<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
--------- -------
Commission File No. 1-10160
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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
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Common Stock having a par New York Stock Exchange
value of $5 per share (name of each exchange
(title of class) on which registered)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
8% Cumulative, Convertible Preferred Stock,
Series E having a stated value of $25 per share
(title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant at February 28, 1998 was approximately $5,003,084,000.
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE
REGISTRANT'S CLASSES OF COMMON STOCK
CLASS OUSTANDING AT FEBRUARY 28, 1998
Common Stock having a par 83,459,418
value of $5 per share
(title of class)
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
Part of Form 10-K
Documents Incorporated into which incorporated
---------------------- -----------------------
<S> <C> <C>
1. Certain parts of the Annual Parts I and II, Items 1, 2, 5,
Report to Shareholders 6, 7, and 8
for the year ended December
31, 1997
2. Certain parts of the Definitive Part III
Proxy Statement for the Annual
Shareholders Meeting to be held
April 16, 1998
</TABLE>
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FORM 10-K CROSS-REFERENCE INDEX
<TABLE>
<CAPTION>
Page
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PART I
<S> <C> <C> <C>
Item 1. Business 3
Item 1a. Executive Officers of the Registrant 10
Item 2. Properties 11
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders *
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters 12
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Item 8. Financial Statements and Supplementary Data 12
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure *
PART III
Item 10. Directors and Executive Officers of the Registrant 12
Item 11. Executive Compensation 13
Item 12. Security Ownership of Certain Beneficial Owners
and Management 13
Item 13. Certain Relationships and Related Transactions 13
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 13
SIGNATURES 15
</TABLE>
* Not Applicable
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PART I
ITEM 1. BUSINESS
GENERAL
Union Planters Corporation (the Corporation) is an $18.1-billion
multi-state bank holding company whose primary business is banking. The
Corporation is the largest bank holding company headquatered in Tennessee and is
one of the fifty largest bank holding companies headquartered in the United
States. Union Planters Bank, National Association, headquartered in Memphis,
Tennessee, is the Corporation's largest subsidiary. The principal banking
markets of the Corporation are in Tennessee, Mississippi, Florida, Missouri,
Arkansas, Louisiana, Alabama, and Kentucky. With the completion of ten pending
acquisitions, the Corporation will expand in existing markets in Missouri,
Kentucky, Tennessee, Florida, and Alabama and expand into new markets in
Illinois, Iowa, and Texas (see the "Acquisition" discussion). The Corporation's
existing market areas are served by the Corporation's 514 banking offices and
651 ATMs. The map on the inside front cover of the 1997 Annual Report to
Shareholders, Table 15, and the listing of communities served on page 39 of the
1997 Annual Report to Shareholders provide information regarding the size,
locations, and markets served by the Corporation's banking subsidiaries. Capital
Factors, Inc. (Capital Factors), a majority-owned subsidiary of the
Corporation's Florida banking subsidiary, which was acquired December 31, 1997,
provides receivable-based commercial financing and related fee-based credit
collection and management information services through four regional offices
located in New York, New York; Los Angeles, California; Charlotte, North
Carolina; and its headquarters in South Florida (Boca Raton, Florida) and an
asset-based lending office in Atlanta, Georgia.
As part of the Corporation's banking services, its subsidiaries are
engaged in factoring operations; mortgage origination and servicing; investment
management and trust services; the issuance of credit and debit cards; the
origination, packaging, and securitization of loans, primarily the
government-guaranteed portions of Small Business Administration (SBA) loans; the
purchase of delinquent FHA/VA government-insured/guaranteed loans from third
parties and GNMA pools serviced for others; full-service and discount brokerage
services; commercial finance business; trade-finance activities; and the sale of
bank-eligible insurance products and services.
CERTAIN REGULATORY CONSIDERATIONS
GENERAL
As a bank holding company, the Corporation is subject to the regulation
and supervision of the Board of Governors of the Federal Reserve System (the
Federal Reserve Board) under the Bank Holding Company Act of 1956 (BHCA). Each
of the Corporation's banking subsidiaries, including its savings bank
subsidiary, is a member of the Federal Deposit Insurance Corporation (the FDIC)
and as such its deposits are insured by the FDIC to the maximum extent provided
by law.
The Corporation's banking subsidiaries which are national banking
associations, including its principal subsidiary, Union Planters National Bank,
the name of which was changed to Union Planters Bank, National Association
(Union Planters Bank or UPB) effective January 1, 1998, are subject to
supervision and examination by the Office of the Comptroller of the Currency
(the Comptroller) and the FDIC. State bank subsidiaries of the Corporation which
are members of the Federal Reserve System are subject to supervision and
examination by the Federal Reserve Board and the state banking authorities of
the states in which they are located. State bank subsidiaries which are not
members of the Federal Reserve System are subject to supervision and examination
by the FDIC and the state banking authorities of the states in which they are
located. The Corporation's savings bank subsidiary is subject to supervision and
examination by the Office of Thrift Supervision (OTS). The Corporation's banking
subsidiaries are subject to an extensive system of banking laws and regulations
that are intended primarily for the protection of their customers and
depositors. These laws and regulations include requirements to maintain reserves
against deposits, restrictions on the types and amounts of loans and other
extensions of credit that may be granted and the interest that may be charged
thereon and limitations on the types of investments that may be made and the
types of services that may be offered. Various consumer laws and regulations
also affect the operations of the banking subsidiaries. In addition to the
impact of regulation, the banking subsidiaries are affected significantly by the
actions of the Federal Reserve Board as it attempts to control the money supply
and credit availability
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in order to influence the economy. Set forth below are brief descriptions of
selected laws and regulations applicable to the Corporation and its
subsidiaries. The references are not intended to be complete and are qualified
in their entirety by reference to the statutes and regulations. Changes in
applicable law or regulation may have a material effect on the business of the
Corporation.
Under the BHCA, the Federal Reserve Board's prior approval is required
where the Corporation proposes to acquire all or substantially all of the assets
of any bank, acquire direct or indirect ownership or control of more than 5% of
the voting shares of any bank, or merge or consolidate with any other bank
holding company. The BHCA also prohibits, with certain exceptions, the
Corporation from acquiring direct or indirect ownership or control of more than
5% of any class of voting shares of any nonbanking corporation. Under the BHCA,
the Corporation may not engage in any business other than managing and
controlling banks or furnishing certain specified services to subsidiaries and
may not acquire voting control of nonbanking corporations unless the Federal
Reserve Board determines such businesses and services to be closely related to
banking or a proper incident thereto.
The BHCA further provides that the Federal Reserve Board may not approve
any transaction that would result in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any section of the United States, or the effect of which
may be substantially to lessen competition or to tend to create a monopoly in
any section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve Board is also required to
consider the financial and managerial resources and future prospects of the bank
holding companies and banks concerned and the convenience and needs of the
community to be served. Consideration of financial resources generally focuses
on capital adequacy and consideration of convenience and needs issues includes
the parties' performance under the Community Reinvestment Act of 1977, as
amended (the CRA).
INTERSTATE BANKING
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
Interstate Act) effected changes in overriding federal law so as to permit bank
holding companies to acquire banks headquartered in any state notwithstanding
any state law prohibiting bank acquisitions across state lines. The Interstate
Act also relaxed significant limitations upon the branching of banks across
state lines. Banks may now lawfully branch across state lines by merging a bank
located in one state into a bank located in another, whereupon the main office
and branches of the merging bank would become branches of the survivor. This
procedure is not permissible for banks headquartered in Texas and Montana which
effectively exercised their rights under the Interstate Act to "opt-out" of
interstate branching. The Texas "opt-out" expires September 2, 1999. Since the
laws of most states, including Tennessee, forbid multi-state branching, neither
the de novo establishment of branches across state lines nor the acquisition
from other banks of existing branches across state lines would ordinarily be
lawful. Thus, the acquisition of branches operating in other states is
ordinarily limited to acquisition by bank merger as now permitted by the
Interstate Act which preempts inconsistent state law. However, a bank which is
already operating a lawfully acquired branch in another state may ordinarily
establish new branches in that state to the same extent that a bank
headquartered in that state may lawfully establish branches there. The
Interstate Act made it possible for the Corporation to merge 31 of its banking
subsidiaries with and into UPB, its principal banking subsidiary headquartered
in Memphis, Tennessee, since many of the 31 subsidiaries were headquartered in
states other than Tennessee. These 31 mergers became effective January 1, 1998
and, as a result of their consummation, UPB has become a multi-state bank with
offices in Tennessee, Mississipi, Missouri, Arkansas, Louisiana, Alabama, and
Kentucky. Management anticipates that substantially all of the Corporation's
banking subsidiaries, including any which may be acquired after January 1, 1998,
would ultimately be merged with and into UPB to the extent allowed by effective
law.
CAPITAL
The Federal Reserve Board has adopted risk-based capital guidelines for
bank holding companies. The minimum guideline for the ratio (Risk-Based Capital
Ratio) of total capital (Total Capital) to risk-weighted assets (including
certain off-balance-sheet commitments such as standby letters of credit) is 8%.
At least one-half of Total Capital must be composed of Tier 1 Capital which
consists of common shareholders' equity, minority interests in the equity
accounts of consolidated subsidiaries, noncumulative perpetual preferred stock
and a limited amount of cumulative perpetual preferred stock, less goodwill and
certain other intangible assets. The remainder, denominated "Tier 2 Capital,"
may consist of limited amounts of subordinated debt,
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qualifying hybrid capital instruments, other preferred stock and a limited
amount of loan loss reserves.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum ratio of Tier 1 Capital to average total assets less goodwill (the
Leverage Ratio) of 3% for bank holding companies that meet certain specified
criteria, including those having the highest regulatory rating. All other bank
holding companies generally are required to maintain a Leverage Ratio of at
least 4% to 5%. The guidelines also provide that bank holding companies
experiencing internal growth or making acquisitions are expected to maintain
strong capital positions substantially above the minimum supervisory levels
without significant reliance upon intangible assets. Furthermore, the Federal
Reserve Board has indicated that it will consider a "tangible Tier 1 Capital
Leverage Ratio" (deducting all intangibles) and other indicia of capital
strength in evaluating proposals for expansion or new activities.
At December 31, 1997, the Corporation's Total Risk-Based Capital Ratio was
18.12%; its Tier 1 Risk-Based Capital Ratio (i.e., its ratio of Tier 1 Capital
to risk-weighted assets) was 15.51%; and its Leverage Ratio was 10.48%. In
addition, each of the Corporation's banking subsidiaries satisfied the minimum
capital requirements applicable to it and had the requisite capital levels to
qualify as a "well-capitalized" institution under the prompt corrective action
provisions discussed below. Such capital classifications may have an influence
on a bank's business activities. For example, under regulations adopted by the
FDIC governing the receipt of brokered deposits, a bank may not lawfully accept,
roll over, or renew brokered deposits unless (i) it is either well capitalized
or (ii) it is adequately capitalized and receives a waiver from the FDIC.
All of the Corporation's banking subsidiaries are subject to Risk-Based
and Leverage Capital Ratio requirements adopted by their respective federal
regulators which are substantially similar to those adopted by the Federal
Reserve Board. As of December 31, 1997, the Total and Tier 1 Risk-Based Capital
and Leverage Ratios of UPB, the Corporation's largest bank subsidiary, were
16.28%, 15.02%, and 9.21%, respectively. Subsequent to the mergers of 31 of the
Corporation's banking subsidiaries into UPB effective January 1, 1998, on a pro
forma basis those ratios were, respectively, 14.05%, 12.89%, and 8.39%. Neither
the Corporation nor any of its banking subsidiaries has been advised by any
federal banking agency of any specific minimum capital ratio requirement
applicable to it.
PROMPT CORRECTIVE ACTION
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
and the joint regulations thereunder adopted by the federal banking agencies
require the banking regulators to take prompt corrective action in respect of
depository institutions that do not meet their minimum capital requirements.
FDICIA establishes five capital tiers: "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." Under capital regulations, a bank is defined to
be well capitalized if it maintains a Leverage Ratio of at least 5%, a Tier 1
Risk-Based Capital Ratio of at least 6% and a Total Risk-Based Capital Ratio of
at least 10% and it is not subject to an order, written agreement, capital
directive, or prompt corrective action directive to meet and maintain a specific
level for any capital measure. A bank is defined to be adequately capitalized if
the institution has a Total Risk-Based Capital Ratio of 8.0% or greater, a Tier
1 Risk-Based Capital Ratio of 4.0% or greater, and a Leverage Ratio of 4.0% or
greater (or a Leverage Ratio of 3.0% or greater if the institution is rated
composite 1 in its most recent report of examination, subject to appropriate
Federal banking agency guidelines) and the institution does not meet the
definition of a well capitalized institution. In addition, a bank will be
considered "undercapitalized" if it fails to meet any minimum required measure,
"significantly undercapitalized" if it is significantly below such measure, and
"critically undercapitalized" if it has a ratio of tangible equity to total
assets that is equal to or less than 2.0%.
The appropriate Federal banking agency may, under certain circumstances,
reclassify a well capitalized insured depository institution as adequately
capitalized. The appropriate agency is also permitted to require an adequately
capitalized or undercapitalized institution to comply with the supervisory
provisions as if the institution were in the next lower category (but not treat
a significantly undercapitalized institution as critically undercapitalized)
based on supervisory information other than the capital levels of the
institution. The statute provides that an institution may be reclassified if the
appropriate Federal banking agency determines (after notice and opportunity for
hearing) that the institution is in an unsafe or unsound condition or deems the
institution to be engaging in an unsafe or unsound practice.
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COMMUNITY REINVESTMENT
All the Corporation's banking subsidiaries are subject to the provisions
of the Community Reinvestment Act (CRA) and the federal banking agencies' other
implemented regulations. Under the CRA, all financial institutions have a
continuing and affirmative obligation consistent with their safe and sound
operation to help meet the credit needs of their entire communities, including
low- to moderate- income neighborhoods. The CRA does not establish specific
lending requirements or programs for products and services. The CRA requires the
federal banking agencies, in connection with their examination of a depository
institution, to assess the institution's record in assessing and meeting the
credit needs of the community served by that institution, including low- to
moderate-income neighborhoods. The regulatory agency's assessment of the
institution's record is made available to the public. Further, such assessment
is required of any institution which has applied to: (i) charter a national
bank; (ii) obtain deposit insurance coverage for a newly chartered institution;
(iii) establish a new branch office that will accept deposits; (iv) relocate an
office; or (v) merge or consolidate with, or acquire the assets or assume the
liabilities of, a federally regulated financial institution. When a bank holding
company applies for approval to acquire a bank or bank holding company, the
Federal Reserve Board will assess the records of each subsidiary depository
institution of the applicant bank holding company and such records may be the
basis for denying the application. Based on their most recent CRA compliance
examinations, the Corporation's subsidiary banks and thrifts all received at
least a "satisfactory" CRA rating.
DIVIDEND RESTRICTIONS
The Corporation is a legal entity separate and distinct from its banking
subsidiaries and its nonbanking subsidiaries. The Corporation's revenues (on a
parent company only basis) result, in significant part, from dividends paid to
the Corporation by its subsidiaries. The right of the Corporation, and
consequently the rights of creditors and shareholders of the Corporation, to
participate in any distribution of the assets or earnings of any subsidiary
through the payment of such dividends, or otherwise, is necessarily subject to
the prior claims of creditors of the subsidiary (including depositors, in the
case of banking subsidiaries) except to the extent that claims of the
Corporation in its capacity as a creditor may be recognized.
There are statutory and regulatory requirements applicable to the payment
of dividends to the Corporation by its banking subsidiaries. Each national
banking association subsidiary of the Corporation is required by federal law to
obtain the prior approval of the Comptroller for the declaration of dividends if
the total of all dividends to be declared by the board of directors of such bank
in any year would exceed the total of (i) such bank's net profits (as defined
and interpreted by regulation) for that year, plus (ii) the retained net profits
(as defined and interpreted by regulation) for the preceding two years, less any
required transfers to surplus. The Corporation's state-chartered banking
subsidiaries are subject to similar restrictions on the payment of dividends by
the respective state laws under which they are organized. Furthermore, all
depository institutions are prohibited from paying any dividends, making other
distributions, or paying any management fees if, after such payment, the
depository institution would fail to satisfy its minimum capital requirements.
In accordance with the specified calculations, at January 1, 1998, approximately
$103 million was available for distribution to the Corporation by the banking
subsidiaries without obtaining prior regulatory approval. Future dividends will
depend primarily upon the level of earnings of the banking subsidiaries of the
Corporation. Federal banking regulators also have the authority to prohibit
banks and bank holding companies from paying a dividend if they should deem such
payment to be an unsafe or unsound practice.
SUPPORT OF BANKING SUBSIDIARIES
Under Federal Reserve Board policy, the Corporation is expected to act as
a source of financial strength to its banking subsidiaries and, where required,
to commit resources to support each of such subsidiaries. Moreover, if one of
its banking subsidiaries should become undercapitalized, under FDICIA the
Corporation would be required to guarantee the subsidiary bank's compliance with
its capital plan in order for such plan to be accepted by the federal regulatory
authority.
Under the "cross guarantee" provisions of the Federal Deposit Insurance
Act (the FDI Act), any FDIC-insured subsidiary of the Corporation may be held
liable for any loss incurred by, or reasonably expected to be incurred by, the
FDIC in connection with (i) the default of any other commonly controlled
FDIC-insured subsidiary or (ii) any assistance provided by the FDIC to any
commonly controlled FDIC-insured subsidiary in danger of default. Such liability
could have a material adverse effect on the financial condition of any assessed
bank and the Corporation. While the FDIC's claim is junior to the claims of
depositors, holders of secured liabilities,
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general creditors and subordinated creditors, it is superior to the claims of
shareholders and affiliates.
TRANSACTIONS WITH AFFILIATES
There are various legal restrictions on the extent to which a bank holding
company or its nonbank subsidiaries may borrow or otherwise obtain credit from
its bank subsidiaries. In general, these restrictions require that any such
extensions of credit must be on nonpreferential terms and secured by designated
amounts of specified collateral and be limited, as to any one of the holding
company or the holding company's nonbank subsidiaries, to 10% of the lending
bank's capital stock and surplus, and as to the holding company and all such
nonbank subsidiaries in the aggregate, to 20% of such capital stock and surplus.
FDIC DEPOSIT INSURANCE
Currently, certain deposits of financial institutions are separately
insured under two deposit-insurance funds, both administered by the FDIC. They
are the Bank Insurance Fund (the BIF) for deposits originated by banks and the
Savings Association Insurance Fund (the SAIF) for deposits originated by savings
associations. The targeted designated reserve ratio (DRR), i.e., the ratio of
the net worth of each of the two funds to the aggregate amount of deposits
insured by it, is 1.25%. Significant claims made against the two funds,
especially the SAIF, have been paid over recent years due to failures of banks
and savings associations. Through deposit-insurance assessments made by the
FDIC, the BIF's DRR was restored to 1.25% of insured deposits in 1995; however,
at September 30, 1996, approximately $4.5 billion was required to restore the
SAIF's DRR to that level. On that date the Deposit Insurance Funds Act of 1996
(the Funds Act) became law. The Funds Act required the FDIC to impose a one-time
assessment on SAIF-assessable deposits (including 80% of those which had been
acquired by banks, i.e., so-called "Oakar" Deposits) sufficient to capitalize
the SAIF at its targeted DRR of 1.25%. In response, the FDIC imposed an
assessment of 65.7 basis points on SAIF-assessable deposits deemed to have been
held as of March 31, 1995. Since certain of its banking subsidiaries held
SAIF-assessable (including "Oakar") deposits, the Corporation incurred a
SAIF-assessment expense of $28.2 million at September 30, 1996.
Under the Funds Act, the BIF and the SAIF would be merged on the date as
of which the last savings association shall cease to exist. The SAIF was
initially funded by issuance of Financing Corporation bonds (the FICO Bonds).
The Funds Act provides that 20% of the interest payable on the FICO Bonds shall
be assessed against BIF-assessable deposits and the remaining 80% against
SAIF-assessable deposits prior to the merger of the BIF and SAIF to form the
Deposit Insurance Fund (the DIF). After the merger, DIF-assessable deposits
would be assessed for 100% of the FICO Bond interest, since the separate
existence of the BIF and SAIF would have ceased.
SAFETY AND SOUNDNESS STANDARDS
The FDI Act, as amended by the FDICIA and the Riegle Community Development
and Regulatory Improvement Act of 1994, requires the federal bank regulatory
agencies to prescribe standards, by regulations or guidelines, relating to the
internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest-rate-risk exposure, asset growth,
asset quality, earnings, stock valuation and compensation, fees and benefits and
such other operational and managerial standards as the agencies may deem
appropriate. The federal bank regulatory agencies adopted, effective August 9,
1995, a set of guidelines prescribing safety and soundness standards pursuant to
FDICIA, as amended. In general, the guidelines require, among other things,
appropriate systems and practices to identify and manage the risks and exposures
specified in the guidelines.
DEPOSITOR PREFERENCE
Legislation enacted in 1993 establishes a nationwide depositor-preference
rule in the event of a bank failure. Under this arrangement all deposits and
certain other claims against a bank, including the claim of the FDIC as subrogee
of insured depositors, would receive payment in full before any general creditor
of the bank, including the holders of its subordinated debt securities, would be
entitled to any payment in the event of an insolvency or liquidation of the
bank.
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PROPOSED LEGISLATION
Because of concerns relating to the competitiveness and the safety and
soundness of the industry, Congress continues to consider a number of
wide-ranging proposals for altering the structure, regulation, and competitive
relationships of the nation's financial institutions. Among such bills are
proposals to combine banks and thrifts into a unified charter, to alter the
statutory separation of commercial and investment banking, and to further expand
or change the regulation of the powers of depository institutions, bank holding
companies, and competitors of depository institutions. It cannot be predicted
whether, or in what form, any of these proposals will be adopted or the extent
to which the business or financial condition of the Corporation may be affected
thereby.
PERSONNEL
As of February 28, 1998, the Corporation, including all subsidiaries,
had 8,400 employees (including 1,502 part-time employees).
STATISTICAL DISCLOSURES
The statistical information required by Item 1 may be found in the 1997
Annual Report to Shareholders (Exhibit 13 hereto) which, to the extent
indicated, is hereby incorporated herein by reference, as follows:
<TABLE>
<CAPTION>
Page in the Corporation's
1997 Annual Report to
Guide 3 Disclosure Shareholders*
------------------ --------------------------
<S> <C> <C>
I. Distribution of Assets, Liabilities, and
Shareholders' Equity; Interest Rates
and Interest Differential
A. Average Balance Sheet 29
B. Net Interest Earnings Analysis 29
C. Rate/Volume Analysis 30
II. Investment Portfolio
A. Book Value of Investment Securities 35, 51, and 52
B. Maturities of Investment Securities 52
C. Investment Securities Concentrations Not applicable
III. Loan Portfolio
A. Types of Loans 31 and 53
B. Maturities and Sensitivity of
Loans to Changes in Interest Rates Follows this table
C. Risk Elements
1. Nonaccrual, Past Due 90 Days
or More, and Restructured Loans 32 and 33
2. Potential Problem Loans 20
3. Foreign Outstandings Not significant
4. Loan Concentrations 19
D. Other Interest-Bearing Assets Not significant
IV. Summary of Loan Loss Experience
A. Analysis of Allowance for Loan Losses 33
B. Allocation of the Allowance for Loan Losses 32
V. Deposits
A. Average Balances 29 and 31
B. Maturities of Large Denomination
Certificates of Deposit Follows this table
C. Foreign Deposit Liability Disclosure Not significant
VI. Return on Equity and Assets
A. Return on Assets 8
B. Return on Equity 8
C. Dividend Payout Ratio 8
D. Equity to Assets Ratio 8
VII. Short-Term Borrowings 55
</TABLE>
*Unless otherwise noted
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The following table presents the maturities and sensitivities of the
Corporation's loans to changes in interest rates at December 31, 1997:
<TABLE>
<CAPTION>
DUE DUE AFTER ONE DUE AFTER
WITHIN BUT WITHIN FIVE
ONE YEAR FIVE YEARS YEARS
-------- ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Commercial, Financial,
and Agricultural $1,792,937 $ 612,816 $ 179,132
Real Estate - Construction 422,265 153,683 63,748
Foreign 197,042 9,546 755
---------- ---------- ----------
Total $2,412,244 $ 776,045 $ 243,635
========== ========== ==========
Fixed Rate $ 561,641 $ 138,046
========== ==========
Variable Rate $ 214,404 $ 105,589
========== ==========
</TABLE>
The following table presents maturities of certificates of deposit of $100,000
and over and other time deposits of $100,000 and over:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Under 3 Months $ 539,829
3 to 6 Months 324,399
6 to 12 Months 420,899
Over 12 Months 265,793
----------
Total $1,550,920
==========
</TABLE>
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ITEM 1a. EXECUTIVE OFFICERS OF THE REGISTRANT
The following lists the executive officers of the Corporation.
Information regarding the executive officers, their present positions held with
the Corporation and its subsidiaries, their ages, and their principal
occupations for the last five years are as follows:
<TABLE>
<CAPTION>
Position of Executive Officers
Name with the Corporation and UPB Age
- --------------------------- ---------------------------------------- -----
<S> <C> <C>
Benjamin W. Rawlins, Jr. Chairman and Chief Executive Officer 60
of the Corporation and UPB
Jackson W. Moore President and Chief Operating Officer 49
of the Corporation and UPB
Jack W. Parker Executive Vice President and 51
Chief Financial Officer of the
Corporation and UPB
M. Kirk Walters Senior Vice President, Treasurer, and 57
Chief Accounting Officer of the
Corporation and UPB
James A. Gurley Executive Vice President of the 64
Corporation and UPB
J. Armistead Smith Executive Vice President and 62
Senior Lending Officer of the
Corporation and UPB
</TABLE>
Mr. Rawlins has been Chairman of the Corporation since April 1989, and Chairman
of UPB from January 1986 until December 1996 when he was elected Vice Chairman.
He has also served as Chief Executive Officer of the Corporation and UPB since
September 1984. On January 1, 1998, he was reelected to the position of Chairman
of UPB. Mr. Rawlins was President of the Corporation from September 1984 until
he was elected Chairman.
Mr. Moore has been President of the Corporation since April 1989 and was elected
President of UPB January 1, 1998. In April 1994, Mr. Moore was elected Chief
Operating Officer of the Corporation and was elected to the same position with
UPB January 1, 1998. He is also Chairman of PSB Bancshares, Inc., and is a Vice
President and Director of its subsidiary, The Peoples Savings Bank (not an
affiliate bank of the Corporation), located in Clanton, Alabama. He has served
on the Boards of the Corporation and UPB since 1986.
Mr. Parker has been Executive Vice President and Chief Financial Officer of the
Corporation and UPB since March 1990. From 1987 until being elected to these
positions with the Corporation, he was an Executive Vice President of UPB and
President of the Mortgage Banking Group of UPB.
Mr. Walters was elected Senior Vice President of the Corporation in November
1990 and has been Chief Accounting Officer since February 1990. He has been
Treasurer of the Corporation since 1985. He was a Vice President of the
Corporation from 1975 until he was elected to his current position. Mr. Walters
has been an officer of UPB for more than twenty years and is currently a Senior
Vice President.
Mr. Gurley was elected Executive Vice President of the Corporation in November
1990. He was a Vice President of the Corporation from 1980 until he was elected
Executive Vice President. He has been an officer of UPB for more than twenty
years and is currently an Executive Vice President.
Mr. Smith became Executive Vice President and Senior Lending Officer of the
Corporation and UPB in April 1997. Prior to that, Mr. Smith was Vice Chairman of
the Corporation from 1989 to 1994. In 1994 he became Chairman of the East
Tennessee Region of UPB which later became Union Planters Bank of East
Tennessee, N.A., headquartered in Knoxville. From 1992 to 1994, Mr. Smith was
President of UPC's Community Bank Group.
10
<PAGE> 11
ITEM 2. PROPERTIES
The Corporation's corporate headquarters are located in the company-owned
Union Planters Administrative Center at 7130 Goodlett Farms Parkway, Memphis,
Tennessee, a three-building complex located near the center of Shelby County. In
addition to being the corporate headquarters, it contains approximately 250,000
square feet of space and houses BankCards, Mortgage Servicing and Origination,
Funds Management, Data Processing, Operations, Human Resources, Financial,
Legal, Credit and Review, and Marketing. A 126,000-square-foot addition to the
Administrative Center was completed in June 1997 to accommodate the growth
related to the recent acquisitions, primarily the Leader Financial Corporation
(Leader) acquisition. The total cost of this addition, including site
improvements, was approximately $13.1 million. Certain space occupied previously
by Leader was vacated and its occupants were moved to the new building which is
expected to be more efficient than the vacated space. Savings are expected from
this move but the amount thereof cannot be quantified at this time.
UPB's headquarters is located in a 70,000 square-foot company-owned
building at 6200 Poplar Avenue in East Memphis. In addition to its headquarters,
the building also houses UPB's Commercial Group, Trust Group, and Retail Group
Administration.
As of March 1, 1998, the Corporation operated 195 banking offices in
Tennessee, 142 in Mississippi, 28 in Florida, 51 in Missouri, 42 in Arkansas, 22
in Louisiana, 30 in Alabama, and 4 locations in Kentucky. The majority of these
locations are owned. A majority-owned subsidiary, Capital Factors, Inc. has
operations in leased facilities in Boca Raton and Ft. Lauderdale, Florida; Los
Angeles, California; New York, New York; Charlotte, North Carolina; and Atlanta,
Georgia. The subsidiaries also operate 675 twenty-four-hour automated teller
locations.
There are no material encumbrances on any of the company-owned properties.
ITEM 3. LEGAL PROCEEDINGS
The Corporation and/or various subsidiaries are parties to various pending
civil actions, all of which are being defended vigorously. Additionally, the
Corporation and/or its subsidiaries are parties to various legal proceedings
that have arisen in the ordinary course of business. Management is of the
opinion, based upon present information including evaluations of outside
counsel, that neither the Corporation's financial position, results of
operations, nor liquidity will be materially affected by the ultimate resolution
of pending or threatened legal proceedings.
The Corporation's five banks located in Mississippi: Union Planters Bank
of Mississippi, Union Planters Bank of Southern Mississippi, Union Planters Bank
of Central Mississippi, Union Planters Bank of Northeast Mississippi,N.A., and
Union Planters Bank of Northwest Mississippi (UPC Banks), which were merged into
UPB January 1, 1998, are defendants in various suits related to the placement of
collateral protection insurance(CPI) by the UPC Banks in the 1980s and early
1990s. On September 28,1995 and October 18,1995, two purported class actions
were filed in the U. S. District Court for the Southern District of Mississippi.
Both actions were consolidated and identified Vivian McCaskill as the
representative of a class of persons who financed personal property through the
UPC Banks and were force placed with Prudential Property and Casualty Insurance
Company's (Prudential) collateral protection insurance. The consolidated action
(Consolidated Action) names as defendants the UPC Banks, Prudential, National
Underwriters of Delaware, Inc., and several Ross & Yerger entities and includes
allegations that premiums were excessive and improperly calculated; coverages
were improper and not disclosed; and improper payments were paid to the UPC
Banks by the insurance companies, allegedly constituting violations of various
state and federal laws and common law. The relief sought in the purported class
actions includes actual damages, treble damages under certain statutes, other
statutory damages, and unspecified punitive damages. The CPI programs appear to
have been substantially similar in many respects to CPI programs of other
Mississippi banks, often with the same insurance companies. Consequently, there
are similar putative class actions pending against various Mississippi banks
(including those against the UPC Banks), various insurance agencies, and
companies based upon their CPI programs. During the fourth quarter of 1997 an
agreement in principle was reached by the UPC Banks with attorneys for the
putative class to settle the Consolidated Action within amounts previously
established. Final agreement is subject to execution of a definitive agreement,
court approval, and the UPC Banks' acceptance of the number of opt-outs from the
class settlement. Eight individual actions filed in state and federal courts
against the UPC Banks, with similar allegations, and seeking compensatory and
punitive damages, remain pending. Other subsidiaries of the Corporation were
involved in similar litigation relating to CPI on mobile home loans to Alabama
borrowers. On June 8,1995, a suit was filed in
11
<PAGE> 12
Greene County, Alabama, by Jeri Lynn Plowman and other individuals against
American Bankers Insurance Company of Florida, Inc., Leader Federal Savings and
Loan Association of Memphis, and seventeen other defendants requesting $200
million in punitive damages against each defendant (Plowman). On June 14, 1995,
a counterclaim to a foreclosure suit was filed by the defendants in Leader
Federal Bank v. Brown, et al (Brown) in the Circuit Court of Tuscaloosa County,
Alabama, demanding judgment for compensatory damages and punitive damages of $10
million for alleged wrongdoing with respect to the CPI related to the
defendant's loan. An agreement to settle Plowman and Brown was reached, and
approval of the Circuit Court of Tuscaloosa County, Alabama, obtained
(certifying as a class all Alabama residents whose mobile home loans were
originated or assigned to Leader Federal and were charged for CPI from January
1, 1986 through October 1, 1996), in the fourth quarter of 1996, within amounts
previously established and payments to class members were substantially
completed during 1997. In January 1996, two individual suits were filed by Queen
Ford (who was excepted from the class described above) in the Circuit Court of
Greene County, Alabama, against Leader Federal Bank for Savings, a subsidiary,
and an unrelated insurance company alleging wrongful placement of insurance on
plaintiff's mobile home. One such case demanded compensatory damages of $5,000
and punitive damages of $20 million, while the other sought $10,000 in
compensatory damages and $50 million in punitive damages. These suits were
settled during 1997 for nominal amounts.
In July 1991, UPNB was joined with nine other banks(including Leader
Federal) as defendants in a civil action in the Circuit Court of Shelby County,
Tennessee, which, as ultimately amended, alleged that the banks unlawfully
conspired to fix the charges for checks drawn on insufficient funds and sought
recovery for fees charged for deposited third-party checks which were returned
uncollected. In March 1992, the state court proceeding was dismissed, which
dismissal the Tennessee Court of Appeals affirmed. In 1995, the Tennessee
Supreme Court reversed its earlier decision declining to review the state court
action and agreed to hear plaintiffs' appeal. During the first quarter of 1997,
the Tennessee Supreme Court denied plaintiffs' petition and petition to rehear,
thus terminating this action. A related federal court action was terminated
during the first quarter of 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information required by Item 5 is included in Table 14 captioned
"Selected Quarterly Data" included in the Corporation's 1997 Annual Report to
Shareholders on pages 36 and 37, which information is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by Item 6 is included under the heading "Selected
Financial Data" in the Corporation's 1997 Annual Report to Shareholders on page
8, which information is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by Item 7 is included under the heading
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" in the Corporation's 1997 Annual Report to Shareholders on pages 9 -
39, which information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 is included in the Corporation's 1997
Annual Report to Shareholders on pages 40 - 71, and in Table 14 captioned
"Selected Quarterly Data" on pages 36 and 37, which pages are incorporated
herein by reference.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 as to the directors of the Corporation
is included under the heading "Proposal I: Election of Directors" on pages 2 - 6
and under the heading "Director Compensation" on page 6 of the definitive proxy
statement of the Corporation to be used in
12
<PAGE> 13
soliciting proxies for the Annual Meeting of shareholders to be held on April
16, 1998 (Proxy Statement), which information is incorporated herein by
reference.
The information concerning "Executive Officers of the Registrant" is
included in Part I (Item 1a) of this Form 10-K in accordance with Instruction 3
to paragraph (b) of Item 401 of Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 as to compensation of directors and
executive officers is included under the heading "Proposal I: Election of
Directors" on pages 2 - 6 and under the heading "Certain Information as to
Management" on pages 7 - 16 of the Proxy Statement, which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 as to certain beneficial owners and
management is included under the heading "Proposal I: Election of Directors" on
pages 2 - 6 of the Proxy Statement, which information is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 as to transactions and relationships
with certain directors and executive officers of the Corporation and their
associates is included under the heading "Certain Relationships and
Transactions" on page 16 of the Proxy Statement, which information is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following audited consolidated financial statements of Union
Planters Corporation and Subsidiaries, included in the Corporation's
1997 Annual Report to Shareholders, are incorporated herein by
reference in response to Part II, Item 8:
<TABLE>
<CAPTION>
Page in
Annual Report
-------------
<S> <C>
Report of Management 40
Report of Independent Accountants 41
Consolidated Balance Sheet -
December 31, 1997 and 1996 42
Consolidated Statement of Earnings -
Years ended December 31, 1997, 1996, and 1995 43
Consolidated Statement of Changes
in Shareholders' Equity - Years ended
December 31, 1997, 1996, and 1995 44
Consolidated Statement of Cash Flows -
Years ended December 31,
1997, 1996, and 1995 45
Notes to Consolidated Financial Statements 46
</TABLE>
(a)(2) All schedules have been omitted, since the required information is
either not applicable, not deemed material, or is included in the
respective consolidated financial statements or in the notes thereto.
(a)(3) Exhibits:
The exhibits listed in the Exhibit Index on pages i and ii,
following page 18 of this Form 10-K are filed herewith or are
incorporated herein by reference.
13
<PAGE> 14
(b) Reports on Form 8-K:
<TABLE>
<CAPTION>
Date of Current Report Subject
---------------------- -------------------------------------------
<S> <C>
October 16, 1997 Press Release announcing Third Quarter 1997
operating results
November 17, 1997 Announcement of an agreement to acquire
Peoples First Corporation
January 15, 1998 Press Release announcing Fourth Quarter 1997
and annual operating results
February 23, 1998 Announcement of an agreement to acquire
Magna Group, Inc.
</TABLE>
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
UNION PLANTERS CORPORATION
(Registrant)
By: /s/ Benjamin W. Rawlins, Jr.
--------------------------------------------------------------
Benjamin W. Rawlins, Jr., Chairman and Chief Executive Officer
Date: March 16, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on the 16th day of March, 1998.
/s/ Benjamin W. Rawlins, Jr. /s/ Jack W. Parker
- ---------------------------------------- ----------------------------------
Benjamin W. Rawlins, Jr. Jack W. Parker
Chairman, Chief Executive Officer, and Executive Vice President and
Director Chief Financial Officer
/s/ Jackson W. Moore /s/ M. Kirk Walters
- ---------------------------------------- ----------------------------------
Jackson W. Moore M. Kirk Walters
President, Chief Operating Officer, and Senior Vice President, Treasurer,
Director and Chief Accounting Officer
/s/ Albert M. Austin
- ---------------------------------------- ----------------------------------
Albert M. Austin Stanley D. Overton
Director Director
/s/ Edgar H. Bailey /s/ Dr. V. Lane Rawlins
- ---------------------------------------- ----------------------------------
Edgar H. Bailey Dr. V. Lane Rawlins
Director Director
/s/ Marvin E. Bruce /s/ Donald F. Schuppe
- ---------------------------------------- ----------------------------------
Marvin E. Bruce Donald F. Schuppe
Director Director
/s/ George W. Bryan
- ---------------------------------------- ----------------------------------
George W. Bryan Mike P. Sturdivant
Director Director
/s/ James E. Harwood /s/ David M. Thomas
- ---------------------------------------- ----------------------------------
James E. Harwood David M. Thomas
Director Director
/s/ Parnell S. Lewis, Jr.
- ---------------------------------------- ----------------------------------
Parnell S. Lewis, Jr. Richard A. Trippeer, Jr.
Director Director
/s/ C. J. Lowrance III /s/ Spence L. Wilson
- ---------------------------------------- ----------------------------------
C. J. Lowrance III Spence L. Wilson
Director Director
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<S> <C>
2(a) Agreement and Plan of Reorganization by and between Magna Bancorp, Inc.
and Union Planters Corporation dated as of May 8, 1997 (incorporated by
reference to Exhibit 2(a) to Union Planters Corporation's Quarterly
Report on Form 10-Q dated March 31, 1997, Commission File No. 1-10160)
2(b) Agreement and Plan of Merger, dated as of August 12, 1997, by and
between Union Planters Corporation and Capital Bancorp (incorporated by
reference to Exhibit 2.1 to Union Planters Corporation's Current Report
on Form 8-K dated August 12, 1997, Commission File No. 1-10160)
2(c) Agreement and Plan of Merger, dated as of November 17, 1997, by and
between Union Planters Holding Corporation and Peoples First
Corporation and joined in by Union Planters Corporation (incorporated
by reference to Exhibit 2.1 to Union Planters Corporation's Current
Report on Form 8-K dated November 17, 1997, Commission File No.
1-10160)
2(d) Agreement and Plan of Merger, dated as of March 8, 1996, by and between
Union Planters Corporation and Leader Financial Corporation
(incorporated by reference to Exhibit 2.1 to Union Planters
Corporation's Current Report on Form 8-K dated March 8, 1996, filed on
March 13, 1996, Commission File No. 1-10160)
3(a) Restated Charter of Incorporation, as most recently amended on February
20, 1997, of Union Planters Corporation (incorporated by reference to
Exhibit 3(a) to Union Planters Corporation's Annual Report on Form 10-K
dated December 31, 1996, Commission File No. 1-10160)
3(b) Amended and Restated Bylaws, as most recently amended on February 20,
1997, of Union Planters Corporation (incorporated by reference to
Exhibit 3(b) to Union Planters Corporation's Annual Report on Form 10-K
dated December 31, 1996, Commission File No. 1-10160)
4(a) Rights Agreement, dated January 19, 1989 between Union Planters
Corporation and Union Planters National Bank, including Form of Rights
Certificate (Exhibit A), and a Form Summary of Rights (Exhibit B)
(incorporated by reference to Exhibit 1 to Union Planters Corporation's
Registration Statement on Form 8-A dated as of January 19, 1989 and on
Form 8-K filed February 1, 1989, Commission File No. 0-6919)
4(b) Indenture dated as of October 1, 1992 between Union Planters
Corporation and The First National Bank of Chicago (Trustee) for
$40,250,000 of 8 1/2% Subordinated Notes due 2002 (2)
4(c) Subordinated Indenture dated as of October 15, 1993 between the
Corporation and The First National Bank of Chicago as Trustee (3)
4(d) Form of Subordinated Debt Security (6.25% Subordinated Notes due 2003)
(4)
4(e) Form of Subordinated Debt Security (6 3/4% Subordinated Notes due 2005)
(5)
4(f) All instruments defining the rights of the holders of the
"Corporation-obligated Mandatorily Redeemable Capital Pass-through
Securities of Subsidiary Trust holding solely a Corporation Guaranteed
Related Subordinated Note issued by Union Planters Corporation,"
including the Indenture dated as of December 12, 1996, the First
Supplemental Indenture, the Amended and Restated Declaration of Trust,
the Capital Securities Guarantee Agreement and the Global Securities
representing the interests of such holders, which instruments are not
being filed herewith in reliance upon Item 601(b)(4)(iii)(A) of
Regulation S-K and the related AGREEMENT PURSUANT TO ITEM
601(b)(4)(iii)(A) OF REGULATION S-K dated March 16, 1998 of Union
Planters Corporation filed with the Commission, a copy of which is
Exhibit 4(g) hereto
</TABLE>
i
<PAGE> 17
<TABLE>
<S> <C>
4(g) Copy of Registrant's AGREEMENT PURSUANT TO ITEM 601(b)(4)(iii)(A) OF
REGULATION S-K dated March 16, 1998 (filed herewith)
10(a) Amended and Restated Employment Agreement between Union Planters
Corporation and Benjamin W. Rawlins, Jr., (incorporated by reference to
Exhibit 10(a) to Union Planters Corporation's Quarterly Report on Form
10-Q dated March 31, 1997, Commission File No. 1-10160)
10(b) Amended and Restated Employment Agreement between Union Planters
Corporation and Jackson W. Moore (incorporated by reference to Exhibit
10(b) to Union Planters Corporation's Quarterly Report on Form 10-Q
dated March 31, 1997, Commission File No. 1-10160)
10(c) Employment Agreement between Union Planters Corporation and J.
Armistead Smith (incorporated by reference to Exhibit 10(b) to the
Annual Report on Form 10-K dated December 31, 1992)
10(d) Deferred Compensation Agreements between Union Planters Corporation and
certain highly compensated officers (specimen copy) (incorporated by
reference to Exhibit 10(g) to the Annual Report on Form 10-K dated
December 31, 1989, filed on March 26, 1990, Commission File No. 0-6919)
10(e) Union Planters Corporation 1983 Stock Incentive Plan as amended January
18, 1990 and approved by shareholders on April 20, 1990 (1)
10(f) Union Planters Corporation 1992 Stock Incentive Plan as Amended and
Restated October 17, 1996 and approved by shareholders April 17, 1997
(incorporated by reference to Exhibit 10(c) to Union Planters
Corporation's Quarterly Report on Form 10-Q dated March 31, 1997
Commission File No. 1-10160)
10(g) Deferred Compensation Agreements between Union Planters Corporation and
Union Planters National Bank and certain outside directors
(incorporated by reference to Exhibit 10(m) to the Annual Report on
Form 10-K dated December 31, 1989 filed on March 26, 1990, Commission
File No. 0-6919)
10(h) Executive Deferred Compensation Agreement between Union Planters
Corporation and certain highly compensated officers (incorporated by
reference to Exhibit 10(n) to the Annual Report on Form 10-K dated
December 31, 1989 filed on March 26, 1990, Commission File No. 0-6919)
10(i) Amendment to Union Planters Corporation Supplemental Executive
Retirement Plan for Executive Officers (incorporated by reference to
Exhibit 10(d) to the Quarterly Report on Form 10-Q dated March 31,
1997, Commission File No. 1-10160)
10(j) Union Planters Corporation Executive Deferred Compensation Plan for
Executives as Amended (incorporated by reference to Exhibit 10 to the
Quarterly Report on Form 10-Q dated September 30, 1997 Commission File
No. 1-10160)
10(k) Stock Option Agreement, dated March 9, 1996, issued by Leader Financial
Corporation to Union Planters Corporation (incorporated by reference to
Exhibit 2.2 to Union Planters Corporation's Current Report on Form 8-K
dated March 8, 1996, filed on March 13, 1996, Commission File No.
1-10160)
10(l) Amendment No. 1 to Union Planters Corporation's Deferred Compensation
Plan for Executives (incorporated by reference to Exhibit 10(e) to the
Quarterly Report on Form 10-Q dated March 31, 1997, Commission file No.
1-10160).
10(m) Union Planters Corporation Supplemental Executive Retirement Plan for
Executive Officers (incorporated by reference to Exhibit 10 to the
Quarterly Report on Form 10-Q dated March 31, 1995, Commission File
No. 1-10160)
11 Computation of Per Share Earnings (incorporated by reference to Note 16
on pages 66 and 67 to the Registrant's 1997 consolidated financial
statements included as Exhibit 13 herein)
13 1997 Annual Report to Security Holders (filed herewith)
21 Subsidiaries of the Registrant (filed herewith)
</TABLE>
ii
<PAGE> 18
23 Consent of Price Waterhouse LLP (filed herewith)
27 Financial Data Schedule (for SEC use only) (filed herewith)
- --------------------
(1) Incorporated by reference to Exhibit 4(a) filed as part of Registration
Statement No. 33-35928, filed July 23, 1990
(2) Incorporated by reference to Exhibit 4 filed as part of Registration
Statement No. 33-52434, filed October 19, 1992
(3) Incorporated by reference to Exhibit 4(a) filed as part of Registration
Statement No. 33-50655, filed October 21, 1993
(4) Incorporated by reference to Exhibit 4(b) filed as part of Registration
Statement No. 33-50655, filed October 21, 1993
(5) Incorporated by reference to Exhibit 4(b) filed as part of Registration
Statement No. 33-63791, filed October 27, 1995
iii
<PAGE> 1
EXHIBIT 4(G)
AGREEMENT PURSUANT TO ITEM 601(b)(4)(iii)
OF REGULATION S-K
The Registrant hereby undertakes and agrees to furnish to the
Securities and Exchange Commission upon request a copy of any instrument
relating to, or defining the rights of the holders of, any long-term debt of the
Registrant and/or its subsidiaries, a copy of which has not been filed in
reliance upon Item 601(b)(4)(iii)(A) of Regulation S-K or which, although
previously filed, shall have become stale in the sense of Item 10(d) of
Regulation S-K or which shall have been disposed of by the Commission pursuant
to its Record Control Schedule. This Agreement and undertaking is intended to be
effective with respect to Registrant's Long-term Debt instruments whether
securities have been issued thereunder or are yet to be issued thereunder.
Date: March 16, 1998
By: /s/ Benjamin W. Rawlins, Jr.
------------------------------------
Benjamin W. Rawlins, Jr.
Chairman and Chief Executive Officer
<PAGE> 1
EXHIBIT 13
1997
ANNUAL
REPORT
UNION
PLANTERS
CORPORATION
LOGO
<PAGE> 2
UNION PLANTERS CORPORATION LOGO
MARKET AREAS SERVED
Alabama, Arkansas, Florida, Illinois, Iowa, Kentucky,
Louisiana, Mississippi, Missouri, Tennessee, and Texas
Figure 1 - The inside front cover of Exhibit 13 (Union Planters Corporation's
Annual Report to Shareholders for 1997) contains a map of the states of Alabama,
Arkansas, Florida, Illinois, Iowa, Kentucky, Louisiana, Mississippi, Missouri,
Tennessee, and Texas showing the counties and parishes where Union Planters
Corporation affiliates and pending acquisitions have banking locations and the
headquarters for Union Planters Corporation.
<PAGE> 3
UNION PLANTERS CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
DECEMBER 31, 1997 1996 % CHANGE
- --------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
FOR THE YEAR
Net earnings $ 208,761 $ 171,474 21.74%
PER COMMON SHARE
Net earnings
Basic $ 2.54 $ 2.13 19.25%
Diluted 2.45 2.05 19.51
Cash dividends 1.495 1.08 38.43
Book value 20.72 19.57 5.88
AT YEAR END
Total assets $18,105,079 $18,330,588 (1.23)%
Earning assets 16,398,087 16,561,265 (0.99)
Loans, net of unearned income 12,658,564 12,578,571 0.64
Allowance for losses on loans 225,389 189,118 19.18
Total deposits 13,440,269 13,514,144 (0.55)
Shareholders' equity 1,746,866 1,618,883 7.91
Common shares outstanding (in thousands) 81,651 78,447 4.08
KEY RATIOS
Return on average assets 1.16% .94%
Return on average common equity 12.54 11.38
Net interest income (taxable-equivalent) as a percentage
of average earning assets 4.79 4.56
Expense ratio 1.54 1.61
Efficiency ratio 54.84 56.94
Allowance for losses on loans as a percentage of loans 1.99 1.72
Nonperforming loans as a percentage of loans .92 .91
Allowance for losses on loans as a percentage of
nonperforming loans 215 188
Nonperforming assets as a percentage of loans and
foreclosed properties 1.13 1.21
Shareholders' equity to total assets 9.65 8.83
Leverage ratio 10.48 9.50
Tier 1 capital to risk-weighted assets 15.51 14.92
Total capital to risk-weighted assets 18.12 17.60
- --------------------------------------------------------------------------------------------------
</TABLE>
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Letter to Shareholders...................................... 2
Economic Overview of Markets Served......................... 4
Selected Financial Data..................................... 8
Management's Discussion and Analysis of Results of
Operations and Financial Condition........................ 9
Financial Tables............................................ 26
Selected Quarterly Data..................................... 36
Banks and Communities Served................................ 39
Report of Management........................................ 40
Report of Independent Accountants........................... 41
Consolidated Financial Statements........................... 42
Notes to Consolidated Financial Statements.................. 46
Executive Officers and Board of Directors................... 72
</TABLE>
1
<PAGE> 4
TO OUR SHAREHOLDERS
We are pleased to present this 1997 Annual Report. It was a busy and
productive year for the Company. We increased our presence and market share
through in-market mergers in Tennessee, Mississippi, and Louisiana, and entered
the state of Florida through a very attractive franchise in Miami. Our core
earnings and financial performance remain excellent. Through the first three
quarters of 1997, we exceeded our long-term goal of top quartile performances in
both return on assets and return on equity. These comments should be taken
together with the financial statements and management's discussion and analysis
on the following pages.
FINANCIAL RESULTS
Net earnings for the year were $208.8 million or $2.45 per diluted share
compared to net earnings of $171.5 million or $2.05 per diluted share in 1996.
The results reflect the acquisitions of five financial institutions during 1997
and include significant merger-related and other charges in both years. They
understate both our current core and future earnings capacity given the
significant charges and the fact that there was no opportunity to fully
integrate the fourth quarter acquisitions. After adjusting for the fourth
quarter charges, we finished the year on budget.
Net interest income for the year was $770.4 million compared to $744.9
million in 1996. The increase is attributable to loan growth funded by
maturities and sales of lower yielding investment securities and reductions in
short-term borrowings. The net interest margin for the year was 4.79% compared
to 4.56% in 1996. We were pleased with this 23 basis point improvement and with
the level of our margin.
The provision for losses on loans for 1997 was $113.6 million compared to
$68.9 million for 1996. The increase relates primarily to the fourth quarter
acquisitions and the credit card portfolio.
Noninterest income for the year increased to $361.6 million versus $320.5
million in 1996. Increases were in service charges, bank cards, brokerage,
annuities, mortgage loan sales, and gain on sale of branches. Mortgage loan
prepayments at higher than expected levels caused a decline in mortgage
servicing income. Noninterest expense for the year was $697.7 million compared
to $731.8 million in 1996. Included in 1997 were $46.2 million of merger-related
charges and $16.7 million of charges related to the consolidation of most of the
Corporation's banking subsidiaries into our lead bank, Union Planters Bank, N.A.
FRANCHISE GROWTH
Growth of our banking franchise continued in 1997 with the addition of the
$1.2 billion Hattiesburg, Mississippi-based Magna Bancorp, Inc. (Magna) and the
$2.2 billion Miami, Florida-based Capital Bancorp and several smaller in-market
acquisitions. With a very attractive deposit base and a high-yield loan product,
Magna has been a very strong earnings performer. Geographically, Magna provides
us a presence in Mobile, Alabama and greatly strengthens our presence throughout
the southeast quadrant of Mississippi and along the Gulf Coast. Capital Bancorp
gives us a presence in the fast growing Florida market, a Miami-based platform
for trade finance activities, and a majority ownership in a highly profitable,
fast growing commercial finance subsidiary, Capital Factors, Inc. Other mergers
were all in-market last year and included the Whiteville Bank in Whiteville,
Tennessee; Selmer Bank and Trust Company in Selmer, Tennessee; and Acadian Bank
in Thibodaux, Louisiana. On January 1, 1998, the Corporation completed the
acquisition of First Savings Bank in Mt. Vernon, Missouri.
Union Planters Corporation ended the year with $18.1 billion in total
assets, an increase of 19% over the originally reported year end 1996 total
assets of $15.2 billion. We now serve customers in eight states with 514 banking
locations and 651 automated teller machines.
At year end the Corporation ranked 41st among the nation's 50 largest bank
holding companies. Our breakdown of loans and deposits by state as of December
31, 1997 is as follows:
<TABLE>
<CAPTION>
STATE LOANS DEPOSITS
- --------------------- ------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Tennessee............ $6,307 $6,696
Mississippi.......... 2,407 2,931
Florida.............. 1,618 1,290
Missouri............. 884 1,022
Arkansas............. 520 603
Louisiana............ 509 605
Alabama.............. 335 417
Kentucky............. 88 105
</TABLE>
PENDING ACQUISITIONS
The Corporation currently has ten pending acquisitions, the largest two
being the $7.1 bil-
2
<PAGE> 5
lion Magna Group, Inc. (MGR), headquartered in St. Louis, Missouri and the $1.5
billion Peoples First Corporation in Paducah, Kentucky. MGR will strengthen our
presence in the state of Missouri where at year end we had $1 billion in
deposits, and give us the third largest market share in metropolitan St. Louis.
Peoples has the number one deposit market share in Paducah, Kentucky with 40%,
and fits very nicely with our strong presence in northwest Tennessee and
southeast Missouri. We will continue to look for acquisition opportunities to
build market share in those areas where we operate.
STRONG BALANCE SHEET
We remain largely a core-deposit funded organization. Leverage is minimal
when compared with our peer group. Credit quality remains good. On a larger loan
portfolio, net charge-offs for the year were $80.6 million compared to $64.7
million in 1996. At December 31, 1997 the allowance for losses on loans was
$225.4 million or 1.99% of loans and 215% of nonperforming loans.
Shareholders' equity at year end was a record $1.7 billion and represented
9.7% of total assets. Tier I regulatory capital was $1.9 billion giving us a
leverage ratio of 10.5%, a Tier I risk-based capital ratio of 15.5%, and a total
risk-based capital ratio of 18.1%. These ratios are all substantially in excess
of required regulatory minimums.
S & P MID CAP INDEX
In April 1997 the Corporation was promoted to the Standard & Poor's Mid Cap
400 Index. The S & P indices are widely considered key barometers of stock
market activity and performance benchmarks for money managers. Our current
market capitalization is approximately $5 billion and is the largest of any
Tennessee-headquartered bank holding company and one of the largest in the
Southeastern region.
QUARTERLY DIVIDEND INCREASE
Reflecting our strong capital position and confidence in core earnings, our
quarterly common stock dividend was increased three times in 1997 and is
currently $.50 per share, an increase of 56% from a year ago. Our dividend
policy targets a 40 to 60% earnings payout ratio.
DIRECTORS
Following the completion of our acquisition of Magna Bancorp, Inc. in the
fourth quarter, David M. Thomas, former President and Director of Magnolia
Federal Bank for Savings, joined the Corporation's Board of Directors and we
welcome his experience.
We want to express our sincere appreciation for the service of Mike
Sturdivant upon his retirement from our Board. Mr. Sturdivant joined our Board
in 1987 as a result of our affiliation with the former United Southern Bank in
Clarksdale, Mississippi. His maternal grandfather, Edward P. Peacock, was
President of Union Planters National Bank from 1930 to 1932 during the
Depression. Edgar H. Bailey is also retiring this year. Mr. Bailey joined our
Board in 1996 following our affiliation with Leader Financial Corporation.
Leader was headquartered in Memphis and the largest thrift institution in the
state of Tennessee. We want to thank Mr. Bailey for his years of service to
Leader and for his advice and counsel as we integrated our two organizations.
OUTLOOK
With the change in the national banking laws and following the lead of our
peers, we have merged the majority of our banking subsidiaries with Union
Planters Bank, N.A. This change will not affect our community banking focus and
officer leadership at the community level and will allow us to achieve the
operating efficiencies from combining certain back office support functions.
Loans are expected to grow 5 to 8% in our markets and we have recently
introduced a number of new insurance products that will allow us to leverage our
convenient retail branch locations and increase noninterest income. We move into
1998 with solid core earnings, very sound loan loss reserves, and one of the
strongest capital bases in the country.
We welcome all our new shareholders and invite you to participate in our
dividend reinvestment program.
Thank you for your continued support.
Yours very truly,
/s/ BENJAMIN W. RAWLINS, JR.
Benjamin W. Rawlins, Jr.
Chairman and Chief Executive Officer
3
<PAGE> 6
ECONOMIC OVERVIEW OF MARKETS SERVED
In the world of financial services, we are all too accustomed to outside
forces -- non-bank competition, interest rates, shareholder expectations,
customer demands . . . the list goes on. These forces are behind the remarkable
expansion that Union Planters has experienced since the mid-1980s, and continues
to enjoy today -- on the edge of a new century. In responding to outside forces
we become a force of our own, able to provide more opportunities for our
employees, stellar service to our customers, and attractive returns for our
shareholders. One of those outside forces is the economic health of our markets.
Union Planters serves customers in an eight-state region across the southeastern
United States. This region figures prominently in the nation's transport and
shipping, manufacturing, agriculture, and food processing industries. The
development and growth taking place in each of our market states continues to
affect our organization in positive ways. A breakdown of each Union Planters
market and that state's primary industries and other demographic data follows.
Key components of the regional economy include manufacturing, wholesale and
retail trade, a rapidly expanding service sector, mining and petroleum/natural
gas extraction, tourism and entertainment, and diverse agricultural production.
Generally, the region can be characterized as having lower than average taxes, a
low to moderate cost of living, low population density, a high overall quality
of life, and a mild climate. These factors, combined with competitive corporate
tax structures and government initiatives, have attracted many industries to
southern locations in the last decade. Manufacturing comprises a larger than
average part of the economy for most states in the region. The economic
components for each of the states and key performance measures are shown below:
REAL GROSS STATE PRODUCT BY COMPONENT
<TABLE>
<CAPTION>
TN MS FL MO LA AR AL KY
--- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Agriculture............................... 1% 3% 2% 2% 1% 5% 2% 3%
Construction.............................. 4 4 5 4 4 4 4 4
Financial................................. 13 11 22 15 13 11 12 11
Government................................ 11 14 12 11 11 11 15 13
Manufacturing............................. 24 23 9 21 16 24 23 26
Mining.................................... -- 1 -- -- 12 1 2 4
Services.................................. 18 15 21 18 17 14 15 14
Trade..................................... 20 16 19 18 15 17 17 15
Transportation, Communication, and
Utilities............................... 9 13 10 11 11 13 10 10
</TABLE>
KEY PERFORMANCE MEASURES
<TABLE>
<CAPTION>
GROSS STATE
EMPLOYMENT RETAIL SALES STATE PRODUCT UNEMPLOYMENT
ANNUAL GROWTH ANNUAL GROWTH ANNUAL GROWTH RATE AS OF
1992-1997 1992-1997 1992-1997 DECEMBER, 1997
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Tennessee..................... 2.65% 7.04% 3.74% 5.0%
Mississippi................... 1.80 5.41 2.82 5.0
Florida....................... 2.48 7.45 3.86 4.7
Missouri...................... 1.95 7.37 3.61 4.0
Louisiana..................... 1.29 5.27 3.29 5.7
Arkansas...................... 2.06 7.64 3.66 5.0
Alabama....................... 2.01 6.65 2.84 4.5
Kentucky...................... 2.05 6.45 3.64 4.6
UPC States.................... 2.04 6.66 3.43 4.8
All States.................... 1.82 5.66 2.98 4.7
</TABLE>
TENNESSEE
Tennessee represents the largest customer base. A population of about 5.4
million ranks Tennessee 17th in the U.S. Manufacturing employs about 19% of the
2.6 million workers in the state, the highest percentage of any business sector,
but a decline from 27% just twelve years ago. Transportation equipment and
machinery, metal products, and printing/publishing contribute significantly to
the
4
<PAGE> 7
manufacturing sector. Retail trade and a large service sector also measure
heavily in the state's economy. Some plant layoffs took place in the industrial
sector during 1997, and as a result, the remarkable growth experienced by the
state for the last several years slowed in early 1997. Bright prospects in the
transportation equipment manufacturing sector partially offset these events.
Auto manufacturers have moved many facilities to Tennessee in response to lower
costs and tax incentives. Auto body parts and components made in Tennessee are
in demand for local assembly plants. Additionally, exports of automobile parts
to Canada, Mexico, and Japan surged beginning in 1996.
Nashville, a fast-growing manufacturing and service center, is the largest
metropolitan area in Tennessee with about 1.1 million people or 21% of the
state's population. The Nashville Health Care Council, founded in 1995, has
helped Nashville attract many major health care players including PhyCor,
Columbia Healthcare, Quorum Health Group, and Vanderbilt University Health
Center.
Memphis, Union Planters corporate headquarters, is the second largest
metropolitan area in the state. Only slightly smaller than Nashville, Memphis is
less dependent on manufacturing and services. Centralized in the Southern U.S.
with a Mississippi riverport and mild year-round climate, the city has developed
into an important distribution center. Federal Express, the area's largest
employer, will soon finish construction of a 501,000 square foot computer
development center. UPS is planning expansion of operations into an 84 acre
facility here.
MISSISSIPPI
Mississippi ranks second in total customers deposits and loans. With a
population of about 2.7 million, Mississippi ranks 31st among U.S. states.
Jackson, Hattiesburg, and Biloxi/Gulfport are the states population centers
along with the Memphis area in Northern Mississippi which includes the fast
growing communities of Southaven and Olive Branch. Traditionally, the state has
depended heavily on manufacturing and agriculture. Since approval of riverboat
gambling in 1992, gaming and tourism have contributed to rapid growth of nearly
40% in the service sector. Growth in Mississippi's gaming industry will likely
slow as market saturation sets in and competition from surrounding states, most
notably Louisiana, lures customers away. Employment gains stimulated by the
gaming sector and reinvestment of increased tax revenue in infrastructure should
positively impact the state. Mississippi is still working to overcome the lowest
per capita income, one of the lowest educational attainment rates and highest
public assistance rates in the nation.
Though not as dominant as in the past, manufacturing still comprises the
largest portion of gross state product (GSP) at about 23%. Given the large
agricultural and forested areas present, it is no surprise that food, food
products, lumber, wood products, and furniture dominate the manufacturing base.
Apparel and electrical machinery are important here as well. Migration of
manufacturing abroad due to cheaper labor and falling trade barriers has become
a serious concern for manufacturing here as it has elsewhere. Other industries
should fare better. Food processing and wood products in particular should not
experience great international competition.
FLORIDA
Union Planters entered the Miami, Florida market in 1997 with the
acquisition of Capital Bancorp. Florida is the most populous of Union Planters'
market states with 14.4 million residents (fourth among U.S. states). The
population of the Miami area is about 2.1 million, making it 24th among U.S.
cities and second to St. Louis in size among Union Planters metropolitan areas.
Miami is an important hub of international trade, especially with Latin America
and the Caribbean. Growth in trade has been remarkable, from estimated levels of
about $1 billion in the 1970s to $34 billion in 1996. Indications are that
strong growth continued through 1997. About 350 multinational corporations have
operations in the area. Tourism is also important with over half of all tourists
visiting from foreign countries, which contributes further to the city's
international nature.
MISSOURI
Missouri is the 16th largest state with a total population of 5.4 million
and ranks fourth in deposits and loans among Union Planters' states. The primary
portions of the state served are the southern and eastern areas. This area is
more industrial and less agricultural than the northern and western portions.
Retail trade, services, and manufacturing are the largest three components of
the state's economy.
5
<PAGE> 8
While manufacturing employs a slightly larger than average percentage of the
state's work force (15.6%), the service sector has accounted for over 40% of job
creation in the state since 1992. Manufacturing employment was down by .11%
during this same period. Overall growth for the state has been slow but steady.
Since 1992, GSP has increased at a rate of 3.61% and employment grew at 1.95%,
both above the national averages of 2.98% and 1.82%, respectively. One
potentially growth-limiting factor is labor availability. Low unemployment and
.8% five year population growth have resulted in tight labor markets.
St. Louis is the largest metropolitan area in the state and has the highest
population of any Union Planters' market at 2.56 million. Durable goods
manufacturing, health care services, retail trade, and transportation form a
large part of the area's economic base. Business developments in 1997 have been
more positive than expected for the area; Ralston Purina has chosen to maintain
offices here, ending a search for a new site. The Boeing/McDonnell Douglas
merger approved in July is expected to boost military contract business, and
Ford announced plans to shift production of the Explorer to the Aerostar plant
in the suburb of Hazelwood, replacing discontinued mini-van production. Annual
employment growth was .9% from 1990 to 1994 but subsequently has jumped to 2.7%.
Fortune magazine recently ranked St. Louis sixth among U.S. cities in a survey
of best cities in which to balance work and family life.
LOUISIANA
Louisiana is the 22nd most populous state at about 4.4 million people and
ranks fifth in assets and deposits among Union Planters states. Baton Rouge, the
state's capital, is Union Planters' main market in the state. Five year growth
of GSP has been above the national rate, but employment growth has been below
the national average. The petrochemical industry is important to the area but
the state government, Louisiana State University, and a growing service economy
buffer the industry's effect on the local economy.
Additionally, dependence on the petroleum and natural gas industry has
declined since the "boom" days. Mining and drilling employ about 2.8% of the
states workforce and chemical manufacturing employs another 1.6%. For
comparison, in 1981 mining employment alone accounted for 6.1% of payrolls. Job
growth has been above the national average for the last two years due to growth
in manufacturing and service economies and to significant construction projects.
The Greater Baton Rouge Airport District expansion is a $100 million project.
Exxon is undergoing a $184 million project and many smaller projects were
announced in 1997. Increased Latin American exports should contribute to growth
at the Port of Baton Rouge, already the nation's fifth largest.
ARKANSAS
Arkansas is Union Planters' sixth largest deposit and loan market and ranks
33rd in population among U.S. states at about 2.53 million. Manufacturing is
even more dominant here than in Mississippi at 24% of GSP and 23.1% of total
employment. Like Mississippi, there are concentrations in the food and food
products and lumber and wood products industries. Poultry processing is the
state's largest manufacturing industry with poultry giant Tyson Foods
headquartered in Arkansas. Timber and wood products is the second largest
manufacturing industry. Over half the state's land is forested, much of it with
harvestable pine. Electrical machinery, metals, and leather goods also represent
large portions of the manufacturing base.
Employment growth in Arkansas has exceeded the overall U.S. for many years
with state unemployment dropping from 8.77% in 1986 to 5.0% in December 1997.
Weak population growth and skilled labor shortages are two variables that may
limit growth in Arkansas at least for the short term. Construction and other
skilled labor saw increases in the wake of severe tornadoes that swept through
the state in the spring of 1997. West Memphis, part of the Memphis metropolitan
area, and Jonesboro constitute the most significant population centers of Union
Planters' Arkansas markets, with significant portions of the more rural part of
the state balancing the bank's market there.
ALABAMA
Alabama ranks seventh largest in terms of deposits among Union Planters'
market states and is the 23rd most populous in the U.S. with 4.3 million
residents. The major Union Planters' markets in the
6
<PAGE> 9
state are in the northern third and the southernmost regions. Manufacturing
employs over 20% of the state's workers with concentrations in apparel,
textiles, wood products, food products, and non-electrical machinery. Recent
years have seen the emergence of the importance of transportation equipment, and
both foreign and domestic manufacturers continue to move facilities here. Five
year employment growth has exceeded the national average with the service
economy increasing its share. Since 1994 there has been some weakness in the
state's manufacturing sector and international pressures continue to threaten
the textile/apparel industry. Recent months have brought good news, especially
in the Mobile area with Mitsubishi Materials opening a large plant and local
expansions announced by International Paper, Mobile Aerospace, and several
chemical companies. Recently Mobile ranked 11th among U.S. cities in a Time
Magazine feature on "hottest places" for job opportunities.
KENTUCKY
With 3.9 million residents, Kentucky is the 24th most populous U.S. state
and eighth of Union Planters' markets when ranked by deposits and loans. Though
fairly diverse, the state's economy has above average concentrations in
manufacturing and agricultural employment. GSP grew at an annual rate of about
3.64% for the last five years, well above the national average. Employment
growth of 2.05% for five years also compares favorably to the national average.
Unlike most markets, manufacturing growth has contributed to job creation in
Kentucky with five year growth of about 1.5%. Since manufacturing jobs are
typically higher paying, they are likely to impact future growth more favorably.
Location and government are key to the areas attractiveness; low labor costs and
low business taxes along with high quality of life and low housing costs have
made Kentucky attractive to companies relocating to the South.
SUMMARY
Overall economic performance for the market area has been slightly stronger
than the U.S. for the last few years and should remain so. Manufacturing will
continue to play the most important role for this region. Foreign competition is
a concern for this sector, particularly the textiles and apparel industries.
Fortunately, industries key to the region, including food processing, wood and
wood products, and transportation equipment have more favorable outlooks than
manufacturing as a whole. Factors that have made the region attractive for
industries seeking to relocate are still in place and improvements in
infrastructure should remove some of the previous barriers to growth. The region
is in position to increase its important role as a transport and shipping center
and benefit from increased commerce. Additionally, recent acquisitions have
placed Union Planters in a position to benefit from international trade,
especially with Latin American and Caribbean trading partners. Overall, the
region should continue to provide a solid banking environment with strong growth
potential.
James K. Plunkett
Senior Vice President
Funds Management Division
7
<PAGE> 10
UNION PLANTERS CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, (1)
-------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income....................................... $ 770,385 $ 744,852 $ 669,451 $ 627,439 $ 558,036
Provision for losses on loans............................. 113,633 68,948 33,917 15,989 35,235
Investment securities gains (losses)...................... 2,104 4,099 1,433 (21,302) 6,686
Other noninterest income.................................. 359,506 316,403 292,277 237,129 228,996
Noninterest expense....................................... 697,704 731,817 607,189 634,965 550,045
----------- ----------- ----------- ----------- -----------
Earnings before income taxes, extraordinary item, and
accounting changes...................................... 320,658 264,589 322,055 192,312 208,438
Applicable income taxes................................... 111,897 93,115 110,799 63,058 66,570
----------- ----------- ----------- ----------- -----------
Earnings before extraordinary item and accounting
changes................................................. 208,761 171,474 211,256 129,254 141,868
Extraordinary item and accounting changes, net of taxes... -- -- -- -- 4,505
----------- ----------- ----------- ----------- -----------
Net earnings.............................................. $ 208,761 $ 171,474 $ 211,256 $ 129,254 $ 146,373
=========== =========== =========== =========== ===========
PER COMMON SHARE DATA(2)
Basic
Earnings before extraordinary item and accounting
changes............................................... $ 2.54 $ 2.13 $ 2.79 $ 1.67 $ 2.19
Net earnings............................................ 2.54 2.13 2.79 1.67 2.27
Diluted
Earnings before extraordinary item and accounting
changes............................................... 2.45 2.05 2.66 1.63 2.13
Net earnings............................................ 2.45 2.05 2.66 1.63 2.21
Cash dividends............................................ 1.495 1.08 .98 .88 .72
Book value................................................ 20.72 19.57 18.34 15.28 14.50
BALANCE SHEET DATA (AT PERIOD END)
Total assets.............................................. $18,105,079 $18,330,588 $17,182,861 $15,893,162 $14,180,524
Loans, net of unearned income............................. 12,658,564 12,578,571 10,917,307 10,074,458 8,077,152
Allowance for losses on loans............................. 225,389 189,118 179,968 174,604 172,330
Investment securities..................................... 3,247,680 3,387,217 3,970,036 4,016,506 4,124,679
Total deposits............................................ 13,440,269 13,514,144 13,047,488 12,506,212 11,732,707
Short-term borrowings..................................... 831,627 961,051 974,416 887,074 392,980
Long-term debt(3)
Parent company.......................................... 373,746 373,459 214,758 114,790 114,729
Subsidiary banks........................................ 1,176,158 1,332,534 1,087,273 819,982 481,193
Total shareholders' equity................................ 1,746,866 1,618,883 1,450,546 1,202,686 1,111,158
Average assets............................................ 17,991,160 18,202,355 16,263,164 15,472,568 13,823,185
Average shareholders' equity.............................. 1,690,992 1,533,348 1,334,995 1,226,852 973,087
Average shares outstanding (in thousands)(2)
Basic................................................... 80,336 77,240 72,512 71,678 56,169
Diluted................................................. 85,195 83,542 78,798 77,579 60,832
PROFITABILITY AND CAPITAL RATIOS
Return on average assets.................................. 1.16% .94% 1.30% .84% 1.06%
Return on average common equity........................... 12.54 11.38 16.56 10.74 15.88
Net interest income (taxable-equivalent)/average earning
assets(4)............................................... 4.79 4.56 4.60 4.56 4.58
Loans/deposits............................................ 94.18 93.08 83.67 80.56 68.84
Common and preferred dividend payout ratio................ 54.96 44.57 29.25 35.03 24.42
Equity/assets (period end)................................ 9.65 8.83 8.44 7.57 7.84
Average shareholders' equity/average total assets......... 9.40 8.42 8.21 7.93 7.04
Leverage ratio............................................ 10.48 9.50 8.11 7.56 7.73
Tier 1 capital/risk-weighted assets....................... 15.51 14.92 13.28 12.58 13.65
Total capital/risk-weighted assets........................ 18.12 17.60 16.21 14.67 15.92
CREDIT QUALITY RATIOS(5)
Allowance/period end loans................................ 1.99 1.72 1.82 1.87 2.27
Nonperforming loans/total loans........................... .92 .91 .85 .74 1.18
Allowance/nonperforming loans............................. 215 188 213 252 193
Nonperforming assets/loans and foreclosed properties...... 1.13 1.21 1.09 1.08 1.76
Provision/average loans................................... 1.01 .65 .35 .19 .47
Net charge-offs/average loans............................. .72 .61 .32 .27 .34
</TABLE>
- ---------------
(1) Reference is made to "Basis of Presentation" in Note 1 to the Corporation's
consolidated financial statements.
(2) Share and per share amounts have been retroactively restated for significant
acquisitions accounted for as poolings of interests and to reflect the
change in presentation of EPS as discussed in Note 16 to the consolidated
financial statements.
(3) Long-term debt includes Medium-Term Bank Notes, Federal Home Loan Bank
(FHLB) advances, Trust Preferred Securities, variable rate asset-backed
certificates, subordinated notes and debentures, obligations under capital
leases, mortgage indebtedness, and notes payable with maturities greater
than one year.
(4) Average balances and calculations exclude the impact of the net unrealized
gains or losses on available for sale securities.
(5) FHA/VA government-insured/guaranteed loans have been excluded, since they
represent minimal credit risk to the Corporation. See Tables 9 and 10 and
the "Loans" discussion which follow.
8
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
This section of the Annual Report provides a narrative discussion and
analysis of the major trends affecting the results of operations and financial
condition of Union Planters Corporation (the Corporation or Union Planters). The
discussion should be read with the consolidated financial statements and
accompanying notes beginning on page 40 and the financial tables at the end of
this discussion.
THE COMPANY
Union Planters is an $18.1-billion, multi-state bank holding company whose
primary business is banking. The Corporation is the largest bank holding company
headquartered in Tennessee and is one of the fifty largest bank holding
companies headquartered in the United States. Union Planters Bank, National
Association (Union Planters Bank or UPB), headquartered in Memphis, Tennessee,
is the Corporation's largest subsidiary. The principal banking markets of the
Corporation are in Tennessee, Mississippi, Florida, Missouri, Arkansas,
Louisiana, Alabama, and Kentucky. With the completion of ten pending
acquisitions, the Corporation will expand in existing markets in Missouri,
Kentucky, Florida, Tennessee, and Alabama and expand into new markets in
Illinois, Iowa, and Texas (see the "Acquisitions" discussion). The Corporation's
existing market areas are served by 514 banking offices and 651 ATMs. The map on
the inside front cover of this report, Table 15, and the listing of Communities
Served on page 39 provide information regarding the size, locations, and markets
served by the Corporation's banking subsidiaries. A majority-owned subsidiary of
the Corporation's Florida banking subsidiary, which was acquired December 31,
1997, Capital Factors, Inc. (Capital Factors), provides receivable-based
commercial financing and related fee-based credit, collection, and management
information services through four regional offices located in New York, New
York; Los Angeles, California; Charlotte, North Carolina; and its headquarters
in South Florida (Boca Raton, Florida) and an asset-based lending office in
Atlanta, Georgia.
As part of the Corporation's banking services, its subsidiaries are engaged
in factoring operations; mortgage origination and servicing; investment
management and trust services; the issuance of credit and debit cards; the
origination, packaging, and securitization of loans, primarily the government-
guaranteed portions of Small Business Administration (SBA) loans; the purchase
of delinquent FHA/VA government-insured/guaranteed loans from third parties and
GNMA pools serviced for others; full-service and discount brokerage services;
commercial finance business; trade-finance activities; and the sale of
bank-eligible insurance products and services.
OVERVIEW
Net earnings for 1997 were $208.8 million, a $37.3 million, or 22%,
increase from $171.5 million in 1996. Basic and diluted earnings per share for
the year were $2.54 and $2.45, respectively, which were both increases of 19%
over $2.13 and $2.05, respectively, for 1996. Return on average assets (ROA) was
1.16% in 1997 compared to .94% in 1996. Return on average common equity (ROE)
increased to 12.54% in 1997 from 11.38% in 1996.
Significant pretax items which adversely impacted 1997 results include the
following: (i) $46.2 million of merger-related charges; (ii) $16.7 million of
charges related to the consolidation of substantially all of the Corporation's
banking subsidiaries into its lead bank, Union Planters Bank; and (iii) a $44.7
million increase in the provision for losses on loans related primarily to
acquisitions and the credit card portfolio. These items were partially offset by
gains on the sale of branches of $15.8 million and investment securities gains
of $2.1 million. Reference is made to Table 1 which presents a comparison of the
Corporation's results for the past five years identifying significant items
impacting net earnings. Excluding the significant items impacting 1997 results,
earnings would have been approximately $241.7 million.
Results for 1996 were similarly impacted. The significant pretax charges
included the following items: (i) $52.8 million of merger-related charges; (ii)
$28.2 million related to special legislation which required financial
institutions to pay a one-time assessment on deposits insured by the Savings
Association Insurance Fund (SAIF); (iii) $19.8 million of provisions for losses
on FHA/VA foreclosure claims of an acquired entity; and (iv) $19.4 million of
write-offs of intangibles. These items were
9
<PAGE> 12
partially offset by gains on the sale of branches and other selected assets of
$7.2 million, investment securities gains of $4.1 million, and a one-time
court-awarded trust fee of $1.3 million. Excluding these significant items,
earnings for 1996 would have been approximately $241.8 million.
A more detailed discussion and analysis of the 1997 results of operations
and financial condition follows.
FORWARD-LOOKING INFORMATION
Certain of the information included in this discussion constitutes
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 Annual Report contains forward-looking statements
with respect to the effects of projected changes in interest rates; 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;
estimated charges related to pending acquisitions; estimated cost savings
related to the integration of completed acquisitions and the consolidation of
banking subsidiaries; and Year-2000 data systems compliance issues. When used in
this discussion, the words "anticipate," "project," "expect," "believe," 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 and projections 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 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; the relative strengths and weakness in the consumer
and commercial credit sectors 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 acquisitions, pending acquisitions, and the consolidation of
subsidiary banks; 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 federal legislation impacting the
operations of the Corporation; and the Corporation's ability to expand into new
markets and to maintain profit margins in the face of pricing pressure.
Moreover, the outcome of litigation is inherently uncertain and depends on
judicial interpretations of law, the exercise of judicial discretion and the
findings of judges and juries.
ACQUISITIONS
Acquisitions have been, and are expected to continue to be a significant
part of the Corporation's growth and have enhanced the market positions of the
Corporation in the various states which it serves. The Corporation has completed
41 acquisitions over the past five years adding approximately $14.5 billion in
total assets. Subsequent to December 31, 1997, the Corporation completed a
$373.8 million acquisition of a savings and loan holding company and as of March
3, 1998, the Corporation had ten pending acquisitions which, if consummated,
would add approximately $10.4 billion in total assets (see Note 2 to the
consolidated financial statements). The tables below provide a summary of the
acquisitions completed over the last three years and a summary of the pending
acquisitions.
10
<PAGE> 13
UNION PLANTERS CORPORATION
ACQUISITIONS COMPLETED SINCE JANUARY 1, 1995
<TABLE>
<CAPTION>
INSTITUTION ACQUIRED DATE STATE ASSETS CONSIDERATION
- --------------------------------------- ----- ------------ ---------- --------------------------------------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
First State Bancorporation, Inc. 7/95 Tennessee $ 116.2 .4 million shares of Series E preferred
Planters Bank and Trust Company 9/95 Arkansas 59.0 .3 million shares of common stock
Capital Bancorporation, Inc. 12/95 Missouri 1,105.1 4.1 million shares of common stock
First Bancshares of Eastern Arkansas,
Inc. 1/96 Arkansas 64.1 $10.9 million cash
First Bancshares of N. E. Arkansas,
Inc. 1/96 Arkansas 65.4 $ 9.2 million cash
Leader Financial Corporation 10/96 Tennessee 3,410.9 15.3 million shares of common stock
Franklin Financial Group, Inc. 10/96 Tennessee 137.1 .7 million shares of common stock
Valley Federal Savings Bank 10/96 Alabama 122.1 .4 million shares of common stock
BancAlabama, Inc. 10/96 Alabama 97.9 .4 million shares of common stock
Financial Bancshares, Inc. 12/96 Missouri 325.9 1.2 million shares of common stock
PFIC Corporation 2/97 Tennessee 4.2 .1 million shares of common stock
SBT Bancshares, Inc. 10/97 Tennessee 98.8 .6 million shares of common stock
Citizens of Hardeman County Financial
Services, Inc. 10/97 Tennessee 62.0 .2 million shares of common stock
Magna Bancorp, Inc. 11/97 Mississippi 1,190.5 7.1 million shares of common stock
First Acadian Bancshares, Inc. 12/97 Louisiana 81.2 .3 million shares of common stock
Capital Bancorp 12/97 Florida 2,155.6 6.5 million shares of common stock
Sho-Me Financial Corp. 1/98 Missouri 373.8 1.2 million shares of common stock
--------
Total assets of completed transactions $9,469.8
========
<CAPTION>
ACCOUNTING
INSTITUTION ACQUIRED METHOD
- --------------------------------------- ----------
<S> <C>
First State Bancorporation, Inc. Purchase
Planters Bank and Trust Company Pooling
Capital Bancorporation, Inc. Pooling
First Bancshares of Eastern Arkansas,
Inc. Purchase
First Bancshares of N. E. Arkansas,
Inc. Purchase
Leader Financial Corporation Pooling
Franklin Financial Group, Inc. Pooling
Valley Federal Savings Bank Pooling
BancAlabama, Inc. Pooling
Financial Bancshares, Inc. Pooling
PFIC Corporation Purchase
SBT Bancshares, Inc. Pooling
Citizens of Hardeman County Financial
Services, Inc. Pooling
Magna Bancorp, Inc. Pooling
First Acadian Bancshares, Inc. Pooling
Capital Bancorp Pooling
Sho-Me Financial Corp. Purchase
Total assets of completed trans
</TABLE>
UNION PLANTERS CORPORATION
SUMMARY OF PENDING ACQUISITIONS AS OF MARCH 3, 1998
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1997
------------------------------------------------------------
ALL OTHER TOTAL
MAGNA PEOPLES FIRST PENDING PENDING
GROUP, INC.(1) CORPORATION ACQUISITIONS ACQUISITIONS
-------------- ------------- ------------ ------------
(DOLLARS AND SHARES IN MILLIONS)
<S> <C> <C> <C> <C>
Loans........................................ $4,484 $1,104 $1,164 $ 6,752
Allowance for losses on loans................ 59 16 14 89
Investment securities........................ 1,989 316 444 2,749
Total assets................................. 7,075 1,501 1,810 10,386
Total deposits............................... 5,436 1,177 1,512 8,125
Shareholders' equity......................... 626 155 203 984
Shareholders' equity to total assets......... 8.85% 10.31% 11.22% 9.47%
Net earnings................................. $ 73 $ 16 $ 22 $ 111
Approximate common shares to be issued....... 35 6 8 49
</TABLE>
- ---------------
(1) Does not include a pending acquisition in Illinois with total assets of $382
million.
Management's philosophy has been to provide additional diversification of
the revenue sources and earnings of the Corporation through the acquisition of
well-managed financial institutions. The strategy generally targets in-market
institutions, institutions in contiguous markets, institutions having
significant local market share, and institutions which would enhance the
Corporation's product lines.
Historically and where practical, the Corporation has permitted an acquired
institution to remain as a separate entity and to retain its local board of
directors and officers. With the changing environment in the banking industry,
particularly changes in the laws which generally permit banks headquartered in
different states to merge, management made the decision in 1997 to merge
substantially all of its banking subsidiaries into its lead bank, Union Planters
Bank, effective January 1, 1998 (see "Charter Consolidation").
With the exception of Texas, all of the states in which the Corporation's
banking subsidiaries are headquartered now permit bank mergers which result in
interstate branching. Therefore, with the exception of Merchants Bancshares,
Inc., a pending acquisition headquartered in Houston, Texas, it is legally
permissible for the Corporation to merge banking subsidiaries into Union
Planters Bank. However, under special circumstances management may deem it
advisable to maintain certain acquired institutions as separate entities.
11
<PAGE> 14
Historically, as the Corporation acquires entities, merger-related and
other charges have been incurred (see Table 1). Typically, these charges include
the following: (i) salaries, employee benefits, and other employment-related
charges for employment contract payments, change in control agreements, early
retirement and involuntary separation and related benefits, postretirement
expenses, and assumed pension expenses of acquired entities; (ii) write-downs of
office buildings and equipment to be sold, lease buyouts, assets determined to
be obsolete or no longer of use, and equipment not compatible with the
Corporation's equipment; (iii) professional fees for legal, accounting,
consulting, and financial advisory services; (iv) additions to the provision for
losses on loans; and (v) other expenses such as asset write-offs, charge-offs of
prepaid assets, cancellation of vendor contracts, and other costs which normally
arise from consolidation of operational activities. These charges totaled $46.2
million, $52.8 million, and $11.9 million in 1997, 1996, and 1995, respectively.
The level of the charges is directly related to the size of the institution
being acquired. Charges in the range of $150 million to $165 million (pretax
basis) are expected in connection with the current pending acquisitions. This
range of charges is an estimate and will change if additional entities are
acquired.
The Year-2000 compliance (see "Year-2000 Risk Factors" discussion) of
currently pending and future acquisitions is a potential risk factor for the
Corporation's acquisition program. As part of its due diligence process, the
systems and application software of the target institutions are reviewed to
determine if they are Year-2000 compliant or, upon conversion to the
Corporation's systems, will be Year-2000 compliant prior to year end 1998.
Regulatory authorities have indicated they will not approve applications for
prior permission to effect acquisitions unless the applicant has provided
assurance satisfactory to them that they will be Year-2000 compliant.
CHARTER CONSOLIDATION
During 1997, management reevaluated its philosophy with respect to the
operation of institutions acquired and determined a change in philosophy was
indicated in order to compete in the changing banking industry. The decision was
made to merge most of the Corporation's separate banking subsidiaries into UPB.
Certain subsidiaries remain as separate banks due to specific operating reasons
but are expected eventually to be merged into UPB.
The legal merger of the Corporation's banking subsidiaries into UPB and the
name changes were made effective January 1, 1998. Integration of the
"back-office" functions (e.g. accounting, deposit services, item processing,
mortgage servicing, credit administration, etc.) is expected to be accomplished
over the next twelve months and to result in significant operating economies by
eliminating duplicate processes, advertising for multiple entities, and certain
regulatory costs.
Management continues to believe that it is imperative that customer
decisions should be made locally as has been the past practice. In matters
affecting their customers, the merging banks have been given very broad
discretion in the past and that is expected to continue in the future.
Maintaining its policy of close liaison with the regions, communities, and
customers served, the Corporation expects to utilize resources such as community
boards to enable the Corporation to continue to be sensitive to local banking
requirements and customer preferences.
The Corporation incurred charges in 1997 totaling approximately $16.7
million related to the decision to combine substantially all its subsidiary
banks under one charter. These charges related primarily to employee severance
payments, write-offs of data processing equipment, and other costs related to
integrating the operations of the new organization. Operationally, all of the
changes are not expected to be fully implemented until late 1998 or early 1999.
Annual cost savings from consolidating the Corporation's existing banking
subsidiaries are estimated to be approximately $15 million to $20 million on a
pretax basis. Additional pretax revenue enhancements are expected, primarily
related to additional liquidity from the new organization, but those amounts
cannot be quantified at this time. A portion of the anticipated savings will be
realized in 1998; however, the full amount of savings and revenue enhancements
are not expected to be realized for 12 to 18 months.
12
<PAGE> 15
EARNINGS ANALYSIS
NET INTEREST INCOME
Net interest income is the principal source of earnings for the
Corporation. Net interest income is comprised of interest income and
loan-related fees less interest expense. Net interest income is affected by a
number of factors including the level, pricing, mix, and maturity of earning
assets and interest-bearing liabilities; interest rate fluctuations; and asset
quality. For purposes of this discussion, net interest income is presented on a
fully-taxable equivalent basis (FTE), which restates tax-exempt income to an
amount that would yield the same after-tax income had the income been subject to
taxation at the federal statutory income tax rate (currently 35% for the
Corporation). Reference is made to Table 4 and Table 5 which present the
Corporation's average balance sheet and volume/rate analysis for each of the
three years in the period ended December 31, 1997.
Net interest income for 1997 was $786.9 million, a 3% increase from the
$762.6 million reported in 1996. In 1996, net interest income grew 11% from the
$688.3 million reported in 1995. The net interest margin (net interest income as
a percentage of average earning assets) was 4.79% in 1997 compared to 4.56% and
4.60%, respectively, in 1996 and 1995. The interest-rate spread between earning
assets and interest-bearing liabilities was 3.97% in 1997, an increase of 18
basis points from the 1996 spread of 3.79% and compared to 3.86% in 1995.
The growth in net interest income in 1997 was attributable primarily to a
reduction in short-term borrowings and other time deposits which resulted in a
net reduction in interest expense of $21.8 million. The reduction in short-term
borrowings related to a restructuring of the balance sheet following the
acquisition of Leader Financial Corporation (Leader) in October, 1996. The
decline in other time deposits relates primarily to the maturity of time
deposits under $100,000 which were not reinvested and the repricing of higher
rate deposits. Also contributing to the improvement in net interest income was
the $782 million growth in average loans which was funded primarily by sales and
maturities of investment securities and a 12-basis-point increase in the average
yield on investment securities. These items were the primary reasons for the
$2.5 million increase in interest income.
The improvement in net interest income between 1995 and 1996 was
attributable to the growth of average earning assets, primarily loans, which
increased $1.8 billion. This growth was the principal reason for the $146.1
million increase in interest income. Partially offsetting the increase in
interest income was a $71.8 million increase in interest expense. This increase
is attributable to the increase in funding liabilities (short- and long-term
borrowings and interest-bearing deposits) in response to the growth of average
earning assets.
A breakdown of the components of average earning assets and
interest-bearing liabilities is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
AVERAGE EARNING ASSETS (IN BILLIONS)........................ $16.4 $16.7 $15.0
Comprised of:
Loans..................................................... 77% 71% 71%
Investment securities..................................... 20 26 25
Other earning assets...................................... 3 3 4
Yield earned on average earning assets...................... 8.73 8.56 8.59
AVERAGE INTEREST-BEARING LIABILITIES (IN BILLIONS).......... $13.6 $14.0 $12.6
Comprised of:
Deposits.................................................. 82% 81% 85%
Short-term borrowings..................................... 6 9 6
FHLB advances, short- and medium-term bank notes and other
long-term debt......................................... 12 10 9
Rate paid on interest-bearing liabilities................... 4.76 4.77 4.73
</TABLE>
The mix of average earning assets changed in 1997 as average loans
increased to 77% of average earning assets while average investment securities
declined to 20%. The decline in the investment securities was due to the use of
these assets as the primary source of funding for the loan growth. The mix of
average interest-bearing liabilities has remained fairly constant over the past
three years with
13
<PAGE> 16
deposits being the primary funding source. Over the last three years there has
been an increase in wholesale borrowings as a funding source due to relatively
attractive interest rates.
PROVISION FOR LOSSES ON LOANS
The provision for losses on loans in 1997 totaled $113.6 million, an
increase of $44.7 million from the $68.9 million reported in 1996, and was $79.7
million higher than the $33.9 million reported in 1995. At the same time, net
charge-offs increased to $80.6 million in 1997 from $64.7 million in 1996 and
$31.3 million in 1995. As a percentage of average loans, excluding FHA/VA
government-insured/guaranteed loans, the provision for losses on loans was
1.01%, .65% and .35%, respectively, for 1997, 1996, and 1995.
The large increase in the provision for losses on loans over the last three
years related principally to the increase in net charge-offs and acquisitions.
The increase in charge-offs was concentrated in the credit card and other
consumer loan categories. Total credit card and other consumer loan net charge-
offs were $66.4 million in 1997 compared to $44.8 million and $23.6 million in
1996 and 1995, respectively. The high level of charge-offs in this category of
loans can be attributed to increases in delinquencies and a high level of
personal bankruptcies. Direct marketing initiatives for credit cards beginning
in 1994 and purchases of credit card portfolios in 1996 to develop new business
have also contributed to the increase in charge-offs over the last three years.
The credit card portfolio had higher charge-off rates than other parts of the
loan portfolio during this three-year period. Also contributing to the higher
provision for losses on loans in 1997 was an increase of approximately $20.3
million related to acquired entities.
Management expects the amount of charge-offs to stabilize or decline
slightly in 1998 (approximately $75 million to $80 million, or .65% to .70% of
average loans), excluding the impact of any additional acquisitions, which
should correspondingly reduce the amount of the provision for losses on loans.
However, there can be no assurance this will occur. There are a number of
factors that impact the level of the provision for losses on loans, some of
which are beyond management's control, such as current and anticipated economic
conditions and the related impact on specific borrowers, the level of personal
bankruptcies, the level of nonperforming assets, and changes in the nature of
the loan portfolio.
NONINTEREST INCOME
Noninterest income for the year increased 12.8% to $361.6 million from
$320.5 million in 1996. Noninterest income for 1995 was $293.7 million. The
major components of noninterest income are presented on the face of the
statement of earnings and in Note 13 to the consolidated financial statements.
Table 1 at the end of this discussion presents a five-year trend of the major
components, including certain significant items impacting the five-year trend.
There were several major items contributing to the growth in noninterest
income in 1997. Gains from the sale of branches and other selected assets,
primarily the sale of certain branches in upper East Tennessee, were $15.8
million in 1997, an increase of $8.6 million from $7.2 million in 1996 and
compared to $1.9 million in 1995. During the third quarter of 1997, the
Corporation securitized and sold approximately $300 million of fixed- and
adjustable-rate single family residential mortgage loans to enhance liquidity,
take advantage of low interest rates and narrow spreads on adjustable rate
mortgage securities. This was the primary reason for the $8.2 million increase
in the gain on sale of residential mortgages, to $14.1 million compared to $5.9
million in 1996 and $5.5 million in 1995. Additional mortgage securitizations
are expected in 1998. Bank card income rose $6.3 million to $31.3 million in
1997 due primarily to a higher volume of transactions. These revenues were $25.0
million and $20.8 million, respectively, in 1996 and 1995. Service charges on
deposit accounts and ATM transaction fees increased revenues $5.4 million to
$120.5 million compared to $115.1 million in 1996 and $108.0 million in 1995.
This growth is related to increased volume of transactions and increased fees,
new fees and fewer waived fees due to an evaluation of the fee structure in
1994. Annuity sales income and insurance commissions increased $3.2 million in
1997 to $19.0 million compared to $15.8 million in 1996 and $9.5 million in
1995. The growth of this fee income source is the result of increased emphasis
on non-traditional bank products. Income from other real estate, primarily
related to the Magna Bancorp, Inc. (Magna) acquisition increased $2.8 million in
1997 to $5.9 million from $3.1 million in 1996.
14
<PAGE> 17
Other major items included in noninterest income are as follows: (i)
Mortgage servicing income totaled $57.3 million in 1997, a decrease of $5.7
million from $63.0 million in 1996, due primarily to lower volumes of loans
serviced resulting from increased refinancing activity. Mortgage servicing
income was $55.9 million in 1995. These revenues will likely decline in 1998 if
interest rates remain at current levels or decline and the level of refinancing
activity continues. (ii) Factoring commissions, which resulted from the primary
business of Capital Factors, totaled $30.1 million in 1997 compared to $26.1
million in 1996 and $19.5 million in 1995. Capital Factors is a specialized
financial services company providing related fee-based credit, collection, and
management information service. Its clients are primarily small- to medium-size
companies in various industries, including textiles, apparel and furniture
manufacturing and, recently, entities involved in health care and temporary
employment service industries. The increase in these fees is the result of
increased sales volume. These fees are seasonal and subject to fluctuation.
(iii) Trust service income was $9.0 million in 1997, a decline in revenues of
$1.1 million from 1996 due primarily to a one-time fee recognized in 1996 and
compares to $8.3 million in 1995. (iv) Profits and commissions from trading
activities totaled $7.3 million in 1997 compared to $5.8 million in 1996 and
$12.4 million in 1995 related primarily to the Corporation's SBA broker/dealer
operations, with some revenues resulting from securities trading activity of an
acquired entity. The SBA broker/dealer operation purchases, pools, and
securitizes the government-guaranteed portions of SBA loans. The higher level of
profits and commissions in 1995 related to favorable market conditions. Revenues
in 1996 declined due to a shortage of government funding which impacted the
trading operations. Revenues from this operation are volatile and future
revenues cannot be predicted.
Management continues to place emphasis on the growth of noninterest income
to enhance the Corporation's profitability. Areas receiving increased emphasis
include annuity sales, bank-eligible insurance products, mortgage servicing, and
factoring revenues. These activities traditionally have higher profit margins
and favorable cost structures. Also, these activities provide a hedge against
decreased revenues if loan volumes decline due to the interest-rate environment
or areas served by the Corporation experience an economic downturn. Other
traditional revenue sources will continue to be emphasized and are expected to
be enhanced by the Corporation's acquisition program.
NONINTEREST EXPENSE
Noninterest expense totaled $697.7 million in 1997, a decrease of $34.1
million from 1996 which totaled $731.8 million. This compares to $607.2 million
in 1995. The components of noninterest expense are presented on the face of the
statement of earnings and in Note 13 to the consolidated financial statements.
Noninterest expenses were impacted by a number of charges over the last
three years which are separately identified in Table 1. The largest items were
merger-related charges which totaled $46.2 million in 1997 compared to $52.8
million and $11.9 million, respectively in 1996 and 1995. Reference is made to
the "Acquisitions" section above for a discussion of the nature of these
charges.
In 1997, noninterest expense was also increased by certain charges totaling
$16.7 million related to management's decision to combine substantially all of
the Corporation's separate banking subsidiaries (see the "Charter Consolidation"
discussion).
Noninterest expense in 1996 included a $28.2 million, one-time Savings
Association Insurance Fund (SAIF) assessment resulting from the enactment of the
Deposit Insurance Fund Act of 1996 to recapitalize the SAIF. Other significant
charges in 1996 included the write-off of certain intangibles which totaled
$19.4 million ($2.6 million in 1997).
Provisions for losses on FHA/VA foreclosure claims totaled $8.0 million in
1997 compared to $25.2 million in 1996, which included a $19.8 million
additional provision related to an acquired entity, and $5.6 million in 1995.
The provisions for losses on FHA/VA foreclosure claims arise from the
Corporation's mortgage servicing operations. In its capacity as servicer of
loans, including FHA/VA government-insured/guaranteed loans, the Corporation
collects and processes payments made by borrowers; remits funds to investors,
taxing authorities, and insurers; and coordinates foreclosure and disposition of
collateral properties. In connection with its responsibilities, the Corporation
advances funds which are repaid through foreclosure-sale proceeds and through
claims made against the Federal Housing Authority and/or Veterans Administration
(FHA/VA claims). Under certain circumstances, the FHA/VA claims are sometimes
rejected or otherwise cannot be collected in full. The provisions for
15
<PAGE> 18
FHA/VA foreclosure claims represent management's estimate of losses attributable
to current and future FHA/VA claims inherent in the servicing portfolio at each
reporting date.
Excluding the significant items discussed above, noninterest expenses were
$630.7 million in 1997, an increase of $19.1 million, or 3%, over $611.6 million
in 1996 and an increase of $35.4 million, or 5.9% over $595.3 million in 1995.
Salaries and employee benefits which represent the largest category of
noninterest expense were $284.6 million in 1997, which compares to $282.7
million in 1996 and $264.7 million in 1995. At December 31, 1997, the
Corporation had 7,711 full-time-equivalent employees which compares to 7,880 and
7,849, respectively, at December 31, 1996 and 1995. Growth in the number of
employees as the result of acquisitions has been offset by reductions of the
number of employees required due to consolidation of operations and sales of
branch locations. The level of expense in this category is impacted by merit
salary increases and incentive compensation. Management is expecting a net
reduction of 600 to 700 employees in connection with its consolidation of
banking subsidiaries (see the "Charter Consolidation" discussion) The reduction
is expected to be accomplished through attrition and employee separation.
Net occupancy and equipment expense totaled $88.6 million in 1997, a
decrease of $3.0 million from 1996 due primarily to sales of branch locations
and was $2.3 million higher than 1995 due primarily to acquisitions. Management
does not expect any significant growth in this category of expenses due to the
consolidation of banking subsidiaries which is expected to reduce these costs
overall, principally equipment expense. Future acquisitions will impact this
category of expenses.
TAXES
Applicable income taxes consist of provisions for federal and state income
taxes totaling $111.9 million in 1997, or an effective rate of 34.9%. This
compares to applicable income taxes of $93.1 million in 1996 and $110.8 million
in 1995. These amounts resulted in effective tax rates of 35.2% and 34.4%,
respectively, in 1996 and 1995. The variances from federal statutory rates (35%
for all three years) are attributable to the level of tax-exempt income from
investment securities and loans and the effect of state income taxes. For
additional information regarding the Corporation's effective tax rates for all
periods, see Note 15 to the consolidated financial statements.
Realization of a portion of the $94.8 million net deferred tax asset, which
is included in other assets, is dependent upon the generation of future taxable
income sufficient to offset future deductions. Management believes that, based
upon historical earnings and anticipated future earnings, normal operations will
continue to generate sufficient future taxable income to realize in full these
deferred tax benefits. Therefore, no extraordinary strategies are deemed
necessary by management to generate sufficient taxable income for purposes of
realizing the net deferred tax asset.
FINANCIAL CONDITION ANALYSIS
The Corporation reported $18.1 billion of total assets at December 31, 1997
compared to $18.3 billion at December 31, 1996 ($15.2 billion prior to the
restatement for its Magna and Capital-Miami acquisitions which were significant
poolings of interests). The six acquisitions completed in 1997, including the
Magna and Capital-Miami acquisitions, added $3.6 billion in total assets.
Average assets were $18.0 billion for 1997, compared to $18.2 billion and $16.3
billion, respectively, for 1996 and 1995. Table 3, which follows this
discussion, presents the balance sheet impact of acquired institutions for the
last three years.
INVESTMENT SECURITIES
As part of its securities portfolio management strategy, the Corporation
classifies all of its investment securities as available for sale securities,
which are carried on the balance sheet at fair market value. This strategy gives
management flexibility to actively manage the investment portfolio as market
conditions and funding requirements change. The Corporation's shareholders'
equity is subject to fluctuation due to changes in the fair market value of the
available for sale investment portfolio.
16
<PAGE> 19
The investment securities portfolio was $3.2 billion at December 31, 1997
compared to $3.4 billion at December 31, 1996. Average investment securities
were $3.3 billion and $4.3 billion, respectively, for these periods. The
investment portfolio had a net unrealized gain of $62.7 million at year end 1997
compared to a net unrealized gain of $38.0 million at year end 1996. The decline
in investment securities in 1997 was due primarily to the additional funding
required to support loan growth during the year. Note 4 to the consolidated
financial statements provides the composition of the portfolio at December 31,
1997 and 1996, along with a breakdown of the maturities and weighted average
yields of the portfolio at December 31, 1997.
U.S. Treasury and U.S. Government agency obligations represented 79.1% of
the investment securities portfolio at December 31, 1997. The Corporation has
some credit risk in the investment securities portfolio; however, management
does not consider that risk to be significant and does not believe that cash
flows will be significantly impacted.
The REMIC and CMO issues held in the investment securities portfolio are
98% U.S. Government agency 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. Approximately 52% of the REMIC and CMO portions of
the portfolio are in floating-rate issues, the majority being indexed to LIBOR
or PRIME. The Corporation's normal practice is to purchase investment securities
at or near par value to reduce risk of premium write-offs resulting from
unexpected prepayments. The limited credit risk in the investment securities
portfolio at December 31, 1997 consisted of 15.7% municipal obligations and 5.2%
other stocks and securities (primarily Federal Reserve Bank and Federal Home
Loan Bank Stock).
At December 31, 1997, the Corporation had approximately $95.3 million of
"structured notes" (as currently defined by regulatory agencies), which
constituted approximately 2.9% of its investment securities portfolio.
Structured notes have uncertain cash flows which are driven by interest-rate
movements and may expose a company to greater market risk than traditional
medium-term notes. All of the Corporation's investments of this type are
government agency issues (primarily Federal Home Loan Banks and Federal National
Mortgage Association). The structured notes vary in type but primarily include
step-up bonds and index-amortizing notes. These securities had an unrealized
gain of $59,000 at December 31, 1997. The market risk of these securities is not
considered material to the Corporation's financial position, results of
operations, or liquidity.
LOANS
Loans are the largest component of the Corporation's average earning
assets, or 77% of the total. Average loans grew 6.6% in 1997 following growth of
11.8% in 1996. Total loans were $12.7 billion at December 31, 1997 compared to
$12.6 billion at December 31, 1996. Table 7 and Note 5 to the consolidated
financial statements provide summary information regarding the loan portfolio.
The average balance sheet, Table 4, provides the average balance and average
yield on loans for the last three years.
SINGLE-FAMILY RESIDENTIAL LOANS. These loans totaled $3.6 billion at
December 31, 1997 and were the largest segment of the loan portfolio,
constituting 28% of total loans. Single-family residential loans decreased $238
million, or 6.2%, between December 31, 1997 and 1996, due primarily to the level
of refinancing activity in the real estate market and the securitization and
sale of approximately $300 million of fixed- and adjustable-rate loans in the
third quarter of 1997. This decline was partially offset by growth of the
portfolio due to acquisitions during 1997. Single-family residential loans are
expected to remain the largest portion of the loan portfolio and is expected to
remain flat or continue to decline gradually if the current low interest rate
environment continues in 1998. These loans historically have a lower level of
charge-offs than the other portions of the portfolio.
COMMERCIAL LOANS. Commercial, financial, and agricultural loans, including
foreign commercial loans and direct lease financing, were $2.2 billion at
December 31, 1997, constituting 17% of the loan portfolio. These loans increased
7.5% in 1997 from $2.1 billion at December 31, 1996. This segment of the
portfolio experienced growth in 1997 due to the favorable economic conditions.
In connection with the acquisition of Capital-Miami, additional foreign risk
exposure was added to the portfolio. The
17
<PAGE> 20
foreign portion of this segment represents only 2% of the overall loan portfolio
and is not considered significant.
OTHER MORTGAGE LOANS. This segment of the loan portfolio totaled $2.1
billion at December 31, 1997, an increase of $381 million, or 23%, from the 1996
year end total of $1.7 billion. The components of other mortgage loans are as
follows: loans secured by nonfarm nonresidential properties (commercial real
estate loans), 77%; loans secured by multifamily residential properties, 14%;
and loans secured by farmland, 9%.
FHA/VA GOVERNMENT-INSURED/GUARANTEED LOANS (FHA/VA LOANS). The FHA/VA loan
portfolio was $1.3 billion at December 31, 1997 compared to $1.6 billion at year
end 1996, a decrease of 15%. As a loan servicer, the Corporation is obligated to
pass through to the holders of a GNMA mortgage-backed security, the coupon rate,
whether or not the interest due on the underlying loans has been collected from
the borrower. When an FHA/VA government-insured/guaranteed single-family loan
which carries an above-market rate of interest has been in default for more than
90 days, it is the Corporation's current policy to buy the delinquent FHA/VA
loan out of the GNMA pools serviced by the Corporation. This action eliminates
the Corporation's obligation to pay the coupon rate. The Corporation thereby
mitigates the loss otherwise attributable to the net interest-rate differential
between the coupon rate which it would otherwise be obligated to pay to the GNMA
holder and the Corporation's lower cost of funds. Furthermore, management has
purchased, on a negotiated basis, additional delinquent FHA/VA
government-insured/guaranteed loans from other GNMA servicers to leverage the
operating costs of this operation. The volume of these loans in 1998 is expected
to remain at the current levels or decrease. Management is considering the
possibility of securitizing a large portion of this portfolio which would
significantly reduce the amount of these loans, although the related servicing
income would be retained.
Since all of these loans are FHA/VA government-insured/guaranteed loans,
the Corporation's investment is expected to be recoverable through claims made
against the FHA or the VA. Management believes the credit risk and the risk of
principal loss is minimal. For this reason, management has excluded these loans
from the credit quality data and resulting ratios. Any losses incurred would not
be significantly greater or less than if the Corporation had continued solely as
servicer of the FHA/VA loans. The risk involving these loans arises from not
complying timely with FHA/VA's foreclosure process and certain unreimbursable
foreclosure costs. The Corporation, by purchasing the delinquent FHA/VA loans
also assumes the interest-rate risk associated with funding a loan if timely
foreclosure should not occur. Risk also exists, under certain circumstances,
that claims might be rejected by the FHA or the VA or otherwise not be able to
be collected in full. Provisions for these types of losses are provided through
noninterest expense as provisions for losses on FHA/VA foreclosure claims (see
the "Noninterest Expense" discussion) and the corresponding liability is carried
in other liabilities. Provisions for losses on FHA/VA foreclosure claims totaled
$8.0 million, $25.2 million, and $5.6 million, respectively, in 1997, 1996, and
1995. At December 31, 1997, the Corporation had a servicing reserve of $33.3
million as compared to $37.2 million at December 31, 1996.
CONSUMER LOANS. This segment of the portfolio represented 16% of the loan
portfolio at December 31, 1997, and decreased 10.5% from year end 1996. Consumer
loans include loans to individuals which totaled $1.4 billion and credit card
loans which totaled $559 million at December 31, 1997, decreases of 8.8% and
14.6%, respectively, from $1.6 billion and $654 million, respectively, at
December 31, 1996. This segment of the portfolio has experienced a high level of
charge-offs over the last three years due to the high level of personal
bankruptcies. The growth of the credit card portfolio over the last several
years is attributable to marketing campaigns and the purchase of credit card
portfolios.
REAL ESTATE CONSTRUCTION LOANS. These loans totaled $640 million at
December 31, 1997, an increase of $64 million, or 11.0%, from the year end 1996
amount of $576 million. The growth of these loans resulted primarily from the
favorable economic conditions in the areas served by the Corporation.
ACCOUNTS RECEIVABLE -- FACTORING. This category of the portfolio totaled
$579 million at December 31, 1997, an increase of $127 million from the December
31, 1996 total of $452 million. Capital Factors provides factoring and other
specialized commercial financial services to small- and medium-size companies.
Capital Factors purchases accounts receivable from its clients pursuant to
factoring
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<PAGE> 21
agreements with them. Its clients primarily include manufacturers, importers,
wholesalers and distributors in the apparel and textile-related industries and,
to a lesser extent, in consumer goods-related industries. More recently, Capital
Factors has provided services to companies in the healthcare industry. Also
included in this category are asset-based loans which are collateralized
primarily by receivables owned by the borrowers.
LOAN OUTLOOK. The primary factors affecting the growth of the
Corporation's loan portfolio are the economic conditions in the areas served and
the level of its acquisition activity. Management expects moderate loan growth
in 1998 as the economies in most of the areas served are growing. FHA/VA loans
and certain single-family residential mortgages are under evaluation for
securitization and sale, which if done, would decrease the level of loans.
ALLOWANCE FOR LOSSES ON LOANS
The allowance for losses on loans (the allowance) at December 31, 1997 was
$225.4 million, or 1.99% of loans, compared to $189.1 million, or 1.72% of
loans, at December 31, 1996. In calculating the allowance to loans, FHA/VA loans
have been excluded (see "FHA/VA Government-Insured/Guaranteed Loans" discussion
above). Management's policy is to maintain the allowance at a level deemed
sufficient to absorb estimated losses in the loan portfolio. The allowance is
reviewed quarterly in accordance with the methodology described in Note 1 to the
consolidated financial statements. Tables 8 and 10 which follow this discussion
provide detailed information regarding the allowance for each of the five years
in the period ended December 31, 1997.
Net charge-offs were $80.6 million in 1997, an increase of $15.9 million,
or 24%, compared to $64.7 million in 1996. All of the increase is attributable
to credit card and other consumer loans. All other categories of loans
experienced a decrease in net charge-offs. Credit card net charge-offs totaled
$43.4 million in 1997, an increase of $16.6 million over 1996 which totaled
$26.8 million. Other consumer loan net charge-offs were $23.1 million in 1997
compared to $18.0 million in 1996. The increase in both of these categories has
been impacted by the high level of personal bankruptcies over the last few
years. Direct marketing initiatives for credit cards in 1994 and subsequent
years and purchases of credit card portfolios to develop new business also
contributed to the increase in credit card charge-offs.
LOAN CONCENTRATIONS
Management believes that the loan portfolio is adequately diversified. The
loan portfolio is for the most part spread over eight states (Tennessee,
Mississippi, Florida, Missouri, Arkansas, Louisiana, Alabama, and Kentucky)
where the Corporation has banking operations. Additionally, Capital Factors has
operations in New York, California, Florida, North Carolina and Georgia.
Reference is made to Table 15 which discloses total loans by banking operation
and by state at December 31, 1997. The Corporation has a limited amount of
foreign exposure, less than 2% of the loan portfolio. At December 31, 1997, the
Corporation had no concentrations of loans to a single industry constituting as
much as 10% of total loans.
The largest concentration of loans is in single family residential loans,
comprising 28% of the loan portfolio, which historically has had low loss
experience. The Corporation also holds $1.3 billion of FHA/VA loans which
account for an additional 10% of the loan portfolio. These loans are also single
family residential loans.
Management has sought to achieve diversification between large and
smaller-sized loans in an effort to reduce risk in the portfolio. At December
31, 1997, the Corporation's largest loan relationship, excluding the lending
relationships of Capital Factors, was $31.9 million and there were only 25
relationships of $10 million or more, which constituted in the aggregate less
than 4% of the total loan portfolio. Capital Factors has six client lending
relationships greater than $10 million and nine customer credits exceeding $10
million with the largest relationship being $35 million to a national department
store chain.
NONPERFORMING ASSETS
LOANS OTHER THAN FHA/VA LOANS. Nonperforming assets consist of nonaccrual
loans, restructured loans, and foreclosed properties. Table 9 presents
nonperforming assets in two categories,
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<PAGE> 22
FHA/VA loans and all other loans. For this discussion and for the credit quality
information presented in this report, FHA/VA loans are excluded from the
calculations because of their minimal exposure to principal loss. (Reference is
made to the discussion of "FHA/VA Government-Insured/Guaranteed Loans" above.)
At December 31, 1997, nonperforming assets totaled $128.7 million, or 1.13%
of loans and foreclosed properties. This compares to $133.5 million, or 1.21% of
loans and foreclosed properties at December 31, 1996. Nonaccrual loans at year
end 1997 totaled $94.6 million, or .83% of total loans which compares to $89.4
million, or .81% of total loans for the same period in 1996. Restructured loans
and foreclosed properties were $10.0 million and $24.1 million, respectively, at
December 31, 1997. This compares to $11.3 million and $32.8 million,
respectively, at December 31, 1996. Loans 90 days or more past due and not on
nonaccrual status, which are not included in nonperforming assets, were $24.1
million, or .21% of loans at December 31, 1997. This compares to $23.5 million,
or .21%, of loans at December 31, 1996. A breakdown of nonaccrual loans and
loans 90 days or more past due and not on nonaccrual status, both excluding
FHA/VA loans, follows:
<TABLE>
<CAPTION>
LOANS 90 DAYS
NONACCRUAL LOANS OR MORE PAST DUE
----------------- -----------------
DECEMBER 31, DECEMBER 31,
----------------- -----------------
LOAN TYPE 1997 1996 1997 1996
- ---------------------------------------------------------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Secured by single family residential...................... $54,018 $53,968 $ 3,872 $ 1,727
Secured by nonfarm nonresidential......................... 9,678 9,606 962 1,716
Other real estate......................................... 16,201 4,973 1,556 1,492
Commercial, financial, and agricultural, including foreign
loans and direct lease financing........................ 8,770 15,746 1,164 1,993
Credit card and related plans............................. -- 50 14,679 11,520
Other consumer............................................ 5,917 5,061 1,830 5,032
------- ------- ------- -------
Total........................................... $94,584 $89,404 $24,063 $23,480
======= ======= ======= =======
</TABLE>
FHA/VA LOANS. As discussed in the "Loans" section of this report, FHA/VA
loans do not, in management's opinion, have traditional credit risk similar to
the rest of the loan portfolio and risk of principal loss is considered minimal.
FHA/VA loans 90 days or more past due and still accruing interest totaled $516.7
million at December 31, 1997 compared to $724.4 million at December 31, 1996.
The decrease in the loans past due relates to the decline in the volume of these
loans. At December 31, 1997, $14.8 million of FHA/VA loans were placed on
nonaccrual status by management because the contractual payment of interest by
FHA/VA had stopped due to missed filing dates. This policy will be followed on a
prospective basis. No loss of principal is expected from these loans.
POTENTIAL PROBLEM ASSETS. Potential problem assets consist of assets which
are generally secured and are not currently considered nonperforming and include
those assets where information about possible credit problems has raised serious
doubts as to the ability of the borrowers to comply with present repayment
terms. Historically, such assets have been loans which have ultimately become
nonperforming. At December 31, 1997, the Corporation had potential problem
assets (all loans) aggregating $17.5 million, comprised of 30 loans, the largest
of which was $6.7 million.
OTHER EARNING ASSETS
Other earning assets include interest-bearing deposits at financial
institutions, federal funds sold, securities purchased under agreements to
resell, and trading account assets. These assets averaged $417 million in 1997
with an average yield of 6.25%. This compares to $531 million in 1996 with a
6.10% average yield and $612 million in 1995 with an average yield of 6.45%.
Over the past three years these earning assets comprised three to four percent
of total average earning assets.
The decline in other earning assets from 1996 is attributable to a $152
million decrease in federal funds sold and securities purchased under agreements
to resell. This decrease was due to utilizing these funds to meet other funding
needs, primarily loans. The other significant component of this category was
trading account assets which represents the government-guaranteed portions of
SBA loans. Trading assets averaged $205 million in 1997, an increase of $12
million from 1996 and compared to $185 million in 1995. The average yield on
these assets over the past three years has ranged from
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<PAGE> 23
7.20% to 7.65%. Management considers the interest-rate and credit risk related
to all of these assets to be minimal.
DEPOSITS
The Corporation's deposit base is its primary source of liquidity and
consists of deposits from the communities served by the Corporation. At December
31, 1997, the Corporation had the largest deposit base of any independent bank
holding company headquartered in Tennessee. Tables 4 and 6 present the
components of the Corporation's average deposits. Note 8 to the consolidated
financial statements presents the maturities of interest-bearing deposits at
December 31, 1997.
Deposits were $13.4 billion at December 31, 1997 and averaged $13.3 billion
for the year. This compares to period end and average deposits for 1996 of $13.5
billion. The decrease in average deposits in 1997 is attributable primarily to
sales of deposits related to the disposition of branches and migration of
deposits by customers to other investment products. Total deposits sold in
connection with branch dispositions in 1997 totaled approximately $240 million.
The decrease in deposits was partially offset by increases from acquisitions
during the year. As shown on the consolidated statement of cash flows, total
deposits, excluding acquisitions, decreased $289 million in 1997 compared to a
decrease of $241 million in 1996.
The composition of average deposits over the last three years was as
follows:
<TABLE>
<CAPTION>
TYPE OF DEPOSITS 1997 1996 1995
- ------------------------------------------------------------ ---- ---- ----
<S> <C> <C> <C>
Noninterest-bearing deposits................................ 17% 16% 15%
Money market deposits....................................... 14 15 15
Savings deposits............................................ 19 18 18
Other time deposits......................................... 40 42 43
Certificates of deposit of $100,000 and over................ 10 9 9
</TABLE>
CAPITAL AND DIVIDENDS
Shareholders' equity increased $128.0 million in 1997 to $1.7 billion, or
9.65% of total assets. This compares to shareholders' equity of $1.6 billion, or
8.83% of total assets at December 31, 1996. The primary source of growth in
shareholders' equity in 1997 was earnings retention of $94.0 million, net stock
transactions in connection with the dividend reinvestment plan and employee
benefit plans of $34.3 million, issuance of stock in connection with
acquisitions of $26.7 million, and the net change in the unrealized gains
(losses) on available for sale securities of $15.1 million. Partially offsetting
these increases was a decrease of $42.1 million resulting from the repurchase of
shares of common stock in connection with a business combination accounted for
as a purchase. The consolidated statement of changes in shareholders' equity
details the changes in equity for the last three years.
The Corporation and its subsidiaries must comply with the capital
guidelines established by the regulatory agencies that supervise their
operations. These agencies have adopted a system to monitor the capital adequacy
of all insured financial institutions. The system includes ratios based on the
risk-weighting of on- and off-balance-sheet transactions. If an institution's
ratios should fall below certain levels, it would become subject to regulatory
action. The Corporation's and its principal subsidiary's regulatory capital
ratios, capital adequacy requirements, and prompt corrective action provisions
are included in Note 12 to the consolidated financial statements. Also, Table 13
presents the Corporation's risk-based capital ratios for the last three years.
At December 31, 1997, all of the Corporation's financial institutions met the
requirements for well-capitalized institutions.
The Corporation declared cash dividends on its common stock of $1.495 per
share in 1997, an increase of 38% over the 1996 amount of $1.08 per share. In
January 1998, the regular quarterly dividend was increased to $.50 per share
($2.00 per share annually). The Corporation also declared and paid cash
dividends on its 8% Series E Convertible Preferred Stock of $2.00 per share in
both 1997 and 1996.
The primary sources for payment of dividends by the Corporation to its
shareholders are management fees and dividends received from its subsidiaries,
interest on loans to subsidiaries, and interest on its available for sale
investment securities. Payment of dividends by the Corporation's
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<PAGE> 24
banking subsidiaries is subject to various statutory limitations which are
described in Note 12 to the consolidated financial statements. Reference is made
to the "Liquidity" discussion for additional information regarding the parent
company's liquidity.
ASSET/LIABILITY AND MARKET RISK MANAGEMENT
The Corporation's assets and liabilities are principally financial in
nature and the resulting earnings thereon, primarily net interest income, are
subject to changes as a result of changes in market interest rates and the mix
of the various assets and liabilities. Interest rates in the financial markets
affect the Corporation's decisions on pricing its assets and liabilities which
impacts net interest income, the Corporation's primary cash flow stream. As a
result, a substantial part of the Corporation's risk-management activities are
devoted to managing interest-rate risk. Currently, the Corporation does not have
any significant risks related to foreign exchange, commodities or equity risk
exposures.
INTEREST-RATE RISK. One of the most important aspects of management's
efforts to sustain long-term profitability for the Corporation is the management
of interest-rate risk. Management's goal is to maximize net interest income
within acceptable levels of interest-rate risk and liquidity. To achieve this
goal, a proper balance must be maintained between assets and liabilities with
respect to size, maturity, repricing date, rate of return, and degree of risk.
Reference is made to the "Investment Securities," "Loans," and "Other Earning
Assets" discussions for additional information regarding the risks related to
these items.
The Corporation, on a limited basis, has used off-balance-sheet financial
instruments to manage interest-rate risk. At December 31, 1997 and 1996, the
Corporation had no such instruments outstanding. Note 17 to the consolidated
financial statements provides a reconciliation of the Corporation's
interest-rate-swap information for 1996.
The Corporation's Funds Management Committee oversees the conduct of global
asset/liability and interest-rate risk management. The Committee reviews the
asset/liability structure and interest-rate risk monthly for the lead bank and
quarterly for the Corporation's other subsidiaries.
The Corporation uses interest-rate sensitivity (GAP) analysis to monitor
the amounts and timing of balances exposed to changes in interest rates, as
shown in Table 11. The analysis presented in Table 11 has been made at a point
in time and could change significantly on a daily basis. The GAP Report is not
relied upon exclusively to evaluate the impact of, or 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. Key assumptions in the simulation analysis include
prepayment speeds on mortgage related assets, cash flows and maturities of
financial instruments held for purposes other than trading, changes in volumes
and pricing, deposit sensitivity, and management's financial capital plans.
These assumptions are inherently uncertain and, as a result, the simulation
cannot precisely estimate net interest income or precisely predict the impact of
higher or lower interest rates on net interest income. Actual results will
differ from simulated results due to timing, magnitude, and frequency of
interest rate changes and changes in market conditions and management
strategies, among others.
At December 31, 1997, the GAP report indicated that the Corporation was
liability sensitive with $1.1 billion more liabilities than assets repricing
within one year. At 6% of total assets, this position was within the
Corporation's policy limit of 10% of total assets.
Balance sheet simulation analysis has been conducted at year end to
determine the impact on net interest income for the coming twelve months under
several interest-rate scenarios. One such scenario uses rates at December 31,
1997, and holds the rates and volumes constant for simulation. When this
position is subjected to immediate and parallel shifts in interest rates ("rate
shock") of 200 basis points rising and 200 basis points falling, the annual
impact on the Corporation's net interest income is a positive $6.3 million and a
negative $11.6 million pretax, respectively. Another simulation uses a "most
likely" scenario of interest rates falling 25 basis points in the latter half of
1998 resulting in a $3.4 million pretax decrease in net interest income from the
constant rate/volume projection. These scenarios are within the Corporation's
policy limit of 5% of shareholders' equity.
The actual impact of changing interest rates on net interest income is
dependent on a number of factors such as the growth of earning assets, the mix
of earning assets and interest-bearing liabilities,
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<PAGE> 25
the magnitude of the interest-rate changes, the timing of the repricing of
assets and liabilities, interest-rate spreads, and the asset/liability
strategies implemented by management.
LIQUIDITY. Liquidity for the Corporation is its ability 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. As discussed previously, the Corporation's
primary sources of liquidity are its deposit base, available for sale
securities, and money-market investments. Liquidity is also achieved through
short-term borrowings, borrowing under available lines of credit, and issuance
of securities and debt instruments in the marketplace.
Parent company liquidity is achieved and maintained by dividends received
from subsidiaries, interest on advances to subsidiaries, interest on the
available for sale investment securities portfolio, and management fees charged
to subsidiaries. At December 31, 1997, the parent company had cash and cash
equivalents totaling $432.9 million. The parent company's net working capital
position at December 31, 1997 was $444.6 million.
At January 1, 1998, the parent company could have received dividends from
subsidiaries of $103 million without prior regulatory approval. The payment of
additional dividends by the Corporation's subsidiaries will be dependent on the
future earnings of the subsidiaries. Management believes that the parent company
has adequate liquidity to meet its cash needs, including the payment of its
regular dividends, servicing of its debt, and cash needed for acquisitions.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The disclosures regarding the fair value of financial instruments are
included in Note 18 to the consolidated financial statements along with a
summary of the methods and assumptions used by the Corporation in determining
fair value. The differences between the fair values and book values were
primarily caused by differences between contractual and market interest rates at
the respective year ends. Fluctuations in the fair values will occur from period
to period due to changes in the composition of the balance sheet and changes in
market interest rates.
FOURTH QUARTER RESULTS
The Corporation's net income for the fourth quarter of 1997 was $5.3
million, or $.05 for both basic and diluted earnings per share. This compares to
$22.5 million, or $.27 for both basic and diluted earnings per share for the
fourth quarter of 1996.
Results for the fourth quarter of 1997 were impacted by the following
significant pretax items: (i) $40.8 million of merger-related charges, (ii)
$16.6 million of charges related to the charter consolidation, and (iii) a $17.6
million increase in the provision for losses on loans primarily related to
acquisitions and the credit card portfolio. These items were offset by gains on
sales of branches of $4.6 million.
Results for the fourth quarter of 1996 included similar pretax charges.
These charges included the following: (i) $44.9 million of merger-related
charges, (ii) $13.7 million of write-offs of intangibles, and (iii) $5.2 million
of provisions for losses on FHA/VA claims related to an acquired entity. The
fourth quarter of 1996 charges were partially offset by $4.3 million of
investment securities gains. These significant items are discussed in more
detail in the "Earnings Analysis" section of this report.
Net interest income on a taxable-equivalent basis was $196.6 million for
the fourth quarter of 1997, $1.0 million higher than 1996's fourth quarter. The
net interest margin was 4.79%, a 19-basis-point increase from 1996. The
improvement relates primarily to loan growth funded by maturities and sales of
lower yielding investment securities and reductions of short-term borrowings.
The provision for losses on loans for the fourth quarter was $36.9 million
compared to $19.3 million for the same period in 1996. The higher provision
related to acquisitions and the credit card portfolio.
Noninterest income for the fourth quarter of 1997 was $91.8 million, an
increase of $6.7 million over 1996. Noninterest expense was $238.4 million for
the fourth quarter of 1997, an increase of $16.8 million from the same period in
1996. Noninterest expenses were impacted by the items described above.
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<PAGE> 26
Table 14, Selected Quarterly Data, presents certain quarterly financial
data for 1997 and 1996.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
REPORTING COMPREHENSIVE INCOME. In June 1997, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (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 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 and will have no impact on the Corporation's financial
position or results of operations. 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 is effective for financial statements for periods beginning
after December 15, 1997. The Corporation's primary business is banking and it
currently does not have a segment under the above standard or the previous
standard. Management is continuing to examine the way it evaluates its business
and if certain operating units meet the tests for segment reporting, it will be
provided in future financial statements.
YEAR 2000 RISK FACTORS
In February 1997, the Corporation implemented its "Y2K Project" to address
a potential problem with which substantially all users of automated data
processing and information systems are faced. This problem arises from the use
by older systems of only two digits to represent the year applicable to a
transaction, e.g., "97" to represent "1997" rather than the full four digits.
Computer systems so programmed may not operate properly when the last two digits
of the year become "00" as will occur on January 1, 2000. In some cases
inputting a date later than December 31, 1999, would cause a computer to stop
operating while in other cases incorrect output may result. This potential
problem could affect a wide variety of automated systems such as mainframe
applications, personal computers, communications systems, and other information
systems routinely used in all industries.
The Corporation uses a vendor-provided system as its "core" banking
application software to process data pertaining to its demand deposits, savings
accounts, CDs and other deposits; certain loans;
24
<PAGE> 27
and like items. On August 21, 1996, the provider certified the Corporation's
"core" banking applications to be Year-2000 compliant and testing is expected to
be completed by April 1998. Other third-party provided application software is
used to process substantially all of the Corporation's other data, e.g., its
mortgage servicing, credit cards, trust accounts, automated clearing house
transfers, wire transfer function, electronic banking, discount securities
broker operations, investment-security management operations, and others.
Testing of these systems is expected to be started in March 1998 and Year-2000
compliance achieved prior to December 1998, either through installation of
presently available software upgrades or through installation of, and conversion
to presently available alternative systems. Each third-party-provider is
contractually bound at its own expense to bring its software into Year-2000
compliance and to maintain it in compliance should problems be identified during
testing. By December 1998, testing of all third-party provided software and
hardware is expected to be completed.
Although substantially all of the date-sensitive software and applications
utilized in the Corporation's information systems is provided by outside
vendors, the Corporation has itself developed some software "in-house" almost
exclusively to permit its several systems and their users to communicate with
one another. Pursuant to the Corporation's Y2K Project, a consulting firm
specializing in Year-2000 software compliance matters has been retained to
review all in-house-developed software to assess the scope of the remedial work
required to bring it into Year-2000 compliance. This review commenced on
December 1, 1997 and is expected to be completed in April 1998. It is currently
estimated that the Corporation will spend approximately $750,000 on its Y2K
Project.
In summary, the Corporation's Y2K Project's goal and management's
expectation is to have all software reviewed and modified or replaced as
necessary to achieve Year-2000 compliance and to be tested with satisfactory
results prior to year-end 1998. Based upon currently available information,
management has no reason to believe that its goal and expectation will not be
met and does not anticipate that the cost of effecting Year-2000 compliance will
have a material impact on the Corporation's financial condition, results of
operations, or liquidity.
Notwithstanding the foregoing, the Corporation continues to bear some risk
arising from the advent of the Year-2000 and could be adversely affected should
significant customers of the Corporation fail to address the issues
appropriately; or should the Corporation's providers fail to perform under their
aforementioned maintenance contracts with it; or should required, qualified,
system technical personnel become unavailable before Year-2000 compliance has
been achieved. With a view to identifying and minimizing the risk to the
Corporation's loan portfolio, the Corporation is conferring with its major
borrowing customers to sensitize them to Year-2000 issues and to encourage them
to implement promptly Y2K projects of their own. A senior-level management
committee is addressing these issues and providing guidance to lending
personnel. Presently management has no reason to believe that any customers with
which it has significant banking relationships are failing to take appropriate
action to effect Year-2000 compliance or that its software vendors will be
unable to perform under their contracts.
25
<PAGE> 28
TABLE 1. SUMMARY OF CONSOLIDATED RESULTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest income...................... $1,416,694 $1,412,991 $1,265,818 $1,064,944 $ 938,785
Interest expense..................... (646,309) (668,139) (596,367) (437,505) (380,749)
---------- ---------- ---------- ---------- ---------
NET INTEREST INCOME........ 770,385 744,852 669,451 627,439 558,036
PROVISION FOR LOSSES ON LOANS........ (113,633) (68,948) (33,917) (15,988) (35,235)
---------- ---------- ---------- ---------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES ON
LOANS.................... 656,752 675,904 635,534 611,451 522,801
NONINTEREST INCOME
Service charges on deposit
accounts........................ 107,248 107,535 102,932 83,221 73,187
Mortgage servicing income.......... 57,265 63,003 55,903 52,410 48,125
Bank card income................... 31,317 24,975 20,758 11,386 10,884
Factoring commissions.............. 30,140 26,066 19,519 17,371 15,376
Trust service income............... 9,020 8,862 8,326 8,210 7,814
Profits and commissions from
trading activities.............. 7,295 5,765 12,362 5,069 15,620
Other income....................... 101,445 71,684 70,543 57,262 57,089
---------- ---------- ---------- ---------- ---------
Total noninterest income... 343,730 307,890 290,343 234,929 228,095
---------- ---------- ---------- ---------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits..... 284,648 282,726 264,663 264,723 245,152
Net occupancy expense.............. 44,813 47,215 44,061 44,481 39,184
Equipment expense.................. 43,812 44,418 42,251 37,224 34,758
Other expense...................... 257,391 237,216 244,303 230,301 220,820
---------- ---------- ---------- ---------- ---------
Total noninterest
expense.................. 630,664 611,575 595,278 576,729 539,914
---------- ---------- ---------- ---------- ---------
EARNINGS BEFORE OTHER
OPERATING ITEMS, INCOME
TAXES, EXTRAORDINARY
ITEM, AND ACCOUNTING
CHANGES.................. 369,818 372,219 330,599 269,651 210,982
OTHER OPERATING ITEMS
Investment securities gains
(losses)........................ 2,104 4,099 1,433 (21,302) 6,686
Restructuring charges.............. -- -- -- (28,929) --
Merger-related expenses............ (46,188) (52,786) (11,911) (14,862) (2,113)
Charter consolidation expenses..... (16,742) -- -- -- --
Consumer loan marketing program
expenses........................ -- -- -- (14,446) --
Gain on sale of collateral related
to a troubled debt
restructuring................... -- -- -- -- 901
Gain on sales of branches and other
selected assets................. 15,776 7,245 1,934 -- --
One-time trust fees related to a
court award..................... -- 1,268 -- -- --
Special regulatory assessment to
recapitalize the SAIF........... -- (28,249) -- -- --
Write-off of mortgage servicing
rights, goodwill, and other
intangibles..................... (2,610) (19,407) -- -- (3,094)
Additional provisions for losses on
FHA/VA foreclosure claims of
acquired entity................. -- (19,800) -- -- --
Provisions for data processing
systems conversions and
abandonment of property......... -- -- -- -- (4,424)
Litigation settlements............. (1,500) -- -- 2,200 (500)
---------- ---------- ---------- ---------- ---------
EARNINGS BEFORE INCOME
TAXES, EXTRAORDINARY
ITEM, AND ACCOUNTING
CHANGES.................. 320,658 264,589 322,055 192,312 208,438
Applicable income taxes.............. (111,897) (93,115) (110,799) (63,058) (66,570)
---------- ---------- ---------- ---------- ---------
EARNINGS BEFORE
EXTRAORDINARY ITEM AND
ACCOUNTING CHANGES....... 208,761 171,474 211,256 129,254 141,868
Extraordinary item and accounting
changes, net of taxes.............. -- -- -- -- 4,505
---------- ---------- ---------- ---------- ---------
NET EARNINGS............... $ 208,761 $ 171,474 $ 211,256 $ 129,254 $ 146,373
========== ========== ========== ========== =========
</TABLE>
26
<PAGE> 29
TABLE 2. CONTRIBUTION TO DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net interest income -- FTE....................... $ 9.23 $ 9.13 $ 8.73 $ 8.35 $ 8.74
Provision for losses on loans.................... (1.33) (0.83) (0.43) (0.21) (0.52)
------- ------- ------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR
LOSSES ON LOANS -- FTE............... 7.90 8.30 8.30 8.14 8.22
NONINTEREST INCOME
Service charges on deposit accounts............ 1.26 1.29 1.31 1.07 1.15
Mortgage servicing income...................... 0.67 0.75 0.71 0.68 0.56
Bank card income............................... 0.37 0.30 0.26 0.15 0.50
Factoring commissions.......................... 0.35 0.31 0.25 0.22 0.25
Trust service income........................... 0.11 0.12 0.11 0.11 0.13
Profits and commissions from trading
activities.................................. 0.09 0.07 0.16 0.06 0.26
Investment securities gains (losses)........... 0.02 0.05 0.02 (0.27) 0.13
Other income................................... 1.38 0.95 0.91 0.76 0.87
------- ------- ------- ------- -------
Total noninterest income............... 4.25 3.84 3.73 2.78 3.85
------- ------- ------- ------- -------
NONINTEREST EXPENSE
Salaries and employee benefits................. (3.34) (3.38) (3.36) (3.41) (3.75)
Net occupancy expense.......................... (0.53) (0.57) (0.56) (0.57) (0.61)
Equipment expense.............................. (0.51) (0.53) (0.54) (0.52) (0.57)
Other expense.................................. (3.81) (4.28) (3.25) (3.68) (3.65)
------- ------- ------- ------- -------
Total noninterest expense.............. (8.19) (8.76) (7.71) (8.18) (8.58)
------- ------- ------- ------- -------
EARNINGS BEFORE INCOME TAXES -- FTE,
EXTRAORDINARY ITEM, AND ACCOUNTING
CHANGES.............................. 3.96 3.38 4.32 2.74 3.49
Applicable income taxes -- FTE................... (1.51) (1.33) (1.64) (1.07) (1.31)
------- ------- ------- ------- -------
EARNINGS BEFORE EXTRAORDINARY ITEM AND
ACCOUNTING CHANGES................... 2.45 2.05 2.68 1.67 2.18
Extraordinary item and accounting changes, net of
taxes.......................................... -- -- -- -- 0.08
Preferred stock dividends........................ -- -- (0.02) (0.04) (0.05)
------- ------- ------- ------- -------
NET EARNINGS........................... $ 2.45 $ 2.05 $ 2.66 $ 1.63 $ 2.21
======= ======= ======= ======= =======
Change in net earnings applicable to diluted
earnings per share using previous year average
shares outstanding............................. $ 0.45 $ (0.49) $ 1.08 $ (0.13) $ 0.89
Change in average shares outstanding............. (0.05) (0.12) (0.05) (0.45) (0.41)
------- ------- ------- ------- -------
Change in net earnings................. $ 0.40 $ (0.61) $ 1.03 $ (0.58) $ 0.48
======= ======= ======= ======= =======
AVERAGE DILUTED SHARES (IN THOUSANDS)............ 85,195 83,542 78,798 77,579 60,832
======= ======= ======= ======= =======
</TABLE>
- ---------------
FTE -- Fully taxable-equivalent
27
<PAGE> 30
TABLE 3. BALANCE SHEET IMPACT OF CONSUMMATED ACQUISITIONS
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------------------------- ---------------------------------- ----------
CAPITAL-MIAMI MAGNA OTHERS TOTAL LEADER OTHERS TOTAL TOTAL
------------- ---------- -------- ---------- ---------- -------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing
deposits at
financial
institutions........ $ 18,441 $ 23,032 $ 100 $ 41,573 $ 241 $ 2,540 $ 2,781 $ 2,367
Loans, net of unearned
income.............. 1,617,896 883,404 150,279 2,651,579 2,248,213 487,274 2,735,487 923,678
Allowance for losses
on loans............ (30,676) (15,983) (3,138) (49,797) (31,645) (6,479) (38,124) (19,717)
---------- ---------- -------- ---------- ---------- -------- ---------- ----------
Net loans....... 1,587,220 867,421 147,141 2,601,782 2,216,568 480,795 2,697,363 903,961
Investment
securities.......... 219,796 115,189 60,565 395,550 836,583 212,303 1,048,886 169,373
Intangible assets..... 1,477 11,051 2,746 15,274 52,985 9,356 62,341 15,608
Cash and cash
equivalents......... 238,197 74,751 26,030 338,978 36,802 73,628 110,430 138,525
Other real estate,
net................. 1,652 9,579 759 11,990 1,070 1,414 2,484 2,590
Premises and
equipment........... 28,037 32,090 4,607 64,734 19,013 20,293 39,306 29,173
Other assets.......... 60,825 57,401 4,192 122,418 247,659 12,295 259,954 18,736
---------- ---------- -------- ---------- ---------- -------- ---------- ----------
TOTAL ASSETS.... $2,155,645 $1,190,514 $246,140 $3,592,299 $3,410,921 $812,624 $4,223,545 $1,280,333
========== ========== ======== ========== ========== ======== ========== ==========
LIABILITIES
Deposits.............. $1,290,429 $ 887,437 $214,988 $2,392,854 $1,697,496 $710,800 $2,408,296 $1,138,644
Other interest-bearing
liabilities......... 429,691 141,803 280 571,774 1,384,610 18,585 1,403,195 30,682
Other liabilities..... 290,533 33,531 3,876 327,940 72,755 9,319 82,074 16,036
---------- ---------- -------- ---------- ---------- -------- ---------- ----------
TOTAL
LIABILITIES... $2,010,653 $1,062,771 $219,144 $3,292,568 $3,154,861 $738,704 $3,893,565 $1,185,362
========== ========== ======== ========== ========== ======== ========== ==========
PURCHASE PRICE/CAPITAL
CONTRIBUTION/EQUITY... $ 144,992 $ 127,743 $ 26,996 $ 299,731 $ 256,060 $ 73,920 $ 329,980 $ 94,971
========== ========== ======== ========== ========== ======== ========== ==========
</TABLE>
28
<PAGE> 31
TABLE 4. AVERAGE BALANCE SHEETS AND AVERAGE INTEREST RATES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
1997 1996
--------------------------------- ---------------------------------
INTEREST FTE INTEREST FTE
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...... $ 52,213 $ 2,627 5.03% $ 26,403 $ 1,593 6.03%
Federal funds sold and
securities purchased under
agreements to resell........ 160,328 9,114 5.68 312,162 16,948 5.43
Trading account assets........ 204,765 14,956 7.30 192,856 13,895 7.20
Investment securities (1)(2)
Taxable securities.......... 2,813,950 187,221 6.65 3,752,983 247,716 6.60
Tax-exempt securities....... 474,864 43,365 9.13 502,140 45,461 9.05
----------- ---------- ----------- ----------
Total investment
securities............ 3,288,814 230,586 7.01 4,255,123 293,177 6.89
Loans, net of unearned
income (1)(3)(4)............ 12,706,965 1,175,965 9.25 11,924,605 1,105,089 9.27
----------- ---------- ----------- ----------
TOTAL EARNING ASSETS (1)
(2)(3)(4)............. 16,413,085 1,433,248 8.73 16,711,149 1,430,702 8.56
Cash and due from banks....... 608,778 634,802
Premises and equipment........ 333,658 342,798
Allowance for losses on
loans....................... (192,647) (192,172)
Other assets.................. 828,286 705,778
----------- -----------
TOTAL ASSETS............ $17,991,160 $18,202,355
=========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Money market accounts......... $ 1,860,230 $ 66,839 3.59% $ 1,974,092 $ 65,692 3.33%
Savings deposits.............. 2,512,641 59,408 2.36 2,399,139 58,408 2.43
Certificates of deposit of
$100,000 and over........... 1,396,928 78,046 5.59 1,277,645 74,071 5.80
Other time deposits........... 5,345,573 290,224 5.43 5,734,545 314,497 5.48
Short-term borrowings......... 665,134 34,307 5.16 1,089,550 59,553 5.47
Short-term bank notes......... 119,493 6,973 5.84 88,361 5,136 5.81
Long-term debt
Federal Home Loan Bank
advances.................. 888,206 52,190 5.88 960,213 55,641 5.79
Subordinated capital
notes..................... 174,173 11,726 6.73 211,866 15,419 7.28
Medium-term bank notes...... 135,000 8,943 6.62 42,637 2,801 6.57
Trust Preferred
Securities................ 198,956 16,511 8.30 10,871 872 8.02
Other....................... 270,987 21,142 7.80 214,413 16,049 7.49
----------- ---------- ----------- ----------
TOTAL INTEREST-BEARING
LIABILITIES........... 13,567,321 646,309 4.76 14,003,332 668,139 4.77
Noninterest-bearing demand
deposits.................... 2,196,231 -- 2,103,059 --
----------- ---------- ----------- ----------
TOTAL SOURCES OF
FUNDS................. 15,763,552 646,309 16,106,391 668,139
Other liabilities............. 536,616 562,616
Shareholders' equity.......... 1,690,992 1,533,348
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS'
EQUITY................ $17,991,160 $18,202,355
=========== ===========
NET INTEREST INCOME(1).......... $ 786,939 $ 762,563
========== ==========
INTEREST RATE SPREAD(1)......... 3.97% 3.79%
==== ====
NET INTEREST MARGIN(1).......... 4.79% 4.56%
==== ====
TAXABLE-EQUIVALENT ADJUSTMENTS
Loans......................... $ 2,221 $ 3,089
Investment securities......... 14,333 14,622
---------- ----------
Total................... $ 16,554 $ 17,711
========== ==========
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1995
---------------------------------
INTEREST FTE
AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE
----------- ---------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Interest-bearing deposits at
financial institutions...... $ 81,589 $ 5,284 6.48%
Federal funds sold and
securities purchased under
agreements to resell........ 344,798 19,965 5.79
Trading account assets........ 185,497 14,192 7.65
Investment securities (1)(2)
Taxable securities.......... 3,164,086 202,889 6.41
Tax-exempt securities....... 519,195 48,081 9.26
----------- ----------
Total investment
securities............ 3,683,281 250,970 6.81
Loans, net of unearned
income (1)(3)(4)............ 10,662,222 994,214 9.32
----------- ----------
TOTAL EARNING ASSETS (1)
(2)(3)(4)............. 14,957,387 1,284,625 8.59
Cash and due from banks....... 596,207
Premises and equipment........ 320,587
Allowance for losses on
loans....................... (179,852)
Other assets.................. 568,835
-----------
TOTAL ASSETS............ $16,263,164
===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Money market accounts......... $ 1,865,027 $ 50,163 2.69%
Savings deposits.............. 2,311,574 59,327 2.57
Certificates of deposit of
$100,000 and over........... 1,084,207 54,754 5.05
Other time deposits........... 5,480,245 314,397 5.74
Short-term borrowings......... 762,754 44,492 5.83
Short-term bank notes......... -- -- --
Long-term debt
Federal Home Loan Bank
advances.................. 792,827 49,004 6.18
Subordinated capital
notes..................... 129,995 10,337 7.95
Medium-term bank notes...... -- -- --
Trust Preferred
Securities................ -- -- --
Other....................... 177,213 13,893 7.84
----------- ----------
TOTAL INTEREST-BEARING
LIABILITIES........... 12,603,842 596,367 4.73
Noninterest-bearing demand
deposits.................... 1,954,312 --
----------- ----------
TOTAL SOURCES OF
FUNDS................. 14,558,154 596,367
Other liabilities............. 370,015
Shareholders' equity.......... 1,334,995
-----------
TOTAL LIABILITIES AND
SHAREHOLDERS'
EQUITY................ $16,263,164
===========
NET INTEREST INCOME(1).......... $ 688,258
==========
INTEREST RATE SPREAD(1)......... 3.86%
====
NET INTEREST MARGIN(1).......... 4.60%
====
TAXABLE-EQUIVALENT ADJUSTMENTS
Loans......................... $ 3,126
Investment securities......... 15,681
----------
Total................... $ 18,807
==========
</TABLE>
- ---------------
(1) Fully taxable-equivalent yields are calculated assuming a 35% federal income
tax rate.
(2) Yields are calculated on historical cost and exclude the impact of the
unrealized gain (loss) on available for sale securities.
(3) Includes loan fees, immaterial in amount, in both interest income and the
calculation of the yield on loans.
(4) Includes loans on nonaccrual status.
29
<PAGE> 32
TABLE 5. ANALYSIS OF VOLUME AND RATE CHANGES
<TABLE>
<CAPTION>
1997 VERSUS 1996 1996 VERSUS 1995
--------------------------------- ----------------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO CHANGE IN:(1) DUE TO CHANGE IN:(1)
-------------------- TOTAL --------------------- TOTAL
AVERAGE AVERAGE INCREASE AVERAGE AVERAGE INCREASE
VOLUME RATE (DECREASE) VOLUME RATE (DECREASE)
--------- -------- ---------- --------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits at
financial institutions....... $ 1,337 $ (303) $ 1,034 $ (3,352) $ (339) $ (3,691)
Federal funds sold and
securities purchased under
agreements to resell......... (8,597) 763 (7,834) (1,819) (1,198) (3,017)
Trading account assets.......... 868 193 1,061 550 (847) (297)
Investment securities -- FTE.... (67,666) 5,075 (62,591) 39,371 2,836 42,207
Loans, net of unearned income --
FTE.......................... 72,406 (1,530) 70,876 117,025 (6,150) 110,875
-------- ------- -------- -------- -------- --------
TOTAL INTEREST INCOME... (1,652) 4,198 2,546 151,775 (5,698) 146,077
-------- ------- -------- -------- -------- --------
INTEREST EXPENSE
Money market accounts........... (3,916) 5,063 1,147 3,071 12,458 15,529
Savings deposits................ 2,714 (1,714) 1,000 2,199 (3,118) (919)
Certificates of deposit of
$100,000 and over............ 6,734 (2,759) 3,975 10,558 8,759 19,317
Other time deposits............. (21,146) (3,127) (24,273) 14,259 (14,159) 100
Short-term borrowings........... (20,792) (2,617) (23,409) 22,938 (2,741) 20,197
Long-term debt.................. 19,097 633 19,730 22,593 (5,045) 17,548
-------- ------- -------- -------- -------- --------
TOTAL INTEREST
EXPENSE............... (17,309) (4,521) (21,830) 75,618 (3,846) 71,772
-------- ------- -------- -------- -------- --------
CHANGE IN NET INTEREST INCOME..... $ 15,657 $ 8,719 $ 24,376 $ 76,157 $ (1,852) $ 74,305
======== ======= ======== ======== ======== ========
PERCENTAGE INCREASE IN NET
INTEREST INCOME OVER PRIOR
PERIOD.......................... 3.20% 10.80%
======== ========
</TABLE>
- ---------------
FTE -- Fully taxable-equivalent
(1) The change due to both rate and volume has been allocated to change due to
volume and change due to rate in proportion to the relationship of the
absolute dollar amounts of the change in each.
30
<PAGE> 33
TABLE 6. AVERAGE DEPOSITS(1)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Noninterest-bearing demand............................ $ 2,196,231 $ 2,103,059 $ 1,954,312 $ 1,923,194 $ 1,766,661
Money market(2)....................................... 1,860,230 1,974,092 1,865,027 2,035,496 2,309,466
Savings(3)............................................ 2,512,641 2,399,139 2,311,574 2,413,878 1,792,854
Other time(4)......................................... 5,345,573 5,734,545 5,480,245 5,114,664 4,714,238
----------- ----------- ----------- ----------- -----------
TOTAL AVERAGE CORE DEPOSITS................... 11,914,675 12,210,835 11,611,158 11,487,232 10,583,219
Certificates of deposit of $100,000 and over.......... 1,396,928 1,277,645 1,084,207 958,325 970,869
----------- ----------- ----------- ----------- -----------
TOTAL AVERAGE DEPOSITS........................ $13,311,603 $13,488,480 $12,695,365 $12,445,557 $11,554,088
=========== =========== =========== =========== ===========
</TABLE>
- ---------------
(1) Table 4 presents the average rate paid on the above deposit categories for
the three years in the period ended December 31, 1997.
(2) Includes money market savings accounts and super NOW accounts.
(3) Includes regular savings accounts, NOW accounts, and premium savings
accounts.
(4) Includes certificates of deposit of less than $100,000, investment savings
deposits, IRAs, and Club accounts.
TABLE 7. COMPOSITION OF THE LOAN PORTFOLIO
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial, financial, and agricultural................ $ 1,940,781 $ 1,839,722 $ 1,864,625 $ 1,842,496 $1,625,855
Foreign................................................ 207,343 145,483 127,623 115,316 84,163
Accounts receivable -- factoring....................... 579,067 452,522 319,487 247,135 221,377
Real estate -- construction............................ 639,696 576,154 492,909 425,893 321,915
Real estate -- mortgage
Secured by 1-4 family residential.................... 3,603,097 3,840,952 3,564,526 3,502,235 2,728,430
FHA/VA government-insured/guaranteed................. 1,319,553 1,555,308 1,002,393 740,276 477,551
Other mortgage....................................... 2,055,420 1,674,555 1,418,021 1,376,645 1,207,826
Home equity............................................ 290,634 237,595 220,252 201,352 180,399
Consumer
Credit cards and related plans....................... 558,705 653,995 446,715 309,940 141,670
Other consumer....................................... 1,427,756 1,565,159 1,425,213 1,307,652 1,093,103
Direct lease financing................................. 65,037 73,306 74,551 50,479 34,717
----------- ----------- ----------- ----------- ----------
TOTAL LOANS.................................... 12,687,089 12,614,751 10,956,315 10,119,419 8,117,006
Less: Unearned income.................................. 28,525 36,180 39,008 44,961 39,854
----------- ----------- ----------- ----------- ----------
TOTAL LOANS, NET OF UNEARNED INCOME............ $12,658,564 $12,578,571 $10,917,307 $10,074,458 $8,077,152
=========== =========== =========== =========== ==========
</TABLE>
31
<PAGE> 34
TABLE 8. ALLOCATION OF THE ALLOWANCE FOR LOSSES ON LOANS BY CATEGORY OF LOANS
AND THE PERCENTAGE OF LOANS BY CATEGORY TO TOTAL LOANS OUTSTANDING
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------------------------------
1997 1996 1995 1994
---------------------- ---------------------- ---------------------- ----------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
OF LOANS TO OF LOANS TO OF LOANS TO OF LOANS TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
-------- ----------- -------- ----------- -------- ----------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial,
financial, and
agricultural....... $ 46,721 22% $ 37,805 21% $ 48,698 22% $ 54,728 22%
Foreign.............. 3,150 2 1,300 1 1,400 1 300 1
Real estate --
construction....... 10,512 6 7,390 5 9,026 5 7,488 5
Real estate --
mortgage........... 83,597 50 78,582 50 63,600 50 67,599 52
Consumer............. 80,487 19 63,053 22 56,053 21 43,961 19
Direct lease
financing.......... 922 1 988 1 1,191 1 528 1
-------- --- -------- --- -------- --- -------- ---
Total........ $225,389 100% $189,118 100% $179,968 100% $174,604 100%
======== === ======== === ======== === ======== ===
<CAPTION>
DECEMBER 31,
----------------------
1993
----------------------
PERCENTAGE
OF LOANS TO
AMOUNT TOTAL LOANS
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Commercial,
financial, and
agricultural....... $ 68,154 24%
Foreign.............. 8,000 1
Real estate --
construction....... 4,931 4
Real estate --
mortgage........... 62,431 52
Consumer............. 28,289 19
Direct lease
financing.......... 525 --
-------- ---
Total........ $172,330 100%
======== ===
</TABLE>
The allocation of the allowance is presented based in part on evaluations of
specific loans, past history, and economic conditions within specific industries
or geographic areas. Since all of these factors are subject to change, the
current allocation of the allowance is not necessarily indicative of the
breakdown of future losses. No portion of the allowance for losses on loans has
been allocated to FHA/VA government-insured/guaranteed loans since they
represent minimal credit risk.
TABLE 9. NONACCRUAL, RESTRUCTURED, AND PAST DUE LOANS AND FORECLOSED PROPERTIES
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
Domestic.................................................. $ 94,488 $ 89,308 $ 71,024 $ 53,683 $ 59,543
Foreign................................................... 96 96 2,072 334 7,312
Restructured loans.......................................... 10,021 11,266 11,271 15,349 22,546
-------- -------- -------- -------- --------
TOTAL NONPERFORMING LOANS........................... 104,605 100,670 84,367 69,366 89,401
-------- -------- -------- -------- --------
Foreclosed properties:
Other real estate, net.................................... 22,059 31,842 23,202 30,730 44,152
Other foreclosed properties............................... 1,993 989 1,138 669 883
-------- -------- -------- -------- --------
TOTAL FORECLOSED PROPERTIES......................... 24,052 32,831 24,340 31,399 45,035
-------- -------- -------- -------- --------
TOTAL NONPERFORMING ASSETS.......................... $128,657 $133,501 $108,707 $100,765 $134,436
======== ======== ======== ======== ========
Loans 90 days or more past due and not on nonaccrual status:
Domestic.................................................. $ 24,063 $ 23,480 $ 20,711 $ 9,083 $ 13,891
Foreign................................................... -- -- -- 1,500 --
-------- -------- -------- -------- --------
TOTAL LOANS 90 DAYS OR MORE PAST DUE................ $ 24,063 $ 23,480 $ 20,711 $ 10,583 $ 13,891
======== ======== ======== ======== ========
FHA/VA GOVERNMENT-INSURED/GUARANTEED LOANS:
Loans 90 days or more past due and not on nonaccrual
status.................................................. $516,692 $724,364 $557,875 $282,523 $144,892
Nonaccrual................................................ 14,794 -- -- -- --
</TABLE>
32
<PAGE> 35
TABLE 10. ALLOWANCE FOR LOSSES ON LOANS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE AT BEGINNING OF PERIOD.............. $ 189,118 $ 179,968 $ 174,604 $ 172,330 $ 141,281
LOANS CHARGED OFF
Commercial, financial, and agricultural... 17,089 17,179 11,086 11,919 18,750
Foreign................................... -- 3,391 743 6,893 1,389
Real estate -- construction............... 192 367 318 312 901
Real estate -- mortgage................... 5,714 5,305 6,601 8,176 4,323
Consumer.................................. 25,971 23,682 15,303 11,016 11,390
Credit cards and related plans............ 50,070 28,835 14,192 2,911 2,817
Direct lease financing.................... 30 48 52 6 52
----------- ----------- ----------- ----------- ----------
Total charge-offs.................. 99,066 78,807 48,295 41,233 39,622
----------- ----------- ----------- ----------- ----------
RECOVERIES ON LOANS PREVIOUSLY CHARGED OFF
Commercial, financial, and agricultural... 5,904 4,108 6,816 7,556 7,141
Foreign................................... 10 -- 1,632 1,523 28
Real estate -- construction............... 174 16 429 468 59
Real estate -- mortgage................... 2,750 2,233 2,170 2,983 932
Consumer.................................. 2,920 5,654 4,843 4,746 4,793
Credit cards and related plans............ 6,686 2,044 1,039 857 860
Direct lease financing.................... 27 4 52 133 54
----------- ----------- ----------- ----------- ----------
Total recoveries................... 18,471 14,059 16,981 18,266 13,867
----------- ----------- ----------- ----------- ----------
Net charge-offs............................. 80,595 64,748 31,314 22,967 25,755
Provisions charged to expense............... 113,633 68,948 33,917 15,989 35,235
Allowance related to the sale of certain
loans..................................... -- (1,628) -- -- --
Increase due to acquisitions................ 3,233 6,578 2,761 9,252 21,569
----------- ----------- ----------- ----------- ----------
BALANCE AT END OF PERIOD.................... $ 225,389 $ 189,118 $ 179,968 $ 174,604 $ 172,330
=========== =========== =========== =========== ==========
Total loans, net of unearned income, at end
of period................................. $12,658,564 $12,578,571 $10,917,307 $10,074,458 $8,077,152
Less: FHA/VA government-insured/guaranteed
loans..................................... 1,319,553 1,555,308 1,002,393 740,276 477,551
----------- ----------- ----------- ----------- ----------
LOANS USED TO CALCULATE RATIOS............ $11,339,011 $11,023,263 $ 9,914,914 $ 9,334,182 $7,599,601
=========== =========== =========== =========== ==========
Average total loans, net of unearned income,
during period............................. $12,706,965 $11,924,605 $10,662,222 $ 9,180,437 $7,925,718
Less: Average FHA/VA government-
insured/guaranteed loans.................. 1,487,085 1,287,183 876,565 598,722 375,199
----------- ----------- ----------- ----------- ----------
AVERAGE LOANS USED TO CALCULATE RATIOS.... $11,219,880 $10,637,422 $ 9,785,657 $ 8,581,715 $7,550,519
=========== =========== =========== =========== ==========
CREDIT QUALITY RATIOS(1)
Allowance at end of period to loans, net
of unearned income...................... 1.99% 1.72% 1.82% 1.87% 2.27%
Allowance at end of period to average
loans, net of unearned income........... 2.01 1.78 1.84 2.03 2.28
Allowance for losses on loans as a
percentage of nonperforming loans....... 215 188 213 252 193
Net charge-offs to average loans, net of
unearned income......................... .72 .61 .32 .27 .34
Provision to average loans, net of
unearned income......................... 1.01 .65 .35 .19 .47
Nonperforming loans as a percentage of
loans................................... .92 .91 .85 .74 1.18
Nonperforming assets as a percentage of
loans plus foreclosed properties........ 1.13 1.21 1.09 1.08 1.76
Loans 90 days or more past due and not on
nonaccrual status as a percentage of
loans................................... .21 .21 .21 .11 .18
</TABLE>
- ---------------
(1) Ratio calculations exclude FHA/VA government-insured/guaranteed loans since
they represent minimal credit risk to the Corporation. See the "Loans"
discussion for additional information regarding the FHA/VA
government-insured/guaranteed loans and Table 9 for the detail of
nonperforming assets.
33
<PAGE> 36
TABLE 11. RATE SENSITIVITY ANALYSIS AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTEREST-SENSITIVE WITHIN (1)(7)
----------------------------------------------------------------------------------------
0-30 31-90 91-180 181-365 1-2 2-5 OVER NONINTEREST-
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)(4).......... $3,363 $ 722 $ 833 $1,349 $1,313 $3,048 $1,954 $ 105 $12,687
Investment
securities(5)(6)......... 384 172 305 407 547 717 716 -- 3,248
Other earning assets....... 366 125 1 -- -- -- -- -- 492
Other assets............... -- -- -- -- -- -- -- 1,678 1,678
------ ------- ------ ------ ------ ------ ------ ------- -------
TOTAL ASSETS........ $4,113 $ 1,019 $1,139 $1,756 $1,860 $3,765 $2,670 $ 1,783 $18,105
====== ======= ====== ====== ====== ====== ====== ======= =======
SOURCES OF FUNDS
Money market
deposits(7)(8)........... $ -- $ 683 $ -- $ 683 $ -- $ 911 $ -- $ -- $ 2,277
Other savings and time
deposits................. 843 1,567 1,046 1,279 704 1,954 20 -- 7,413
Certificates of deposit of
$100,000 and over........ 271 300 279 379 141 56 1 -- 1,427
Short-term borrowings...... 830 1 -- 1 -- -- -- -- 832
Short and medium-term bank
notes.................... -- -- -- 30 45 60 -- -- 135
Federal Home Loan Bank
advances................. 266 320 3 5 12 16 82 -- 704
Other long-term debt....... 319 1 1 2 2 13 373 -- 711
Noninterest-bearing
deposits................. -- -- -- -- -- -- -- 2,323 2,323
Other liabilities.......... -- -- -- -- -- -- -- 536 536
Shareholders' equity....... -- -- -- -- -- -- -- 1,747 1,747
------ ------- ------ ------ ------ ------ ------ ------- -------
TOTAL SOURCES OF
FUNDS............. $2,529 $ 2,872 $1,329 $2,379 $ 904 $3,010 $ 476 $ 4,606 $18,105
====== ======= ====== ====== ====== ====== ====== ======= =======
INTEREST-RATE SENSITIVITY
GAP........................ $1,584 $(1,853) $ (190) $ (623) $ 956 $ 755 $2,194 $(2,823)
CUMULATIVE INTEREST RATE
SENSITIVITY GAP (8)........ 1,584 (269) (459) (1,082) (126) 629 2,823 --
CUMULATIVE GAP AS A
PERCENTAGE OF TOTAL
ASSETS (8)................. 9% (1)% (3)% (6)% (1)% 3% 16% --%
</TABLE>
- ---------------
MANAGEMENT HAS MADE THE FOLLOWING ASSUMPTIONS IN 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) 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.
(8) If all money market, NOW and savings deposits had been included in the 0-30
Days category, the cumulative gap as a percentage of total assets would have
been negative (16%), (19%), (20%), (19%), (14%), and positive 3% and 16%,
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 December 31, 1997.
34
<PAGE> 37
TABLE 12. INVESTMENT SECURITIES AND OTHER EARNING ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1997 1996 1995
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
U.S. Government obligations
U.S. Treasury............................................ $ 731,440 $ 915,251 $ 947,613
U.S. Government agencies................................. 1,838,178 1,790,208 2,363,066
---------- ---------- ----------
Total U.S. Government obligations................ 2,569,618 2,705,459 3,310,679
Obligations of states and political subdivisions........... 509,142 508,271 522,344
Other investment securities................................ 168,920 173,487 137,013
---------- ---------- ----------
Total investment securities...................... 3,247,680 3,387,217 3,970,036
Interest-bearing deposits at financial institutions........ 24,490 20,488 51,000
Federal funds sold and securities purchased under
agreements to resell..................................... 109,192 205,567 521,655
Trading account assets..................................... 187,419 260,266 136,772
Loans held for resale...................................... 170,742 109,156 120,431
---------- ---------- ----------
Total investment securities and other earning
assets......................................... $3,739,523 $3,982,694 $4,799,894
========== ========== ==========
</TABLE>
TABLE 13. RISK-BASED CAPITAL
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
TIER 1 CAPITAL
Shareholders' equity.................................. $ 1,746,866 $ 1,618,883 $ 1,450,546
Trust Preferred Securities and minority interest in
consolidated subsidiaries.......................... 214,460 211,637 1,088
Less: Goodwill and other intangibles................. (44,570) (53,081) (56,260)
Disallowed deferred tax asset.................. (1,601) (1,867) (2,237)
Unrealized gain on available for sale
securities......................................... (38,729) (23,231) (31,931)
----------- ----------- -----------
TOTAL TIER 1 CAPITAL.......................... 1,876,426 1,752,341 1,361,206
TIER 2 CAPITAL
Allowance for losses on loans......................... 152,177 142,856 126,200
Qualifying long-term debt............................. 174,232 174,121 174,166
----------- ----------- -----------
TOTAL CAPITAL BEFORE DEDUCTIONS............... 2,202,835 2,069,318 1,661,572
Less investment in unconsolidated subsidiaries........ (10,628) (1,812) (214)
----------- ----------- -----------
TOTAL CAPITAL................................. $ 2,192,207 $ 2,067,506 $ 1,661,358
=========== =========== ===========
RISK-WEIGHTED ASSETS.................................... $12,100,939 $11,747,824 $10,246,806
=========== =========== ===========
RATIOS
Equity to assets...................................... 9.65% 8.83% 8.44%
Leverage ratio(1)..................................... 10.48 9.50 8.11
Tier 1 capital to risk-weighted assets(1)............. 15.51 14.92 13.28
Total capital to risk-weighted assets(1).............. 18.12 17.60 16.21
</TABLE>
- ---------------
(1) Regulatory minimums for institutions considered "well-capitalized" are 5%,
6%, and 10% for the leverage, Tier 1 capital to risk-weighted assets, and
Total capital to risk-weighted assets ratios, respectively. As of December
31, 1997, all of the Corporation's banking subsidiaries were considered
"well-capitalized" for purposes of FDIC deposit insurance assessments. See
Note 12 to the consolidated financial statements for a comparison of the
Corporation's capital levels and ratios to the regulatory minimums for
"adequately capitalized" and "well capitalized."
35
<PAGE> 38
TABLE 14. SELECTED QUARTERLY DATA
<TABLE>
<CAPTION>
1997 QUARTERS ENDED(1)
--------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
----------- ----------- ------------ ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net interest income.......... $ 190,950 $ 194,961 $ 191,915 $ 192,559 $ 770,385
Provision for losses on
loans...................... (22,004) (22,034) (32,646) (36,949) (113,633)
Investment securities gains
(losses)................... 173 (107) 2,385 (347) 2,104
Noninterest income........... 82,451 83,621 101,310 92,124 359,506
Noninterest expense.......... (148,646) (152,932) (157,722) (238,404) (697,704)
----------- ----------- ----------- ----------- -----------
Earnings before income
taxes...................... 102,924 103,509 105,242 8,983 320,658
Applicable income taxes...... 36,479 35,251 36,489 3,678 111,897
----------- ----------- ----------- ----------- -----------
Net earnings................. $ 66,445 $ 68,258 $ 68,753 $ 5,305 $ 208,761
=========== =========== =========== =========== ===========
PER COMMON SHARE DATA
Net earnings
Basic................... $ .82 $ .84 $ .84 $ .05 $ 2.54
Diluted................. .79 .80 .81 .05 2.45
Dividends.................. .32 .375 .40 .40 1.495
UPC COMMON STOCK DATA(2)
High trading price......... $ 47.75 $ 52.13 $ 56.50 $ 67.88 $ 67.88
Low trading price.......... 38.38 41.25 49.25 57.00 38.38
Closing price.............. 40.63 51.88 55.88 67.88 67.88
Trading volume (in
thousands)(3)........... 11,211 11,449 8,310 10,001 40,971
KEY FINANCIAL DATA
Return on average assets... 1.49% 1.52% 1.52% .12% 1.16%
Return on average common
equity.................. 17.16 16.81 16.20 .98 12.54
Expense ratio(4)........... 1.44 1.47 1.32 1.92 1.54
Efficiency ratio(5)........ 52.63 52.94 52.42 61.34 54.84
Equity/assets (period
end).................... 9.21 9.55 9.75 9.65 9.65
Average earning assets..... $16,466,377 $16,515,334 $16,351,634 $16,321,265 $16,413,085
Interest income -- FTE..... 355,682 360,682 359,394 357,490 1,433,248
Yield on average earning
assets -- FTE........... 8.76% 8.76% 8.72% 8.69% 8.73%
Average interest-bearing
liabilities............. $13,806,466 $13,670,609 $13,527,649 $13,270,884 $13,567,321
Total interest expense..... 160,539 161,717 163,190 160,863 646,309
Rate on average interest-
bearing liabilities..... 4.72% 4.74% 4.79% 4.81% 4.76%
Net interest
income -- FTE........... $ 195,143 $ 198,965 $ 196,204 $ 196,627 $ 786,939
Net interest
margin -- FTE........... 4.81% 4.83% 4.76% 4.78% 4.79%
</TABLE>
36
<PAGE> 39
TABLE 14. SELECTED QUARTERLY DATA (CONTINUED)
<TABLE>
<CAPTION>
1996 QUARTERS ENDED(1)
--------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
----------- ----------- ------------ ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net interest income.......... $ 181,097 $ 187,021 $ 185,187 $ 191,547 $ 744,852
Provision for losses on
loans...................... (15,244) (16,014) (18,379) (19,311) (68,948)
Investment securities gains
(losses)................... 61 (29) (257) 4,324 4,099
Noninterest income........... 74,247 79,836 81,538 80,782 316,403
Noninterest expense.......... (156,020) (159,070) (195,075) (221,652) (731,817)
----------- ----------- ----------- ----------- -----------
Earnings before income
taxes...................... 84,141 91,744 53,014 35,690 264,589
Applicable income taxes...... 27,842 32,509 19,532 13,232 93,115
----------- ----------- ----------- ----------- -----------
Net earnings................. $ 56,299 $ 59,235 $ 33,482 $ 22,458 $ 171,474
=========== =========== =========== =========== ===========
PER COMMON SHARE DATA
Net earnings
Basic................... $ .71 $ .75 $ .41 $ .27 $ 2.13
Diluted................. .68 .71 .40 .27 2.05
Dividends.................. .27 .27 .27 .27 1.08
UPC COMMON STOCK DATA(2)
High trading price......... $ 31.75 $ 31.25 $ 36.25 $ 41.38 $ 41.38
Low trading price.......... 29.00 29.63 28.63 34.63 28.63
Closing price.............. 30.25 30.38 35.50 39.00 39.00
Trading volume (in
thousands)(3)........... 5,862 5,221 9,506 7,795 28,383
KEY FINANCIAL DATA
Return on average assets... 1.27% 1.32% .73% .48% .94%
Return on average common
equity.................. 15.76 16.26 8.60 5.52 11.38
Expense ratio(4)........... 1.70 1.61 1.55 1.59 1.61
Efficiency ratio(5)........ 57.88 56.57 57.46 55.92 56.94
Equity/assets (period
end).................... 8.52 8.58 8.55 8.83 8.83
Average earning assets..... $16,403,616 $16,630,134 $16,898,805 $16,907,819 $16,711,149
Interest income -- FTE..... 350,374 356,805 358,528 364,174 1,430,702
Yield on average earning
assets -- FTE........... 8.59% 8.63% 8.44% 8.57% 8.56%
Average interest-bearing
liabilities............. $13,693,439 $13,965,854 $14,235,981 $14,114,280 $14,003,332
Total interest expense..... 165,171 165,448 168,999 168,521 668,139
Rate on average interest-
bearing liabilities..... 4.85% 4.76% 4.72% 4.75% 4.77%
Net interest
income -- FTE........... $ 185,203 $ 191,357 $ 189,529 $ 195,653 $ 762,563
Net interest
margin -- FTE........... 4.54% 4.63% 4.46% 4.60% 4.56%
</TABLE>
- ---------------
FTE -- Fully taxable-equivalent basis
(1) Quarterly amounts for 1996 and 1997 have been restated for the fourth
quarter 1997 acquisitions of Magna and Capital-Miami which were accounted
for using the pooling of interests method of accounting. Certain quarterly
amounts for acquired entities have been restated from originally reported
amounts due to certain adjustments to conform to the Corporation's policies.
(2) Union Planters Corporation's common stock is listed on the New York Stock
Exchange (NYSE) and is traded under the symbol UPC. All share prices
represent closing prices as reported by the NYSE. There were approximately
20,000 holders of the Corporation's common stock as of December 31, 1997.
(3) Trading volume represents total volume for the period shown as reported by
NYSE.
(4) The expense ratio equals noninterest expense minus noninterest income
(excluding significant nonrecurring revenues and expenses, investment
securities gains and losses, and goodwill and other intangibles
amortization) divided by average assets.
(5) The efficiency ratio is calculated excluding the same items as in the
expense ratio calculation, dividing noninterest expense by net interest
income (FTE) plus noninterest income.
37
<PAGE> 40
TABLE 15. UNION PLANTERS CORPORATION'S BANKING SUBSIDIARIES
<TABLE>
<CAPTION>
DECEMBER 31, 1997(1)
-------------------------------------
ASSETS LOANS DEPOSITS EQUITY
------- ------ -------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
TENNESSEE
Union Planters Bank, N.A.
Memphis Bank.............................................. $ 5,407 $3,605 $2,840 $509.9
Nashville Bank............................................ 1,059 591 961 78.6
Humboldt Bank............................................. 441 291 390 37.5
Knoxville Bank............................................ 434 306 349 36.5
Jackson Bank.............................................. 326 195 297 22.1
Cookeville Bank........................................... 247 158 227 17.8
Shelbyville Bank.......................................... 201 126 171 17.3
Harriman Bank............................................. 188 122 171 13.2
Crossville Bank........................................... 183 88 163 12.9
Goodlettsville Bank....................................... 180 125 167 11.1
Chattanooga Bank.......................................... 130 71 115 13.1
Lexington Bank............................................ 112 74 103 7.1
Brownsville Bank.......................................... 92 50 74 5.2
Somerville Bank........................................... 89 55 81 6.4
Woodbury Bank............................................. 80 61 70 6.6
Hohenwald Bank............................................ 58 34 50 4.5
Erin Bank................................................. 52 31 46 5.1
Union Planters Bank of the Lakeway Area (Morristown)........ 212 151 181 15.4
Union Planters Bank of Northwest Tennessee FSB (Paris)...... 173 124 154 11.3
Selmer Bank & Trust Company................................. 95 49 86 8.0
------- ------ ------ ------
Total Tennessee.................................... $ 9,759 $6,307 $6,696 $839.6
======= ====== ====== ======
MISSISSIPPI
Union Planters Bank, N.A.
Hattiesburg Bank.......................................... $ 1,316 $1,020 $1,001 $135.8
Jackson Bank.............................................. 757 510 664 57.1
Clarksdale Bank........................................... 597 319 539 43.0
Grenada Bank.............................................. 509 363 461 44.3
New Albany Bank........................................... 296 195 266 18.8
------- ------ ------ ------
Total Mississippi.................................. $ 3,475 $2,407 $2,931 $299.0
======= ====== ====== ======
FLORIDA
Union Planters Bank of Florida (Miami)...................... $ 2,156 $1,618 $1,290 $145.0
======= ====== ====== ======
MISSOURI
Union Planters Bank, N.A.
Cape Girardeau Bank....................................... $ 670 $ 528 $ 598 $ 44.8
St. Louis Bank............................................ 197 132 175 19.4
Springfield Bank.......................................... 189 138 169 18.7
Columbia Bank............................................. 100 86 80 6.2
------- ------ ------ ------
Total Missouri..................................... $ 1,156 $ 884 $1,022 $ 89.1
======= ====== ====== ======
ARKANSAS
Union Planters Bank, N.A.
Jonesboro Bank............................................ $ 713 $ 456 $ 521 $ 57.5
Clinton Bank.............................................. 93 64 82 6.5
------- ------ ------ ------
Total Arkansas..................................... $ 806 $ 520 $ 603 $ 64.0
======= ====== ====== ======
LOUISIANA
Union Planters Bank, N.A.
Baton Rouge Bank.......................................... $ 698 $ 509 $ 605 $ 50.9
======= ====== ====== ======
ALABAMA
Union Planters Bank, N.A.
Decatur Bank.............................................. $ 449 $ 335 $ 417 $ 27.5
======= ====== ====== ======
KENTUCKY
Union Planters Bank, N.A.
Franklin Bank............................................. $ 115 $ 88 $ 105 $ 7.3
======= ====== ====== ======
</TABLE>
- ---------------
(1) State totals do not add to consolidated amounts due to eliminations.
Intercompany loans have been excluded from the individual bank totals.
38
<PAGE> 41
UNION PLANTERS CORPORATION
BANKS AND COMMUNITIES SERVED
<TABLE>
<CAPTION>
OFFICES
-------
<S> <C>
TENNESSEE
UNION PLANTERS BANK, N.A.
MEMPHIS BANK
Bartlett, Collierville, Cordova, Germantown, and
Memphis............................................. 40
NASHVILLE BANK
Antioch, Brentwood, Columbia, Dickson, Donelson,
Eagleville, Franklin, Gallatin, Goodlettsville,
Hendersonville, Lebanon, Madison, Mt. Juliet,
Murfreesboro, Nashville, and Smyrna................. 25
HUMBOLDT BANK
Dyersburg, Elbridge, Gibson, Humboldt, Martin,
Newbern, Obion, Ridgely, Ripley, Rutherford,
Tiptonville, Trenton, Union City, and Yorkville..... 27
KNOXVILLE BANK
Alcoa, Clinton, Greenback, Jefferson City,
Knoxville, Maryville, Morristown, and Oak Ridge..... 16
JACKSON BANK
Jackson and Milan................................... 9
COOKEVILLE BANK
Alexandria, Algood, Baxter, Byrdstown, Celina,
Cookeville, Dowelltown, Monterey, and Smithville.... 12
SHELBYVILLE BANK
Fayetteville, Monteagle, Shelbyville, and Tracy
City................................................ 7
HARRIMAN BANK
Harriman, Kingston, Oliver Springs, Rockwood,
Sunbright, and Wartburg............................. 6
CROSSVILLE BANK
Crossville and Fairfield Glade...................... 6
GOODLETTSVILLE BANK
Goodlettsville, Springfield, and White House........ 4
CHATTANOOGA BANK
Chattanooga, Cleveland, and East Ridge.............. 8
LEXINGTON BANK
Jackson and Lexington............................... 3
BROWNSVILLE BANK
Brownsville and Stanton............................. 4
SOMERVILLE BANK
Bolivar, Somerville, and Whiteville................. 3
WOODBURY BANK
Auburntown and Woodbury............................. 3
HOHENWALD BANK........................................ 3
ERIN BANK
Cumberland City and Erin............................ 2
UNION PLANTERS BANK OF THE LAKEWAY AREA
Jefferson City, Morristown, Newport, and Talbott.... 7
UNION PLANTERS BANK OF NORTHWEST TENNESSEE FSB
Camden, Huntingdon, McKenzie, Paris, and Waverly.... 6
SELMER BANK AND TRUST COMPANY
Bethel Springs, Ramer, and Selmer................... 4
MISSISSIPPI
UNION PLANTERS BANK, N.A.
HATTIESBURG BANK
Bassfield, Bay St. Louis, Biloxi, Collins,
Ellisville, Gulfport, Hattiesburg, Laurel, Moss
Point, Mount Olive, Ocean Springs, Pascagoula,
Petal, and Prentiss................................. 38
UNION PLANTERS BANK, N.A.
JACKSON BANK
Brandon, Byram, Canton, Clinton, Collinsville,
Crystal Springs, Decatur, Flowood, Forest,
Hazlehurst, Jackson, Madison, Meridian, Newton,
Pearl, Philadelphia, Ridgeland, Terry, Union, and
Vicksburg........................................... 38
</TABLE>
<TABLE>
<CAPTION>
OFFICES
-------
<S> <C>
CLARKSDALE BANK
Batesville, Charleston, Clarksdale, Cleveland, Drew,
Friars Point, Greenville, Greenwood, Itta Bena,
Lambert, Leland, Lula, Moorhead, Pope, Shaw, Sledge,
and Sumner.......................................... 29
GRENADA BANK
Ackerman, Calhoun City, Columbus, Derma, Eupora,
Grenada, Houston, Kosciusko, Louisville, Water
Valley, West Point, and Winona...................... 21
NEW ALBANY BANK
Ashland, Baldwyn, New Albany, Oxford, Ripley, and
Tupelo.............................................. 12
MEMPHIS BANK
Olive Branch and Southaven.......................... 4
FLORIDA
UNION PLANTERS BANK OF FLORIDA
Boca Raton, Coral Gables, Coral Springs, Deerfield
Beach, Delray Beach, Ft. Lauderdale, Hialeah, Miami,
North Bay Village, North Miami Beach, South Miami
Beach, Plantation, and West Palm Beach.............. 28
MISSOURI
UNION PLANTERS BANK, N.A.
CAPE GIRARDEAU BANK
Advance, Benton, Cape Girardeau, Charleston, Dexter,
East Prairie, Jackson, Marble Hill, Matthews, New
Madrid, Oran, Perryville, Poplar Bluff, Ste.
Genevieve, Scott City, and Sikeston................. 24
ST. LOUIS BANK
Affton, Clayton, Rock Hill, and St. Louis........... 6
SPRINGFIELD BANK
Aurora, Bolivar, Branson, El Dorado, Mt. Vernon,
Ozark, Republic, Spring, and Springfield............ 17
COLUMBIA BANK
Ashland and Columbia................................ 4
ARKANSAS
UNION PLANTERS BANK, N.A.
JONESBORO BANK
Bono, Brookland, Cherokee Village, Hardy, Jonesboro,
Mammoth Spring, Marmaduke, Newport, Paragould,
Rector, Sidney, and Weiner.......................... 22
CLINTON BANK
Bee Branch, Clinton, Fairfield Bay, Leslie,
Marshall, and Mountain View......................... 6
MEMPHIS BANK
Cotton Plant, Crawfordsville, Earle, Forrest City,
Joiner, Luxora, Marion, Osceola, and West Memphis... 14
LOUISIANA
UNION PLANTERS BANK, N.A.
BATON ROUGE BANK
Baton Rouge, Covington, Galliano, Larose,
Mandeville, and Thibodaux........................... 22
ALABAMA
UNION PLANTERS BANK, N.A.
DECATUR BANK
Athens, Decatur, Florence, Hartselle, Huntsville,
Madison, Moulton, Muscle Shoals, Owens Cross Roads,
Sheffield, and Tuscumbia............................ 17
HATTIESBURG BANK
Chickasaw, Daphane, Foley, Mobile, and Saraland..... 13
KENTUCKY
UNION PLANTERS BANK, N.A.
FRANKLIN BANK
Adairville and Franklin............................. 4
---
TOTAL BRANCH OFFICES.................................... 514
===
</TABLE>
39
<PAGE> 42
REPORT OF MANAGEMENT
The accompanying financial statements and related financial information in
this annual report were prepared by the management of Union Planters Corporation
in accordance with generally accepted accounting principles and, where
appropriate, reflect management's best estimates and judgment. Management is
responsible for the integrity, objectivity, consistency, and fair presentation
of the financial statements and all financial information contained in this
annual report.
Management maintains and depends upon internal accounting systems and
related internal controls. Internal controls are designed to ensure that
transactions are properly authorized and recorded in the Corporation's financial
records and to safeguard the Corporation's assets from material loss or misuse.
The Corporation utilizes internal monitoring mechanisms and an extensive
external audit to monitor compliance with, and assess the effectiveness of the
internal controls. Management believes the Corporation's internal controls
provide reasonable assurance that the Corporation's assets are safeguarded and
that its financial records are reliable.
The Audit Committee of the Board of Directors meets periodically with
representatives of the Corporation's independent accountants, the corporate
audit manager, and management to review accounting policies, control procedures,
and audit and regulatory examination reports. The independent accountants and
corporate audit manager have free access to the Committee, with and without the
presence of management, to discuss the results of their audit work and their
evaluation of the internal controls and the quality of financial reporting.
The financial statements have been audited by Price Waterhouse LLP,
independent accountants, who were engaged to express an opinion as to the
fairness of presentation of such financial statements.
<TABLE>
<S> <C>
/s/ BENJAMIN W. RAWLINS, JR. /s/ JACK W. PARKER
Benjamin W. Rawlins, Jr. Jack W. Parker
Chairman and Executive Vice President and
Chief Executive Officer Chief Financial Officer
</TABLE>
40
<PAGE> 43
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Union Planters Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of earnings, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Union Planters Corporation (the Corporation) and its subsidiaries at December
31, 1997 and 1996, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Corporation's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/S/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Memphis, Tennessee
January 15, 1998, except as to
Note 2 which is as of
March 3, 1998
41
<PAGE> 44
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks................................... $ 816,472 $ 789,473
Interest-bearing deposits at financial institutions....... 24,490 20,488
Federal funds sold and securities purchased under
agreements to resell................................... 109,192 205,567
Trading account assets.................................... 187,419 260,266
Loans held for resale..................................... 170,742 109,156
Available for sale investment securities (amortized cost:
$3,185,002 and $3,349,244, respectively)............... 3,247,680 3,387,217
Loans..................................................... 12,687,089 12,614,751
Less: Unearned income.................................. (28,525) (36,180)
Allowance for losses on loans.................... (225,389) (189,118)
----------- -----------
Net loans........................................ 12,433,175 12,389,453
Premises and equipment, net............................... 330,703 334,336
Accrued interest receivable............................... 204,504 232,282
FHA/VA claims receivable.................................. 134,112 80,560
Mortgage servicing rights................................. 61,346 66,993
Goodwill and other intangibles............................ 52,655 63,537
Other assets.............................................. 332,589 391,260
----------- -----------
TOTAL ASSETS...................................... $18,105,079 $18,330,588
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing.................................... $ 2,323,367 $ 2,223,112
Certificates of deposit of $100,000 and over........... 1,426,751 1,322,869
Other interest-bearing................................. 9,690,151 9,968,163
----------- -----------
Total deposits.................................... 13,440,269 13,514,144
Short-term borrowings..................................... 831,627 696,051
Short-and medium-term bank notes.......................... 135,000 400,000
Federal Home Loan Bank advances........................... 703,996 985,042
Other long-term debt...................................... 710,908 585,951
Accrued interest, expenses, and taxes..................... 145,452 163,804
Other liabilities......................................... 390,961 366,713
----------- -----------
TOTAL LIABILITIES................................. 16,358,213 16,711,705
----------- -----------
Commitments and contingent liabilities (Notes 14, 17,
19).................................................... -- --
Shareholders' equity
Convertible preferred stock (Note 10).................. 54,709 83,809
Common stock, $5 par value; 100,000,000 shares
authorized; 81,650,946 issued and outstanding
(78,447,057 in 1996).................................. 408,255 392,235
Additional paid-in capital............................. 193,032 149,070
Retained earnings...................................... 1,061,670 981,037
Unearned compensation.................................. (9,529) (10,499)
Unrealized gain on available for sale securities,
net................................................... 38,729 23,231
----------- -----------
TOTAL SHAREHOLDERS' EQUITY........................ 1,746,866 1,618,883
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $18,105,079 $18,330,588
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
42
<PAGE> 45
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1996 1995
---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans........................... $1,165,925 $1,095,148 $ 986,230
Interest on investment securities
Taxable........................................... 187,221 247,716 202,890
Tax-exempt........................................ 29,032 30,839 32,400
Interest on deposits at financial institutions....... 2,627 1,593 5,284
Interest on federal funds sold and securities
purchased under agreements to resell.............. 9,114 16,948 19,965
Interest on trading account assets................... 14,956 13,895 14,191
Interest on loans held for resale.................... 7,819 6,852 4,858
---------- ---------- ----------
Total interest income........................ 1,416,694 1,412,991 1,265,818
---------- ---------- ----------
INTEREST EXPENSE
Interest on deposits................................. 494,517 512,668 478,641
Interest on short-term borrowings.................... 41,280 64,689 44,492
Interest on long-term debt........................... 110,512 90,782 73,234
---------- ---------- ----------
Total interest expense....................... 646,309 668,139 596,367
---------- ---------- ----------
NET INTEREST INCOME.......................... 770,385 744,852 669,451
PROVISION FOR LOSSES ON LOANS.......................... 113,633 68,948 33,917
---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR
LOSSES ON LOANS............................ 656,752 675,904 635,534
NONINTEREST INCOME
Service charges on deposit accounts ................. 107,248 107,535 102,932
Mortgage servicing income............................ 57,265 63,003 55,903
Bank card income..................................... 31,317 24,975 20,758
Factoring commissions................................ 30,140 26,066 19,519
Trust service income................................. 9,020 10,130 8,326
Profits and commissions from trading activities...... 7,295 5,765 12,362
Investment securities gains.......................... 2,104 4,099 1,433
Other income......................................... 117,221 78,929 72,477
---------- ---------- ----------
Total noninterest income..................... 361,610 320,502 293,710
---------- ---------- ----------
NONINTEREST EXPENSE
Salaries and employee benefits....................... 284,648 282,726 264,663
Net occupancy expense................................ 44,813 47,215 44,061
Equipment expense.................................... 43,812 44,418 42,251
Other expense........................................ 324,431 357,458 256,214
---------- ---------- ----------
Total noninterest expense.................... 697,704 731,817 607,189
---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES................. 320,658 264,589 322,055
Applicable income taxes................................ 111,897 93,115 110,799
---------- ---------- ----------
NET EARNINGS................................. $ 208,761 $ 171,474 $ 211,256
========== ========== ==========
NET EARNINGS APPLICABLE TO COMMON SHARES..... $ 203,822 $ 164,530 $ 202,644
========== ========== ==========
EARNINGS PER COMMON SHARE (NOTE 16)
Basic................................................ $ 2.54 $ 2.13 $ 2.79
Diluted.............................................. 2.45 2.05 2.66
AVERAGE SHARES OUTSTANDING
Basic................................................ 80,336,267 77,239,792 72,512,168
Diluted.............................................. 85,195,337 83,542,496 78,797,721
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
43
<PAGE> 46
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
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, 1995............... $101,098 $360,877 $ 66,548 $ 717,179 $ (7,614) $(35,402) $1,202,686
Net earnings......................... -- -- -- 211,256 -- -- 211,256
Cash dividends
Common stock, $.98 per share....... -- -- -- (39,925) -- -- (39,925)
Preferred stock.................... -- -- -- (7,251) -- -- (7,251)
Pooled institutions prior to
pooling.......................... -- -- -- (14,613) -- -- (14,613)
Common stock issued under employee
benefit plans and dividend
reinvestment plan, net of stock
exchanged.......................... -- 4,480 12,969 (516) 1,528 -- 18,461
Issuance of stock for acquisitions
(Note 2)........................... 9,712 1,740 5,551 3,585 -- (436) 20,152
Other stock transactions of pooled
institutions prior to pooling...... -- 2,028 3,783 -- -- -- 5,811
Conversion of preferred stock........ (5,200) 1,268 3,932 -- -- -- --
Redemption of preferred stock of
acquired entity.................... (13,800) -- -- -- -- -- (13,800)
Change in unrealized gain (loss) on
available for sale securities, net
of taxes........................... -- -- -- -- -- 67,769 67,769
-------- -------- -------- ---------- -------- -------- ----------
BALANCE, DECEMBER 31, 1995............. 91,810 370,393 92,783 869,715 (6,086) 31,931 1,450,546
Net earnings......................... -- -- -- 171,474 -- -- 171,474
Cash dividends
Common stock, $1.08 per share...... -- -- -- (54,333) -- -- (54,333)
Preferred stock.................... -- -- -- (6,944) -- -- (6,944)
Pooled institutions prior to
pooling.......................... -- -- -- (15,155) -- -- (15,155)
Common stock issued under employee
benefit plans and dividend
reinvestment plan, net of stock
exchanged.......................... -- 6,227 32,808 (6,539) (4,413) -- 28,083
Issuance of stock for acquisitions
(Note 2)........................... -- 13,626 16,882 22,888 -- 419 53,815
Other stock transactions of pooled
institutions prior to pooling...... -- (610) (3,321) (69) -- -- (4,000)
Conversion of preferred stock........ (8,001) 2,599 5,402 -- -- -- --
Gain from issuance of subsidiary's
common stock....................... -- -- 4,516 -- -- -- 4,516
Change in net unrealized gain on
available for sale securities, net
of taxes........................... -- -- -- -- -- (9,119) (9,119)
-------- -------- -------- ---------- -------- -------- ----------
BALANCE, DECEMBER 31, 1996............. 83,809 392,235 149,070 981,037 (10,499) 23,231 1,618,883
Net earnings......................... -- -- -- 208,761 -- -- 208,761
Cash dividends
Common stock, $1.495 per share..... -- -- -- (99,808) -- -- (99,808)
Preferred stock.................... -- -- -- (4,939) -- -- (4,939)
Pooled institutions prior to
pooling.......................... -- -- -- (9,997) -- -- (9,997)
Common stock issued under employee
benefit plans and dividend
reinvestment plan, net of stock
exchanged.......................... -- 6,403 32,527 (5,595) 970 -- 34,305
Issuance of stock for acquisitions
(Note 2)........................... -- 5,704 (2,289) 22,897 -- 424 26,736
Other stock transactions of pooled
institutions prior to pooling...... -- (597) (6,543) -- -- -- (7,140)
Conversion of preferred stock........ (29,100) 7,275 21,825 -- -- -- --
Common stock repurchased............. -- (2,765) (1,558) (30,686) -- -- (35,009)
Change in net unrealized gain on
available for sale securities, net
of taxes........................... -- -- -- -- -- 15,074 15,074
-------- -------- -------- ---------- -------- -------- ----------
BALANCE, DECEMBER 31, 1997............. $ 54,709 $408,255 $193,032 $1,061,670 $ (9,529) $ 38,729 $1,746,866
======== ======== ======== ========== ======== ======== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
44
<PAGE> 47
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings.............................................. $ 208,761 $ 171,474 $ 211,256
Reconciliation of net earnings to net cash provided by
operating activities:
Provision for losses on loans, other real estate, and
FHA/VA foreclosure claims............................. 124,785 94,792 37,527
Depreciation and amortization of premises and
equipment............................................. 34,796 38,073 35,499
Amortization and write-offs of intangibles ............. 30,581 50,943 32,519
Provisions for merger-related expenses.................. 30,635 36,095 10,182
Provisions for charter consolidation and other
expenses.............................................. 14,196 -- --
Net accretion of investment securities.................. (7,380) (8,949) (3,038)
Net realized (gains) losses on sales of investment
securities............................................ (2,104) (5,100) 463
Deferred income tax benefit............................. (1,499) (36,124) (2,810)
Decrease (increase) in assets
Trading account assets and loans held for resale...... 11,261 (170,227) (53,432)
Other assets.......................................... 40,300 (124,544) 29,965
(Decrease) increase in accrued interest, expenses,
taxes, and other liabilities.......................... (33,556) 48,544 62,150
Other, net.............................................. 1,380 (5,030) (3,495)
----------- ----------- -----------
Net cash provided by operating activities............. 452,156 89,947 356,786
----------- ----------- -----------
INVESTING ACTIVITIES
Net (increase) decrease in short-term investments......... (3,902) 33,052 (11,059)
Proceeds from sales of available for sale securities...... 676,662 907,694 663,652
Proceeds from maturities, calls, and prepayments of
available for sale securities........................... 1,379,448 2,077,491 684,989
Purchases of available for sale securities................ (1,805,751) (1,973,489) (866,994)
Proceeds from maturities, calls, and prepayments of held
to maturity securities.................................. -- 130,290 262,030
Purchases of held to maturity securities.................. -- (113,053) (126,255)
Net increase in loans..................................... (55,776) (1,425,853) (1,211,190)
Net cash received from acquired institutions ............. 26,030 53,579 10,759
Purchases of premises and equipment, net.................. (39,500) (30,742) (31,573)
----------- ----------- -----------
Net cash provided (used) by investing activities........ 177,211 (341,031) (625,641)
----------- ----------- -----------
FINANCING ACTIVITIES
Net (decrease) increase in deposits....................... (288,859) (241,007) 283,132
Net (decrease) increase in short-term borrowings.......... (128,198) (153,619) 35,291
Proceeds from long-term debt, net......................... 373,093 827,429 656,540
Repayment of long-term debt............................... (531,024) (303,178) (246,258)
Redemption of preferred stock............................. -- -- (13,800)
Proceeds from issuance of common stock.................... 33,543 20,300 22,737
Proceeds from public offering by an acquired institution
of its subsidiary's common stock........................ -- 17,633 --
Purchases of common stock, including stock transactions of
acquired entities prior to acquisition.................. (42,149) (4,000) (1,064)
Cash dividends paid....................................... (115,149) (76,501) (61,715)
----------- ----------- -----------
Net cash (used) provided by financing activities........ (698,743) 87,057 674,863
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents........ (69,376) (164,027) 406,008
Cash and cash equivalents at the beginning of the period.... 995,040 1,159,067 753,059
----------- ----------- -----------
Cash and cash equivalents at the end of the period.......... $ 925,664 $ 995,040 $ 1,159,067
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES
Cash paid for
Interest................................................ $ 658,663 $ 714,057 $ 603,080
Taxes................................................... 131,302 138,494 99,958
Unrealized gain on available for sale securities.......... 62,678 37,973 51,794
</TABLE>
NONCASH ACTIVITIES. See Notes 1, 2 and 10, respectively, regarding other real
estate transfers, acquisitions, and conversions of preferred stock.
The accompanying notes are an integral part of these consolidated financial
statements.
45
<PAGE> 48
UNION PLANTERS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Union Planters Corporation (the Corporation) is a multi-state bank holding
company headquartered in Memphis, Tennessee. The Corporation operates five
banking subsidiaries with branches in Tennessee, Mississippi, Florida, Missouri,
Arkansas, Louisiana, Alabama, and Kentucky and has 514 banking offices and 651
ATMs. At December 31, 1997, the Corporation had consolidated total assets of
$18.1 billion, making it one of the 50 largest bank holding companies based in
the United States and the largest headquartered in Tennessee. Through its
subsidiaries, the Corporation provides a diversified range of financial services
in the communities in which it operates including consumer, commercial, and
corporate lending; retail banking; and other ancillary financial services
traditionally furnished by full-service financial institutions. Additional
services offered include factoring operations; mortgage origination and
servicing; investment management and trust services; the issuance of credit and
debit cards; the origination, packaging, and securitization of loans, primarily
the government-guaranteed portion of Small Business Administration (SBA) loans;
the purchase and collection of delinquent FHA/VA government-insured/guaranteed
loans from third parties and from GNMA pools serviced for others; full-service
and discount brokerage; and the sale of annuities and bank-eligible insurance
products.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES. The accounting and reporting policies of the Corporation
and its subsidiaries conform with generally accepted accounting principles and
general practices within the financial services industry. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. The most
significant estimate relates to the adequacy of the allowance for losses on
loans. Actual results could differ from those estimates. The following is a
summary of the more significant accounting policies of the Corporation.
BASIS OF PRESENTATION. The consolidated financial statements include the
accounts of the Corporation and its subsidiaries after elimination of
significant intercompany accounts and transactions. Prior period consolidated
financial statements have been restated to include the accounts of significant
acquisitions accounted for using the pooling of interests method of accounting.
Other acquisitions accounted for as poolings of interests are included from
their dates of acquisition. Business combinations accounted for as purchases are
included in the consolidated financial statements from their respective dates of
acquisition. Assets and liabilities of financial institutions accounted for as
purchases are adjusted to their fair values as of their dates of acquisition.
Certain 1995 and 1996 amounts have been reclassified to conform with the 1997
financial reporting presentation.
STATEMENT OF CASH FLOWS. Cash and cash equivalents include cash and due
from banks and federal funds sold. Federal funds sold in the amounts of $109
million, $206 million, and $522 million at December 31, 1997, 1996, and 1995,
respectively, are included in cash and cash equivalents. Noncash transfers to
foreclosed properties from loans for the years ended December 31, 1997, 1996,
and 1995 were $28.4 million, $25.8 million, and $22.9 million, respectively.
Other noncash transactions are detailed in Notes 2 and 10.
SECURITIES AND TRADING ACCOUNT ASSETS. Debt and equity securities that are
bought and principally held for the purpose of selling them in the near term are
classified as trading securities. These consist primarily of the
government-guaranteed portion of SBA loans and SBA participation certificates.
Gains and losses on sales and fair-value adjustments of trading securities are
included in profits and commissions from trading activities.
Debt and equity securities which the Corporation has not classified as held
to maturity or trading are classified as available for sale securities and, as
such, are reported at fair value, with unrealized gains and losses, net of
deferred taxes, reported as a component of shareholders' equity. Gains or losses
46
<PAGE> 49
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
from sales of available for sale securities are computed using the specific
identification method and are included in investment securities gains (losses).
Debt securities that the Corporation has the positive intent and ability to
hold to maturity are classified as held to maturity securities and carried at
cost, adjusted for the amortization of premium and accretion of discount using
the level-yield method. Generally, the held to maturity portfolios of acquired
entities are reclassified to the available for sale portfolio upon acquisition.
At December 31, 1997 and 1996, the Corporation had no securities classified as
held to maturity.
LOANS HELD FOR RESALE. Loans held for resale include mortgage and other
loans and are carried at the lower of cost or fair value on an aggregate basis.
LOANS. Loans are carried at the principal amount outstanding. Interest
income on loans is recognized using constant yield methods except for unearned
income which is recorded as income using a method which approximates the
interest method. Loan origination fees and direct loan origination costs are
deferred and recognized over the life of the related loans as adjustments to
interest income.
NONPERFORMING LOANS. Nonperforming loans consist of nonaccrual loans and
restructured loans. Loans, other than installment loans, are generally placed on
nonaccrual status and interest is not recorded if, in management's opinion,
payment in full of principal or interest is not expected or when payment of
principal or interest is more than 90 days past due, unless the loan is both
well-secured and in the process of collection. FHA/VA
government-insured/guaranteed loans which are 90 days or more past due are
placed on nonaccrual status when interest claim reimbursements are likely to be
denied due to missed filing dates in the foreclosure process. Upon the
occurrence of an adverse change in the account status (e.g., filing of
bankruptcy, repossession of collateral, foreclosure, or death of the borrower)
and after appropriate legal compliance, installment loans (including accrued
interest) are written down to the net realizable value of the underlying
collateral. Such loans are reviewed periodically for further write-downs until
fully liquidated. Income recognized on credit card loans is discontinued upon
the occurrence of an adverse change in the financial condition of the borrower.
Credit card loans are charged-off when an account becomes past due after
notification of a customer's bankruptcy or death, while all other credit card
loans are charged off if no payment has been received for 150 days. As of
December 31, 1997 and 1996, the amounts of impaired loans and related
disclosures thereto were not considered material.
ALLOWANCE FOR LOSSES ON LOANS. The allowance for losses on loans
represents management's best estimate of potential losses inherent in the
existing loan portfolio. The allowance for losses on loans is increased by the
provision for losses on loans charged to expense and reduced by loans charged
off, net of recoveries. The provision for losses on loans is determined based on
management's assessment of several factors: current and anticipated economic
conditions and the related impact on specific borrowers and industry groups,
historical loan loss experience, the level of classified and nonperforming
loans, reviews and evaluations of specific loans, changes in the nature and
volume of the loan portfolio, and the results of regulatory examinations.
PREMISES AND EQUIPMENT. Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation expense is computed
using the straight-line method and is charged to operating expense over the
estimated useful lives of the assets. Depreciation expense has been computed
principally using estimated lives of five to forty years for premises and three
to ten years for furniture and equipment. Leasehold improvements are amortized
using the straight-line method over the shorter of the initial term of the
respective lease or the estimated useful life of the improvement. Costs of major
additions and improvements are capitalized. Expenditures for maintenance and
repairs are charged to operations as incurred.
GOODWILL AND OTHER INTANGIBLES. The unamortized costs in excess of the
fair value of acquired net tangible assets are included in goodwill and other
intangibles. Identifiable intangibles, except for premiums on purchased deposits
which are amortized on a straight-line method over 10 years, are amortized over
the estimated periods benefited. The remaining costs (goodwill) are generally
amortized on a straight-line basis over 15 years. For acquisitions where the
fair value of net assets
47
<PAGE> 50
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
acquired exceeds the purchase price, the resulting negative goodwill is
allocated proportionally to noncurrent, nonmonetary assets.
IMPAIRMENT OF LONG-LIVED ASSETS. Effective January 1, 1996, the
Corporation adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," which requires impairment losses
to be recorded on long-lived assets used in operations and certain related
identifiable intangibles when indications of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. Additionally, long-lived assets and certain related
identifiable intangibles to be disposed of are reported at the lower of carrying
amount or fair value, less selling costs. The adoption of this statement did not
have a material impact on the Corporation, since existing policies for
determining impairment of long-lived assets were similar to the new standard.
MORTGAGE SERVICING RIGHTS. Mortgage servicing rights are accounted for
under the provisions of SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," which became effective
January 1, 1997. SFAS No. 125 superseded SFAS No. 122, "Accounting for Mortgage
Servicing Rights," but did not significantly change the methodology used to
account for servicing rights. The Corporation had adopted SFAS No. 122 as of
July 1, 1995 and at that time began capitalizing originated servicing rights.
The adoption did not have a material impact on financial position or results of
operations. Prior to that date, capitalization had been limited to purchased
servicing. The servicing rights capitalized are amortized in proportion to and
over the period of estimated servicing income. Management stratifies servicing
rights based on origination period and interest rate and evaluates the
recoverability in relation to the impact of actual and anticipated loan
portfolio prepayment, foreclosure, and delinquency experience. The Corporation
did not have a valuation allowance associated with the mortgage servicing rights
portfolio as of December 31, 1997.
OTHER REAL ESTATE. Properties acquired through foreclosure and unused bank
premises are stated at the lower of the recorded amount of the loan or the
property's estimated net realizable value, reduced by estimated selling costs.
Write-downs of the assets at, or prior to, the date of foreclosure are charged
to the allowance for losses on loans. Subsequent write-downs, income and expense
incurred in connection with holding such assets, and gains and losses realized
from the sales of such assets are included in noninterest income and expense.
STOCK COMPENSATION. The Corporation has elected not to adopt the
recognition provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," which requires a fair-value-based method of accounting for stock
options and similar equity awards. The Corporation elected to continue applying
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its stock compensation
plans and, accordingly, does not recognize compensation cost, except for stock
grants. See Note 14 for a summary of the pro forma effect if the accounting
provisions of SFAS No. 123 had been elected.
INCOME TAXES. The Corporation files a consolidated Federal income tax
return which includes all of its subsidiaries except for credit life insurance
companies and certain pass-through entities. Income tax expense is allocated
among the parent company and its subsidiaries as if each had filed a separate
return. The provision for income taxes is based on income reported for
consolidated financial statement purposes and includes deferred taxes resulting
from the recognition of certain revenues and expenses in different periods for
tax-reporting purposes. Deferred tax assets and liabilities are measured using
the enacted tax rates expected to apply to taxable income in the year in which
those temporary differences are expected to be realized or settled. Recognition
of certain deferred tax assets is based upon management's belief that, based
upon historical earnings and anticipated future earnings, normal operations will
continue to generate sufficient future taxable income to realize these benefits.
A valuation allowance is established for deferred tax assets when, in the
opinion of management, it is "more likely than not" that the asset will not be
realized.
48
<PAGE> 51
NOTE 2. ACQUISITIONS
CONSUMMATED ACQUISITIONS
POOLINGS OF INTERESTS
The Corporation consummated the following acquisitions which were accounted
for using the pooling of interests method of accounting. Financial information
for all periods has been restated for the Capital-Miami, Magna, Leader, and
Capital-Missouri acquisitions. Prior period amounts have not been restated for
the remaining acquisitions which were not considered, in the aggregate, material
to the consolidated financial statements.
<TABLE>
<CAPTION>
COMMON
DATE SHARES
ACQUIRED ISSUED TOTAL ASSETS TOTAL EQUITY
-------- ---------- ------------ ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
1997 ACQUISITIONS
Capital Bancorp (Capital-Miami).................. 12/31/97 6,494,889 $2,155.6 $145.0
Magna Bancorp, Inc. (Magna)...................... 11/1/97 7,103,272 1,190.5 127.7
Other acquisitions (three acquisitions).......... Various 1,081,552 242.0 24.5
---------- -------- ------
Total.................................. 14,679,713 $3,588.1 $297.2
========== ======== ======
1996 ACQUISITIONS
Leader Financial Corporation (Leader)............ 10/1/96 15,285,575 $3,410.9 $256.1
Other acquisitions (four acquisitions)........... Various 2,779,655 683.1 53.9
---------- -------- ------
Total.................................. 18,065,230 $4,094.0 $310.0
========== ======== ======
1995 ACQUISITIONS
Capital Bancorporation, Inc.
(Capital-Missouri)............................. 12/31/95 4,087,124 $1,105.1 $ 74.8
Planters Bank and Trust Company.................. 9/1/95 348,029 59.0 6.6
---------- -------- ------
Total.................................. 4,435,153 $1,164.1 $ 81.4
========== ======== ======
</TABLE>
The following table summarizes the impact of the Capital-Miami and Magna
acquisitions on the Corporation's net interest income, noninterest income, and
net earnings.
<TABLE>
<CAPTION>
NET INTEREST NONINTEREST NET
INCOME INCOME EARNINGS
------------ ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
1996
Union Planters............................................ $605,962 $226,331 $133,738
Capital-Miami............................................. 70,303 53,158 20,204
Magna..................................................... 68,587 41,013 17,532
-------- -------- --------
Union Planters pooled............................. $744,852 $320,502 $171,474
======== ======== ========
1995
Union Planters............................................ $535,997 $203,423 $172,756
Capital-Miami............................................. 67,579 46,106 17,101
Magna..................................................... 65,875 44,181 21,399
-------- -------- --------
Union Planters pooled............................. $669,451 $293,710 $211,256
======== ======== ========
</TABLE>
PURCHASE ACQUISITIONS
The Corporation acquired four institutions in the three years ended
December 31, 1997 that were accounted for as purchases. Total assets of the
institutions at their respective dates of acquisition were approximately $249.9
million. Consideration of $36.1 million paid for the institutions included cash
and shares of the Corporation's common stock and Series E preferred stock,
resulting in total intangibles of $14.9 million. Because these purchase
acquisitions, in the aggregate, are insignificant to the consolidated results of
the Corporation, pro forma information has been omitted.
Subsequent to December 31, 1997, the Corporation consummated the
acquisition of Sho-Me Financial Corporation (Sho-Me), the parent of First
Savings Bank, FSB, in Mt. Vernon, Missouri. The acquisition was accounted for as
a purchase. Total assets of Sho-Me at the date of acquisition were
49
<PAGE> 52
NOTE 2. ACQUISITIONS (CONTINUED)
approximately $373.8 million. The Corporation exchanged 1,153,459 shares of its
common stock for all the outstanding shares of Sho-Me.
PENDING ACQUISITIONS
Through its acquisition program the Corporation has the following pending
acquisitions which are considered probable of consummation.
<TABLE>
<CAPTION>
ANTICIPATED
APPROXIMATE METHOD OF APPROXIMATE
INSTITUTION CONSIDERATION ACCOUNTING TOTAL ASSETS
- --------------------------------------------- --------------- ----------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Security Bancshares, Inc..................... 491,000 shares Pooling of $ 165
Des Arc, Arkansas of common stock Interests
Duck Hill Bank............................... 42,000 shares Purchase 21
Duck Hill, Mississippi of common stock
Peoples First Corporation.................... 6,338,000 shares Pooling of 1,501
Paducah, Kentucky of common stock Interests
Capital Savings Bancorp, Inc................. 801,000 shares Pooling of 242
Jefferson City, Missouri of common stock Interests
First Community Bancshares, Inc.............. 129,000 shares Pooling of 41
Middleton, Tennessee of common stock Interests
First National Bancshares of Wetumpka, Inc. 836,000 shares Pooling of
Wetumpka, Alabama of common stock Interests 211
C B & T, Inc................................. 1,450,000 shares Pooling of 268
McMinnville, Tennessee(1) of common stock Interests
Merchants Bancshares, Inc. .................. 1,952,000 shares Pooling of 546
Houston, Texas(1) of common stock Interests
Magna Group, Inc. (MGR)...................... 35,446,000 shares Pooling of 7,075
St. Louis, Missouri(1)(2) of common stock Interests
Transflorida Bank............................ 1,655,000 shares Pooling of 316
Boca Raton, Florida(1) of common stock Interests
-------
TOTAL.............................. $10,386
=======
</TABLE>
- ---------------
(1) Agreements signed subsequent to December 31, 1997.
(2) On February 22, 1998, the Corporation entered into a definitive agreement to
acquire all of the outstanding common stock of MGR at a fixed exchange ratio
of .9686 shares of the Corporation's common stock for each MGR common share
outstanding. MGR reported total deposits of $5.4 billion and total
shareholders' equity of $626 million at December 31, 1997 and reported net
income of $72.7 million for the year then ended. The consummation of the
transaction is subject to certain contractual conditions, regulatory
approvals, and approval by shareholders of both MGR and the Corporation and
is expected to close in the third quarter of 1998.
NOTE 3. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Corporation's banking subsidiaries are required to maintain
noninterest-bearing average reserve balances with the Federal Reserve Bank.
Average balances required to be maintained for such purposes during 1997 and
1996 were $94 million and $107 million, respectively.
50
<PAGE> 53
NOTE 4. INVESTMENT SECURITIES
The following is a summary of the Corporation's investment securities, all
of which were classified as "available for sale."
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------
UNREALIZED
AMORTIZED ----------------- FAIR
COST GAINS LOSSES VALUE
---------- ------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Government obligations
U.S. Treasury...................................... $ 727,600 $ 4,045 $ 205 $ 731,440
U.S. Government agencies
Collateralized mortgage obligations............. 101,236 1,302 100 102,438
Mortgage-backed................................. 633,184 20,260 269 653,175
Other........................................... 1,074,061 9,268 764 1,082,565
---------- ------- ------- ----------
Total U.S. Government obligations.......... 2,536,081 34,875 1,338 2,569,618
Obligations of states and political subdivisions..... 480,702 28,871 431 509,142
Other stocks and securities.......................... 168,219 983 282 168,920
---------- ------- ------- ----------
Total available for sale securities........ $3,185,002 $64,729 $ 2,051 $3,247,680
========== ======= ======= ==========
</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...................................... $ 911,660 $ 4,603 $ 1,012 $ 915,251
U.S. Government agencies
Collateralized mortgage obligations............. 133,123 635 348 133,410
Mortgage-backed securities...................... 972,545 22,472 2,724 992,293
Other........................................... 665,917 986 2,398 664,505
---------- ------- ------- ----------
Total U.S. Government obligations.......... 2,683,245 28,696 6,482 2,705,459
Obligations of states and political subdivisions..... 489,790 20,746 2,265 508,271
Other stocks and securities.......................... 176,209 290 3,012 173,487
---------- ------- ------- ----------
Total available for sale securities........ $3,349,244 $49,732 $11,759 $3,387,217
========== ======= ======= ==========
</TABLE>
The following table presents the gross realized gains and losses on
available for sale investment securities for the years ended December 31, 1997,
1996, and 1995.
<TABLE>
<CAPTION>
REALIZED GAINS REALIZED LOSSES
------------------------------ ---------------------------------
1997 1996 1995 1997 1996 1995
------ ------ ------ ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
$5,241 $8,231 $5,841 $(3,137) $(4,132) $(7,208)
</TABLE>
Investment securities having a fair value of approximately $1.5 billion and
$1.3 billion at December 31, 1997 and 1996, respectively, were pledged to secure
public and trust funds on deposit, securities sold under agreements to
repurchase, and Federal Home Loan Bank (FHLB) advances.
51
<PAGE> 54
NOTE 4. INVESTMENT SECURITIES (CONTINUED)
The fair values, contractual maturities, and weighted average yields of
available for sale investment securities as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
MATURING
---------------------------------------------------------------------------
WITHIN ONE AFTER ONE BUT AFTER FIVE BUT
YEAR WITHIN FIVE YEARS WITHIN TEN YEARS AFTER TEN YEARS TOTAL
---------------- ------------------ ---------------- ---------------- ------------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
-------- ----- ---------- ----- -------- ----- -------- ----- ---------- -----
(FULLY TAXABLE-EQUIVALENT BASIS/DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government obligations
U.S. Treasury................ $355,790 5.93% $ 367,418 6.20% $ 4,392 6.89% $ -- --% $ 727,600 6.07%
U.S. Government agencies
Collateralized mortgage
obligations................ 68 6.25 8,232 6.40 6,116 6.66 86,820 6.68 101,236 6.66
Mortgage-backed............ 2,052 7.47 65,342 6.74 75,864 7.31 489,926 7.90 633,184 7.71
Other...................... 199,730 5.76 617,378 6.29 187,685 6.90 69,268 7.15 1,074,061 6.35
-------- ---------- -------- -------- ----------
Total U.S. Government
obligations.......... 557,640 5.87 1,058,370 6.29 274,057 7.01 646,014 7.66 2,536,081 6.62
Obligations of states and
political subdivisions....... 24,532 8.94 76,350 9.43 232,074 9.36 147,746 9.42 480,702 9.37
Other stocks and securities
Federal Reserve Bank and
Federal Home Loan Bank
stock...................... -- -- -- -- -- -- 139,744 6.80 139,744 6.80
Bonds, notes, and
debentures................. 3,037 7.68 1,988 12.33 4,079 8.11 -- -- 9,104 8.89
Collateralized mortgage
obligations................ -- -- 8,243 5.14 -- -- 7,372 7.63 15,615 6.32
Other........................ -- -- -- -- -- -- 3,756 9.37 3,756 9.37
-------- ---------- -------- -------- ----------
Total other stocks and
securities........... 3,037 7.68 10,231 6.54 4,079 8.11 150,872 6.90 168,219 6.92
-------- ---------- -------- -------- ----------
Total amortized cost of
available for sale
securities........... $585,209 6.01% $1,144,951 6.50% $510,210 8.09% $944,632 7.81% $3,185,002 7.05%
======== ========== ======== ======== ==========
Total fair value....... $586,086 $1,153,368 $530,761 $977,465 $3,247,680
======== ========== ======== ======== ==========
</TABLE>
The weighted average yields are calculated by dividing the sum of the
individual security yield weights (effective yield times book value) by the
total book value of the securities. The weighted average yield for obligations
of states and political subdivisions is adjusted to a taxable-equivalent yield,
using a federal income tax rate of 35%. Expected maturities of securities will
differ from contractual maturities because some borrowers have the right to call
or prepay obligations without prepayment penalties. The investment securities
portfolio is expected to have a principal weighted average life of approximately
3.4 years.
52
<PAGE> 55
NOTE 5. LOANS
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Commercial, financial, and agricultural..................... $ 1,940,781 $ 1,839,722
Foreign..................................................... 207,343 145,483
Accounts receivable -- factoring ........................... 579,067 452,522
Real estate -- construction................................. 639,696 576,154
Real estate -- mortgage
Secured by 1-4 family residential......................... 3,603,097 3,840,952
FHA/VA government-insured/guaranteed...................... 1,319,553 1,555,308
Other mortgage............................................ 2,055,420 1,674,555
Home equity................................................. 290,634 237,595
Consumer
Credit cards and related plans............................ 558,705 653,995
Other consumer............................................ 1,427,756 1,565,159
Direct lease financing...................................... 65,037 73,306
----------- -----------
Total loans....................................... $12,687,089 $12,614,751
=========== ===========
</TABLE>
Nonperforming loans are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Nonaccrual loans............................................ $ 94,584 $ 89,404
Restructured loans.......................................... 10,021 11,266
----------- -----------
Total............................................. $ 104,605 $ 100,670
=========== ===========
</TABLE>
The impact on net interest income of nonperforming loans was not material
in 1997 or 1996. Also, there were no significant outstanding commitments to lend
additional funds at December 31, 1997.
Certain of the Corporation's bank subsidiaries, principally Union Planters
Bank, N.A. (UPB), have granted loans to the Corporation's directors, executive
officers, and their affiliates. These loans were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with unrelated persons and do not involve more than
normal risks of collectability. The aggregate dollar amount of these loans was
$13.7 million and $36.9 million at December 31, 1997 and 1996, respectively.
During 1997, $8.0 million of new loans and advances under credit lines were made
to related parties; repayments totaled approximately $17.7 million.
Additionally, the balance at December 31, 1996 was reduced by $13.5 million for
loans related to a former director and other loans no longer considered
related-party relationships.
Included in December 31, 1996 related-party loans was a $5.5 million
tax-exempt loan made in 1986 to a partnership in which a director, who is also a
brother-in-law of an executive officer, is a partner. At the time the loan was
made, neither the borrower nor any of its partners, officers, directors, or
beneficial owners was affiliated or associated with the Corporation or any of
its subsidiaries. The loan was made in the ordinary course of business on
substantially the same terms, including interest rate and collateral
requirements, as those prevailing at the time for comparable transactions. The
loan had previously performed as required; however, during 1996 because of
significant depreciation in the value of the collateral, a $2.0 million
charge-off was taken and the remaining $3.4 million was placed on nonaccrual
status, although the loan was not in default. In 1997, the $3.4 million balance
was collected, including interest due.
53
<PAGE> 56
NOTE 6. ALLOWANCE FOR LOSSES ON LOANS
The changes in the allowance for losses on loans are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance, January 1......................................... $189,118 $179,968 $174,604
Increase due to acquisitions............................. 3,233 6,578 2,761
Decrease due to the sale of certain loans................ -- (1,628) --
Provision for losses on loans............................ 113,633 68,948 33,917
Recoveries of loans previously charged off............... 18,471 14,059 16,981
Loans charged off........................................ (99,066) (78,807) (48,295)
-------- -------- --------
Balance, December 31....................................... $225,389 $189,118 $179,968
======== ======== ========
</TABLE>
NOTE 7. PREMISES AND EQUIPMENT
A summary of premises and equipment follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Land........................................................ $ 68,910 $ 69,953
Buildings and improvements.................................. 262,281 251,649
Leasehold improvements...................................... 22,586 31,573
Equipment................................................... 200,156 219,378
Construction in progress.................................... 7,949 17,802
-------- --------
561,882 590,355
Less accumulated depreciation and amortization.............. 231,179 256,019
-------- --------
Total premises and equipment...................... $330,703 $334,336
======== ========
</TABLE>
NOTE 8. INTEREST-BEARING DEPOSITS
The following table presents the maturities of interest-bearing deposits at
December 31, 1997 (Dollars in millions).
<TABLE>
<S> <C>
1998........................................................ $ 5,309
1999........................................................ 845
2000........................................................ 292
2001........................................................ 82
2002........................................................ 113
2003 and after.............................................. 21
-------
Total time deposits.................................... 6,662
Interest-bearing deposits with no stated maturity...... 4,455
-------
Total interest-bearing deposits................... $11,117
=======
</TABLE>
54
<PAGE> 57
NOTE 9. BORROWINGS
SHORT-TERM BORROWINGS
Short-term borrowings include federal funds purchased and securities sold
under agreements to repurchase, commercial paper, and other short-term
borrowings having maturities of less than one year. 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>
DECEMBER 31,
------------------------------------
1997 1996 1995
-------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Year-end balances
Federal funds purchased and securities sold under
agreements to repurchase........................... $754,939 $ 518,009 $ 924,322
FHLB advances......................................... 75,060 177,716 50,000
Other short-term borrowings........................... 1,628 326 94
-------- ---------- ----------
Total short-term borrowings................... $831,627 $ 696,051 $ 974,416
======== ========== ==========
Federal funds purchased and securities sold under
agreements to repurchase
Daily average balance................................. $503,514 $ 974,929 $ 661,655
Weighted average interest rate........................ 4.92% 5.33% 5.72%
Maximum outstanding at any month end.................. $754,939 $1,204,757 $1,187,152
Weighted average interest rate at December 31......... 5.53% 5.10% 5.46%
</TABLE>
SHORT- AND MEDIUM-TERM BANK NOTES
In 1996, the Corporation's principal subsidiary, UPB, established a
$1-billion short- and medium-term bank note program to supplement UPB's funding
sources. Under the program UPB 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 the bank notes follows:
<TABLE>
<CAPTION>
DECEMBER 31, 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 year end...................... $ -- $ 135,000 $ 265,000 $ 135,000
Average balance for the year.............. 119,493 135,000 88,361 42,637
Weighted average interest rate............ 5.84% 6.62% 5.81% 6.57%
Weighted average interest rate at year
end..................................... -- 6.59 5.69 6.59
Fixed rate notes.......................... $ -- $ 135,000 $ 265,000 $ 135,000
Range of maturities....................... -- 8/98-10/01 1/97-5/97 8/98-10/01
</TABLE>
The principal maturities of Medium-Term Bank Notes subsequent to December
31, 1997 are $30 million in 1998, $45 million in 1999, and $60 million in 2001.
FEDERAL HOME LOAN BANK 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 December 31, 1997,
the Corporation had an adequate amount of
55
<PAGE> 58
NOTE 9. BORROWINGS (CONTINUED)
mortgage-backed securities and loans to satisfy the collateral requirements. A
summary of the advances is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1997 1996
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Balance at year end......................................... $ 703,996 $ 985,042
Range of interest rates..................................... 3.25% - 8.95% 3.25% - 9.00%
Range of maturities......................................... 1998 - 2017 1997 - 2017
</TABLE>
The principal maturities of FHLB advances subsequent to December 31, 1997
are $171.4 million in 1998, $184.7 million in 1999, $134.1 million in 2000,
$69.1 million in 2001, $29.0 million in 2002, and $115.7 million after 2002.
OTHER LONG-TERM DEBT
The Corporation's other long-term debt is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Corporation-Obligated Mandatorily Redeemable Capital
Pass-through Securities of Subsidiary Trust holding solely
a Corporation-Guaranteed Related Subordinated Note (Trust
Preferred Securities)..................................... $198,973 $198,938
Variable rate asset-backed certificates..................... 275,000 175,000
6 3/4% Subordinated Notes due 2005.......................... 99,536 99,477
6.25% Subordinated Notes due 2003........................... 74,696 74,644
Other long-term debt........................................ 62,703 37,892
-------- --------
Total other long-term debt........................ $710,908 $585,951
======== ========
</TABLE>
The Corporation-Obligated Mandatorily Redeemable Capital Pass-through
Securities of Subsidiary Trust holding solely a Corporation-Guaranteed Related
Subordinated Note represents Capital Securities issued by Union Planters Capital
Trust A (the UPC Trust). In 1996, the UPC Trust issued $200 million liquidation
amount of 8.20% Capital Trust Pass-through Securities(SM) (Trust Preferred
Securities) at 99.468% which represented an undivided beneficial interest in the
assets of the UPC Trust, a statutory business trust created under the laws of
the state of Delaware. The Corporation owns all of the common securities of the
UPC Trust representing an undivided beneficial interest in the assets of the UPC
Trust. The sole asset of the UPC Trust is $206.2 million (carrying value of
$205.1 million at December 31, 1997 and 1996) of 8.20% Junior Subordinated
Deferrable Interest Debentures of the Corporation issued at 99.468%, which will
mature on December 15, 2026. The distributions payable on the Trust Preferred
Securities are a fixed rate per annum, 8.20% of the stated liquidation amount,
and are cumulative from the date of issuance.
The Corporation has the right, at any time, subject to certain conditions,
to defer payments of interest on the Subordinated Debentures, in which case
distributions on Trust Preferred Securities would likewise be deferred. Upon
electing to defer such interest payments, the Corporation will be prohibited
from paying dividends on its common and preferred stock and interest on certain
outstanding borrowings. The Subordinated Debt and therefore, the Trust Preferred
Securities are redeemable by the Corporation at a call price, plus accrued and
unpaid interest to the date of redemption, in whole or in part and from
time-to-time on or after December 15, 2006, subject to certain conditions. In
certain limited circumstances, primarily related to certain tax events, the
Subordinated Debt and therefore, the Trust Preferred Securities are redeemable
at par, plus accrued interest to date of redemption. The Trust Preferred
Securities qualify as Tier 1 regulatory capital and are reported in bank
regulatory reports as a minority interest in a consolidated subsidiary.
In June 1994, December 1994, and July 1995, Capital Factors, Inc., a
majority-owned subsidiary, through a wholly owned financing trust subsidiary,
issued $100 million, $25 million, and $50 million, respectively, of Variable
Rate Asset-Backed Certificates (senior certificates) with maturity dates of
56
<PAGE> 59
NOTE 9. BORROWINGS (CONTINUED)
December 1999, June 2000, and January 2001. The senior certificates bear an
interest rate of LIBOR plus 1.25%. The interest rates on December 31, 1997 and
1996 were 7.23% and 6.86%, respectively. The senior certificates may not be
redeemed prior to their stated maturity. In April 1997, a fourth series of
variable rate asset-backed certificates (the Variable Funding Certificates) that
mature in June 2004 were issued. Unlike the previously issued Certificates which
were fixed as to principal amount, the Variable Funding Certificates provide for
a monthly settlement of principal, which may increase or decrease the
outstanding amount. The fourth series includes the issuance of $95.25 million of
senior Variable Funding Certificates and $4.75 million of senior subordinated
Variable Funding Certificates which bear interest rates of LIBOR plus 0.75% and
LIBOR plus 1.50%, respectively. The interest rates on December 31, 1997 were
6.73% and 7.48%, respectively. Interest on all certificates is payable monthly.
The senior certificates are collateralized by interest-earning advances to
factoring clients which totaled approximately $323.8 million at December 31,
1997. Such advances are made on receivables before they are due or collected by
Capital Factors, Inc., which services and administers these advances and related
receivables under an agreement with another financial institution. The senior
certificates are subject to acceleration if certain collateral requirements are
not maintained. Remaining deferred issuance costs of $2.1 million are being
amortized over the terms of the related series. Such costs are included in other
assets on the balance sheets. A cash collateral account is required pursuant to
the terms of the aforementioned agreement. Such restricted cash collateral
amounted to $10.1 million at December 31, 1997.
During November 1993, the Corporation issued in a public offering $75
million of 6.25% Subordinated Capital Notes due 2003 at 99.305%. In November
1995, the Corporation issued in another public offering $100 million of 6 3/4%
Subordinated Capital Notes due 2005 at 99.408%. The Notes qualify as Tier 2
regulatory capital.
Included in other long-term debt is a $50-million revolving loan payable to
another financial institution which was established by Capital Factors, Inc., in
1996. At December 31, 1997 and 1996, $43.6 million and $15.9 million,
respectively, was outstanding under the revolving line. Interest accrues on this
line at LIBOR plus 2.15% (8.09% and 7.76% at December 31, 1997 and 1996) with
interest payable monthly. The loan matures in March 1999, with an automatic
one-year renewal. The revolving loan agreement has certain financial covenants
and ratios, including those related to Capital Factors' debt to net worth,
profitability, and net cash flows. Also included at December 31, 1997 and 1996
is a privately placed $10 million 7.95% subordinated note issued in connection
with Capital Factors' securitized financing. Interest on the note is payable
monthly and it matures in July 2001. At December 31, 1997 and 1996, other
long-term debt also included other borrowings of $9.1 million and $12.0 million,
respectively.
The principal maturities of other long-term debt subsequent to December 31,
1997 are $2.9 million in 1998, $146.7 million in 1999, $27.7 million in 2000,
$60.4 million in 2001, $299.0 million in 2002, and $174.3 million after 2002.
The ability of the Corporation to service its long-term debt obligations is
dependent upon the future profitability of its banking subsidiaries and their
ability to pay dividends and management fees to the Corporation (see Note 12).
NOTE 10. SHAREHOLDERS' EQUITY
DIVIDENDS
The payment of dividends is determined by the Board of Directors taking
into account the earnings, capital levels, cash requirements, and the financial
condition of the Corporation and its subsidiaries, applicable government
regulations and policies, and other factors deemed relevant by the Board of
Directors, including the amount of dividends payable to the Corporation by its
subsidiaries. Various federal laws, regulations, and policies limit the ability
of the Corporation's subsidiary banks to pay dividends. See Note 12, "Regulatory
Capital and Restrictions on Dividends and Loans from Subsidiaries."
57
<PAGE> 60
NOTE 10. SHAREHOLDERS' EQUITY (CONTINUED)
CONVERTIBLE PREFERRED STOCK
The Corporation's preferred stock is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
PREFERRED STOCK, WITHOUT PAR VALUE, 10,000,000 SHARES
AUTHORIZED FOR ALL ISSUES:
Series A Preferred Stock.................................. $ -- $ --
Series E Preferred Stock.................................. 54,709 83,809
------- -------
Total preferred stock............................. $54,709 $83,809
======= =======
</TABLE>
SERIES A PREFERRED STOCK (SHARE PURCHASE RIGHTS PLAN). In 1989, the Board
of Directors of the Corporation adopted a Share Purchase Rights Plan and
distributed a dividend of one Preferred Share Purchase Right (Right) for each
outstanding share of the Corporation's $5 par value Common Stock and for each
share to be issued thereafter. The Rights are generally designed to deter
coercive takeover tactics and to encourage all persons interested in acquiring
control of the Corporation to deal with each shareholder on a fair and equal
basis. Each Right trades in tandem with its respective share of common stock
until the occurrence of certain events, in which case it would separate from the
common stock and entitle the registered holder, subject to the terms of the
Rights Agreement, to purchase certain equity securities at a price below their
market value. The Corporation has authorized 750,000 shares of Series A
Preferred Stock for issuance under the Share Purchase Rights Plan, none of which
have been issued.
SERIES B PREFERRED STOCK. All 44,000 outstanding shares of a Series B
Preferred Stock were converted by holders into 339,765 shares of the
Corporation's common stock in 1996.
SERIES E PREFERRED STOCK. At December 31, 1997 and 1996, 2,188,358 and
3,352,347 shares, respectively, of the Corporation's 8% Cumulative, Convertible,
Preferred Stock, Series E (Series E Preferred Stock) were issued and
outstanding. Such shares have a stated value of $25 per share on which dividends
accrue at the rate of 8% per annum; dividends are cumulative and are payable
quarterly. The Series E Preferred Stock is not subject to any sinking fund
provisions and has no preemptive rights. Such shares have a liquidation
preference of $25 per share plus unpaid dividends accrued thereon, and with the
prior approval of the Federal Reserve, may be redeemed by the Corporation in
whole or in part at any time after March 31, 1997 at $25 per share. At any time
prior to redemption, each share of Series E Preferred Stock is convertible, at
the option of the holder, into 1.25 shares of the Corporation's Common Stock.
Holders of Series E Preferred Stock have no voting rights except for those
provided by law and in certain other limited circumstances.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Dividend Reinvestment and Stock Purchase Plan (the Plan) authorizes the
issuance of 2,000,000 shares (1,187,867 issued through December 31, 1997) of
common stock to shareholders who choose to invest all or a portion of their cash
dividends or make optional cash purchases. On certain investment dates, shares
may be purchased with reinvested dividends and optional cash payments without
brokerage commissions. Shares issued under the Plan totaled 271,615, 241,060,
and 189,921 in 1997, 1996, and 1995, respectively.
58
<PAGE> 61
NOTE 11. UNION PLANTERS CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and cash equivalents at subsidiary banks............. $ 432,947 $ 274,622
Investment securities available for sale.................. 132,690 213,491
Advances to and receivables from subsidiaries............. 5,112 9,535
Investment in bank and bank holding company
subsidiaries........................................... 1,518,492 1,489,444
Investment in nonbank subsidiaries ....................... 22,700 17,137
Other assets.............................................. 67,965 27,583
---------- ----------
TOTAL ASSETS...................................... $2,179,906 $2,031,812
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Long-term debt (Note 9)................................... $ 379,360 $ 379,212
Loans from and payables to subsidiaries................... 5,324 8,384
Other liabilities......................................... 48,356 25,333
Shareholders' equity (Note 10)............................ 1,746,866 1,618,883
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $2,179,906 $2,031,812
========== ==========
</TABLE>
CONDENSED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1996 1995
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INCOME
Dividends from bank and bank holding company
subsidiaries........................................... $233,990 $152,534 $162,810
Dividends from nonbank subsidiaries....................... 3,355 950 500
Fees and interest from subsidiaries....................... 73,919 46,326 32,219
Interest and dividends on investments, loans, and
interest-bearing deposits at other financial
institutions........................................... 8,265 12,888 4,611
Other income.............................................. 1,775 398 478
-------- -------- --------
Total income...................................... 321,304 213,096 200,618
-------- -------- --------
EXPENSES
Interest expense.......................................... 28,776 16,351 10,400
Salaries and employee benefits............................ 34,413 22,233 16,190
Other expense............................................. 42,911 37,032 23,607
-------- -------- --------
Total expenses.................................... 106,100 75,616 50,197
-------- -------- --------
EARNINGS BEFORE INCOME TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF SUBSIDIARIES.......... 215,204 137,480 150,421
Tax benefit................................................. (10,283) (5,701) (7,576)
-------- -------- --------
EARNINGS BEFORE EQUITY IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES................................. 225,487 143,181 157,997
Equity in undistributed earnings of subsidiaries............ (16,726) 28,293 53,259
-------- -------- --------
NET EARNINGS...................................... $208,761 $171,474 $211,256
======== ======== ========
</TABLE>
59
<PAGE> 62
NOTE 11. UNION PLANTERS CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION
(CONTINUED)
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings.............................................. $ 208,761 $ 171,474 $ 211,256
Equity in undistributed earnings of subsidiaries.......... 16,726 (28,293) (53,259)
Deferred income tax (benefit) expense .................... (8,660) (2,770) 425
Other, net................................................ (1,018) 7,472 9,409
--------- --------- ---------
Net cash provided by operating activities......... 215,809 147,883 167,831
--------- --------- ---------
INVESTING ACTIVITIES
Net decrease (increase) in short-term investments......... -- 10,000 (10,000)
Purchases of available for sale securities................ (122,802) (437,340) (389,624)
Proceeds from sales of available for sale securities...... 205,029 397,931 221,532
Net increase in investment in and receivables from
subsidiaries........................................... (34,259) (36,778) (55,261)
Purchases of premises and equipment, net.................. (3,981) (126) (5,279)
Net cash received from acquired entities.................. 18,384 -- --
--------- --------- ---------
Net cash provided by (used in) investing
activities...................................... 62,371 (66,313) (238,632)
--------- --------- ---------
FINANCING ACTIVITIES
Net decrease in commercial paper.......................... -- -- (2,971)
Proceeds from issuance of long-term debt, net............. 439 205,089 99,956
Repayment and defeasance of long-term debt................ (488) (40,349) (49)
Net (repayments) proceeds from loans from and payables to
subsidiaries........................................... (3,060) 5,133 (9,668)
Proceeds from issuance of common stock, net............... 22,781 16,336 12,934
Repurchase of common stock................................ (35,009) -- --
Cash dividends paid....................................... (105,151) (61,352) (47,128)
Other, net................................................ 633 -- --
--------- --------- ---------
Net cash (used) provided by financing
activities...................................... (119,855) 124,857 53,074
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents........ 158,325 206,427 (17,727)
Cash and cash equivalents at the beginning of the year...... 274,622 68,195 85,922
--------- --------- ---------
Cash and cash equivalents at the end of the year............ $ 432,947 $ 274,622 $ 68,195
========= ========= =========
</TABLE>
- ---------------
NONCASH ACTIVITIES. See Note 2 and Note 10, respectively, regarding
acquisitions in 1997, 1996, and 1995 and the conversions of Series B and E
Preferred Stock.
NOTE 12. REGULATORY CAPITAL AND RESTRICTIONS ON DIVIDENDS AND LOANS FROM
SUBSIDIARIES
REGULATORY CAPITAL
The Corporation and its banking subsidiaries are subject to various
regulatory capital requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on the Corporation or its banking
subsidiaries' financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Corporation and its
banking subsidiaries must meet specific capital guidelines that involve
quantitative measures of the Corporation's and its banking subsidiaries' assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Corporation's and its banking subsidiaries' capital
amounts and classifications are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Corporation and its banking subsidiaries to maintain minimum amounts
and ratios (set forth in the table below for the Corporation and its significant
subsidiary, UPB) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined), and Tier 1 capital (as defined) to average
assets (as defined). As of December 31, 1997, management believes that the
Corporation, UPB, and the Corporation's other banking subsidiaries met all
capital adequacy requirements to which they are subject.
60
<PAGE> 63
NOTE 12. REGULATORY CAPITAL AND RESTRICTIONS ON DIVIDENDS AND LOANS FROM
SUBSIDIARIES (CONTINUED)
At December 31, 1997, the most recent notification from the Office of the
Comptroller of the Currency (OCC) categorized UPB as well capitalized under the
regulatory framework for prompt corrective action. Additionally, all of the
Corporation's other banking subsidiaries were categorized as well capitalized
and the Corporation's capital levels and ratios would be considered well
capitalized. To be categorized as well capitalized, an institution must maintain
Tier 1 leverage, Tier 1 risk-based, and total risk-based capital ratios as set
forth in the table below. Subsequent to December 31, 1997, the Corporation
merged the majority of its separate banking subsidiaries into UPB. Because the
merged banks' capital levels were lower than UPB's, it is expected that UPB's
capital ratios will decline as a result of the merger. UPB is still expected to
be considered well capitalized following this merger. There are no other
conditions or events since the latest notification that management believes have
changed any of the institutions' categories. The capital and ratios of the
Corporation and UPB are presented in the table below. No amount was deducted
from capital for interest-rate risk.
<TABLE>
<CAPTION>
MINIMUM
FOR MINIMUM TO BE WELL
ACTUAL CAPITAL ADEQUACY CAPITALIZED(1)
--------------- ----------------- ---------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------- ------ ------ -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1997:
LEVERAGE (TIER 1 CAPITAL TO AVERAGE ASSETS)
Consolidated............................... $1,876 10.48% $714 4.00% N/A N/A
UPB(2)..................................... 489 9.21 212 4.00 $265 5.00%
TIER 1 CAPITAL (TO RISK-WEIGHTED ASSETS)
Consolidated............................... $1,876 15.51% $484 4.00% N/A N/A
UPB(2)..................................... 489 15.02 130 4.00 $195 6.00%
TOTAL CAPITAL (TO RISK-WEIGHTED ASSETS)
Consolidated............................... $2,192 18.12% $968 8.00% N/A N/A
UPB(2)..................................... 530 16.28 260 8.00 $326 10.00%
AS OF DECEMBER 31, 1996:
LEVERAGE (TIER 1 CAPITAL TO AVERAGE ASSETS)
Consolidated............................... $1,752 9.50% $738 4.00% N/A N/A
UPB........................................ 384 7.25 212 4.00 $265 5.00%
TIER 1 CAPITAL (TO RISK-WEIGHTED ASSETS)
Consolidated............................... $1,752 14.91% $470 4.00% N/A N/A
UPB........................................ 384 13.92 110 4.00 $165 6.00%
TOTAL CAPITAL (TO RISK-WEIGHTED ASSETS)
Consolidated............................... $2,067 17.60% $940 8.00% N/A N/A
UPB........................................ 416 15.11 220 8.00 $275 10.00%
</TABLE>
- ---------------
(1) Not applicable (N/A) for bank holding companies such as the Corporation.
(2) Excludes the impact of the subsequent merger of the majority of the
Corporation's banking subsidiaries into UPB.
RESTRICTIONS ON DIVIDENDS AND LOANS FROM SUBSIDIARIES
The amount of dividends which the Corporation's subsidiaries may pay is
limited by applicable laws and regulations. For the subsidiary national banks,
prior regulatory approval is required if dividends to be declared in any year
would exceed net earnings of the current year (as defined under the National
Bank Act) plus retained net profits for the preceding two years. The payment of
dividends by state-chartered bank subsidiaries is regulated by applicable state
laws and the regulations of the Federal Deposit Insurance Corporation (FDIC).
The payment of dividends by savings and loan subsidiaries is subject to the
regulations of the Office of Thrift Supervision (OTS). At January 1, 1998, its
banking subsidiaries could have paid dividends to the Corporation aggregating
$103 million without prior regulatory approval. Future dividends will be
dependent on the level of earnings of the subsidiary financial institutions.
The Corporation's banking subsidiaries are limited by federal law in the
amount of credit which they may extend to their nonbank affiliates, including
the Corporation. Loans and other extensions of credit (loans) to a single
nonbank affiliate may not exceed 10% nor shall loans to all nonbank affiliates
exceed 20% of an individual bank's capital plus its allowance for losses on
loans. Such loans must be collateralized by assets having market values of 100%
to 130% of the loan amount depending on the nature of the collateral. The law
imposes no restrictions upon extensions of credit between FDIC-insured banks
which are 80%-owned subsidiaries of the Corporation.
61
<PAGE> 64
NOTE 13. OTHER NONINTEREST INCOME AND EXPENSE
The major components of other noninterest income and expense are summarized
as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OTHER NONINTEREST INCOME
Gain on sale of branches/deposits and other selected
assets.................................................. $ 15,776 $ 7,245 $ 1,934
Gain on sale of residential mortgages..................... 14,058 5,904 5,509
Customer ATM usage fee.................................... 13,223 7,550 5,033
Insurance commissions..................................... 11,474 13,154 8,969
Annuity sales income...................................... 7,566 2,660 521
Brokerage fee income...................................... 6,490 3,453 2,545
Letter of credit fees..................................... 5,013 5,590 5,689
VSIBG partnership earnings................................ 2,332 2,890 1,992
Other income.............................................. 41,289 30,483 40,285
-------- -------- --------
Total other noninterest income..................... $117,221 $ 78,929 $ 72,477
======== ======== ========
OTHER NONINTEREST EXPENSE
Amortization and write-off of goodwill, other intangibles,
and mortgage servicing rights:
Amortization of mortgage servicing rights............... $ 17,409 $ 18,250 $ 19,180
Amortization of goodwill and other intangibles.......... 10,562 13,286 13,617
Write-off of mortgage servicing rights, goodwill, and
other intangibles..................................... 2,610 19,407 --
Other contracted services................................. 21,849 18,620 13,412
Stationery and supplies................................... 20,163 17,552 17,111
Postage and carrier....................................... 18,907 17,774 16,249
Advertising and promotion................................. 18,390 17,923 19,032
Communications............................................ 14,767 14,920 11,856
Other personnel services.................................. 10,199 9,816 8,143
Other real estate expense................................. 10,026 4,749 4,281
Miscellaneous charge-offs................................. 9,947 6,224 5,380
Legal fees................................................ 8,731 8,814 9,316
Provision for losses on FHA/VA foreclosure claims (1)..... 8,016 25,163 5,622
Taxes other than income................................... 6,822 6,084 6,049
Travel.................................................... 6,412 5,770 5,293
Consultant fees........................................... 5,511 3,672 3,581
Merchant credit card charges.............................. 5,324 5,152 4,468
Dues, subscriptions, and contributions.................... 4,692 4,553 5,029
Brokerage and clearing fees on trading activities......... 4,339 4,207 6,233
Accounting and audit fees................................. 3,732 4,235 4,556
Insurance................................................. 3,358 4,232 4,240
FDIC insurance............................................ 3,286 10,039 18,869
One-time SAIF assessment on deposits...................... -- 28,249 --
Federal Reserve fees...................................... 2,951 2,722 2,252
Merger-related expenses (2)............................... 46,188 52,786 11,911
Charter consolidation expenses (3)........................ 16,742 -- --
Other expense............................................. 43,498 33,259 40,534
-------- -------- --------
Total other noninterest expense.................... $324,431 $357,458 $256,214
======== ======== ========
</TABLE>
- ---------------
(1) The amount for 1996 includes $19.8 million of provisions for losses on
FHA/VA foreclosure claims related to an acquired entity.
(2) Includes amounts for employment contract payments, severance, postretirement
benefit expenses, and pension expense of acquired entities; write-downs of
office buildings and equipment including assets to be sold, lease buyouts,
assets determined to be obsolete or no longer of use and equipment not
compatible with the Corporation's equipment; professional fees including
legal, accounting, consulting, and financial advisory services; and other
expenses including write-off of assets, charge-offs of prepaid expenses, and
miscellaneous merger-related expenses. The majority of these charges will be
paid in cash over the next 12 months, excluding asset write-downs.
(3) Effective January 1, 1998, the Corporation merged most of its separate
banking subsidiaries with UPB. Charter consolidation expenses include
amounts for employee severance payments, write-offs of data processing
equipment, and other miscellaneous costs related to combining most of the
Corporation's banking subsidiaries into UPB. The majority of these charges
will be paid in cash over the next 12 to 18 months, excluding asset
write-downs.
62
<PAGE> 65
NOTE 14. EMPLOYEE BENEFIT PLANS
401(K) RETIREMENT SAVINGS PLAN. The Corporation's 401(k) Retirement Savings
Plan (401(k) Plan) is available to employees having one or more years of service
and who work in excess of 1,000 hours per year. Employees may voluntarily
contribute 1 to 16 percent of their gross compensation on a pretax basis up to a
maximum of $9,500 in 1997 and the Corporation makes a matching contribution of
50 to 100 percent of the amounts contributed by the employee (up to 6% of
compensation) depending upon his or her eligible years of service. The
Corporation's contributions to the 401(k) Plan for 1997, 1996, and 1995 were
$4.0 million, $3.0 million, and $2.7 million, respectively.
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST. The Employee Stock Ownership Plan and
Trust (ESOP) is noncontributory and covers employees having one or more years of
service and who work in excess of 1,000 hours per year. The amounts of
contributions to the ESOP are determined annually at the discretion of the Board
of Directors and were $3.5 million, $3.5 million, and $3.0 million for 1997,
1996, and 1995, respectively. At December 31, 1997, the ESOP held 1,049,235
shares of the Corporation's common stock, all of which were allocated to
participants.
STOCK INCENTIVE PLANS. Certain employees and directors of the Corporation and
its subsidiaries are eligible to receive options or restricted stock grants
under the 1992 Stock Incentive Plan. A maximum of 6,000,000 shares of the
Corporation's common stock may be issued through the exercise of nonstatutory or
incentive stock options and as restricted stock awards. The option price is the
fair value of the Corporation's shares at the date of grant. Options granted
generally become exercisable in installments of 20% to 33 1/3% each year
beginning one year from date of grant. Additional options under a former plan
and options assumed in connection with various acquisitions remain outstanding;
however, no further options will be granted under such plans. Additional
information with respect to the number of shares of the Corporation's common
stock which are subject to stock options is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1997 1996
-------------------------- -------------------------
WEIGHTED- WEIGHTED-
AVERAGE PRICE NUMBER AVERAGE PRICE NUMBER
------------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
Options
Outstanding, beginning of year............... $21.26 4,406,452 $13.07 3,436,000
Granted...................................... 55.95 1,114,594 34.36 1,833,860
Exercised.................................... 12.93 (1,022,562) 15.80 (798,969)
Canceled or surrendered...................... 26.18 (33,022) 16.13 (64,439)
---------- ---------
Outstanding, end of year..................... 31.80 4,465,462 21.26 4,406,452
========== =========
Options becoming exercisable during the year... $35.35 1,488,781 $15.59 1,392,244
====== ========== ====== =========
Options exercisable at end of year............. $25.02 2,756,626 $14.08 2,311,227
====== ========== ====== =========
</TABLE>
Exercise prices ranged from $1.72 to $65.1875 in 1997 and from $1.72 to
$39.875 in 1996. The contractual remaining life of all options was seven years
at December 31, 1997.
Restricted stock grants aggregating 209,000 shares were awarded in the
fourth quarter of 1997 having a fair value of $7.5 million. Restrictions on the
grants lapse in annual increments over twelve years. The market value of the
restricted stock grants is charged to expense as the restrictions lapse. Amounts
expensed for 1997 and 1996 were $490,000 and $238,000, respectively, and the
ending balance at December 31, 1997 was $6.8 million, which is included in
unearned compensation in shareholders' equity.
Had compensation cost for the Corporation's stock option plans been
consistently determined based upon the fair value at the grant date for awards
under the methodology prescribed under SFAS No. 123, the Corporation's net
income and earnings per share would have been reduced as shown in the table
below. The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions in
1997 and 1996, respectively: expected dividend yield 2.50% and 3.16%; expected
volatility of 22.79% and 25.73%; risk-free interest rate of 5.89% and 5.94%; and
an expected life of 4.0 years and 4.55 years. Forfeitures are recognized as they
occur.
63
<PAGE> 66
NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1997 1996
------ ------
(DOLLARS IN
MILLIONS,
EXCEPT PER SHARE
DATA)
<S> <C> <C>
Net earnings -- as reported................................. $208.8 $171.5
Net earnings -- pro forma................................... 202.8 169.1
Earnings per share -- as reported
Basic..................................................... 2.54 2.13
Diluted................................................... 2.45 2.05
Earnings per share -- pro forma
Basic..................................................... 2.46 2.10
Diluted................................................... 2.38 2.02
</TABLE>
Due to the inclusion of option grants since January 1, 1995, the effects of
applying SFAS No. 123 may not be representative of the pro forma impact in
future years.
RETIREE HEALTHCARE AND LIFE INSURANCE. The Corporation provides certain
healthcare and life insurance benefits to retired employees who had completed 20
years of unbroken full-time service immediately prior to retirement and who have
attained age 60 or more. Healthcare benefits are provided partially through an
insurance company (for retirees age 65 and above) and partially through direct
payment of claims.
The following table reflects the Corporation's net periodic postretirement
benefit costs for 1997, 1996, and 1995 which were determined assuming a discount
rate of 7% for 1997 and 1996 and 8% for 1995 and an expected return on Plan
assets of 5%.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996 1995
----- ----- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost................................................ $ 330 $ 322 $ 203
Interest cost of accumulated postretirement benefit
obligation................................................ 919 938 1,005
Amortization of unrecognized net gain....................... (164) (39) (5)
Return on Plan assets....................................... (458) (534) (363)
----- ----- ------
Total............................................. $ 627 $ 687 $ 840
===== ===== ======
</TABLE>
The following table sets forth the Plans' funded status and the amounts
reported in the Corporation's consolidated balance sheet:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1997 1996
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Fair value of Plan assets (primarily tax-free municipal
obligations).............................................. $10,968 $10,927
------- -------
Accumulated postretirement benefit obligation (APBO):
Retirees.................................................. 9,109 9,326
Fully eligible Plan participants.......................... 279 253
Other active Plan participants............................ 3,608 4,287
------- -------
Total APBO........................................ 12,996 13,866
------- -------
APBO in excess of Plan assets..................... $(2,028) $(2,939)
======= =======
Reconciliation of funded status to reported amounts:
Accrued liability included in consolidated balance sheet,
including
unfunded portion of transition obligation.............. $(6,413) $(6,000)
Unrecognized net gain..................................... 4,385 3,061
------- -------
APBO in excess of Plan assets..................... $(2,028) $(2,939)
======= =======
</TABLE>
The assumed discount rate used to measure the APBO was 7% at both December
31, 1997 and 1996. The weighted average healthcare cost trend rate in 1997 was
9%, gradually declining to an
64
<PAGE> 67
NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED)
ultimate projected rate in 2001 of 5%. A one percent increase in the assumed
healthcare cost trend rates for each future year would have increased the
aggregate of the service and interest cost components of the 1997 net periodic
postretirement benefit cost by $138,000 and would have increased the APBO as of
December 31, 1997 by $1.0 million.
ACQUIRED INSTITUTIONS. Certain of the acquired institutions have sponsored
various employee benefit and retirement plans. Such plans have been or are in
the process of being terminated and their employees now participate in the
Corporation's benefit and retirement plans. At December 31, 1997, certain
institutions acquired in 1997 had outstanding plans including defined benefit
pension plans, 401(k) plans, and ESOPs. The liabilities, if any, for such
terminations have been recorded as of December 31, 1997.
Included in unearned compensation in shareholders' equity at December 31,
1997 and 1996, respectively, is $2.8 million and $3.2 million for a leveraged
ESOP maintained by an acquired institution. At December 31, 1997, the ESOP held
420,900 unallocated shares of the Corporation's common stock which will be
allocated to the appropriate participants as the related debt is paid. Effective
January 1, 1998, this ESOP was merged with the Corporation's ESOP.
NOTE 15. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1996 1995
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CURRENT TAX EXPENSE
Federal................................................... $103,644 $112,545 $102,010
State..................................................... 9,752 16,694 11,599
-------- -------- --------
Total current tax expense......................... 113,396 129,239 113,609
-------- -------- --------
DEFERRED TAX (BENEFIT) EXPENSE
Federal................................................... (3,524) (29,540) (4,358)
State..................................................... 2,025 (6,584) 1,548
-------- -------- --------
Total deferred tax benefit............................. (1,499) (36,124) (2,810)
-------- -------- --------
Total income tax.................................. $111,897 $ 93,115 $110,799
======== ======== ========
</TABLE>
Deferred tax assets/liabilities are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1996
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX ASSETS
Losses on loans and other real estate..................... $ 76,245 $ 69,405
Postretirement and postemployment benefits................ 5,273 3,454
Amortization of intangibles............................... 11,665 10,970
Deferred compensation plans............................... 12,449 6,854
Merger-related and charter consolidation expenses......... 6,340 8,088
Allowance for losses on FHA/VA foreclosure claims......... 8,895 12,325
Mortgage servicing rights................................. 5,642 7,646
Other deferred items...................................... 17,492 21,195
-------- --------
Total deferred tax assets......................... 144,001 139,937
-------- --------
DEFERRED TAX LIABILITIES
Basis difference on FHLB stock............................ 12,729 8,773
Unrealized gain on available for sale securities.......... 24,199 14,772
Other deferred items...................................... 12,306 21,059
-------- --------
Total deferred tax liabilities ................... 49,234 44,604
-------- --------
Deferred tax asset, net........................... $ 94,767 $ 95,333
======== ========
</TABLE>
65
<PAGE> 68
NOTE 15. INCOME TAXES (CONTINUED)
The change in the net deferred tax asset during the year is a result of the
addition of net deferred tax assets of acquired companies, the net change in
unrealized gain on available for sale securities, and the current period
deferred tax benefit.
A reconciliation of income tax expense computed at the applicable statutory
income tax of 35% to actual income tax expense is computed below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1996 1995
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax..................................... $112,230 $ 92,606 $112,719
State income taxes, net of federal tax benefit.............. 7,655 6,467 8,580
Tax-exempt interest, net.................................... (10,750) (11,619) (12,225)
Other, net.................................................. 2,762 5,661 1,725
-------- -------- --------
Applicable income tax............................. $111,897 $ 93,115 $110,799
======== ======== ========
</TABLE>
Income tax expense (benefit) applicable to securities transactions was
$819,000 for 1997, $1.6 million for 1996, and ($508,000) for 1995.
NOTE 16. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share," which became effective for reporting periods ending
after December 15, 1997. Under the provisions of SFAS No. 128, primary and fully
diluted earnings per share were replaced with basic and diluted earnings per
share in an effort to simplify the computation of these measures and align them
more closely with the methodology used internationally. Basic earnings per share
is arrived at by dividing net earnings available to common shareholders by the
weighted-average number of common shares outstanding and does not include the
impact of any potentially dilutive common stock equivalents. The diluted
earnings per share calculation method is similar to, but slightly different
from, the previously required fully diluted earnings per share method and is
arrived at by dividing net earnings less dividends on nonconvertible preferred
stock by the weighted-average number of shares outstanding, adjusted for the
dilutive effect of outstanding stock options and the conversion impact of
convertible equity securities. For purposes of comparability, all prior-period
earnings per share data have been restated.
66
<PAGE> 69
NOTE 16. EARNINGS PER SHARE (CONTINUED)
The calculation of net earnings per share follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
BASIC:
Net earnings...................................... $ 208,761 $ 171,474 $ 211,256
Less preferred dividends....................... 4,939 6,944 8,612
----------- ----------- -----------
Net earnings applicable to common shares.......... $ 203,822 $ 164,530 $ 202,644
=========== =========== ===========
Average common shares outstanding................. 80,336,267 77,239,792 72,512,168
=========== =========== ===========
Net earnings per common share -- basic............ $ 2.54 $ 2.13 $ 2.79
=========== =========== ===========
DILUTED:
Net earnings...................................... $ 208,761 $ 171,474 $ 211,256
Less dividends on nonconvertible preferred
stock........................................ -- -- 1,361
----------- ----------- -----------
Net earnings applicable to common shares.......... $ 208,761 $ 171,474 $ 209,895
=========== =========== ===========
Average common shares outstanding................. 80,336,267 77,239,792 72,512,168
Stock option adjustment........................... 1,562,382 1,863,871 1,690,291
Preferred stock adjustment........................ 3,296,688 4,438,833 4,595,262
----------- ----------- -----------
Average common shares outstanding................. 85,195,337 83,542,496 78,797,721
=========== =========== ===========
Net earnings per common share -- diluted.......... $ 2.45 $ 2.05 $ 2.66
=========== =========== ===========
</TABLE>
NOTE 17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business, the Corporation becomes a party to
various types of financial instruments in order to meet the financing needs of
its customers and to reduce its exposure to fluctuations in interest rates.
These instruments involve, to varying degrees, elements of credit and
interest-rate risk and are not reflected in the accompanying consolidated
financial statements. For these instruments, the exposure to credit loss is
limited to the contractual amount of the instrument. The Corporation follows the
same credit policies in making commitments and contractual obligations as it
does for on-balance-sheet instruments. In addition, controls for these
instruments related to approval, monetary limits, and monitoring procedures are
established by the Corporation's Directors' Loan Committee. The following table
presents the contractual amounts of these types of instruments.
<TABLE>
<CAPTION>
CONTRACT AMOUNT
DECEMBER 31,
------------------
1997 1996
------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C>
FINANCIAL INSTRUMENTS WHOSE CONTRACT AMOUNTS REPRESENT
CREDIT RISK
Commitments to extend credit (excluding credit card
plans)................................................ $1,705 $1,387
Commitments to extend credit under credit card plans... 2,209 1,773
Standby, commercial, and similar letters of credit..... 190 200
</TABLE>
Commitments to extend credit are legally binding agreements to extend
credit to customers for specific purposes, at stipulated rates, with fixed
expiration and review dates if the conditions in the agreement are met, and may
require payment of a fee. Since many of the commitments normally expire without
being drawn upon, the total commitment amounts do not necessarily represent
future cash requirements. Collateral held, if any, varies but may include
accounts receivable, inventory, property, plant and equipment, income producing
properties, or securities. Loan commitments with an original maturity of one
year or less or which are unconditionally cancelable totaled $3.3 billion and
loan commitments with a maturity over one year which are not unconditionally
cancelable totaled $655 million.
Letters of credit are conditional commitments issued by the Corporation to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The Corporation in some
67
<PAGE> 70
NOTE 17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED)
cases holds various types of collateral to support those commitments for which
collateral is deemed necessary. The outstanding letters of credit expire between
1998 and 2008.
Other outstanding off-balance-sheet instruments are forward contracts,
interest-rate swap agreements, and commitments to purchase or sell when-issued
securities. The following table presents the notional amounts of these types of
instruments.
<TABLE>
<CAPTION>
NOTIONAL AMOUNT
DECEMBER 31,
----------------------
1997 1996
------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C>
FINANCIAL INSTRUMENTS WHOSE NOTIONAL CONTRACT AMOUNTS EXCEED
THE AMOUNTS OF ACTUAL CREDIT RISK
Forward contracts...................................... $333 $ 87
When-issued securities
Commitments to sell.................................. 61 142
Commitments to purchase.............................. 79 108
</TABLE>
Forward contracts are contracts for delayed delivery of securities or money
market instruments in which the seller agrees to make delivery at a specified
future date of a specified instrument, at a specified price or yield. Risks
arise from the possible inability of the counterparties to meet the terms of
their contracts and from market movements in securities values and interest
rates. The Corporation as seller utilizes short-term forward commitments to
deliver mortgages to protect the Corporation against the risk of rate changes
which could impact the value of mortgage originations to be securitized or
otherwise sold to investors. Such commitments to deliver mortgages generally
have maturities of 90 days or less.
The Corporation has a policy for its use of derivative products, including
interest-rate swaps, which has been approved and is monitored by the Funds
Management Committee and the Board of Directors. The Corporation is not
currently trading derivative products. The policy requires that individual
positions for derivative products shall not exceed $100-million notional amount
and that open positions in the aggregate shall not exceed 10% of consolidated
total assets. Any exceptions to the policy must be approved by the Board of
Directors. The policy requires open positions to be reviewed monthly by the
Funds Management Committee to ensure compliance with established policies. At
December 31, 1997, the Corporation had no interest-rate swap/cap agreements
outstanding. The following table provides a reconciliation of interest-rate
swaps/cap for 1996.
<TABLE>
<CAPTION>
NOTIONAL AMOUNT
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
BALANCE AT JANUARY 1, 1996.................................. $ 530
Maturities................................................ (200)
Interest-rate swaps/cap of acquired entities terminated at
acquisition as the instruments were no longer
effective.............................................. (330)
-----
BALANCE AT DECEMBER 31, 1996................................ $ --
=====
</TABLE>
The impact on the Corporation's net interest income of the interest-rate
swaps/cap outstanding was a net reduction of approximately $1.5 million in 1996
and $2.9 million in 1995. The impact of the termination of the interest-rate
swaps/cap related to an acquired entity was a $1.1 million loss which was
recorded in noninterest expense in 1996.
When-issued securities are commitments to either purchase or sell
securities when, as, and if they are issued. The trades are contingent upon the
actual issuance of the security. These transactions represent conditional
commitments made by the Corporation and risk arises from the possible inability
of the counterparties to meet the terms of their contracts and from market
movements in securities values and interest rates.
MORTGAGE LOAN SERVICING. The Corporation was acting as servicing agent for
residential mortgage loans totaling approximately $13.4 billion ($10.6 billion
serviced for others) at December 31, 1997 compared to $14.6 billion ($11.9
billion serviced for others) at December 31, 1996. The loans serviced
68
<PAGE> 71
NOTE 17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED)
for others are not included in the Corporation's consolidated balance sheet. The
following table presents a reconciliation of the changes in mortgage servicing
rights for the two years ended December 31, 1997.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
1997 1996
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Beginning balance........................................... $ 66,993 $ 67,481
Additions................................................... 11,762 22,619
Sale of servicing rights.................................... -- (841)
Write-off of servicing rights............................... -- (4,016)
Amortization of servicing rights............................ (17,409) (18,250)
-------- --------
Ending balance.............................................. $ 61,346 $ 66,993
======== ========
</TABLE>
In its capacity as servicer of certain of these loans, the Corporation is
responsible for foreclosure and the related costs of foreclosure. These costs
are estimated each period based on historical loss experience and are shown as
provisions for losses on FHA/VA foreclosure claims in noninterest expense. At
December 31, 1997 and 1996, the Corporation had reserves for these losses of
$33.3 million and $37.2 million, respectively.
In the normal course of business, the Corporation sells mortgage loans and
makes certain limited representations and warranties to the purchaser.
Management does not expect any significant losses to arise from these
representations and warranties.
CONCENTRATIONS OF CREDIT RISK. Through its subsidiary banks' offices in
Tennessee, Mississippi, Florida, Missouri, Arkansas, Louisiana, Alabama, and
Kentucky, the Corporation grants commercial, agricultural, residential, and
consumer loans to customers throughout those states. The amount and percentage
of total loans outstanding by the state in which the subsidiaries were
headquartered at December 31, 1997 were as follows: Tennessee $6.3 billion
(50%); Mississippi $2.4 billion (19%); Florida $1.6 billion (13%); Missouri $884
million (7%); Arkansas $520 million (4%); Louisiana $509 million (4%); Alabama
$335 million (2%); and Kentucky $88 million (1%). In connection with its
acquisition of Capital-Miami, the Corporation now has exposure related to
foreign lending of approximately $207 million (2%). Although the Corporation has
a diversified loan portfolio, the ability of its debtors to honor their
contracts is to some extent dependent upon economic conditions prevailing
throughout the above and surrounding areas.
69
<PAGE> 72
NOTE 18. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values and fair values of the Corporation's financial
instruments are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------- -------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and short-term investments........... $ 950,154 $ 950,154 $ 1,015,528 $ 1,015,528
Trading account assets.................... 187,419 187,419 260,266 260,266
Loans held for resale..................... 170,742 170,742 109,156 109,156
Investment securities -- available for
sale................................... 3,247,680 3,247,680 3,387,217 3,387,217
Net loans................................. 12,433,175 12,480,320 12,389,453 12,433,205
Mortgage servicing rights................. 61,346 111,582 66,993 105,913
FINANCIAL LIABILITIES
Noninterest-bearing....................... $ 2,323,367 $ 2,323,367 $ 2,223,112 $ 2,223,112
Interest-bearing.......................... 11,116,902 11,142,252 11,291,032 11,305,361
Short-term borrowings..................... 831,627 831,627 696,051 696,051
Short- and medium-term notes.............. 135,000 136,918 400,000 400,411
Federal Home Loan Bank advances........... 703,996 702,961 985,042 987,102
Other long-term debt, excluding capital
lease obligations...................... 709,762 723,268 584,342 578,116
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Forward contracts......................... -- (1,037) -- 19
</TABLE>
The following methods and assumptions were used by the Corporation in
estimating the fair value for financial instruments:
CASH AND SHORT-TERM INVESTMENTS. The carrying amount for cash and
short-term investments approximates the fair value of the assets. Included in
this classification are cash and due from banks (non-earning assets), federal
funds sold, securities purchased under agreements to resell, and interest-
bearing deposits at financial institutions.
TRADING ACCOUNT ASSETS. These instruments are carried in the consolidated
balance sheet at values which approximate their fair values based on quoted
market prices of similar instruments.
LOANS HELD FOR RESALE. These instruments are carried in the consolidated
balance sheet at the lower of cost or fair value. The fair values of these
instruments are based on subsequent liquidation values of the instruments which
did not result in any significant gains or losses.
INVESTMENT SECURITIES. Fair values of these instruments are based on
quoted market prices, where available. If quoted market prices are not
available, fair values are based on the quoted values of similar instruments.
LOANS. The fair values of loans are estimated using discounted cash flow
analyses and using interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality and risk.
MORTGAGE SERVICING RIGHTS. The fair values of mortgage servicing rights
are estimated using discounted cash flow analyses.
DEPOSITS. The fair values of demand deposits (i.e., checking accounts,
savings accounts, money market deposit accounts, and NOW accounts) are, by
definition, equal to the amount payable on demand at the reporting date (i.e.,
their carrying amount). The fair values of time deposits (i.e., certificates of
deposit, IRAs, investment savings, etc.) are estimated using a discounted cash
flow calculation that applies interest rates currently being offered on these
instruments to a schedule of aggregated expected monthly maturities on time
deposits.
SHORT-TERM BORROWINGS. The carrying amount of short-term borrowings (i.e.,
federal funds purchased, securities sold under agreements to repurchase,
commercial paper, and other short-term borrowings) approximates their fair
values.
70
<PAGE> 73
NOTE 18. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
SHORT- AND MEDIUM-TERM BANK NOTES. The fair value of these notes is
estimated using discounted cash flow analyses and using current LIBOR-based
indices.
FEDERAL HOME LOAN BANK ADVANCES. The fair value of these advances is
estimated using discounted cash flow analyses and using the FHLB-quoted rates of
borrowing for advances with similar terms.
OTHER LONG-TERM DEBT. The fair value of long-term debt was estimated from
dealer quotes.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS. Fair values of off-balance-sheet
instruments are based on current settlement values for forward contracts. The
fair value of commitments to extend credit and letters of credit (see Note 17)
is not presented, since management believes the fair value to be insignificant.
NOTE 19. CONTINGENT LIABILITIES
The Corporation and/or various subsidiaries are parties to various pending
civil actions, all of which are being defended vigorously. Additionally, the
Corporation and/or its subsidiaries are parties to various legal proceedings
that have arisen in the ordinary course of business. Management is of the
opinion, based upon present information, including evaluations by outside
counsel, that neither the Corporation's financial position, results of
operations, nor liquidity will be materially affected by the ultimate resolution
of pending or threatened legal proceedings.
The Corporation's five banks (UPC Banks) located in Mississippi (which were
merged into UPB January 1, 1998) are defendants in various related lawsuits
pending in state and federal courts in Mississippi related to the placement of
collateral protection insurance (CPI) by the UPC Banks in the 1980s and early
1990s. Two of the federal actions, which have been consolidated (the
Consolidated Action), purport to have been brought as class actions and include
allegations that premiums were excessive and improperly calculated; coverages
were improper and not disclosed; and improper payments were paid to the UPC
Banks by the insurance companies, allegedly constituting violations of various
state and federal statutes and common law. The CPI programs appear to have been
substantially similar in many respects to CPI programs of other Mississippi
banks, often with the same insurance companies. Consequently, there are now
similar putative class actions pending against various Mississippi banks
(including those against the UPC Banks), various insurance agencies and
companies based upon their CPI programs. The relief sought in the purported
class actions includes actual damages, treble damages under certain statutes,
other statutory damages, and unspecified punitive damages. During the fourth
quarter of 1997, an agreement in principle was reached by the UPC Banks with
attorneys for the putative class to settle the Consolidated Action within
amounts previously established. Final settlement is subject to execution of a
definitive agreement, court approval, and the UPC Banks' acceptance of the
number of opt-outs from the class settlement. Other subsidiaries of the
Corporation have been involved in similar litigation relating to CPI on mobile
home loans. One such suit was filed as a putative class action in June 1995
against Leader Federal Bank for Savings (Leader Federal) and eighteen other
unrelated defendants, requesting $200 million in punitive damages against each
defendant. Another individual suit filed in June 1995 against Leader Federal as
a counterclaim to a foreclosure suit demanded judgment for compensatory damages
and punitive damages of $10 million. An agreement to settle these cases was
reached, and court approval obtained, in the fourth quarter of 1996, within
amounts previously established. Payments to class members were substantially
completed during 1997. Two other CPI-related actions were filed against Leader
Federal, a subsidiary, and an unrelated insurance company in January 1996. One
such case demanded compensatory damages of $5,000 and punitive damages of $20
million, while the other sought $10,000 in compensatory damages and $50 million
in punitive damages. These suits were settled during 1997 for nominal amounts.
71
<PAGE> 74
UNION PLANTERS CORPORATION
EXECUTIVE OFFICERS
BENJAMIN W. RAWLINS, JR.
Chairman and Chief Executive Officer
JACKSON W. MOORE
President and Chief Operating Officer
JACK W. PARKER
Executive Vice President and
Chief Financial Officer
JAMES A. GURLEY
Executive Vice President
Risk Management
J. ARMISTEAD SMITH
Executive Vice President and
Senior Lending Officer
M. KIRK WALTERS
Senior Vice President, Treasurer, and Chief Accounting Officer
BOARD OF DIRECTORS
ALBERT M. AUSTIN
Chairman
Cannon, Austin & Cannon, Inc.
EDGAR H. BAILEY
Vice Chairman
Union Planters Corporation
MARVIN E. BRUCE
Chairman
TBC Corporation
GEORGE W. BRYAN
Senior Vice President
Sara Lee Corporation
JAMES E. HARWOOD
President
Sterling Equities
PARNELL S. LEWIS, JR.
President
Anderson-Tully Company
C. J. LOWRANCE III
President
Lowrance Brothers & Company Inc.
JACKSON W. MOORE
President and Chief Operating Officer
Union Planters Corporation and
Union Planters Bank, N.A.
STANLEY D. OVERTON
Chairman (Retired)
Union Planters Bank of
Middle Tennessee, N.A.
BENJAMIN W. RAWLINS, JR.
Chairman and Chief Executive Officer
Union Planters Corporation and
Union Planters Bank, N.A.
DR. V. LANE RAWLINS
President
The University of Memphis
DONALD F. SCHUPPE
DFS Service Company
MIKE P. STURDIVANT
President
Due West Gin Co., Inc.
DAVID M. THOMAS
President (Retired)
Magnolia Federal Bank for Savings
RICHARD A. TRIPPEER, JR.
President
R. A. Trippeer, Inc.
SPENCE L. WILSON
President
Kemmons Wilson, Inc.
72
<PAGE> 75
[LOGO] UNION
PLANTERS
CORPORATION
CORPORATE INFORMATION
ANNUAL MEETING
Thursday, April 16, 1998 at 10 a.m.
Union Planters Administrative Center
Assembly Room C
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
CORPORATE OFFICES
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
CORPORATE MAILING ADDRESS
P. O. Box 387
Memphis, Tennessee 38147
INTERNET:
http://www.unionplanters.com
TRANSFER AGENT AND REGISTRAR
Union Planters Bank, N.A.
Corporate Trust Operations
6200 Poplar Avenue, Suite 300
Memphis, Tennessee 38119
(901) 580-5523
DIVIDEND PAYING AGENT
Union Planters Bank, N.A.
Corporate Trust Operations
6200 Poplar Avenue, Suite 300
Memphis, Tennessee 38119
(901) 580-5523
STOCK AND OPTION LISTINGS
Common
NYSE Symbol: UPC
Wall Street Journal: UnPlantr
Series E Convertible Preferred
NASDAQ NMS Symbol: UPCPO
Wall Street Journal: UnPlantr pfE
Options
Philadelphia Stock Exchange
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
FOR FINANCIAL INFORMATION, CONTACT
Jack W. Parker
Executive Vice President and
Chief Financial Officer
(901) 580-6781
FORM 10-K
Copies of the Corporation's
Annual Report on Form 10-K
as filed with the Securities
and Exchange Commission are
available on request by
calling the Corporate Marketing
Division at (901) 580-6604.
DIVIDEND REINVESTMENT AND
STOCK PURCHASE PLAN
The Plan allows Union Planters
shareholders to reinvest their
dividends in Union Planters
Common Stock. No brokerage
commissions or service charges
are paid by shareholders.
The Plan also permits those
participating in the Plan to
buy additional shares
with optional cash payments
and no brokerage commissions.
Full details are available
by calling (901) 580-5516 or
writing Union Planters
Corporate Trust Operations.
The Corporation's banking
subsidiaries are members of the
FDIC and are Equal Housing
Lenders. UPC and its subsidiaries
are Equal Opportunity Employers.
[LOGO]
<PAGE> 76
UNION PLANTERS CORPORATION
P.O. BOX 387
MEMPHIS, TENNESSEE 38147
<PAGE> 1
EXHIBIT 21
Page 1 of 2
UNION PLANTERS CORPORATION, Registrant,
A registered bank holding company
<TABLE>
<CAPTION>
STATE OR PERCENTAGE
JURISDICTION OF VOTING
UNDER LAWS OF SECURITIES
NAME OF REGISTRANT AND SUBSIDIARIES WHICH ORGANIZED OWNED
- ----------------------------------- --------------- ----------
<S> <C> <C>
Union Planters Corporation (Registrant) Tennessee
Union Planters Holding Corporation (a) Tennessee 100.00%
Union Planters Bank, National Association (b) United States 100.00%
Planters Investment Corporation, Inc. (c) Arkansas 100.00%
Leader Enterprises, Inc. (c) (g) Tennessee 100.00%
Leader Services, Inc. (c) (g) Tennessee 100.00%
Leader Federal Mortgage, Inc. (c) (g) Tennessee 100.00%
ASMI, LLC (d) Indiana 50.00%
Leader Leasing, Inc. (c) Delaware 100.00%
Leader Funding Corporation III (c) Delaware 100.00%
Magna Insurance Company (c) Mississippi 100.00%
PFIC Corporation (c) Tennessee 100.00%
PFIC Securities Corporation (e) Tennessee 100.00%
PFIC Alabama Agency, Inc. (e) Alabama 100.00%
PFIC Georgia Agency, Inc. (e) Georgia 100.00%
PFIC Agency New Mexico, Inc. (e) New Mexico 100.00%
PFIC Corporation of Kentucky (e) Kentucky 100.00%
PFIC Agency, Inc. (e) Illinois 100.00%
PFIC Arkansas Agency, Inc. (e) Arkansas 100.00%
PFIC Mississippi Agency, P.C. (e) Mississippi 100.00% indirectly
PFIC Mississippi Agency, Inc. (e) Mississippi 100.00%
PFIC Michigan Agency, Inc. (e) Michigan 100.00%
PFIC Wisconsin Agency, Inc. (e) Wisconsin 100.00%
PFIC Louisiana Agency, Inc. (e) Louisiana 100.00%
PFIC Missouri Agency, Inc. (e) Missouri 100.00%
PFIC Virginia Agency, Inc. (e) Virginia 100.00%
PFIC Oregon Agency, Inc. (e) Oregon 100.00%
PFIC Ohio Agency, Inc. (e) Ohio 100.00%
PFIC Nevada Agency, Inc. (e Nevada 100.00%
PFIC New York Agency, Inc. (e) New York 100.00%
PFIC Tennessee Agency, Inc. (e) Tennessee 100.00%
Navigator Agency Incorporated (e) Texas 100.00% indirectly
Union Planters Mortgage Finance Corporation (c) Delaware 100.00%
First North Central Insurance, Inc. (c and g) Arkansas 100.00%
Colonial Loan Association (c) Tennessee 100.00%
Union Planters Insurance Agency, Inc. (c) Tennessee 100.00%
Magna Mortgage Company (c) Mississippi 100.00%
Union Planters Insurance Agency of Mississippi, Inc. (c) Mississippi 100.00%
Capital Equity Corporation (c) Louisiana 100.00%
First Financial Automation, Inc. (c) Missouri 100.00%
First Savings Financial Corporation (c) Missouri 100.00%
Millcreek Development Partnership, LP (c) Tennessee 49.50%
Planters Life Insurance Company (c) Arizona 100.00%
Union Planters Bank of Florida (b) Florida 100.00%
Capital Finance Group, Inc. (j) Florida 100.00%
Capital Insurance Group, Inc. (j) Florida 100.00%
Villages at Imperial Lakes, Inc. (j) Florida 100.00%
Cap Holdings, Inc. (j and g) Florida 100.00%
Bay Estates, Inc. (j and g) Florida 100.00%
Cap Personalty, Inc. (j) Florida 100.00%
Cap Realty, Inc. (j) Florida 100.00%
Cap Harbor, Inc. (j and g) Florida 100.00%
Cap Temp, Inc. (j and g) Florida 100.00%
Cap Properties, Inc. (j and g) Texas 100.00%
Colonial Apartments LTD (j) Florida 98.00%
Interdevco, Inc. (j) Florida 40.00%
Capital Factors Holding, Inc. (j) Florida 81.00%
Capital Factors, Inc. (k) Florida 100.00%
CF Funding Corp. (l) Delaware 100.00%
Capital Tempfunds, Inc. (l) North Carolina 100.00%
CF One, Inc. (k) Delaware 100.00%
CF Investor Corp. (k) Delaware 100.00%
CF Two, LLC (m) Delaware 100.00%
</TABLE>
<PAGE> 2
EXHIBIT 21
Page 2 of 2
UNION PLANTERS CORPORATION, Registrant,
A registered bank holding company
<TABLE>
<CAPTION>
STATE OR PERCENTAGE
JURISDICTION OF VOTING
UNDER LAWS OF SECURITIES
NAME OF REGISTRANT AND SUBSIDIARIES WHICH ORGANIZED OWNED
- ----------------------------------- --------------- ----------
<S> <C> <C>
Selmer Bank and Trust Co. (a) Tennessee 100.00%
Franklin Financial Group, Inc. (a) Tennessee 100.00%
Union Planters Bank of the Lakeway Area (f) Tennessee 100.00%
Union Planters Bank of Northwest Tennessee FSB (a) United States 100.00%
Union Planters Investment Bankers Corporation (a and g) Tennessee 100.00%
Union Planters Investment Bankers Group, Inc. (i and g) Tennessee 100.00%
UMIC, Inc. (i and g) Tennessee 100.00%
UMIC Securities Corporation (i and g) Tennessee 100.00%
Southwestern Investment Company (a and g) Tennessee 100.00%
Tennessee Equity Mortgage Corporation (a and g) Tennessee 100.00%
Guardian Realty Company (a and g) Alabama 100.00%
Union Planters Capital Trust A (a) Delaware 100.00%
</TABLE>
(a) Subsidiary of Union Planters Corporation
(b) Subsidiary of Union Planters Holding Corporation
(c) Subsidiary of Union Planters Bank, National Association
(d) Subsidiary of Leader Federal Mortgage, Inc.
(e) Subsidiary of PFIC Corporation
(f) Subsidiary of Franklin Financial Group
(g) Inactive Subsidiary
(h) Subsidiary of Union Planters Bank of the Lakeway Area
(i) Subsidiary of Union Planters Investment Bankers Corporation
(j) Subsidiary of Union Planters Bank of Florida
(k) Subsidiary of Capital Factors Holding, Inc.
(l) Subsidiary of Capital Factors, Inc.
(m) Subsidiary of CF Investor Corp.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the previously
filed Registration Statements on Form S-3 (Nos. 333-02377, 333-11817, and
33-27814) and Form S-8 (Nos. 333-41089, 333-28507, 333-17363, 333-13207,
333-13205, 333-02363, 2-87392, 33-23306, 33-35928, 33-53454, 33-55257,
33-56269, and 33-65467) of Union Planters Corporation of our report dated
January 15, 1998, except as to Note 2 which is as of March 3, 1998, appearing
on page 41 of the Annual Report to Shareholders which is incorporated in this
Annual Report on Form 10-K.
/s/PRICE WATERHOUSE LLP
Memphis, Tennessee
March 17, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF UNION PLANTERS FOR THE YEAR ENDED DECEMBER 31, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 816,472
<INT-BEARING-DEPOSITS> 24,490
<FED-FUNDS-SOLD> 109,192
<TRADING-ASSETS> 187,419
<INVESTMENTS-HELD-FOR-SALE> 3,247,680
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 12,829,306
<ALLOWANCE> 225,389
<TOTAL-ASSETS> 18,105,079
<DEPOSITS> 13,440,269
<SHORT-TERM> 831,627
<LIABILITIES-OTHER> 536,413
<LONG-TERM> 1,549,904
0
54,709
<COMMON> 408,255
<OTHER-SE> 1,283,902
<TOTAL-LIABILITIES-AND-EQUITY> 18,105,079
<INTEREST-LOAN> 1,173,744
<INTEREST-INVEST> 216,253
<INTEREST-OTHER> 26,697
<INTEREST-TOTAL> 1,416,694
<INTEREST-DEPOSIT> 494,517
<INTEREST-EXPENSE> 646,309
<INTEREST-INCOME-NET> 770,385
<LOAN-LOSSES> 113,633
<SECURITIES-GAINS> 2,104
<EXPENSE-OTHER> 697,704
<INCOME-PRETAX> 320,658
<INCOME-PRE-EXTRAORDINARY> 320,658
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 208,761
<EPS-PRIMARY> 2.54
<EPS-DILUTED> 2.45
<YIELD-ACTUAL> 8.73
<LOANS-NON> 109,378
<LOANS-PAST> 540,755
<LOANS-TROUBLED> 10,021
<LOANS-PROBLEM> 17,547
<ALLOWANCE-OPEN> 189,118
<CHARGE-OFFS> 99,066
<RECOVERIES> 18,471
<ALLOWANCE-CLOSE> 225,389
<ALLOWANCE-DOMESTIC> 222,239
<ALLOWANCE-FOREIGN> 3,150
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
