<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period ________ to ________
Commission File No. 1-10160
UNION PLANTERS CORPORATION
(Exact name of registrant as specified in its charter)
Tennessee 62-0859007
------------------------ ---------------------------------
(State of incorporation) (IRS Employer Identification No.)
Union Planters Administrative Center
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
-------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (901) 580-6000
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding at July 31, 2000
------------------------- ----------------------------
Common stock $5 par value 134,740,096
<PAGE> 2
UNION PLANTERS CORPORATION AND SUBSIDIARIES
FORM 10-Q FOR THE THREE MONTHS ENDED JUNE 30, 2000
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
a) Consolidated Balance Sheet - June 30, 2000,
June 30, 1999, and December 31, 1999...................................3
b) Consolidated Statement of Earnings -
Three and Six Months Ended June 30, 2000 and 1999......................4
c) Consolidated Statement of Changes in Shareholders' Equity -
Six Months Ended June 30, 2000 ........................................5
d) Consolidated Statement of Cash Flows -
Six Months Ended June 30, 2000 and 1999................................6
e) Notes to Unaudited Consolidated Financial Statements...................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.........................13
Item 3. Quantitative and Qualitative Disclosures about Market Risk............31
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.....................................................34
Item 2. Changes in Securities.................................................34
Item 3. Defaults Upon Senior Securities.......................................34
Item 4. Submission of Matters to a Vote of Security Holders...................34
Item 5. Other Information.....................................................34
Item 6. Exhibits and Reports on Form 8-K......................................34
Signatures......................................................................35
</TABLE>
2
<PAGE> 3
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------------------ ------------
2000 1999 1999
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and due from banks .................................................. $ 1,006,884 $ 1,140,966 $ 1,127,902
Interest-bearing deposits at financial institutions ...................... 28,819 49,808 73,062
Federal funds sold and securities purchased under agreements to resell ... 72,389 120,762 51,117
Trading account assets ................................................... 202,019 282,199 315,734
Loans held for resale .................................................... 356,934 403,520 430,690
Available for sale securities (Amortized cost: $7,192,127,
$8,035,376, and $7,685,096, respectively) .............................. 6,954,593 7,939,035 7,472,455
Loans .................................................................... 23,342,893 20,263,128 21,474,498
Less: Unearned income .................................................. (14,703) (32,016) (28,098)
Allowance for losses on loans .................................... (345,858) (340,586) (342,300)
------------ ------------ ------------
Net loans ........................................................... 22,982,332 19,890,526 21,104,100
Premises and equipment, net .............................................. 622,892 584,717 637,628
Accrued interest receivable .............................................. 288,231 281,752 287,231
FHA/VA claims receivable ................................................. 88,445 137,337 108,618
Mortgage servicing rights, net ........................................... 132,985 115,033 122,110
Goodwill and other intangibles, net ...................................... 985,361 725,046 975,432
Other assets ............................................................. 504,929 589,471 574,274
------------ ------------ ------------
TOTAL ASSETS ..................................................... $ 34,226,813 $ 32,260,172 $ 33,280,353
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing .................................................... $ 4,097,788 $ 4,236,678 $ 4,035,189
Certificates of deposit of $100,000 and over ........................... 2,485,447 2,120,692 1,963,347
Other interest-bearing ................................................. 16,707,120 18,450,271 17,373,580
------------ ------------ ------------
Total deposits ................................................... 23,290,355 24,807,641 23,372,116
Short-term borrowings .................................................... 5,526,280 2,596,517 5,422,504
Short- and medium-term senior notes ...................................... 660,000 105,000 60,000
Federal Home Loan Bank advances .......................................... 601,506 208,463 203,032
Other long-term debt ..................................................... 829,057 894,798 854,738
Accrued interest, expenses, and taxes .................................... 282,583 247,195 202,303
Other liabilities ........................................................ 338,362 427,486 389,551
------------ ------------ ------------
TOTAL LIABILITIES ................................................ 31,528,143 29,287,100 30,504,244
------------ ------------ ------------
Commitments and contingent liabilities ................................... -- -- --
Shareholders' equity
Convertible preferred stock ............................................ 19,983 22,134 20,875
Common stock, $5 par value; 300,000,000 shares authorized;
134,731,904 issued and outstanding (142,712,856 at June 30, 1999,
and 138,487,381 at December 31, 1999) ............................... 673,660 713,564 692,437
Additional paid-in capital ............................................. 752,846 770,932 755,306
Retained earnings ...................................................... 1,424,808 1,541,608 1,453,468
Unearned compensation .................................................. (22,273) (13,595) (11,760)
Accumulated other comprehensive income--unrealized loss on
available for sale securities, net of income taxes ................... (150,354) (61,571) (134,217)
------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY ....................................... 2,698,670 2,973,072 2,776,109
------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ....................... $ 34,226,813 $ 32,260,172 $ 33,280,353
============ ============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
3
<PAGE> 4
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- -----------------------
2000 1999 2000 1999
-------- -------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans ........................................ $500,527 $428,335 $ 970,290 $ 846,106
Interest on investment securities
Taxable ......................................................... 98,491 107,518 200,182 214,098
Tax-exempt ...................................................... 16,293 17,633 33,106 35,093
Interest on deposits at financial institutions .................... 193 450 513 1,437
Interest on federal funds sold and securities purchased under
agreements to resell ............................................ 1,578 963 2,607 1,832
Interest on trading account assets ................................ 3,362 3,934 8,416 7,529
Interest on loans held for resale ................................. 6,300 6,468 12,618 13,791
-------- -------- ---------- ----------
Total interest income ..................................... 626,744 565,301 1,227,732 1,119,886
-------- -------- ---------- ----------
INTEREST EXPENSE
Interest on deposits .............................................. 200,594 206,296 390,562 419,300
Interest on short-term borrowings ................................. 94,381 26,088 171,077 45,342
Interest on long-term debt ........................................ 20,417 21,328 39,991 47,958
-------- -------- ---------- ----------
Total interest expense .................................... 315,392 253,712 601,630 512,600
-------- -------- ---------- ----------
NET INTEREST INCOME ....................................... 311,352 311,589 626,102 607,286
PROVISION FOR LOSSES ON LOANS ....................................... 19,699 17,740 37,002 34,019
-------- -------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON LOANS ... 291,653 293,849 589,100 573,267
-------- -------- ---------- ----------
NONINTEREST INCOME
Service charges on deposit accounts ............................... 44,667 42,523 86,698 81,390
Mortgage banking revenue .......................................... 24,945 24,215 47,817 51,702
Bank card income .................................................. 9,391 8,083 17,813 11,043
Factoring commissions ............................................. 7,542 7,403 14,686 14,431
Trust service income .............................................. 6,567 7,004 13,232 13,714
Profits and commissions from trading activities ................... 1,253 1,519 2,716 1,864
Investment securities gains ....................................... 77 3,181 77 3,192
Other income ...................................................... 44,058 46,788 83,030 89,634
-------- -------- ---------- ----------
Total noninterest income .................................. 138,500 140,716 266,069 266,970
-------- -------- ---------- ----------
NONINTEREST EXPENSE
Salaries and employee benefits .................................... 127,567 129,871 256,298 253,101
Net occupancy expense ............................................. 23,550 21,676 46,949 41,911
Equipment expense ................................................. 21,329 20,218 42,404 39,238
Goodwill and other intangibles amortization ....................... 15,862 12,285 31,709 25,148
Other expense ..................................................... 87,577 90,959 170,230 173,850
-------- -------- ---------- ----------
Total noninterest expense ................................. 275,885 275,009 547,590 533,248
-------- -------- ---------- ----------
EARNINGS BEFORE INCOME TAXES .............................. 154,268 159,556 307,579 306,989
Income taxes ........................................................ 51,383 53,792 103,357 103,875
-------- -------- ---------- ----------
NET EARNINGS .............................................. $102,885 $105,764 $ 204,222 $ 203,114
======== ======== ========== ==========
NET EARNINGS APPLICABLE TO COMMON SHARES .................. $102,483 $105,318 $ 203,408 $ 202,210
======== ======== ========== ==========
EARNINGS PER COMMON SHARE
Basic ..................................................... $ 0.76 $ 0.74 $ 1.50 $ 1.42
Diluted ................................................... 0.76 0.73 1.49 1.40
AVERAGE COMMON SHARES OUTSTANDING (IN THOUSANDS)
Basic ..................................................... 134,794 142,574 135,670 142,417
Diluted ................................................... 136,268 144,798 137,170 144,737
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
4
<PAGE> 5
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
UNREALIZED
LOSS ON
CONVERTIBLE 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, 2000 ............... $ 20,875 $ 692,437 $ 755,306 $ 1,453,468 $(11,760) $(134,217) $ 2,776,109
Comprehensive income
Net earnings ......................... -- -- -- 204,222 -- -- 204,222
Other comprehensive income,
net of taxes:
Net change in the unrealized
losses on available for sale
securities ..................... -- -- -- -- -- (16,137) (16,137)
-----------
Total comprehensive income ... 188,085
Cash dividends
Common stock, $1.00 per share ........ -- -- -- (136,345) -- -- (136,345)
Preferred stock, $1.00 per share ..... -- -- -- (814) -- -- (814)
Common stock issued under
employee benefit plans,
net of stock exchanged ............... -- 3,376 21,364 (341) (10,513) -- 13,886
Conversion of preferred stock .......... (892) 223 669 -- -- -- --
Common stock purchased
and retired .......................... -- (22,376) (24,493) (95,382) -- -- (142,251)
--------- --------- --------- ----------- -------- --------- -----------
BALANCE, JUNE 30, 2000 ................. $ 19,983 $ 673,660 $ 752,846 $ 1,424,808 $(22,273) $(150,354) $ 2,698,670
========= ========= ========= =========== ======== ========= ===========
<CAPTION>
BEFORE-TAX TAX NET OF TAX
AMOUNT BENEFIT AMOUNT
---------- ------- ----------
<S> <C> <C> <C>
DISCLOSURE OF RECLASSIFICATION AMOUNT:
Change in the unrealized losses
on available for sale securities
arising during the period ......... $(24,816) $ 8,726 $(16,090)
Less: reclassification for losses
included in net income ..... 77 (30) 47
-------- ------- --------
Net change in the unrealized losses
on available for sale securities ... $(24,893) $ 8,756 $(16,137)
======== ======= ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
5
<PAGE> 6
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------------
2000 1999
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings ........................................................................ $ 204,222 $ 203,114
Reconciliation of net earnings to net cash provided by operating activities:
Provision for losses on loans, other real estate, and FHA/VA foreclosure claims ... 37,767 34,534
Depreciation and amortization of premises and equipment ........................... 39,686 31,919
Amortization of goodwill and other intangibles .................................... 31,709 25,148
Amortization of mortgage servicing rights ......................................... 9,295 10,588
Net amortization of investment securities ......................................... 26 17,146
Net realized gains on sales of investment securities .............................. (77) (3,192)
Deferred income tax expense (benefit) ............................................. 6,125 (19,025)
Decrease in assets
Trading account assets and loans held for resale .............................. 187,471 37,114
Other assets .................................................................. 102,900 48,787
Increase (decrease) in accrued interest, expenses, taxes, and other liabilities ... 8,597 (70,118)
Other, net ........................................................................ 2,394 5,616
------------ ------------
Net cash provided by operating activities ................................... 630,115 321,631
------------ ------------
INVESTING ACTIVITIES
Net decrease in short-term investments .............................................. 44,245 767,174
Proceeds from sales of available for sale securities ................................ 401,088 837,508
Proceeds from maturities, calls, and prepayments of available for sale securities ... 636,231 3,685,117
Purchases of available for sale securities .......................................... (545,254) (4,226,403)
Net (increase) decrease in loans .................................................... (1,931,897) 617,470
Net cash (paid for) received from acquisitions ...................................... (38,703) 21,117
Purchases of premises and equipment, net ............................................ (23,564) (35,079)
------------ ------------
Net cash provided (used) by investing activities ............................ (1,457,854) 1,666,904
------------ ------------
FINANCING ACTIVITIES
Net decrease in deposits ............................................................ (80,595) (2,419,632)
Net increase in short-term borrowings ............................................... 703,776 738,624
Proceeds from long-term debt ........................................................ 600,000 --
Repayment of long-term debt ......................................................... (227,707) (231,573)
Proceeds from issuance of common stock .............................................. 11,940 12,778
Purchase and retirement of common stock ............................................. (142,251) (49,408)
Cash dividends paid ................................................................. (137,170) (143,835)
Other, net .......................................................................... -- 57
------------ ------------
Net cash provided (used) by financing activities ............................ 727,993 (2,092,989)
------------ ------------
Net decrease in cash and cash equivalents ........................................... (99,746) (104,454)
Cash and cash equivalents at the beginning of the period ............................ 1,179,019 1,366,182
------------ ------------
Cash and cash equivalents at the end of the period .................................. $ 1,079,273 $ 1,261,728
============ ============
SUPPLEMENTAL DISCLOSURES
Cash paid for
Interest .......................................................................... $ 565,038 $ 530,453
Income taxes ...................................................................... 49,536 100,865
Unrealized loss on available for sale securities .................................... (237,534) (96,341)
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
6
<PAGE> 7
UNION PLANTERS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. PRINCIPLES OF ACCOUNTING
The consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States. The
foregoing financial statements are unaudited; however, in the opinion of
management, all adjustments, including normal recurring adjustments, necessary
for a fair presentation of the consolidated financial statements have been
included.
The accounting policies followed by Union Planters Corporation and its
subsidiaries (collectively, Union Planters or the Company) for interim financial
reporting are consistent with the accounting policies followed for annual
financial reporting. The notes included herein should be read in conjunction
with the notes to the consolidated financial statements included in Union
Planters Corporation's 1999 Annual Report to Shareholders (1999 Annual Report),
a copy of which is Exhibit 13 to Union Planters Corporation's Annual Report on
Form 10-K for the year ended December 31, 1999 (1999 10-K). Certain prior year
amounts have been reclassified to be consistent with the 2000 financial
reporting presentation.
NOTE 2. ACQUISITIONS
On April 26, 2000, Union Planters Bank, National Association (UPB), the
Company's principal subsidiary, completed the acquisition of Strategic
Outsourcing, Inc. (SOI) which is headquartered in Charlotte, North Carolina. SOI
is one of the largest providers of professional employment organization services
(e.g., workers' compensation management, employee benefits management, payroll
administration, safety and risk management, human resources administration, and
compliance administration) in the United States. Clients, which are small and
mid-sized businesses, are provided integrated and cost-effective approaches to
the management of critical human resources responsibilities and employer risks.
The cash purchase price for this acquisition was approximately $45.9 million
(excluding up to $10 million of future contingent consideration). Goodwill
resulting from the acquisition totaled $46.5 million. Pro forma information has
been omitted because the acquisition is not significant to the consolidated
results of Union Planters.
NOTE 3. LOANS
Loans are summarized by type as follows:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------------- DECEMBER 31,
2000 1999 1999
----------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Commercial, financial, and agricultural ... $ 5,245,722 $ 4,156,973 $ 4,799,840
Foreign ................................... 519,890 319,050 374,814
Accounts receivable - factoring ........... 645,021 613,695 555,128
Real estate - construction ................ 1,864,718 1,252,069 1,581,164
Real estate - mortgage
Secured by 1-4 family residential ....... 6,355,931 5,243,449 5,554,943
FHA/VA government-insured/guaranteed .... 447,815 598,046 519,213
Other mortgage .......................... 4,667,239 4,696,723 4,591,110
Home equity ............................... 638,528 538,219 584,546
Consumer .................................. 2,856,268 2,778,164 2,835,014
Direct lease financing .................... 101,761 66,740 78,726
----------- ----------- -----------
TOTAL LOANS ..................... $23,342,893 $20,263,128 $21,474,498
=========== =========== ===========
</TABLE>
7
<PAGE> 8
Nonperforming loans are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Nonaccrual loans ...................... $127,685 $127,766
Restructured loans .................... 1,680 1,878
-------- --------
TOTAL NONPERFORMING LOANS ... $129,365 $129,644
======== ========
FHA/VA GOVERNMENT-INSURED/GUARANTEED
LOANS ON NONACCRUAL STATUS .......... $ 4,408 $ 6,613
======== ========
</TABLE>
NOTE 4. ALLOWANCE FOR LOSSES ON LOANS
The changes in the allowance for losses on loans for the three and six
months ended June 30, 2000 are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 2000
------------------ ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BEGINNING BALANCE ............................ $ 345,821 $ 342,300
Provision for losses on loans ................ 19,699 37,002
Recoveries of loans previously charged off ... 13,729 28,904
Loans charged off ............................ (33,391) (62,348)
--------- ---------
BALANCE, JUNE 30, 2000 ....................... $ 345,858 $ 345,858
========= =========
</TABLE>
NOTE 5. INVESTMENT SECURITIES
The amortized cost and fair value of investment securities are
summarized as follows:
<TABLE>
<CAPTION>
JUNE 30, 2000
----------------------------------------------------
UNREALIZED
AMORTIZED ---------------------
COST GAINS LOSSES FAIR VALUE
---------- ------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE SECURITIES
U.S. Government obligations
U.S. Treasury ................................. $ 137,149 $ 103 $ 1,107 $ 136,145
U.S. Government agencies
Collateralized mortgage obligations ......... 2,399,526 976 98,077 2,302,425
Mortgage-backed ............................. 538,132 1,244 18,420 520,956
Other ....................................... 906,874 645 26,190 881,329
---------- ------- -------- ----------
Total U.S. Government obligations ..... 3,981,681 2,968 143,794 3,840,855
Obligations of states and political subdivisions 1,248,268 12,629 32,152 1,228,745
Other stocks and securities ..................... 1,962,178 2,773 79,958 1,884,993
---------- ------- -------- ----------
TOTAL AVAILABLE FOR SALE SECURITIES ... $7,192,127 $18,370 $255,904 $6,954,593
========== ======= ======== ==========
<CAPTION>
DECEMBER 31, 1999
----------------------------------------------------
UNREALIZED
AMORTIZED ---------------------
COST GAINS LOSSES FAIR VALUE
---------- ------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE SECURITIES
U.S. Government obligations
U.S. Treasury ................................. $ 165,335 $ 398 $ 1,190 $ 164,543
U.S. Government agencies
Collateralized mortgage obligations ......... 2,440,301 498 85,350 2,355,449
Mortgage-backed ............................. 650,125 3,507 16,870 636,762
Other ....................................... 1,048,180 1,879 26,232 1,023,827
---------- ------- -------- ----------
Total U.S. Government obligations ..... 4,303,941 6,282 129,642 4,180,581
Obligations of states and political subdivisions 1,303,088 13,902 43,845 1,273,145
Other stocks and securities ..................... 2,078,067 3,510 62,848 2,018,729
---------- ------- -------- ----------
TOTAL AVAILABLE FOR SALE SECURITIES ... $7,685,096 $23,694 $236,335 $7,472,455
========== ======= ======== ==========
</TABLE>
8
<PAGE> 9
Investment securities having a fair value of approximately $4.0 billion
and $2.8 billion at June 30, 2000 and December 31, 1999, respectively, were
pledged to secure public and trust funds on deposit, securities sold under
agreements to repurchase, and Federal Home Loan Bank (FHLB) advances.
The following table presents the gross realized gains and losses on
available for sale investment securities for the three and six months ended June
30, 2000 and 1999 (Dollars in thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Realized gains .... $1,696 $5,091 $1,696 $5,159
Realized losses ... 1,619 1,910 1,619 1,967
</TABLE>
NOTE 6. OTHER NONINTEREST INCOME AND EXPENSE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED,
JUNE 30, JUNE 30,
---------------------------- -----------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
OTHER NONINTEREST INCOME
ATM transaction fees .................................. $ 7,457 $ 6,074 $ 14,861 $ 11,266
Brokerage fee income .................................. 4,602 4,922 9,590 9,650
Annuity sales income .................................. 3,366 5,567 7,992 9,835
Insurance commissions ................................. 4,883 4,431 8,733 8,442
Letters of credit fees ................................ 1,823 1,810 3,437 3,168
Gain on sales of branches/deposits and other assets ... 986 1,403 1,490 2,934
Gain on sale of FHA/VA loans .......................... -- -- -- 5,317
Gain on sale of credit card portfolio ................. -- 874 -- 3,268
Gain on sale of corporate trust business .............. -- 2,417 -- 2,417
Earnings (losses ) of equity method investments ....... (214) 417 (771) (130)
Reversion of excess assets of a pension plan
of an acquired entity .............................. 4,762 -- 4,762 --
Other income .......................................... 16,393 18,873 32,936 33,467
--------- --------- --------- ---------
TOTAL OTHER NONINTEREST INCOME ................ $ 44,058 $ 46,788 $ 83,030 $ 89,634
========= ========= ========= =========
OTHER NONINTEREST EXPENSE
Communications ........................................ $ 9,186 $ 8,302 $ 19,356 $ 16,360
Other contracted services ............................. 8,874 9,299 16,830 16,415
Postage and carrier ................................... 7,305 7,858 14,606 15,143
Stationery and supplies ............................... 6,534 9,347 12,972 16,180
Merchant interchange fees ............................. 6,525 3,898 12,280 7,048
Advertising and promotion ............................. 8,676 6,789 14,080 13,480
Amortization of mortgage servicing rights ............. 4,707 4,731 9,295 10,588
Other personnel services .............................. 3,106 4,544 6,653 8,912
Legal fees ............................................ 3,505 2,932 6,122 6,245
Travel ................................................ 2,669 2,947 5,071 5,604
Consultant fees ....................................... 1,315 2,294 3,421 4,328
Federal Reserve fees .................................. 1,632 1,282 3,291 2,602
Accounting and audit fees ............................. 1,849 1,114 3,463 2,532
Other real estate expense ............................. 1,321 1,477 2,788 2,899
Brokerage and clearing fees on trading activities ..... 1,382 1,509 2,826 2,585
Taxes other than income ............................... 2,125 2,248 3,454 3,978
FDIC insurance ........................................ 1,266 1,526 2,466 3,036
Dues, subscriptions, and contributions ................ 1,095 951 2,028 2,259
Insurance ............................................. 913 696 1,730 1,232
Provision for losses on FHA/VA foreclosure claims ..... 364 -- 464 250
Miscellaneous charge-offs ............................. 2,750 2,762 2,825 5,148
Other expense ......................................... 10,478 14,453 24,209 27,026
--------- --------- --------- ---------
TOTAL OTHER NONINTEREST EXPENSE ............... $ 87,577 $ 90,959 $ 170,230 $ 173,850
========= ========= ========= =========
</TABLE>
NOTE 7. INCOME TAXES
Income taxes for the six months ended June 30, 2000, were $103.4
million, resulting in an effective tax rate of 33.60%. Income taxes for the same
period in 1999 were $103.9 million, resulting in an effective tax rate of
33.84%. The decrease in the effective rate in 2000, as compared to 1999, is due
primarily to the change in the mix of taxable and nontaxable revenues.
9
<PAGE> 10
At June 30, 2000, Union Planters had a net deferred tax asset of $259.6
million compared to $254.7 million at December 31, 1999. The net deferred tax
asset includes a deferred tax asset related to the net unrealized loss on
available for sale securities of $87.2 million and $78.4 million at those dates,
respectively. Based upon historical earnings and anticipated future earnings,
management believes that normal operations will generate sufficient taxable
income to realize these deferred tax benefits in full. Therefore, no
extraordinary strategies are deemed necessary by management to generate
sufficient taxable income for purposes of realizing the net deferred tax asset.
NOTE 8. BORROWINGS
SHORT-TERM BORROWINGS
Short-term borrowings include short-term FHLB advances, federal funds
purchased, securities sold under agreements to repurchase, and other short-term
borrowings. Short-term FHLB advances are borrowings from the FHLB, which are
secured by mortgage-backed securities and mortgage loans. Federal funds
purchased arise from Union Planters' 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>
JUNE 30, DECEMBER 31,
------------------------- ------------
2000 1999 1999
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balances at period end:
Short-term FHLB advances .................................................... $2,775,000 $ 900,000 $3,000,000
Federal funds purchased ..................................................... 1,380,754 333,737 945,869
Securities sold under agreements to repurchase .............................. 1,370,078 1,362,241 1,476,142
Other short-term borrowings ................................................. 448 539 493
---------- ---------- ----------
Total short-term borrowings ....................................... $5,526,280 $2,596,517 $5,422,504
========== ========== ==========
Federal funds purchased and securities sold under agreements to repurchase
Daily average balance ..................................................... $2,501,508 $1,906,142 $1,980,674
Weighted average interest rate ............................................ 5.61% 4.42% 4.62%
Short-term FHLB advances
Daily average balance ..................................................... $3,012,839 $ 142,612 $ 928,493
Weighted average interest rate ............................................ 6.22% 5.09% 5.42%
</TABLE>
SHORT- AND MEDIUM-TERM SENIOR NOTES
UPB has a $5 billion senior and subordinated bank note program to
supplement UPB's funding sources. Under the program, UPB may from time to time
issue senior bank notes having maturities ranging from 30 days to one year from
their respective issue dates (Short-Term Senior Notes), senior bank notes having
maturities of more than one year to 30 years from their respective dates of
issue (Medium-Term Senior Notes), and subordinated bank notes with maturities
from 5 years to 30 years from their respective dates of issue (Subordinated
Notes). At June 30, 2000 and 1999 and December 31, 1999, UPB had no Subordinated
Notes outstanding under this program. At June 30 and December 31, 1999, UPB had
no Short-Term Senior Notes outstanding. A summary of the Short-Term and
Medium-Term Senior Notes outstanding follows.
<TABLE>
<CAPTION>
SHORT-TERM
SENIOR NOTES MEDIUM-TERM SENIOR NOTES
------------- ----------------------------------------------------
JUNE 30, 2000 JUNE 30, 2000 JUNE 30, 1999 DECEMBER 31, 1999
------------- ------------- ------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balances at period end... $ 600,000 $ 60,000 $ 105,000 $ 60,000
Variable-rate notes...... -- -- -- --
Fixed-rate notes......... 600,000 60,000 105,000 60,000
Range of maturities...... 8/00 - 10/00 8/01 - 10/01 10/99 - 10/01 8/01 - 10/01
</TABLE>
FEDERAL HOME LOAN BANK ADVANCES
Certain of Union Planters' banking and thrift subsidiaries had
outstanding advances, with original maturity dates of greater than one year,
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
10
<PAGE> 11
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 June 30, 2000, Union Planters had an adequate amount of
mortgage-backed securities and loans to satisfy the collateral requirements. A
summary of the advances is as follows.
<TABLE>
<CAPTION>
JUNE 30,
---------------------------- DECEMBER 31,
2000 1999 1999
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at period end........ $ 601,506 $ 208,463 $ 203,032
Range of interest rates...... 1.75 - 6.63% 3.25 - 6.85% 1.75 - 6.85%
Range of maturities.......... 2001 - 2015 2000 - 2015 2000 - 2015
</TABLE>
OTHER LONG-TERM DEBT
Union Planters' other long-term debt is summarized as follows.
Reference is made to Note 9 to the consolidated financial statements in the 1999
Annual Report for additional information regarding these borrowings.
<TABLE>
<CAPTION>
JUNE 30,
---------------------- DECEMBER 31,
2000 1999 1999
-------- -------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Corporation-Obligated Mandatorily Redeemable Capital Pass-through
Securities of Subsidiary Trust holding solely a Corporation-Guaranteed
Related Subordinated Note (Trust Preferred Securities) .................. $199,062 $199,027 $199,044
Variable-rate asset-based certificates .................................... 150,000 201,509 175,000
6 3/4% Subordinated Notes due 2005 ........................................ 99,684 99,625 99,655
6.25% Subordinated Notes due 2003 ......................................... 74,327 74,774 74,800
6.5% Putable/Callable Subordinated Notes due 2018 ......................... 300,962 301,623 301,055
Other long-term debt ...................................................... 5,022 18,240 5,184
-------- -------- --------
TOTAL OTHER LONG-TERM DEBT ...................................... $829,057 $894,798 $854,738
======== ======== ========
</TABLE>
NOTE 9. SHAREHOLDERS' EQUITY
PREFERRED STOCK
Union Planters' outstanding preferred stock, all of which is
convertible into shares of Union Planters' common stock, is summarized as
follows:
<TABLE>
<CAPTION>
JUNE 30,
------------------------- DECEMBER 31,
2000 1999 1999
-------- -------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Preferred stock, without par value, 10,000,000 shares authorized
Series F Preferred Stock
300,000 shares authorized, none issued ........................... $ -- $ -- $ --
Series E, 8% Cumulative, Convertible,
Preferred Stock (stated at liquidation value of $25 per share),
799,333 shares issued and outstanding (885,354 at June 30, 1999
and 835,006 at December 31, 1999) ............................... 19,983 22,134 20,875
-------- -------- --------
TOTAL PREFERRED STOCK ...................................... $ 19,983 $ 22,134 $ 20,875
======== ======== ========
</TABLE>
11
<PAGE> 12
NOTE 10. EARNINGS PER SHARE
The calculation of net earnings per share is summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
2000 1999 2000 1999
------------ ------------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
BASIC
Net earnings ............................... $ 102,885 $ 105,764 $ 204,222 $ 203,114
Less preferred dividends ................. 402 446 814 904
------------ ------------- ------------ ------------
Net earnings applicable to common shares ... $ 102,483 $ 105,318 $ 203,408 $ 202,210
============ ============= ============ ============
Average common shares outstanding .......... 134,794,456 142,574,377 135,670,414 142,417,387
============ ============= ============ ============
Net earnings per common share -- basic ..... $ .76 $ .74 $ 1.50 $ 1.42
============ ============= ============ ============
DILUTED
Net earnings ............................... $ 102,885 $ 105,764 $ 204,222 $ 203,114
Elimination of interest on convertible debt -- (63) -- 20
------------ ------------- ------------ ------------
Net earnings applicable to common shares ... $ 102,885 $ 105,701 $ 204,222 $ 203,134
============ ============= ============ ============
Average common shares outstanding .......... 134,794,456 142,574,377 135,670,414 142,417,387
Stock option adjustment .................... 453,559 875,418 470,756 941,836
Preferred stock adjustment ................. 1,019,883 1,135,295 1,029,081 1,147,331
Effect of other dilutive securities ........ -- 212,758 -- 230,149
------------ ------------- ------------ ------------
Average common shares outstanding .......... 136,267,898 144,797,848 137,170,251 144,736,703
============ ============= ============ ============
Net earnings per common share -- diluted ... $ .76 $ .73 $ 1.49 $ 1.40
============ ============= ============ ============
</TABLE>
NOTE 11. LINES OF BUSINESS REPORTING
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 2000 SIX MONTHS ENDED JUNE 30, 2000
----------------------------------------------- ------------------------------------------------
OTHER OTHER
OPERATING PARENT CONSOLIDATED OPERATING PARENT CONSOLIDATED
BANKING UNITS COMPANY TOTAL BANKING UNITS COMPANY TOTAL
----------- ---------- -------- ------------ ----------- ---------- --------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income ............. $ 300,383 $ 14,040 $ (3,071) $ 311,352 $ 604,473 $ 27,245 $ (5,616) $ 626,102
Provision for losses on loans ... (15,899) (3,800) -- (19,699) (30,347) (6,655) -- (37,002)
Noninterest income(1) .......... 83,701 49,976 (16) 133,661 162,107 99,469 (346) 261,230
Noninterest expense ............. (226,191) (47,657) (2,037) (275,885) (452,241) (91,201) (4,148) (547,590)
Other significant items, net .... 4,839 -- -- 4,839 4,839 -- -- 4,839
----------- ---------- -------- ----------- ----------- ---------- --------- -----------
Earnings before taxes(1) ........ $ 146,833 $ 12,559 $ (5,124) $ 154,268 $ 288,831 $ 28,858 $ (10,110) $ 307,579
=========== ========== ======== =========== =========== ========== ========= ===========
Average assets .................. $31,314,121 $2,412,930 $136,332 $33,863,383 $30,959,772 $2,454,186 $ 144,141 $33,558,099
=========== ========== ======== =========== =========== ========== ========= ===========
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1999 SIX MONTHS ENDED JUNE 30, 1999
----------------------------------------------- ------------------------------------------------
OTHER OTHER
OPERATING PARENT CONSOLIDATED OPERATING PARENT CONSOLIDATED
BANKING UNITS COMPANY TOTAL BANKING UNITS COMPANY TOTAL
----------- ---------- -------- ------------ ----------- ---------- --------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income ............. $ 298,517 $ 15,745 $ (2,673) $ 311,589 $ 576,994 $ 35,091 $ (4,799) $ 607,286
Provision for losses on loans ... (15,509) (2,231) -- (17,740) (30,508) (3,511) -- (34,019)
Noninterest income (1) .......... 75,130 52,707 (37) 127,800 138,646 106,019 136 244,801
Noninterest expense ............. (226,781) (45,889) (2,078) (274,748) (438,314) (89,830) (4,843) (532,987)
Other significant items, net .... 8,647 2,623 1,385 12,655 11,000 9,483 1,425 21,908
----------- ---------- -------- ------------ ----------- ---------- --------- ------------
Earnings before taxes (1) ....... $ 140,004 $ 22,955 $ (3,403) $ 159,556 $ 257,818 $ 57,252 $ (8,081) $ 306,989
=========== ========== ======== ============ =========== ========== ========= ============
Average assets .................. $30,045,750 $2,718,084 $224,964 $ 32,988,798 $29,630,962 $2,805,984 $ 234,233 $ 32,671,179
=========== ========== ======== ============ =========== ========== ========= ============
</TABLE>
--------------------
(1) Parent company noninterest income and earnings before income taxes are
net of the intercompany dividend eliminations of $89.8 million and
$24.6 million for the three months ended June 30, 2000 and 1999,
respectively, and $160.4 million and $109.1 million, respectively, for
the six months ended June 30, 2000 and 1999.
12
<PAGE> 13
NOTE 12. CONTINGENT LIABILITIES
Union Planters and/or various subsidiaries are parties to certain
pending or threatened civil actions which are described in Item 3, Part I of
Union Planters' 1999 10-K, in Note 20 to Union Planters' consolidated financial
statements on page 70 of the 1999 Annual Report, and in Note 12 of the Company's
Quarterly Reports on Form 10-Q for the quarter ended March 31, 2000. Various
other legal proceedings pending against Union Planters and/or its subsidiaries
have arisen in the ordinary course of business.
Based upon present information, including evaluations of certain
actions by outside counsel, management believes that neither Union Planters'
financial position, results of operations, nor liquidity will be materially
affected by the ultimate resolution of pending or threatened legal proceedings.
There were no significant developments during the second quarter of 2000 in any
of the pending or threatened actions that affected such opinion.
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following provides a narrative discussion and analysis of
significant changes in Union Planters' results of operations and financial
condition. This discussion should be read in conjunction with the consolidated
financial statements and related financial analysis set forth in Union Planters'
1999 Annual Report, the interim unaudited consolidated financial statements and
notes for the three and six months ended June 30, 2000 included in Part I
hereof, and the supplemental financial data included in this discussion.
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING INFORMATION
This discussion contains certain forward-looking statements (as defined
in the Private Securities Litigation Reform Act of 1995). Such statements are
based on management's expectations as well as certain assumptions made by, and
information available to, management. Specifically, this discussion contains
forward-looking statements with respect to the following items:
- effects of projected changes in interest rates,
- effects of changes in the securities markets,
- effects of changes in general economic conditions,
- the adequacy of the allowance for losses on loans and
the level of future provisions for losses on loans,
- the effect of legal proceedings on Union Planters'
financial condition, results of operations, and
liquidity,
- the effect of Internal Revenue Service examinations
on Union Planters' financial condition, results of
operations, and liquidity, and
- business plans for the year 2000 and beyond.
When used in this discussion, the words "anticipate," "project,"
"expect," "believe," "should" and similar expressions are intended to identify
forward-looking statements.
These forward-looking statements involve significant risks and
uncertainties including changes in general economic and financial market
conditions, changes in banking laws and regulations, and Union Planters' ability
to execute its business plans. Although Union Planters believes that the
expectations reflected in the forward-looking statements are reasonable, actual
results could differ materially.
13
<PAGE> 14
SELECTED FINANCIAL DATA
The following table presents selected financial highlights for the
three- and six-month periods ended June 30, 2000 and 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- PERCENTAGE ----------------------- PERCENTAGE
2000 1999 CHANGE 2000 1999 CHANGE
-------- -------- ---------- -------- -------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net earnings ................................. $102,885 $105,764 (3)% $204,222 $203,114 1%
Per share
Basic .................................... .76 .74 3 1.50 1.42 6
Diluted .................................. .76 .73 4 1.49 1.40 6
Return on average assets ................... 1.22% 1.29% 1.22% 1.25%
Return on average common equity ............ 14.73 14.19 14.56 13.80
Cash operating earnings ...................... $113,782 $108,881 5 $228,441 $212,077 8
Per share
Basic .................................... .84 .76 11 1.68 1.48 14
Diluted .................................. .84 .75 12 1.67 1.47 14
Return on average assets ................... 1.35% 1.32% 1.37% 1.31%
Return on average common equity ............ 16.30 14.61 16.29 14.41
Return on average tangible assets .......... 1.39 1.35 1.41 1.33
Return on average tangible common equity ... 24.85 19.25 24.81 18.12
Dividends per common share ................... $ .50 $ .50 $ 1.00 $ 1.00
Net interest margin (FTE) .................... 4.19% 4.35% 4.26% 4.28%
Net interest spread (FTE) .................... 3.50 3.68 3.60 3.59
Expense ratio ................................ 1.50 1.62 1.53 1.61
Efficiency ratio ............................. 57.27 58.27 56.97 58.10
Book value per common share .................. $ 19.98 $ 20.68 (3)
Leverage ratio ............................... 6.29% 7.79%
Common share prices ..........................
High closing price ......................... $ 33.88 $ 45.31 $ 37.25 $ 48.75
Low closing price .......................... 27.69 40.31 25.63 40.31
Closing price at quarter end ............... 27.94 44.69 27.94 44.69
</TABLE>
--------------------
Cash operating earnings = Net earnings adjusted for the after-tax impact of
goodwill and other intangibles amortization and other significant items
Net interest margin = Net interest income (FTE) as a percentage of average
earning assets
Net interest spread = Difference in the FTE yield on average earning assets and
the rate on average interest-bearing liabilities
Expense ratio = Operating net noninterest expense [noninterest expense minus
noninterest income, excluding significant nonrecurring revenues/expenses,
investment securities gains (losses) and goodwill and other intangibles
amortization] divided by average assets
Efficiency ratio = Operating noninterest expense (excluding significant
nonrecurring expenses and goodwill and other intangibles amortization) divided
by net interest income (FTE) plus noninterest income, excluding significant
nonrecurring revenues and investment securities gains (losses)
FTE = Fully taxable-equivalent basis
14
<PAGE> 15
OPERATING RESULTS -- THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
The following table presents a summary of Union Planters' operating
results for the three and six months ended June 30, 2000 and 1999 identifying
significant items impacting the results for the periods shown. Net gains from
the sale of branches, which have previously been excluded from operating
results, are now included in operating results due to their recurring nature.
UNION PLANTERS CORPORATION
SUMMARY OF CONSOLIDATED RESULTS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- ---------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest income ................................................ $ 626,744 $ 565,301 $1,227,732 $1,119,886
Interest expense ............................................... (315,392) (253,712) (601,630) (512,600)
---------- ---------- ---------- ----------
NET INTEREST INCOME ....................................... 311,352 311,589 626,102 607,286
PROVISION FOR LOSSES ON LOANS .................................. (19,699) (17,740) (37,002) (34,019)
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON LOANS ... 291,653 293,849 589,100 573,267
---------- ---------- ---------- ----------
NONINTEREST INCOME
Service charges on deposit accounts .......................... 44,667 42,523 86,698 81,390
Mortgage banking revenue ..................................... 24,945 24,215 47,817 51,702
Bank card income ............................................. 9,391 8,083 17,813 11,043
Factoring commissions ........................................ 7,542 7,403 14,686 14,431
Trust service income ......................................... 6,567 7,004 13,232 13,714
Profits and commissions from trading activities .............. 1,253 1,519 2,716 1,864
Other income ................................................. 39,296 38,456 78,268 73,591
---------- ---------- ---------- ----------
Total noninterest income .................................. 133,661 129,203 261,230 247,735
---------- ---------- ---------- ----------
NONINTEREST EXPENSE
Salaries and employee benefits ............................... 127,567 129,871 256,298 253,101
Net occupancy expense ........................................ 23,550 21,676 46,949 41,911
Equipment expense ............................................ 21,329 20,218 42,404 39,238
Goodwill and other intangibles amortization .................. 15,862 12,285 31,709 25,148
Other expense ................................................ 87,577 90,698 170,230 173,589
---------- ---------- ---------- ----------
Total noninterest expense ................................. 275,885 274,748 547,590 532,987
---------- ---------- ---------- ----------
EARNINGS BEFORE OTHER SIGNIFICANT ITEMS AND INCOME TAXES ....... 149,429 148,304 302,740 288,015
OTHER SIGNIFICANT ITEMS
Gain on sale of the credit card portfolio .................... -- 874 -- 3,268
Gain on securitization and sale of FHA/VA loans .............. -- -- -- 5,317
Gain on sale of corporate trust business ..................... -- 2,417 -- 2,417
Gain on sale of ARM loans .................................... -- 5,041 -- 5,041
Reversion of excess assets of a pension plan
of an acquired entity ..................................... 4,762 -- 4,762 --
Investment securities gains .................................. 77 3,181 77 3,192
Other, net ................................................... -- (261) -- (261)
---------- ---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES .............................. 154,268 159,556 307,579 306,989
Income taxes ................................................... (51,383) (53,792) (103,357) (103,875)
---------- ---------- ---------- ----------
NET EARNINGS .............................................. $ 102,885 $ 105,764 $ 204,222 $ 203,114
========== ========== ========== ==========
NET EARNINGS ................................................... $ 102,885 $ 105,764 $ 204,222 $ 203,114
Other significant items, net of taxes .......................... (2,493) (6,876) (2,493) (11,594)
---------- ---------- ---------- ----------
NET OPERATING EARNINGS ......................................... 100,392 98,888 201,729 191,520
Goodwill and other intangibles amortization, net of taxes ...... 13,390 9,993 26,712 20,557
---------- ---------- ---------- ----------
CASH OPERATING EARNINGS ........................................ $ 113,782 $ 108,881 $ 228,441 $ 212,077
========== ========== ========== ==========
PER COMMON SHARE DATA
Diluted earnings per share ................................... $ .76 $ .73 $ 1.49 $ 1.40
Diluted operating earnings per share ......................... .74 .68 1.47 1.32
Diluted cash operating earnings per share .................... .84 .75 1.67 1.47
</TABLE>
15
<PAGE> 16
The table which follows presents the contributions to diluted earnings
per common share. A discussion of the operating results follows this table.
UNION PLANTERS CORPORATION
CONTRIBUTIONS TO DILUTED EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, EPS
------------------------------ INCREASE
2000 1999 (DECREASE)
-------- -------- ---------
<S> <C> <C> <C>
Net interest income-FTE ....................................... $ 4.70 $ 4.33 $ .37
Provision for losses on loans ................................. (.27) .24 (.03)
-------- -------- --------
Net interest income after provision for losses on loans-FTE ... 4.43 4.09 .34
-------- -------- --------
Noninterest income
Service charges on deposit accounts ......................... .63 .56 .07
Mortgage banking revenue .................................... .35 .36 (.01)
Bank card income ............................................ .13 .08 .05
Factoring commissions ....................................... .11 .10 .01
Trust service income ........................................ .10 .09 .01
Profits and commissions from trading activities ............. .02 .01 .01
Investment securities gains ................................. -- .02 (.02)
Other income ................................................ .60 .62 (.02)
-------- -------- --------
TOTAL NONINTEREST INCOME ............................ 1.94 1.84 .10
-------- -------- --------
Noninterest expense
Salaries and employee benefits .............................. 1.87 1.75 (.12)
Net occupancy expense ....................................... .34 .29 (.05)
Equipment expense ........................................... .31 .27 (.04)
Goodwill and other intangibles amortization ................. .23 .17 (.06)
Other expense ............................................... 1.24 1.20 (.04)
-------- -------- --------
TOTAL NONINTEREST EXPENSE ........................... 3.99 3.68 (.31)
-------- -------- --------
EARNINGS BEFORE INCOME TAXES-FTE .............................. 2.38 2.25 .13
Income taxes-FTE .............................................. .89 .85 (.04)
-------- -------- --------
NET EARNINGS .................................................. 1.49 1.40 .09
Less preferred stock dividends ................................ -- -- --
-------- -------- --------
DILUTED EARNINGS PER COMMON SHARE ................... $ 1.49 $ 1.40 $ .09
======== ======== ========
Change in net earnings applicable to diluted earnings
per share using previous year average shares outstanding .... $ .01
Change in average shares outstanding .......................... .08
--------
CHANGE IN NET EARNINGS .............................. $ .09
========
AVERAGE DILUTED SHARES (IN THOUSANDS) ......................... 137,170 144,737
======== ========
</TABLE>
----------------
FTE = Fully taxable-equivalent basis
SECOND QUARTER EARNINGS OVERVIEW
For the second quarter of 2000, Union Planters reported cash operating
earnings of $113.8 million, or $.84 per diluted common share, a 12% increase
over the $.75 per diluted common share reported for the same period in 1999. The
cash operating earnings resulted in an annualized return on average assets of
1.35% and an annualized return on average common equity of 16.30% for the second
quarter of 2000 which compares to 1.32% and 14.61%, respectively, for the same
period in 1999. For the first half of 2000, cash operating earnings were $228.4
million, or $1.67 per diluted share which compares to $212.1 million, or $1.47
per diluted share for the same period last year.
Cash operating earnings exclude the after tax impact of goodwill and
other intangibles amortization and other significant items. The second quarter
of 2000 included $2.4 million ($4.8 before income taxes) related to the
reversion of excess assets of a pension plan of an acquired entity. The same
period last year included gains, aggregating $7.0 million ($11.5 million before
income taxes) from sales of
16
<PAGE> 17
certain ARM loans, investment securities, the sale of Union Planters' corporate
trust business, and the sale of the remaining portion of Union Planters' credit
card portfolio. These items are identified in the "Summary of Consolidated
Results" table above.
Net earnings for the second quarter of 2000 were $102.9 million, or
$.76 per diluted common share, a 4% increase over the $.73 per diluted common
share earned for the same period in 1999. Net earnings for the quarter resulted
in annualized returns on average assets and average common equity of 1.22% and
14.73%, respectively, which compares to 1.29% and 14.19%, respectively, for the
second quarter of 1999. Net earnings for the first half of 2000 were $204.2
million, or $1.49 per diluted share which compares to $203.1 million, or $1.40
per diluted share for the same period in 1999.
EARNINGS ANALYSIS
NET INTEREST INCOME
Net interest income (FTE) for the second quarter of 2000 was $320.4
million which compares to $321.2 million for the second quarter of 1999 and
$323.9 million for the first quarter of 2000. Solid loan growth during the
second quarter increased interest income but the increase was offset by
increased deposit and funding costs resulting from the six Federal Funds rate
increases since mid 1999. For the first half of 2000 net interest income was
$644.3 million compared to $626.3 million for the same period last year.
Reference is made to Union Planters' average balance sheet and analysis of
volume and rate changes which follow this discussion for additional information
regarding the changes in net interest income.
The net interest margin for the second quarter of 2000 was 4.19% which
compares to 4.35% and 4.34%, respectively, for the second quarter of 1999 and
the first quarter of 2000. The interest-rate spread was 3.50% for the second
quarter of 2000 down from 3.68% for the same period last year and 3.70% for the
first quarter of 2000.
INTEREST INCOME
The following table presents a breakdown of average earning assets for
the three and six months ended June 30, 2000 and 1999 and the three months ended
March 31, 2000.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------------- -------------------
JUNE 30, JUNE 30,
------------------- MARCH 31 -------------------
2000 1999 2000 2000 1999
------ ------ -------- ------ ------
(DOLLARS IN BILLIONS)
<S> <C> <C> <C> <C> <C>
Average earning assets ...................................... $ 30.8 $ 29.6 $ 30.0 $ 30.4 $ 29.5
Comprised of:
Loans ................................................... 75% 71% 73% 74% 70%
Investment securities ................................... 24 28 25 25 29
Other earning assets .................................... 1 1 2 1 1
Fully taxable-equivalent yield on average earning assets ... 8.31% 7.78% 8.17% 8.24% 7.79%
</TABLE>
Interest income (FTE) increased $60.9 million for the second quarter of
2000 compared to the same period in 1999. The increase is attributable primarily
to the growth of average loans and to an increase in the yield on average
earning assets resulting from the increase in interest rates.
Average earning assets increased $1.12 billion, which accounted for
$28.4 million of the increase in interest income. Average loans grew 10.2% from
the second quarter of 1999, due primarily to loan growth and acquisitions.
Average investment securities decreased $965 million as maturities of investment
securities were used to fund the loan growth.
The average yield on earning assets increased from 7.78% for the second
quarter of 1999 to 8.31% for the second quarter of 2000, which accounted for
$32.5 million of the increase in interest income. The higher yield is
attributable primarily to the rising interest-rate environment over this period.
17
<PAGE> 18
Interest income increased $25.7 million compared to the first quarter
of 2000 due to growth of average earning assets, which increased interest income
$17.2 million. This growth resulted from a 4.7% growth in average loans. A 14
basis point increase in the average yield on earning assets to 8.31% for the
second quarter accounted for $8.5 million of the increase in interest income.
For the first half of 2000, interest income increased $107.0 million to
$1.25 billion. The increase is attributable to the $916 million growth in
average earnings assets, which accounted for $52.0 million of the increase. The
balance of the increase is attributable to a 45 basis point increase in the
average yield on average earning assets to 8.24%.
INTEREST EXPENSE
The following table presents a breakdown of average interest-bearing
liabilities for the three and six months ended June 30, 2000 and 1999 and the
three months ended March 31, 2000.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------------- -------------------
JUNE 30, JUNE 30,
------------------- MARCH 31 -------------------
2000 1999 2000 2000 1999
------ ------ -------- ------ ------
(DOLLARS IN BILLIONS)
<S> <C> <C> <C> <C> <C>
Average interest-bearing liabilities ........................ $ 26.4 $ 24.8 $ 25.8 $ 26.1 $ 24.6
Comprised of:
Deposits ................................................ 73% 86% 75% 74% 86%
Short-term borrowings ................................... 23 9 21 22 8
FHLB advances and long-term debt ........................ 4 5 4 4 6
Rate paid on average interest-bearing liabilities ........... 4.81% 4.10% 4.47% 4.64% 4.20%
</TABLE>
Interest expense increased $61.7 million in the second quarter of 2000
compared to the same period in 1999. An increase in average interest-bearing
liabilities accounted for $29.7 million of the increase. This increase resulted
from an increase in short-term borrowings (primarily short-term FHLB advances)
partially offset by a decrease in average deposits (primarily certificates of
deposit under $100,000). Also contributing to the increase was a 71 basis point
increase in the average rate paid for interest-bearing liabilities to 4.81%,
which accounted for $32.0 million of the increase in interest expense.
Compared to the first quarter of 2000, interest expense increased $29.2
million. This increase was attributable primarily to an increase in borrowings
(primarily short-term FHLB advances) offset by a decrease in average deposits,
which increased interest expenses by a net of $10.7 million. Interest expense
increased $18.5 million due to a 34 basis point increase in the average rate
paid on interest-bearing liabilities to 4.81% for the second quarter of 2000.
PROVISION FOR LOSSES ON LOANS
The provision for losses on loans for the second quarter of 2000 was
$19.7 million, or .35% of average loans on an annualized basis, excluding FHA/VA
loans. This compares to $17.7 million, or .35% of average loans, for the same
period in 1999 and $17.3 million, or .32% of average loans, for the first
quarter of 2000. Reference is made to the "Allowance for Losses on Loans"
discussion for additional information regarding loan charge-offs and other items
impacting the provision for losses on loans.
NONINTEREST INCOME
Noninterest income for the second quarter of 2000 was $138.5 million, a
decrease of $2.2 million from $140.7 million in the same period last year and an
increase of $10.9 million from the first quarter of 2000. Noninterest income for
the second quarter of 2000 included $4.8 million related to the reversion of
excess assets of a pension plan of an acquired entity. The same period last year
included net gains aggregating $11.5 million from the sale of certain ARM loans,
investment securities, Union Planters' corporate trust business, and the
remaining portion of the credit card portfolio. Reference is made to the
"Summary of Consolidated Results" table on page 15 for a detail of these items
for both the three and six-month periods ending June 30, 2000.
18
<PAGE> 19
Excluding these significant items, noninterest income for the second
quarter of 2000 increased $4.5 million compared to the same period in 1999 and
increased $6.1 million compared to the first quarter of 2000. The major
components of noninterest income are presented on the consolidated statement of
earnings and in Note 6 to the unaudited interim consolidated financial
statements included in Item 1, Part I of this report.
The net increase in noninterest income for the second quarter of 2000
compared to the same period in 1999 is attributable primarily to the following
items:
- $2.1 million increase in service charges on deposit accounts.
- $1.5 million increase due to revenues from the acquisition of
Strategic Outsourcing, Inc.(SOI) (see Note 2 to the financial
statements).
- $1.4 million increase in ATM transaction fees - These fees
relate to the volume of noncustomer usage of Union Planters'
1,061 ATMs.
- $1.3 million increase in bank card income (merchant
processing) - The growth relates primarily to the acquisition
of Republic Bank in July 1999 which had a large merchant
processing operation.
- $ .7 million increase in mortgage banking revenues - the
majority of the growth relates to mortgage acquisitions in the
second half of 1999.
- $2.2 million decrease in annuity sales income - management
attributes most of this decline to the uncertain interest rate
environment.
- $ .3 million net decrease in all other noninterest income.
The $6.1 million net increase in noninterest income in the second
quarter of 2000 compared to the first quarter of 2000 relates to the following
items:
- $2.6 million increase in service charges on deposit accounts.
- $2.1 million increase in mortgage banking revenues.
- $1.5 million increase due to revenues from the acquisition of
SOI (see Note 2 to the financial statements).
- $1.0 million increase in insurance commissions.
- $1.3 million decrease in annuity sales income.
- $ .2 million net increase in all other noninterest income.
NONINTEREST EXPENSE
Noninterest expense for the second quarter of 2000 increased to $275.9
million, which compares to $275.0 million for the second quarter of 1999, a .3%
increase. For the first quarter of 2000, noninterest expenses were $271.7
million. Noninterest expense increased in the last half of 1999 due primarily to
the acquisition of Republic Bank in July 1999 and the acquisition of a smaller
mortgage company and certain mortgage production offices. During the second
quarter of 2000, Union Planters acquired SOI (see Note 2 to the financial
statements) which also increased noninterest expenses. Offsetting these
increases have been expense reductions in other areas of the organization. The
major components of noninterest expense are detailed on the consolidated
statement of earnings and in Note 6 to the unaudited interim consolidated
financial statements included in Item 1, Part I of this report.
The net increase in noninterest expense for the second quarter of 2000
compared to the same period in 1999 relates primarily to the following items:
- $3.6 million increase in goodwill and other intangibles
amortization related to purchase acquisitions in 1999,
primarily Republic Bank.
- $3.0 million increase in occupancy and equipment expense
related primarily to acquisitions.
- $2.6 million increase in merchant interchange fees which is
directly related to the increase in bank card income (merchant
processing).
- $1.9 million increase in advertising and promotion expense.
- $2.8 million decrease in stationery and supplies expense.
- $2.3 million decrease in salaries and employee benefits
expense.
- $1.4 million decrease in other personnel expense (contracted
clerical labor, training, relocation expenses, etc.).
- $3.7 million net decrease in other operating expenses.
19
<PAGE> 20
The net increase in noninterest expense compared to the first quarter
of 2000 relates primarily to the following items:
- $3.3 million increase in advertising and promotion expense.
- $2.7 million increase in miscellaneous charge-offs.
Miscellaneous charge-offs for the first quarter included a
higher than normal level of recoveries of previously
charged-off amounts.
- $1.0 million increase in losses on the sale of fixed assets.
- $1.2 million decrease in salaries and employee benefit
expense.
- $1.6 million net decrease in all other noninterest expenses.
The largest component of noninterest expense, salaries and employee
benefits, was $127.6 million for the second quarter of 2000 compared to $129.9
million for the same quarter last year and compared to $128.7 million for the
first quarter of 2000. Full-time-equivalent employees at June 30, 2000 were
12,639 compared to 13,076 at June 30, 1999 and 12,711 at March 31, 2000. For the
six months ended June 30, 2000, salaries and employee benefits were $256.3
million compared to $253.1 million for the same period in 1999.
20
<PAGE> 21
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND INTEREST RATES
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-------------------------------------------------------------------------
2000 1999
--------------------------------- ------------------------------------
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 ... $ 26,785 $ 193 2.90% $ 31,606 $ 450 5.71%
Federal funds sold and securities purchased
under agreements to resell .......................... 96,490 1,578 6.58 75,924 963 5.09
Trading account assets ................................ 184,841 3,362 7.32 256,247 3,934 6.16
Investment securities(1)(2)
Taxable ............................................. 6,145,785 98,491 6.45 7,020,196 107,518 6.14
Tax-exempt .......................................... 1,246,479 23,894 7.71 1,337,229 25,991 7.80
----------- -------- ------------ --------
Total investment securities ................... 7,392,264 122,385 6.66 8,357,425 133,509 6.41
Loans, net of unearned income(1)(3)(4) ................ 23,058,844 508,262 8.87 20,916,423 436,051 8.36
----------- -------- ------------ --------
TOTAL EARNING ASSETS(1)(2)(3)(4) .............. 30,759,224 635,780 8.31 29,637,625 574,907 7.78
-------- ------------ --------
Cash and due from banks ............................... 909,685 1,081,436
Premises and equipment ................................ 632,790 581,790
Allowance for losses on loans ......................... (350,085) (349,409)
Goodwill and other intangibles ........................ 962,208 717,830
Other assets .......................................... 949,561 1,319,526
------------ ------------
TOTAL ASSETS .................................. $ 33,863,383 $ 32,988,798
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Money market accounts ................................. $ 3,826,930 $ 39,022 4.10% $ 3,703,442 $ 35,526 3.85%
Interest-bearing checking ............................. 3,309,979 13,463 1.64 3,683,567 12,406 1.35
Savings deposits ...................................... 1,513,795 5,408 1.44 1,729,399 6,810 1.58
Certificates of deposit of $100,000 and over .......... 2,228,985 31,775 5.73 2,286,601 30,016 5.27
Other time deposits ................................... 8,268,440 110,926 5.40 9,829,513 121,538 4.96
Short-term borrowings
Federal funds purchased and securities sold
under agreements to repurchase .................... 2,659,034 39,079 5.91 2,056,357 22,615 4.41
Short-term senior notes ............................. 408,791 6,904 6.79 -- --
Short-term FHLB advances ............................ 3,019,708 48,398 6.45 281,114 3,473 4.96
Long-term debt
Federal Home Loan Bank advances ..................... 236,743 3,864 6.56 209,468 2,600 4.98
Subordinated capital notes .......................... 475,130 7,754 6.56 479,874 7,704 6.44
Medium-term senior notes ............................ 60,000 1,024 6.86 105,000 1,761 6.73
Trust Preferred Securities .......................... 199,058 4,127 8.34 199,022 4,128 8.32
Other ............................................... 154,836 3,648 9.48 255,670 5,135 8.06
----------- -------- ------------ --------
TOTAL INTEREST-BEARING LIABILITIES ............ 26,361,429 315,392 4.81 24,819,027 253,712 4.10
Noninterest-bearing demand deposits ................... 4,058,827 -- 4,476,077 --
------------ -------- ------------ --------
TOTAL SOURCES OF FUNDS ........................ 30,420,256 315,392 29,295,104 253,712
-------- --------
Other liabilities ..................................... 625,244 693,587
Shareholders' equity
Preferred stock ..................................... 20,398 22,706
Common equity ....................................... 2,797,485 2,977,401
------------ ------------
TOTAL SHAREHOLDERS' EQUITY .................... 2,817,883 3,000,107
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY ..... $ 33,863,383 $ 32,988,798
============ ============
NET INTEREST INCOME(1)................................... $320,388 $321,195
======== ========
INTEREST-RATE SPREAD(1).................................. 3.50% 3.68%
==== ====
NET INTEREST MARGIN(1)................................... 4.19% 4.35%
==== ====
TAXABLE-EQUIVALENT ADJUSTMENTS:
Loans................................................ $1,435 $1,248
Securities........................................... 7,601 8,358
------ ------
TOTAL.......................................... $9,036 $9,606
====== ======
</TABLE>
----------------------
(1) 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 in both interest income and the calculation of the
yield on loans.
(4) Includes loans on nonaccrual status.
21
<PAGE> 22
UNION PLANTERS CORPORATION AND SUBSIDIARIES
ANALYSIS OF VOLUME AND RATE CHANGES
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
2000 VERSUS 1999
-------------------------------------
INCREASE (DECREASE)
DUE TO CHANGE IN:(1)
---------------------- TOTAL
AVERAGE AVERAGE INCREASE
VOLUME RATE (DECREASE)
-------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits at financial institutions....................... $ (61) $ (196) $ (257)
Federal funds sold and securities purchased under agreements to resell.... 296 319 615
Trading account assets.................................................... (1,222) 650 (572)
Investment securities (FTE)............................................... (16,099) 4,975 (11,124)
Loans, net of unearned income (FTE)....................................... 45,480 26,731 72,211
-------- -------- --------
TOTAL INTEREST INCOME................................................ 28,394 32,479 60,873
-------- -------- --------
INTEREST EXPENSE
Money market accounts..................................................... 1,175 2,321 3,496
Interest-bearing checking................................................. (1,352) 2,409 1,057
Savings deposits.......................................................... (813) (589) (1,402)
Certificates of deposit of $100,000 and over.............................. (787) 2,546 1,759
Other time deposits....................................................... (20,553) 9,941 (10,612)
Short-term borrowings..................................................... 54,857 13,436 68,293
Long-term debt............................................................ (2,783) 1,872 (911)
-------- -------- --------
TOTAL INTEREST EXPENSE............................................... 29,744 31,936 61,680
-------- -------- --------
CHANGE IN NET INTEREST INCOME (FTE)......................................... $ (1,350) $ 543 $ (807)
======== ======== ========
PERCENTAGE INCREASE IN NET INTEREST INCOME (FTE) FROM PRIOR PERIOD.......... (0.25)%
========
</TABLE>
---------------
FTE = Fully taxable-equivalent basis
(1) The change due to both rate and volume has been allocated to change due
to volume and change due to rate in proportion to the relationship of
the absolute dollar amounts of the change in each.
22
<PAGE> 23
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND INTEREST RATES
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------------------------------------------------------
2000 1999
------------------------------------ ------------------------------------
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................................... $ 31,138 $ 513 3.31% $ 75,796 $ 1,437 3.82%
Federal funds sold and securities purchased
under agreements to resell .................... 83,861 2,607 6.25 75,939 1,832 4.86
Trading account assets .......................... 225,205 8,416 7.52 247,577 7,529 6.13
Investment securities(1)(2)
Taxable ....................................... 6,257,532 200,182 6.43 7,073,724 214,098 6.10
Tax-exempt .................................... 1,261,207 48,586 7.75 1,328,507 51,737 7.85
------------ ------------ ------------ ------------
Total investment securities ............. 7,518,739 248,768 6.65 8,402,231 265,835 6.38
Loans, net of unearned income(1)(3)(4) .......... 22,544,773 985,585 8.79 20,686,397 862,305 8.41
------------ ------------ ------------ ------------
TOTAL EARNING ASSETS(1)(2)(3)(4) ........ 30,403,716 1,245,889 8.24 29,487,940 1,138,938 7.79
------------ ------------
Cash and due from banks ........................... 942,988 1,044,945
Premises and equipment ............................ 632,876 574,106
Allowance for losses on loans ..................... (348,131) (346,063)
Goodwill and other intangibles .................... 964,244 605,277
Other assets ...................................... 962,406 1,304,974
------------ ------------
TOTAL ASSETS ............................ $ 33,558,099 $ 32,671,179
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Money market accounts ........................... $ 3,871,068 $ 79,102 4.11% $ 3,273,960 $ 65,784 4.05%
Interest-bearing checking ....................... 3,356,588 25,104 1.50 3,867,428 28,646 1.49
Savings deposits ................................ 1,536,068 11,037 1.44 1,724,050 14,362 1.68
Certificates of deposit of $100,000 and over .... 2,103,577 57,863 5.53 2,389,174 63,496 5.36
Other time deposits ............................. 8,336,204 217,456 5.25 9,854,440 247,012 5.05
Short-term borrowings
Federal funds purchased and securities sold
under agreements to repurchase .............. 2,501,508 69,831 5.61 1,906,142 41,741 4.42
Short-term senior notes ....................... 240,659 8,016 6.70 -- -- --
Short-term FHLB advances ...................... 3,012,839 93,230 6.22 142,612 3,601 5.09
Long-term debt
Federal Home Loan Bank advances ............... 219,413 6,876 6.30 401,341 9,951 5.00
Subordinated capital notes .................... 475,315 15,513 6.56 480,285 15,554 6.53
Medium-term senior notes ...................... 60,000 2,049 6.87 105,000 3,523 6.77
Trust Preferred Securities .................... 199,053 8,255 8.34 199,018 8,255 8.36
Other ......................................... 159,046 7,298 9.23 281,067 10,675 7.66
------------ ------------ ------------ ------------
TOTAL INTEREST-BEARING LIABILITIES ...... 26,071,338 601,630 4.64 24,624,517 512,600 4.20
Noninterest-bearing demand deposits ............. 4,043,121 -- 4,390,270
------------ ------------ ------------ ------------
TOTAL SOURCES OF FUNDS .................. 30,114,459 601,630 29,014,787 512,600
------------ ------------
Other liabilities ............................... 613,761 677,763
Shareholders' equity
Preferred stock ............................... 20,582 22,947
Common equity ................................. 2,809,297 2,955,682
------------ ------------
TOTAL SHAREHOLDERS' EQUITY .............. 2,829,879 2,978,629
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS
EQUITY ................................. $ 33,558,099 $ 32,671,179
============ ============
NET INTEREST INCOME(1) ............................ $ 644,259 $ 626,338
============ ============
INTEREST-RATE SPREAD(1) ........................... 3.60% 3.59%
====== ======
NET INTEREST MARGIN(1) ............................ 4.26% 4.28%
====== ======
TAXABLE-EQUIVALENT ADJUSTMENTS:
Loans ......................................... $ 2,677 $ 2,408
Securities .................................... 15,480 16,644
------------ ------------
TOTAL ................................... $ 18,157 $ 19,052
============ ============
</TABLE>
---------------
(1) 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 in both interest income and the calculation of the
yield on loans.
(4) Includes loans on nonaccrual status.
23
<PAGE> 24
UNION PLANTERS CORPORATION AND SUBSIDIARIES
ANALYSIS OF VOLUME AND RATE CHANGES
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
2000 VERSUS 1999
--------------------------------------
INCREASE (DECREASE)
DUE TO CHANGE IN:(1)
------------------------ TOTAL
AVERAGE AVERAGE INCREASE
VOLUME RATE (DECREASE)
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits at financial institutions ..................... $ (753) $ (171) $ (924)
Federal funds sold and securities purchased under agreements to resell .. 207 568 775
Trading account assets .................................................. (720) 1,607 887
Investment securities (FTE) ............................................. (28,359) 11,292 (17,067)
Loans, net of unearned income (FTE) ..................................... 81,625 41,655 123,280
---------- ---------- ----------
TOTAL INTEREST INCOME ........................................... 52,000 54,951 106,951
---------- ---------- ----------
INTEREST EXPENSE
Money market accounts ................................................... 12,359 959 13,318
Interest-bearing checking ............................................... (3,743) 201 (3,542)
Savings deposits ........................................................ (1,456) (1,869) (3,325)
Certificates of deposit of $100,000 and over ............................ (7,665) 2,032 (5,633)
Other time deposits ..................................................... (38,769) 9,213 (29,556)
Short-term borrowings ................................................... 105,869 19,866 125,735
Long-term debt .......................................................... (12,221) 4,254 (7,967)
---------- ---------- ----------
TOTAL INTEREST EXPENSE .......................................... 54,374 34,656 89,030
---------- ---------- ----------
CHANGE IN NET INTEREST INCOME (FTE) ....................................... $ (2,374) $ 20,295 $ 17,921
========== ========== ==========
PERCENTAGE INCREASE IN NET INTEREST INCOME (FTE) FROM PRIOR PERIOD ........ 2.86%
==========
</TABLE>
---------------
FTE = Fully taxable-equivalent basis
(1) The change due to both rate and volume has been allocated to change due
to volume and change due to rate in proportion to the relationship of
the absolute dollar amounts of the change in each.
FINANCIAL CONDITION
Union Planters' total assets were $34.2 billion at June 30, 2000
compared to $32.3 billion at June 30, 1999 and $33.3 billion at December 31,
1999. Average assets were $33.9 billion for the second quarter of 2000 compared
to $33.0 billion for the second quarter of 1999.
Earning assets at June 30, 2000 were $30.9 billion, an increase of $1.1
billion from year end. Average earning assets were $30.8 billion for the second
quarter of 2000 which compares to $29.6 billion for the same period last year
and $30.0 billion for the first quarter of 2000.
INVESTMENT SECURITIES
Union Planters' investment securities portfolio of $7.0 billion at June
30, 2000 consisted entirely of available for sale securities, which are carried
on the balance sheet at fair value. This compares to investment securities of
$7.9 billion and $7.5 billion at June 30, 1999 and December 31, 1999,
respectively.
At June 30, 2000, these securities had net unrealized losses of $237.5
million (before income taxes). This compares to net unrealized losses of $230.7
million and $212.6 million, respectively, at March 31, 2000 and December 31,
1999. The investment portfolio had a net unrealized loss of $96.3 million at
June 30, 1999. The unrealized loss in the investment portfolio resulted from the
increasing interest-rate environment during the latter part of 1999 and first
half of 2000. Management expects that maturities of securities and other funding
sources should provide sufficient funds to meet Union Planters' liquidity needs,
so that the Company will not be forced to sell investments at a loss prior to
maturity. Any losses taken will result from strategic or discretionary decisions
to restructure the portfolio. The investment
24
<PAGE> 25
portfolio has decreased as funds received from the maturities and calls of
securities were used to meet other funding needs. Reference is made to Note 5 to
the unaudited interim consolidated financial statements which provides the
composition of the investment portfolio at June 30, 2000 and December 31, 1999.
U.S. Treasury and U.S. Government agency obligations represented
approximately 55% of the investment securities portfolio at June 30, 2000, 74%
of which were Collateralized Mortgage Obligations (CMOs) and mortgage-backed
securities issues. Union Planters has some credit risk in the investment
portfolio; however, management does not consider that risk to be significant and
does not believe that cash flows will be significantly impacted. Reference is
made to the "Net Interest Income" and "Asset/Liability and Market Risk
Management" discussions for information regarding the market-risk in the
investment securities portfolio.
The limited credit risk in the investment securities portfolio at June
30, 2000 consisted of 24% investment grade CMOs, 18% municipal obligations, and
3% other stocks and securities (primarily Federal Reserve Bank and FHLB Stock).
LOANS
Loans, net of unearned income, at June 30, 2000 were $23.3 billion
compared to $20.2 billion and $21.4 billion at June 30, 1999 and December 31,
1999, respectively. Average loans for the second quarter of 2000 were $23.1
billion compared to $20.9 billion for the second quarter of 1999 and $22.0
billion for the first quarter of 2000. Excluding the FHA/VA
government-insured/guaranteed loans, average loans were $22.6 billion at June
30, 2000, an increase of 11% from the second quarter of 1999 and an increase of
5% from the first quarter of 2000.
The increase in loans compared to 1999 relates to the acquisition of
Republic Bank in July 1999, which increased loans approximately $961 million,
and to core loan growth. The loan growth from the first quarter of 2000 related
primarily to home mortgage loans (approximately 50% of the increase) and loan
growth in a number of the markets served by Union Planters (primarily the Miami,
Indianapolis, St. Louis, and Baton Rouge markets). Note 3 to the unaudited
interim consolidated financial statements included in Part I, Item 1 of this
report presents the composition of the loan portfolio.
ALLOWANCE FOR LOSSES ON LOANS
Union Planters maintains the allowance for losses on loans (the
allowance) at a level deemed adequate to absorb estimated losses inherent in the
loan portfolio. The allowance is reviewed quarterly to assess the risk in the
portfolio. This methodology includes assigning loss factors, based on historical
experience as adjusted for current business and economic conditions, to loans
with similar characteristics for which estimates of inherent probable loss can
be assessed. The loss factors are applied to the respective portfolios to assist
in the determination of the overall adequacy of the allowance.
A periodic review of selected credits (based on loan size) is conducted
to identify loans with heightened risk or inherent losses. The primary
responsibility for this review rests with management assigned accountability for
the credit relationship. This review is supplemented with periodic reviews by
Union Planters' credit review function, and regulatory agencies. These reviews
provide information which assists in the timely identification of problems or
potential problems and in deciding whether the credit represents a probable loss
or risk which should be recognized.
25
<PAGE> 26
The following table provides a reconciliation of the allowance at the
dates indicated and certain key ratios for the six-month periods ended June 30,
2000 and 1999 and for the year ended December 31, 1999.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
-------------------------------- ------------
2000 1999 1999
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
BALANCE AT THE BEGINNING OF PERIOD .............................. $ 342,300 $ 321,476 $ 321,476
LOANS CHARGED OFF
Commercial, financial, and agricultural ....................... 19,616 15,066 42,657
Foreign ....................................................... 117 3 459
Accounts receivable - factoring ............................... 7,874 8,583 24,992
Real estate - construction .................................... 1,941 753 3,330
Real estate - mortgage
Secured by 1-4 family residential .......................... 5,426 4,539 11,024
Other mortgage ............................................. 1,663 10,104 15,818
Home equity ................................................... 892 926 1,234
Consumer ...................................................... 24,819 20,262 49,247
Direct lease financing ........................................ -- 291 396
------------ ------------ ------------
Total charge-offs ..................................... 62,348 60,527 149,157
------------ ------------ ------------
RECOVERIES ON LOANS PREVIOUSLY CHARGED OFF
Commercial, financial, and agricultural ....................... 8,277 8,930 21,404
Foreign ....................................................... 119 477 77
Accounts receivable - factoring ............................... 933 1,371 1,862
Real estate - construction .................................... 514 261 670
Real estate - mortgage
Secured by 1-4 family residential ........................... 1,145 1,069 2,151
Other mortgage .............................................. 5,145 2,864 5,333
Home equity ................................................... 338 77 155
Consumer ...................................................... 12,433 9,021 21,083
Direct lease financing ........................................ -- 88 126
------------ ------------ ------------
Total recoveries ...................................... 28,904 24,158 52,861
------------ ------------ ------------
Net charge-offs ................................................. (33,444) (36,369) (96,296)
Provision charged to expense .................................... 37,002 34,019 74,045
Increase due to acquisitions .................................... -- 21,460 43,075
------------ ------------ ------------
BALANCE AT END OF PERIOD .............................. $ 345,858 $ 340,586 $ 342,300
============ ============ ============
Total loans, net of unearned income, at end of period ........... $ 23,328,190 $ 20,231,112 $ 21,446,400
Less: FHA/VA government insured/guaranteed loans ................ 447,815 598,046 519,213
------------ ------------ ------------
LOANS USED TO CALCULATE RATIOS ........................ $ 22,880,375 $ 19,633,066 $ 20,927,187
============ ============ ============
Average total loans, net of unearned income, during period ...... $ 22,544,773 $ 20,686,397 $ 21,141,576
Less: Average FHA/VA government-insured/guaranteed loans ........ 481,385 648,193 597,944
------------ ------------ ------------
AVERAGE LOANS USED TO CALCULATE RATIOS ................ $ 22,063,388 $ 20,038,204 $ 20,543,632
============ ============ ============
RATIOS(1):
Allowance at end of period/loans, net of unearned income ...... 1.51% 1.73% 1.64%
Charge-offs/average loans, net of unearned income(2) .......... .57 .61 .73
Recoveries/average loans, net of unearned income(2) ........... .27 .24 .26
Net charge-offs/average loans, net of unearned income(2) ...... .30 .37 .47
Provision/average loans, net of unearned income(2) ............ .34 .34 .36
</TABLE>
---------------
(1) Ratio calculations exclude FHA/VA government-insured/guaranteed loans,
since they represent minimal credit risk.
(2) Amounts annualized for June 30, 2000 and 1999.
The allowance at June 30, 2000 was $345.9 million, an increase of $3.6
million from December 31, 1999, and compared to $340.6 million at June 30, 1999.
The increase from December 31, 1999 relates primarily to the provision for
losses on loans exceeding net charge-offs. Net charge-offs for the second
quarter of 2000 were .35% of average loans and compared to .44% and .26%,
respectively, for the second quarter of 1999 and the first quarter of 2000.
26
<PAGE> 27
NONPERFORMING ASSETS
NONACCRUAL, RESTRUCTURED, AND PAST DUE LOANS AND FORECLOSED PROPERTIES
<TABLE>
<CAPTION>
JUNE 30,
-------------------- MARCH 31,
2000 1999 2000
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
NONACCRUAL LOANS .............................................................................. $127,685 $196,749 $130,483
RESTRUCTURED LOANS ............................................................................ 1,680 1,655 1,811
-------- -------- --------
TOTAL NONPERFORMING LOANS ........................................................... 129,365 198,404 132,294
-------- -------- --------
FORECLOSED PROPERTY
Other real estate owned, net ................................................................ 38,868 26,417 38,798
Other foreclosed property ................................................................... 1,213 1,849 1,300
-------- -------- --------
TOTAL FORECLOSED PROPERTIES ......................................................... 40,081 28,266 40,098
-------- -------- --------
TOTAL NONPERFORMING ASSETS .......................................................... $169,446 $226,670 $172,392
======== ======== ========
LOANS PAST DUE 90 DAYS OR MORE AND STILL ACCRUING INTEREST .................................... $ 78,843 $ 25,858 $ 81,738
======== ======== ========
FHA/VA GOVERNMENT-INSURED/GUARANTEED LOANS
Loans past due 90 days or more and still accruing interest .................................. $166,231 $306,238 $216,185
Nonaccrual loans ............................................................................ 4,408 7,391 5,767
RATIOS(1):
Nonperforming loans/loans, net of unearned income ........................................... .57% 1.01% .61%
Nonperforming assets/loans, net of unearned income plus foreclosed properties................ .74 1.15 .79
Allowance for losses on loans/nonperforming loans ........................................... 267 172 261
Loans past due 90 days or more and still accruing interest/loans, net of unearned income .... .34 .13 .38
</TABLE>
--------------------
(1) FHA/VA government-insured/guaranteed loans are excluded from loans in
the ratio calculations.
The breakdown of nonaccrual loans and loans past due 90 days or more
and still accruing interest, both excluding FHA/VA loans, is as follows:
<TABLE>
<CAPTION>
NONACCRUAL LOANS(1) LOANS PAST DUE 90 DAYS OR MORE(1)
------------------------------ ---------------------------------
JUNE 30, JUNE 30,
------------------- MARCH 31, ------------------- MARCH 31,
2000 1999 2000 2000 1999 2000
-------- -------- --------- -------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
LOAN TYPE
Commercial, financial, and agricultural ....... $ 53,367 $ 58,965 $ 45,455 $ 9,522 $ 11,415 $ 8,931
Foreign ....................................... 85 345 686 -- -- 42
Real estate - construction .................... 17,722 12,446 19,158 1,485 2,127 2,556
Real estate - mortgage
Secured by 1-4 family residential .......... 22,275 74,546 19,550 53,049 4,226 59,959
Other mortgage ............................. 30,347 43,827 41,376 9,689 3,480 5,288
Home Equity ................................... 1,398 1,407 1,422 617 308 564
Consumer ...................................... 2,476 5,213 2,821 4,044 4,287 4,330
Direct lease financing ........................ 15 -- 15 437 15 68
-------- -------- -------- -------- -------- --------
TOTAL ................................. $127,685 $196,749 $130,483 $ 78,843 $ 25,858 $ 81,738
======== ======== ======== ======== ======== ========
</TABLE>
--------------------
(1) See the preceding table for the amount of FHA/VA government-insured
guaranteed/loans on nonaccrual and past due 90 days or more and still
accruing interest.
LOANS OTHER THAN FHA/VA LOANS. As a percentage of loans and foreclosed
properties, nonperforming assets were .74% at June 30, 2000 compared to 1.15% at
June 30, 1999 and .79% at March 31, 2000. The coverage of nonperforming loans
(allowance for losses on loans as a percentage of nonperforming loans) was 267%
at June 30, 2000, which compares to 172% at June 30, 1999 and 261% at March 31,
2000.
27
<PAGE> 28
The higher percentage of nonperforming assets and the lower level of
loans past due 90 days or more and still accruing interest at June 30, 1999
compared to the same period in 2000 relates primarily to a change made in the
third quarter of 1999 to Union Planters' policy for placing single family
residential mortgages on nonaccrual status (see Note 5 on page 52 of the 1999
Annual Report). The impact of this change in policy was to reduce nonaccrual
loans approximately $50 million with loans past due 90 days or more and still
accruing interest increasing by a corresponding amount. The change was made
prospectively and prior period amounts were not restated.
Loans past due 90 days or more and still accruing interest totaled
$78.8 million, or .34% of loans, at June 30, 2000 compared to $25.9 million, or
.13%, and $81.7 million, or .38% of loans, at June 30, 1999 and March 31, 2000,
respectively. The preceding table details the composition of these loans.
FHA/VA LOANS. FHA/VA government-insured/guaranteed loans (FHA/VA loans)
do not, in management's opinion, have traditional credit risk inherent in the
balance of the loan portfolio and risk of principal loss is considered minimal.
FHA/VA loans past due 90 days or more and still accruing interest totaled $166.2
million at June 30, 2000 which compares to $306.2 million and $216.2 million at
June 30, 1999 and March 31, 2000, respectively. The decrease in past due loans
relates to a decline in the overall volume of these loans. At June 30, 2000,
June 30, 1999, and March 31, 2000, $4.4 million, $7.4 million and $5.8 million,
respectively, of these loans were placed on nonaccrual status by management
because the contractual payment of interest by FHA/VA had stopped due to missed
filing dates. No loss of principal is expected from these loans.
FHA/VA FORECLOSURE CLAIMS
Provisions for losses related to FHA/VA claims are provided through
noninterest expense as provisions for losses on FHA/VA foreclosure claims and
the corresponding liability is carried in other liabilities. Provisions for
losses on FHA/VA foreclosure claims totaled $464,000 and $250,000 for the six
months ended June 30, 2000 and 1999, respectively. At June 30, 2000, the Company
had a reserve for FHA/VA claims losses of $15.3 million compared to $18.4
million and $28.0 million at March 31, 2000 and December 31, 1999, respectively.
POTENTIAL PROBLEM ASSETS
Potential problem assets are assets which are generally secured and not
currently considered nonperforming, but where information about possible credit
problems has caused management to have serious doubts as to the ability of the
borrowers to comply with present repayment terms in the future. Historically,
these assets were loans which became nonperforming. At June 30, 2000, Union
Planters had potential problem assets of $45.4 million, composed of 10 loans.
This compares to $52.2 million, or 14 loans, at March 31, 2000 and $64.3
million, or 22 loans, at June 30, 1999.
DEPOSITS
Union Planters' core deposit base is its most important and stable
funding source and consists of deposits from the communities served by Union
Planters.
<TABLE>
<CAPTION>
AVERAGE DEPOSITS
----------------------------------------------------------------------------
THREE MONTHS ENDED
-------------------------------------------- SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- MARCH 31, ----------------------------
2000 1999 2000 2000 1999
------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Demand deposits .................................. $ 4,058,827 $ 4,476,077 $ 4,027,414 $ 4,043,121 $ 4,390,270
Money market accounts ............................ 3,826,930 3,703,442 3,915,206 3,871,068 3,273,960
Interest-bearing checking ........................ 3,309,979 3,683,567 3,403,196 3,356,588 3,867,428
Savings deposits ................................. 1,513,795 1,729,399 1,558,341 1,536,068 1,724,050
Other time deposits .............................. 8,268,440 9,829,513 8,403,967 8,336,204 9,854,440
------------ ------------ ------------ ------------ ------------
Total core deposits ...................... 20,977,971 23,421,998 21,308,124 21,143,049 23,110,148
Certificates of deposit of $100,000 and over ..... 2,228,985 2,286,601 1,978,169 2,103,577 2,389,174
------------ ------------ ------------ ------------ ------------
Total average deposits ................... $ 23,206,956 $ 25,708,599 $ 23,286,293 $ 23,246,626 $ 25,499,322
============ ============ ============ ============ ============
</TABLE>
Average deposits for the second quarter of 2000 were $23.2 billion,
which represents decreases of $2.5 billion and $79 million, respectively, from
the average deposits for the second quarter of 1999 and the first quarter of
2000. The decrease is attributable to several factors, including time deposits
that matured and were not renewed (including higher priced deposits of acquired
entities), not competing as
28
<PAGE> 29
aggressively for public fund deposits (which require pledging of investment
securities), the competitive market in general, and increased competition from
other investment sources (annuities, mutual funds, broker money market accounts,
etc.), including Union Planters' sale of nontraditional deposit products.
SHAREHOLDERS' EQUITY
Union Planters' total shareholders' equity decreased by $77.4 million
from December 31, 1999 to $2.7 billion at June 30, 2000. The major items
affecting shareholders' equity are as follows:
- $142.3 million decrease due to shares purchased (4.5 million
shares)
- $16.1 million decrease due to the net change in the
unrealized loss on available for sale investment securities
- $67.1 million increase due to retained net earnings (net
earnings less dividends paid)
- $13.9 million increase due to common stock issued for
employee benefit plans
In August 1999, the Company's Board of Directors authorized the
purchase of up to 5% of Union Planters' common stock or approximately 7.1
million shares. In February 2000, the Company completed the purchase of the 7.1
million shares under this plan. On February 17, 2000, the Board of Directors
authorized the purchase from time to time of up to an additional 7.1 million
shares. The purchases are expected to take place over 18 to 24 months either in
the open market or privately negotiated transactions. As of July 31, 2000, 1.6
million shares had been purchased under the current authorization.
CAPITAL ADEQUACY
The following table presents capital adequacy information for Union Planters:
<TABLE>
<CAPTION>
JUNE 30,
------------ DECEMBER 31,
2000 1999 1999
---- ---- ------------
<S> <C> <C> <C>
CAPITAL ADEQUACY DATA
Total shareholders' equity/total assets (at period end) ............ 7.88% 9.22% 8.34%
Average shareholders' equity/average total assets .................. 8.43 9.12 9.06
Tier 1 capital/unweighted average assets (leverage ratio)(1) ....... 6.29 7.79 6.65
</TABLE>
---------------
(1) Based on period-end capital and quarterly adjusted average assets.
29
<PAGE> 30
The following tables present risk-based capital and capital adequacy
ratios for Union Planters and its principal subsidiary, Union Planters Bank.
Union Planters Bank's regulatory capital ratios qualify for the
"well-capitalized" regulatory classification established by the FDIC.
UNION PLANTERS CORPORATION
RISK-BASED CAPITAL
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------------- DECEMBER 31,
2000 1999 1999
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
TIER 1 CAPITAL
Shareholders' equity ........................................................... $ 2,698,670 $ 2,973,072 $ 2,776,109
Trust Preferred Securities and minority interest in consolidated subsidiaries .. 202,250 202,215 202,232
Less: Goodwill and other intangibles ........................................... (982,346) (720,604) (971,770)
Disallowed deferred tax asset ............................................ (1,314) (1,029) (1,053)
Unrealized loss on available for sale securities ......................... 150,354 61,571 134,217
------------ ------------ ------------
TOTAL TIER 1 CAPITAL ....................................................... 2,067,614 2,515,225 2,139,735
TIER 2 CAPITAL
Allowance for losses on loans .................................................. 307,105 267,714 282,149
Qualifying long-term debt ...................................................... 445,243 461,067 445,590
Other adjustments .............................................................. -- 68 --
------------ ------------ ------------
TOTAL CAPITAL BEFORE DEDUCTIONS ............................................ 2,819,962 3,244,074 2,867,474
Less investment in unconsolidated subsidiaries ................................. (10,196) (11,822) (10,289)
------------ ------------ ------------
TOTAL CAPITAL .............................................................. $ 2,809,766 $ 3,232,252 $ 2,857,185
============ ============ ============
RISK-WEIGHTED ASSETS ............................................................. $ 24,529,632 $ 21,344,275 $ 22,511,772
============ ============ ============
RATIOS AS A PERCENT OF END OF PERIOD RISK-WEIGHTED ASSETS
Tier 1 capital ................................................................. 8.43% 11.78% 9.50%
Total capital .................................................................. 11.45 15.14 12.69
</TABLE>
UNION PLANTERS BANK, NATIONAL ASSOCIATION
RISK-BASED CAPITAL
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------------- DECEMBER 31,
2000 1999 1999
-------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Tier 1 capital .................... $ 1,926,749 $ 2,150,480 $ 1,878,443
Total capital ..................... 2,530,954 2,709,015 2,456,210
Risk-weighted assets .............. 24,267,259 20,587,904 22,130,083
RATIOS
Leverage ........................ 5.94% 7.17% 5.95%
Tier 1 risk-based capital ....... 7.94 10.45 8.49
Total risk-based capital ........ 10.43 13.16 11.10
</TABLE>
Union Planters' shareholders' equity to total assets ratio decreased at
June 30, 2000 compared to prior periods due to the Company's share purchase
plans and 1999 purchase acquisitions. Regulatory capital ratios were further
impacted by goodwill and other intangibles resulting from the 1999 purchase
acquisitions which are deducted from capital in calculating regulatory capital.
LIQUIDITY
Union Planters requires liquidity sufficient to meet cash requirements
for deposit withdrawals, to make new loans and satisfy loan commitments, to take
advantage of attractive investment opportunities, and to repay borrowings at
maturity. Deposits, available for sale securities, and money market investments
are Union Planters' primary sources of liquidity. Liquidity is also achieved
through short-term borrowings, borrowings under available lines of credit, and
issuance of securities and debt instruments in the financial markets. Union
Planters has adequate liquidity to meet its operating requirements.
Parent company liquidity is achieved and maintained by dividends
received from subsidiaries, interest on advances to subsidiaries, and interest
on its available for sale investment securities portfolio. At June 30, 2000, the
parent company had cash and cash equivalents
30
<PAGE> 31
totaling $180.6 million, which compares to $170.2 million and $264.3 million at
March 31, 2000 and December 31, 1999. Net working capital (total assets maturing
within one year less similar liabilities) was $177.1 million, which compares to
$195.1 million and $296.5 million at March 31, 2000 and December 31, 1999. The
decrease in parent company liquidity from December 31, 1999 relates primarily to
the Company's share purchase plan.
At July 1, 2000, the parent company could have received dividends from
subsidiaries of $159.0 million without prior regulatory approval. The payment of
dividends by Union Planters' subsidiaries in the second quarter of 2000 will be
limited to $67.6 million by management due to capital and liquidity requirements
of individual financial institutions. The payment of additional dividends by
Union Planters' subsidiaries will be dependent on the future earnings and growth
of the subsidiaries. Management believes that the parent company has adequate
liquidity to meet its cash needs, including the payment of its regular dividends
and servicing of its debt.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ASSET LIABILITY AND MARKET RISK MANAGEMENT
Union Planters' assets and liabilities are principally financial in
nature and the resulting earnings, primarily net interest income, are subject to
changes as a result of fluctuations in market interest rates and the mix of the
various assets and liabilities. Interest rates in the financial markets affect
decisions on pricing its assets and liabilities, which impacts net interest
income, which is approximately 70% of Union Planters' operating revenues. As a
result, a substantial part of Union Planters' risk management activities are
devoted to managing interest-rate risk. Currently, Union Planters does not have
any significant risks related to foreign exchange, commodities or equity risk
exposure.
INTEREST-RATE RISK. One of the most important aspects of management's
efforts to sustain long-term profitability for Union Planters 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.
Union Planters' Funds Management Committee (the Committee) oversees the
conduct of asset/liability and interest-rate management. The Committee meets
monthly and reviews the outlook for the economy and interest rates, Union
Planters' balance sheet structure, and yields on earning assets and rates on
interest-bearing liabilities. Union Planters uses two methods, interest-rate
sensitivity analysis and simulation analysis, to measure interest-rate risk.
Interest-rate sensitivity analysis (GAP analysis) is used to monitor
the amounts and timing of balances exposed to changes in interest rates, as
shown in the following table. The analysis has been made at a point in time and
could change significantly on a daily basis.
As a general policy guideline, management expects the GAP position at
one year not to exceed 10% of Union Planters' assets. At June 30, 2000, this
position was 14% of Union Planters' total assets with $4.9 billion more
liabilities repricing than assets. This position compares to March 31, 2000
which was 14% of total assets with $4.8 billion more liabilities repricing than
assets.
Even though the GAP position exceeds the policy at one year, $4.0
billion of the liabilities affecting the one year GAP are scheduled money
market, savings and interest-bearing checking deposits whose rates are
administered by management. Total money market, savings, and interest-bearing
checking deposits of $8.4 billion that have no contractual maturity are
scheduled according to management's best estimate of their repricing in response
to changes in interest rates. Even with conservative estimates of their rate
sensitivity, the resulting impact on earnings at risk in simulation analysis
produces results which bring interest-rate risk into an acceptable range and one
not implied by GAP analysis alone.
Interest-rate risk is evaluated by conducting balance sheet simulation
analysis to project net interest income for twelve months forward under
different interest rate scenarios. Each of these scenarios is compared with a
base case scenario wherein current market rates and current period balances are
held constant for the simulation period.
The scenarios include immediate "shocks" to current rates of 200 basis
points up and down and a "most likely" scenario in which current rates are moved
according to economic forecasts and management's expectations of changes in
administered rates.
31
<PAGE> 32
The results of these simulations are compared to policy guidelines
approved by the Committee. The policy limits the changes of net interest income
to 20% of net operating earnings (net earnings before other significant items,
net of taxes, annualized - see the "Summary of Consolidated Results" on page 15)
when compared with the base case (flat) scenario. The simulations have
consistently fallen within the policy guidelines.
At June 30, 2000, the 200 basis point immediate rise in interest rates
produced a 16% ($65 million after-tax) decrease in net operating earnings, which
compares to a 16.4% ($66 million after-tax ) decrease at March 31, 2000. The 200
basis point immediate fall in interest rates produced a 10% ($41 million
after-tax) increase in net operating earnings versus a 12.9% ($52 million
after-tax) increase at March 31, 2000. The "most likely" scenario at June 30,
2000 produced less than a .1% ($382,000 after-tax) decrease in net operating
earnings compared to a .6% ($2 million after-tax) decrease in net operating
earnings at March 31, 2000. The "most likely" scenario at June 30, 2000 assumed
the Federal Funds rate increasing from 6.50% to 6.75% over the first three
months of the twelve month simulation period. At March 31, 2000, the "most
likely" scenario assumed the Federal Funds rate increasing from 6.00% to 6.50%
over the first three months of the twelve month simulation period.
The key assumptions used in simulation analysis include the following
- prepayment rates on mortgage-related assets
- cash flows and maturities of all financial instruments
- changes in volumes and pricing
- future shapes of the yield curve
- money market spreads
- credit spreads
- deposit sensitivity
- management's financial capital plan
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, the difference between actual experience and
the characteristics assumed, and changes in market conditions and management
strategies.
32
<PAGE> 33
UNION PLANTERS CORPORATION AND SUBSIDIARIES
RATE SENSITIVITY ANALYSIS AT JUNE 30, 2000
<TABLE>
<CAPTION>
INTEREST-SENSITIVE WITHIN(1)(7)
--------------------------------------------------------------------------------------------
NON-
0-90 91-180 181-365 1-3 3-5 5-15 OVER 15 INTEREST-
DAYS DAYS DAYS YEARS YEARS YEARS YEARS BEARING TOTAL
-------- ------- ------- ------- ------ ------ ------- --------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans and leases(2)(3)(4) ........ $ 7,956 $ 1,952 $ 2,932 $ 6,509 $2,706 $ 791 $ 54 $ 443 $23,343
Investment securities(5)(6) ...... 409 190 458 1,434 1,566 2,786 349 (237) 6,955
Other earning assets ............. 659 -- -- -- 1 -- -- 660
Other assets ..................... -- -- -- -- -- -- -- 3,269 3,269
-------- ------- ------- ------- ------ ------ ------ ------- -------
TOTAL ASSETS ............. $ 9,024 $ 2,142 $ 3,390 $ 7,943 $4,272 $3,578 $ 403 $ 3,475 $34,227
======== ======= ======= ======= ====== ====== ====== ======= =======
SOURCES OF FUNDS
Money market deposits(7)(8) ...... $ 1,226 $ -- $ 1,226 $ 1,263 $ -- $ -- $ -- $ -- $ 3,715
Savings and interest-bearing
checking deposits(7)(8) ........ 1,539 -- -- 1,539 -- 1,586 -- 4,664
Other time deposits .............. 2,201 1,846 2,315 1,688 238 37 3 -- 8,328
Certificates of deposit of
$100,000 and over .............. 934 534 714 271 29 3 -- -- 2,485
Short-term borrowings ............ 4,923 1,202 1 -- -- -- -- -- 6,126
Short- and medium-term
senior notes .................. -- -- -- 60 -- -- -- -- 60
Federal Home Loan Bank
advances ...................... 600 -- 1 1 -- -- -- -- 602
Other long-term debt ............. 154 -- -- 1 74 401 199 -- 829
Noninterest-bearing deposits ..... -- -- -- -- -- -- -- 4,098 4,098
Other liabilities ................ -- -- -- -- -- -- -- 621 621
Shareholders' equity ............. -- -- -- -- -- -- -- 2,699 2,699
-------- ------- ------- ------- ------ ------ ------ ------- -------
TOTAL SOURCES OF FUNDS ... $ 11,577 $ 3,582 $ 4,257 $ 4,823 $ 341 $2,027 $ 202 $ 7,418 $34,227
======== ======= ======= ======= ====== ====== ====== ======= =======
INTEREST-RATE SENSITIVITY GAP ...... $ (2,553) $(1,440) $ (867) $ 3,120 $3,931 $1,551 $ 201 $(3,943) --
CUMULATIVE INTEREST-RATE
SENSITIVITY GAP(8) ............... (2,553) (3,993) (4,860) (1,740) 2,191 3,742 3,943 --
CUMULATIVE GAP AS A
PERCENTAGE OF TOTAL ASSETS(8) .... (7)% (12)% (14)% (5)% 6% 11% 12% --%
POLICY ............................. +/-15% +/-10% +/-5% >0% >0% >0%
</TABLE>
---------------
Management has made the following assumptions in presenting the above analysis:
(1) Assets and liabilities are generally scheduled according to their
earliest repricing dates regardless of their contractual maturities.
(2) Nonaccrual loans and accounts receivable-factoring are included in the
noninterest-bearing category.
(3) Fixed-rate mortgage loan maturities include estimates of principal
prepayments using industry estimates of prepayment speeds for various
coupon segments of the portfolio.
(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 calculated within a
proprietary cash flow model.
(6) Securities are generally scheduled according to their call dates when
valued at a premium to par.
(7) Money market deposits, interest-bearing checking, 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, interest-bearing checking, and savings deposits
had been included in the 0-90 Days category above, the cumulative gap
as a percentage of total assets would have been negative (24%), (28%),
(27%), and (10%) for the 0-90 Days, 91-180 Days 181-365 Days and 1-3
Years categories and positive 2%, 11%, and 12%, respectively, for the
3-5 Years, 5-15 Years, and over 15 Years categories at June, 2000.
33
<PAGE> 34
PART II -- OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS
During the period covered by this report, there have been no new
material legal proceedings or material developments in pending material
litigation to which Union Planters or any of its subsidiaries is a party or of
which any of their property is subject, other than ordinary routine litigation
incidental to their business. Information concerning legal proceedings is
contained in Item 3, Part I of Union Planters' 1999 Form 10-K , Note 20 to Union
Planters' consolidated financial statements on page 70 of the 1999 Annual
Report, and Note 12 to Union Planters' unaudited interim consolidated financial
statements included herein under Item 1 of Part I.
ITEM 2 -- CHANGES IN SECURITIES
None.
ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
UNION PLANTERS CORPORATION ANNUAL MEETING
The Corporation's Annual Meeting of Shareholders was held on April 20,
2000. Matters submitted to, and approved by, shareholders are listed below, as
is a tabulation of voting. There were no broker nonvotes as all proposals were
deemed to be discretionary.
(1) The following persons nominated as Directors were elected:
<TABLE>
<CAPTION>
Class I For Against Abstain
------- ----------- ---------- -------
<S> <C> <C> <C>
James E. Harwood 104,025,076 5,152,992 50,766
Donald F. Schuppe 103,574,063 5,598,151 56,620
Richard A. Trippeer, Jr. 104,127,585 5,049,491 51,758
</TABLE>
Directors continuing in office are as follows: Benjamin W. Rawlins,
Jr., Jackson W. Moore, Albert M. Austin, George W. Bryan, Parnell S.
Lewis, Jr., Dr. V. Lane Rawlins, David M. Thomas, and Spence L. Wilson.
(2) The selection by the Board of Directors of
PricewaterhouseCoopers LLP as the Corporation's independent accountants and
auditors for the year ending December 31, 2000 was ratified by the following
vote:
<TABLE>
<CAPTION>
For Against Abstain
----------- --------- -------
<S> <C> <C>
106,606,375 1,736,670 885,789
</TABLE>
ITEM 5 -- OTHER INFORMATION
None.
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
<TABLE>
<S> <C>
11 Computation of Per Share Earnings (incorporated by
reference to Note 10 to Union Planters' unaudited
interim consolidated financial statements included
herein)
27 Financial Data Schedule (for SEC use only)
</TABLE>
b) Reports on Form 8-K:
<TABLE>
<CAPTION>
Date of Current Report Subject
---------------------- -------
<S> <C>
1. April 20, 2000 Press release announcing first quarter
2000 net earnings, reported under Item 5
2. July 20, 2000 Press release announcing second quarter
2000 net earnings, reported under Item 5
</TABLE>
34
<PAGE> 35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNION PLANTERS CORPORATION
-------------------------------------------
(Registrant)
Date: August 9, 2000
---------------------------
By: /s/ Benjamin W. Rawlins, Jr.
----------------------------------------
Benjamin W. Rawlins, Jr.
Chairman and Chief Executive Officer
By: /s/ Bobby L. Doxey
----------------------------------------
Bobby L. Doxey
Senior Executive Vice President and
Chief Financial Officer
By: /s/ M. Kirk Walters
--------------------------------------
M. Kirk Walters
Executive Vice President and
Chief Accounting Officer
35
<PAGE> 36
UNION PLANTERS CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
11 Computation of Per Share Earnings (incorporated by reference to Note 10 to
Union Planters' unaudited interim consolidated financial statements included
herein)
27 Financial Data Schedule (for SEC use only)
</TABLE>
36
