follows:
<TABLE>
<CAPTION>
NET INTEREST
INCOME IMPACT
-----------------
NOTIONAL AMOUNT SIX MONTHS ENDED
---------------------- JUNE 30,
JUNE 30, DECEMBER 31, -----------------
BALANCE SHEET INSTRUMENTS 1996 1995 1996 1995
-------- ------------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Loans $ - $150 $(.3) $ (.9)
Long-term debt-debentures - 50 (.2) (.4)
Long-term debt-FHLB
advances - - - .1
---- ---- ---- -----
Total $ - $200 $(.5) $(1.2)
==== ==== ==== =====
</TABLE>
ASSET LIABILITY MANAGEMENT
The following table presents the Corporation's interest-rate sensitivity
(GAP) analysis at June 30, 1996. The analysis is made as of that point-in-time
and could change significantly on a daily basis. This analysis alone cannot be
relied upon to predict how the Corporation is positioned to react to changing
interest rates. Other factors such as the growth of earning assets, the mix of
earning assets and interest-bearing liabilities, the magnitude of the
interest-rate changes, the timing of the repricing of assets and liabilities,
interest-rate spreads, and the asset/liability strategies implemented by
management impact the Corporation's net interest income. This discussion should
be read in connection with the discussion in the 1995 Annual Report on page 16.
At June 30, 1996, the GAP analysis indicated that the Corporation was liability
sensitive with $118 million more liabilities than assets repricing within one
year. At 1% of total assets, this position was within management's guidelines
of 10% of total assets.
Balance sheet simulation analysis has been conducted at June 30, 1996 to
determine the impact on net interest income for the coming twelve months under
several interest-rate scenarios. One such scenario uses rates at June 30, 1996,
and holds the rates and volumes constant for simulation. When this projection
is subjected to immediate and parallel shifts in interest rates (rate shocks)
of 200 basis points, first rising and then falling, the annual impact on the
Corporation's net interest income was a positive $15.5 million and a negative
$23.2 million pretax, respectively. Another simulation uses a "most likely"
scenario of rates rising 75 basis points gradually over the next twelve months
resulting in a $7.7 million pretax increase in net interest income from the
constant rate/volume projection. The results under these scenarios are within
the Corporation's policy limit of 5% of shareholders' equity.
26
<PAGE> 27
UNION PLANTERS CORPORATION AND SUBSIDIARIES
RATE-SENSITIVITY ANALYSIS AT JUNE 30, 1996
<TABLE>
<CAPTION>
INTEREST-SENSITIVE WITHIN (1) AND (6)
--------------------------------------------------------------------------------------
NON-
0-30 31-90 91-180 181-365 1-2 2-5 OVER INTEREST-
DAYS DAYS DAYS DAYS YEARS YEARS 5 YEARS BEARING TOTAL
----- -------- ------ ------- ----- ----- ------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans and leases (2) and (3) $1,869 $ 471 $604 $ 957 $ 617 $1,898 $ 749 $ 37 $ 7,202
Investment securities (4) and (5) 405 281 322 469 464 572 541 - 3,054
Other earning assets 179 90 - - - - - - 269
Other assets - - - - - - - 843 843
------ ------ ---- ------ ------ ------ ------ ------ -------
TOTAL ASSETS $2,453 $ 842 $926 $1,426 $1,081 $2,470 $1,290 $ 880 $11,368
====== ====== ==== ====== ====== ====== ====== ====== =======
SOURCES OF FUNDS
Money market deposits (6) and (7) $ - $ 448 $ - $ 448 $ - $ 597 $ - $ - $ 1,493
Other savings and time deposits 733 1,233 701 945 485 1,588 23 - 5,708
Time deposits over $100,000 192 138 143 165 66 45 1 - 750
Short-term borrowings 419 2 - - - - - - 421
Federal Home Loan Bank advances 176 8 3 11 15 31 14 - 258
Long-term debt - - - - 1 1 213 - 215
Noninterest-bearing deposits - - - - - - - 1,393 1,393
Other liabilities - - - - - - - 122 122
Shareholders' equity - - - - - - - 1,008 1,008
------ ------ ---- ----- ------ ------ ------ ------- -------
TOTAL SOURCES OF FUNDS $1,520 $1,829 $847 $1,569 $ 567 $2,262 $ 251 $ 2,523 $11,368
====== ====== ==== ====== ====== ====== ====== ======= =======
INTEREST RATE SENSITIVITY GAP $ 933 $ (987) $ 79 $(143) $ 514 $ 208 $1,039 $(1,643)
CUMULATIVE INTEREST RATE
SENSITIVITY GAP $ 933 $ (54) $ 25 $(118) $ 396 $ 604 $1,643 $ -
CUMULATIVE GAP AS A PERCENTAGE
OF TOTAL ASSETS (7) 8% -% -% (1)% 3% 5% 14%
</TABLE>
- ---------------------------------
Management has made the following assumptions in preparing the above analysis:
(1) Assets and liabilities are generally scheduled according to their
earliest repricing dates regardless of their contractual maturities.
(2) Nonaccrual loans are included in the noninterest-bearing category.
(3) Fixed-rate mortgage loan maturities are estimated based on the currently
prevailing principal prepayment patterns of comparable mortgage-backed
securities.
(4) The scheduled maturities of mortgage-backed securities, including REMICs
and CMOs, assume principal prepayment of these securities on dates
estimated by management, relying primarily upon current and consensus
interest-rate forecasts in conjunction with the latest three-month
historical prepayment schedules.
(5) Securities are scheduled according to their call dates when valued at a
premium to par.
(6) Money market deposits and savings deposits that have no contractual
maturities are scheduled according to management's best estimate of their
repricing in response to changes in market rates. The impact of changes in
market rates would be expected to vary by product type and market.
(7) 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 (20%), (20%), (20%), (17%), (13%), and
positive 5% and 14%, respectively, for the 0-30 Days, 31-90 Days, 91-180
Days, 181-365 Days, 1-2 Years, 2-5 Years, and over 5 Years categories at
June 30, 1996.
27
<PAGE> 28
LIQUIDITY
The Corporation's core deposit base is its most important and stable
funding source and consists of deposits from the communities served by the
Corporation. Core deposits, along with available for sale securities and other
marketable earning assets, provide liquidity for the Corporation. The following
table presents an analysis of the Corporation's deposits:
<TABLE>
<CAPTION>
AVERAGE DEPOSITS
-----------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, MARCH 31, JUNE 30,
------------------------- ---------- ------------------------
1996 1995 1996 1996 1995
---------- ---------- ---------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Demand deposits $1,351,321 $1,319,006 $1,343,150 $1,347,236 $1,326,943
Money market accounts (a) 1,497,711 1,407,822 1,468,737 1,483,224 1,445,247
Savings deposits (b) 1,779,514 1,782,591 1,830,468 1,804,991 1,803,629
Other time deposits (c) 4,000,497 3,971,099 4,073,991 4,037,244 3,905,076
---------- ---------- ---------- ---------- ----------
Total core deposits 8,629,043 8,480,518 8,716,346 8,672,695 8,480,895
Certificates of deposit of $100,000 and over 766,983 692,637 761,060 764,021 678,457
---------- ---------- ---------- ---------- ----------
Total deposits $9,396,026 $9,173,155 $9,477,406 $9,436,716 $9,159,352
========== ========== ========== ========== ==========
</TABLE>
- -------------------------------
(a) Includes money market savings accounts, High Yield accounts, and super
NOW accounts.
(b) Includes regular and premium savings accounts and NOW accounts.
(c) Includes certificates of deposit under $100,000, investment savings
accounts, and other time deposits.
Average deposits for the second quarter were $9.4 billion, which
represents an increase of $223 million over the same period in 1995, and
relates primarily to deposits of acquired banks. Compared to the first quarter
of 1996, average deposits decreased approximately $81 million.
The parent company's current source of liquidity is management fees and
dividends received from subsidiaries, interest on advances to subsidiaries, and
interest on its available for sale investment securities. The number of
financial institutions owned by the Corporation provides a diversified base for
the payment of dividends should one or more of the subsidiaries have capital
needs and be unable to pay dividends to the parent company. At June 30, 1996,
the parent company had cash and cash equivalents totaling $24.2 million. The
parent company's net working capital at June 30, 1996 was $160.7 million. At
July 1, 1996, the parent company could have received dividends from subsidiary
banks of $49 million without prior regulatory approval. The payment of
additional dividends will be dependent on the future earnings of the
Corporation's subsidiary banks. Management believes that the parent company
has adequate liquidity to meet its cash needs, including the payment of
dividends and servicing of its long-term debt.
SHAREHOLDERS' EQUITY
The Corporation's total shareholders' equity increased $41.3 million from
December 31, 1995 to $1.0 billion at June 30, 1996. The increase was due to
retained net earnings of $51.6 million and Common Stock issued in connection
with employee benefit and dividend reinvestment plans of $8.6 million,
partially offset by the net change in the unrealized gain (loss) on available
for sale securities, net of taxes, which reduced shareholders' equity by $18.9
million.
28
<PAGE> 29
CAPITAL ADEQUACY
The following table presents certain capital-adequacy ratios of the
Corporation and the table on the following page presents the calculation of the
Corporation's risk-based capital.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------- DECEMBER 31,
1996 1995 1995
------- ------- ------------
<S> <C> <C> <C>
CAPITAL ADEQUACY DATA
Total shareholders' equity/
total assets (at period end) 8.86% 8.21% 8.57%
Average shareholders' equity/average total assets 8.61 7.96 8.21
Tier 1 capital/unweighted
assets (leverage ratio) (a) 8.49 7.88 8.09
Parent company long-term debt/equity 21.18 12.80 22.22
Dividend payout ratio 35.41 34.12 37.55
</TABLE>
- --------------------------
(a) Based on period-end capital and quarterly adjusted average assets.
At June 30, 1996, total shareholders' equity was 8.86% of total assets and
the leverage ratio was 8.49% compared to 8.57% and 8.09%, respectively, at
December 31, 1995. The improvement in these ratios has resulted primarily from
the Corporation's retained net earnings.
The following table presents the Corporation's risk-based capital and
capital adequacy ratios. The Corporation's regulatory capital ratios qualify
the Corporation for the "well-capitalized" regulatory classification. The
Corporation's risk-based capital increased from year end due primarily to
retained net earnings. Risk-weighted assets increased during the first half of
1996 as a result of loan growth, since loans are typically 100% risk-weighted,
and also increased as a result of acquisitions during the first quarter.
RISK-BASED CAPITAL
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------------------- DECEMBER 31,
1996 1995 1995
---------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Tier 1 capital
Shareholders' equity $1,007,608 $ 897,066 $ 966,331
Minority interest in consolidated subsidiaries 1,088 1,088 1,088
Less goodwill, other intangibles, and one-half
of investment in unconsolidated subsidiaries (49,130) (45,940) (46,913)
Less deferred tax asset not qualifying for
regulatory capital (2,428) (2,295) (2,237)
Unrealized (gain) loss on available for
sale securities (2,489) (664) (21,366)
---------- ---------- ----------
Total Tier 1 capital 954,649 849,255 896,903
Tier 2 capital
Allowance for losses on loans (1) 91,042 85,469 89,230
Qualifying long-term debt 174,065 74,566 174,166
Less one-half of investment in unconsolidated
subsidiaries (113) (104) (107)
---------- ---------- ----------
Total capital $1,219,643 $1,009,186 $1,160,192
========== ========== ==========
Risk-weighted assets (2) $7,237,953 $6,790,144 $7,094,254
========== ========== ==========
Ratios as a percent of end of
period risk-weighted assets
Tier 1 capital 13.19% 12.51% 12.64%
Total capital 16.85 14.86 16.35
</TABLE>
- --------------------------------------
(1) Limited as required by regulatory guidelines.
(2) Based on "risk-weighted assets" as defined by regulatory guidelines.
29
<PAGE> 30
CAPITAL EXPENDITURES
During the second quarter of 1996, the Corporation finalized certain plans
related to the facilities of the Corporation once the acquisition of Leader
Federal has been completed (see Note 2 to the interim unaudited consolidated
financial statements). It has been determined that 14 branches will be
consolidated following the acquisition, certain branch locations will be
renovated, and a 125,000 square foot addition will be made to the Corporation's
existing Administrative Center. The total costs of these projects are
estimated to be approximately $15 million. These changes are expected to result
in reduced occupancy costs for the combined operations of Leader Federal and
the Corporation because certain existing space will be vacated and the
operation of the new space being constructed is expected to be more cost
efficient than existing locations. The net cost savings cannot be quantified
precisely at this time.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The information called for by this item is incorporated by reference to
Item 3, Part I of the Corporation's 1995 Form 10-K, Note 19 to the
Corporation's consolidated financial statements on pages 62 and 63 of the 1995
Annual Report, Note 10 to the Corporation's unaudited consolidated financial
statements included in the quarterly report on Form 10-Q dated March 31, 1996,
and Note 10 to the Corporation's unaudited consolidated financial statements
included herein.
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Corporation's Annual Meeting of Shareholders was held on April 25,
1996. Matters submitted to and approved by shareholders are listed below, as is
a tabulation of voting. Broker nonvotes totaled 47,115.
(1) The following persons nominated as Directors were elected:
<TABLE>
<CAPTION>
Class III For Withheld
--------- --- --------
<S> <C> <C>
Jackson W. Moore 34,752,651 291,981
Benjamin W. Rawlins, Jr. 34,740,289 304,343
V. Lane Rawlins 34,722,530 322,102
Richard A. Trippeer, Jr. 34,782,808 261,824
</TABLE>
(2) The selection by the Board of Directors of Price Waterhouse LLP as
the Corporation's independent accountants and auditors for the year
ending December 31, 1996 was ratified by the following vote:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
34,792,996 119,069 132,567
</TABLE>
(3) The Union Planters Senior Management Performance Incentive Plan was
approved by the following vote:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
32,028,946 2,439,064 576,622
</TABLE>
ITEM 5 - OTHER INFORMATION
None
30
<PAGE> 31
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11 - Computation of Earnings Per Common Share
27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K:
<TABLE>
<CAPTION>
Date of Current Report Subject
------------------------------ -----------------------------------------
<S> <C>
1. April 1, 1996 Audited financial statements of Leader
Financial Corporation for 1995, a pending
probable acquisition
2. April 2, 1996 Unaudited pro forma consolidated financial
statements dated December 31, 1995 for
certain pending probable acquisitions
3. April 18, 1996 Press release announcing first quarter of
1996 net earnings
4. May 21, 1996 Interim unaudited consolidated financial
statements for the three months ended
March 31, 1996 for Leader Financial
Corporation, a pending probable
acquisition
5. May 22, 1996 Unaudited pro forma consolidated financial
statements dated March 31, 1996 for certain
probable pending acquisitions
</TABLE>
31
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNION PLANTERS CORPORATION
--------------------------
(Registrant)
Date: August 9, 1996
--------------
By: /s/ Benjamin W. Rawlins, Jr.
---------------------------------
Benjamin W. Rawlins, Jr.
Chairman of the Board and
Chief Executive Officer
By: /s/ John W. Parker
---------------------------------
John W. Parker
Executive Vice President and
Chief Financial Officer
By: /s/ M. Kirk Walters
---------------------------------
M. Kirk Walters
Senior Vice President, Treasurer,
and Chief Accounting Officer
32
<PAGE> 1
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
<PAGE> 2
EXHIBIT 11
PAGE 1 OF 2
UNION PLANTERS CORPORATION AND SUBSIDIARIES
COMPUTATION OF PRIMARY EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ---------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE
Average shares outstanding 45,930,501 44,451,073 45,726,407 44,351,228
Assumed exercise of options outstanding 197,959 328,472 214,049 296,807
------------ ----------- ----------- -----------
Primary average shares outstanding 46,128,460 44,779,545 45,940,456 44,648,035
============ =========== =========== ===========
Net earnings $ 40,643 $ 36,451 $ 79,787 $ 72,108
Less: Preferred stock dividends
Series B 43 (88) (45) (176)
Series D - (42) - (165)
Series E (1,748) (1,554) (3,496) (3,108)
Preferred stock of an acquired entity - (339) - (676)
------------ ----------- ----------- -----------
Net earnings applicable to common shares $ 38,938 $ 34,428 $ 76,246 $ 67,983
============ =========== =========== ===========
Primary Earnings Per Common Share $ .84 $.77 $1.66 $1.52
</TABLE>
<PAGE> 3
EXHIBIT 11
PAGE 2 OF 2
UNION PLANTERS CORPORATION AND SUBSIDIARIES
COMPUTATION OF FULLY DILUTED EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ------------------------------
1996 1995 1996 1995
---------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
FULLY DILUTED EARNINGS PER COMMON SHARE
Average shares outstanding 45,930,501 44,451,073 45,726,407 44,351,228
Assumed exercise of options outstanding 198,721 351,070 214,437 308,815
Assumed conversion of preferred stock
outstanding:
Series B 108,278 339,768 224,023 339,768
Series D - 253,655 - 253,655
Series E 4,365,076 3,884,902 4,367,800 3,884,902
----------- ----------- ----------- -----------
Fully diluted average shares outstanding 50,602,576 49,280,468 50,532,667 49,138,368
=========== =========== =========== ===========
Net earnings $ 40,643 $ 36,451 $ 79,787 $ 72,108
Less: Preferred stock dividends of
an acquired entity - (339) - (676)
----------- ----------- ----------- -----------
Net earnings applicable to common shares $ 40,643 $ 36,112 $ 79,787 $ 71,432
=========== =========== =========== ===========
Fully Diluted Earnings Per Common Share $ .80 $ .73 $ 1.58 $ 1.45
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF UNION PLANTERS FOR THE SIX MONTHS ENDED JUNE 30, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 465,555
<INT-BEARING-DEPOSITS> 4,962
<FED-FUNDS-SOLD> 61,918
<TRADING-ASSETS> 134,528
<INVESTMENTS-HELD-FOR-SALE> 3,053,759
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 7,169,872
<ALLOWANCE> 136,255
<TOTAL-ASSETS> 11,367,625
<DEPOSITS> 9,343,893
<SHORT-TERM> 421,061
<LIABILITIES-OTHER> 121,919
<LONG-TERM> 473,144
0
87,233
<COMMON> 230,602
<OTHER-SE> 689,773
<TOTAL-LIABILITIES-AND-EQUITY> 11,367,625
<INTEREST-LOAN> 327,252
<INTEREST-INVEST> 89,973
<INTEREST-OTHER> 14,191
<INTEREST-TOTAL> 431,416
<INTEREST-DEPOSIT> 177,253
<INTEREST-EXPENSE> 199,100
<INTEREST-INCOME-NET> 232,316
<LOAN-LOSSES> 15,851
<SECURITIES-GAINS> 66
<EXPENSE-OTHER> 178,362
<INCOME-PRETAX> 119,573
<INCOME-PRE-EXTRAORDINARY> 119,573
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 79,787
<EPS-PRIMARY> 1.66
<EPS-DILUTED> 1.58
<YIELD-ACTUAL> 4.63
<LOANS-NON> 37,196
<LOANS-PAST> 19,522
<LOANS-TROUBLED> 1,150
<LOANS-PROBLEM> 19,418
<ALLOWANCE-OPEN> 133,487
<CHARGE-OFFS> 19,935
<RECOVERIES> 6,237
<ALLOWANCE-CLOSE> 136,255
<ALLOWANCE-DOMESTIC> 136,255
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
