<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 September 30, 1997
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) 580-6000
----------------
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 October 31, 1997
- ------------------------- --------------------------------
Common stock $5 par value 68,077,181
<PAGE> 2
UNION PLANTERS CORPORATION AND SUBSIDIARIES
FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
a) Consolidated Balance Sheet - September 30, 1997,
September 30, 1996, and December 31, 1996 3
b) Consolidated Statement of Earnings -
Three and Nine Months Ended September 30, 1997 and 1996 4
c) Consolidated Statement of Changes in Shareholders' Equity -
Nine Months Ended September 30, 1997 5
d) Consolidated Statement of Cash Flows -
Nine Months Ended September 30, 1997 and 1996 6
e) Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 33
Item 2. Changes in Securities 33
Item 3. Defaults Upon Senior Securities 33
Item 4. Submission of Matters to a Vote of Security Holders 33
Item 5. Other Information 33
Item 6. Exhibits and Reports on Form 8-K 33
Signatures 34
</TABLE>
2
<PAGE> 3
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------- DECEMBER 31,
1997 1996 1996
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 534,914 $ 556,725 $ 594,535
Interest-bearing deposits at financial institutions 5,544 10,571 9,082
Federal funds sold and securities purchased
under agreements to resell 20,685 63,913 152,667
Trading account assets 231,315 185,757 225,336
Loans held for resale 127,219 52,689 58,622
Investment securities
Available for sale (Amortized cost: $2,764,565; $3,632,212;
and $2,916,051, respectively) 2,812,927 3,653,240 2,956,234
Held to maturity (Fair value: $176,579 at September 30, 1996) - 175,506 -
Loans 10,095,601 10,197,099 10,464,176
Less: Unearned income (22,348) (32,198) (30,106)
Allowance for losses on loans (166,894) (169,274) (166,853)
----------- ----------- -----------
Net loans 9,906,359 9,995,627 10,267,217
Premises and equipment, net 268,593 268,303 260,971
Accrued interest receivable 195,961 208,901 211,082
FHA/VA claims receivable 165,210 105,453 78,241
Mortgage servicing rights 53,987 61,924 57,206
Goodwill and other intangibles 53,252 69,089 56,585
Other assets (Note 5) 482,722 193,234 294,785
----------- ----------- -----------
TOTAL ASSETS $14,858,688 $15,600,932 $15,222,563
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 1,765,944 $ 1,708,018 $ 1,730,721
Certificates of deposit of $100,000 and over 1,033,252 995,139 1,011,414
Other interest-bearing 8,242,587 8,809,518 8,748,127
----------- ----------- -----------
Total deposits 11,041,783 11,512,675 11,490,262
Short-term borrowings 629,056 1,011,703 449,146
Short- and medium-term bank notes 285,000 295,000 400,000
Federal Home Loan Bank advances 787,471 969,319 889,985
Other long-term debt 382,081 242,454 383,731
Accrued interest, expenses, and taxes 142,707 138,046 141,455
Other liabilities 103,206 93,576 115,110
----------- ----------- -----------
TOTAL LIABILITIES 13,371,304 14,262,773 13,869,689
----------- ----------- -----------
Commitments and contingent liabilities - - -
Shareholders' equity
Convertible preferred stock 57,240 85,147 83,809
Common stock, $5 par value; 100,000,000 shares authorized;
67,211,642 issued and outstanding (64,472,474 at
September 30, 1996 and 64,927,320 at December 31, 1996) 336,058 322,362 324,637
Additional paid-in capital 223,869 162,409 177,372
Retained earnings 850,721 761,294 752,963
Unearned compensation (10,131) (5,468) (10,499)
Unrealized gain on available for sale securities 29,627 12,415 24,592
----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY 1,487,384 1,338,159 1,352,874
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $14,858,688 $15,600,932 $15,222,563
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
1997 1996 1997 1996
-------- -------- -------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $236,698 $223,826 $712,424 $664,357
Interest on investment securities
Taxable 40,366 57,689 121,104 168,992
Tax-exempt 7,272 7,652 21,746 23,197
Interest on deposits at financial institutions 50 135 192 419
Interest on federal funds sold and securities
purchased under agreements to resell 853 2,315 3,766 11,350
Interest on trading account assets 3,352 3,008 9,921 8,123
Interest on loans held for resale 1,705 1,735 4,836 5,082
-------- -------- -------- --------
Total interest income 290,296 296,360 873,989 881,520
-------- -------- -------- --------
INTEREST EXPENSE
Interest on deposits 106,404 111,050 319,138 339,888
Interest on short-term borrowings 8,164 16,060 23,629 40,372
Interest on long-term debt 21,407 17,589 63,951 50,057
-------- -------- -------- --------
Total interest expense 135,975 144,699 406,718 430,317
-------- -------- -------- --------
NET INTEREST INCOME 154,321 151,661 467,271 451,203
PROVISION FOR LOSSES ON LOANS 22,251 16,070 47,252 41,739
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR
LOSSES ON LOANS 132,070 135,591 420,019 409,464
-------- -------- -------- --------
NONINTEREST INCOME
Service charges on deposit accounts 19,457 19,080 58,207 56,366
Mortgage servicing income 10,012 11,278 30,656 33,126
Bank card income 7,591 6,590 21,921 17,436
Trust service income 2,037 2,031 6,325 7,803
Profits and commissions from trading activities 1,414 1,041 4,697 4,145
Investment securities gains (losses) 26 (261) 35 (229)
Other income 34,250 17,612 64,937 48,041
-------- -------- -------- --------
Total noninterest income 74,787 57,371 186,778 166,688
-------- -------- -------- --------
NONINTEREST EXPENSE
Salaries and employee benefits 51,574 50,659 155,261 156,224
Net occupancy expense 8,495 8,432 24,384 24,631
Equipment expense 8,257 8,985 24,214 26,109
Other expense 43,781 83,104 127,550 182,461
-------- -------- -------- --------
Total noninterest expense 112,107 151,180 331,409 389,425
-------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES 94,750 41,782 275,388 186,727
Applicable income taxes 32,315 15,170 93,908 64,339
-------- -------- -------- --------
NET EARNINGS $ 62,435 $ 26,612 $181,480 $122,388
======== ======== ======== ========
NET EARNINGS APPLICABLE TO COMMON SHARES $ 61,310 $ 24,869 $177,646 $117,104
======== ======== ======== ========
EARNINGS PER COMMON SHARE
Primary $ .90 $ .38 $ 2.63 $ 1.80
Fully diluted .87 .38 2.55 1.76
AVERAGE COMMON SHARES OUTSTANDING (IN THOUSANDS)
Primary 68,373 65,219 67,628 64,609
Fully diluted 71,463 69,823 71,174 69,222
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
ADDITIONAL AVAILABLE
PREFERRED COMMON PAID-IN RETAINED UNEARNED FOR SALE
STOCK STOCK CAPITAL EARNINGS COMPENSATION SECURITIES TOTAL
--------- -------- ---------- -------- ------------ ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $ 83,809 $324,637 $177,372 $752,963 $(10,499) $24,592 $1,352,874
Net earnings - - - 181,480 - - 181,480
Cash dividends
Common Stock, $1.095 per share - - - (72,577) - - (72,577)
Series E Preferred Stock,
$1.50 per share - - - (3,834) - - (3,834)
Issuance of common stock for
acquisition - 300 2,219 - - - 2,519
Conversion of Series E
Preferred Stock (26,569) 6,642 19,925 - - - (2)
Common shares issued under
employee benefit plans and
dividend reimbursement plan,
net of shares exchanged and
repurchased - 4,479 24,353 (7,106) 368 - 22,094
Change in net unrealized gain
on available for sale
securities, net of taxes - - - - - 5,035 5,035
Other - - - (205) - - (205)
-------- -------- -------- -------- -------- ------- ----------
BALANCE, SEPTEMBER 30, 1997 $ 57,240 $336,058 $223,869 $850,721 $(10,131) $29,627 $1,487,384
======== ======== ======== ======== ======== ======= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------------
1997 1996
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 181,480 $ 122,388
Reconciliation of net earnings to net cash provided by operating activities:
Provision for losses on loans, other real estate, and FHA/VA foreclosure claims 49,349 60,852
Depreciation and amortization of premises and equipment 18,464 20,233
Amortization and write-offs of intangibles 14,865 21,202
Net accretion of investment securities (4,104) (7,065)
Net realized (gains) losses on sales of investment securities (35) 229
Deferred income tax expense (benefit) 4,493 (18,569)
Increase in assets
Trading account assets and loans held for resale (74,576) (28,630)
Other assets (260,173) (52,281)
Decrease in accrued interest, expenses, taxes, and other liabilities (13,327) (26,715)
Other, net 718 (208)
----------- -----------
Net cash (used) provided by operating activities (82,846) 91,436
----------- -----------
INVESTING ACTIVITIES
Net decrease in short-term investments 3,538 6,083
Proceeds from sales of available for sale securities 522,824 64,440
Proceeds from maturities, calls, and prepayments of available for sale securities 1,025,528 1,612,290
Purchases of available for sale securities (1,393,117) (1,586,017)
Proceeds from maturities, calls, and prepayments of held to maturity securities - 130,085
Purchases of held to maturity securities - (109,128)
Net decrease (increase) in loans 303,008 (855,377)
Net cash received from acquisitions of financial institutions 68 53,579
Purchases of premises and equipment, net (27,275) (21,655)
----------- -----------
Net cash provided (used) by investing activities 434,574 (705,700)
----------- -----------
FINANCING ACTIVITIES
Net decrease in deposits (448,479) (272,847)
Net increase in short-term borrowings 66,136 345,166
Proceeds from long-term debt, net 249,910 503,070
Repayment of long-term debt (355,689) (213,078)
Proceeds from issuance of common stock, net of shares repurchased 21,572 14,401
Cash dividends paid (76,781) (48,429)
----------- -----------
Net cash (used) provided by financing activities (543,331) 328,283
----------- -----------
Net decrease in cash and cash equivalents (191,603) (285,981)
Cash and cash equivalents at the beginning of the period 747,202 906,619
----------- -----------
Cash and cash equivalents at the end of the period $ 555,599 $ 620,638
=========== ===========
SUPPLEMENTAL DISCLOSURES
Cash paid for
Interest $ 406,616 $ 436,741
Taxes 76,901 80,591
Unrealized gain on available for sale securities 48,362 21,028
</TABLE>
The accompanying notes are an integral part of these consolidated 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 of Union Planters Corporation and
its subsidiaries (the Corporation) 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.
In 1997, the Corporation changed its accounting policy for insignificant
acquisitions using the pooling of interests method of accounting. Insignificant
poolings of interests will be included in the Corporation's results from the
date of acquisition on a prospective basis. Prior period results will be
restated only for significant poolings of interests. The recently completed
acquisition of Magna Bancorp, Inc. and the pending acquisition of Capital
Bancorp (see Note 2) are the only recently completed or pending acquisitions
that are considered significant to the Corporation.
The accounting policies followed by the Corporation for interim financial
reporting are consistent with the accounting policies followed for annual
financial reporting, except for the change noted above. The notes included
herein should be read in conjunction with the notes to the consolidated
financial statements included in the Corporation's 1996 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, 1996 (1996 10-K). Certain 1996
amounts have been reclassified to be consistent with the 1997 financial
reporting presentation.
NOTE 2. ACQUISITIONS AND SALE OF BRANCHES
CONSUMMATED ACQUISITIONS
In a transaction accounted for as a purchase, the Corporation acquired
PFIC Corporation (PFIC) on February 27, 1997, exchanging 59,992 shares of the
Corporation's common stock for all of the outstanding common stock of PFIC. PFIC
is a third-party marketer of nontraditional bank products and had total assets
of $4.2 million at the date of acquisition. Goodwill of $2.8 million resulted
from the transaction.
Reference is made to Note 2 of the consolidated financial statements on
pages 45 through 46 of the Corporation's Annual Report to Shareholders for
information regarding acquisitions completed in 1996.
RECENTLY COMPLETED ACQUISITIONS - ACQUISITIONS CONSUMMATED SUBSEQUENT TO
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
APPROXIMATE
DATE OF APPROXIMATE METHOD OF TOTAL ASSETS
INSTITUTION CONSUMMATION CONSIDERATION ACCOUNTING AT SEPTEMBER 30, 1997
------------- -------------- --------------- ------------ ----------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
SBT Bancshares, Inc. in 10/1/97 612,138 shares Pooling of $ 101
Selmer, Tennessee and of Common Stock Interests
its subsidiary,
Selmer Bank & Trust Co.
Citizens of Hardeman County 10/1/97 210,520 shares Pooling of 62
Financial Services, Inc. in of Common Stock Interests
Whiteville, Tennessee and
its subsidiary,
The Whiteville Bank
Magna Bancorp, Inc. in 11/1/97 7,104,078 shares Pooling of 1,288
Hattiesburg, Mississippi of Common Stock Interests ------
and its subsidiary,
Magnolia Federal Bank for Savings
Total $1,451
======
</TABLE>
7
<PAGE> 8
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. With the exception of the Sho-Me Financial
Corporation and the Security Bancshares, Inc. acquisitions, all of these
transactions are expected to be completed in 1997.
<TABLE>
<CAPTION>
ANTICIPATED APPROXIMATE
APPROXIMATE METHOD OF TOTAL ASSETS
INSTITUTION CONSIDERATION ACCOUNTING AT SEPTEMBER 30, 1997
--------------- ------------------ ------------ ----------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
First Acadian Bancshares, Inc. 335,000 shares Pooling of $ 83
in Thibodaux, Louisiana of Common Stock Interests
and its subsidiary,
Acadian Bank
Sho-Me Financial Corporation in 1,048,000 shares Purchase 345
Mt. Vernon, Missouri and its of Common Stock
subsidiary, First Savings Bank,
FSB
Capital Bancorp in Miami, Florida 7,576,000 shares Pooling of 2,030
and its subsidiary, Capital Bank of Common Stock Interests
Security Bancshares, Inc. in 488,000 shares Pooling of 162
Des Arc, Arkansas and its of Common Stock Interests ------
subsidiaries Farmers & Merchants
Bank in Des Arc and Merchants &
Farmers Bank in West Helena
Total $2,620
======
</TABLE>
SALE OF BRANCHES
In September 1997, the Corporation sold the deposits and certain assets of
five northeast Tennessee branches of the acquired Leader Federal Bank for
Savings and one branch of another banking subsidiary of Union Planters
Corporation. The sale involved approximately $136 million of deposits and
resulted in a gain of approximately $10.7 million which is recorded in
noninterest income (Note 6).
NOTE 3. LOANS
Loans are summarized by type as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------- DECEMBER 31,
1997 1996 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Commercial, financial, and agricultural $ 1,540,527 $ 1,518,750 $ 1,537,535
Real estate - construction 469,615 436,476 446,946
Real estate - mortgage
Secured by 1-4 family residential 2,904,950 3,324,532 3,218,651
FHA/VA government-insured/guaranteed 1,310,147 1,243,949 1,477,459
Other mortgage loans 1,779,414 1,615,253 1,530,110
Home equity 271,766 251,309 228,511
Consumer
Credit cards and related plans 541,732 518,706 627,406
Other consumer 1,210,194 1,210,490 1,324,252
Direct lease financing 67,256 77,634 73,306
----------- ----------- -----------
TOTAL LOANS $10,095,601 $10,197,099 $10,464,176
=========== =========== ===========
</TABLE>
8
<PAGE> 9
Nonperforming loans are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Nonaccrual loans $56,329 $63,346
Restructured loans 1,967 2,546
------- -------
TOTAL NONPERFORMING LOANS $58,296 $65,892
======= =======
</TABLE>
A discussion of the change in nonaccrual loans is included in the
"Nonperforming Assets" section of "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
NOTE 4. ALLOWANCE FOR LOSSES ON LOANS
The changes in the allowance for losses on loans for the three and nine
months ended September 30, 1997, are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
------------------ -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Beginning balance $161,159 $166,853
Provision charged to expense 22,251 47,252
Recoveries 4,395 12,900
Amounts charged off (20,911) (60,111)
-------- --------
Balance, September 30, 1997 $166,894 $166,894
======== ========
</TABLE>
As of September 30, 1997, the amount of the Corporation's impaired loans
and the disclosures related thereto were not considered significant.
NOTE 5. INVESTMENT SECURITIES
The amortized cost and fair value of investment securities are summarized
as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------------------------------
UNREALIZED
AMORTIZED ------------------- FAIR
COST GAINS LOSSES VALUE
---------- -------- ------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Government obligations
U.S. Treasury $ 704,426 $ 3,382 $ 230 $ 707,578
U.S. Government agencies
Collateralized mortgage obligations 107,491 1,296 122 108,665
Mortgage-backed 610,152 19,464 177 629,439
Other 724,676 3,260 442 727,494
---------- ------- ------ ----------
Total U.S. Government obligations 2,146,745 27,402 971 2,173,176
Obligations of states and political subdivisions 469,728 24,529 1,620 492,637
Other stocks and securities 148,092 309 1,287 147,114
---------- ------- ------ ----------
TOTAL AVAILABLE FOR SALE SECURITIES $2,764,565 $52,240 $3,878 $2,812,927
========== ======= ====== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------------------------
UNREALIZED
AMORTIZED ------------------- FAIR
COST GAINS LOSSES VALUE
---------- -------- ------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Government obligations
U.S. Treasury $ 834,054 $ 4,123 $ 791 $ 837,386
U.S. Government agencies
Collateralized mortgage obligations 124,908 617 347 125,178
Mortgage-backed 806,160 21,106 978 826,288
Other 511,986 965 1,747 511,204
---------- ------- ------ ----------
Total U.S. Government obligations 2,277,108 26,811 3,863 2,300,056
Obligations of states and political subdivisions 487,489 20,746 2,265 505,970
Other stocks and securities 151,454 240 1,486 150,208
---------- ------- ------ ----------
TOTAL AVAILABLE FOR SALE SECURITIES $2,916,051 $47,797 $7,614 $2,956,234
========== ======= ====== ==========
</TABLE>
The held to maturity investment securities shown on the consolidated
balance sheet at September 30, 1996 resulted from acquired financial
institutions and were reclassified to available for sale investment securities
upon acquisition.
Investment securities having a carrying value of approximately $1.3
billion at September 30, 1997 and $1.1 billion at December 31, 1996 were pledged
to secure public and trust funds on deposit, securities sold under agreements to
repurchase and Federal Home Loan Bank advances.
9
<PAGE> 10
Included in other assets at September 30, 1997, is approximately $243
million of receivables related to investment securities transactions. The
majority of these receivables relate to the securitization and sale of
approximately $300 million of fixed and adjustable rate single family
residential mortgage loans during the quarter. A significant portion of the sale
of these securities had traded but had not settled at period end.
The following table presents the gross realized gains and losses on
investment securities for the nine months ended September 30, 1997 and 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------
REALIZED GAINS REALIZED LOSSES
-------------------- ---------------------
1997 1996 1997 1996
------ ------ ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Available for sale securities $ 2,073 $ 159 $(2,038) $ (342)
Held to maturity securities -- -- -- (46)
------- ------- ------- -------
$ 2,073 $ 159 $(2,038) $ (388)
======= ======= ======= =======
</TABLE>
10
<PAGE> 11
NOTE 6. OTHER NONINTEREST INCOME AND EXPENSE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1997 1996 1997 1996
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
OTHER NONINTEREST INCOME
Insurance commissions $ 2,263 $ 2,619 $ 6,649 $ 8,216
Gain on sale of residential mortgage loans 9,386 1,792 11,545 5,206
Gain on sale of branches/deposits 10,666 -- 11,166 1,964
ATM transaction fees 2,486 1,717 6,856 3,695
VSIBG partnership earnings 787 415 1,626 2,320
Brokerage fee income 1,365 661 3,674 2,075
Annuity sales income 1,967 645 6,323 1,213
Other income 5,330 9,763 17,098 23,352
-------- -------- -------- --------
TOTAL OTHER NONINTEREST INCOME $ 34,250 $ 17,612 $ 64,937 $ 48,041
======== ======== ======== ========
OTHER NONINTEREST EXPENSE
FDIC insurance (1) $ 758 $ 24,507 $ 2,233 $ 28,743
Provision for losses on FHA/VA
foreclosure claims (2) 750 5,625 1,750 18,736
Amortization of mortgage servicing rights 3,026 3,042 8,947 8,769
Amortization of goodwill and other intangibles 1,978 2,255 5,918 6,730
Write-off of mortgage servicing rights,
goodwill, and other intangibles -- 3,524 -- 5,704
Other contracted services 4,053 3,642 12,482 9,491
Postage and carrier 4,037 3,587 11,093 10,366
Advertising and promotion 3,540 3,446 9,863 10,007
Stationery and supplies 3,268 2,853 9,821 10,092
Merger-related expenses:
Salaries, employee benefits, and other
employment-related charges -- 229 -- 229
Write-downs of office buildings and equipment -- 290 -- 290
Professional fees -- 1,048 -- 1,048
Other real estate expense -- 756 -- 756
Other -- 5,568 -- 5,568
Communications 2,760 2,329 8,197 7,754
Other personnel services 2,024 2,155 5,717 5,812
Miscellaneous charge-offs 1,643 1,566 4,822 4,663
Legal fees 1,621 1,408 3,983 3,706
Merchant credit card charges 1,400 1,369 3,907 3,784
Taxes other than income 1,443 1,236 4,047 3,680
Dues, subscriptions, and contributions 914 934 2,785 2,824
Brokerage and clearing fees on trading activities 948 753 3,384 2,843
Travel 954 858 2,740 2,705
Accounting and audit fees 682 694 2,069 2,101
Insurance 646 884 1,917 2,355
Consultant fees 422 516 1,265 1,699
Federal Reserve fees 619 550 1,821 1,696
Other real estate expense 465 1,122 1,295 1,715
Other expense 5,830 6,358 17,494 18,595
-------- -------- -------- --------
TOTAL OTHER NONINTEREST EXPENSE $ 43,781 $ 83,104 $127,550 $182,461
======== ======== ======== ========
</TABLE>
- --------
(1) The amounts for 1996 include a one-time SAIF deposit insurance assessment
of $22.3 million.
(2) The amounts for 1996 include $4.9 million and $14.6 million, respectively,
of provisions for losses on FHA/VA foreclosure claims related to an
acquired entity.
NOTE 7. INCOME TAXES
Applicable income taxes for the nine months ended September 30, 1997, were
$93.9 million, resulting in an effective tax rate of 34.1%. Applicable income
taxes for the same period in 1996 were $64.3 million, resulting in an effective
tax rate of 34.5%. The decrease in the effective rate in 1997, as compared to
1996, is due primarily to the change in the mix of taxable and nontaxable
revenues.
11
<PAGE> 12
At September 30, 1997, the Corporation had a net deferred tax asset of
$71.4 million compared to $80.0 million at December 31, 1996. The net deferred
tax asset includes a deferred tax liability related to the net unrealized gain
on available for sale securities of $18.7 million and $15.6 million at those
dates, respectively. Based upon historical earnings, management continues to
believe that 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. BORROWINGS
SHORT-TERM BORROWINGS
Short-term borrowings include federal funds purchased and securities sold
under agreements to repurchase and other short-term borrowings. Federal funds
purchased arise primarily from the Corporation's market activity with its
correspondent banks and generally mature in one business day. Securities sold
under agreements to repurchase are secured by U. S. Government and agency
securities.
Short-term borrowings are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
---------------------------
1997 1996 1996
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balances at quarter end:
Federal funds purchased and securities sold
under agreements to repurchase $ 591,378 $ 997,210 $ 438,104
Other short-term borrowings 37,678 14,493 11,042
---------- ---------- ----------
Total short-term borrowings $ 629,056 $1,011,703 $ 449,146
========== ========== ==========
Federal funds purchased and securities sold
under agreements to repurchase
Year to date daily average balance $ 415,971 $ 922,272 $ 889,793
Weighted average interest rate 4.99% 5.44% 5.41%
</TABLE>
SHORT- AND MEDIUM-TERM BANK NOTES
The Corporation's principal subsidiary, Union Planters National Bank
(UPNB), established in 1996 a $1-billion short- and medium-term bank note
program to supplement UPNB's funding sources. Under the program UPNB may from
time to time issue bank notes having maturities ranging from 30 days to one year
from their respective issue dates (Short-Term Bank Notes) and bank notes having
maturities of more than one year to 30 years from their respective dates of
issue (Medium-Term Bank Notes). A summary of UPNB's bank notes outstanding on
the dates indicated follows.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------------------ -----------------------------
SHORT-TERM MEDIUM-TERM SHORT-TERM MEDIUM-TERM
BANK NOTES BANK NOTES BANK NOTES BANK NOTES
-------------- ------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balances at period end $ 150,000 $ 135,000 $ 265,000 $ 135,000
Variable rate notes 50,000 - - -
Fixed rate notes 100,000 135,000 265,000 135,000
Range of maturities 10/97 8/98 - 10/01 1/97 - 5/97 8/98 - 10/01
</TABLE>
12
<PAGE> 13
FEDERAL HOME LOAN BANK (FHLB) ADVANCES
Certain of the Corporation's banking and thrift subsidiaries had
outstanding advances from the FHLB under Blanket Agreements for Advances and
Security Agreements (the Agreements). The Agreements enable these subsidiaries
to borrow funds from the FHLB to fund mortgage loan programs and to satisfy
certain other funding needs. The value of the mortgage-backed securities and
mortgage loans pledged under the Agreements must be maintained at not less than
115% and 150%, respectively, of the advances outstanding. At September 30, 1997,
the Corporation had an adequate amount of mortgage-backed securities and loans
to satisfy the collateral requirements. A summary of the advances is as follows.
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------------ DECEMBER 31,
1997 1996 1996
------------- -------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at period end $787,471 $969,319 $889,985
Range of interest rates 3.25% - 9.00% 3.25% - 9.00% 3.25% - 9.00%
Range of maturities 1997 - 2025 1996 - 2025 1997 - 2025
</TABLE>
OTHER LONG-TERM DEBT
The Corporation's other long-term debt is summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------ DECEMBER 31,
1997 1996 1996
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Corporation-Obligated Mandatorily Redeemable
Capital Pass-through Securities of Subsidiary Trust
holding solely a Corporation-Guaranteed Related
Subordinated Note (Trust Preferred Securities) $198,965 $ - $198,938
6 3/4% Subordinated Notes due 2005 99,521 99,462 99,477
6.25% Subordinated Notes due 2003 74,683 74,631 74,644
8 1/2% Subordinated Notes due 2002 - 36,930 -
Other long-term debt 8,912 31,431 10,672
-------- -------- --------
TOTAL OTHER LONG-TERM DEBT $382,081 $242,454 $383,731
======== ======== ========
</TABLE>
NOTE 9. SHAREHOLDERS' EQUITY
PREFERRED STOCK
The Corporation's preferred stock is summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------ DECEMBER 31,
1997 1996 1996
-------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Preferred stock, without par value,
10,000,000 shares authorized
Series A Preferred Stock,
750,000 shares authorized, none issued $ - $ - $ -
Series E, 8% Cumulative, Convertible,
Preferred Stock (stated at liquidation
value of $25 per share),2,289,594
shares issued and outstanding (3,405,878
at September 30, 1996 and 3,352,347 at
December 31, 1996) 57,240 85,147 83,809
------- ------- -------
TOTAL PREFERRED STOCK $57,240 $85,147 $83,809
======= ======= =======
</TABLE>
13
<PAGE> 14
NOTE 10. CONTINGENT LIABILITIES
CONTINGENT LIABILITIES
The Corporation or its subsidiaries are parties to certain pending or
threatened civil actions which are described in Item 3, Part I of the
Corporation's Annual Report on Form 10-K for the year ended December 31, 1996
(1996 10-K), in Note 19 to the Corporation's consolidated financial statements
on page 67 of the 1996 Annual Report to Shareholders (1996 Annual Report), and
in Note 10 of the Corporation's quarterly reports on Form 10-Q dated March 31,
1997 and June 30, 1997. Two such previously reported matters involve collateral
protection insurance (CPI)-related suits filed in Circuit Court, Greene County,
Alabama by the same person, Queen Ford. One of the suits was settled in the
first quarter of 1997 for a nominal amount. An agreement in principal to settle
the second suit (also for a nominal amount), which demanded $5,000 in
compensatory damages and punitive damages of $20 million, was reached early in
the fourth quarter. 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 lawsuits. There
were no significant developments during the third quarter of 1997 in any of the
pending or threatened actions which affected such opinion.
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 1996
Annual Report, the Corporation's Quarterly Reports on Form 10-Q dated March 31,
1997 and June 30, 1997, the Corporation's interim unaudited financial statements
and notes for the three and nine months ended September 30, 1997, included in
Part I hereof, and the 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. Specifically, this 10-Q contains forward-looking statements with
respect to the adequacy of the allowance for losses on loans; the effect of
legal proceedings on the Corporation's financial condition, results of
operations, and liquidity; charges related to pending acquisitions; cost savings
related to integration of completed acquisitions; and year 2000 compliance
issues. When used in this discussion, the words "anticipate," "project,"
"expect," "believes," 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 forward-looking statements are subject to certain risks, uncertainties, and
assumptions. Should one or more of these risks materialize, or should any 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 are
fluctuations in the economy, especially in the Southeast; the relative strength
and weakness in the consumer and commercial credit sector and in the real estate
market; the actions taken by the Federal Reserve for the purpose of managing the
economy; the Corporation's ability to realize anticipated cost savings related
to both recently completed and pending acquisitions; the ability of the
Corporation to achieve anticipated revenue enhancements; its success in
assimilating acquired operations into the Corporation's culture, including its
ability to instill the Corporation's credit culture and approach to operating
efficiencies into acquired operations; the continued growth of the markets in
which the Corporation operates consistent with recent historical experience; the
absence of undisclosed material contingencies inherent in acquired operations,
including asset quality and litigation contingencies; the enactment of
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. Moreover, the outcome of litigation is inherently uncertain
and depends on judicial interpretations of law and the findings of judges and
juries.
14
<PAGE> 15
SELECTED FINANCIAL HIGHLIGHTS --- THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997
AND 1996
The following table presents selected financial highlights for the three
and nine months ended September 30, 1997 and 1996.
<TABLE>
<CAPTION> PERCENTAGE
THREE MONTHS ENDED NINE MONTHS ENDED CHANGE
SEPTEMBER 30, SEPTEMBER 30, -------------------
------------------------ ------------------------ THREE NINE
1997 1996 1997 1996 MONTHS MONTHS
-------- -------- -------- -------- -------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net earnings $62,435 $26,612 $181,480 $122,388 135% 48%
Primary earnings per common share .90 .38 2.63 1.80 137 46
Fully diluted earnings per common share .87 .38 2.55 1.76 129 45
Return on average assets 1.68% .69% 1.64% 1.07%
Return on average common equity 17.79 8.18 18.01 13.27
Dividends per common share $ .40 $ .27 $ 1.095 $ .81 48 35
Net interest margin (FE) 4.67% 4.36% 4.71% 4.40%
Interest rate spread (FE) 3.93 3.70 3.99 3.70
Expense ratio 1.29 1.53 1.40 1.58
Efficiency ratio 50.37 56.11 50.57 55.66
Book value per common share $ 21.28 $ 19.43
Leverage ratio 10.96% 8.33%
Common share prices:
Last closing price $ 55.88 $ 35.50
High closing price $ 56.50 $ 36.25 56.50 36.25
Low closing price 49.25 28.63 38.38 28.63
</TABLE>
- --------------------
Net interest margin = Net interest income as a percentage of average earning
assets
Interest rate spread = Difference between 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 (FE) plus noninterest
income, excluding significant nonrecurring revenues and investment securities
gains (losses)
FE = Fully taxable-equivalent basis
15
<PAGE> 16
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> NINE MONTHS ENDED
SEPTEMBER 30, EPS
--------------------- INCREASE
1997 1996 (DECREASE)
------ ------ ----------
<S> <C> <C> <C>
Net interest income-FE $ 6.73 $ 6.70 $ 0.03
Provision for losses on loans (0.66) (0.60) (0.06)
------ ------ ------
Net interest income after provision
for losses on loans-FE 6.07 6.10 (0.03)
------ ------ ------
Noninterest income
Service charges on deposit accounts 0.82 0.81 0.01
Mortgage servicing income 0.43 0.48 (0.05)
Bank card income 0.31 0.25 0.06
Trust service income 0.09 0.11 (0.02)
Profits and commissions from trading activities 0.07 0.06 0.01
Investment securities gains (losses) - - -
Other income 0.90 0.70 0.20
------ ------ ------
Total noninterest income 2.62 2.41 0.21
------ ------ ------
Noninterest expense
Salaries and employee benefits 2.18 2.26 0.08
Net occupancy expense 0.34 0.35 0.01
Equipment expense 0.34 0.38 0.04
Other expense 1.79 2.64 0.85
------ ------ ------
Total noninterest expense 4.65 5.63 0.98
------ ------ ------
Earnings before income taxes-FE 4.04 2.88 1.16
Applicable income taxes-FE 1.49 1.12 (0.37)
------ ------ ------
Net earnings 2.55 1.76 0.79
Less preferred stock dividends - - -
------ ------ ------
$ 2.55 $ 1.76 $ 0.79
====== ====== ======
Change in net earnings applicable to fully
diluted earnings per share using previous
year average shares outstanding $ 0.85
Change in average shares outstanding (0.06)
------
Change in net earnings $ 0.79
======
Average fully diluted shares (in thousands) 71,174 69,222
====== ======
</TABLE>
- --------------------
FE = Fully taxable-equivalent basis
16
<PAGE> 17
THIRD QUARTER EARNINGS OVERVIEW
For the third quarter of 1997, the Corporation reported record earnings of
$62.4 million compared to $26.6 million for the same period in 1996. Fully
diluted earnings per common share for the third quarter of 1997 were $.87
compared to $.38 for the same period in 1996. Third quarter earnings resulted in
a return on average assets of 1.68% and a return on average common equity of
17.79% compared to .69% and 8.18%, respectively, for the same period in 1996.
Net earnings for the nine months ended September 30, 1997 were $181.5
million, or $2.55 per fully diluted common share. This compares to net earnings
of $122.4 million, or $1.76 per fully diluted common share, for the same period
in 1996.
The improvement in net earnings for the third quarter of 1997 is
attributable to an increase in taxable-equivalent net interest income of $2.5
million, an increase in noninterest income of $17.4 million, and a reduction of
noninterest expenses of $39.1 million. Partially offsetting these improvements
was an increase in the provision for losses on loans of $6.2 million. Results
for the third quarter of 1997 included a $10.7 million gain from the sale of
certain branches and deposits and an increase of $7.6 million in the gain on
sale of residential mortgage loans resulting primarily from the securitization
and sale of certain loans. Third quarter results for 1996 were negatively
impacted by a one-time Savings Association Insurance Fund (SAIF) assessment of
$22.3 million and merger-related and other significant charges of $16.3 million,
partially offset by a $5.0 million one-time gain from the sale of certain
assets. The following is a more complete discussion and analysis of the
financial results for the three and nine months ended September 30, 1997
compared to the same periods in 1996.
EARNINGS ANALYSIS
NET INTEREST INCOME
For the third quarter of 1997, net interest income (FTE) was $158.5
million, a 1.6% increase over $156.0 million for the third quarter of 1996 and
down 1.9% from the second quarter of 1997 which was $161.6 million. For the nine
months ended September 30, 1997, net interest income (FTE) was $479.3 million
compared to $464.1 million for the same period in 1996. Growth of average loans
funded by maturities and sales of lower yielding investment securities and
reductions of short-term borrowings positively impacted taxable-equivalent net
interest income, allowing both the net interest margin and the dollar amount of
net interest income to increase. Also contributing to the improvement were
increases in noninterest-bearing demand deposits and shareholders' equity and
slightly lower rates paid on interest-bearing liabilities. The decline in
taxable-equivalent net interest income between the second and third quarters of
1997 was due primarily to a decrease in earning assets and a slight increase in
funding costs.
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.
For the third quarter of 1997, the net interest margin was 4.67% compared
to 4.36% for the same quarter in 1996 and 4.75% for the second quarter of 1997.
The net interest margin for the first nine months of 1997 was 4.71%, 31 basis
points higher than the net interest margin for the same period in 1996. The
interest rate spread increased to 3.93% for the third quarter of 1997 from 3.70%
for the third quarter of 1996 and is down from 4.01% for the second quarter of
1997.
INTEREST INCOME
The following table presents a breakdown of average earning assets for the
three and nine months ended September 30, 1997 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1997 1996 1997 1996
------ ------ ------ ------
(DOLLARS IN BILLIONS)
<S> <C> <C> <C> <C>
Average earning assets $13.5 $14.2 $13.6 $14.1
Comprised of:
Loans 77% 70% 77% 69%
Investment securities 21 28 21 28
Other earning assets 2 2 2 3
- -------------------
Fully taxable-equivalent yield on
average earning assets 8.68% 8.40% 8.71% 8.48%
</TABLE>
17
<PAGE> 18
Fully taxable-equivalent interest income for the third quarter of 1997
decreased $6.3 million compared to the same period in 1996 and decreased $2.2
million compared to the second quarter of 1997. The decline between the third
quarter of 1996 and 1997 resulted from a $774 million decrease in average
earning assets, or approximately $10.4 million of the decrease, resulting
primarily from a restructuring of the balance sheet following the Leader
Financial Corporation (LFC) acquisition. This was partially offset by an
increase in the average yield on average earning assets of 28 basis points or
$4.1 million.
For the first nine months of 1997, fully-taxable-equivalent interest
income decreased 1% compared to the same period in 1996. The decrease was
attributable to a $487 million decline in average earning assets which accounted
for approximately $10.0 million of the decrease partially offset by an increase
in the average yield on earning assets which accounted for a $1.7 million
increase.
INTEREST EXPENSE
The following table presents a breakdown of average interest-bearing
liabilities for the three and nine months ended September 30, 1997 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- ------------------
1997 1996 1997 1996
---- ---- ---- ----
(DOLLARS IN BILLIONS)
<S> <C> <C> <C> <C>
Average interest-bearing liabilities $11.4 $12.2 $11.5 $12.0
Comprised of:
Deposits 83% 81% 83% 83%
Short-term borrowings 5 9 5 8
FHLB advances and long-term debt 12 10 12 9
- -------------------------
Rates paid on average interest-bearing liabilities 4.75% 4.70% 4.72% 4.78%
</TABLE>
Interest expense decreased 6.0% in the third quarter of 1997 compared to
the same period in 1996 and increased .6% from the second quarter of 1997. The
decrease in interest expense for the third quarter of 1997 is attributable to a
decline in average interest-bearing liabilities which accounted for
approximately $10.2 million of the decrease partially offset by a
five-basis-point increase in the average rate paid on interest-bearing
liabilities, or approximately $1.4 million. The majority of the decrease in
interest-bearing liabilities related to a reduction of short-term borrowings in
connection with the balance sheet restructuring discussed above. Also
contributing to the decline was a reduction in deposits due to the sale of
certain branch locations and a decrease in time deposits.
For the nine months ended September 30, 1997, interest expense decreased
5.5% compared to the same period in 1996. The decline was due to a decrease in
average interest-bearing liabilities which accounted for approximately $17.0
million of the decline and a six-basis-point decrease in the average rate paid
on these liabilities which accounted for approximately $6.6 million of the
decrease.
PROVISION FOR LOSSES ON LOANS
The provision for losses on loans for the third quarter of 1997 was $22.3
million, or 1.01% of average loans on an annualized basis, compared to $16.1
million, or .64% of average loans, for the same period in 1996 and $12.6
million, or .56% of average loans, for the second quarter of 1997. For the nine
months ended September 30, 1997, the provision for losses on loans was $47.3
million compared to $41.7 million for the same period in 1996. The level of the
provision for losses on loans continues to be impacted by the high level of
charge-offs in the credit card and other consumer loan portfolios.
Reference is made to the "Allowance for Losses on Loans" discussion for
additional information regarding loan charge-offs.
18
<PAGE> 19
NONINTEREST INCOME
Noninterest income for the third quarter of 1997 was $74.8 million, an
increase of 30.4% from the same period in 1996, and an increase of 37.1%
compared to the second quarter of 1997. For the nine months ended September 30,
1997, noninterest income was $186.8 million compared to $166.7 million for the
same period in 1996. 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.
Included in noninterest income for the third quarter of 1997, is a $10.7
million gain from the sale of certain branches and deposits in upper East
Tennessee. Additionally, during the quarter, the Corporation securitized and
sold approximately $300 million of fixed and adjustable rate single family
residential mortgage loans, which primarily accounted for the $7.6 million
increase in gains on sale of loans. The purpose of this securitization and sale
was to enhance liquidity and take advantage of low interest rates and narrow
spreads on adjustable rate mortgage securities. Noninterest income for the third
quarter of 1996 included a $5.0 million one-time gain from the sale of certain
assets of a subsidiary.
For the nine months ended September 30, 1997, the increase in noninterest
income was due to the following increases: (i) gain on sale of branches and
deposits of $9.2 million; (ii) gain on sale of residential mortgage loans of
$6.3 million; (iii) annuity sales income of $5.1 million; bank card income of
$4.6 million and (iv) service charges on deposit accounts and ATM transaction
fees of $5.0 million. The increase in noninterest income between 1997 and 1996
was partially offset due to reductions resulting from the following items: (i) a
decrease in mortgage servicing income of $2.5 million between the two periods,
(ii) a one-time gain on the sale of certain assets of $5.0 million in 1996, and
(iii) one-time trust fees of $1.3 million in 1996 resulting from a court award
of trust fees for several years.
NONINTEREST EXPENSE
Noninterest expense for the third quarter of 1997 decreased $39.1 million
to $112.1 million compared to $151.2 million for the third quarter of 1996 and
an increase from $110.1 million for the second quarter of 1997. For the nine
months ending September 30, 1997, noninterest expense decreased $58.0 million to
$331.4 million. 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 decline in noninterest expense for both the three and nine months
ended September 30, 1997, was due primarily to: (i) decreases in the FDIC
insurance assessment of $23.7 million and $26.5 million, respectively (primarily
a one-time SAIF assessment on deposits of approximately $22.3 million) and (ii)
decreases in merger-related and other significant charges of $16.3 million and
$28.9 million, respectively (see Note 6 to the interim financial statements for
a detail of these charges).
Salaries and employee benefits expense, the largest component of
noninterest expense, increased $915,000 and decreased $963,000, respectively,
for the three and nine months ended September 30, 1997 compared to the same
periods in 1996. The Corporation had 5,971 full-time-equivalent employees at
September 30, 1997 compared to 6,027 at September 30, 1996.
Management expects some additional expense reductions over the next 18 to
24 months in connection with plans to consolidate the Corporation's subsidiary
bank charters. See "Consolidation of Subsidiary Bank Charters."
EARNINGS CONSIDERATIONS RELATED TO ACQUISITIONS
It is expected that either the Corporation, the Recently Completed, or the
Pending Acquisitions (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. Most of
the charges are expected to relate to the Magna Bancorp, Inc. and Capital
Bancorp acquisitions. Anticipated charges would normally arise from items such
as, but not limited to, legal and accounting fees, financial advisory fees,
consultant 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 usually arise
from the consolidation of operational activities.
19
<PAGE> 20
All of the Corporation's Recently Completed and Pending Acquisitions are
expected to be accounted for as poolings of interests, except for one which is
expected to be accounted for as a purchase. Aggregate charges expected to arise
from the pooling of interests transactions have been estimated to be in the
range of $30 million to $40 million after taxes. 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 an estimate of the significant
charges which may in the aggregate be required and should be viewed accordingly.
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND INTEREST RATES
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
1997 1996
------------------------------------ --------------------------------------
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 $ 5,587 $ 50 3.55% $ 6,002 $ 135 8.95%
Federal funds sold and securities
purchased under agreements to resell 57,785 853 5.86 169,914 2,315 5.42
Trading account assets 181,184 3,352 7.34 158,758 3,008 7.54
Investment securities (1) (2)
Taxable 2,415,541 40,366 6.63 3,479,431 57,689 6.60
Tax-exempt 467,106 10,875 9.24 501,745 11,358 9.01
----------- -------- ----------- --------
Total investment securities 2,882,647 51,241 7.05 3,981,176 69,047 6.90
Loans, net of unearned income (1) 10,338,321 238,944 9.17 9,923,426 226,197 9.07
----------- -------- ----------- --------
TOTAL EARNING ASSETS (1) (2) 13,465,524 294,440 8.68 14,239,276 300,702 8.40
-------- --------
Cash and due from banks 443,676 471,728
Premises and equipment 265,409 266,815
Allowance for losses on loans (164,545) (167,998)
Other assets 741,902 562,199
----------- -----------
TOTAL ASSETS $14,751,966 $15,372,020
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Money market accounts $ 1,672,955 $ 15,316 3.63% $ 1,805,209 $ 15,029 3.31%
Savings deposits 2,096,396 13,010 2.46 2,016,662 12,434 2.45
Certificates of deposit of
$100,000 and over 1,042,811 14,715 5.60 996,305 14,233 5.68
Other time deposits 4,623,124 63,363 5.44 5,096,963 69,354 5.41
Short-term borrowings 533,124 7,015 5.22 1,054,311 14,589 5.50
Short-term bank notes 79,348 1,149 5.74 101,522 1,471 5.76
Long-term debt
Federal Home Loan Bank advances 801,461 12,111 6.00 916,261 13,013 5.65
Subordinated capital notes 174,187 2,932 6.68 212,828 3,824 7.15
Medium-term bank notes 135,000 2,236 6.57 45,652 752 6.55
Trust Preferred Securities 198,960 4,128 8.23 - - -
----------- -------- ----------- --------
TOTAL INTEREST-BEARING LIABILITIES 11,357,366 135,975 4.75 12,245,713 144,699 4.70
-------- --------
Noninterest-bearing demand deposits 1,717,712 1,582,415
----------- -----------
TOTAL SOURCES OF FUNDS 13,075,078 13,828,128
Other liabilities 249,568 247,663
Shareholders' equity 1,427,320 1,296,229
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $14,751,966 $15,372,020
=========== ===========
NET INTEREST INCOME $158,465 $156,003
======== ========
INTEREST RATE SPREAD 3.93% 3.70%
==== ====
NET INTEREST MARGIN 4.67% 4.36%
==== ====
- --------------------
(1) Taxable-equivalent adjustments:
Loans $ 541 $ 636
Investment securities 3,603 3,706
-------- --------
$ 4,144 $ 4,342
======== ========
</TABLE>
(2) Yields are calculated on historical cost and exclude the impact of the net
unrealized gain (loss) on available for sale securities.
20
<PAGE> 21
UNION PLANTERS CORPORATION AND SUBSIDIARIES
ANALYSIS OF VOLUME AND RATE CHANGES
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
1997 VERSUS 1996
---------------------------------------------------------------
INCREASE
(DECREASE)
DUE TO CHANGE IN: (1)
-----------------------------------------
INCREASE
AVERAGE VOLUME AVERAGE RATE (DECREASE)
-------------- ------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits at
financial institutions $ (9) $ (76) $ (85)
Federal funds sold and securities
purchased under agreements to resell (1,632) 170 (1,462)
Trading account assets 421 (77) 344
Investment securities (FTE) (19,259) 1,453 (17,806)
Loans, net of unearned income (FTE) 10,054 2,693 12,747
-------- -------- --------
TOTAL INTEREST INCOME (10,425) 4,163 (6,262)
-------- -------- --------
INTEREST EXPENSE
Money market accounts (1,105) 1,392 287
Savings deposits 526 50 576
Certificates of deposit of
$100,000 and over 681 (199) 482
Other time deposits (6,299) 308 (5,991)
Short-term borrowings (7,231) (665) (7,896)
Long-term debt 3,263 555 3,818
-------- -------- --------
TOTAL INTEREST EXPENSE (10,165) 1,441 (8,724)
-------- -------- --------
CHANGE IN NET INTEREST INCOME $ (260) $ 2,722 $ 2,462
======== ======== ========
PERCENTAGE INCREASE IN NET INTEREST
INCOME OVER PRIOR PERIOD 1.58%
========
</TABLE>
FTE = Fully taxable-equivalent basis
(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.
21
<PAGE> 22
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND INTEREST RATES
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------------------------
1997 1996
-------------------------------------- ---------------------------------------
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 $ 6,474 $ 192 3.97% $ 6,179 $ 419 9.06%
Federal funds sold and securities
purchased under agreements to resell 88,402 3,766 5.70 272,929 11,350 5.55
Trading account assets 177,350 9,921 7.48 142,215 8,123 7.63
Investment securities (1) (2)
Taxable 2,433,398 121,104 6.65 3,437,455 168,992 6.57
Tax-exempt 472,483 32,137 9.09 502,477 34,335 9.13
----------- -------- ----------- --------
Total investment securities 2,905,881 153,241 7.05 3,939,932 203,327 6.89
Loans, net of unearned income (1) 10,422,022 718,911 9.22 9,725,717 671,164 9.22
----------- -------- ----------- --------
TOTAL EARNING ASSETS (1) (2) 13,600,129 886,031 8.71 14,086,972 894,383 8.48
-------- --------
Cash and due from banks 437,378 473,119
Premises and equipment 261,130 266,988
Allowance for losses on loans (165,939) (168,321)
Other assets 702,496 557,863
----------- -----------
TOTAL ASSETS $14,835,194 $15,216,621
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Money market accounts $ 1,652,157 $ 43,831 3.55% $ 1,834,513 $ 45,022 3.28%
Savings deposits 2,151,812 39,497 2.45 1,987,906 37,992 2.55
Certificates of deposit of
$100,000 and over 1,045,462 43,686 5.59 986,920 44,027 5.96
Other time deposits 4,729,767 192,124 5.43 5,139,307 212,847 5.53
Short-term borrowings 445,839 16,831 5.05 936,039 38,901 5.55
Short-term bank notes 156,282 6,798 5.82 34,088 1,471 5.76
Long-term debt
Federal Home Loan Bank advances 826,344 36,065 5.84 880,508 37,506 5.69
Subordinated capital notes 174,159 8,795 6.75 213,744 11,799 7.37
Medium-term bank notes 135,000 6,708 6.64 15,328 752 6.55
Trust Preferred Securities 198,951 12,383 8.32 - - -
----------- -------- ----------- --------
TOTAL INTEREST-BEARING LIABILITIES 11,515,773 406,718 4.72 12,028,353 430,317 4.78
-------- --------
Noninterest-bearing demand deposits 1,670,991 1,587,131
----------- -----------
TOTAL SOURCES OF FUNDS 13,186,764 13,615,484
Other liabilities 260,024 332,723
Shareholders' equity 1,388,406 1,268,414
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $14,835,194 $15,216,621
=========== ===========
NET INTEREST INCOME $479,313 $464,066
======== ========
INTEREST RATE SPREAD 3.99% 3.70%
==== ====
NET INTEREST MARGIN 4.71% 4.40%
==== ====
- -------------------
(1) Taxable-equivalent adjustments:
Loans $ 1,651 $ 1,725
Investment securities 10,391 11,138
-------- --------
$ 12,042 $ 12,863
======== ========
</TABLE>
(2) Yields are calculated based on historical cost and exclude the impact of
the net unrealized gain (loss) on available for sale securities.
22
<PAGE> 23
UNION PLANTERS CORPORATION AND SUBSIDIARIES
ANALYSIS OF VOLUME AND RATE CHANGES
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1997 VERSUS 1996
--------------------------------------------------
INCREASE
(DECREASE)
DUE TO CHANGE IN: (1)
------------------------------------
INCREASE
AVERAGE VOLUME AVERAGE RATE (DECREASE)
-------------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits at
financial institutions $ 20 $ (247) $ (227)
Federal funds sold and securities
purchased under agreements to resell (7,677) 93 (7,584)
Trading account assets 1,862 (64) 1,798
Investment securities (FTE) (51,734) 1,648 (50,086)
Loans, net of unearned income (FTE) 47,511 236 47,747
-------- -------- --------
TOTAL INTEREST INCOME (10,018) 1,666 (8,352)
-------- -------- --------
INTEREST EXPENSE
Money market accounts (3,333) 2,142 (1,191)
Savings deposits 2,350 (845) 1,505
Certificates of deposit of
$100,000 and over 1,608 (1,949) (341)
Other time deposits (16,853) (3,870) (20,723)
Short-term borrowings (14,585) (2,158) (16,743)
Long-term debt 13,851 43 13,894
-------- -------- --------
TOTAL INTEREST EXPENSE (16,962) (6,637) (23,599)
-------- -------- --------
CHANGE IN NET INTEREST INCOME $ 6,944 $ 8,303 $ 15,247
======== ======== ========
PERCENTAGE INCREASE IN NET INTEREST
INCOME OVER PRIOR PERIOD 3.29%
========
</TABLE>
- -------------------
FTE = Fully taxable-equivalent basis
(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.
FINANCIAL CONDITION
The Corporation's total assets were $14.9 billion at September 30, 1997
compared to $15.6 billion at September 30, 1996, and $15.2 billion at December
31, 1996. Average assets for both the three and nine months ended September 30,
1997 were $14.8 billion compared to $15.4 billion and $15.2 billion,
respectively, for the same periods in 1996. The decrease in total assets from
1996 resulted from a restructuring of the balance sheet in the fourth quarter of
1996 and first quarter of 1997 following the completion of the Leader Financial
Corporation acquisition. The restructuring involved sales and maturities of
investment securities to fund loan growth and reduce certain short-term
borrowings.
INVESTMENT SECURITIES
The Corporation's investment securities portfolio of $2.8 billion at
September 30, 1997 consisted entirely of available for sale securities which are
carried on the balance sheet at fair value. This compares to investment
securities of $3.0 billion at December 31, 1996. At September 30, 1997, and
December 31, 1996, these securities had net unrealized gains of $48.4 million
and $40.2 million, respectively. Reference is made to Note 5 to the interim
unaudited consolidated financial statements which provides the composition of
the investment portfolio at September 30, 1997 and December 31, 1996.
23
<PAGE> 24
U. S. Treasury and U. S. Government agency obligations represented
approximately 77.3% of the investment securities portfolio at September 30,
1997. 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 98% U.
S. Government agencies issues; the remaining 2% 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 & Poor's or Moody's. The REMIC and CMO portions of the
investment securities portfolio include approximately 56% 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 17.5%, .6%, and 4.7%,
respectively, of the investment securities portfolio at September 30, 1997. The
latter category is predominately required holdings of Federal Home Loan Bank and
Federal Reserve Bank stock.
At September 30, 1997, the Corporation held approximately $79 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 gain in these securities at
September 30, 1997 was approximately $355,000. 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 net of unearned income at September 30, 1997 were $10.1 billion
compared to $10.2 billion and $10.4 billion at September 30, 1996 and December
31, 1996, respectively. Average loans for the third quarter of 1997 were $10.3
billion, a 4.2% increase over the $9.9 billion for the third quarter of 1996.
For the first nine months of 1997, average loans were $10.4 billion compared to
$9.7 billion for the same period in 1996. Excluding the impact of FHA/VA loans,
the impact of the securitization of loans discussed below, and the impact of
acquisitions, year to date average core loans have increased approximately 5.44%
between September 30, 1996 and 1997. Note 3 to the interim unaudited
consolidated financial statements presents the composition of the loan
portfolio.
FHA/VA government-insured/guaranteed loans aggregated $1.3 billion at
September 30, 1997, an increase of $66 million from September 30, 1996. Compared
to June 30, 1997 and December 31, 1996, these loans decreased $125 million and
$167 million, respectively. No significant net growth is expected in this
category of loans. Reference is made to the 1996 Annual Report to Shareholders
on page 15 for a discussion of FHA/VA government-insured/guaranteed loans.
Excluding FHA/VA loans, loans at September 30, 1997 decreased 1.8%
compared to September 30, 1996 and decreased 2.3% compared to June 30, 1997. The
decrease in loans, excluding FHA/VA loans, between September 30, 1997 and 1996
and from June 30, 1997 is attributable primarily to the securitization and sale
of approximately $300 million of fixed- and adjustable-rate single-family
residential mortgage loans. Single-family residential loans decreased
approximately $119 million in addition to the sale of loans. Offsetting this
decrease were increases in commercial, financial, and agricultural loans; real
estate construction loans; other mortgage loans; home equity loans; and credit
card loans of $11 million, $33 million, $164 million, $20 million, and $23
million, respectively.
ALLOWANCE FOR LOSSES ON LOANS
The Corporation maintains its allowance for losses on loans at a level
which is believed adequate to absorb losses inherent in the loan portfolio. A
formal review is made quarterly to assess the risk in the portfolio and to
determine the adequacy of the allowance for losses on loans. The review includes
analyses of certain problem loans, historical loan loss experience, the levels
of classified and nonperforming loans, reviews and evaluations of specific
loans, changes in the nature and volume of loans, the results of regulatory
examinations, and current economic conditions and the related impact on specific
borrowers and industry groups. The results
24
<PAGE> 25
of the review are presented to, and approved by, senior management and a
committee of the Board of Directors.
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
nine-month periods ended September 30, 1997 and 1996 and for the year ended
December 31, 1996.
<TABLE>
<CAPTION> NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------- FOR THE YEAR ENDED
1997 1996 DECEMBER 31, 1996
---------- ---------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
BALANCE AT THE BEGINNING OF PERIOD $ 166,853 $ 156,388 $ 156,388
LOANS CHARGED OFF
Commercial, financial, and agricultural 5,755 5,948 10,808
Real estate - construction 80 282 367
Real estate - mortgage 2,930 3,547 4,863
Consumer 13,472 13,874 20,346
Credit cards and related plans 37,856 19,532 27,657
Direct lease financing 18 24 48
----------- ----------- -----------
Total charge-offs 60,111 43,207 64,089
----------- ----------- -----------
RECOVERIES ON LOANS PREVIOUSLY CHARGED OFF
Commercial, financial, and agricultural 4,147 2,532 3,247
Real estate - construction 167 11 16
Real estate - mortgage 2,086 1,928 2,190
Consumer 4,238 3,666 4,940
Credit cards and related plans 2,235 1,363 1,912
Direct lease financing 27 4 4
----------- ----------- -----------
Total recoveries 12,900 9,504 12,309
----------- ----------- -----------
Net charge-offs 47,211 33,703 51,780
Provision charged to expense 47,252 41,739 57,395
Allowance related to the sale of certain loans - - (1,628)
Increase due to acquisitions - 4,850 6,478
----------- ----------- -----------
BALANCE AT END OF PERIOD $ 166,894 $ 169,274 $ 166,853
=========== =========== ===========
Total loans, net of unearned income,
at end of period $10,073,253 $10,164,901 $10,434,070
Less: FHA/VA government-insured/
guaranteed loans 1,310,147 1,243,949 1,477,459
----------- ----------- -----------
LOANS USED TO CALCULATE RATIOS $ 8,763,106 $ 8,920,952 $ 8,956,611
=========== =========== ===========
Average total loans, net of unearned income,
during period $10,422,022 $ 9,725,717 $ 9,894,427
Less: Average FHA/VA government-insured/
guaranteed loans 1,448,520 1,075,020 1,197,070
----------- ----------- -----------
AVERAGE LOANS USED TO CALCULATE RATIOS $ 8,973,502 $ 8,650,697 $ 8,697,357
=========== =========== ===========
RATIOS (1):
Allowance at end of period to loans,
net of unearned income 1.90% 1.90% 1.86%
Charge-offs to average loans,
net of unearned income (2) .90 .67 .74
Recoveries to average loans,
net of unearned income (2) .19 .15 .14
Net charge-offs to average loans,
net of unearned income (2) .70 .52 .60
Provision to average loans,
net of unearned income(2) .70 .64 .66
</TABLE>
- --------------------
(1) Ratio calculations exclude FHA/VA government-insured/guaranteed loans,
since they represent minimal credit risk.
(2) Amounts annualized for September 30, 1997 and 1996
The allowance at September 30, 1997 was $166.9 million, an increase of
$41,000 from December 31, 1996, and compared to $169.3 million at September 30,
1996. Net charge-offs for the third quarter of 1997 were $16.5 million compared
to $15.4 million for the second quarter of 1997
25
<PAGE> 26
and $13.2 million for the third quarter of 1996. Management believes that the
allowance is sufficient to absorb estimated losses inherent in the loan
portfolio at September 30, 1997.
Net charge-offs of credit cards for the nine months ended September 30,
1997 were $35.6 million, an increase of $17.5 million over the same period in
1996, accounting for all of the increase in net charge-offs. The level of credit
card charge-offs is attributable primarily to growth of the portfolio since the
fourth quarter of 1994 and high levels of personal bankruptcies.
Management expects charge-offs of these loans to remain at the current level.
NONPERFORMING ASSETS
NONACCRUAL, RESTRUCTURED, AND PAST DUE LOANS AND FORECLOSED PROPERTIES
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------- DECEMBER 31,
1997 1996 1996
-------- -------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Nonaccrual loans $ 56,329 $ 58,646 $ 63,346
Restructured loans 1,967 3,549 2,546
-------- -------- --------
TOTAL NONPERFORMING LOANS 58,296 62,195 65,892
-------- -------- --------
Foreclosed property
Other real estate owned, net of reserves
for losses 11,915 9,864 15,531
Other foreclosed properties 1,563 1,212 989
-------- -------- --------
TOTAL FORECLOSED PROPERTIES 13,478 11,076 16,520
-------- -------- --------
TOTAL NONPERFORMING ASSETS $ 71,774 $ 73,271 $ 82,412
======== ======== ========
LOANS 90 DAYS OR MORE PAST DUE
AND NOT ON NONACCRUAL STATUS
FHA/VA government-insured/guaranteed loans $504,475 $507,017 $709,424
All other loans 20,369 18,090 22,707
-------- -------- --------
TOTAL LOANS 90 DAYS OR MORE PAST DUE $524,844 $525,107 $732,131
======== ======== ========
Ratios (1):
Nonperforming loans as a percentage of loans .67% .70% .74%
Nonperforming assets as a percentage of loans
plus foreclosed properties .82 .82 .92
Allowance for losses on loans as a percentage
of nonperforming loans 286 272 253
Loans 90 days or more past due and not on
nonaccrual status as a percentage of loans .23 .20 .25
</TABLE>
- --------
(1) FHA/VA government-insured/guaranteed loans are excluded from loans in the
ratio calculations.
26
<PAGE> 27
The 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
---------------------------- -----------------------------
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
LOAN TYPE 1997 1996 1997 1996
- -------------------------------- ------------ ----------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Secured by single family residential (1) $31,294 $34,464 $507,459 $711,151
Secured by nonfarm nonresidential 7,560 8,272 839 1,716
Other real estate 4,518 3,929 1,264 1,492
Commercial, financial, and agricultural,
including direct lease financing 8,779 12,111 1,067 1,841
Credit cards and related plans 9 39 11,445 11,520
Other consumer 4,169 4,531 2,770 4,411
------- ------- -------- --------
TOTAL $56,329 $63,346 $524,844 $732,131
======= ======= ======== ========
- --------------------
</TABLE>
(1) Loans 90 days or more past due and not on nonaccrual status include
$504,475 and $709,424, respectively, of FHA/VA
government-insured/guaranteed loans.
As a percentage of loans and foreclosed properties, nonperforming assets
were .82% at September 30, 1997 compared to .82% at September 30, 1996 and
compared to .80% at June 30, 1997. The coverage of nonperforming loans
(allowance for losses on loans as a percentage of nonperforming loans) was 286%
at September 30, 1997, compared to 272% at September 30, 1996 and 295% at June
30, 1997. The decrease in nonperforming loans from year end resulted primarily
from a change in the application of the Corporation's nonaccrual loan policies
with respect to certain FHA/VA government-insured/guaranteed loans. The change
provides for consistent exclusion of all FHA/VA loans from nonaccrual status
once the loans become 90 days or more past due, since FHA/VA loans are
government-insured/guaranteed and have minimal credit risk. This change resulted
in a decrease in nonaccrual loans (single-family residential loans) of
approximately $7.0 million from year end 1996 to September 30, 1997 and did not
have a significant impact on interest income. The remaining decrease relates
primarily to collections of nonaccrual loans.
Loans 90 days or more past due and still accruing interest totaled $524.8
million at September 30, 1997. FHA/VA government-insured/guaranteed loans
accounted for $504.5 million of the total loans 90 days or more past due at
September 30, 1997. These loans are government-insured/guaranteed and have
minimal credit risk. FHA/VA loans past due 90 days or more totaled $507.0
million and $501.0 million at September 30, 1996 and June 30, 1997,
respectively. Other loans 90 days or more past due totaled $20.4 million at
September 30, 1997, a decrease of approximately $521,000 from June 30, 1997.
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
September 30, 1997, the Corporation had potential problem assets (all of which
were loans) aggregating $17.8 million.
ASSET LIABILITY MANAGEMENT
The following table presents the Corporation's interest-rate sensitivity
(GAP) analysis at September 30, 1997. The GAP 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 methods such as simulation analysis, are also
considered in evaluating the Corporation's interest-rate risk.
At September 30, 1997, the GAP analysis indicated that the Corporation was
liability sensitive with $781 million more liabilities than assets repricing
within one year. At 5% of total assets, this position was within management's
policy limit of 10% of total assets.
Balance sheet simulation analysis has been conducted at September 30, 1997
to determine the impact on net interest income for the coming twelve months
under several interest-rate scenarios. One such scenario uses rates at September
30, 1997, and holds the rates and volumes constant for simulation. When this
projection is subjected to immediate and parallel shifts in interest rates
27
<PAGE> 28
("rate shocks") of 200 basis points, first rising and then falling, the annual
impact on the Corporation's net interest income was a positive $7.6 million and
a negative $13.3 million pretax, respectively. Another simulation uses
management's "most likely" scenario which assumes rates rising 25 basis points
gradually then falling 25 basis points over the next twelve months resulting in
a $7.6 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.
UNION PLANTERS CORPORATION AND SUBSIDIARIES
RATE-SENSITIVITY ANALYSIS AT SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
INTEREST-SENSITIVE WITHIN (1) AND (7)
--------------------------------------------------------------------------------------------
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),(3), and (4) $2,487 $ 517 $ 703 $1,132 $1,073 $2,669 $1,457 $ 58 $10,096
Investment securities (5) and (6) 324 222 198 473 557 490 548 - 2,812
Other earning assets (7) 466 155 1 - - - - - 622
Other assets - - - - - - - 1,329 1,329
------ ------- ------ ------ ------ ------ ------ ------- -------
Total assets $3,277 $ 894 $ 902 $1,605 $1,630 $3,159 $2,005 $ 1,387 $14,859
====== ======= ====== ====== ====== ====== ====== ======= =======
Sources of funds
Money market deposits (8) and (9) $ - $ 568 $ - $ 569 $ - $ 758 $ - $ - $ 1,895
Other savings and time deposits 716 1,254 1,006 1,061 613 1,673 25 - 6,348
Certificates of deposit of
$100,000 and over 218 187 227 224 127 49 1 1,033
Short-term borrowings 586 42 1 - - - - - 629
Short- and medium-term bank notes 150 - - 30 30 75 - - 285
Federal Home Loan Bank advances 225 369 14 7 10 32 131 - 788
Other long-term debt 1 1 1 2 2 2 373 - 382
Noninterest-bearing deposits - - - - - - - 1,766 1,766
Other liabilities - - - - - - - 246 246
Shareholders' equity - - - - - - - 1,487 1,487
------ ------- ------ ------ ------ ------ ------ ------- -------
Total sources of funds $1,896 $ 2,421 $1,249 $1,893 $ 782 $2,589 $ 530 $ 3,499 $14,859
====== ======= ====== ====== ====== ====== ====== ======= =======
Interest rate sensitivity gap $1,381 $(1,527) $ (347) $ (288) $ 848 $ 570 $1,475 $(2,112) -
Cumulative interest rate
sensitivity gap (8) $1,381 $ (146) $ (493) $ (781) $ 67 $ 637 $2,112 $ - -
Cumulative gap as a percentage
of total assets (8) 9% (1)% (3)% (5)% -% 4% 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) Delinquent FHA/VA loans are scheduled based on foreclosure and repayment
patterns.
(5) The scheduled maturities of mortgage-backed securities 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.
(6) Securities are generally scheduled according to their call dates when
valued at a premium to par.
(7) Includes $236 million funds receivable from the sale of securities
recorded on a trade date basis.
(8) 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.
(9) 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 (16%), (19%), (21%), (19%), (13%), and positive 4%
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 September 30,
1997.
28
<PAGE> 29
DEPOSITS
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.
<TABLE>
<CAPTION>
AVERAGE DEPOSITS
-------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------------------ ------------------------
SEPTEMBER 30, JUNE 30, SEPTEMBER 30,
------------------------- ---------- ------------------------
1997 1996 1997 1997 1996
--------- -------- ---------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Demand deposits $ 1,717,712 $ 1,582,415 $ 1,670,512 $ 1,670,991 $ 1,587,131
Money market accounts (1) 1,672,955 1,805,209 1,620,441 1,652,157 1,834,513
Savings deposits (2) 2,096,396 2,016,662 2,165,260 2,151,812 1,987,906
Other time deposits (3) 4,623,124 5,096,963 4,731,142 4,729,767 5,139,307
----------- ----------- ----------- ----------- -----------
Total core deposits 10,110,187 10,501,249 10,187,355 10,204,727 10,548,857
Certificates of deposit of $100,000 and over 1,042,811 996,305 1,060,392 1,045,462 986,920
----------- ----------- ----------- ----------- -----------
Total deposits $11,152,998 $11,497,554 $11,247,747 $11,250,189 $11,535,777
=========== =========== =========== =========== ===========
</TABLE>
- --------------------
(1) Includes money market savings accounts, High Yield accounts, and super NOW
accounts.
(2) Includes regular and premium savings accounts and NOW accounts.
(3) Includes certificates of deposit under $100,000, investment savings
accounts, and other time deposits.
Average deposits for the third quarter were $11.2 billion, which
represents a decrease of $344.6 million from the same period in 1996. Compared
to the second quarter of 1997, average deposits decreased approximately $94.7
million. The decline in average deposits is due primarily to sales of deposits
and migration of deposits to other investment products. During the third quarter
of 1997, the Corporation sold approximately $136 million of deposits in upper
East Tennessee and in 1996 and the first half of this year other deposit sales
totaled approximately $52 million. The majority of the decrease in deposits has
occurred in time deposits of $100,000 or less, which reflects a nationwide
downward trend in the number of households holding certificates of deposit.
Offsetting the decline in time deposits was a 2.83% increase in
noninterest-bearing demand deposits between the second and third quarters of
1997.
LIQUIDITY
The Corporation requires liquidity sufficient to meet cash requirements
for deposit withdrawals, to make new loans and satisfy loan commitments, to take
advantage of attractive investment opportunities, and to repay borrowings when
they mature. Deposits, available for sale securities, and money market
investments are the Corporation's primary sources of liquidity. Liquidity is
also achieved through short-term borrowings, borrowings under available lines of
credit, and issuance of securities and debt instruments in the marketplace. The
Corporation has adequate liquidity to meet its operating requirements.
The parent company's sources of liquidity are 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 September 30,
1997, the parent company had cash and cash equivalents totaling $462 million and
net working capital of $480 million. At October 1, 1997, the Corporation's
banking subsidiaries could have paid dividends totaling $127 million without
prior regulatory approval. The actual amount of dividends that will be paid in
the fourth quarter of 1997 will be limited by management to approximately $36
million due to capital and liquidity requirements of individual financial
institutions. Future dividends will be dependent on the future earnings and
growth of the subsidiary financial institutions.
SHAREHOLDERS' EQUITY
The Corporation's total shareholders' equity increased $134.5 million from
December 31, 1996 to $1.5 billion at September 30, 1997. The increase was due to
retained net earnings of $105.1 million, Common Stock issued in connection with
benefit plans and acquisitions of $24.6 million, and the net change in the
unrealized gain on available for sale securities, net of taxes, which increased
shareholders' equity by $5.0 million.
29
<PAGE> 30
CAPITAL ADEQUACY
The following tables present capital-adequacy information for the
Corporation and the calculation of the Corporation's risk-based capital.
<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS ENDED AS OF OR FOR THE
SEPTEMBER 30, TWELVE MONTHS ENDED
1997 1996 DECEMBER 31, 1996
------ ------ ------------------
<S> <C> <C> <C>
CAPITAL ADEQUACY DATA
Total shareholders' equity/
total assets (at period end) 10.01% 8.58% 8.89%
Average shareholders' equity/average total assets 9.36 8.34 8.40
Tier 1 capital/unweighted
assets (leverage ratio) (a) 10.96 8.33 9.61
Parent company long-term debt/equity 25.54 15.80 28.06
Dividend payout ratio 42.10 39.91 50.64
- ---------------------
</TABLE>
(a) Based on period-end capital and quarterly adjusted average assets.
At September 30, 1997, total shareholders' equity was 10.01% of total
assets and the leverage ratio was 10.96% compared to 8.89% and 9.61%,
respectively, at December 31, 1996. The improvement in these ratios has resulted
primarily from the Corporation's retained net earnings and a decrease in total
assets from the balance sheet restructuring discussed previously. The leverage
ratio and Tier 1 capital ratio improved compared to the prior year due to the
issuance of $200 million of Trust Preferred Securities in the fourth quarter of
1996 which qualify as Tier 1 capital for regulatory capital purposes.
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.
RISK-BASED CAPITAL
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------- DECEMBER 31,
1997 1996 1996
---------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
TIER 1 CAPITAL
Shareholders' equity $ 1,487,384 $ 1,338,159 $ 1,352,874
Trust Preferred Securities and minority
interest in consolidated subsidiary 200,053 1,088 200,026
Less: Goodwill (44,516) (48,577) (46,129)
Disallowed deferred tax asset (1,596) (1,958) (1,867)
Unrealized gain on available
for sale securities (29,627) (12,415) (24,592)
----------- ----------- -----------
TOTAL TIER 1 CAPITAL 1,611,698 1,276,297 1,480,312
TIER 2 CAPITAL
Allowance for losses on loans 120,940 117,781 121,623
Qualifying long-term debt 174,204 174,238 174,121
----------- ----------- -----------
TOTAL CAPITAL BEFORE DEDUCTIONS 1,906,842 1,568,316 1,776,056
Less investment in unconsolidated subsidiaries (1,449) (2,547) (1,743)
----------- ----------- -----------
TOTAL CAPITAL $ 1,905,393 $ 1,565,769 $ 1,774,313
=========== =========== ===========
RISK-WEIGHTED ASSETS $ 9,629,218 $ 9,371,026 $ 9,684,621
=========== =========== ===========
Ratios as a percent of end of period
risk-weighted assets
Tier 1 capital 16.74% 13.62% 15.29%
Total capital 19.79 16.71 18.32
</TABLE>
30
<PAGE> 31
CONSOLIDATION OF SUBSIDIARY BANK CHARTERS
The Corporation has applied for regulatory approval to merge the majority
of its separate banking subsidiaries into its principal banking subsidiary,
Union Planters National Bank. A number of action teams within UPNB are looking
at the best ways to implement the consolidation without adverse effect on
customer service. Implementation of the plan will likely result in the
Corporation incurring charges in the fourth quarter. Additionally, cost savings
are anticipated over the next 18 to 24 months from the consolidation of
administrative and back office functions. The exact charges and future savings
cannot be quantified at this time.
YEAR 2000
The Corporation is currently in the process of addressing a potential
problem that is facing all users of automated information systems. The problem
is that many computer systems process transactions based on two digits
representing the year of transaction (e.g., "97" for 1997), rather than the full
four digits. These computer systems may not operate properly when the last two
digits become "00", as will occur on January 1, 2000. In some cases a date after
December 31, 1999 will cause a computer to stop operating, while in other cases
incorrect output may result. The problem could affect a wide variety of
automated information systems, such as mainframe applications, personal
computers, communications systems, and other information systems utilized by the
Corporation. This is not just a problem for banks, as corporations around the
world and in all industries are similarly impacted.
Many companies have developed their own core applications, or they have
added a high degree of customization to third-party applications. The
Corporation has not used this approach. The majority of the
programs/applications used in the Corporation's operations were purchased from
outside vendors. The vendors providing the software are responsible for
maintenance of the systems and modifications to enable uninterrupted usage after
the year 2000. The Corporation does have some in-house programs/applications and
interfaces that must be reviewed and modified.
The Corporation's plan is to identify the full extent of the problem by
performing an inventory of software applications, meeting with third-party
providers, obtaining certification of compliance from third parties, and testing
all of the impacted applications (both internally developed and
third-party-provided). The Corporation's goal is to have this plan complete and
to be fully compliant by December 31, 1998. The vendor for the Corporation's
core operating system has already provided certification of compliance with the
year 2000 issue. Testing of the system will occur over the next fifteen months.
Based on currently available information, management does not anticipate
that the cost to address the year 2000 issues will have a material adverse
impact on the Corporation's financial condition, results of operations, or
liquidity.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, EARNINGS PER SHARE.
The Statement establishes standards for computing and presenting earnings per
share (EPS). The Statement simplifies the standards for computing EPS previously
found in APB Opinion No. 15, EARNINGS PER SHARE, and makes them comparable to
international EPS standards. It replaces the presentation of "primary" EPS with
a presentation of "basic" EPS. The Statement requires dual presentation of basic
and diluted EPS on the face of the statement of earnings and requires a
reconciliation between basic EPS and diluted EPS.
Basic EPS excludes dilution and is computed by dividing net earnings
available to common shares by the weighted average number of common shares
outstanding. Diluted EPS reflects the potential dilution that could occur if
options, convertible securities, or other contracts to issue common stock were
to be exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. Diluted EPS is
computed similarly to the current fully diluted EPS pursuant to APB Opinion No.
15.
SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods; earlier application
is not permitted. The Statement requires restatement of all prior-period EPS
data presented. The following presents the Corporation's pro forma EPS under the
current and new requirements.
31
<PAGE> 32
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- ---------------------- TWELVE MONTHS ENDED
1997 1996 1997 1996 DECEMBER 31, 1996
------ ------ ------ ------ ------------------
<S> <C> <C> <C> <C> <C>
AS REPORTED
Primary EPS $ .90 $ .38 $ 2.63 $ 1.80 $ 1.95
Fully Diluted EPS .87 .38 2.55 1.76 1.92
PRO FORMA SFAS 128
Basic EPS .91 .39 2.68 1.85 1.99
Diluted EPS .88 .38 2.57 1.77 1.93
</TABLE>
REPORTING COMPREHENSIVE INCOME
In June 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE
INCOME. The Statement establishes standards for the reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in financial statements. This Statement requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. This Statement does not
require a specific format for that financial statement but requires that an
enterprise display an amount representing total comprehensive income for the
period in that financial statement.
This Statement requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position.
This Statement is effective for fiscal years beginning after December 15,
1997. Reclassification of financial statements for earlier periods provided for
comparative purposes is required.
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
In June 1997, the FASB issued SFAS No. 131, DISCLOSURE ABOUT SEGMENTS OF
AN ENTERPRISE AND RELATED INFORMATION. This Statement establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
This Statement supersedes FASB Statement No. 14, FINANCIAL REPORTING FOR
SEGMENTS OF A BUSINESS ENTERPRISE, but retains the requirement to report
information about major customers. It amends FASB Statement No. 94,
CONSOLIDATION OF ALL MAJORITY-OWNED SUBSIDIARIES, to remove the special
disclosure requirements for previously unconsolidated subsidiaries.
This Statement requires that a public business enterprise report financial
and descriptive information about its reportable operating segments. Operating
segments are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. Generally, financial information is required to be reported on the
basis that it is used internally for evaluating segment performance and deciding
how to allocate resources to segments.
This Statement requires that a public business enterprise report a measure
of segment profit or loss, certain specific revenue and expense items, and
segment assets. It requires reconciliation of total segment revenues, total
segment profit or loss, total segment assets, and other amounts disclosed for
segments to corresponding amounts in the enterprise's general-purpose financial
statements. It requires that all public business enterprises report information
about the revenues derived from the enterprise's products or services (or groups
of similar products and services), about the countries in which the enterprise
earns revenues and holds assets, and about major customers regardless of whether
that information is used in making operating decisions. However, this Statement
does not require an enterprise to report information that is not prepared for
internal use if reporting it would be impracticable.
This Statement also requires that a public business enterprise report
descriptive information about the way that the operating segments were
determined, the products and services provided by
32
<PAGE> 33
the operating segments, differences between the measurements used in reporting
segment information and those used in the enterprise's general-purpose financial
statements, and changes in the measurement of segment amounts from period to
period.
This Statement is effective for financial statements for periods beginning
after December 15, 1997. The Corporation is currently evaluating its operations
to determine the appropriate disclosures, if any, with respect to SFAS No. 131.
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 Annual Report on Form 10-K for the year
ended December 31, 1996, Note 19 to the Corporation's consolidated financial
statements on page 67 of its 1996 Annual Report to Shareholders (Exhibit 13 to
said Form 10-K), Note 10 to the Corporation's quarterly reports on Form 10-Q
dated March 31, 1997 and June 30, 1997, and Note 10 to the Corporation's
unaudited 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
None
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits:
10 - Union Planters Corporation Deferred Compensation Plan for
Executives, As Amended April 17, 1997
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. July 17, 1997 Press release announcing second quarter of
1997 net earnings
2. August 12, 1997 Announcement of Capital Bancorp
acquisition and filing of Agreement and
Plan of Merger
</TABLE>
33
<PAGE> 34
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: November 6, 1997 By: /s/ Benjamin W. Rawlins, Jr.
------------------------------------
Benjamin W. Rawlins, Jr.
Chairman of the Board and
Chief Executive Officer
Date: November 6, 1997 By: /s/ John W. Parker
------------------------------------
John W. Parker
Executive Vice President and
Chief Financial Officer
Date: November 6, 1997 By: /s/ M. Kirk Walters
------------------------------------
M. Kirk Walters
Senior Vice President, Treasurer,
and Chief Accounting Officer
34
<PAGE> 35
EXHIBIT INDEX
10 Union Planters Corporation Deferred Compensation Plan for Executives, As
Amended April 17, 1997
11 Computation of Earnings per Common Share
27 Financial Data Schedule (for SEC use only)
35
<PAGE> 1
EXHIBIT 10
1996
DEFERRED COMPENSATION PLAN FOR EXECUTIVES
AS AMENDED APRIL 17, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
RECITALS......................................................................1
Section 1 DEFINITIONS.................................................1
Section 2 ELIGIBILITY AND PARTICIPATION
2.1 Eligibility.................................................6
2.2 Participation...............................................6
Section 3 ADMINISTRATION
3.1 General Powers of Administration............................6
3.2 Company as Fiduciary........................................7
3.3 Indemnification.............................................7
Section 4 DEFERRAL, MATCHING, AND SUPPLEMENTAL CONTRIBUTIONS
4.1 Deferred Compensation.......................................7
A. Deferral Election
B. Timing of Election
C. Content of Deferral Elections
4.2 Matching Contributions......................................8
4.3 Supplemental Contributions..................................8
Section 5 DEFERRAL PLAN ACCOUNTS
5.1 Establishment of Deferral Plan Accounts.....................9
5.2 Deferred Compensation Subaccount............................9
A. Initial Credit to Subaccount
B. Earnings Credit to Subaccount
5.3 Matching Contribution Subaccount............................9
A. Initial Credit to Subaccount
B. Earnings Credit to Subaccount
5.4 Supplemental Contribution Subaccount.......................10
A. Initial Credit to Subaccount
B. Earnings Credit to Subaccount
5.5 Transfer of Prior Plan Deferral Amounts to DPAs............11
Section 6 VESTING OF DPA SUBACCOUNTS
6.1 Vesting ................................................11
A. Deferred Compensation Subaccount
B. Matching Contribution Subaccount
C. Supplemental Contribution Subaccount
Section 7 PAYMENT TO PARTICIPANTS
7.1 Payment Upon Termination of Employment.....................12
A. Lump Sum Distribution
B. Death Before Payment of Benefits
7.2 Distributions in Cases of Hardship.........................13
Section 8 PARTICIPANT STATEMENTS
8.1 Participant Statements.....................................14
A. Annual Participant Statements
B. Statement Upon Termination of Employment
Section 9 AMENDMENT OR TERMINATION OF PLAN
9.1 Amendment or Termination of Plan...........................15
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
Section 10 GENERAL PROVISIONS
10.1 Participant's Rights Unfunded..............................16
10.2 Independence of Other Benefit Arrangements.................16
10.3 No Secured Guarantee of Benefits...........................16
10.4 No Enlargement of Employee Rights..........................16
10.5 Spendthrift Provision......................................16
10.6 Applicable Law.............................................16
10.7 Severability...............................................16
10.8 Incapacity of Recipient....................................17
10.9 Successors ................................................17
10.10 Unclaimed Benefits.........................................17
10.11 Limitations on Liability...................................17
10.12 Forfeiture of Benefits.....................................17
10.13 Payment of Attorney's Fees, Court Costs,
and Interest on Loss of Benefits.........................17
10.14 Payment of Taxes...........................................18
10.15 Withholding................................................18
10.16 Participants Bound by Terms of the Plan....................18
10.17 Effective Date of the Plan.................................18
</TABLE>
EXHIBIT A: PARTICIPATION AGREEMENT
EXHIBIT B: DEFERRED COMPENSATION ELECTION FORM
EXHIBIT C: TRUST UNDER DEFERRED COMPENSATION PLAN
<PAGE> 4
UNION PLANTERS CORPORATION
DEFERRED COMPENSATION PLAN FOR EXECUTIVES
RECITALS
WHEREAS, Union Planters Corporation ("Company") desires to assist selected
Company executives in their ability to better provide for their own financial
future by permitting such executives to defer a portion of their current annual
salary and any bonus compensation;
WHEREAS, the Company desires that such deferrals are to be made without
restrictions imposed by those Internal Revenue Code provisions which apply to
tax-qualified retirement plans;
WHEREAS, Company has in the past periodically entered into individual income
deferral arrangements with selected Company executives whereby such executives
were provided the opportunity to elect to defer a portion of their base
compensation and/or bonus received during a calendar year; and
WHEREAS, as to future deferral by such executives, Company desires to set forth
the terms and conditions of any such future deferral arrangements through this
Deferred Compensation Plan.
SECTION 1
DEFINITIONS
1.1 "APPLICABLE FEDERAL RATE" shall mean 120 percent of the applicable federal
rate (as calculated on a midterm basis, compounded monthly) pursuant to Code
Section 1274(d), as amended.
1.2 "BENEFICIARY" shall mean the person or persons Participant has designated
in writing to Company to receive benefits under the Agreement in the event of
Participant's death. If the Participant has not specifically designated any
Beneficiary for purposes of the Agreement, then the Beneficiary shall become the
Participant's estate. In the case of the death of the Beneficiary before
completion of payments under the Agreement to the Beneficiary, then the
Beneficiary's estate shall become entitled to any remaining payments.
1.3 "BONUS" shall mean any special and/or discretionary compensation amounts
in excess of Salary determined by the Company to be payable to a Participant
with respect to services rendered.
1.4 "CHANGE OF CONTROL" shall mean the occurrence of the earliest of any of
the following events:
A. The acquisition by any individual, entity, or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended) of 25% or more of either (i) the then outstanding shares
of common stock of the Company (the "Outstanding Company Common Stock") or
(ii) the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors
(the "Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection A, the following acquisitions shall not
constitute a Change of Control: (w) any acquisition directly from the
Company, (x) any acquisition by the Company, (y) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled
1
<PAGE> 5
by the Company, or (z) any acquisition by any Person pursuant to a
transaction which complies with clauses (i) (ii), and (iii) of subsection
C of this Section 1.4; or
B. Individuals who, as of the date hereof, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; or
C. Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company
(a "Business Combination"), in each case, unless, following such Business
Combination,
(i) all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly,
more than 65% of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially
all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, and
(ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination, and
(iii) at least a majority of the members of the board of directors of
the corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination.
1.5 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.6 "COMMITTEE" shall mean the Salary and Benefits Committee of the Company's
Board of Directors, or such committee charged with oversight of the Company's
salary and benefits programs.
1.7 "COMPANY" shall mean Union Planters Corporation.
2
<PAGE> 6
1.8 "CURRENT EARNINGS RATE" shall mean an interest rate determined as of each
December 31. Such interest rate shall be equal to a 12-month average of 120
percent of the applicable and midterm federal rate under Code Section 1274(d),
as amended; provided, however, that in no event shall such Current Earnings Rate
exceed that interest rate which would require disclosure under Securities and
Exchange Commission annual proxy statement reporting guidelines as additional
reportable earnings. Interest compounding shall be on an annual basis based upon
the period of deferral.
1.9 "DEFERRED COMPENSATION" shall mean the sum of Salary and/or Bonus that is
the subject of an elective deferral under Section 4.1 of the Plan.
1.10 "DEFERRED COMPENSATION SUBACCOUNT" shall mean the bookkeeping account
established for a Participant under the Plan to which Deferred Compensation
amounts with respect to such Participant are credited from time to time, as
provided in Section 5.2 of the Plan. For purposes of this definition, unless
otherwise indicated by the Plan, Deferred Compensation Subaccount shall refer to
both the Deferred Compensation Cash and Stock Subparts.
1.11 "DEFERRED COMPENSATION ELECTION FORM" shall mean the form which
Participants use to defer Salary and/or Bonus pursuant to Section 4.1 of the
Plan.
1.12 "DISABILITY" shall mean mental or physical disability as determined by the
Committee in accordance with standards and procedures similar to those under the
Company's employee long-term disability plan, if any. At any time the Company
does not maintain such a long-term disability plan, Disability shall mean the
inability of a Participant, as determined by the Committee, to substantially
perform such Participant's regular duties and responsibilities due to a
medically determinable physical or mental illness which has lasted (or can
reasonably be expected to last) for a period of six (6) consecutive months.
1.13 "DIVIDEND PAYMENT DATE" shall mean the date upon which cash dividends are
paid to Company shareholders.
1.14 "ELIGIBLE EXECUTIVE" shall mean any employee of the Company being paid
Salary at a rate in excess of $125,000 annually and who is selected by the
Committee to participate in the Plan.
1.15 "GOOD REASON" shall mean a termination of employment by the Participant
with the Company if, without the Participant's express written consent:
(i) Company shall assign to Participant duties of a nonexecutive nature
or for which Participant is not reasonably equipped by his or her skills
and experience; or
(ii) Company shall reduce the salary of the Participant, or materially
reduce the amount of paid vacations to which he or she is entitled, or
materially reduce his or her fringe benefits and perquisites; or
(iii) Company shall fail to provide office facilities, secretarial
services, and other administrative services to the Participant which are
substantially equivalent to the facilities and services provided to the
Participant at the initial date of the Participant's participation in the
Plan; or
(iv) Company shall terminate incentive and/or benefit plans or
arrangements, or reduce or limit the Participant's participation therein,
relative to the level of participation of other executives of similar
rank, to such an extent as to materially reduce the aggregate value of the
Participant's incentive
3
<PAGE> 7
compensation and/or benefits below their aggregate value as of the initial
date of the Participant's participation in the Plan.
1.16 "MATCHING CONTRIBUTIONS SUBACCOUNT" shall mean the bookkeeping account
established for a Participant under Section 5.3 of the Plan to which the
Company's Matching Contributions under Section 4.2 of the Plan are credited from
time to time. For purposes of this definition, unless otherwise indicated by the
Plan, Matching Contribution Subaccount shall refer to both the Matching
Contribution Cash and Stock Subparts.
1.17 "PARTICIPANT" shall mean an Eligible Executive who has been selected by
the Committee to participate in the Plan.
1.18 "PARTICIPATION AGREEMENT" shall mean that Agreement entered into by a
Participant (as set forth in Exhibit A to the Plan) prior to participation in
the Plan.
1.19 "PLAN" shall mean the Union Planters Corporation 1996 Deferred
Compensation Plan for Executives, as set forth herein and as amended from time
to time.
1.20 "PRIOR PLAN" shall mean a nonqualified deferred compensation plan or
similar arrangement in which a Participant participated prior to the Plan and
through which the Participant reduced and deferred a portion of his or her
current taxable Salary and/or Bonus.
1.21 "SALARY" shall mean the regular annual base compensation paid by the
Company to a Participant (without regard to any reduction thereof pursuant to
the Plan, any 401(k) plan or Code Section 125 flexible benefits plan maintained
by the Company), exclusive of Bonus and any other incentive payments made by the
Company to such Participant.
1.22 "STOCK" shall mean common stock of the Company quoted on the New York
Stock Exchange, as identified by the symbol UPC.
1.23 "STOCK UNITS" shall mean the number of shares of Stock (carried to four
decimal places) credited to a Participant's Deferred Compensation, Matching
Contribution, or Supplemental Contribution Subaccounts in accordance with the
provisions of Sections 5.2, 5.3, and 5.4 of the Plan. Such credit shall be for
bookkeeping purposes only, with the number of Stock Units automatically
converted to cash prior to payment to a Participant. Under no circumstances
shall any shares of Stock be payable or distributable to a Participant under the
terms of the Plan, nor shall any Participant have any rights as a shareholder of
the Company based on those Stock Units allocated to his or her Subaccounts.
In the event of a Change in Capital Stock, the Stock Units then credited to a
Participant's Deferred Compensation, Matching Contribution, or Supplemental
Contribution Subaccounts shall be appropriately adjusted, based on the
Committee's directions, to account for the change in number of issued and
outstanding shares of Stock. For these purposes a Change in Capital Stock shall
mean any increase or decrease in the number of shares of issued Stock resulting
from a subdivision or consolidation of shares, whether through reorganization,
recapitalization, stock split-up, stock distribution or combination of shares,
or the payment of a share dividend or other increase or decrease in the number
of such shares outstanding effected without receipt of consideration by the
Company.
4
<PAGE> 8
1.24 "SUBACCOUNT" shall mean the Deferred Compensation Cash and Stock Subparts,
the Matching Contributions Cash and Stock Subparts, and/or the Supplemental
Contributions Cash and Stock Subparts, as the context requires.
1.25 "SUPPLEMENTAL CONTRIBUTIONS SUBACCOUNT" shall mean the bookkeeping account
established for the Participant under Section 5.4 of the Plan and to which the
Company's Supplemental Contributions under Section 4.3 of the Plan are credited.
For purposes of this definition, unless otherwise indicated by the Plan,
Supplemental Contributions Subaccount shall refer to both the Supplemental
Contributions Cash and Stock Subparts.
1.26 "UNFORESEEABLE EMERGENCY" shall mean any of the following: (i) a severe
financial hardship to the Participant resulting from a sudden and unexpected
illness or accident of or with respect to the Participant or a dependent of the
Participant, (ii) a loss of the Participant's property due to casualty, or (iii)
some other similar extraordinary unforeseeable circumstances arising as a result
of events beyond the control of the Participant.
1.27 "VOTING STOCK" shall mean that class (or classes) of common stock of the
Company entitled to vote in the election of the Company's directors.
1.28 "WEIGHTED AVERAGE CLOSING PRICE" shall mean the weighted closing price of
the Stock during the thirty-day period preceding the date of valuation. The
Weighted Average Closing Price shall be the result of (i) divided by (ii),
where:
(i) shall equal the sum of the closing prices of Stock on each trading
day during the thirty-day period preceding the date of valuation; and
(ii) shall equal the actual number of trading days during the thirty-day
period preceding the date of valuation.
1.29 "YEAR OF SERVICE" shall mean any calendar year of employment by the
Participant with Company (prior to and after the effective date of the Plan)
during which the Participant accumulates at least 1000 hours of service. For
these purposes, the provisions of Department of Labor Regulations 2530.200-2(b)
and (c) are incorporated herein by reference as they relate to the determination
of "hour of service."
SECTION 2
ELIGIBILITY AND PARTICIPATION
2.1 ELIGIBILITY. Individuals eligible to participate in the Plan shall consist
of the Eligible Executives of the Company.
2.2 PARTICIPATION. Participation in the Plan by Eligible Executives shall be
determined by the Committee in its sole discretion, and shall be subject to the
terms and conditions of the Plan. All Participants in the Plan shall, prior to
participation, execute a Participation Agreement as set forth in Exhibit A to
the Plan.
Once becoming a Participant in the Plan, an Eligible Executive shall continue to
participate in the Plan until such time as: (i) the Participant ceases to be an
Eligible Executive, or (ii) the Committee takes action to terminate the Eligible
Executive's right to continued participation in the Plan. Should an individual
cease to be a Participant under the provisions of (i) or (ii) above while still
employed by the Company, any payment to
5
<PAGE> 9
Participant will be made in accordance with the provisions of Section 7.1 upon
the termination of employment by the individual with Company.
SECTION 3
ADMINISTRATION
3.1 GENERAL POWERS OF ADMINISTRATION. The Plan shall be administered by the
Committee. The Committee is authorized to construe and interpret the Plan and
promulgate, amend, and rescind rules and regulations relating to the
implementation, administration, and maintenance of the Plan. Subject to the
terms and conditions of the Plan, the Committee shall make all determinations
necessary or advisable for the implementation, administration, and maintenance
of the Plan, including, without limitation, determining the Eligible Executives
and correcting any technical defect(s) or technical omission(s), or reconciling
any technical inconsistencies in the Plan.
The Committee may designate persons other than members of the Committee to carry
out the day-to-day ministerial administration of the Plan under such conditions
and limitations as it may prescribe; provided, however, that the Committee shall
not delegate its authority with regard to the determination of Eligible
Executives. The Committee's determinations under the Plan need not be uniform
and may be made selectively among Participants, whether or not such Participants
are similarly situated. Any determination, administration, implementation, or
maintenance of the Plan shall be final, conclusive, and binding upon all
Participants and any person(s) claiming any Plan benefits under or through any
Participants.
3.2 COMPANY AS FIDUCIARY. Company is hereby designated as a fiduciary under
the Plan. Any decision by Company or the Committee denying a claim by
Participant or a Beneficiary for benefits under the Agreement shall be stated in
writing and shall be delivered or mailed to the Participant or Beneficiary. Such
statement shall set forth the specific reasons for the denial, written to the
best of the Company's ability in a manner that may be understood without legal
counsel. In addition, Company shall afford a reasonable opportunity to the part
shall afford a reasonable opportunity to the Participant or Beneficiary for a
full and fair review of the decision denying such claim.
Notwithstanding the above provisions of Section 3.2, to the extent that the
Employee Retirement Income Security Act ("ERISA") may require specific
procedures to be followed in the event of a denial of a claim, such provisions
of ERISA will be followed.
3.3 INDEMNIFICATION. The Company will indemnify and hold harmless the
Committee and each member thereof against any cost or expense (including,
without limitation, attorney's fees) or liability (including, without
limitation, any sum paid with the approval of the Company in settlement of a
claim) arising out of any act or omission to act, except in the case of willful
gross misconduct or gross negligence.
SECTION 4
DEFERRAL, MATCHING, AND SUPPLEMENTAL CONTRIBUTIONS
4.1 DEFERRED COMPENSATION. Participants may defer all or a portion of their
Salary and/or Bonus earned during any calendar year, in accordance with the
following provisions.
6
<PAGE> 10
A. DEFERRAL ELECTION. To defer compensation during any particular year,
those Eligible Executives participating in the Plan must execute a
Deferred Compensation Election Form ("Form") and file such Form with the
Committee (or its designee).
B. TIMING OF ELECTION. In the year in which the Plan is first
implemented (and in each succeeding calendar year), those Eligible
Executives selected by the Committee to participate in the Plan must make
an election to defer Salary and/or Bonus within 30 days after the later
of: (i) the date the Eligible Executive is selected by the Committee to
participate in the Plan, or (ii) the effective date of the Plan. Such
election will only be effective for Salary and/or Bonus earned subsequent
to such election.
Once participating in the Plan, deferral elections by Participants during
subsequent years shall be completed and filed with the Committee (or its
designee) prior to the January 1 of the year to which such deferral
election applies.
C. CONTENT OF DEFERRAL ELECTIONS. The following shall apply to all
deferral elections:
(i) All deferral elections shall contain a statement that the
Participant elects to defer a portion of the Participant's Salary
and/or Bonus for a specified calendar year and that is earned and
becomes payable to the Participant after the filing of such deferral
election;
(ii) Except for the provisions of subsection (iii) below, any
deferral election shall only apply to the Salary and/or Bonus that
is attributable to the Participant's services rendered to the
Company during the calendar year for which such election is made
(whether or not such compensation is actually paid and received in
such calendar year);
(iii) If a Participant is currently deferring Salary and/or Bonus
and fails to complete and return a Form prior to the January 1 of
the calendar year to which such Form is to be effective, then the
deferral election made by the Participant on the most recently filed
Form shall be considered effective for the new calendar year; and
(iv) A Participant may terminate a deferral election for the
remaining portion of any calendar year by filing with the Committee
(or its designee) written notice that any deferrals are to cease
during such calendar year. Such notice shall be effective with
respect to all Salary or Bonus earned and paid after the filing of
such notice. Once any such notice is filed, the Participant must
file a new Form with the Committee (or its designee) to recommence
any deferral and may not resume any deferral of Salary and/or Bonus
until the following year.
4.2 MATCHING CONTRIBUTIONS. Provided the Participant is employed by the
Company, on the first business day of each month the Company shall credit to the
Participant's Matching Contribution Subaccount a matching contribution equal to
25% of Salary and/or Bonus actually deferred under the Plan by the Participant
during the preceding month. Notwithstanding the above, no Matching Contribution
shall be made on any transfer to the Plan of Prior Plan deferred amounts
pursuant to Section 5.5 of the Plan.
4.3 SUPPLEMENTAL CONTRIBUTIONS. In its sole discretion, provided the
Participant is employed by the Company, the Company may, on the first business
day of any month, credit additional sums to the Participant's Supplemental
Contribution Subaccount. The amount of any such contributions shall be
determined by the Company in its sole discretion.
7
<PAGE> 11
SECTION 5
DEFERRAL PLAN ACCOUNTS
5.1 ESTABLISHMENT OF DEFERRAL PLAN ACCOUNTS. The Company shall establish a
Deferral Plan Account ("DPA") for each Participant. Each Participant's DPA shall
be comprised of Deferred Compensation Cash and Stock Subparts, Matching
Contribution Cash and Stock Subparts, and Supplemental Contribution Cash and
Stock Subparts.
5.2 DEFERRED COMPENSATION SUBACCOUNT. Deferred Compensation Cash and Deferred
Compensation Stock Subparts shall be created under each Participant's Deferred
Compensation Subaccount to which shall be credited all Salary and/or Bonus
amounts deferred by a Participant in accordance with Section 4.1 of the Plan.
A. INITIAL CREDIT TO SUBACCOUNT. Each Participant's Deferred
Compensation Cash and Stock Subparts shall be credited no less frequently
than the first business day of each month with an amount equal to the sum
of the Salary and/or Bonus deferred by the Participant during the
preceding month in accordance with Section 4.1 of the Plan.
(I) CREDIT TO STOCK SUBPART. The dollar amount of Salary and/or
Bonus deferred shall be converted into Stock Units by dividing such
dollar amount by the Weighted Average Closing Price of the Company's
Stock which exists on the date such Salary and/or Bonus is credited
to the Participant's Stock Subpart.
(II) CREDIT TO CASH SUBPART. The actual dollar amount of Salary
and/or Bonus deferred shall be credited as cash to the Participant's
Cash Subpart.
B. EARNINGS CREDIT TO SUBACCOUNT. Each Participant's Deferred
Compensation Stock and Cash Subparts shall be credited with earnings
amounts equal to the following.
(I) EARNINGS CREDIT TO STOCK SUBPART. On each Dividend Payment
Date, an amount equal to the sum of the cash dividends potentially
payable on all Stock Units then allocated to the Participant's
Deferred Compensation Stock Subpart shall be credited to such
Subpart. The dollar amount of such cash dividends shall be converted
into Stock Units by dividing such dollar amount by the Weighted
Average Closing Price of the Company's Stock which exists on such
Dividend Payment Date.
(II) EARNINGS CREDIT TO CASH SUBPART. On each December 31, the
Current Earnings Rate(appropriately compounded) shall be multiplied
by the dollar sum then allocated to the Participant's Deferred
Compensation Cash Subpart. The resulting amount shall be credited to
such Subpart.
5.3 MATCHING CONTRIBUTION SUBACCOUNT. Matching Contribution Cash and Matching
Contribution Stock Subparts shall be created under each Participant's Matching
Contribution Subaccount to which shall be credited all Matching Contributions
made in accordance with Section 4.2 of the Plan.
A. INITIAL CREDIT TO SUBACCOUNT. Each Participant's Matching
Contribution Cash and Stock Subparts shall be credited no less frequently
than the first business day of each month with an amount equal to the
Matching Contributions made in accordance with Section 4.2 of the Plan.
8
<PAGE> 12
(I) CREDIT TO STOCK SUBPART. The dollar amount of Matching
Contribution shall be converted into Stock Units by dividing such
dollar amount by the Weighted Average Closing Price of the Company's
Stock which exists on the date such Salary and/or Bonus is credited
to the Participant's Stock Subpart.
(II) CREDIT TO CASH SUBPART. The actual dollar amount of Matching
Contribution shall be credited as cash to the Participant's Cash
Subpart.
B. EARNINGS CREDIT TO SUBACCOUNT. Each Participant's Matching
Contribution Stock and Cash Subparts shall be credited with earnings
amounts equal to the following.
(I) EARNINGS CREDIT TO STOCK SUBPART. On each Dividend Payment
Date, an amount equal to the sum of the cash dividends potentially
payable on all Stock Units then allocated to the Participant's
Matching Contribution Stock Subpart shall be credited to such Stock
Subpart. The dollar amount of such cash dividends shall be converted
into Stock Units by dividing such dollar amount by the Weighted
Average Closing Price of the Company's Stock which exists on such
Dividend Payment Date.
(II) EARNINGS CREDIT TO CASH SUBPART. On each December 31, the
Current Earnings Rate (appropriately compounded) shall be multiplied
by the dollar sum then allocated to the Participant's Matching
Contribution Cash Subpart. The resulting amount shall be credited to
such Cash Subpart.
5.4 SUPPLEMENTAL CONTRIBUTION SUBACCOUNT. Supplemental Contribution Cash and
Supplemental Contribution Stock Subparts shall be created under each
Participant's Supplemental Contribution Subaccount to which shall be credited
all Supplemental Contributions made in accordance with Section 4.3 of the Plan.
A. INITIAL CREDIT TO SUBACCOUNT. Each Participant's Supplemental
Contribution Cash and Stock Subparts shall be credited no less frequently
than the first business day of each month with an amount equal to any
Supplemental Contributions made in accordance with Section 4.3 of the
Plan.
(I) CREDIT TO STOCK SUBPART. The dollar amount of Supplemental
Contribution shall be converted into Stock Units by dividing such
dollar amount by the Weighted Average Closing Price of the Company's
Stock which exists on the date such Salary and/or Bonus is credited
to the Participant's Stock Subpart.
(II) CREDIT TO CASH SUBPART. The actual dollar amount of
Supplemental Contribution shall be credited as cash to the
Participant's Cash Subpart.
B. EARNINGS CREDIT TO SUBACCOUNT. Each Participant's Supplemental
Contribution Stock and Cash Subparts shall be credited with earnings
amounts equal to the following.
(I) EARNINGS CREDIT TO STOCK SUBPART. On each Dividend Payment
Date, an amount equal to the sum of the cash dividends potentially
payable on all Stock Units then allocated to the Participant's
Supplemental Contribution Stock Subpart shall be credited to such
Stock Subpart. The dollar amount of such cash dividends shall be
converted into Stock Units by dividing such dollar amount by the
Weighted Average Closing Price of the Company's Stock which exists
on such Dividend Payment Date.
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<PAGE> 13
(II) EARNINGS CREDIT TO CASH SUBPART. On each December 31, the
Current Earnings Rate (appropriately compounded) shall be multiplied
by the dollar sum then allocated to the Participant's Supplemental
Contribution Cash Subpart. The resulting amount shall be credited to
such Cash Subpart.
5.5 TRANSFER OF PRIOR PLAN DEFERRAL AMOUNTS TO DPAS. Should a Participant have
previously deferred a portion of his or her Salary and/or Bonus compensation
under a Prior Plan, then any amounts credited to a Participant's deferred
compensation account (or similar bookkeeping account) under the Prior Plan as of
the date of commencement of participation in the Plan by the Participant shall
be transferred to the Plan's Deferred Compensation Subaccount. From such date of
transfer, the deferred compensation account (or similar bookkeeping account)
under the Prior Plan shall cease to exist for purposes of paying any benefits
under the provisions of the Prior Plan and any benefits payable under the Prior
Plan shall henceforth be payable subject to the terms and conditions of the
Plan.
SECTION 6
VESTING OF DPA SUBACCOUNTS
6.1 VESTING. A Participant's Subaccounts shall vest in accordance with the
following.
A. DEFERRED COMPENSATION SUBACCOUNT. A Participant's Deferred
Compensation Subaccount shall at all times be 100% vested.
B. MATCHING CONTRIBUTION SUBACCOUNT. A Participant's Matching
Contribution Subaccount shall vest in accordance with the following
schedule:
<TABLE>
<CAPTION>
Participant's Years
of Service Vested Percentage
-------------------- -----------------
<S> <C>
1 0%
2 0%
3 0%
4 0%
5 100%
</TABLE>
Notwithstanding the above vesting schedule under Section 6.1(B), upon
the following events, a Participant's Matching Contribution
Subaccount shall become 100% vested: (i) the death or Disability of
the Participant, (ii) a Change in Control of the Company, or (iii)
the termination of employment by a Participant for Good Reason.
C. SUPPLEMENTAL CONTRIBUTION SUBACCOUNT. A Participant's Supplemental
Contribution Subaccounts shall vest in accordance with the following
schedule:
<TABLE>
<CAPTION>
Participant's Years
of Service Vested Percentage
----------------------- -----------------
<S> <C>
1 0%
2 0%
3 0%
4 0%
5 100%
</TABLE>
10
<PAGE> 14
Notwithstanding the above vesting schedule under Section 6.1(C), upon the
following events, a Participant's Matching Contribution Subaccount shall
become 100% vested: (i) the death or Disability of the Participant, (ii) a
Change in Control of the Company, or (iii) the termination of employment
by a Participant for Good Reason.
SECTION 7
PAYMENT TO PARTICIPANTS
7.1 PAYMENT UPON TERMINATION OF EMPLOYMENT. Once a Participant terminates
service with the Company (for whatever reason), the Participant (or, if
appropriate, his or her Beneficiary) will be entitled to payment of the vested
value of such Participant's Deferred Compensation, Matching Contribution, and
Supplemental Subaccounts as follows:
A. LUMP SUM DISTRIBUTION. An amount equal to the vested value of the
Participant's Deferred Compensation, Matching Contribution, and
Supplemental Contribution Subaccounts shall be paid to the Participant:
(1) in one lump-sum distribution on the first business day of the second
month following the Participant's termination of employment, or (2) in
such manner as the Company and Participant mutually agree to in writing.
(I) VALUATION OF DEFERRED COMPENSATION SUBACCOUNT. For purposes of
determining the payment from the Participant's Deferred Compensation
Subaccount, the greater of the cash value of the Deferred
Compensation Cash or Deferred Compensation Stock Subpart will be
used for purposes of determining the amount of payment.
To determine the cash value of the Participant's Deferred
Compensation Stock Subpart, the number of Stock Units credited on
the date of termination of employment shall be multiplied by the
Weighted Average Closing Price of the Stock on such date. To
determine the value of the Participant's Deferred Compensation Cash
Subpart, the cash amount credited to such Subpart on the date of
termination of employment shall be utilized.
(II) VALUATION OF MATCHING CONTRIBUTION SUBACCOUNT. For purposes of
determining the payment from the Participant's Matching Contribution
Subaccount, the greater of the cash value of the Matching
Contribution Cash or Matching Contribution Stock Subpart will be
used for purposes of determining the amount of payment.
To determine the cash value of the Participant's Matching
Contribution Stock Subpart, the number of Stock Units credited on
the date of termination of employment shall be multiplied by the
Weighted Average Closing Price of the Stock on such date. To
determine the value of the Participant's Matching Contribution Cash
Account, the cash amount credited to such Subpart on the date of
termination of employment shall be utilized.
(III) VALUATION OF SUPPLEMENTAL CONTRIBUTION SUBACCOUNT. For
purposes of determining the payment from the Participant's
Supplemental Contribution Subaccount, the greater of the cash value
of the Supplemental Contribution Cash or Supplemental Contribution
Stock Subpart will be used for purposes of determining the amount of
payment.
11
<PAGE> 15
To determine the cash value of the Participant's Supplemental
Contribution Stock Subpart, the number of Stock Units credited
on the date of termination of employment shall be multiplied by
the Weighted Average Closing Price of the Stock on such date. To
determine the value of the Participant's Supplemental
Contribution Cash Account, the cash amount credited to such
Subpart on the date of termination of employment shall be
utilized.
B. DEATH BEFORE PAYMENT OF BENEFITS. Should Participant die
before the balance of the Participant's Deferred Compensation,
Matching Contribution, and Supplemental Contribution Subaccounts
have been paid to the Participant, then any remaining payments will
be made to the Participant's Beneficiary in the same form and manner
as they would have been made to the Participant under the provisions
of Section 7.1(A) of the Plan.
7.2 DISTRIBUTIONS IN CASES OF HARDSHIP. Notwithstanding the provisions of
Section 7.1 of the Plan, the Committee may, in its sole discretion, choose to
permit a Participant to withdraw amounts from his or her Deferred Compensation
Subaccount upon a showing by such Participant that an Unforeseeable Emergency
has occurred. Such distributions shall be limited to the amount shown to be
necessary to meet the Unforeseeable Emergency, and no more than one withdrawal
will be permitted from a Participant's Deferred Compensation Subaccount during
each calendar year.
The dollar amount of any withdrawal shall reduce the value of both the
Participant's Deferred Compensation Cash and Stock Subparts. To determine the
cash value of the Participant's Deferred Compensation Stock Subpart on the date
of withdrawal of funds, the number of Stock Units credited on the date of
withdrawal of funds shall be multiplied by the Weighted Average Closing Price of
the Stock on such date. To determine the value of the Participant's Deferred
Compensation Cash Subpart on the date of withdrawal of funds, the cash amount
credited to such Subpart on such date shall be utilized.
Any amounts distributed to a Participant pursuant to a hardship withdrawal shall
be considered to be taxable wages to the Participant in the calendar year of
withdrawal.
SECTION 8
PARTICIPANT STATEMENTS
8.1 PARTICIPANT STATEMENTS. Each Participant shall be provided with the
following statements.
A. ANNUAL PARTICIPANT STATEMENTS. At or within a reasonable period of
time following the end of each calendar year, each Participant shall be
provided with a statement showing the balances (vested and nonvested) in
the Participant's Deferred Compensation, Matching Contribution, and
Supplemental Contributions Subaccounts as follows.
(I) DEFERRED COMPENSATION SUBACCOUNT. The end-of-year balance in a
Participant's Deferred Compensation Stock Subpart shall consist of
the number of Stock Units allocated to the Participant's Stock
Subpart at year end, multiplied by the Weighted Average Closing
Price of the Stock on such date. The end-of-year balance in a
Participant's Deferred Compensation Cash Subpart shall consist of
the dollar amount of cash allocated to the Participant's Cash
Subpart at year end.
(II) MATCHING CONTRIBUTION SUBACCOUNT. The end-of-year balance in a
Participant's Matching Contribution Stock Subpart shall consist of
the number of Stock Units allocated to the
12
<PAGE> 16
Participant's Stock Subpart at year end, multiplied by the Weighted
Average Closing Price of the Stock on such date. The end-of-year
balance in a Participant's Matching Contribution Cash Subpart shall
consist of the dollar amount of cash allocated to the Participant's
Cash Subpart at year end.
(III) SUPPLEMENTAL CONTRIBUTION SUBACCOUNT. The end-of-year balance
in a Participant's Supplemental Contribution Stock Subpart shall
consist of the number of Stock Units allocated to the Participant's
Subpart at year end, multiplied by the Weighted Average Closing
Price of the Stock on such date. The end-of-year balance in a
Participant's Supplemental Contribution Cash Subpart shall consist
of the dollar amount of cash allocated to the Participant's Cash
Subpart at year end.
B. STATEMENT UPON TERMINATION OF EMPLOYMENT. Within 30 days following
the date of termination of employment by a Participant (for any reason),
the Participant shall be provided with a statement showing the vested
balances in the Participant's Deferred Compensation, Matching
Contribution, and Supplemental Contributions Subaccounts, as follows.
(I) DEFERRED COMPENSATION SUBACCOUNT. The balance in a
Participant's Deferred Compensation Subaccount shall consist of the
greater of the cash value of the Deferred Compensation Cash or
Deferred Compensation Stock Subpart.
To determine the cash value of the Participant's Deferred
Compensation Stock Account, the number of Stock Units credited on
the date of termination of employment shall be multiplied by the
Weighted Average Closing Price of the Stock on such date. To
determine the value of the Participant's Deferred Compensation Cash
Subpart, the cash amount credited to such Subpart on the date of
termination shall be utilized.
(II) MATCHING CONTRIBUTION SUBACCOUNT. The balance in a
Participant's Matching Contribution Subaccount shall consist of the
greater of the cash value of the Matching Contribution Cash or
Matching Contribution Stock Subpart.
To determine the cash value of the Participant's Matching
Contribution Stock Subpart, the number of Stock Units credited on
the date of termination of employment shall be multiplied by the
Weighted Average Closing Price of the Stock on such date. To
determine the value of the Participant's Matching Contribution Cash
Subpart, the cash amount credited to such Subpart on the date of
termination of employment shall be utilized.
(III) SUPPLEMENTAL CONTRIBUTION SUBACCOUNT. The balance in a
Participant's Supplemental Contribution Subaccount shall consist of
the greater of the cash value of the Supplemental Contribution Cash
or Supplemental Contribution Stock Subpart.
To determine the cash value of the Participant's Supplemental
Contribution Stock Subpart, the number of Stock Units credited on
the date of termination of employment shall be multiplied by the
Weighted Average Closing Price of the Stock on such date. To
determine the value of the Participant's Supplemental Contribution
Cash Account, the cash amount credited to such Subpart on the date
of termination of employment shall be utilized.
13
<PAGE> 17
SECTION 9
AMENDMENT OR TERMINATION OF PLAN
9.1 AMENDMENT OR TERMINATION OF PLAN. Any amendment to this Plan shall be made
pursuant to a resolution of the Board; provided, however, that if such amendment
directly or indirectly affects the benefits payable under the Plan, such
amendment must be mutually agreed to in writing by Participant (or, in the event
that the Participant is deceased at the date of amendment, the Beneficiary).
SECTION 10
GENERAL PROVISIONS
10.1 PARTICIPANT'S RIGHTS UNFUNDED. The Plan at all times shall be unfunded as
defined under provisions of the Code. The right of Participant or any
Beneficiary to receive a distribution hereunder shall be an uninsured claim
against the general assets of Company in the event of the Company's insolvency
or bankruptcy.
Company shall implement a form of trust arrangement (known generally as a "rabbi
trust") to hold Company assets which will be used to make payments to the
Participant (or any Beneficiary) under the terms of the Plan. Such trust
arrangement will not be a "funded" arrangement under the provisions of the Code,
and a copy of such trust arrangement shall be included with this Plan as Exhibit
C.
10.2 INDEPENDENCE OF OTHER BENEFIT ARRANGEMENTS. Participation in the Plan
shall in no way restrict or otherwise impact Participant's participation in any
other welfare benefit plan, employment or other contract, deferred compensation
arrangement, equity participation plan, or any other form of retirement benefit
arrangement sponsored by Company.
10.3 NO SECURED GUARANTEE OF BENEFITS. In the event of the insolvency or
bankruptcy of Company, Participant shall remain a general creditor of the
Company with respect to any benefits payable under the Plan and nothing
contained in the Plan shall constitute a secured guaranty by Company or any
other person or entity that the assets of Company will be sufficient to pay any
benefit hereunder in the event of the Company's insolvency or bankruptcy.
10.4 NO ENLARGEMENT OF EMPLOYEE RIGHTS. No Participant shall have any right to
receive a distribution of any benefits under the Plan except in accordance with
the terms of the Plan. Establishment of the Plan shall not be construed to give
any Participant the right to be retained in the service of Company.
10.5 SPENDTHRIFT PROVISION. No interest of any person or entity in, or right to
receive a distribution under, the Plan shall be subject in any manner to sale,
transfer, assignment, pledge, attachment, garnishment, or other alienation or
encumbrance of any kind; nor may such interest or right to receive a
distribution be taken, either voluntarily or involuntarily for the satisfaction
of the debts of, or other obligations or claims against, such person or entity,
including claims for alimony, support, separate maintenance, and claims in
bankruptcy proceedings.
10.6 APPLICABLE LAW. The Plan shall be construed and administered under the
laws of the state of Tennessee.
10.7 SEVERABILITY. In the event that any of the provisions of the Plan are held
to be inoperative or invalid by any court of competent jurisdiction, then: (i)
insofar as is reasonable, effect will be given to the intent
14
<PAGE> 18
manifested in the provision held invalid or inoperative, and (ii) the validity
and enforceability of the remaining provisions of the Plan will not be affected
thereby.
10.8 INCAPACITY OF RECIPIENT. If any person entitled to a distribution under
the Plan is deemed by Company to be incapable (physically or mentally) of
personally receiving and giving a valid receipt for any payment pursuant to the
Plan, then, unless and until claim therefore shall have been made by a duly
appointed guardian or other legal representative of such person, Company may
provide for such payment or any part thereof to be made to any other person or
institution then contributing toward or providing for the care and maintenance
of such person. Any such payment shall be a payment for the account of such
person and a complete discharge of any liability of Company and the Plan with
respect to such payment.
10.9 SUCCESSORS. The terms and conditions of the Plan will be binding on the
Company's and Participant's successors, heirs, and assigns (herein, "Participant
Successors" and "Company Successors").
10.10 UNCLAIMED BENEFITS. Participant shall keep Company informed of his or her
current address and the current address of his or her Beneficiary. Company shall
not be obligated to search for the whereabouts of any person. If the location of
Participant is not made known to Company within a one (1) year period after the
date on which payment is to be made under the provisions of Section 7.1, then
payment may be made by the Company to the Beneficiary instead. If, within one
(1) additional year after such initial one (1) year period, Company is unable to
locate any designated Beneficiary of the Participant, then Company shall have no
further obligation to pay any benefit under the Plan to such Participant or
designated Beneficiary and any such benefit shall be irrevocably forfeited.
10.11 LIMITATIONS ON LIABILITY. Participant and any other person claiming
benefits under the Plan shall be entitled under this Plan only to those payments
provided in accordance with the provisions of the Plan ("Payment Claims"). With
the exception of the provisions of Section 10.13 of the Plan, neither Company,
Company Successor, nor any individual acting as employee or agent of Company or
Company Successor shall be liable to Participant or any other person for any
other claim, loss, liability, or expense under this Plan not directly related to
a Payment Claim.
10.12 FORFEITURE OF BENEFITS. Notwithstanding any other provision of the Plan,
should Participant engage in theft, fraud, or embezzlement causing significant
property damage to Company, then any benefits payable to such Participant under
the Plan will automatically be forfeited. The determination of theft or
embezzlement will be made by the Board in good faith, but such determination
does not require an actual criminal indictment or conviction prior to or after
such decision. In any determination of forfeiture pursuant to this Section
10.12, Participant will be given the opportunity to refute any such decision by
the Board, but the Board's decision on the matter will be considered final and
binding on Participant and all other parties.
10.13 PAYMENT OF ATTORNEY'S FEES, COURT COSTS, AND INTEREST ON LOSS OF BENEFITS.
Should either the Company or Company Successor (for these purposes, "Company")
or Participant bring an action at law (or through arbitration) in order that the
Plan's terms be enforced, then the party prevailing in the action at law (or
through arbitration) shall be entitled to reimbursement from the losing party
for reasonable attorney's fees, court costs, and other similar amounts expended
in the enforcement of the Plan. In addition, should the prevailing party be
Participant, he or she shall also be entitled to interest on any delayed
payments, with such interest computed at the Applicable Rate.
10.14 PAYMENT OF TAXES. Anything in the Plan to the contrary notwithstanding, in
the event it shall be determined that any payment of benefits under this Plan
(the "Plan Payment") would be subject to the excise tax imposed by Section 4999
of the Code, or any interest or penalties are incurred by the Participant with
15
<PAGE> 19
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Participant shall be entitled to receive an additional payment (an "Excise
Tax Gross-Up Payment") in an amount such that after payment by the Participant
of all taxes (including any interest or penalties imposed with respect thereto)
and Excise Tax Gross-Up Payment equal to the Excise Tax imposed upon the Plan
Payment. The Excise Tax Gross-Up Payment will be made within two (2) months
following the Participant's termination of employment, once a good faith
determination has been made by either the Company or the Participant that the
Plan Payment is subject to the excise tax imposed by Section 4999 of the Code.
10.15 WITHHOLDING. There shall be deducted from all payments under the Plan the
amount of any taxes required to be withheld by any federal, state, or local
government. Except as provided in Section 10.14, the Participants, any
Beneficiaries, and personal representatives shall bear any and all federal,
foreign, state, local, income, or other taxes imposed on amounts paid under the
Plan.
10.16 PARTICIPANTS BOUND BY TERMS OF THE PLAN. Each Participant shall be deemed
conclusively to have accepted and consented to all terms of the Plan and all
actions or decisions made by the Company with regard to the Plan. Such terms and
consent shall also apply to and be binding upon any Beneficiaries, personal
representatives, and other Participant Successors of each Participant. Each
Participant shall receive a copy of the Plan.
10.17 EFFECTIVE DATE OF THE PLAN. The Plan shall be effective as of January 1,
1996.
IN WITNESS WHEREOF, the Plan is hereby adopted by the Company on the 23rd day of
February, 1995 and amended on the 17th day of April 1997.
UNION PLANTERS CORPORATION
By: /s/ Benjamin W. Rawlins, Jr.
---------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------
16
<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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------- ------------------------------------
1997 1996 1997 1996
----------- ------------ ----------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE
Average shares outstanding 67,010,178 64,006,649 66,278,149 63,389,113
Assumed exercise of options outstanding 1,362,431 1,212,152 1,349,691 1,219,583
------------ ------------ ------------ ------------
Primary average shares outstanding 68,372,609 65,218,801 67,627,840 64,608,696
============ ============ ============ ============
Net earnings $ 62,435 $ 26,612 $ 181,480 $ 122,388
Less: Preferred stock dividends
Series B -- -- -- (45)
Series E (1,125) (1,743) (3,834) (5,239)
------------ ------------ ------------ ------------
Net earnings applicable to common shares $ 61,310 $ 24,869 $ 177,646 $ 117,104
============ ============ ============ ============
Primary earnings per common share $ .90 $ .38 $ 2.63 $ 1.80
</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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30
------------------------------ -----------------------------
1997 1996 1997 1996
---------- --------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
FULLY DILUTED EARNINGS PER COMMON SHARE
Average shares outstanding 67,010,178 64,006,649 66,278,149 63,389,113
Assumed exercise of options outstanding 1,458,185 1,460,712 1,444,771 1,320,686
Assumed conversion of preferred stock outstanding:
Series B -- -- -- 148,804
Series E 2,994,970 4,355,961 3,451,489 4,363,825
----------- ----------- ----------- -----------
Fully diluted average shares outstanding 71,463,333 69,823,322 71,174,409 69,222,428
=========== =========== =========== ===========
Net earnings $ 62,435 $ 26,612 $ 181,480 $ 122,388
Less: Preferred stock dividends -- -- -- --
----------- ----------- ----------- -----------
Net earnings applicable to common shares $ 62,435 $ 26,612 $ 181,480 $ 122,388
=========== =========== =========== ===========
Fully diluted earnings per common share $ .87 $ .38 $ 2.55 $ 1.76
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF UNION PLANTERS CORP. FOR THE NINE MONTHS ENDED SEPTEMBER
30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 534,914
<INT-BEARING-DEPOSITS> 5,544
<FED-FUNDS-SOLD> 20,685
<TRADING-ASSETS> 231,315
<INVESTMENTS-HELD-FOR-SALE> 2,812,927
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 10,073,253
<ALLOWANCE> 166,894
<TOTAL-ASSETS> 14,858,688
<DEPOSITS> 11,041,783
<SHORT-TERM> 779,056
<LIABILITIES-OTHER> 245,913
<LONG-TERM> 1,304,552
0
57,240
<COMMON> 336,058
<OTHER-SE> 1,094,086
<TOTAL-LIABILITIES-AND-EQUITY> 14,858,688
<INTEREST-LOAN> 712,424
<INTEREST-INVEST> 142,850
<INTEREST-OTHER> 18,715
<INTEREST-TOTAL> 873,989
<INTEREST-DEPOSIT> 319,138
<INTEREST-EXPENSE> 406,718
<INTEREST-INCOME-NET> 467,271
<LOAN-LOSSES> 47,252
<SECURITIES-GAINS> 35
<EXPENSE-OTHER> 331,409
<INCOME-PRETAX> 275,388
<INCOME-PRE-EXTRAORDINARY> 181,480
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 181,480
<EPS-PRIMARY> 2.63
<EPS-DILUTED> 2.55
<YIELD-ACTUAL> 8.71
<LOANS-NON> 56,329
<LOANS-PAST> 524,844
<LOANS-TROUBLED> 1,967
<LOANS-PROBLEM> 17,772
<ALLOWANCE-OPEN> 166,853
<CHARGE-OFFS> 60,111
<RECOVERIES> 12,900
<ALLOWANCE-CLOSE> 166,894
<ALLOWANCE-DOMESTIC> 166,894
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
