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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission File No. 1-10160
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UNION PLANTERS CORPORATION
(Exact name of registrant as specified in its charter)
Tennessee 62-0859007
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(State of incorporation) (IRS Employer Identification No.)
Union Planters Administrative Center
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
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Registrant's telephone number, including area code: (901) 580-6000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Common Stock having a par New York Stock Exchange
value of $5 per share and
associated Preferred Share Purchase Rights
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
8% Cumulative, Convertible Preferred Stock,
Series E having a stated value of $25 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant at February 29, 2000 was approximately $3,714,651,000
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INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE
REGISTRANT'S CLASSES OF COMMON STOCK
CLASS OUTSTANDING AT FEBRUARY 29, 2000
Common Stock having a par 135,695,016
value of $5 per share -----------
DOCUMENTS INCORPORATED BY REFERENCE
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Part of Form 10-K
Documents Incorporated into which incorporated
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1. Certain parts of the Annual Parts I and II, Items 1, 2, 5,
Report to Shareholders for the 6, 7, 7A, and 8
year ended December 31, 1999
2. Certain parts of the Definitive Part III
Proxy Statement for the Annual
Shareholders Meeting to be held
April 20, 2000
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FORM 10-K CROSS-REFERENCE INDEX
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Page
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PART I
Item 1. Business...........................................................................................4
Item 1a. Executive Officers of the Registrant..............................................................13
Item 2. Properties........................................................................................14
Item 3. Legal Proceedings.................................................................................14
Item 4. Submission of Matters to a Vote of Security Holders................................................*
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters..........................15
Item 6. Selected Financial Data...........................................................................15
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.............15
Item 7A. Quantitative and Qualitative Disclosures About Market Risk........................................15
Item 8. Financial Statements and Supplementary Data.......................................................15
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...............*
PART III
Item 10. Directors and Executive Officers of the Registrant................................................15
Item 11. Executive Compensation............................................................................15
Item 12. Security Ownership of Certain Beneficial Owners and Management....................................15
Item 13. Certain Relationships and Related Transactions....................................................16
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..................................16
Signatures ..................................................................................................18
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* Not Applicable
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RISK FACTORS
A cautionary note about forward-looking statements. In its oral and
written communication, Union Planters Corporation from time to time includes
forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward looking statements can include
statements about estimated cost savings, plans and objectives for future
operations, and expectations about performance as well as economic and market
conditions and trends. They often can be identified by the use of words like
"expect," "may," "could," "intend," "project", "estimate," "believe" or
"anticipate." Union Planters may include forward-looking statements in filings
with the Securities and Exchange Commission, such as this Annual Report, in
other written materials, and in oral statements made by senior management to
analysts, investors, representatives of the media, and others. It is intended
that these forward-looking statements speak only as of the date they are made,
and Union Planters undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which the forward
looking statement is made or to reflect the occurrence of unanticipated events.
By their nature, forward-looking statements are based on assumptions
and are subject to risks, uncertainties, and other factors. Actual results may
differ materially from those contained in the forward looking statement. The
discussion in the "Management's Discussion and Analysis of Results of Operations
and Financial Condition," including, in particular, the discussion under the
heading "Cautionary Statement About Forward-Looking Information," incorporated
in Item 7 of this Annual Report, lists some of the factors which could cause
Union Planters' actual results to vary materially from those in any
forward-looking statements. Your attention is directed to this discussion which
can be found in Exhibit 13 to this Report. Other uncertainties which could
affect Union Planters' future performance include the effects of competition,
technological changes and regulatory developments (see the discussion under the
heading "Supervision and Regulation" in Item 1 below); changes in fiscal,
monetary and tax policies; changes in business conditions and inflation; changes
in general economic conditions, either nationally or regionally, resulting in,
among other things, credit quality deterioration; and changes in the securities
markets.
Investors should consider these risks, uncertainties, and other factors
in addition to those mentioned by Union Planters Corporation in its other
filings from time to time when considering any forward-looking statement.
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PART I
ITEM 1. BUSINESS
GENERAL
Union Planters Corporation (Union Planters or the Company) is a $33.3
billion multi-state bank holding company whose primary business is banking.
Incorporated under the laws of Tennessee on November 15, 1971, Union Planters is
the largest bank holding company headquartered in Tennessee and, as of December
31, 1999, was the 27th largest bank holding company headquartered in the United
States based on total assets. Union Planters Bank, National Association (Union
Planters Bank or UPB), headquartered in Memphis, Tennessee, is Union Planters'
largest subsidiary. The principal banking markets of Union Planters are in
Alabama, Arkansas, Florida, Illinois, Indiana, Iowa, Kentucky, Louisiana,
Mississippi, Missouri, Tennessee, and Texas. Union Planters' existing market
areas are served by Union Planters' 868 banking offices and 1018 ATMs. The map
on the inside front cover of the 1999 Annual Report to Shareholders provides
information regarding the markets served by Union Planters' banking
subsidiaries. Capital Factors, Inc. (Capital Factors), a wholly owned subsidiary
of UPB, provides receivable-based commercial financing and related fee-based
credit, collection, and management information services through four regional
offices located in New York, New York; Los Angeles, California; Charlotte, North
Carolina; and Dallas, Texas; an asset-based lending office in Atlanta, Georgia;
and its headquarters in Boca Raton, Florida. The mortgage operations of UPB
operate 30 stand alone mortgage production offices in Alabama, Arizona,
California, Colorado, Florida, Georgia, Iowa, Louisiana, Mississippi, Nevada,
North Carolina, Ohio, Tennessee, Texas, and Washington, in addition to mortgage
production offices located in its branch banking locations.
As part of Union Planters' banking business, its subsidiaries offer a
broad range of financial services and products. They are engaged in
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- - factoring operations; - the purchase of delinquent FHA/VA government-
- - mortgage origination and servicing; insured/guaranteed loans from third parties and
- - investment management and trust services, and GNMA pools serviced for others;
mutual fund activities; - full-service and discount brokerage services;
- - the issuance of debit cards, and the offering of credit cards; - commercial finance business;
- - the origination, packaging, and securitization of loans, - trade-finance activities; and
primarily the government-guaranteed portions of - insurance agency activities, including the sale of
Small Business Administration (SBA) loans; bank-eligible insurance products and services
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Information about Union Planters' business segments and nonbanking
lines of business is contained under the headings "Union Planters Corporation"
on pages 11 and 12, and "Noninterest Income" on pages 17 to 20 in the 1999
Annual Report to Shareholders (1999 Shareholders Report) and in Note 18 to the
Consolidated Financial Statements on page 68 of that report, which information
is incorporated herein by reference.
Acquisitions have been an important part of Union Planters' business
strategy. After completing a record number of acquisitions in 1998 (18
acquisitions in 9 states), Union Planters completed four acquisitions in 1999.
Information about the banking organizations acquired since January 1, 1997,
their asset size and the consideration paid, is included in the table titled
"Acquisitions Completed Since January 1, 1997" on page 14 of the 1999
Shareholders Report, which is incorporated herein by reference. Management
currently expects the level of acquisition activity in 2000 to be limited.
Beginning in 1998, Union Planters implemented a strategy of
consolidating and streamlining substantially all of its banking operations. As a
part of this strategy, local management retains broad discretion in serving
their local customer base and making customer decisions, while banking products
are being standardized, new methods of product delivery, such as internet
banking, are being developed, and operational functions, including accounting,
deposit services, item processing, mortgage servicing, and credit
administration, are being centralized on a company-wide or regional basis. The
goal of this strategy, which is ongoing, is to improve efficiency and customer
service and to enable Union Planters to realize cost savings and to benefit from
the economies of scale available as a result of its growth through acquisitions.
In the short-term, this strategy demands a significant amount of management time
and attention. In addition, there are a number of factors that could affect its
ultimate success, including customer response in the communities in which Union
Planters has banking offices.
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COMPETITION
Union Planters and its subsidiaries operate in a highly competitive
environment. They compete with other bank holding companies and banks, thrift
institutions, credit unions, and money market and other mutual funds for
deposits and other sources of funds. In addition, they compete with a variety of
other financial service providers, such as finance companies, mortgage loan
companies, leasing companies, merchant banks, insurance companies and brokerage
firms. Many of these competitors are not subject to the same regulatory
restrictions as are bank holding companies and banks, such as Union Planters and
its bank subsidiaries. As a result, they may have a competitive advantage over
Union Planters.
The financial modernization legislation enacted by Congress in November
1999, and discussed below, is likely to have a significant impact on the
competitive environment in which Union Planters conducts business when the
legislation is fully phased in. By permitting combinations of banking, insurance
and securities firms, it will foster the creation of a consolidated financial
services industry and increase the competition among all providers of financial
services.
CERTAIN REGULATORY CONSIDERATIONS
General
As a registered bank holding company, Union Planters is subject to the
regulation and supervision of the Board of Governors of the Federal Reserve
System (the Federal Reserve Board) under the Bank Holding Company Act of 1956
(BHCA). Each of Union Planters's banking subsidiaries, including its federal
savings bank subsidiary, is a member of the Federal Deposit Insurance
Corporation (the FDIC) and as such its deposits are insured by the FDIC to the
maximum extent provided by law.
Union Planters currently has three banking subsidiaries. Union
Planters' principal subsidiary, Union Planters Bank, is a national banking
association and is subject to supervision and examination by the Office of the
Comptroller of the Currency (the Comptroller) and the FDIC. The state bank
subsidiary of Union Planters is subject to supervision and examination by the
FDIC and the state banking authority of the state in which it is organized
(Tennessee). Union Planters' federal savings bank subsidiary is subject to
supervision and examination by the Office of Thrift Supervision (OTS). Union
Planters' banking subsidiaries are subject to an extensive system of banking
laws and regulations that are intended primarily for the protection of their
customers and depositors. These laws and regulations include requirements to
maintain reserves against deposits, restrictions on the types and amounts of
loans and other extensions of credit that may be granted and the interest that
may be charged thereon, and limitations on the types of investments that may be
made, as well as types of services that may be offered. Various consumer laws
and regulations also affect the operations of the banking subsidiaries. In
addition to the impact of regulation, the banking subsidiaries are affected
significantly by the actions of the Federal Reserve Board as it attempts to
control the money supply and credit availability in order to influence the
economy. Set forth below are brief descriptions of selected laws and regulations
applicable to Union Planters and its subsidiaries. The references are not
intended to be complete and are qualified in their entirety by reference to the
statutes and regulations. Changes in an applicable law or regulation could have
a material effect on the business of Union Planters.
Nonbanking subsidiaries of Union Planters are also subject to
regulation by other federal and state agencies. The nonbank subsidiaries engaged
in insurance activities are subject to regulation by the insurance departments
in the states in which they conduct business. Union Planters' registered
broker-dealer subsidiary is regulated by the Securities and Exchange Commission,
among others, and is subject to the rules and regulations of the National
Association of Securities Dealers, Inc., a securities industry self-regulatory
organization.
Acquisitions
Under the BHCA, Union Planters must obtain the prior approval of the
Federal Reserve Board before it may acquire all or substantially all of the
assets of any bank, acquire direct or indirect ownership or control of more than
5% of the voting shares of any bank, or merge or consolidate with any other bank
holding company. The BHCA also currently prohibits, with certain exceptions,
Union Planters from acquiring direct or indirect ownership or control of 5% or
more of any class of voting shares of any nonbanking corporation. The BHCA
further provides that the Federal Reserve Board may not approve any transaction
that would result in a monopoly or would be in furtherance of any combination or
conspiracy to monopolize or attempt to monopolize the business of banking in any
region of the United States, or the effect of which may be substantially to
lessen competition or to tend to create a monopoly in any section of the
country, or that in any other manner would be in restraint of trade, unless the
anticompetitive effects of the proposed transaction are clearly outweighed by
the public interest in meeting the convenience and needs of the community to be
served. The Federal Reserve Board is also required to
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consider the financial and managerial resources and future prospects of the bank
holding companies and banks concerned and the convenience and needs of the
community to be served. Consideration of financial resources generally focuses
on capital adequacy. Consideration of convenience and needs issues includes the
parties' performance under the Community Reinvestment Act of 1977, as amended
(the CRA). Under the CRA, all financial institutions have a continuing and
affirmative obligation consistent with safe and sound operation to help meet the
credit needs of their entire communities, including low-to-moderate income
neighborhoods. Based on their most recent CRA compliance examinations, Union
Planters' subsidiary banks and savings bank have all received at least a
"satisfactory" CRA rating.
Impact of Recent Legislation
The activities permissible to bank holding companies and their
affiliates were substantially expanded by the Gramm-Leach-Bliley Act which the
President signed into law on November 12, 1999. Effective March 11, 2000, the
Gramm-Leach-Bliley Act removed Federal and state law barriers that prevented
banking organizations, such as Union Planters, from affiliating with insurance
organizations and securities firms. An eligible bank holding company may elect
to be treated as a financial holding company and, as such, it may engage in
financial activities (activities that are financial in nature, such as insurance
and securities underwriting and dealing activities) and activities the Federal
Reserve determines to be complementary to financial activities which do not pose
a substantial risk to the safety or soundness of depository institutions or the
financial system generally. To be eligible to elect the status of a financial
holding company, all of the depository institution subsidiaries of the bank
holding company must meet the requirements of their regulators to be considered
well managed and well capitalized and have a CRA rating of at least
"satisfactory." Bank holding companies that do not elect the status of a
financial holding company may continue to engage in and own companies conducting
nonbanking activities which had been approved by Federal Reserve order or
regulation prior to November 12, 1999.
The Federal Reserve and Treasury Secretary will determine what
activities qualify as financial in nature. A financial holding company will not
be required to obtain prior Federal Reserve approval in order to engage in the
financial activities identified in the Act, other than in connection with an
acquisition of a thrift institution. However, a financial holding company will
not be able to commence, or acquire, any new financial activities if one of its
depository institution subsidiaries receives a less than satisfactory CRA
rating. In addition, if any of its depository institution subsidiaries ceases
being well capitalized or well managed, and compliance is not achieved within
180 days, a financial holding company may be forced, in effect, to cease
conducting business as a financial holding company by divesting either its
nonbanking financial activities or its banks.
Subject to certain exceptions, national banks, such as Union Planters'
principal subsidiary, Union Planters Bank, will also be able to engage in
financial activities through separate subsidiaries. As a general rule, financial
subsidiaries of national banks will not be permitted to engage as principal in
underwriting insurance or issuing annuities, real estate development or
investment, merchant banking (for at least 5 years) or insurance company
portfolio activities in which financial holding companies may engage. Insured
state banks are permitted to control or hold an interest in a financial
subsidiary that engages in the same type of activities permissible for national
banks. Large banks (the top 50 to 100 in the U.S.) may be required to meet
certain eligible investment grade debt rating requirements in order to utilize
financial subsidiaries to engage in financial activities. Conducting financial
activities through a bank subsidiary can impact capital adequacy, and
restrictions will apply to affiliate transactions between the bank and its
financial subsidiary.
The banking, securities and insurance activities of financial
organizations will be functionally regulated by the banking regulators, the
Securities and Exchange Commission and state securities regulators and
organizations, and the state insurance regulators, respectively. Consistent with
this functional approach, and after eighteen months have elapsed after the
enactment of the Gramm-Leach-Bliley Act, banks will no longer be excluded from
the definition of a broker or a dealer under the Federal securities laws.
Limited exemptions will be retained for specific types of bank activities,
including an exemption to permit banks to continue to offer on-site third party
brokerage services under certain conditions. Banks advising registered
investment companies will be required to register as investment advisors, and
only collective investment funds (common trust funds) that are employed by banks
solely as an aid to the administration of trusts, estates, or other fiduciary
accounts will be able to avoid the registration requirements imposed on
investment companies.
The Gramm-Leach-Bliley Act also includes consumer privacy protections
and CRA "sunshine" rules, "modernizes" various other banking-related statutes,
permits mutual bank holding companies, and requires a number of studies and
reports to Congress over the next five years.
Union Planters meets the eligibility requirements imposed under the
Gramm-Leach-Bliley Act, and currently intends to elect the status of a financial
holding company. That status may alleviate certain restrictions applicable to
the insurance agency and securities brokerage activities of Union Planters'
subsidiaries. It will not, however, lessen the regulatory oversight to which
Union Planters and its
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subsidiaries are subject in the conduct of their business. In the future, as the
Gramm-Leach-Bliley Act becomes fully phased-in, it is likely that the activities
of Union Planters' banking subsidiaries, and in particular, UPB, will become
subject to increased regulation, to the extent they continue to engage in
investment advisory services.
Interstate Banking
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 (the Interstate Act), Union Planters and any other bank holding company
may acquire a bank located in any state, subject to certain deposit-percentage
limitations, aging requirements, and other restrictions. The Interstate Act also
generally permits a bank to conduct interstate branching through acquisitions of
banks in other states, except to the extent that a particular state adopted
legislation prior to June 1, 1997, to "opt-out" of interstate banking. Union
Planters has taken advantage of the interstate banking provisions of the
Interstate Act to merge substantially all of its banking subsidiaries with and
into Union Planters Bank. This charter consolidation began on January 1, 1998,
with the merger of 31 banking subsidiaries into UPB. Since then, Union Planters
has continued this strategy of consolidation, and management anticipates that
substantially all of Union Planters' banking subsidiaries, including any which
may be acquired in the future, would ultimately be merged with and into UPB to
the extent allowed by effective law.
The Interstate Act also permits a bank to establish de novo branches in
another state, to the extent de novo interstate branching is expressly permitted
by the laws of that state. The Tennessee banking statutes now permit an
out-of-state bank to acquire a branch office located in Tennessee which has been
in operation for at least five (5) years, provided the laws of the home state of
the out-of-state bank permit Tennessee banks to establish and maintain branches
in that state through the acquisition of a branch under substantially the same
terms and conditions.
Capital
The Federal Reserve Board has adopted risk-based capital guidelines for
bank holding companies. The minimum guideline for the ratio (Risk-Based Capital
Ratio) of total capital (Total Capital) to risk-weighted assets (including
certain off-balance-sheet commitments such as standby letters of credit) is 8%.
At least one-half of Total Capital must be composed of Tier 1 Capital which
generally consists of common shareholders' equity, minority interests in the
equity accounts of consolidated subsidiaries, noncumulative perpetual preferred
stock and a limited amount of cumulative perpetual preferred stock, less
goodwill and certain other intangible assets. The remainder, denominated "Tier 2
Capital," generally may consist of limited amounts of subordinated debt,
qualifying hybrid capital instruments, other preferred stock, loan loss
reserves, and unrealized gains on certain equity securities.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum ratio of Tier 1 Capital to average total assets less goodwill (the
Leverage Ratio) of 3% for bank holding companies that meet certain specified
criteria, including those having the highest regulatory rating. All other bank
holding companies generally are required to maintain a Leverage Ratio of at
least 4%. The guidelines also provide that bank holding companies anticipating
or experiencing internal growth or making acquisitions are expected to maintain
strong capital positions substantially above the minimum supervisory levels
without significant reliance upon intangible assets. Furthermore, the Federal
Reserve Board has indicated that it will consider a "tangible Tier 1 Capital
Leverage Ratio" (deducting all intangibles) and other indicia of capital
strength in evaluating proposals for expansion or new activities.
At December 31, 1999, Union Planters' Total Risk-Based Capital Ratio
was 12.69%; its Tier 1 Risk-Based Capital Ratio (i.e., its ratio of Tier 1
Capital to risk-weighted assets) was 9.50%; and its Leverage Ratio was 6.65%. In
addition, each of Union Planters' banking subsidiaries satisfied the minimum
capital requirements applicable to it and had the capital levels required to
qualify as a "well-capitalized" institution under the prompt corrective action
provisions discussed below. A bank's capital classifications may have an
influence on a bank's business activities. For example, under regulations
adopted by the FDIC governing the receipt of brokered deposits, a bank may not
lawfully accept, roll over, or renew brokered deposits unless either (i) it is
well capitalized or (ii) it is adequately capitalized and receives a waiver from
the FDIC.
All of Union Planters' banking subsidiaries are subject to Risk-Based
and Leverage Capital Ratio requirements adopted by their respective federal
regulators which are substantially similar to those adopted by the Federal
Reserve Board. As of December 31, 1999, the Total and Tier 1 Risk-Based Capital
and Leverage Ratios of UPB, Union Planters' largest bank subsidiary, were
11.10%, 8.49%, and 5.95%, respectively. Neither Union Planters nor any of its
banking subsidiaries has been advised by any federal banking agency of any
specific minimum capital ratio requirement applicable to it.
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Prompt Corrective Action
The Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA) and the joint regulations thereunder adopted by the federal banking
agencies require the banking regulators to take prompt corrective action in
respect of depository institutions that do not meet their minimum capital
requirements. FDICIA establishes five capital tiers: "well capitalized,"
"adequately capitalized," "undercapitalized," "significantly undercapitalized,"
and "critically undercapitalized." Under the capital regulations:
An institution is deemed to be well capitalized if it:
- has a Total Capital Ratio of 10% or greater;
- has a Tier 1 Capital Ratio of 6.0% or greater;
- has a Leverage Ratio of 5.0% or greater; and
- is not subject to any written agreement, order,
capital directive, or prompt corrective action
directive issued by its federal banking agency.
An institution is considered to be adequately capitalized if it has:
- a Total Capital Ratio of 8.0% or greater;
- a Tier 1 Capital Ratio of 4.0% or greater; and
- a Leverage Ratio of 4.0% or greater (or, if the
institution received a composite 1 rating under the
regulator's CAMEL rating system, a Leverage Ratio of
3.0% or greater).
A depository institution is considered to be undercapitalized if it
has:
- a Total Capital Ratio of less than 8.0%; or
- a Tier 1 Capital Ratio of less than 4.0%; or
- a Leverage Ratio of less than 4.0% (or, if the
institution received a composite 1 rating under the
regulator's CAMEL rating system, a Leverage Ratio of
3.0% or less).
A depository institution is considered to be significantly
undercapitalized if it has:
- a Total Capital Ratio of less than 6.0%; or
- a Tier 1 Capital Ratio of less than 3.0%; or
- a Leverage Ratio of less than 3.0%.
An institution that has a tangible equity capital to assets ratio equal
to or less than 2.0% is deemed to be critically undercapitalized. "Tangible
equity" includes core capital elements counted as Tier 1 Capital for purposes of
the risk-based capital standards, plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus all intangible
assets, with certain exceptions.
The appropriate Federal banking agency may, under certain
circumstances, reclassify a well capitalized insured depository institution as
adequately capitalized. The appropriate agency is also permitted to require an
adequately capitalized or undercapitalized institution to comply with the
supervisory provisions as if the institution were in the next lower category
(but not treat a significantly undercapitalized institution as critically
undercapitalized) based on supervisory information other than the capital levels
of the institution. The statute provides that an institution may be reclassified
if the appropriate Federal banking agency determines (after notice and
opportunity for hearing) that the institution is in an unsafe or unsound
condition or deems the institution to be engaging in an unsafe or unsound
practice.
Dividend Restrictions
Union Planters is a legal entity separate and distinct from its
banking, thrift and other subsidiaries. Union Planters' principal sources of
cash flow (including cash flow to pay dividends to shareholders, on a parent
company only basis), are dividends paid to Union Planters by its subsidiaries.
The right of Union Planters, and consequently the rights of creditors and
shareholders of Union Planters, to participate in any distribution of the assets
or earnings of any subsidiary through the payment of such dividends, or
otherwise, is necessarily subject to the prior claims of creditors of the
subsidiary (including depositors, in the case of banking subsidiaries) except to
the extent that claims of Union Planters in its capacity as a creditor may be
recognized.
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There are statutory and regulatory limitations on the payment of
dividends to Union Planters by its banking subsidiaries. UPB, a national banking
association, is required by federal law to obtain the prior approval of the
Comptroller for the declaration of dividends if the total of all dividends to be
declared by the board of directors of such bank in any year would exceed the
total of (i) such bank's net profits (as defined and interpreted by regulation)
for that year, plus (ii) the retained net profits (as defined and interpreted by
regulation) for the preceding two years, less any required transfers to surplus.
Union Planters' state-chartered banking subsidiary is subject to similar
restrictions on the payment of dividends by the state laws under which it is
organized. The payment of dividends by savings and loan subsidiaries is subject
to regulation of the Office of Thrift Supervision. Furthermore, all depository
institutions are prohibited from paying any dividends, making other
distributions, or paying any management fees if, after such payment, the
depository institution would fail to satisfy its minimum capital requirements.
At January 1, 2000, under dividend restrictions imposed under federal and state
laws, Union Planters' banking subsidiaries could declare aggregate dividends of
approximately $106.6 million without obtaining prior regulatory approval. Future
dividends will depend primarily upon the level of earnings of the banking
subsidiaries of Union Planters. Federal banking regulators also have the
authority to prohibit banks and bank holding companies from paying a dividend if
they should deem such payment to be an unsafe or unsound practice.
Support of Banking Subsidiaries
Under Federal Reserve Board policy, Union Planters is expected to act
as a source of financial strength to its banking subsidiaries and, where
required, to commit resources to support each of such subsidiaries. Moreover, if
one of its banking subsidiaries should become undercapitalized, under FDICIA,
Union Planters would be required to guarantee the subsidiary bank's compliance
with its capital plan in order for such plan to be accepted by the federal
regulatory authority.
Under the "cross guarantee" provisions of the Federal Deposit Insurance
Act (the FDI Act), any FDIC-insured subsidiary of Union Planters may be held
liable for any loss incurred by, or reasonably expected to be incurred by, the
FDIC in connection with (i) the "default" of any other commonly controlled
FDIC-insured subsidiary or (ii) any assistance provided by the FDIC to any
commonly controlled FDIC-insured subsidiary "in danger of default." "Default" is
defined generally as the appointment of a conservator or receiver, and "in
danger of default" is defined generally as the existence of certain conditions
indicating that a default is likely to occur in the absence of regulatory
assistance. Such liability could have a material adverse effect on the financial
condition of any assessed bank and Union Planters. While the FDIC's claim is
junior to the claims of depositors, holders of secured liabilities, general
creditors and subordinated creditors, it is superior to the claims of
shareholders and affiliates.
Transactions With Affiliates
There are various legal restrictions on the extent to which a bank
holding company or its nonbank subsidiaries may borrow or otherwise obtain
credit from or sell assets or affiliate securities to its bank subsidiaries. In
general, covered transactions with a bank subsidiary must be on nonpreferential
terms and cannot exceed, as to any one of the holding company or the holding
company's nonbank subsidiaries, 10% of the bank's capital stock and surplus, and
as to the holding company and all of its nonbank subsidiaries in the aggregate,
20% of such capital stock and surplus. Special collateral requirements also
apply to covered extensions of credit.
FDIC Deposit Insurance
Currently, the FDIC maintains two funds for the insurance of deposits
of financial institutions - the Bank Insurance Fund (the BIF) for deposits
originated by banks and the Savings Association Insurance Fund (the SAIF) for
deposits originated by savings associations, including savings association
deposits acquired by banks. For this deposit insurance coverage, each insured
institution pays assessments to the FDIC, under a risk-based assessment system
which takes into account the institution's capital and supervisory
considerations. The FDIC sets assessments for deposits insured by the BIF or the
SAIF to maintain the targeted designated reserve ratio in that fund, i.e., $1.25
for each $100 of insured deposits.
The Deposit Insurance Funds Act of 1996 provided for the
recapitalization of the SAIF through a one-time special assessment in 1996 on
SAIF-insured deposits, and the sharing by banks and savings associations of
obligations under the Financing Corporation bonds which were issued to initially
fund the SAIF. That act contemplates the ultimate merger of the BIF and the
SAIF, on the date as of which the last savings association shall cease to exist.
9
<PAGE> 10
Safety and Soundness Standards
The FDI Act, as amended by the FDICIA and the Riegle Community
Development and Regulatory Improvement Act of 1994, requires the federal bank
regulatory agencies to prescribe standards, by regulations or guidelines,
relating to the internal controls, information systems and internal audit
systems, loan documentation, credit underwriting, interest-rate-risk exposure,
asset growth, asset quality, earnings, stock valuation and compensation, fees
and benefits and such other operational and managerial standards as the agencies
may deem appropriate. The federal bank regulatory agencies adopted, effective
August 9, 1995, a set of guidelines prescribing safety and soundness standards
pursuant to FDICIA, as amended. In general, the guidelines require, among other
things, appropriate systems and practices to identify and manage the risks and
exposures specified in the guidelines.
Depositor Preference
Legislation enacted in 1993 establishes a nationwide
depositor-preference rule in the event of a bank failure. Under this arrangement
all deposits and certain other claims against a bank, including the claim of the
FDIC as subrogee of insured depositors, would receive payment in full before any
general creditor of the bank, including the holders of its subordinated debt
securities, would be entitled to any payment in the event of an insolvency or
liquidation of the bank.
Proposed Legislation
Because of concerns relating to the competitiveness and the safety and
soundness of the industry, the United States Congress continues to consider a
number of proposals for altering the structure, regulation, and competitive
relationships of the nation's financial institutions. Among such bills are
proposals to combine banks and thrifts into a unified charter, and to further
expand or change the regulation of the powers of depository institutions, bank
holding companies, and competitors of depository institutions. In addition,
numerous regulations are required to be promulgated to implement the significant
legislative changes made in the recently enacted Gramm-Leach-Bliley Act
discussed above. It cannot be predicted whether, or in what form, any of these
proposals or regulatory initiatives will be adopted, the impact they will have
on the financial institutions industry or the extent to which the business or
financial condition of Union Planters may be affected thereby.
PERSONNEL
As of February 29, 2000, Union Planters, including all subsidiaries,
had 13,950 employees (including 2,248 part-time employees).
10
<PAGE> 11
STATISTICAL DISCLOSURES
The statistical information required by Item 1 may be found in the 1999
Shareholders Report (Exhibit 13 hereto) which, to the extent indicated, is
hereby incorporated herein by reference, as follows:
<TABLE>
<CAPTION>
Page in Union Planters'
Guide 3 Disclosures 1999 Shareholders Report*
- ------------------------------------------------------------------------ -------------------------
<S> <C> <C>
I. Distribution of Assets, Liabilities and Shareholders' Equity:
Interest Rates and Interest Differential
A. Average Balance Sheet 33
B. Net Interest Earnings Analysis 33
C. Rate/Volume Analysis 34
II. Investment Portfolio
A. Book Value of Investment Securities 39, 50, and 51
B. Maturities of Investment Securities 51
C. Investment Securities Concentrations Not applicable
III. Loan Portfolio
A. Types of Loans 35 and 52
B. Maturities and Sensitivity of
Loans to Changes in Interest Rates Follows this table
C. Risk Elements
1. Nonaccrual, Past Due 90 Days or More,
and Restructured Loans 36 and 37
2. Potential Problem Loans 26
3. Foreign Outstandings Not Significant
4. Loan Concentrations 23
D. Other Interest-Bearing Assets Not Significant
IV. Summary of Loan Loss Experience
A. Analysis of Allowance for Loan Losses 37
B. Allocation of the Allowance for Loan Losses 36
V. Deposits
A. Average Balances 33 and 35
B. Maturities of Large Denomination Certificates of
Deposit Follows this table
C. Foreign Deposit Liability Disclosure Not significant
VI. Return on Equity and Assets
A. Return on Average Assets 10
B. Return on Average Equity 10
C. Dividend Payout Ratio 10
D. Equity to Assets Ratio 10
VII. Short-Term Borrowings 54
</TABLE>
*Unless otherwise noted
11
<PAGE> 12
The following table presents the maturities and sensitivities of Union
Planters' loans to changes in interest rates at December 31, 1999:
<TABLE>
<CAPTION>
DUE AFTER ONE
DUE WITHIN BUT WITHIN DUE AFTER
ONE YEAR FIVE YEARS FIVE YEARS
----------------- ----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Commercial, Financial, and Agricultural(1).................... $ 3,132,708 $ 2,028,899 $ 272,087
Real Estate - Construction.................................... 960,175 420,825 200,164
Foreign....................................................... 367,846 6,685 283
----------- ----------- -----------
Total............................................... $ 4,460,729 $ 2,456,409 $ 472,534
=========== =========== ===========
Fixed Rate.................................................... $ 1,874,275 $ 265,754
=========== ===========
Variable Rate................................................. $ 582,134 $ 206,780
=========== ===========
</TABLE>
- --------------------
(1) Includes accounts receivable-factoring and direct lease financing.
The following table presents maturities of certificates of deposit of
$100,000 and over and other time deposits of $100,000 and over:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Under 3 Months................ $ 755,193
3 to 6 Months................. 474,669
6 to 12 Months................ 644,698
Over 12 Months................ 358,248
-------------
Total............... $ 2,232,808
=============
</TABLE>
12
<PAGE> 13
ITEM 1A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following lists the executive officers of Union Planters. Executive
officers of Union Planters are elected annually. Information regarding the
executive officers, their present positions held with Union Planters and its
subsidiaries, and their ages as of March 6, 2000, and their principal
occupations for the last five years are as follows:
<TABLE>
<CAPTION>
Position of Executive Officers
Name with Union Planters and UPB Age
- ------------------------- ------------------------------------- -----
<S> <C> <C>
Benjamin W. Rawlins, Jr. Chairman and Chief Executive Officer 62
Jackson W. Moore President and Chief Operating Officer 51
Bobby L. Doxey Senior Executive Vice President and 52
Chief Financial Officer
Alan W. Kennebeck Senior Executive Vice President 54
Retail Services
Lloyd B. DeVaux Executive Vice President and 47
Chief Information Officer
Michael B. Russell Executive Vice President and 45
Senior Lending Officer
Jack W. Parker Executive Vice President 53
M. Kirk Walters Senior Vice President, Treasurer, and 59
Chief Accounting Officer
</TABLE>
On January 1, 1998, Mr. Rawlins was reelected to the position of
Chairman of UPB. Mr. Rawlins was President of Union Planters from September 1984
until he was elected Chairman. Mr. Rawlins has been Chairman of Union Planters
since April 1989, and Chairman of UPB from January 1986 until December 1996 when
he was elected Vice Chairman. He has also served as Chief Executive Officer of
Union Planters and UPB since September 1984. Mr. Rawlins serves as an executive
officer of Union Planters pursuant to an employment agreement with Union
Planters, which is renewable annually each December 31.
Mr. Moore has been President of Union Planters since April 1989 and was
elected President of UPB January 1, 1998. In April 1994, Mr. Moore was elected
Chief Operating Officer of Union Planters and was elected to the same position
with UPB January 1, 1998. He is also Chairman of PSB Bancshares, Inc., and is a
Vice President and Director of its subsidiary, The Peoples Savings Bank (not an
affiliate bank of Union Planters), located in Clanton, Alabama. He has served on
the Boards of Union Planters and UPB since 1986. Mr. Moore serves as an
executive officer of Union Planters pursuant to an employment agreement with
Union Planters, which is renewable annually each December 31.
Mr. Doxey joined Union Planters as Senior Executive Vice President and
Chief Financial Officer on March 1, 2000. Prior to joining Union Planters, Mr.
Doxey was a Senior Vice President and Financial Systems Project Manager and
Manager of Organizational Profitability Measurement with Banc One Corporation.
He was Senior Vice President and Controller for Banc One Corporation from 1996
to 1998 and was Chief Financial Officer for Banc One Texas Corporation from 1994
to 1996.
Mr. Kennebeck joined Union Planters as Senior Executive Vice President
for Retail Services on February 11, 2000. From 1995 until joining Union
Planters, Mr. Kennebeck was President and Chief Executive Officer of AMCORE
Investment Group and Chairman of AMCORE Insurance Group, Inc., AMCORE Investment
Services, Inc., and Investment Management Group. He was also Executive Vice
President of AMCORE Financial, Inc.
13
<PAGE> 14
Mr. DeVaux joined Union Planters Corporation as Executive Vice
President and Chief Information Officer, and manager of Technology and
Operations in January 1995. From 1988 until 1995, prior to joining Union
Planters, Mr. DeVaux was Executive Director of Operations for Kirchman
Corporation and a Finance Industry Large Systems Specialist with IBM
Corporation.
Mr. Russell became Senior Lending Officer on January 1, 1999.
Previously, he had been the Corporate Risk Analysis Manager with responsibility
for credit review, compliance, data security, and business resumption. Mr.
Russell has been an officer of UPB for more than sixteen years.
Mr. Parker was Executive Vice President and Chief Financial Officer of
Union Planters and UPB from March 1990 until March 1, 2000 when he became
Executive Vice President. Mr. Parker has been an officer of Union Planters and
UPB for more than twenty years.
Mr. Walters was elected Senior Vice President of Union Planters in
November 1990 and has been Chief Accounting Officer since February 1990. He has
been Treasurer of Union Planters since 1985. He was a Vice President of Union
Planters from 1975 until he was elected to his current position. Mr. Walters has
been an officer of UPB for more than twenty-five years and is currently a Senior
Vice President.
ITEM 2. PROPERTIES
Union Planters' corporate headquarters are located in the company-owned
Union Planters Administrative Center at 7130 Goodlett Farms Parkway, Memphis,
Tennessee, a three-building complex located near the center of Shelby County. In
addition to being the corporate headquarters, it contains approximately 376,000
square feet of space and houses Mortgage Servicing and Origination, Funds
Management, Data Processing, Operations, Human Resources, Financial, Legal,
Credit Review, and Marketing.
As of March 5, 2000, Union Planters operated 22 banking offices in
Alabama, 42 in Arkansas, 82 in Florida, 99 in Illinois, 78 in Indiana, 28 in
Iowa, 40 in Kentucky, 23 in Louisiana, 137 in Mississippi, 94 in Missouri, 208
in Tennessee, and 15 in Texas. The majority of these locations are owned. Union
Planters' subsidiaries also operate 1,018 twenty-four-hour automated teller
locations. A wholly owned subsidiary, Capital Factors, Inc., has operations in
leased facilities in Boca Raton and Ft. Lauderdale, Florida; Los Angeles,
California; New York, New York; Charlotte, North Carolina; Dallas, Texas; and
Atlanta, Georgia. The mortgage operations of UPB operates 30 mortgage production
offices in Arizona, California, Colorado, Florida, Georgia, Iowa, Louisiana,
Mississippi, Nevada, North Carolina, Ohio, Tennessee, and Texas in addition to
mortgage production offices located in certain of Union Planters' branch banking
locations.
There are no material encumbrances on any of the company-owned
properties.
ITEM 3. LEGAL PROCEEDINGS
Union Planters and/or various subsidiaries are parties to various
pending civil actions, all of which are being defended vigorously. Additionally,
Union Planters and/or its subsidiaries are parties to various legal proceedings
that have arisen in the ordinary course of business. Management is of the
opinion, based upon present information including evaluations of outside
counsel, that neither Union Planters' financial position, results of operations,
nor liquidity will be materially affected by the ultimate resolution of pending
or threatened legal proceedings.
UPB (as successor to Union Planters' five banks (UPC Banks) located in
Mississippi: Union Planters Bank of Mississippi, Union Planters Bank of Southern
Mississippi, Union Planters Bank of Central Mississippi, Union Planters Bank of
Northeast Mississippi, N.A., and Union Planters Bank of Northwest Mississippi
(which were merged into UPB January 1, 1998)) is a defendant in various suits
related to the placement of collateral protection insurance (CPI) by the UPC
Banks in the 1980s and early 1990s. On September 28, 1995 and October 18,1995,
two purported class actions were filed in the U.S. District Court for the
Southern District of Mississippi. Both actions were consolidated and identified
Vivian McCaskill as the representative of a class of persons who financed
personal property through the UPC Banks and were force placed with Prudential
Property and Casualty Insurance Company's (Prudential) collateral protection
insurance. The consolidated action (Consolidated Action) names as defendants the
UPC Banks, Prudential, National Underwriters of Delaware, Inc., and several Ross
& Yerger entities and includes allegations that premiums were excessive and
improperly calculated; coverages were improper and not disclosed; and improper
payments were paid to the UPC Banks by the insurance companies, allegedly
constituting violations of various state and federal laws and common law. The
relief sought in the purported class actions includes actual damages, treble
damages under certain statutes, other statutory damages, and unspecified
punitive damages. The CPI programs appear to have been substantially similar in
many respects to CPI programs of other Mississippi banks, often with the same
insurance companies. Consequently, there have been suits against various
Mississippi banks (including
14
<PAGE> 15
those against the UPC Banks), various insurance agencies, and companies based
upon their CPI programs. During the fourth quarter of 1997, an agreement in
principle was reached by UPB with attorneys for the putative class to settle the
Consolidated Action within amounts previously established. Final agreement is
subject to execution of a definitive agreement, court approval, and UPB's
acceptance of the number of opt-outs from the class settlement. Five individual
actions filed in state and federal courts against the UPC Banks, with similar
allegations, and seeking compensatory and punitive damages, remain pending.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The information required by Item 5 is included in Table 14 captioned
"Selected Quarterly Data" included in the 1999 Shareholders Report on pages 40
and 41 which information is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by Item 6 is included under the heading
"Selected Financial Data" in the 1999 Shareholders Report on page 10, which
information is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by Item 7 is included under the heading
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" in the 1999 Shareholders Report on pages 11 - 41, which information
is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by Item 7A is included under the heading
"Market Risk and Asset/Liability Management" and Table 11 in the 1999
Shareholders Report on pages 28 and 38, respectively, which information is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 is included in the 1999 Shareholders
Report on pages 42 - 71 and in Table 14 captioned "Selected Quarterly Data" on
pages 40 and 41, which pages are incorporated herein by reference.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning "Executive Officers of the Registrant" is
included in Part I (Item 1a) of this Form 10-K in accordance with Instruction 3
to paragraph (b) of Item 401 of Regulation S-K, and incorporated by reference
herein.
The remaining information required by Item 10 is included under the
heading "Election of Directors" on pages 2 - 6 and under the heading "Union
Planters Stock Ownership by Directors and Executive Officers" on page 6 of the
Definitive Proxy Statement of Union Planters to be used in soliciting proxies
for the Annual Meeting of shareholders to be held on April 20, 2000 (Proxy
Statement), which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 as to compensation of directors and
executive officers is included under the heading "Director Compensation" on page
6 and under the heading "Executive Compensation" on pages 7 - 14 of the Proxy
Statement, which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
15
<PAGE> 16
The information required by Item 12 as to certain beneficial owners and
management is included under the heading "Union Planters Stock Ownership by
Directors and Executive Officers" on pages 6 - 7 of the Proxy Statement, which
information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 as to transactions and
relationships with certain directors and executive officers of Union Planters
and their associates is included under the heading "Certain Relationships and
Transactions" on page 15 of the Proxy Statement, which information is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following audited consolidated financial statements of Union
Planters and its Subsidiaries, included in the 1999 Shareholders
Report beginning on page 42, are incorporated herein by reference in
response to Part II, Item 8:
<TABLE>
<CAPTION>
Page in
Annual Report
-------------
<S> <C>
Consolidated Balance Sheet - December 31, 1999 and 1998 42
Consolidated Statement of Earnings -
Years ended December 31, 1999, 1998, and 1997 43
Consolidated Statement of Changes in Shareholders' Equity -
Years ended December 31, 1999, 1998, and 1997 44
Consolidated Statement of Cash Flows -
Years ended December 31, 1999, 1998, and 1997 45
Notes to Consolidated Financial Statements 46
Report of Management 71
Report of Independent Accountants 71
The exhibits listed in the Exhibit Index beginning on page i,
following page 18 of this Form 10-K are filed herewith or are
incorporated herein by reference. Each management contract or
compensatory plan or arrangement required to be filed as an exhibit
pursuant to Item 14(c) of this report is identified on the Exhibit
Index by an *.
</TABLE>
(a)(2) Not applicable
(a)(3) Exhibits:
16
<PAGE> 17
(b) Reports on Form 8-K:
<TABLE>
<CAPTION>
Date of Current Report Subject Reported Under Item 5
----------------------- -------------------------------------------
<S> <C>
October 21, 1999 Press Release announcing Third Quarter
1999 net earnings, reported under Item 5
January 20, 2000 Press Release announcing Fourth Quarter and
1999 Year-End operating results, reported
under Item 5
</TABLE>
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
UNION PLANTERS CORPORATION
(Registrant)
By: /s/ Benjamin W. Rawlins, Jr.
--------------------------------------------------------------
Benjamin W. Rawlins, Jr., Chairman and Chief Executive Officer
Date: March 6, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on the 6th day of March, 2000.
<TABLE>
<S> <C>
/s/ Benjamin W. Rawlins, Jr. /s/ Bobby L. Doxey
- ---------------------------------------------- ---------------------------------------
Benjamin W. Rawlins, Jr. Bobby L. Doxey
Chairman, Chief Executive Officer, and Senior Executive Vice President and
Director Chief Financial Officer
/s/ Jackson W. Moore /s/ M. Kirk Walters
- ---------------------------------------------- ---------------------------------------
Jackson W. Moore M. Kirk Walters
President, Chief Operating Officer, and Senior Vice President, Treasurer, and
Director Chief Accounting Officer
/s/ Albert M. Austin /s/ C. J. Lowrance
- ---------------------------------------------- ---------------------------------------
Albert M. Austin C. J. Lowrance
Director Director
/s/ George W. Bryan /s/ Dr. V. Lane Rawlins
- ---------------------------------------------- ---------------------------------------
George W. Bryan Dr. V. Lane Rawlins
Director Director
/s/ James E. Harwood /s/ Donald F. Schuppe
- ---------------------------------------------- ---------------------------------------
James E. Harwood Donald F. Schuppe
Director Director
/s/ C. E. Heiligenstein
- ---------------------------------------------- ---------------------------------------
C. E. Heiligenstein David M. Thomas
Director Director
/s/ Carl G. Hogan
- ---------------------------------------------- ---------------------------------------
Carl G. Hogan Richard A. Trippeer, Jr.
Director Director
/s/ S. Lee Kling /s/ Spence L. Wilson
- ---------------------------------------------- ---------------------------------------
S. Lee Kling Spence L. Wilson
Director Director
/s/ Parnell S. Lewis, Jr.
- ----------------------------------------------
Parnell S. Lewis, Jr.
Director
</TABLE>
18
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<S> <C>
2(a) Agreement and Plan of Reorganization by and between Magna Bancorp,
Inc. and Union Planters Corporation dated as of May 8, 1997
(incorporated by reference to Exhibit 2(a) to Union Planters
Corporation's Quarterly Report on Form 10-Q dated March 31, 1997,
Commission File No. 1-10160)
2(b) Agreement and Plan of Merger, dated as of August 12, 1997, by and
between Union Planters Corporation and Capital Bancorp (incorporated
by reference to Exhibit 2.1 to Union Planters Corporation's Current
Report on Form 8-K dated August 12, 1997, Commission File No.
1-10160)
2(c) Agreement and Plan of Merger, dated as of March 8, 1996, by and
between Union Planters Corporation and Leader Financial Corporation
(incorporated by reference to Exhibit 2.1 to Union Planters
Corporation's Current Report on Form 8-K dated March 8, 1996, filed
on March 13, 1996, Commission File No. 1-10160)
2(d) Agreement and Plan of Merger, dated as of November 17, 1997, by and
between Union Planters Corporation, Union Planters Holding
Corporation, and Peoples First Corporation and joined in by Union
Planters Corporation (incorporated by reference to Exhibit 2.1 to
Union Planters Corporation's Current Report on Form 8-K dated
November 17, 1997, Commission File No. 1-10160)
2(e) Agreement and Plan of Reorganization by and between Magna Bancorp,
Inc. and Union Planters Corporation dated as of May 8, 1997
(incorporated by reference to Exhibit A to Prospectus filed as part
of Union Planters's Registration Statement No. 333-30239).
2(f) Agreement and Plan of Reorganization by and between AMBANC Corp. and
Union Planters Corporation dated as of March 31, 1998 (incorporated
by reference to Exhibit 1 to the Schedule 13D dated March 31, 1998,
filed by UPC (File No. 1-10160) with respect to the common stock of
AMBANC Corp. (File No. 0-10710).
3(a) Restated Charter of Incorporation, as most recently amended on
January 19, 1999, of Union Planters Corporation (incorporated by
reference to Exhibit 3 to the Form 8-A12B filed by Union Planters
Corporation on January 22, 1999, Commission File No. 1-10160).
3(b) Amended and Restated Bylaws, as most recently amended on October 21,
1999, of Union Planters Corporation (incorporated by reference to
Exhibit 3(b) to Union Planters Corporation's Quarterly Report on Form
10-Q dated September 30, 1999, Commission File No. 1-10160).
4(a) Rights Agreement, dated January 19, 1999 between Union Planters
Corporation and Union Planters Bank, National Association, including
Form of Rights Certificate (incorporated by reference to Exhibit 2 to
the Form 8-A filed by Union Planters Corporation on January 22, 1999,
Commission File No. 1-10160).
4(b) Copy of Registrant's AGREEMENT PURSUANT TO ITEM 601(b)(4)(iii)(A) OF
REGULATION S-K dated March 15, 2000 with respect to certain debt
instruments (filed herewith)
10(a)* Amended and Restated Employment Agreement between Union Planters
Corporation and Benjamin W. Rawlins, Jr., (incorporated by reference
to Exhibit 10(a) to Union Planters Corporation's Quarterly Report on
Form 10-Q dated March 31, 1997, Commission File No. 1-10160)
10(b)* Amended and Restated Employment Agreement between Union Planters
Corporation and Jackson W. Moore (incorporated by reference to
Exhibit 10(b) to Union Planters Corporation's Quarterly Report on
Form 10-Q dated March 31, 1997, Commission File No. 1-10160)
</TABLE>
i
<PAGE> 20
<TABLE>
<S> <C>
10(c)* Union Planters Corporation 1983 Stock Incentive Plan as amended
January 18, 1990 and approved by shareholders on April 20, 1990
(incorporated by reference to Exhibit 4(a) filed as part of
Registration Statement No. 33-35928, filed July 23, 1990)
10(d)* Union Planters Corporation 1992 Stock Incentive Plan as Amended and
Restated October 17, 1996 and approved by shareholders April 17,
1997, and approved by shareholders April 15, 1999, and July 15, 1999
(incorporated by reference to Exhibit 10(n) to Union Planters
Corporation's Quarterly Report on Form 10-Q dated June 30, 1999
Commission File No. 1-10160)
10(e)* Deferred Compensation Agreements between Union Planters Corporation
and Union Planters National Bank and certain outside directors
(incorporated by reference to Exhibit 10(m) to the Annual Report on
Form 10-K dated December 31, 1989 filed on March 26, 1990, Commission
File No. 0-6919)
10(f)* Executive Deferred Compensation Agreement between Union Planters
Corporation and certain highly compensated officers (incorporated by
reference to Exhibit 10(n) to the Annual Report on Form 10-K dated
December 31, 1989 filed on March 26, 1990, Commission File No.
0-6919)
10(g)* Amendment to Union Planters Corporation Supplemental Executive
Retirement Plan for Executive Officers (incorporated by reference to
Exhibit 10(d) to the Quarterly Report on Form 10-Q dated March 31,
1997, Commission File No. 1-10160)
10(h)* Union Planters Corporation Executive Deferred Compensation Plan for
Executives as Amended (incorporated by reference to Exhibit 10 to the
Quarterly Report on Form 10-Q dated September 30, 1997 Commission
File No. 1-10160)
10(i)* Amendment No. 1 to Union Planters Corporation's Deferred Compensation
Plan for Executives (incorporated by reference to Exhibit 10(e) to
the Quarterly Report on Form 10-Q dated March 31, 1997, Commission
file No. 1-10160).
10(j)* Union Planters Corporation Supplemental Executive Retirement Plan for
Executive Officers (incorporated by reference to Exhibit 10 to the
Quarterly Report on Form 10-Q dated March 31, 1995, Commission File
No. 1-10160)
10(k)* Amended and Restated Trust Under Union Planters Corporation
Supplemental Executive Retirement for Certain Executive Officers
(incorporated by reference to Exhibit 10(a) to Union Planters
Corporation's Quarterly Report on Form 10-Q dated September 30, 1999,
Commission File No. 1-10160).
10(l)* Union Planters Corporation Supplemental Executive Retirement
Agreement with Benjamin W. Rawlins, Jr. (incorporated by reference to
Exhibit 10(b) to Union Planters Corporation's Quarterly Report on
Form 10-Q dated September 30, 1999, Commission File No. 1-10160).
10(m)* Amendment to Union Planters Corporation Supplemental Executive
Retirement Agreement with Benjamin W. Rawlins, Jr. (incorporated by
reference to Exhibit 10(c) to Union Planters Corporation's Quarterly
Report on Form 10-Q dated September 30, 1999, Commission File No.
1-10160).
10(n)* Amendment No. 2 to Union Planters Corporation Supplemental Executive
Retirement Agreement with Benjamin W. Rawlins, Jr. (incorporated by
reference to Exhibit 10(d) to Union Planters Corporation's Quarterly
Report on Form 10-Q dated September 30, 1999, Commission File No.
1-10160).
10(o)* Union Planters Corporation Supplemental Executive Retirement
Agreement with Jackson W. Moore (incorporated by reference to Exhibit
10(e) to Union Planters Corporation's Quarterly Report on Form 10-Q
dated September 30, 1999, Commission File No. 1-10160).
10(p)* Amendment to Union Planters Corporation Supplemental Executive
Retirement Agreement with Jackson W. Moore (incorporated by reference
to Exhibit 10(f) to Union Planters Corporation's Quarterly Report on
Form 10-Q dated September 30, 1999, Commission File No. 1-10160).
</TABLE>
ii
<PAGE> 21
<TABLE>
<S> <C>
10(q)* Amendment No. 2 to Union Planters Corporation Supplemental Executive
Retirement Agreement with Jackson W. Moore (incorporated by reference
to Exhibit 10(g) to Union Planters Corporation's Quarterly Report on
Form 10-Q dated September 30, 1999, Commission File No. 1-10160).
10(r)* Union Planters Corporation Supplemental Executive Retirement
Agreement with M. Kirk Walters (incorporated by reference to Exhibit
10(h) to Union Planters Corporation's Quarterly Report on Form 10-Q
dated September 30, 1999, Commission File No. 1-10160).
10(s)* Amendment to Union Planters Corporation Supplemental Executive
Retirement Agreement with M. Kirk Walters (incorporated by reference
to Exhibit 10(i) to Union Planters Corporation's Quarterly Report on
Form 10-Q dated September 30, 1999, Commission File No. 1-10160).
10(t)* Amendment No. 2 to Union Planters Corporation Supplemental Executive
Retirement Agreement with M. Kirk Walters (incorporated by reference
to Exhibit 10(j) to Union Planters Corporation's Quarterly Report on
Form 10-Q dated September 30, 1999, Commission File No. 1-10160).
10(u)* Union Planters Corporation Supplemental Executive Retirement
Agreement with John W. Parker (incorporated by reference to Exhibit
10(k) to Union Planters Corporation's Quarterly Report on Form 10-Q
dated September 30, 1999, Commission File No. 1-10160).
10(v)* Amendment to Supplemental Executive Retirement Agreement with John W.
Parker (incorporated by reference to Exhibit 10(l) to Union Planters
Corporation's Quarterly Report on Form 10-Q dated September 30, 1999,
Commission File No. 1-10160).
10(w)* Trust Under Union Planters Corporation Deferred Compensation Plan for
Executives (incorporated by reference to Exhibit 10(m) to Union
Planters Corporation's Quarterly Report on Form 10-Q dated September
30, 1999, Commission File No. 1-10160).
10(x)* Amendment to Trust Under Union Planters Corporation Deferred
Compensation Plan for Executives (incorporated by reference to
Exhibit 10(n) to Union Planters Corporation's Quarterly Report on
Form 10-Q dated September 30, 1999, Commission File No. 1-10160).
10(y)* Employment Agreement between Union Planters Corporation and Bobby L.
Doxey (filed herewith)
10(z)* Employment Agreement between Union Planters Corporation and Alan W.
Kennebeck (filed herewith)
10(aa)* Employment Agreement between Union Planters Corporation and Lloyd B.
DeVaux (filed herewith)
10(bb)* Amended Executive Financial Service Plan 2000 (filed herewith)
11 Computation of Per Share Earnings (incorporated by reference to Note
16 on page 66 to the Registrant's 1999 consolidated financial
statements included as Exhibit 13 herein)
13 1999 Annual Report to Shareholders (filed herewith)
21 Subsidiaries of the Registrant (filed herewith)
23 Consent of PricewaterhouseCoopers LLP (filed herewith)
27 Financial Data Schedule (for SEC use only) (filed herewith)
</TABLE>
- --------------------
*Denotes a management contract or compensatory plan or arrangement required to
be filed as an exhibit pursuant to Item 14(c) of Form 10-K
iii
<PAGE> 1
EXHIBIT 4(B)
AGREEMENT PURSUANT TO ITEM 601(B)(4)(III)
OF REGULATION S-K
The Registrant hereby undertakes and agrees to furnish to the
Securities and Exchange Commission upon request a copy of any instrument
relating to, or defining the rights of the holders of, any long-term debt of the
Registrant and/or its subsidiaries, a copy of which has not been filed in
reliance upon Item 601(b)(4)(iii)(A) of Regulation S-K or which, although
previously filed, shall have become stale in the sense of Item 10(d) of
Regulation S-K or which shall have been disposed of by the Commission pursuant
to its Record Control Schedule. This Agreement and undertaking is intended to be
effective with respect to Registrant's Long-term Debt instruments whether
securities have been issued thereunder or are yet to be issued thereunder.
Date: March 15, 2000
--------------
By: /s/ Benjamin W. Rawlins, Jr.
----------------------------------------
Benjamin W. Rawlins, Jr.
Chairman and Chief Executive Officer
<PAGE> 1
EXHIBIT 10(Y)
EMPLOYMENT AGREEMENT
This Employment Agreement entered into and effective as of the first
day of March, 2000 (the "Effective Date"), by and between Union Planters
Corporation, and its wholly owned subsidiary, Union Planters Bank, N.A.
(hereinafter collectively referred to as "UP"), and Bobby L. Doxey
("Executive").
WHEREAS, it is the intention and desire of the parties hereto to enter
into a formal agreement whereby UP will have the benefit of the employment of
Executive during the period covered by this Agreement and Executive will have
the assurance of such continued employment during the period covered by this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants, representations, warranties and agreements of the parties
set forth herein, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound, agree as follows:
1. Employment.
(a) Term. UP hereby agrees to employ Executive and
Executive hereby agrees to serve UP as Senior Executive Vice President
in accordance with the terms and conditions set forth herein, for a
period of three (3) years (the "Initial Term"), commencing on the
Effective Date of this Agreement, as set forth above; subject, however,
to earlier termination as expressly provided herein.
The Initial Term shall automatically be extended for one (1)
additional year at the end of thereof, unless, subject to the
provisions set forth below in this Paragraph 1(a), either party hereto
shall terminate this Agreement at the end of the Initial Term or at the
end of any successive one (1) year term thereafter by giving the other
party written notice of the intent not to renew, delivered at least
ninety (90) days prior to the end of such Initial Term or successive
term; provided, however, that in the event UP shall elect not to renew
this Agreement after the Initial Term in accordance with the provisions
of this Paragraph 1(a) and shall give notice of such election not to
renew as provided herein, Executive shall be entitled to the
compensation set forth in Paragraph 10 hereof.
In the event such notice of intent not to renew is properly
delivered subject to the provisions set forth in this Paragraph 1(a),
this Agreement, along with all corresponding rights, duties and
covenants, shall automatically expire at the end of the Initial Term or
successive term then in progress.
(b) Position. UP shall employ the Executive during the
term of this Agreement as Senior Executive Vice President. The
Executive shall be responsible to the Chairman of the Board and Chief
Executive Officer of UP (the "UP Chairman") and to the President and
Chief Operating Officer of UP (the "UP President"), or to such other UP
executive as either of them shall designate from time to time. The
Executive may engage in charitable, civic or community activities and,
with the prior approval of the UP Chairman or the UP President, may
serve as a director of any other business corporation. The Executive's
office for the performance of his duties under this Agreement shall be
located within the greater metropolitan area of Memphis, Tennessee.
(c) Cash Payment. Upon the execution hereof, Executive
shall be paid the sum of Twenty Two Thousand Nine Hundred Seventeen
Dollars ($22,917.00). Should Executive terminate his employment without
Good Reason during the Initial Term hereof, Executive shall repay UP
one-third of such Cash Payment for each year or portion thereof of the
Initial Term remaining after such termination.
2. Base Salary. As compensation for services to UP, UP agrees to
pay to Executive the sum of Two Hundred Seventy-five Thousand Dollars
($275,000.00) per annum payable in twenty-four (24) as equal as possible
payments, one such payment being made twice each month. Such compensation shall
be reviewed annually and may be increased annually following each such annual
review of the Executive's performance. Such compensation, as it may be increased
annually, shall not be decreased during the term of this Agreement.
<PAGE> 2
3. Benefits. UP agrees to provide Executive the following
benefits, commencing with the Effective Date hereof or as soon thereafter as
practicable (all of which shall vest as of the date thereof or at such date or
dates as provided in the plan documents establishing such benefits) and
continuing for so long as Executive is employed under this Agreement or any
extension hereof.
(a) Any fringe benefit package presently offered or to be
offered in the future generally to the employees of UP, such as health
and dental insurance, disability insurance and participation in the
ESOP and 401K Plans of UP, on the same basis as offered to other
similar senior executives of UP participating therein.
(b) An annual paid vacation in accordance with UP's
Personnel Policy. At least two (2) weeks of such vacation shall be
taken consecutively.
(c) Any other benefits generally provided to similar
senior executives of UP as the Board of Directors may, from time to
time, approve.
4. Additional Benefits and Bonuses. In addition to those benefits
set forth in Paragraph 3 above, Executive shall receive the following benefits
and bonuses:
(a) Reimbursement of membership dues and assessments
incurred during the term of this Agreement, in the appropriate country
and civic clubs as approved by the UP Chairman or UP President in
accordance with normal policies regarding club dues.
(b) An eligibility to participate in UP's Key Officer
incentive bonus program. For the first year of service by Executive
hereunder, Executive shall be guaranteed an incentive bonus of at least
twenty-five percent (25%) of base salary.
(c) Upon the Effective Date hereof, the Executive shall
receive an initial grant of twelve thousand (12,000) restricted shares
of Union Planters Corporation("UPC") Common Stock (the "Initial
Stock").
(d) Upon the Effective Date hereof, the Executive shall
receive an initial grant of options to purchase (at the closing market
price upon date of grant) twenty-five thousand (25,000) shares of UPC
Common Stock (the "Initial Options").
The Initial Stock described in paragraph 4(c) above shall vest
in equal portions over ten (10) years. The Initial Options described in
paragraph 4(d) shall vest in equal portions at the end of each year of
the Initial Term. If at any time during the Initial Term, Executive
voluntarily terminates his employment hereunder for Good Reason, as
described in paragraph 10, then the unvested portion of the Initial
Options shall automatically be vested. Executive shall be considered
annually for the grant of additional stock options by the UP Stock
Option Committee on the same basis as other senior executives of UP.
(e) Executive shall be eligible to participate in UP's
Executive Deferred Compensation Plan.
5. Expenses. Executive is authorized to incur necessary and
customary expenses in connection with the business of UP. UP will pay or
reimburse Executive for such expenses upon presentation by Executive of the
appropriate records which verify such expenses in accordance with normal expense
policies.
Executive shall be granted an automobile allowance of $500.00 per month
during the term hereof. Relocation expenses, such as moving, travel, and
temporary living expenses, shall be governed by UP's policy on such expenses.
6. Termination. This Agreement shall terminate upon the first to
occur of the following:
(a) The expiration of the term provided for in Paragraph
1;
(b) The death of the Executive;
(c) The permanent disability of Executive, as defined in
Paragraph 8;
(d) The Termination for Cause of the employment of the
Executive, as defined in Paragraph 9;
<PAGE> 3
(e) Termination of the employment of the Executive by UP
without cause or by the Executive for Good Reason, as described in
Paragraph 10; and
(f) Termination of employment by the Executive without
Good Reason, provided that Executive shall give at least ninety (90)
days prior written notice of termination. UP reserves the right to
accelerate Executive's termination under this provision and pay to
Executive accrued Base Salary through the date of the termination as
determined by UP, and any other benefits to which the Executive is
entitled upon his termination of employment with UP, in accordance with
the terms of the plans and programs of UP.
7. Noncompetition. For a period of two (2) years from the date of
any voluntary termination of this Agreement by the Executive without Good
Reason, the Executive covenants and agrees that: (a) the Executive shall not,
directly or indirectly, on his own behalf, or as an employee, representative, or
agent of a third party, by ownership of any type of interest in any business
enterprise or by any other means whatsoever, engage in any business or
activities which are competitive with UP's business (a "Competitor's Business")
within the states where UP maintains and operates banking offices or become
associated with or render services to a Competitor's Business; and (b) the
Executive shall not, directly or indirectly, call upon or solicit any customers
of UP or any presently existing affiliate for any purpose or business that is
competitive with UP's business. For the purposes of this paragraph, the term
"Competitor's Business" shall apply only to such businesses or activities
conducted by a competitor of UP within the states where UP maintains and
operates banking offices.
Nothing in this Paragraph 7 shall prohibit the Executive from being (i)
a stockholder in a mutual fund or a diversified investment company or (ii) a
passive owner of not more than two (2) percent of the outstanding stock of any
class of a corporation, so long as the Executive has no active participation in
the business of such corporation.
8. Death or Disability.
(a) In the event of the termination of the employment of
the Executive due to his permanent disability or death, the Executive
(or in the event of his death, his executor, administrator or other
personal representative) shall receive:
(1) accrued Base Salary through the date of the
termination of the Executive's employment;
(2) any annual bonus owing but not yet paid for
any fiscal year ended on or before the Executive's termination
of employment; and
(3) any other benefits to which the Executive is
entitled upon his termination of employment with UP due to his
death, in accordance with the terms of the plans and programs
of UP.
(b) "Disability" as used herein, means a physical or
mental condition of the Executive determined by UPC in accordance with
standards and procedures similar to those under UPC's employee
long-term disability plan, if any. At any time that UPC does not
maintain such a long-term disability plan, Disability shall mean the
inability of Executive, as determined by UPC, to substantially perform
Executive's regular duties and responsibilities due to a medically
determinable physical or mental illness which has lasted (or can
reasonably be expected to last) for a period of six (6) consecutive
months.
9. Termination for Cause. As used in Paragraph 6(d), "Termination
for Cause" means a termination of the Executive's employment because the
Executive engages in theft, fraud, or embezzlement causing significant damage to
UP. The determination of theft, fraud, or embezzlement will be made by the UP
Board of Directors in good faith, but such determination does not require an
actual criminal indictment or conviction prior to or after such decision.
If UP terminates the Executive's employment for Cause, he
shall be entitled only to:
(1) accrued Base Salary through the date of the
termination of his employment; and
(2) any other benefits to which the Executive
shall be legally entitled upon his termination of employment
with UP, in accordance with the terms of the plans and
programs of UP.
10. Termination by UP without Cause or by the Executive for Good
Reason. As stated in Paragraph 6(e) hereof, Executive's employment may be
terminated by UP without Cause. In addition, the Executive may voluntarily
terminate his employment with UP for
<PAGE> 4
Good Reason. For purposes of this Agreement, Good Reason shall mean any material
breach of this Agreement by UP, including but not limited to, (1) any reduction
in Executive's Base Salary or incentive opportunities, (2) any material
reduction in benefits to which the Executive shall be entitled under the plans
and programs of UP (unless such reduction is equally applicable to all senior
executives of UP, including the Executive), (3) any material reduction in the
Executive's employment responsibilities or in his office or title, or (4) the
Executive's relocation from the greater metropolitan area of Memphis, Tennessee
without his consent. Upon termination of the employment of the Executive by UP
without Cause or the voluntary termination of such employment by the Executive
for Good Reason, the Executive shall receive:
(1) accrued Base Salary through the date of the
termination of his employment;
(2) any annual bonus owing but not yet paid for any
fiscal year ended on or before the Executive's termination of
employment;
(3) any other benefits to which the Executive is entitled
upon his termination of employment with UP, in accordance with the
terms of the plans and programs of UP; and
(4) a lump-sum amount equal to Executive's Base Salary
for the remainder of the term of this Agreement then in effect, but not
less than one year's Base Salary.
11. Termination following a Change in Control. If a Change in
Control, as hereinafter defined, occurs during the term of this Agreement and
within one (1) year after such Change in Control, Executive's employment shall
be terminated for reasons other than Cause as described in Paragraph 9 hereof,
or if following such Change in Control, the Executive terminates his employment
for Good Reason, then Executive shall receive:
(1) accrued Base Salary through the date of termination
of his employment;
(2) a lump sum equal to Executive's Base Salary due for
the remainder of the term of this Agreement then in effect, but not
less than one year's Base Salary;
(3) any annual bonus owing but not yet paid for any
fiscal year ended on or before the Executive's termination of
employment; and
(4) any other benefits to which the Executive is entitled
upon his termination of employment with UP, in accordance with the
terms of the plans and programs of UP.
"Change in Control" means the occurrence of any of the following
events:
(1) The acquisition by any individual, entity, or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended) of 25% or more
of either (a) the then outstanding shares of common stock of UPC (the
"Outstanding Company Common Stock") or (b) the combined voting power of
the then outstanding voting securities of UPC entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection
(1), the following acquisitions shall not constitute a Change in
Control: (w) any acquisition directly from UPC, (x) any acquisition by
UPC, (y) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by UPC or any corporation controlled by
UPC, or (z) any acquisition by any Person pursuant to a transaction
which complies with clauses (A), (B), and (C) of subsection (3) of this
Section; or
(2) Individuals who, as of the date hereof, constitute
the Board of Directors of UPC (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by UPC's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or
on behalf of a Person other than the Board; or
<PAGE> 5
(3) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of UPC (a "Business Combination"), in each case, unless,
following such Business Combination,
(A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and outstanding Company Voting
Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 65% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns UPC or all or
substantially all of UPC's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, and
(B) no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan (or related
trust) of UPC or such corporation resulting from such Business
Combination) beneficially owns directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination, and
(C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for such
Business Combination.
12. Non-Disclosure. For a period of five (5) years after the date
of any termination or expiration of this Agreement, Executive will not disclose
any information deemed Confidential Information, except (i) to a person who is
an authorized employee (as such term is defined in Paragraph 13), (ii) as
required by law, regulation or order of any court or regulatory commission,
department or agency or (iii) as part of a confidential communication to an
attorney. If Executive shall attempt to disclose the Confidential Information or
any part or parts thereof in a manner contrary to the terms of this Agreement,
UP shall have the right, in addition to other remedies which may be available to
it, to injunctive relief enjoining such acts or attempts, it being acknowledged
that legal remedies are inadequate. This provision shall survive termination of
this Agreement for the five (5) year period above provided.
13. Definition of Confidential Information and Authorized
Employee. Confidential Information means any information not disseminated by UP
to the general public (including identity of customers, clients, business
contacts, suppliers of goods and/or services, and any transaction by or between
such person or entities and UP) and which Executive used or knew of because of
his employment at UP, including specific information about methods not generally
employed in the industry at large and which are used or known to be contemplated
for use in the future by UP for the purpose of gaining proprietary advantage
over competitors; provided, however, that Confidential Information shall not
include general knowledge of skills and techniques acquired or improved as a
result of the employment experience at UP. Authorized employee means with
respect to UP, members of the UP Board of Directors; the Chief Executive
Officer; the President; Executive Vice Presidents; immediate supervisors; a
fellow employee on a need-to-know basis only; and any UP employee in the course
of the performance of the Executive's duties pursuant to this Agreement.
Executive shall be entitled at all times to disclose Confidential Information to
his personal attorney on a confidential basis and as may otherwise be required
by law.
14. Assignment. The rights and obligations of UP and Executive
(except Executive's obligation to perform services) under this Agreement shall
inure to the benefit of and shall be binding upon their respective successors,
if any.
15. Execution of Agreement. The execution of this Agreement shall
be final upon signing by UP and the Executive, and shall not require the
approval or ratification of any Committee or of the Board of Directors.
16. Entire Agreement. This Agreement contains the entire agreement
between the parties and supersedes all prior discussions, understandings and
commitments, if any, whether oral or written. This Agreement cannot be amended
or modified except by subsequent written agreement signed by all of the parties.
In agreeing that this Agreement may not be changed in any way except by a
written and executed document, the parties knowingly waive and give up any
constitutional right which they may otherwise have to amend or modify this
Agreement by some means other than in writing. Finally, any agreement between UP
and Executive which concerns any subject dealt
<PAGE> 6
with by this Agreement shall be considered an amendment or modification of this
Agreement and not an agreement separate from this Agreement.
17. Arbitration. Any dispute or controversy between UP and the
Executive, whether arising out of or relating to this Agreement, its
interpretation, its breach, or otherwise, shall be settled by arbitration in
Memphis, Tennessee, administered by the American Arbitration Association, with
any such dispute or controversy arising under this Agreement being so
administered in accordance with its rules then in effect, and judgment on the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitrator shall have the authority to award any remedy or relief
that a court of competent jurisdiction could order or grant, including, without
limitation, the issuance of an injunction. However, either party may, without
inconsistency with this arbitration provision, apply to any court having
jurisdiction over such dispute or controversy and seek interim provisional,
injunctive or other equitable relief until the arbitration award is rendered or
the controversy is otherwise resolved. Except as necessary in court proceedings
to enforce this arbitration provision or an award rendered hereunder, or to
obtain interim relief, neither a party nor an arbitrator may disclose the
existence, content or results of any arbitration hereunder without the prior
written consent of UP and the Executive. Notwithstanding any choice of law
provision included in this Agreement, the United States Federal Arbitration Act
shall govern the interpretation and enforcement of this arbitration provision.
18. Controlling Law. This Agreement and the rights and obligations
hereunder shall be governed by and construed in accordance with the federal law
of the United States of America, and in the absence of controlling federal law,
in accordance with the laws of the State of Tennessee.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
EXECUTIVE
/s/ Bobby L. Doxey
--------------------------------------
UNION PLANTERS BANK, N.A.
By: /s/ Jackson W. Moore
-----------------------------------
Jackson W. Moore
President and Chief Operating Officer
UNION PLANTERS CORPORATION
By: /s/ Jackson W. Moore
-----------------------------------
Jackson W. Moore
President and Chief Operating Officer
<PAGE> 1
EXHIBIT 10(Z)
EMPLOYMENT AGREEMENT
This Employment Agreement made and entered into this twenty-second day
of February, 2000, effective as of the eleventh day of February, 2000 (the
"Effective Date"), by and between Union Planters Corporation, and its wholly
owned subsidiary, Union Planters Bank, N.A.(hereinafter collectively referred to
as "UP"), and Alan W. Kennebeck ("Executive").
WHEREAS, it is the intention and desire of the parties hereto to enter
into a formal agreement whereby UP will have the benefit of the employment of
Executive during the period covered by this Agreement and Executive will have
the assurance of such continued employment during the period covered by this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants, representations, warranties and agreements of the parties
set forth herein, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound, agree as follows:
1. Employment.
(a) Term. UP hereby agrees to employ Executive and
Executive hereby agrees to serve UP as Senior Executive Vice President
in accordance with the terms and conditions set forth herein, for a
period of three (3) years (the "Initial Term"), commencing on the
Effective Date of this Agreement, as set forth above; subject, however,
to earlier termination as expressly provided herein.
The Initial Term shall automatically be extended for one (1)
additional year at the end of thereof, unless, subject to the
provisions set forth below in this Paragraph 1(a), either party hereto
shall terminate this Agreement at the end of the Initial Term or at the
end of any successive one (1) year term thereafter by giving the other
party written notice of the intent not to renew, delivered at least
ninety (90) days prior to the end of such Initial Term or successive
term; provided, however, that in the event UP shall elect not to renew
this Agreement after the Initial Term in accordance with the provisions
of this Paragraph 1(a) and shall give notice of such election not to
renew as provided herein, Executive shall be entitled to the
compensation set forth in Paragraph 10 hereof.
In the event such notice of intent not to renew is properly
delivered subject to the provisions set forth in this Paragraph 1(a),
this Agreement, along with all corresponding rights, duties and
covenants, shall automatically expire at the end of the Initial Term or
successive term then in progress.
(b) Position. UP shall employ the Executive during the
term of this Agreement as Senior Executive Vice President. The
Executive shall be responsible to the Chairman of the Board and Chief
Executive Officer of UP (the "UP Chairman") and to the President and
Chief Operating Officer of UP (the "UP President"), or to such other UP
executive as either of them shall designate from time to time. The
Executive may engage in charitable, civic or community activities and,
with the prior approval of the UP Chairman or the UP President, may
serve as a director of any other business corporation. The Executive's
office for the performance of his duties under this Agreement shall be
located within the greater metropolitan area of Memphis, Tennessee.
(c) Cash Payment. Upon the execution hereof, Executive
shall be paid the sum of Seventy Five Thousand Dollars ($75,000.00).
Should Executive terminate his employment without Good Reason during
the Initial Term hereof, Executive shall repay UP one-third of such
Cash Payment for each year or portion thereof of the Initial Term
remaining after such termination.
2. Base Salary. As compensation for services to UP, UP agrees to
pay to Executive the sum of Two Hundred Fifty Thousand Dollars ($250,000.00) per
annum payable in twenty-four (24) as equal as possible payments, one such
payment being made twice each month. Such compensation shall be reviewed
annually and may be increased annually following each such annual review of the
Executive's performance. Such compensation, as it may be increased annually,
shall not be decreased during the term of this Agreement.
<PAGE> 2
3. Benefits. UP agrees to provide Executive the following
benefits, commencing with the Effective Date hereof or as soon thereafter as
practicable (all of which shall vest as of the date thereof or at such date or
dates as provided in the plan documents establishing such benefits) and
continuing for so long as Executive is employed under this Agreement or any
extension hereof.
(a) Any fringe benefit package presently offered or to be
offered in the future generally to the employees of UP, such as health
and dental insurance, disability insurance and participation in the
ESOP and 401K Plans of UP, on the same basis as offered to other
similar senior executives of UP participating therein.
(b) An annual paid vacation in accordance with UP's
Personnel Policy. At least two (2) weeks of such vacation shall be
taken consecutively.
(c) Any other benefits generally provided to similar
senior executives of UP as the Board of Directors may, from time to
time, approve.
4. Additional Benefits and Bonuses. In addition to those benefits
set forth in Paragraph 3 above, Executive shall receive the following benefits
and bonuses:
(a) Reimbursement of membership dues and assessments
incurred during the term of this Agreement, in the appropriate country
and civic clubs as approved by the UP Chairman or UP President in
accordance with normal policies regarding club dues.
(b) An eligibility to participate in UP's Key Officer
incentive bonus program. For the first year of service by Executive
hereunder, Executive shall be guaranteed an incentive bonus of at least
thirty-two percent (32%) of base salary.
(c) Upon the Effective Date hereof, the Executive shall
receive an initial grant of ten thousand (10,000) restricted shares of
Union Planters Corporation("UPC") Common Stock (the "Initial Stock").
(d) Upon the Effective Date hereof, the Executive shall
receive an initial grant of options to purchase (at the closing market
price upon date of grant) twenty thousand (20,000) shares of UPC Common
Stock (the "Initial Options").
The Initial Stock described in paragraph 4(c) above shall vest
in equal portions over nine (9) years. The Initial Options described in
paragraph 4(d) shall vest in equal portions at the end of each year of
the Initial Term. If at any time during the Initial Term, Executive
voluntarily terminates his employment hereunder for Good Reason, as
described in paragraph 10, then the unvested portion of the Initial
Options shall automatically be vested. Executive shall be considered
annually for the grant of additional stock options by the UP Stock
Option Committee on the same basis as other senior executives of UP.
(e) Executive shall be eligible to participate in UP's
Executive Deferred Compensation Plan.
5. Expenses. Executive is authorized to incur necessary and
customary expenses in connection with the business of UP. UP will pay or
reimburse Executive for such expenses upon presentation by Executive of the
appropriate records which verify such expenses in accordance with normal expense
policies. Executive shall be granted an automobile allowance of $500.00 per
month during the term hereof. Relocation expenses, such as moving, travel, and
temporary living expenses, shall be governed by UP's policy on such expenses.
6. Termination. This Agreement shall terminate upon the first to
occur of the following:
(a) The expiration of the term provided for in Paragraph
1;
(b) The death of the Executive;
(c) The permanent disability of Executive, as defined in
Paragraph 8;
(d) The Termination for Cause of the employment of the
Executive, as defined in Paragraph 9;
(e) Termination of the employment of the Executive by UP
without cause or by the Executive for Good Reason, as described in
Paragraph 10; and
<PAGE> 3
(f) Termination of employment by the Executive without
Good Reason, provided that Executive shall give at least ninety (90)
days prior written notice of termination. UP reserves the right to
accelerate Executive's termination under this provision and pay to
Executive accrued Base Salary through the date of the termination as
determined by UP, and any other benefits to which the Executive is
entitled upon his termination of employment with UP, in accordance with
the terms of the plans and programs of UP.
7. Noncompetition. For a period of two (2) years from the date of
any voluntary termination of this Agreement by the Executive without Good
Reason, the Executive covenants and agrees that: (a) the Executive shall not,
directly or indirectly, on his own behalf, or as an employee, representative, or
agent of a third party, by ownership of any type of interest in any business
enterprise or by any other means whatsoever, engage in any business or
activities which are competitive with UP's business (a "Competitor's Business")
within the states where UP maintains and operates banking offices or become
associated with or render services to a Competitor's Business; and (b) the
Executive shall not, directly or indirectly, call upon or solicit any customers
of UP or any presently existing affiliate for any purpose or business that is
competitive with UP's business. For the purposes of this paragraph, the term
"Competitor's Business" shall apply only to such businesses or activities
conducted by a competitor of UP within the states where UP maintains and
operates banking offices.
Nothing in this Paragraph 7 shall prohibit the Executive from being (i)
a stockholder in a mutual fund or a diversified investment company or (ii) a
passive owner of not more than two (2) percent of the outstanding stock of any
class of a corporation, so long as the Executive has no active participation in
the business of such corporation.
8. Death or Disability.
(a) In the event of the termination of the employment of
the Executive due to his permanent disability or death, the Executive
(or in the event of his death, his executor, administrator or other
personal representative) shall receive:
(1) accrued Base Salary through the date of the
termination of the Executive's employment;
(2) any annual bonus owing but not yet paid for
any fiscal year ended on or before the Executive's termination
of employment; and
(3) any other benefits to which the Executive is
entitled upon his termination of employment with UP due to his
death, in accordance with the terms of the plans and programs
of UP.
(b) "Disability" as used herein, means a physical or
mental condition of the Executive determined by UPC in accordance with
standards and procedures similar to those under UPC's employee
long-term disability plan, if any. At any time that UPC does not
maintain such a long-term disability plan, Disability shall mean the
inability of Executive, as determined by UPC, to substantially perform
Executive's regular duties and responsibilities due to a medically
determinable physical or mental illness which has lasted (or can
reasonably be expected to last) for a period of six (6) consecutive
months.
9. Termination for Cause. As used in Paragraph 6(d), "Termination
for Cause" means a termination of the Executive's employment because the
Executive engages in theft, fraud, or embezzlement causing significant damage to
UP. The determination of theft, fraud, or embezzlement will be made by the UP
Board of Directors in good faith, but such determination does not require an
actual criminal indictment or conviction prior to or after such decision.
If UP terminates the Executive's employment for Cause, he
shall be entitled only to:
(1) accrued Base Salary through the date of the
termination of his employment; and
(2) any other benefits to which the Executive shall be
legally entitled upon his termination of employment with UP, in
accordance with the terms of the plans and programs of UP.
10. Termination by UP without Cause or by the Executive for Good
Reason. As stated in Paragraph 6(e) hereof, Executive's employment may be
terminated by UP without Cause. In addition, the Executive may voluntarily
terminate his employment with UP for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean any material breach of this Agreement by UP,
including but not limited to, (1) any reduction in Executive's Base Salary or
incentive opportunities, (2) any material reduction in benefits to which the
Executive shall be entitled under the plans and programs of UP (unless such
reduction is equally applicable to all senior executives of UP,
<PAGE> 4
including the Executive), (3) any material reduction in the Executive's
employment responsibilities or in his office or title, or (4) the Executive's
relocation from the greater metropolitan area of Memphis, Tennessee, without his
consent. Upon termination of the employment of the Executive by UP without Cause
or the voluntary termination of such employment by the Executive for Good
Reason, the Executive shall receive:
(1) accrued Base Salary through the date of the
termination of his employment;
(2) any annual bonus owing but not yet paid for any
fiscal year ended on or before the Executive's termination of
employment;
(3) any other benefits to which the Executive is entitled
upon his termination of employment with UP, in accordance with the
terms of the plans and programs of UP; and
(4) a lump sum amount equal to Executive's Base Salary
for the remainder of the term of this Agreement then in effect, but not
less than one year's Base Salary.
11. Termination following a Change in Control. If a Change in
Control, as hereinafter defined, occurs during the term of this Agreement and
within one (1) year after such Change in Control, Executive's employment shall
be terminated for reasons other than Cause as described in Paragraph 9 hereof,
or if following such Change in Control, the Executive terminates his employment
for Good Reason, then Executive shall receive:
(1) accrued Base Salary through the date of termination
of his employment;
(2) a lump sum equal to Executive's Base Salary due for
the remainder of the term of this Agreement then in effect, but not
less than one year's Base Salary;
(3) any annual bonus owing but not yet paid for any
fiscal year ended on or before the Executive's termination of
employment; and
(4) any other benefits to which the Executive is entitled
upon his termination of employment with UP, in accordance with the
terms of the plans and programs of UP.
"Change in Control" means the occurrence of any of the
following events:
(1) The acquisition by any individual, entity, or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended) of 25% or more
of either (a) the then outstanding shares of common stock of UPC (the
"Outstanding Company Common Stock") or (b) the combined voting power of
the then outstanding voting securities of UPC entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection
(1), the following acquisitions shall not constitute a Change in
Control: (w) any acquisition directly from UPC, (x) any acquisition by
UPC, (y) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by UPC or any corporation controlled by
UPC, or (z) any acquisition by any Person pursuant to a transaction
which complies with clauses (A), (B), and (C) of subsection (3) of this
Section; or
(2) Individuals who, as of the date hereof, constitute
the Board of Directors of UPC (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by UPC's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or
on behalf of a Person other than the Board; or
(3) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of UPC (a "Business Combination"), in each case, unless,
following such Business Combination,
<PAGE> 5
(A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and outstanding Company Voting
Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 65% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns UPC or all or
substantially all of UPC's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, and
(B) no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan (or related
trust) of UPC or such corporation resulting from such Business
Combination) beneficially owns directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination, and
(C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for such
Business Combination.
12. Non-Disclosure. For a period of five (5) years after the date
of any termination or expiration of this Agreement, Executive will not disclose
any information deemed Confidential Information, except (i) to a person who is
an authorized employee (as such term is defined in Paragraph 13), (ii) as
required by law, regulation or order of any court or regulatory commission,
department or agency or (iii) as part of a confidential communication to an
attorney. If Executive shall attempt to disclose the Confidential Information or
any part or parts thereof in a manner contrary to the terms of this Agreement,
UP shall have the right, in addition to other remedies which may be available to
it, to injunctive relief enjoining such acts or attempts, it being acknowledged
that legal remedies are inadequate. This provision shall survive termination of
this Agreement for the five (5) year period above provided.
13. Definition of Confidential Information and Authorized
Employee. Confidential Information means any information not disseminated by UP
to the general public (including identity of customers, clients, business
contacts, suppliers of goods and/or services, and any transaction by or between
such person or entities and UP) and which Executive used or knew of because of
his employment at UP, including specific information about methods not generally
employed in the industry at large and which are used or known to be contemplated
for use in the future by UP for the purpose of gaining proprietary advantage
over competitors; provided, however, that Confidential Information shall not
include general knowledge of skills and techniques acquired or improved as a
result of the employment experience at UP. Authorized employee means with
respect to UP, members of the UP Board of Directors; the Chief Executive
Officer; the President; Executive Vice Presidents; immediate supervisors; a
fellow employee on a need-to-know basis only; and any UP employee in the course
of the performance of the Executive's duties pursuant to this Agreement.
Executive shall be entitled at all times to disclose Confidential Information to
his personal attorney on a confidential basis and as may otherwise be required
by law.
14. Assignment. The rights and obligations of UP and Executive
(except Executive's obligation to perform services) under this Agreement shall
inure to the benefit of and shall be binding upon their respective successors,
if any.
15. Execution of Agreement. The execution of this Agreement shall
be final upon signing by UP and the Executive, and shall not require the
approval or ratification of any Committee or of the Board of Directors.
16. Entire Agreement. This Agreement contains the entire agreement
between the parties and supersedes all prior discussions, understandings and
commitments, if any, whether oral or written. This Agreement cannot be amended
or modified except by subsequent written agreement signed by all of the parties.
In agreeing that this Agreement may not be changed in any way except by a
written and executed document, the parties knowingly waive and give up any
constitutional right which they may otherwise have to amend or modify this
Agreement by some means other than in writing. Finally, any agreement between UP
and Executive which concerns any subject dealt with by this Agreement shall be
considered an amendment or modification of this Agreement and not an agreement
separate from this Agreement.
<PAGE> 6
17. Arbitration. Any dispute or controversy between UP and the
Executive, whether arising out of or relating to this Agreement, its
interpretation, its breach, or otherwise, shall be settled by arbitration in
Memphis, Tennessee, administered by the American Arbitration Association, with
any such dispute or controversy arising under this Agreement being so
administered in accordance with its rules then in effect, and judgment on the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitrator shall have the authority to award any remedy or relief
that a court of competent jurisdiction could order or grant, including, without
limitation, the issuance of an injunction. However, either party may, without
inconsistency with this arbitration provision, apply to any court having
jurisdiction over such dispute or controversy and seek interim provisional,
injunctive or other equitable relief until the arbitration award is rendered or
the controversy is otherwise resolved. Except as necessary in court proceedings
to enforce this arbitration provision or an award rendered hereunder, or to
obtain interim relief, neither a party nor an arbitrator may disclose the
existence, content or results of any arbitration hereunder without the prior
written consent of UP and the Executive. Notwithstanding any choice of law
provision included in this Agreement, the United States Federal Arbitration Act
shall govern the interpretation and enforcement of this arbitration provision.
18. Controlling Law. This Agreement and the rights and obligations
hereunder shall be governed by and construed in accordance with the federal law
of the United States of America, and in the absence of controlling federal law,
in accordance with the laws of the State of Tennessee.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
EXECUTIVE
/s/ Alan W. Kennebeck
-------------------------------------------
UNION PLANTERS BANK, N.A.
By:/s/ Jackson W. Moore
----------------------------------------
Jackson W. Moore
President and Chief Operating Officer
UNION PLANTERS CORPORATION
By: /s/ Jackson W. Moore
----------------------------------------
Jackson W. Moore
President and Chief Operating Officer
<PAGE> 1
EXHIBIT 10(AA)
SALARY CONTINUATION AGREEMENT
AGREEMENT made as of the fifth day of May 1998, ("the Effective Date") by
and between Union Planters Corporation ("UPC") and Lloyd DeVaux ("DeVaux").
WHEREAS, DeVaux and UPC entered into a Salary Continuation Agreement dated
January 1, 1998, which they now desire to replace and supersede in its entirety
with this Salary Continuation Agreement, and
WHEREAS, UPC desires to assure continued payment of DeVaux's base salary
and annual bonus and provide for other compensation and benefits under certain
circumstances; and
WHEREAS, DeVaux wishes to continue in the employment of UPC and receipt
of his compensation; and
WHEREAS, except as otherwise specifically set forth herein, the parties
acknowledge that this is not a contract of employment for any fixed period of
time at any agreed upon compensation, and DeVaux is an employee-at-will.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement and for other good and valuable consideration, the
parties hereby agree as follows:
1. Replacement of Previous Agreement. The Salary Continuation
Agreement dated January 1, 1998 between DeVaux and UPC is hereby replaced
and superseded in its entirety by this Salary Continuation
Agreement("Agreement").
2. Base Salary and Bonus. Effective June 1, 1998, DeVaux's base
salary shall be $200,000.00 per annum. DeVaux shall continue to be
eligible for an annual cash bonus and stock options to the same extent as
other UPC officers of similar position.
3. Grant of Right to Stock. There shall be a recommendation made to
the Salary and Benefits Committee at its meeting next following the
execution of this Agreement that there be granted to DeVaux twelve
thousand (12,000) shares of restricted UPC common stock ("Restricted
Stock") in accordance with UPC's standard terms and conditions regarding
the granting of rights in such stock. Such recommendation shall provide
that the Restricted Stock shall vest in DeVaux according to the following
schedule: 1,000 shares on October 18, 1998, and 1,000 shares on October 18
of each of the next eleven years.
4. Change in Control. For the purposes of this Agreement, "Change in
Control" of UPC means the acquisition of UPC by another entity, which
shall be defined herein as the merger of UPC with or into an acquiring
entity, with UPC not surviving the merger.
5. Entitlement Following a Change in Control. Upon a Change in
Control:
(a) all shares of Restricted Stock not yet vested in DeVaux
shall immediately vest; and
(b) UPC and DeVaux shall be deemed to have entered into a
contract of employment for a period of one year, at DeVaux's then
current base compensation. At any time during such one year term,
should DeVaux resign, he shall receive:
(i) a lump-sum payment, payable in cash within thirty (30)
days of the effective date of DeVaux's resignation (less
applicable federal and state taxes) equal to (A) his current base
salary multiplied by two (2), plus (B) an amount equal to the
highest of the preceding two years' cash bonuses paid to DeVaux
multiplied by two(2); and
(ii) continued medical coverage for the lesser of (A) two
years or (B) until DeVaux shall be reemployed. Upon DeVaux's
resignation, such contract of employment shall terminate.
6. Termination without a Change in Control. Should DeVaux be
terminated without cause prior to December 31, 2001 by UPC without a
Change in Control having occurred, DeVaux shall be entitled to:
<PAGE> 2
(a) a lump sum payment, payable in cash within thirty (30) days of
the effective date of DeVaux's termination (less applicable federal and
state taxes) equal to(A) his current base salary multiplied by two(2)
plus(B) an amount equal to the highest of the preceding two years' cash
bonuses paid to DeVaux multiplied by two (2); and
(b) continued medical coverage for the lesser of (A) two years or (B)
until DeVaux shall be reemployed.
7. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State
of Tennessee.
8. Modification, Waiver or Discharge. No provision of this Agreement
may be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by DeVaux and an authorized
officer of UPC. No waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall he
deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set forth in
this Agreement; provided, however, that this Agreement shall not supersede
or in any way limit the right, duties or obligations that DeVaux or UPC
may have under any other written agreement between such parties, under any
employee pension benefit plan or employee welfare benefit plan as defined
under the Employee Retirement Income Security Act of 1974, as amended, and
maintained by UPC, or under any established personnel practice or policy
applicable to DeVaux.
IN WITNESS WHEREOF, the undersigned have executed this Agreement.
UNION PLANTERS CORPORATION
By: /s/ Jackson W. Moore
-------------------------------------
Title: President and CEO
---------------------------------
/s/ Lloyd DeVaux
----------------------------------------
Lloyd DeVaux
<PAGE> 1
EXHIBIT 10(BB)
AMENDED EXECUTIVE FINANCIAL PLANNING SERVICES PLAN 2000
This nonqualified Plan allows Section 16 Executive Officers of the
Corporation to receive reimbursement for payment of fees to attorney,
accountant, or financial planning service for tax or estate planning services.
Reimbursements are limited to $12,000 annually, grossed up for applicable taxes,
and are paid as Special Pay taxable to Executive. The Executive is responsible
for payment to the provider of services. Payments under this Plan are expensed
as compensation to the Executive when reimbursed and charged to their respective
cost center.
The listing below includes Executives eligible for Plan for the current
plan year.
SECTION 16 EXECUTIVE OFFICERS
<TABLE>
<S> <C> <C>
Rawlins, Jr. Benjamin W. Chairman & CEO -- Corporation
Moore Jackson W. President & COO -- Corporation
DeVaux Lloyd B. Executive Vice President
Parker John W. Executive Vice President
Russell Michael B. Executive Vice President
Walters Milt K. Senior Vice President
</TABLE>
<PAGE> 1
UNION PLANTERS CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1999 1998 % CHANGE
- -----------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
Net earnings $ 409,998 $ 225,606 81.73%
Cash operating earnings(1) 440,337 351,866 25.14
Per common share:
Net earnings
Basic 2.88 1.61 78.88
Diluted 2.85 1.58 80.38
Cash operating earnings(1)
Basic 3.09 2.52 22.62
Diluted 3.06 2.47 23.89
Cash dividends 2.00 2.00 --
Book value 19.90 20.86 (4.60)
AT DECEMBER 31,
Assets $33,280,353 $31,691,953 5.01%
Earning assets 29,789,458 28,737,886 3.66
Loans, net of unearned income 21,446,400 19,576,826 9.55
Allowance for losses on loans 342,300 321,476 6.48
Deposits 23,372,116 24,896,455 (6.12)
Shareholders' equity 2,776,109 2,984,078 (6.97)
Common shares outstanding (in thousands) 138,487 141,925 (2.42)
PROFITABILITY AND CAPITAL RATIOS
Net earnings
Return on average assets 1.25% .73%
Return on average common equity 13.80 7.71
Cash operating earnings(1)
Return on average assets 1.34 1.14
Return on average common equity 14.83 12.06
Net interest margin 4.36 4.40
Net interest spread 3.69 3.60
Expense ratio 1.61 1.58
Efficiency ratio 57.14 55.96
Shareholders' equity to total assets 8.34 9.42
Leverage ratio 6.65 8.86
Tier 1 capital/risk-weighted assets 9.50 13.34
Total capital/risk-weighted assets 12.69 16.78
CREDIT QUALITY RATIOS
Allowance for losses on loans/loans 1.64% 1.71%
Nonperforming loans/loans .62 .83
Allowance for losses on loans/nonperforming loans 264 206
Nonperforming assets/loans and foreclosed properties .80 .97
Provision for losses on loans/average loans .36 1.04
Net charge-offs/average loans .47 .95
</TABLE>
- ---------------
(1) Earnings before merger-related and other significant items and goodwill and
other intangibles amortization, net of income taxes (see Table 1 on page 31
of this report)
- --------------------------------------------------------------------------------
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Letter to Shareholders...................................... 2
Selected Financial Data..................................... 10
Management's Discussion and Analysis of Results of
Operations and Financial Condition........................ 11
Financial Tables............................................ 31
Selected Quarterly Data..................................... 40
Consolidated Financial Statements........................... 42
Notes to Consolidated Financial Statements.................. 46
Report of Management........................................ 71
Report of Independent Accountants........................... 71
Executive Officers and Board of Directors................... 72
</TABLE>
1
<PAGE> 2
TO OUR SHAREHOLDERS
Although 1999 was a difficult year in many respects it was a very
productive one as well. While no one would suspect it from the way our share
price performed, Union Planters reported record net earnings and record earnings
per share in 1999. Both net earnings at $410 million and earnings per share at
$2.85 were records for the Company and substantially exceeded the corresponding
numbers for the prior year. Because 1998's earnings were reduced by
merger-related and other significant charges, operating earnings (excludes the
charges) provide a more meaningful year-to-year comparison of results and
underlying operating trends. Total operating earnings and operating earnings per
share were up 21 percent and 20 percent, respectively, from the prior year.
Total cash operating earnings and cash operating earnings per share were up 25
percent and 24 percent, respectively.
The results for 1999 represent solid year-to-year improvement in the income
statement, balance sheet, and operating fundamentals. The following paragraphs
provide a profile of the organization, review our recent history, and discuss
the general operating environment for 1999, and how they came together to affect
performance.
THE ORGANIZATION AND RECENT HISTORY
Founded in Memphis, Tennessee in 1869, Union Planters is one of the oldest
and largest banks in Tennessee. Union Planters has a rich heritage in those
areas of the Southeast, Mid-South, and Mid-West that drain the waters of the
Mississippi, and has always had a strong commitment to community investment and
to consumer, business, and agricultural lending in the geographic markets in
which we operate.
Since the mid-1980's Union Planters followed a buy and build strategy to
augment loans and earnings growth and to maintain an attractive regional
franchise in a consolidating industry. This strategy had been very successful.
We grew from $2 billion in the early 1980's to an $18 billion multi-state
regional bank by year-end 1997, and our core earnings and operating performance
ratios were in the top quartile of our peer group. While much of this growth had
come through acquisitions it did not change the essential character of the
organization. Many, if not most, of the organizations we acquired had local
franchises not dissimilar to our own in many respects. Many were seasoned
organizations, with a long history of commitment and service to their
communities and had significant local market share.
It had been our philosophy to maintain separate bank charters within local
markets, and operate the acquired banks on a decentralized basis. In response to
changes in the industry the separate charter philosophy was reevaluated in the
latter half of 1997 and the decision was made to move to a single charter. This
decision was made because of changes in banking regulation and law, the
convergence of traditional banking products and services with those of allied
industries, rapid advances in technology and the Internet, and the need for
scale in a rapidly consolidating industry.
A single charter "model-bank" plan was conceived and developed for the
organization. It promised significant benefits in terms of customer service,
customer relationship management, and significant noninterest expense savings
from already good numbers. Best practices developed in or for one affiliate were
adopted in the form of model bank policies and procedures for the entire
organization. Staffing models, service standards, and quality of service testing
were incorporated in the plan. The information platform for the model bank
included a data warehouse, an operational data store, a consolidated customer
view, an integrated desktop, image technology, and both Intranet and Internet
access.
The charter consolidation and implementation of the model bank began in
January of 1998 with the merger of 31 of our 35 bank charters, and was to have
been an 18-month effort. Progress, and therefore cost savings, were anticipated
all along the way.
2
<PAGE> 3
We anticipated that consolidation activity in the industry would remain fairly
strong but did not expect it to exceed levels of the recent past. That was not
the case, however. In 1998, several of the largest banking organizations in the
United States merged with each other, and a large number of smaller regional
banking organizations placed themselves on the market. Many of the organizations
were not dissimilar in history and character to those we had success with
previously and a number were in markets where we had existing operations. Given
our prior success at integrating acquired organizations, and a desire to
maintain an attractive franchise and to avoid marginalization in a rapidly
consolidating industry, from year-end 1997 through mid-year 1999 we essentially
doubled in asset size through acquisitions.
We knew that integration of the large number of 1998 acquisitions would
slow the data processing conversions involved with the charter consolidation
effort and that the corresponding benefits and cost savings would be delayed to
some extent. We felt that this temporary loss of savings would be offset from
the integration of the acquired organizations and that the much larger
organization would ultimately provide much greater economies of scale. The plan
was to schedule the required conversions, whether charter consolidation or new
bank, whenever possible such that those with the maximum benefit would be
completed at the earliest date.
The conversion to a single charter operation, and the associated reduction
in back office staff at the local level, was a difficult transition for many of
our existing affiliates. The merger and integration of the new affiliates in the
single charter organizational format in the same time period essentially doubled
the effort required. The changes also represented a substantial increase in
scale, scope and responsibility for our staff support departments and an immense
temporary increase in workload for the period of the conversions. Despite the
challenges, the decision to pursue the single charter strategy and the
concurrent asset expansion remain sound for the long-term future of Union
Planters. The following paragraphs review our operating and financial
performance for 1999 and discuss the impact of these major organizational
changes on our results.
LOANS AND LOAN GROWTH IN 1999
Net interest income represents approximately 72 percent of our total
revenue. Loan growth and net interest margin are therefore critical to our top
line revenue growth and financial performance.
Business lending, which in our definition includes general business and
corporate lending, agricultural loans, and non-residential real estate loans, is
focused on those geographic markets where we have full service banking
operations. Our loan growth tends to mirror those markets. We buy syndicated
loans or participations only when the borrower is domiciled in one of our
markets and it is in support of a local relationship.
We are an active lender to both large and small companies. We count many of
the largest and best-known companies in our markets (in some cases the United
States) among our customer base. We are also a very active small business
lender. We were pleased to be ranked near the top among the nation's most "small
business friendly" lenders again in 1999, as we have been for the past several
years. This recognition by the Small Business Administration is based on our
total outstanding loans to the small business sector. As part of our commitment
to small business we are an active lender under the government-guaranteed small
business program and have the SBA certified lender designation in a number of
the regions in which we operate. This permits us to provide credit to companies
that might not otherwise be possible. Our commitment to the small business
sector, and our self-imposed internal lending limits to a single borrower, tend
to keep our average loan size comparatively small for an organization our size.
Our business lending and core growth
3
<PAGE> 4
in this part of our loan portfolio in 1999, except for the agriculture sector
that is discussed below, was generally in line with recent years.
While agricultural loans no longer represent as large a percentage of our
total loans outstanding as they once did, as you might expect from our name and
roots in the Mid-South and the Mid-West, we have long supported the agricultural
community. Our original commitment to trade finance was to support the export of
agricultural products from our region. In 1999, we were recognized as one of the
nation's most "farm-friendly" lenders, and we recently were named a Preferred
Lender -- the highest status a lender can hold in the guaranteed lending
program -- under the Farm Lending Program of the USDA Farm Service Agency. We
believe the Preferred Lender designation will help us serve our planting and
farming customers even better than in the past. With surpluses in basic
commodities and prices at historically low levels, it has been a difficult
operating environment for much of the agricultural sector over the past few
years. While credit quality has not been a major factor, these difficulties have
no doubt caused loan volumes to be less than they would have been otherwise. As
with our business lending our average agricultural loan is relatively small for
an organization our size.
As you would expect from our history we have a strong commitment to
community investment activities. In 1999, we received the prestigious
President's Award for outstanding achievement from the Federal Home Loan Bank of
Cincinnati for our commitment and activities related to affordable housing.
Union Planters is an active consumer lender as well, and our loan portfolio
is well balanced between consumer and business loans. Consumer loans include
traditional consumer installment and revolving loans, home equity lines of
credit, and amortizing first mortgage loans on single-family homes. Although the
first mortgages we retain in our portfolio are escrowed and have monthly
payments that would amortize the loans over some longer period, they generally
carry a five-year term. We view the loans as (well-secured) consumer credit and
they carry a higher interest rate than a secondary market mortgage. This has
been a very popular loan product and has been a solid income producer for our
community banks. It makes up approximately 26 percent of our total loan
portfolio, and represents the largest concentration of a loan-type in the
portfolio. The credit history on our consumer loans and our portfolio mortgages
has been generally excellent.
While the amortizing loan described above is very popular, because of the
shortness of the term, our customers tend to view it as the equivalent of a
variable rate mortgage. The generally declining mortgage rate environment
throughout much of the latter half of the 90's caused mortgage refinancing
activity to increase well above normal levels. While activity slowed somewhat in
the first half of 1998, toward the end of the third quarter, in reaction to a
severe economic dislocation in the international markets, and a near collapse in
a major US hedge fund, there was a significant widening of spreads in the debt
markets for all but the very best credits. Reversing a bias for tightening to
avoid a shut down in the debt markets, the Federal funds rate was reduced three
times in just a matter of weeks.
Mortgages in general tend to be priced in relation to the 10-year
government bond. The sharp pull back in rates set off a huge refinancing boom.
Annualized prepayment speeds reached as high as 60 to 70 percent in some months
during the latter half of 1998 and remained high, as the mortgage pipeline
cleared, through the first quarter of 1999. This surge in refinance activity, on
top of already above normal prepayment speeds, produced truly extraordinary
origination and prepayment activity in mortgage loans, including our portfolio
mortgages. At the same time, the very low secondary market rates created a
strong preference for secondary market loans. To compound the unusually
4
<PAGE> 5
high prepayment problem, many consumers bundled existing home equity and other
personal debt into the new mortgage, creating unusual prepayment activity in
those loans as well.
Normal mortgage prepayments and pay downs would result in a reduction in
loans of approximately $1 billion. This represents about 4.5 percent of our
total loan portfolio. New loans originated are normally sufficient to cover
prepayments and pay downs and grow the portfolio. Mortgage rates have been at
levels over the past few years that prepayment speeds have run at double and
triple historic norms. This type of loan represents such a meaningful percentage
of our total loan portfolio that the greater refinance activity and the
consolidation of other consumer debt into the new mortgage, combined with the
preference for secondary market loans, made it very difficult to grow consumer
loans in 1999.
Because of the increasing need for scale, continuing high credit losses,
and unfavorable profitability trends in the sector, in the latter half of 1998,
like a number of other banking organizations, we made the decision to exit the
credit card business on a direct basis. We sold our credit card loan portfolio
to a third party provider of credit card services. This reduced our outstanding
loans approximately $460 million and our year-to-year comparisons by a similar
amount.
As stated above, since the mid-1980's we have augmented revenue and loan
growth through acquisitions. The large number of acquisitions over the past two
years, and the liquidation of undesirable assets from the acquired
organizations, however, impacted our consolidated loan growth in 1999 as
explained below.
Organizations contemplating a sale, or conversely trying to avoid a sale as
the case may be, may not be as diligent in their underwriting, charge-off or
reserving practices as might otherwise be the case. This may result in anything
from lesser quality underwriting and minor under reserving to aggressively
reaching for assets and significant under reserving. While the condition of the
loan portfolio is carefully evaluated during due diligence and accounted for in
the pricing, following an acquisition it is necessary to conform the loan
portfolio, lending policies and practices, and the ongoing reserving methodology
of the acquired organization to those of Union Planters. Even when an acquired
bank's underwriting is very good and conformance requirements relatively minor,
this process will almost always result in a reduction of from two to three
percent in an acquired loan portfolio, and it is not unusual for the reduction
to be higher.
Because many of our acquisitions have been in the same or adjacent markets
with Union Planters, it is not unusual to share many of the same customers. We
have policy limits on the size of a loan to a single borrower. To comply with
these limits, it is sometimes necessary to reduce a customer's outstanding debt.
In one instance this represented a 25 percent reduction of the customer's debt
in the combined companies. One acquisition had two out-of-market real estate
lending joint ventures with approximately $40 million in loans outstanding. The
bank was not involved in the loan underwriting. We only originate loans for our
portfolio where we have full-service banking operations and our personnel are
involved in the underwriting. We worked out of these two joint ventures in an
orderly fashion reducing our loans outstanding accordingly.
It is not unusual for an acquired organization, particularly if it is a
traditional thrift institution, to have a meaningful percentage of its portfolio
assets in long-term fixed- or variable-rate mortgages. We do not normally
portfolio either type loan. The spreads are simply too thin and the interest
rate risk too high, given the capital necessary to support this loan asset type.
Over the past few years we have liquidated over $1 billion in long-term
fixed-rate mortgages picked up in one acquisition, and an equal amount in both
long-term fixed- and variable-rate loans acquired through other acquisitions.
Given the general interest-rate environment over that
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<PAGE> 6
period, and the more recent back up in the mortgage market, this policy has
served us well.
Because we essentially doubled in size through acquisitions over the past
two years, the liquidation of the non-policy loan assets from the portfolios of
the acquired organizations was far more significant to loan and top-line revenue
growth than is normally the case.
Our year-to-year loan growth has typically been in the six to eight percent
range and generally in line with the markets in which we operate. Our commitment
to lending and loan production was no less in 1998 and 1999 than in previous
years. For the reasons outlined in the paragraphs above, we were not able to
grow loans at a normal rate in 1999. Loan volume was about equal to the prior
year. The good news is that mortgage rates are moderately higher, refinance
activity has markedly slowed, the portfolio mortgage is a much more popular
product, and the liquidation of non-policy assets from the acquired
organizations is essentially over. Loan growth should return to much more normal
levels in 2000.
NET INTEREST INCOME
The margin environment for the past two years has been particularly
difficult. After flattening and squeezing margins through much of 1998, the
yield curve began to steepen during the first half of the year. The Federal
funds rate was increased twice in the latter half of the year, however, at least
temporarily compressing the margin again. There was unusually aggressive rate
competition for deposits throughout 1999 but particularly in the latter half of
the year as the millennium approached. Competition from money market and mutual
funds seems to have increased. The pressure on deposits is an industry
phenomenon and is expected to continue for the foreseeable future.
Although loan volume was about equal to the prior year, in a difficult
margin environment, net interest income increased about four percent for the
year. This improvement was the result of standardization of prices on certain
basic transaction accounts throughout the organization, re-pricing of some
public fund deposits and promotional certificates in some of the banks acquired
in 1998 and 1999, and better pricing discipline on both loans and deposits
throughout the organization. These changes were not sufficient to offset the
impact of the Federal funds rate increases in the latter half of the year. The
margin improved in each of the first three quarters but declined in the fourth.
The margin environment will remain difficult until the Federal funds rate
increases are over and rates have stabilized. The higher rates can then be
priced into both the liability and asset side of the balance sheet. At least
one, and perhaps as many as three, more rate increases are currently
anticipated. When rates stabilize we should be well positioned to grow our
margin.
CREDIT AND INTEREST-RATE RISK
The business of banking is the management of credit and interest-rate risk.
Long-term survival and profitability are dependent on it. There have been one or
more major credit crises in banking in each of the last three decades. The
thrift industry has all but disappeared because of its failure first to manage
interest-rate and later credit risk.
Union Planters has a reputation for conservative credit standards and
underwriting. As previously noted, our loan portfolio is nicely balanced between
business and consumer loans outstanding. We have no material industry
concentrations in our business loan portfolio, and despite our legal lending
limit our average loan size is relatively small for an organization our size.
There were no significant unexpected credit problems in 1999.
While the United States has experienced good economic growth for almost
eight years, the credit cycle has not been repealed. It is almost impossible to
be an active lender and totally avoid credit problems, but we believe our
lending policies and practices, although
6
<PAGE> 7
they may have reduced loan volume and outstanding loans over the past two years,
will serve us well in the next economic slowdown.
NONINTEREST INCOME
Noninterest income represents approximately 28 percent of our total
revenue. A primary objective of Union Planters is to increase
noninterest-sensitive fee income. Prior to recent acquisitions, and the sale of
the credit card portfolio, it represented approximately 32 percent of our total
revenue.
We are expanding our product set to include a broad line of insurance and
investment products. Our objective is to become the "trusted advisor" to our
customers for all their financial needs, whether banking, insurance, or
investments. These products will be fully integrated into our existing delivery
and service platforms. More than 80,000 hours were spent in training our
customer service representatives on annuity, insurance, and investment products
in 1999. As a result, our annuity income more than doubled from the prior year
and our insurance income was up 28 percent. We recently added term life and
property and casualty insurance to the product line and expect continued growth
in income from this area. Despite our growth in this area we have only scratched
the surface. Over time that will become a much larger percentage of total income
and help reduce our sensitivity to margin compression.
Our mortgage originations and our mortgage banking revenue, despite very
heavy refinance activity in 1998, and declining origination volume in the latter
half of 1999, was up nicely year-to-year. The secondary market origination
activity increases our fee income, helps us attract a greater volume of higher
yielding loan product for the portfolio, and makes it possible to grow our third
party loan-servicing portfolio with our own originations. We do not retain
secondary market loans in our portfolio. The spreads are simply too narrow, and
the interest-rate risk too great. We sell them into the secondary market but
retain the servicing and the relationship with the customer. The fee income from
servicing provides a stable source of income and will tend to offset the
volatility in mortgage origination activity somewhat.
NONINTEREST EXPENSE
The charter consolidation and implementation of the model bank, which began
in January 1998, was to have been an 18-month project, providing cost savings
all along the way. We created regional credit administration and check
collection centers, and moved to centralized underwriting for consumer and
mortgage loans. We expected to began to realize those savings nine to 12 months
after the single charter project began.
Original plans for creation of the check processing and credit
administration centers called for a reduction in affiliate staff of
approximately 900 employees and an increase in support staff of approximately
300 employees for a net staff reduction of 600 employees, or approximately 10
percent of staff at the time. While the relationship is not completely linear,
the increase in asset size from $15 billion when the single charter plan was
developed to over $30 billion at year end 1999 essentially doubled the staffing
impact and needs for the support centers.
Data processing conversions were originally scheduled throughout 1998 and
for the first nine months of 1999. There were some delays in installation and
conversion to the new technology both in the support centers and at the retail
platform. We knew that building and training staff and the actual transfer of
work to the support centers would be expensive and time consuming. As many
employees as possible were transferred from the affiliates to the support
centers, but as a practical matter the large majority of staffing for the
support centers had to come from new hires. Building and training a staff of the
size necessary in the low-unemployment economy that has existed for the past two
years slowed the conversions.
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<PAGE> 8
We normally begin realizing cost savings on new acquisitions within a few
weeks of their data processing conversions. We expected similar savings on the
charter conversions. We had hoped that the savings achieved through year-end
1998 would be sufficient to offset the additional cost of training new personnel
and the transfer of work to the support centers. Our last major data processing
conversion was scheduled for the third quarter of 1999. At that point we
expected to be approaching our original cost estimates. In 1999, it was
necessary to staff a project management office for the millennium change. While
this project and the century date change went smoothly, it was a very expensive
undertaking, and diverted some of our best project management, data processing
system testing, and conversion talent. Because of this diversion, difficulty of
building staff in the support centers, and some technology delays, we fell
approximately six months behind on the charter consolidation and conversions. To
compound the delay, any major systems projects not completed by the end of the
third quarter 1999 had to be delayed beyond February 29, 2000, because of the
millennium change. As a result we did not meet our noninterest expense targets
for 1999.
Our affiliate banks have reduced their noninterest expenses substantially
compared to what they were previously, and a number of our best performing banks
have already achieved their expected reduction in expenses. Essentially all of
the back office conversions have now been made and the work transferred to one
of the support centers. The expenses associated with the staff training and
conversions should now return to much more normal levels in the support centers,
and in terms of cost, the remaining technology conversions are minor in
comparison to those already completed. We expect all of our banking units to hit
their targets over the next few months.
SHARE PRICE
After a strong 1997 and early 1998, bank stocks have significantly under
performed the broader market. Bank price/earnings multiples have declined from
near all time highs at year end 1997 to near all time lows today. Our share
price peaked at the same time the multiple peaked, at year-end 1997. The rapid
and dramatic change in valuation for the industry that began in 1998 has been
caused largely by a change in the perception of earnings growth prospects for
the industry. A well-known and widely followed bank stock analyst gave investors
"Ten Reasons Not To Own Bank Stock." This was an extraordinarily negative piece
on the future of bank earnings. Similar articles by many others have appeared as
well.
The overriding concern has been the perception that rising interest rates
will have an adverse impact on bank earnings because a significant percentage of
bank earnings come from net interest income. Net interest margins tend to be
squeezed during periods of rising rates and widen during periods of declining
rates. One analyst told me his philosophy is simple, buy when you think rates
are going down, and sell when you think rates are going up. There are also
credit concerns. If the Federal Reserve raises interest rates, the economy will
slow causing loan growth to slow and problem credits to increase. Reserves in
the industry have declined since the early 1990's and would likely need to be
increased somewhat in the face of increasing credit problems. Slower loan
growth, tighter margins, and increased credit costs lead to slower earnings
growth.
Momentum and growth investors seemed to begin leaving the sector in 1998
and 1999 taking down valuations. With the declining stock prices, takeover
speculation began to diminish, and some investors that had stayed in the sector
for the takeover play also began to leave. The pressure on share prices
continued throughout 1999. Sector funds had withdrawals that forced further
liquidations. While I believe bank valuations generally have reached very
attractive levels, three more Federal funds rate hikes are now anticipated.
After all the estimate revisions,
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<PAGE> 9
earnings shortfalls, and shortfall announcements last year, since year end five
organizations have announced significant anticipated earnings shortfalls for
this year. All of this is overhanging the sector at present. Value investors
believe they can afford to wait.
The Federal funds rate increases notwithstanding, I believe Union Planters
is very well positioned and an extraordinary buy at current levels.
SUMMARY
While our earnings were not as much as we would have hoped, 1999 was a very
productive year. Both net earnings and diluted earnings per share were records
for the Company. Operating earnings and cash operating earnings were also
records and well above 1998. The margin environment, while improving during the
early part of the year, remained difficult, and loan growth was less than
normal, primarily because of the mortgage environment in the early part of the
year and the liquidation of non-policy loans from acquired organizations.
Nevertheless, our net interest income was up over 1998 and our noninterest
income increased as well. The loan loss provision came in as expected. Because
of technology delays and the difficulty of building staff, we did not meet our
noninterest expense targets, and along with the compression in the margin, we
fell short of where we wanted to be in the fourth quarter. In the end they were
in line with those of other banking organizations of similar size. We rank 27th
in both total earnings for the year ($410 million) and total assets ($33.3
billion) at year end among banking organizations in the United States.
In 2000, the transition to the single charter and centralized operating
environment will be completed. Our support centers and our affiliate banks will
reach or exceed their original targets. Prior to the beginning of the conversion
to a single charter, our consolidated efficiency and expense ratios were
excellent, making it possible for our overall performance to be within the top
quartile of our peer group. They should be better in a single charter
environment than in a multiple charter environment. We should begin to see some
of the benefits in 2000. We will continue to emphasize non-interest-sensitive
noninterest income. We expect continued strong growth in insurance and related
products, and loan growth should return to much more normal levels.
I want to recognize Rick Heiligenstein, Lee Kling, and Carl Hogan for their
service to the Board and Company. Mr. Heiligenstein served as a member of our
Directors' Audit Committee, Mr. Kling Chaired our Directors' Trust Committee,
and Mr. Hogan was a member of the Directors' Salary and Benefits Committee. I
want to thank all three for their service to the Company and say that their
guidance and support during this period of transition is very much appreciated.
I also want to give special recognition to C. J. Lowrance, III. Mr.
Lowrance is retiring after 15 years of service on the Board of Union Planters
Corporation and 30 years on the Board of Union Planters Bank of Memphis. Mr.
Lowrance has served on the Directors' Loan Committee for most of this period.
His father served on the bank Board from 1950 to 1969. I want to personally
thank Charlie for his guidance and support, which will be missed, and to
recognize the Lowrance family for its 50 years of service to Union Planters.
In closing let me say that I am very disappointed about our share price
performance and the delay in achieving all of the cost savings anticipated from
the charter consolidations and recent acquisitions in 1999. While the margin
environment is problematic in 2000, the progress made in balance sheet and
internal operations in 1999 will provide long-term benefits and greater earnings
for the Company in 2000 and beyond. Thank you for your support and for being a
shareholder of Union Planters.
Yours very truly,
/s/ BENJAMIN RAWLINS, JR.
Benjamin W. Rawlins, Jr.
Chairman and Chief Executive Officer
9
<PAGE> 10
UNION PLANTERS CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income........................ $ 1,256,531 $ 1,207,233 $ 1,199,899 $ 1,114,989 $ 1,010,501
Provision for losses on loans.............. (74,045) (204,056) (153,100) (86,381) (50,696)
Investment securities gains (losses)....... 2,128 (9,074) 4,888 4,934 2,288
Other noninterest income................... 490,559 475,195 449,573 391,054 369,047
Noninterest expense........................ (1,082,434) (991,619) (932,569) (865,409) (849,268)
Merger-related and other significant
items(1)................................. 26,093 (105,757) (52,842) (113,430) (10,335)
----------- ----------- ----------- ----------- -----------
Earnings before income taxes............... 618,832 371,922 515,849 445,757 471,537
Income taxes............................... (208,834) (146,316) (176,014) (153,055) (156,718)
----------- ----------- ----------- ----------- -----------
Net earnings............................... $ 409,998 $ 225,606 $ 339,835 $ 292,702 $ 314,819
=========== =========== =========== =========== ===========
Cash operating earnings(2)................. $ 440,337 $ 351,866 $ 392,476 $ 381,233 $ 336,503
=========== =========== =========== =========== ===========
PER COMMON SHARE DATA
Net earnings
Basic.................................... $ 2.88 $ 1.61 $ 2.53 $ 2.28 $ 2.55
Diluted.................................. 2.85 1.58 2.47 2.21 2.47
Cash operating earnings(2)
Basic.................................... 3.09 2.52 2.93 2.98 2.73
Diluted.................................. 3.06 2.47 2.85 2.87 2.64
Cash dividends............................. 2.00 2.00 1.495 1.08 .98
Book value................................. 19.90 20.86 20.96 20.13 18.93
BALANCE SHEET DATA (AT PERIOD END)
Total assets............................... $33,280,353 $31,691,953 $29,974,463 $28,108,528 $26,131,594
Loans, net of unearned income.............. 21,446,400 19,576,826 20,302,969 18,811,441 16,614,031
Allowance for losses on loans.............. 342,300 321,476 324,474 270,439 255,103
Investment securities...................... 7,472,455 8,301,703 6,414,197 6,185,699 6,425,174
Total deposits............................. 23,372,116 24,896,455 22,875,879 21,330,304 20,322,078
Short-term borrowings(3)................... 5,422,504 1,648,039 1,824,513 1,758,027 1,086,369
Long-term debt(3)
Parent company........................... 379,656 378,249 373,746 373,459 214,758
Subsidiary banks......................... 738,114 1,060,483 1,365,753 1,451,712 1,219,744
Total shareholders' equity................. 2,776,109 2,984,078 2,874,473 2,557,117 2,312,892
Average assets............................. 32,902,370 30,744,326 29,188,805 27,610,263 24,812,394
Average shareholders' equity............... 2,980,664 2,931,703 2,755,209 2,417,913 2,125,796
Average shares outstanding (in thousands)
Basic.................................... 141,854 139,034 132,451 125,449 119,995
Diluted.................................. 143,983 142,693 138,220 133,452 127,416
PROFITABILITY AND CAPITAL RATIOS
Return on average assets................... 1.25% .73% 1.16% 1.06% 1.27%
Return on average common equity............ 13.80 7.71 12.45 12.26 15.14
Net interest margin........................ 4.36 4.40 4.57 4.48 4.53
Net interest spread........................ 3.69 3.60 3.79 3.71 3.80
Loans/deposits (period end)................ 91.76 78.63 88.75 88.19 81.75
Common and preferred dividend payout
ratio.................................... 69.93 113.67 48.84 40.03 30.46
Shareholders' equity/total assets (period
end)..................................... 8.34 9.42 9.59 9.10 8.85
Average shareholders' equity/average total
assets................................... 9.06 9.54 9.44 8.76 8.57
Leverage ratio............................. 6.65 8.86 9.62 9.40 8.54
Tier 1 capital/risk-weighted assets........ 9.50 13.34 14.32 14.49 13.46
Total capital/risk-weighted assets......... 12.69 16.78 16.39 16.66 15.75
CREDIT QUALITY RATIOS(4)
Allowance for losses on loans/period end
loans.................................... 1.64% 1.71% 1.71% 1.57% 1.63%
Nonperforming loans/total loans............ .62 .83 .81 .79 .79
Allowance for losses on loans/nonperforming
loans.................................... 264 206 210 199 207
Nonperforming assets/loans and foreclosed
properties............................... .80 .97 1.01 1.03 1.03
Provision for losses on loans/average
loans.................................... .36 1.04 .83 .52 .33
Net charge-offs/average loans.............. .47 .95 .63 .47 .31
</TABLE>
- ---------------
(1) Reference is made to Table 1 on page 31 for the merger-related and other
significant items.
(2) Cash operating earnings are net earnings before merger-related and other
significant items and goodwill and other intangibles amortization, net of
income taxes.
(3) Reference is made to Note 9 to Union Planters' financial statements on page
54 for the components of short-term borrowings and long-term debt.
(4) FHA/VA government-insured/guaranteed loans have been excluded, since they
represent minimal credit risk to Union Planters.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
The following provides a narrative discussion and analysis of the major
trends affecting the results of operations and financial condition of Union
Planters Corporation (Union Planters or the Company). This discussion
supplements Union Planters' financial statements and accompanying notes which
begin on page 42 and should be read in conjunction with the financial statements
and the related financial tables beginning on page 31.
UNION PLANTERS CORPORATION
Union Planters is a $33.3 billion, multi-state bank holding company whose
primary business is banking. The Company is the largest bank holding company
headquartered in Tennessee and as of December 31, 1999 was the 27th largest bank
holding company headquartered in the United States, based on total assets. Union
Planters Bank, National Association (Union Planters Bank or UPB), headquartered
in Memphis, Tennessee, is Union Planters' largest subsidiary with $32.7 billion
in total assets.
Union Planters is managed along traditional banking and non-traditional
banking lines. Union Planters' only major reportable business segment is its
banking operations, which accounted for 87%, 84%, and 83%, respectively, of
total revenues and 92%, 89%, and 93%, respectively, of earnings before
merger-related and other significant items for the three years ended December
31, 1999. This segment consists of traditional deposit taking and lending
functions, including consumer, commercial and corporate lending; retail banking;
and trade-finance activities. These functions are organized and managed along
geographic lines. Listed below for the banking operations is the percentage of
total assets, loans, deposits, and the number of banking offices and ATMs by
state as of December 31, 1999.
<TABLE>
<CAPTION>
PERCENTAGE OF BANKING
OPERATIONS NUMBER OF
------------------------- ---------------
BANKING
ASSETS LOANS DEPOSITS OFFICES ATMS
------ ----- -------- ------- -----
<S> <C> <C> <C> <C> <C>
Alabama............................. 2% 2% 2% 22 20
Arkansas............................ 2 3 2 42 38
Florida............................. 16 14 16 82 73
Illinois............................ 13 11 13 99 114
Indiana............................. 8 7 8 78 79
Iowa................................ 3 4 3 28 34
Kentucky............................ 6 7 6 40 36
Louisiana........................... 3 4 3 23 19
Mississippi......................... 10 12 10 137 124
Missouri............................ 10 10 10 94 112
Tennessee........................... 25 24 25 208 348
Texas............................... 2 2 2 15 21
--- -----
Total...................... 868 1,018
=== =====
</TABLE>
The Mortgage Banking operations of Union Planters Bank originate both fixed
and adjustable-rate single family first mortgage loans through 30 mortgage
production offices (13 retail offices and 17 wholesale offices). These offices
are located in Alabama, Arizona, California, Colorado, Florida, Georgia, Iowa,
Louisiana, Mississippi, Nevada, North Carolina, Ohio, Tennessee, Texas, and
Washington. In addition, mortgage loans are originated in banking offices of
UPB. The types of loans originated include the following:
- loans that meet the standard underwriting policies and purchase limits
established by FNMA and FHLMC (conforming conventional loans)
- loans in amounts greater than FNMA and FHLMC purchase limits (jumbo
loans)
- loans insured or guaranteed under FHA and VA programs
- loans exclusively for sale to specific investors that conform to the
requirements of such investors
- affordable housing loans in UPB's marketplaces
In addition to originating mortgage loans, Union Planters operates one of
the 25 largest residential mortgage loan servicing businesses in the United
States. The servicing portfolio includes GNMA, FNMA, FHLMC, and private
investors' loans as well as loans owned by Union Planters.
A wholly owned subsidiary, Capital Factors, Inc. (Capital Factors),
provides receivable-based commercial financing and related fee-based credit,
collection, and management information services. Capital Factors has four
regional offices located in New York, New York; Los Angeles, California;
Charlotte, North Carolina; and Dallas, Texas; an
11
<PAGE> 12
asset-based lending office in Atlanta, Georgia; and its headquarters in Boca
Raton, Florida.
In addition to Mortgage Banking and Capital Factors discussed above, the
following other non-traditional banking lines are managed on a separate basis.
- FINANCIAL SERVICES -- includes sales of bank-eligible insurance and
investment products, including annuities, credit life and mortgage
insurance products sold through Union Planters Bank's extensive platform
distribution sales force, and full-service and discount brokerage
services
- TRUST -- investment management, personal trust services, employee benefit
administration, and proprietary mutual funds
- BANK CARDS (MERCHANT SERVICING) -- converts payments by bank cards to
cash for merchants selling goods and services (prior to the fourth
quarter of 1998, UPB's credit card portfolio was included in this unit)
- FHA/VA LOANS -- the purchase of delinquent FHA/VA
government-insured/guaranteed loans from GNMA pools and third parties and
the securitization and sale of these loans
- SBA LOAN TRADING -- purchasing, packaging, and securitizing the
government-guaranteed portions of Small Business Administration (SBA)
loans
- PARENT COMPANY -- funding source for acquisition activities
Reference is made to Note 18 to the financial statements on page 68 for
additional information regarding the Union Planters' operating segments. The
following table summarizes earnings before taxes for banking operations, the
other operating units as a group, the parent company, and merger-related and
other significant items for the past three years.
<TABLE>
<CAPTION>
EARNINGS (LOSS)
BEFORE TAXES
---------------------
1999 1998 1997
----- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Banking operations........... $542 $431 $522
Other operating units........ 67 56 50
Parent company(1)............ (18) -- (8)
Merger-related and other
significant items.......... 28 (115) (48)
---- ---- ----
Consolidated earnings before
taxes...................... $619 $372 $516
==== ==== ====
</TABLE>
- ---------------
(1) Net of the elimination of intercompany earnings and dividends.
CAUTIONARY STATEMENT REGARDING 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 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 (IRS) examinations on Union
Planters' financial condition, results of operations, and liquidity
- estimated future cost savings related to the consolidation of banking
operations
- business plans for the year 2000 and beyond
These forward-looking statements involve significant risks and
uncertainties including changes in general economic and financial market
conditions 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.
EARNINGS OVERVIEW
Union Planters reported net earnings of $410.0 million, or $2.85 per
diluted share, in 1999 compared to $225.6 million, or $1.58 per diluted share,
in 1998, and $339.8 million, or $2.47 per diluted share, in 1997. Net earnings
in 1999 represented a return on average assets of 1.25% and a return on average
common equity of 13.80%. This compares to .73% and 7.71%, respectively, in 1998
and 1.16% and 12.45%, respectively, in 1997. Net earnings in each year included
merger-related and other significant items. Table 1, on page 31, presents a
summary of these items for the last five years.
Cash operating earnings (earnings before merger-related and other
significant items and goodwill and other intangibles amortization, net of income
taxes) were $440.3 million, or $3.06 per diluted share, in 1999. This compares
to $351.9 million, or $2.47 per diluted share, in 1998 and $392.5 million, or
$2.85 per diluted share, in 1997. On a cash operating basis, the
12
<PAGE> 13
return on average assets was 1.34% in 1999, an increase from 1.14% in 1998 and
compared to 1.34% in 1997. On the same basis, the return on average common
equity was 14.83% in 1999, compared to 12.06% in 1998 and 14.41% in 1997.
ACQUISITIONS
In 1999, Union Planters completed four acquisitions, all of which were
accounted for as purchases and are included in Union Planters' financial results
from the respective dates of acquisition. The table on page 14 presents the
twenty-eight acquisitions completed over the last three years. The map on the
inside front cover of this report highlights the markets currently served by
Union Planters. Table 3 on page 32 and Note 2 to the financial statements on
page 49 present additional information regarding acquisitions.
STRATEGY. Management's philosophy has been to provide additional
diversification of the revenue sources and earnings of Union Planters through
the acquisition of well-managed financial institutions. This strategy generally
targets in-market institutions, institutions in contiguous markets, and
institutions having significant local market share. Acquisitions are sought that
provide the opportunity to enhance Union Planters' product lines and provide the
opportunity for new products and services. This strategy is also designed to
enhance Union Planters' delivery system, to lower overall distribution costs,
and to leverage existing banking and operational capabilities.
OPERATING PHILOSOPHY. Prior to 1997, it was Union Planters' policy to
acquire institutions and operate them as separately chartered banks. Allowing
acquired banks to retain their name and continue operating on a decentralized
basis was believed to provide customers the best service. This philosophy was
reevaluated in 1997 due to competitive changes and the need to take advantage of
technology to reduce costs, better serve customers, and provide better
management information. A decision was made to merge existing banking
subsidiaries and newly acquired institutions into Union Planters Bank (charter
consolidation). All but two of Union Planters' subsidiary banks have been merged
into Union Planters Bank.
Management continues to believe it is imperative that customer decisions be
made locally. Management's primary focus at the local level is serving its
customers (loans and deposits) and broad discretion is given in achieving this
end. Operational functions including accounting, deposit services, item
processing, mortgage servicing, trust services, and credit administration are
now provided on a centralized regional basis.
The centralization of selected operational functions related to
management's philosophy started at the end of 1997 and was substantially
completed in the fourth quarter of 1999. All the planned data processing
conversions for charter consolidation and 1999 and 1998 acquisitions are now
complete.
Management expected pretax earnings to be increased by an estimated $115
million to $120 million from reduced expenses related to charter consolidation
and the expense and revenue synergies anticipated from acquisitions, primarily
Magna Group, Inc. Savings have been achieved but were partially offset by higher
expense levels resulting from acquisitions in 1999 and the expansion of existing
operations such as mortgage banking and financial services.
MERGER-RELATED AND OTHER SIGNIFICANT CHARGES. Historically, as Union
Planters acquired entities, merger-related and other charges have been incurred.
Also, in 1997 and 1998, charges were incurred related to the decision to
consolidate substantially all of the banking charters under Union Planters Bank.
These charges included the following:
- salaries, employee benefits, and other employment-related charges for
employment contract payments, change in control agreements, early
retirement and involuntary separation and related benefits, post-
retirement expenses, severance payments, and assumed pension termination
expenses of acquired entities
- write-downs of office buildings and equipment to be sold, lease buyouts,
assets determined to be obsolete or no longer of use, and equipment not
compatible with Union Planters' equipment
- professional fees for legal, accounting, consulting, and financial
advisory services
- expenses such as asset write-offs, cancellation of vendor contracts, and
other costs which normally arise from consolidation of operational
activities
- costs related to combining operations, such as FHLB prepayment penalties
- costs related to implementing new technology, such as document imaging
In 1999, there were no significant merger-related charges impacting
operating results since the acquisitions completed were accounted for as
purchases. Merger-related and charter consolidation charges totaled ($7.2)
million, $183.1 million, and $64.9 million in 1999, 1998, and 1997,
respectively. Reference is made to Table 1 on page 31 and Note 13 to the
financial statements on page 61.
The level of merger-related charges is directly related to the size of the
institution being
13
<PAGE> 14
acquired. Currently, Union Planters does not have any material pending
acquisitions and management expects the level of acquisition activity to be
limited in 2000.
ACQUISITIONS COMPLETED SINCE JANUARY 1, 1997
<TABLE>
<CAPTION>
ACCOUNTING
INSTITUTION ACQUIRED DATE STATE ASSETS CONSIDERATION METHOD
- --------------------------- ----- --------- --------- --------------------------------------- ----------
(DOLLARS
IN
MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
PFIC Corporation 2/97 Tennessee $ 4 .1 million shares of common stock Purchase
SBT Bancshares, Inc. 10/97 Tennessee 99 .6 million shares of common stock Pooling
Citizens of Hardeman County
Financial Services, Inc. 10/97 Tennessee 62 .2 million shares of common stock Pooling
Magna Bancorp, Inc. 11/97 Mississippi 1,191 7.1 million shares of common stock Pooling
First Acadian Bancshares,
Inc. 12/97 Louisiana 81 .3 million shares of common stock Pooling
Capital Bancorp 12/97 Florida 2,156 6.5 million shares of common stock Pooling
Sho-Me Financial Corp. 1/98 Missouri 374 1.2 million shares of common stock Purchase
Security Bancshares, Inc. 4/98 Arkansas 146 .5 million shares of common stock Pooling
Peoples First Corporation 7/98 Kentucky 1,427 6.0 million shares of common stock Pooling
Magna Group, Inc. 7/98 Missouri 7,683 33.4 million shares of common stock Pooling
Capital Savings Bancorp,
Inc. 7/98 Missouri 207 .7 million shares of common stock Pooling
CB & T, Inc. 7/98 Tennessee 278 1.4 million shares of common stock Pooling
Merchants Bancshares, Inc. 7/98 Texas 565 2.0 million shares of common stock Pooling
First National Bancshares
of Wetumpka, Inc. 7/98 Alabama 202 .8 million shares of common stock Pooling
Alvin Bancshares, Inc. 8/98 Texas 117 .4 million shares of common stock Pooling
Duck Hill Bank 8/98 Mississippi 21 - million shares of common stock Purchase
First Community Bancshares,
Inc. 8/98 Tennessee 39 .1 million shares of common stock Pooling
Transflorida Bank 8/98 Florida 334 1.7 million shares of common stock Pooling
AMBANC Corp. 8/98 Indiana 740 3.4 million shares of common stock Pooling
Florida Branch Purchase 9/98 Florida 1,389 $110.0 million in cash Purchase
Ready State Bank 12/98 Florida 622 3.2 million shares of common stock Pooling
Southeast Bancorp, Inc. 12/98 Tennessee 324 1.2 million shares of common stock Pooling
and
Kentucky
FSB, Inc. 12/98 Tennessee 145 .9 million shares of common stock Pooling
LaPlace Bancshares, Inc. 12/98 Louisiana 64 .4 million shares of common stock Pooling
First Mutual Bancorp, Inc. 1/99 Illinois 403 1.4 million shares of common stock Purchase
First & Farmers Bancshares,
Inc. 2/99 Kentucky 411 $ 76.0 million in cash Purchase
Indiana Branch Purchase 3/99 Indiana 1,903 $283.0 million in cash Purchase
Republic Banking
Corporation of Florida 7/99 Florida 1,792 $410.3 million in cash Purchase
-------
Total assets of
acquisitions $22,779
=======
</TABLE>
14
<PAGE> 15
EARNINGS ANALYSIS
NET INTEREST INCOME
Net interest income is comprised of interest income and loan-related fees
less interest expense. Net interest income is affected by a number of factors
including the level, pricing, mix, and maturity of earning assets and
interest-bearing liabilities; interest rate fluctuations; and asset quality. For
purposes of this discussion, net interest income is presented on a fully-taxable
equivalent basis (FTE), which adjusts tax-exempt income to an amount that would
yield the same after-tax income had the income been subject to taxation at the
federal statutory income tax rate (currently 35% for Union Planters). Reference
is made to Tables 4 and 5, on pages 33 and 34, that present Union Planters'
average balance sheet and volume/rate analysis for each of the three years in
the period ended December 31, 1999.
Net interest income (FTE) in 1999 was $1.29 billion, an increase of 4.0%
from $1.24 billion reported in 1998. In 1997 net interest income was $1.23
billion. The net interest margin (net interest income (FTE) as a percentage of
average earning assets) was 4.36% in 1999, down from 4.40% in 1998 and 4.57% in
1997. The net interest spread between earning assets and interest-bearing
liabilities increased to 3.69% in 1999 from 3.60% in 1998 and compared to 3.79%
in 1997.
In the first quarter of 1997, the Federal Reserve raised the Federal Funds
rate to 5.50% where it remained for the rest of 1997. In 1998, the Federal
Reserve reduced the Federal Funds rate in a series of quarter-point reductions
to 4.75%. As the Federal Funds rate decreased, yields on intermediate to
long-term government securities dropped significantly. The Federal Funds rate
remained at the same level until the middle of 1999 when the Federal Reserve
began a series of three, quarter-point increases, with the Federal Funds rate
ending the year at 5.50%. In February 2000, the Federal Funds rate was increased
by another quarter-point.
The decline in rates in 1998 created a relatively flat yield curve thereby
reducing opportunities to increase asset yields based on choice of maturity.
Earning asset yields and the cost of interest-bearing liabilities both declined,
with earning asset yields falling at a faster rate. In addition to the decline
in market rates, heavy mortgage prepayments and loan sales in both 1998 and 1999
reduced the quantity of higher-yielding earning assets. During the latter part
of 1998 and early 1999, Union Planters was also investing funds received in
return for assumption of deposit liabilities in the Florida and Indiana Branch
Purchases. As a result of these circumstances, the net interest spread
(difference between earning asset yields and cost of interest-bearing
liabilities) declined in 1998 and the first part of 1999.
In the middle of 1999 as rates began to rise, Union Planters was able to
reprice certain earning assets to higher yields and at the same time replace
higher costing certificates of deposit with lower costing certificates of
deposit or short-term borrowings and hold other interest-bearing deposits costs
stable. This allowed for the net interest spread to widen and overall net
interest income to increase. Net interest income also increased by approximately
$115 million in 1999 due to purchase acquisitions.
The Florida Branch Purchase refers to the purchase of 24 branches and
assumption of $1.4 billion of deposit liabilities of California Federal Bank of
Florida in September 1998. The Indiana Branch Purchase refers to the purchase in
March 1999 of $850 million of loans, the acquisition of 56 branch locations, and
the assumption of $1.7 billion of deposit liabilities of First Chicago NBD
Corporation in Indiana. The other significant purchase acquisition in 1999 was
Republic Banking Corporation of Florida and its subsidiary, Republic National
Bank in Miami, Florida (Republic). Acquired in July 1999, Republic had total
assets of $1.8 billion, total loans of $1.0 billion, and total deposits of $1.3
billion. Reference is made to Note 2 to the financial statements on page 49 for
additional information regarding these acquisitions and the other acquisitions
completed over the last three years.
If interest rates continue to rise, some downward pressure is likely to
continue on both the net interest margin and net interest spread. This is
consistent with industry trends which is a reflection of heightened competition
for traditional loan and deposit products. It also reflects Union Planters
increased reliance on short-term borrowings resulting from a decline in
deposits. Management is continuing to emphasize loan and deposit growth in the
markets it serves to strengthen net interest income. The "Market Risk and
Asset/Liability Management" discussion on page 28 presents an analysis of the
projected impact of interest rate changes on Union Planters' net interest
income.
INTEREST INCOME
Interest income (FTE) decreased $15.8 million in 1999 to $2.34 billion. The
decrease was attributable to a reduction in the average yield on average earning
assets from 8.31% in 1998 to 7.87% in 1999, which equated to a $122.3 million
decline in interest income. This decrease was partially offset by a $1.4 billion
increase in
15
<PAGE> 16
average earning assets to $29.7 billion in 1999, which increased interest income
$106.5 million.
During the fourth quarter of 1998 and first quarter of 1999, the low
interest rate environment produced a high level of mortgage loan refinancing. As
these refinancing levels increased, mortgage-backed loans and securities yields
dropped. At December 31, 1999 and 1998 approximately 36% and 39%, respectively,
of Union Planters' earning assets were mortgage-backed loans and mortgage-backed
investment securities. Downward pressure on earning asset yields also occurred
as a result of the following: (i) sale of Union Planters' credit card portfolio
(approximately $440 million in the fourth quarter of 1998 and $20 million in the
first quarter of 1999) which had a weighted average yield of approximately 13%;
(ii) the securitization and sale in the first quarter of 1999 of $132 million of
FHA/VA loans, with a weighted average yield of 9.7%; and (iii) the sale of $296
million of ARM loans in June 1999, with a weighted average yield of 7.6%.
Reference is made to "Noninterest Income" on page 17 for a discussion of the
gains that resulted from these sales. As interest rates rose in the latter half
of 1999, yields on mortgage loans and variable-rate commercial loans, as well as
yields on other earning assets, increased.
The growth of earning assets in 1999 is attributable primarily to both
loans and investment securities. Average loans increased 3% due primarily to
acquisitions. The growth was partially offset by the loan sales and the high
level of mortgage refinancing discussed above. The investment securities growth,
12.8%, is attributable to the investment of funds received in exchange for the
assumption of deposit liabilities in the Florida and Indiana Branch Purchases.
Interest income (FTE) increased 2.5% in 1998. The increase is attributable
to the growth of average earning assets, which increased $1.4 billion. This
growth equated to a $106.8 million increase in interest income. Partially
offsetting this growth was a decline in the average yield on earning assets from
8.53% in 1997 to 8.31% in 1998, or a decrease in interest income of $48.4
million.
The earning asset growth in 1998 was attributable to a 15.0% growth in
investment securities and a 2.5% growth in average loans. The growth of
investment securities was attributable to the investment of funds received in
exchange for the assumption of deposit liabilities in the Florida Branch
Purchase. Loan growth in 1998 was offset by the sale of the credit card
portfolio and the securitization and sale of $380 million of FHA/VA loans. The
decrease in the yield on average earning assets was attributable to the lower
interest rate environment and partially to the sale of higher yielding loans.
INTEREST EXPENSE
Interest expense decreased $65.7 million in 1999 to $1.04 billion. The
decrease was due primarily to a decrease in rates paid on average
interest-bearing liabilities from 4.71% in 1998 to 4.18% in 1999. The decline in
the average rate paid reduced interest expense $104.1 million. This decrease was
partially offset by a $1.4 billion increase in average interest-bearing
liabilities, which increased interest expense $38.4 million. This growth was
attributable primarily to deposit liabilities assumed in the Florida and Indiana
Branch Purchases and the Republic acquisition and to an increase in short-term
borrowings, primarily short-term FHLB advances. Short-term FHLB advances
increased in 1999 in response to a decline in deposits (see the "Deposits"
discussion on page 26) which created a need for an alternative funding source.
Average long-term debt outstanding decreased as long-term FHLB advances of
acquired entities merged with Union Planters Bank were paid off and long-term
debt of subsidiaries matured in 1999.
Interest expense increased $42.6 million in 1998 to $1.11 billion. The
increase was attributable to the $1.1 billion increase in average interest-
bearing liabilities, which increased interest expense $50.0 million. The
increase is attributable to interest-bearing deposit liabilities assumed in the
third quarter Florida Branch Purchase and other 1998 acquisitions. Average
long-term debt also increased due to the issuance of $300 million of 6.5%
Putable/Callable Subordinated Notes. Partially offsetting these increases was a
decline in the average rate paid for interest-bearing liabilities from 4.74% in
1997 to 4.71% in 1998, or a $7.4 million decrease in interest expense.
16
<PAGE> 17
A summary of the components of average earning assets and interest-bearing
liabilities is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------ ----- -----
<S> <C> <C> <C>
AVERAGE EARNING ASSETS (IN BILLIONS)........................ $ 29.7 $28.3 $26.9
Comprised of:
Loans..................................................... 71% 72% 74%
Investment securities..................................... 27 25 23
Other earning assets...................................... 2 3 3
Yield earned on average earning assets...................... 7.87 8.31 8.53
AVERAGE INTEREST-BEARING LIABILITIES (IN BILLIONS).......... $ 24.9 $23.5 $22.4
Comprised of:
Deposits.................................................. 83% 85% 84%
Short-term borrowings..................................... 12 6 8
FHLB advances, short- and medium-term bank notes, and
other long-term debt.................................... 5 9 8
Rate paid on average interest-bearing liabilities........... 4.18 4.71 4.74
</TABLE>
PROVISION FOR LOSSES ON LOANS
The provision for losses on loans (the provision) in 1999 was $74.0
million, or .36% of average loans, excluding FHA/VA government-
insured/guaranteed loans (FHA/VA loans). This compares to a provision of $204.1
million, or 1.04% of average loans, excluding FHA/VA loans, in 1998 and $153.1
million, or .83% of average loans, excluding FHA/VA loans, in 1997.
The higher provision in 1998 compared to 1999 was attributable primarily to
the banks acquired in 1998 and the December 31, 1997 acquisitions. Upon
acquisition, management implemented a more aggressive policy of dealing with
problem credits, which involved setting goals for reducing the overall level of
problem credits. Loans were charged down to estimated realizable values allowing
for quicker disposal of the underlying assets pledged as collateral. This policy
resulted in higher provisions and higher levels of specific credit charge-offs
in 1998. Union Planters' credit card portfolio, prior to its sale in the fourth
quarter of 1998, accounted for a large percentage of the provision and net
charge-offs in 1998 and 1997. In 1998, credit card provisions and net
charge-offs were approximately 16% and 25%, respectively, of the total provision
and charge-offs. This compares to 39% for both in 1997. Also impacting the
provision were provisions and charge-offs related to two asset-based credits in
Capital Factors' operations which deteriorated in the fourth quarter of 1998.
The provision and charge-offs related to these loans were $20 million and $13
million, respectively.
Management expects increases in the provision in 2000 only in proportion to
the level of loan growth, excluding the impact of any acquisitions and
deterioration of specific credits. Provisions in the range of 35 to 45 basis
points on average loans are anticipated for the existing portfolio based on the
current condition of the portfolio and assuming current economic conditions
continue.
NONINTEREST INCOME
Noninterest income in 1999 was $512.7 million, down $56.1 million from
$568.8 million in 1998 and compared to $470.8 million in 1997. The major
components of noninterest income are presented on the statement of earnings on
page 43 and in Note 13 to the financial statements on page 61. Table 1, which
follows this discussion, on page 31 presents a five-year trend of the major
components of noninterest income including certain significant items that impact
the five-year trend.
The significant items impacting noninterest income over the last three
years, which management does not consider operating items are as follows.
Certain of the items do recur periodically.
- Union Planters sold its credit card portfolio in the fourth quarter of
1998, which resulted in a gain of $72.7 million. In 1999, additional
gains of $3.3 million were recognized as portfolios of acquired entities
were sold.
- Periodically, Union Planters securitizes and sells previously past due
FHA/VA guaranteed-loans serviced by Union Planters Bank. In 1998
approximately $380 million of these loans were sold and a gain of $19.6
million was recognized. In 1999, a gain of $5.3 million was recognized
when $132 million of these loans were securitized and sold. Additional
sales are expected depending on market conditions and qualifying loans in
the portfolio.
- As part of Union Planters' asset/liability management, investment
securities are all classified as available for sale securities. In 1999,
investment securities gains of $2.1 million were realized compared to
investment securities losses of $9.1 million in 1998. In 1997 investment
securities gains were $4.9 million. The loss in 1998 resulted from
premium write-downs ($22.8 million) of certain high-coupon
mortgage-backed securities of an acquired entity due to the acceleration
of prepay-
17
<PAGE> 18
ments of the underlying loans. The loss was partially offset by a $6.0
million gain resulting from the contribution of certain equity securities
to a charitable foundation established by Union Planters.
- Gains on the sale of branches and other selected assets have resulted
primarily from Union Planters' acquisition program. In 1999 these gains
totaled $3.9 million compared to $6.3 million and $16.3 million in 1998
and 1997, respectively. The larger gain in 1997 resulted from the sale of
several upper east Tennessee branches and deposits acquired from Leader
Federal Corporation.
- The sale of $296 million of ARM loans in 1999 resulted in a gain of $5.0
million.
- Union Planters' corporate trust business (primarily general obligation
bond administration for government entities) was sold in 1999 resulting
in a gain of $2.4 million. An additional gain of approximately $2.1
million may be recognized in 2001, contingent upon business retention.
Certain other amounts have been deferred over the period of non-compete
agreements.
Excluding the items identified above, noninterest income was $490.6 million
in 1999, an increase of $15.4 million from 1998 and compared to $449.6 million
in 1997. A discussion of the major components of noninterest income follows.
SERVICE CHARGES ON DEPOSIT ACCOUNTS. Service charges on deposit accounts
are fees received for services related to retail and commercial deposit
products. These fees are the largest component of noninterest income. These fees
increased $13.7 million in 1999 to $170.1 million. This compares to $156.4
million and $157.3 million in 1998 and 1997, respectively. The growth in this
area related to acquisitions, primarily the Florida and Indiana Branch Purchases
and the Republic acquisition. Growth of these fees leveled off in the fourth
quarter of 1999. Continued growth of these fees is dependent on the level of
deposits and volume of customer transaction activity as well as competitive
conditions in local markets.
MORTGAGE BANKING REVENUES. Mortgage banking revenues are comprised of
mortgage servicing income, mortgage origination fees, gains or losses on the
sale of mortgage loans, capitalized mortgage servicing rights, gains on the sale
of mortgage servicing rights, and other miscellaneous fees related to mortgage
origination and servicing activities. These revenues increased 7.6% in 1999 to
$96.8 million. This compares to $90.0 million in 1998 and $80.7 million in 1997.
Mortgage banking revenues increased in 1997, 1998, and the first half of 1999 as
a low interest rate environment increased mortgage originations driven by a high
level of refinancing activity. These increases slowed in the last half of 1999
as interest rates increased.
In order to increase its mortgage loan origination capacity, Union Planters
acquired retail and wholesale loan production offices in 1999 in markets outside
of its existing banking markets. In April 1999, Union Planters acquired seven
retail mortgage loan production offices in Northern California which was a
complement to its existing wholesale office in Irvine, California. The
California retail offices are located in Benecia, Dublin, Campbell, Capitola,
Saratoga, Santa Maria, and Bakersfield. In October 1999, Union Planters acquired
the wholesale loan production operations of Colonial Mortgage Company, which
included offices in Atlanta, Cincinnati, Dallas, Denver, Des Moines, Greensboro,
Las Vegas, Montgomery, Niceville (FL), Phoenix, Seattle, and St. Petersburg.
Both of these acquisitions complement existing Union Planters' mortgage
production operations and provide a better balance between origination and
servicing capacity. The increased origination capacity will allow the mortgage
operations to replace normal run-off in its servicing portfolio and increase the
number of loans serviced. Union Planters' goal is to increase mortgage servicing
fee income.
Mortgage loans originated are either retained for UPB's portfolio or are
sold into the secondary market and the servicing rights are retained.
"Conforming conventional loans" sold into the secondary market are typically
pooled and exchanged for securities issued by FNMA or FHLMC, which are sold to
investment banking firms. "Jumbo loans" produced are sold to private investors.
FHA-insured and VA-guaranteed loans produced for sale in the secondary market
are pooled to form GNMA mortgage-backed securities, which are sold to investment
banking firms. Loans originated through the wholesale offices are purchased
through approximately 3,000 approved mortgage brokers. A formal approval and
monitoring process is in place to select all brokers, assess their performance,
and evaluate the credit quality of loans they originate. Mortgage brokers
demonstrating unacceptable performance or insufficient loan activity are removed
from UPB's program. Loans originated and retained in Union Planters' portfolio
are centrally processed, underwritten, and serviced by UPB's Portfolio Mortgage
Administration Center located in Hattiesburg, Mississippi.
Single family mortgage loans originated were $3.6 billion and $2.6 billion
in 1999 and 1998, respectively. Of the $3.6 billion originated in 1999, $2.4
billion was sold in the secondary market and $1.2 billion was retained in Union
Planters' portfolio. In 1998, $1.6 billion of the originated loans were sold in
the secondary
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market and the balance were retained in the portfolio.
At December 31, 1999, Union Planters' single family mortgage loan servicing
portfolio totaled $18.0 billion or approximately 355,000 loans, including $5.8
billion of loans serviced, or approximately 125,000 loans, for Union Planters'
own account. At December 31, 1998, Union Planters' single family mortgage loan
servicing portfolio totaled $17.4 billion, or approximately 357,000 loans,
including $5.3 billion serviced for Union Planters.
FACTORING COMMISSIONS. A separate subsidiary of Union Planters Bank,
Capital Factors, provides factoring and other specialized commercial financial
services to small- and medium-sized companies. Capital Factors purchases
accounts receivable from its clients pursuant to factoring agreements. Capital
Factors earns a commission in return for the services rendered to clients,
including credit protection, collection, and management information services.
Commissions earned from these activities were $29.5 million in 1999, down from
$30.6 million in 1998 and compared to $30.1 million in 1997. The decline in
factoring commissions in 1999 was due to a decrease of approximately $16 million
in factored sales purchased. The factoring volume was $3.49 billion in 1999
compared to $3.50 billion in 1998. Additionally, factoring fees as a percentage
of factored sales purchased have declined. Both decreases are attributable
primarily to competitive market pressure.
BANK CARD INCOME. Bank card income currently represents Union Planters'
merchant processing. Income is earned by the conversion to cash of payments
received by merchants from customers using credit cards, debit cards, purchase
cards, and private label credit cards. Prior to 1999 bank card income also
included transaction fee income from Union Planters' credit card portfolio. Bank
card income was $26.9 million in 1999 compared to $38.6 million in 1998 and
compared to $39.5 million in 1997. Management sees an opportunity to grow this
business and achieve "back-office" efficiencies.
ATM TRANSACTION FEES. These fees relate to noncustomer usage of Union
Planters' ATMs. These fees are directly related to the volume of transactions.
Union Planters had 1,018 ATM machines at December 31, 1999 compared to 1,034 at
December 31, 1998. Union Planters' ATMs by state are shown in the "Union
Planters Corporation" discussion on page 11. These fees were $25.0 million in
1999, an increase of 29.5% over 1998. These fees increased 23.0% in 1998
compared to 1997.
TRUST SERVICE INCOME. Trust service income represents fees from management
of estates, personal trusts and employee benefit plans, investment advisory
services, and stock transfer services for a limited number of companies. Trust
service income in 1999 was $23.9 million, down slightly from $24.1 million in
1998 and compared to $24.0 million in 1997. At December 31, 1999, total assets
under administration were $11.3 billion, compared to $12.4 billion at year end
1998. Of that number, managed assets were $4.4 billion at December 31, 1999
compared to $3.4 billion at December 31, 1998. The decrease in trust service
income and total assets under administration during 1999 is attributable
primarily to the sale of Union Planters' corporate trust business in 1999.
FINANCIAL SERVICES INCOME. Financial services income includes annuity
sales income, insurance commissions, and brokerage fee income, which are
generated by Union Planters Financial Services Group. Revenues from these areas
grew by 29.4% and 22.4% in 1999 and 1998, respectively. Union Planters utilizes
a platform distribution format in which Union Planters' branch office personnel
generate a majority of these revenues through customer contact in branch
locations. Union Planters currently has over 2,800 licensed branch office
annuity and insurance agents and that number is projected to grow in 2000.
Brokerage fee income is generated through a centrally located discount brokerage
operation, as well as full service registered representatives handling sales of
investment products primarily in the Metropolitan markets served by Union
Planters.
Annuity sales income is generated from commissions resulting from the sale
of fixed-rate annuities. Income from annuity sales commissions were $17.5
million in 1999 compared to $7.8 million in 1998 and $10.5 million in 1997.
Growth from this operation is attributable to extensive training of Union
Planters platform representatives that focuses on identifying financial
solutions for customers and developing relationship selling skills.
Insurance commission income is generated from the sale of credit life,
mortgage, property and casualty, and other bank-eligible insurance products. In
1999, insurance commissions were $17.8 million, an increase of $3.7 million over
$14.1 million in 1998. These commissions were $12.9 million in 1997.
Approximately 60% of the commissions in 1999 were credit life insurance
commissions and 40% were other insurance commissions. Union Planters owns a
captive credit life underwriter that allows Union Planters to better serve its
customers' needs and participate in underwriting gains. Union Planters plans to
offer additional term and single premium insurance products as well as to
initiate a joint venture title insurance relationship in 2000.
Brokerage fee income is generated through full-service and discount
brokerage operations. Brokerage fee income in 1999 was $17.6 million,
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down $1.4 million from 1998. In 1998, these fees increased $9.0 million to $19.0
million. The decline in income is primarily attributable to restructuring and
integrating the brokerage operations of acquired banks into Union Planters'
platform sales format. This operation currently has over 360 licensed "Series 6"
platform agents and dedicated full service "Series 7" representatives. Expansion
of this operation is expected in 2000, with an increase in the number of
licensed agents and the completion of the program's restructuring effort. Fee
income in this operation is transaction driven and fluctuates year to year.
All three of these areas are cross-selling their products to Union
Planters' customers as well as other financial services customers. This group
has implemented a TeamsEnAction program to assist in this effort. TeamsEnAction
was developed and partnered with another firm to enhance Union Planters'
capabilities in identifying customer financial needs and implementing
appropriate financial solutions. In 2000, Union Planters will initiate an
Internet-based version of TeamsEnAction software that is designed to increase
the cross-selling of all financial and bank products offered to customers and
facilitate the measurement of account profitability. This software will allow
Union Planters' branch personnel to proactively evaluate customers' needs for
the purpose of determining the most effective manner for delivering the
appropriate financial solution.
The Gramm-Leach-Bailey Act passed in 1999 will increase competitive
pressure as Union Planters seeks to expand this business segment and engage (and
retain) talented licensed personnel. Effective March 11, 2000, this financial
modernization legislation will permit eligible holding companies to offer
expanded financial services as a financial holding company, and to combine with
insurance and securities firms. Union Planters believes it has a successful
platform sales program for its financial service activities based on
relationship selling, which is expected to continue to increase revenues in
2000.
OTHER INCOME AND ELECTRONIC BANKING. All other noninterest income totaled
$65.5 million in 1999, which compares to $75.3 million and $68.9 million in 1998
and 1997, respectively. Other income sources include letter of credit fees,
miscellaneous factoring fees, safe deposit box fees, fees for travelers checks
and money orders, earnings or losses related to investments accounted for using
the equity method of accounting, and other miscellaneous revenue sources.
In 1998, Union Planters invested in FundsXpress, Inc., a third-party
Internet delivery company, to develop Union Planters Bank's Internet delivery
system. In 1999, Union Planters' losses related to FundsXpress' operations were
$4.5 million, which reduced other noninterest income. Union Planters has
approximately 40,000 customers (approximately 2% of its total customers) using
its online banking services and expects to increase that number. The system
supports both retail and commercial customers and includes the following
services:
- Balance inquiry/transfers/transaction history/statements
- Bill payment services
- ATM network delivery (two networks under contract and one in production)
- Bill presentment (Internet and ATM)
- Images of checks and statements
- Brokerage services (currently piloting this service)
- Other traditional and nontraditional products
Also contributing to the decrease in other noninterest income was a decline
in earnings from VSIBG, a limited partnership investment, to $1.9 million for
1999 compared to $3.8 million in 1998 and $2.3 million in 1997. VSIBG is an
investment banking operation which provides fixed-income investment products to
small and medium size financial institutions. Profits and commissions from SBA
trading operations also decreased in 1999 to $4.3 million from $5.4 million in
1998 and $7.3 million in 1997. This operation buys, sells, and securitizes
government-guaranteed SBA pools and government-guaranteed portions of SBA loans.
NONINTEREST EXPENSE
Noninterest expense decreased 10.3% in 1999 to $1.1 billion compared to
$1.2 billion and $1.0 billion in 1998 and 1997, respectively. The components of
noninterest expense are presented on the statement of earnings on page 43 and in
Note 13 to the financial statements on page 61. Table 1, on page 31, presents a
five-year trend on the major components of noninterest expense, including
merger-related and significant charges.
Merger-related, charter consolidation and other expenses related to ongoing
integration of operations totaled $183.1 million in 1998 compared to $64.9
million in 1997. These expenses were not significant in 1999 since Union
Planters' acquisitions were accounted for as purchases.
Excluding the above-described expenses and other unusual expenses
identified on Table 1, noninterest expenses were $1.1 billion in 1999, an
increase of 9.2% from 1998 and compared to $932.6 million in 1997. Acquisitions,
primarily the Republic acquisition, and the impact of the Indiana and Florida
Branch Purchases increased expenses an estimated $76 million in 1999. This is an
estimated number since their operations were merged immediately with Union
Planters' operations. Goodwill and other intangibles amortization related to
acquisitions increased $27.1
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million in 1999 to $56.4 million. This compares to $29.3 million in 1998 and
$21.4 million in 1997. Excluding the impact of acquisitions and goodwill and
other intangibles amortization, expenses decreased approximately $13 million in
1999. The reduction of expenses resulted from cost savings from mergers of
operations and was offset by growth in the mortgage banking and financial
services operations, expenses related to conversion and integration of bank
operations, and expenses related to year 2000 preparedness.
Salaries and employee benefits, which represent the largest category of
noninterest expense, were $502.3 million in 1999 compared to $468.7 million in
1998 and $440.5 million in 1997. At December 31, 1999, Union Planters had 13,156
full-time equivalent employees compared to 12,330 and 12,304, respectively, at
December 31, 1998 and 1997. The increase in salaries and employee benefits
expense is attributable to merit salary increases, incentive compensation, and
increases in salaries and employee benefits expense related to acquisitions
accounted for as purchase transactions.
The other major expense categories impacting noninterest expenses between
1999 and 1998 are as follows:
- Net occupancy expense increased $12.1 million to $88.1 million in 1999.
This increase relates to acquisitions (primarily the Florida and Indiana
Branch Purchases and the Republic acquisition) and expansion of existing
operations.
- Equipment expense increased $9.0 million in 1999 to $81.7 million. This
increase relates to acquisitions and to additional equipment for regional
processing centers (data warehouse and check imaging systems).
- Communications expense increased $8.3 million in 1999 to $34.3 million.
The increase relates to acquisitions and communication systems necessary
to support Union Planters' twelve-state operations.
- Advertising and promotion expense increased $4.8 million in 1999 to $29.8
million. Advertising to promote Union Planters in newly entered markets,
advertising in existing markets to increase loans and deposits,
advertising related to "Y2K" education and readiness, and growth due to a
larger organization were the primary reasons for the increase.
- Taxes other than income taxes decreased $4.8 million to $6.9 million in
1999.
- Other real estate expense decreased $4.4 million to $5.4 million in 1999.
- All other operating expenses had a net increase of $5.1 million.
Between 1998 and 1997 the other major expense categories changed as
follows:
- Equipment expense increased $10.0 million to $72.7 million in 1998. The
increase related to Union Planters' expansion through acquisitions and
equipment needs related to the charter consolidation.
- Amortization of mortgage servicing rights increased $4.5 million to $22.0
million in 1998. The increase related to additional servicing acquired in
1998, which increased mortgage servicing rights approximately $62.5
million.
- Communications expense increased $5.3 million to $26.0 million. The
increase related to expansion of operations.
- Other personnel services expense increased $4.8 million to $15.6 million
in 1998. This expense category includes training, relocation, and other
miscellaneous expenses related to personnel.
- All other operating expenses decreased approximately $1.6 million.
In addition to the items discussed above, a significant amount of
management time in 1999 was again spent on the continuing consolidations of
"back office" functions, integration of recently completed acquisitions, and
compliance issues related to "Y2K." In some cases, expenses were duplicated
while the conversions or integrations were in progress. Quantification of these
expenses cannot be made but they increased overall operating expenses in 1998
and 1999.
INCOME TAXES
Income taxes consist of provisions for federal and state income taxes
totaling $208.8 million in 1999, or an effective rate of 33.75%. This compares
to applicable income taxes of $146.3 million in 1998 and $176.0 million in 1997.
These amounts represent effective tax rates of 39.34% and 34.12%, respectively,
in 1998 and 1997. The variances from federal statutory rates (35% for all three
years) are attributable to the level of tax-exempt income from investment
securities and loans, nondeductible merger-related expenses, and the effect of
state income taxes. The decrease in the effective tax rate in 1999, as compared
to 1998, is attributable to the level of taxable income, changes in the mix of
taxable and nontaxable revenues, and a decrease in nondeductible merger-related
and other expenses. For additional information regarding Union Planters'
effective tax rates for all periods, see Note 15 to the financial statements on
page 64.
Union Planters and certain of its subsidiaries are currently under routine
examination by the IRS. While the ultimate results of these examinations cannot
be predicted with certainty, management believes that it has sufficient reserves
to
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cover any resulting liability therefrom and consequently, the examinations are
not expected to have a material adverse effect on Union Planters' results of
operations, financial condition, or liquidity.
At December 31, 1999, Union Planters' had a net deferred tax asset of
$254.7 million, which is included in other assets. This compares to $160.6
million at December 31, 1998. The increase is attributable primarily to the
change in the net deferred tax asset related to the unrealized gain or loss on
available for sale investment securities. Reference is made to the "Investment
Securities" discussion below.
Realization of a portion of the $254.7 million net deferred tax asset is
dependent upon generation of future taxable income sufficient to offset future
deductions. Management believes that, based upon historical earnings and
anticipated future earnings, normal operations will continue to generate
sufficient future taxable income to realize in full these deferred tax benefits.
Therefore, no extraordinary strategies are deemed necessary by management to
generate sufficient taxable income for purposes of realizing the net deferred
tax asset.
FINANCIAL CONDITION ANALYSIS
At December 31, 1999, Union Planters reported total assets of $33.3 billion
compared to $31.7 billion for December 31, 1998. Average total assets for 1999
were $32.9 billion compared to $30.7 billion for 1998. Acquisitions and branch
purchases in 1999, accounted for as purchases, increased total assets
approximately $4.5 billion. Reference is made to Table 3 on page 32 for the
balance sheet impact of acquisitions.
EARNING ASSETS
Earning assets are composed of loans, investment securities, trading
account assets, federal funds sold, securities purchased under resale
agreements, and interest-bearing deposits at financial institutions. The net
interest income from these assets accounts for approximately 72% of Union
Planters' operating revenue stream. At December 31, 1999, earning assets totaled
$29.8 billion compared to $28.7 billion at year end 1998. Average earning assets
were $29.7 billion in 1999 compared to $28.3 billion in 1998. The increase in
average earning assets in 1999 is attributable to purchase acquisitions,
primarily the Florida and Indiana Branch Purchases and the Republic acquisition.
INVESTMENT SECURITIES
As part of its asset/liability management strategy, Union Planters
classifies all of its investment securities as available for sale securities,
which are carried on the balance sheet at fair value. This strategy gives
management flexibility to actively manage the investment portfolio as market
conditions and funding requirements change. The investment securities portfolio
was $7.5 billion at December 31, 1999 compared to $8.3 billion at December 31,
1998. Average investment securities were $8.1 billion and $7.2 billion,
respectively, for these periods.
The investment portfolio declined between 1998 and 1999 as securities
matured and were not reinvested due to other funding needs. Funds were invested
in the investment portfolio in the latter part of 1998 as Union Planters
received funds in return for assuming approximately $1.4 billion of deposit
liabilities in the Florida Branch Purchase. The investments in late 1998 and
purchase acquisitions caused investment securities on average in 1999 to be
higher than in 1998. The weighted average yield on the investment portfolio
decreased six basis points from 1998 to 6.43% in 1999.
At December 31, 1999 the investment portfolio had a net unrealized loss of
$212.6 million which compares to a net unrealized gain of $93.1 million at year
end 1998. The unrealized loss resulted from increasing interest rates.
Investments made in a lower interest rate environment lost value as interest
rates increased. Management does not expect any losses to result from the
decline in the value of the portfolio because maturities of securities and other
funding sources should meet Union Planters' liquidity needs. Any losses taken
will result from strategic or discretionary decisions to adjust the investment
portfolio. Reference is made to Note 4 to the financial statements on page 50,
which provides the composition of the investment portfolio for the last two
years, along with a breakdown of the maturities and weighted average yields of
the portfolio at December 31, 1999.
U.S. Treasury and U.S. Government agency obligations represented 56.0% of
the investment securities portfolio at December 31, 1999, 71.6% of which are
Collateralized Mortgage Obligation (CMO) and mortgage-backed security issues. At
December 31, 1998, 63.1% of the investment portfolio was U.S. Treasury and U.S.
Government agency obligations, of which 63.7% were CMOs and mortgage-backed
securities. Union Planters has some credit risk in the investment securities
portfolio; however, management does
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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 "Market Risk and Asset/Liability Management" discussions on pages 15 and 28,
respectively, for information regarding the market-risk in the investment
securities portfolio.
The limited credit risk in the investment securities portfolio at December
31, 1999 consisted of 23.7% of investment grade CMOs, 17.0% municipal
obligations, and 3.3% other stocks and securities (primarily equity securities
and Federal Reserve Bank and Federal Home Loan Bank stock).
At December 31, 1999, Union Planters had approximately $7.2 million of
"structured notes" compared to $45.3 million at year end 1998. Structured notes
have uncertain cash flows which are driven by interest-rate movements and may
expose a company to greater market risk than traditional investments. All of
Union Planters' investments of this type are government agency issues (primarily
Federal Home Loan Banks and Federal National Mortgage Association).
LOANS
Loans are the largest classification within earning assets of Union
Planters and represented approximately 71% of average earning assets for 1999
compared to 72% for 1998. Loans at December 31, 1999 totaled $21.4 billion
compared to $19.6 billion at year end 1998. Average loans were $21.1 billion in
1999, an increase of $643 million (3.1%) from $20.5 billion in 1998. Excluding
FHA/VA loans, average loans increased 5.1% in 1999 to $20.5 billion. Purchase
acquisitions in 1999, primarily the Indiana Branch Purchase and the Republic
acquisition, added approximately $2.3 billion of loans. Table 7 on page 35
presents a five-year summary of the composition of the loan portfolio.
Loan volumes were impacted in the fourth quarter of 1998 and first quarter
of 1999 by the sale of Union Planters' credit card portfolio, approximately $440
million of loans and approximately $20 million of loans, respectively. Union
Planters also securitized and sold approximately $380 million of previously
defaulted FHA and VA loans in 1998. In March 1999, a similar transaction
occurred involving approximately $132 million of FHA/VA loans. Similar
securitizations and sales of FHA/VA loans in the future are dependent on market
conditions and the level of qualifying FHA/VA loans. A sale of ARM loans
occurred in June 1999 involving approximately $296 million of loans.
The various categories of loans are subject to varying levels of risk.
Management mitigates this risk through portfolio diversification and geographic
diversification. Union Planters' loan portfolio is spread over the twelve states
in which it has banking locations and other geographic areas serviced by these
locations. Reference is made to the table at the beginning of this discussion,
which presents the percentage of Union Planters' loans by state for the banking
operations. The largest concentration of loans is in single family residential
loans, comprising 26% of the loan portfolio, which historically have low loan
loss experience. Union Planters has a limited amount of foreign exposure, less
than 2% of the loan portfolio. The foreign loans are primarily U.S. dollar trade
finance loans to correspondent banks in Central and South America and there are
no significant loans to foreign governments.
Union Planters' loan portfolio is also diversified by the relative size of
the loans in the portfolio. Of the top 50 loan relationships in the loan
portfolio, the largest outstanding was $45 million. The top fifty relationships
totaled $971 million, or an average of $20 million. Union Planters has an
overall internal limit, subject to exception on a case-by-case basis, for loan
relationships of $50 million, with lower sub-limits established for various risk
classifications.
SINGLE FAMILY RESIDENTIAL LOANS. Single family residential loans totaled
$5.6 billion at both December 31, 1999 and 1998. These loans were 26% of the
loan portfolio at December 31, 1999 compared to 29% at year end 1998. The
decrease in the percentage of these loans in the portfolio and the lack of
growth in this sector of the portfolio reflects the high level of prepayments
from refinancing activity in the low interest rate environment present in 1998
and the first half of 1999, as well as loan sales. The overall decline was
partially offset by single family loans from acquisitions. The expected higher
interest rate environment in 2000 is expected to slow loan prepayments and
increase new volume since these loans are generally adjustable-rate and are
expected to be more attractive to borrowers relative to fixed-rate loans.
COMMERCIAL LOANS. Commercial, financial, and agricultural loans, including
foreign loans and direct lease financing, totaled $5.3 billion, or 24% of the
portfolio, at December 31, 1999. This represents a 38% increase over December
31, 1998, which was $3.8 billion. The growth in this segment is attributable
primarily to the acquisitions in 1999.
OTHER MORTGAGE LOANS. This segment of the portfolio totaled $4.6 billion,
or 21% of the loan portfolio at December 31, 1999. This compares to $4.4 billion
at December 31, 1998, or 22% of the loan portfolio. At December 31, 1999, loans
for nonfarm nonresidential properties (commercial real estate) totaled $3.6
billion, or 79% of this category, which compares to $3.5
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billion, or 80% of this category at year end 1998. Owner occupied commercial
real estate loans represented approximately 40% of the loans in this category
and typically have less risk than income producing commercial real estate loans.
Loans secured by multifamily residential properties and loans secured by
farmland comprised 13% and 8%, respectively, of this category of the portfolio,
which compares to 12% and 8%, respectively, at year end 1998.
REAL ESTATE CONSTRUCTION LOANS. These loans totaled $1.6 billion at
December 31, 1999, or 7% of the loan portfolio, which compares to $1.2 billion
at December 31, 1998, or 6% of the loan portfolio. At year-end approximately 32%
are single family construction loans, approximately 36% commercial construction
loans, and approximately 32% are land development loans. These percentages were
40%, 40%, and 20%, respectively, in 1998.
FHA/VA GOVERNMENT-INSURED/GUARANTEED LOANS (FHA/VA LOANS). The FHA/VA
loans (single family residential loans) declined $241 million in 1999 to $519
million at December 31, 1999, or 2% of the loan portfolio. The decrease relates
partially to the securitization and sale of approximately $132 million of
previously defaulted FHA/VA loans in the first quarter of 1999, for a gain of
approximately $5.3 million. Management continues to purchase these loans out of
its servicing portfolio. The number of past due loans at above current market
rates in the servicing portfolio has significantly declined which has reduced
the opportunities to increase interest income from the purchase of these loans.
Additional securitizations and sales are possible in 2000.
As a loan servicer, Union Planters is obligated to pass through to the
holders of a GNMA mortgage-backed security, the coupon rate, whether or not the
interest due on the underlying loans has been collected from the borrower. When
an FHA/VA government-insured/guaranteed single-family loan which carries an
above-market rate of interest has been in default for more than 90 days, it is
Union Planters' policy to buy the delinquent FHA/VA loan out of the GNMA pools
serviced by Union Planters. This action eliminates Union Planters' obligation to
pay the coupon rate. Union Planters thereby earns the net interest-rate
differential between the coupon rate which it would otherwise be obligated to
pay to the GNMA holder and Union Planters' lower cost of funds. Furthermore,
management has purchased in prior years additional delinquent FHA/VA
government-insured/guaranteed loans from other GNMA servicers to leverage the
operating costs of this operation.
Since all of these loans are FHA/VA government-insured/guaranteed loans,
Union Planters' investment is expected to be recoverable through claims made
against the FHA or the VA. Management believes the credit risk and the risk of
principal loss is minimal. For this reason, management has excluded these loans
from the credit quality data and resulting ratios presented in this report. Any
losses incurred would not be significantly greater or less than if Union
Planters had continued solely as servicer of the FHA/VA loans. The risk
involving these loans arises from not complying timely with FHA/VA's foreclosure
process and certain non-reimbursable foreclosure costs.
Union Planters, by purchasing the delinquent FHA/VA loans, also assumes the
interest-rate risk associated with funding a loan if timely foreclosure should
not occur. Risk also exists, under certain circumstances, that FHA or VA might
reject claims or the claim might otherwise not be able to be collected in full.
FHA/VA claims receivables totaled $108.6 million at December 31, 1999 compared
to $126.2 million at December 31, 1998.
Provisions for losses related to the 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 $1.2 million, $4.7 million, and $8.0
million, respectively, in 1999, 1998, and 1997. At December 31, 1999, the
Corporation had a reserve for FHA/VA claims losses of $28.0 million compared to
$27.5 million at December 31, 1998.
CONSUMER LOANS. This segment of the loan portfolio totaled $2.8 billion at
December 31, 1999, or 13% of the loan portfolio. This compares to consumer loans
of $2.7 billion, or 14% of the loan portfolio, at year end 1998. Approximately
60% of these loans are automobile loans with the balance being loans to
individual consumers for a variety of uses.
HOME EQUITY LOANS. These loans totaled $585 million at December 31, 1999
compared to $483 million at December 31, 1998. These loans are revolving,
open-ended single-family residential loans that consumers use for various
purposes.
ACCOUNTS RECEIVABLE - FACTORING. This category of the portfolio totaled
$555 million at December 31, 1999, a decrease of $61 million from the December
31, 1998 total of $616 million. Capital Factors, a separate subsidiary of Union
Planters Bank, provides factoring and other specialized commercial financial
services to small and medium size companies. Capital Factors purchases accounts
receivable from its clients pursuant to factoring agreements. Its clients
primarily include manufacturers, importers, wholesalers and distributors in the
apparel and textile-
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related industries and, to a lesser extent, in consumer goods-related
industries. Also included in this category are asset-based loans, which are
collateralized primarily by receivables owned by the borrowers. The decrease in
these receivables is due to increased competition and also to Capital Factors'
withdrawal from healthcare industry factoring activities. In exiting this
segment, two loans were retained totaling $9.7 million, both of which are on
nonaccrual status.
LOAN OUTLOOK. Management expects modest loan growth in 2000 as the markets
served by Union Planters generally have a good economic outlook. Loan growth
continues to be an area of emphasis in 2000 for the Union Planters' local banks.
ALLOWANCE FOR LOSSES ON LOANS
The allowance for losses on loans (the allowance) at December 31, 1999 was
$342.3 million, or 1.64% of loans, compared to $321.5 million, or 1.71% of
loans, at December 31, 1998. In calculating the allowance to loans ratios,
FHA/VA loans have been excluded (see "FHA/VA Government-Insured/Guaranteed
Loans" discussion above). The allowance is increased by the provision for losses
on loans and recoveries and is decreased by charged-off loans. The allowance
increased $43.1 million and $15.9 million in 1999 and 1998, respectively, due to
acquisitions accounted for as purchases.
Management's policy is to maintain the allowance at a level deemed adequate
to absorb estimated losses inherent in the loan portfolio. The allowance is
reviewed quarterly in accordance with the methodology described in Note 1 to the
financial statements on page 46. 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 losses 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 risks 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, regulatory agencies, and the Company's
independent accountants. These reviews provide information which assists in the
timely identification of problems and potential problems and in deciding whether
the credit represents a probable loss or risk which should be recognized.
Tables 8 and 10, on pages 36 and 37, respectively, provide detailed
information regarding the allowance for each of the five years in the period
ended December 31, 1999.
Net charge-offs were $96.3 million in 1999 compared to $186.3 million in
1998 and $116.3 million in 1997. As a percentage of average loans, net
charge-offs were .47% in 1999 compared to .95% and .63% in 1998 and 1997,
respectively. The $90.0 million decrease in net charge-offs in 1999 relates
primarily to lower charge-offs by institutions Union Planters acquired in 1998,
the December 31, 1997 acquisitions, and the credit card portfolio sale. Union
Planters' policies for charging off loans and dealing with problem credits is
generally more aggressive than the practice of the acquired entities.
Approximately 53% of the charge-offs in 1998 related to these institutions.
Credit card net charge-offs also decreased $44.7 million in 1999 compared to
1998 due to the sale of the credit card portfolio in 1998.
NONPERFORMING ASSETS
LOANS OTHER THAN FHA/VA LOANS. Nonperforming assets consist of nonaccrual
loans, restructured loans, and foreclosed properties less specific valuation
allowances. Table 9 on page 36 presents nonperforming assets in two categories,
FHA/VA loans and all other loans. For this discussion and for the credit quality
information presented in this annual report, FHA/VA loans are excluded from the
calculations because of their minimal exposure to principal loss. (Reference is
made to the discussion of "FHA/VA Government-Insured/Guaranteed Loans" on the
previous page.)
Nonperforming loans (nonaccrual loans and restructured loans) decreased
$26.3 million in 1999 to $129.6 million, or .62% of loans. In the third quarter
of 1999, Union Planters changed its policy related to placing single family
residential mortgage loans on nonaccrual status to conform to industry practice.
Previously, single family residential mortgage loans were automatically placed
on nonaccrual status after they became past due 90 days or more. Prospectively,
these loans are being placed on nonaccrual status if the loan is not in the
process of collection or is not well secured. The impact of this change was to
reduce single family residential mortgage loans on nonaccrual status
approximately $50 million with loans past due 90 days or more and still accruing
interest increasing by a corresponding amount.
Union Planters' nonaccrual loans are primarily smaller, well-secured loans.
At December 31, 1999, there were five loan relationships greater than $3 million
in this category and the largest relationship was $6.9 million. Additionally,
nonaccrual loans related to entities acquired in
25
<PAGE> 26
1999 totaled approximately $11 million. As discussed previously, two loans
totaling $9.7 million related to the healthcare division of Capital Factors were
on nonaccrual status at year end. Capital Factors withdrew from this industry in
1999.
Loans past due 90 days or more and still accruing interest, which are not
included in nonperforming assets, were $92.8 million at December 31, 1999, or
.44% of loans. This compares to $48.6 million, or .26% of loans at December 31,
1998. As discussed above, the increase in these loans compared to 1998 related
to a change in Union Planters' policy for placing single family residential
mortgage loans on nonaccrual status. A breakdown of nonaccrual loans and loans
past due 90 days or more and still accruing interest, both excluding FHA/VA
loans, follows:
<TABLE>
<CAPTION>
LOANS PAST DUE
NONACCRUAL LOANS 90 DAYS OR MORE
------------------------------ ---------------------------
DECEMBER 31, DECEMBER 31,
------------------------------ ---------------------------
LOAN TYPE 1999 1998 1997 1999 1998 1997
- ---------------------------------------------- -------- -------- -------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Secured by single family residential.......... $ 20,031 $ 73,433 $ 67,747 $64,515 $12,991 $15,784
Secured by nonfarm nonresidential............. 33,818 25,242 15,415 3,975 8,193 4,458
Other real estate............................. 23,453 17,616 19,676 3,480 5,387 4,395
Commercial, financial, and agricultural,
including foreign loans and direct lease
financing................................... 47,551 26,831 27,267 15,130 15,041 4,754
Credit card and related plans................. 3 58 2 67 2,044 15,351
Other consumer................................ 2,910 7,198 8,789 5,667 4,970 6,386
-------- -------- -------- ------- ------- -------
Total................................ $127,766 $150,378 $138,896 $92,834 $48,626 $51,128
======== ======== ======== ======= ======= =======
</TABLE>
FHA/VA LOANS. These loans do not, in management's opinion, have
traditional credit risk similar to the rest of the loan portfolio and risk of
principal loss is considered minimal due to the government-guarantee. FHA/VA
loans past due 90 days or more and still accruing interest totaled $240.8
million at December 31, 1999 compared to $355.1 million at December 31, 1998.
The decrease in the loans past due relates to the decline in the volume of these
loans. At December 31, 1999 and 1998, $6.6 million and $9.2 million,
respectively, of FHA/VA loans were placed on nonaccrual status by management
because the contractual payment of interest by FHA/VA had stopped due to missed
filing dates; however, no loss of principal is expected from these loans.
POTENTIAL PROBLEM ASSETS. Potential problem assets consist of assets which
are generally secured and are not currently considered nonperforming and include
those assets where information about possible credit problems has raised serious
doubts as to the ability of the borrowers to comply with present repayment
terms. Historically, such assets have been loans which have ultimately become
nonperforming. At December 31, 1999, Union Planters had potential problem assets
(all loans) aggregating $48.1 million, comprised of twelve loans, the largest of
which was $12.7 million. This compares to potential problem assets (all loans)
at December 31, 1998 aggregating $66.8 million, comprised of 52 loans, the
largest of which was $18.9 million.
OTHER EARNING ASSETS
Other earning assets include interest-bearing deposits at financial
institutions, federal funds sold, securities purchased under agreements to
resell, and trading account assets. These assets averaged $397 million, or 2% of
average earning assets, in 1999 with an average yield of 5.73%. This compares to
$587 million in 1998 with a 5.93% average yield and $609 million in 1997 with an
average yield of 6.13%. Trading account assets, the largest category, are
comprised of government-guaranteed SBA pools and the government-guaranteed
portion of SBA loans. Management considers these assets to have minimal
interest-rate and credit risk. Trading account assets fluctuate depending on
market conditions and demand. The other categories fluctuate depending on
funding needs and investment opportunities.
DEPOSITS
Union Planters' deposit base is its primary source of liquidity and
consists of deposits from the communities served in Union Planters' twelve-state
market area. The mix of deposits has remained relatively constant as shown in
the table below. Tables 4 and 6 on pages 33 and 35, respectively, present the
components of Union Planters' average deposits. Note 8 to the financial
statements on page 53 presents the maturities of interest-bearing deposits at
December 31, 1999.
26
<PAGE> 27
The composition of average deposits over the last three years was as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Noninterest-bearing deposits 17% 15% 15%
Money market deposits 17 13 13
Savings deposits 19 19 19
Other time deposits 38 41 42
Certificates of deposit of
$100,000 and over 9 12 11
</TABLE>
Deposits were $23.4 billion at December 31, 1999 and averaged $25.0 billion
for the year. This compares to period end deposits of $24.9 billion and average
deposits of $23.6 billion in 1998. Acquisitions, primarily the Indiana Branch
Purchase and the Republic acquisition, increased total deposits $3.6 billion at
their respective dates of acquisition. Excluding the impact of acquisitions,
total deposits declined $5.2 billion from December 31, 1998 to December 31,
1999. On average, excluding the estimated impact of acquisitions, total deposits
decreased approximately $2.4 billion. The decrease is attributable to not
competing as aggressively for public fund deposits (which require pledging of
investment securities), time deposits that matured and were not renewed, the
competitive market in general, and increased competition from other investment
products, including Union Planters' sale of non-traditional products, such as
annuities and brokerage services. Management is developing strategies to slow
this deposit decline. Further declines could increase dependency on short-term
borrowings and increase Union Planters' interest rate volatility.
CAPITAL AND DIVIDENDS
Union Planters' shareholders' equity decreased by $208.0 million in 1999 to
$2.8 billion at December 31, 1999. At that date the shareholders' equity to
total assets ratio was 8.34%. Shareholders' equity at December 31, 1998 was $3.0
billion, or 9.42% of total assets.
The decrease in shareholders' equity is attributable primarily to a share
repurchase plan announced in August 1999. The purchase of shares under the share
repurchase plan and shares purchased for the First Mutual Bancorp, Inc.
acquisition (1.1 million shares) reduced shareholders' equity $250.8 million in
1999. The other item reducing shareholders' equity was the net change in the
unrealized loss on available for sale securities of $191.5 million, to an
unrealized loss of $134.2 million at December 31, 1999. These items were
partially offset by retained net earnings of $123.3 million and common stock
issued in connections with the First Mutual acquisition, employee benefit plans,
and conversion of debt, which totaled $111.0 million.
The share repurchase plan was authorized by the Board of Directors in
August 1999 and authorized the purchase of up to 5% of Union Planters' common
stock or approximately 7.1 million shares. As of February 16, 2000, the 7.1
million shares had been purchased (4.7 million shares were purchased as of
December 31, 1999). 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 the next 18 to 24 months either in the
open market or privately negotiated transactions.
Union Planters has consistently maintained regulatory capital ratios above
the "well capitalized" standard. Table 13 on page 39, the statement of changes
in shareholders' equity on page 44, and Note 12 to the financial statements on
page 59 present further information regarding Union Planters' capital adequacy
and changes in shareholders' equity.
Union Planters and its subsidiaries must comply with the capital guidelines
established by the regulatory agencies that supervise their operations. These
agencies have adopted a system to monitor the capital adequacy of all insured
financial institutions. The system includes ratios based on the risk-weighting
of on- and off-balance-sheet transactions. At December 31, 1999 Union Planters'
Tier 1 and Total risk-weighted capital ratios were 9.50% and 12.69%,
respectively. The leverage ratio (Tier 1 capital divided by unweighted average
quarterly total assets) was 6.65%. These ratios decreased from December 31,
1998, due primarily to acquisitions which increased total assets approximately
$4.5 billion with no capital being issued. Intangibles resulting from these
acquisitions totaled $631.4 million, which are deducted from Tier 1 capital,
which in turn reduces the ratios. The shares purchased under Union Planters'
share repurchase plan also lowered the regulatory capital ratios.
Union Planters declared cash dividends on its common stock of $2.00 per
share in both 1999 and 1998. In January 2000, a regular quarterly dividend was
declared, $.50 per share ($2.00 per share annualized). Union Planters
Corporation also declared and paid cash dividends of $2.00 per share on its 8%
Series E Convertible Preferred Stock in both 1999 and 1998. Management's goal is
to maintain a common dividend payout ratio in the range of 40% to 60% of net
earnings. Common dividends as a percentage of net earnings and cash operating
earnings were 70% and 65%, respectively in 1999. Management currently intends to
pay dividends at the same level in 2000 based on expected performance.
The primary sources for payment of dividends by Union Planters to its
shareholders and the share purchase plan are dividends received
27
<PAGE> 28
from its lead bank, UPB, dividends from other subsidiaries, interest on loans to
subsidiaries, and interest on its available for sale investment securities.
Payment of dividends by UPB and other banking subsidiaries are subject to
various statutory limitations that are described in Note 12 to the financial
statements on page 59. Reference is made to the "Liquidity" discussion on the
following page for additional information regarding the parent company's
liquidity.
MARKET RISK AND ASSET/LIABILITY 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 assets and liabilities, which impacts net interest income
which is approximately 72% 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
exposures.
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.
Reference is made to the "Investment Securities," "Loans," and "Other Earning
Assets" discussions for additional information regarding the risks related to
these items.
Union Planters, on a limited basis, has used off-balance-sheet financial
instruments to manage interest-rate risk. At December 31, 1999 and 1998, Union
Planters had a limited number of such instruments, primarily those used in its
mortgage operations to hedge loans held for resale.
Union Planters' Funds Management Committee oversees the conduct of
asset/liability and interest-rate risk 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
Table 11 on page 38. 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' total assets. At December 31, 1999
this position was 15% of total assets with $4.9 billion more liabilities
repricing than assets. This position has essentially reversed since December 31,
1998 when 2% of total assets were mismatched at one year with repricing assets
exceeding liabilities by $693 million. The change is due to the significant
increase in short-term borrowings, primarily short-term FHLB advances.
Even though the GAP position exceeds the policy at one year, $4.3 billion
of the liabilities affecting the one year GAP are scheduled money market and
savings deposits whose rates are administered by management. Total money market
and savings deposits of $8.8 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. Still, management is evaluating strategies to
reduce the liability sensitive position at one year.
Interest rate risk is evaluated by conducting balance sheet simulation 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.
The results of these simulations are compared to policy guidelines approved
by the Funds Management Committee of Union Planters which limit the change of
net interest income to 20% of net operating earnings (net earnings before
merger-related and other significant items, net of income taxes) when compared
with the base case (flat) scenario. The simulations have consistently fallen
within the policy guidelines. At December 31, 1999, the 200 basis point
immediate rise in interest rates produced a 16.5% ($65 million after-tax)
decrease in net operating earnings, which compared to a .41% ($1.3 million af-
28
<PAGE> 29
ter-tax) decrease at December 31, 1998. The 200 basis point immediate fall in
interest rates produced a 12.5% ($49 million after-tax) increase in net
operating earnings versus a 5% ($16 million after-tax) decrease at December 31,
1998. The "most likely" scenario (Federal Funds rate increasing 50 basis points
over the first six months of 2000) at December 31, 1999 produced a 4.9% ($19
million after-tax) decrease in net operating earnings compared to a 1.6% ($5
million after-tax) increase at the end of 1998.
The key assumptions used in simulation analysis include the following:
- prepayment rates on mortgage related assets
- cash flows and repricings 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
The 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.
LIQUIDITY. Liquidity for Union Planters is its ability to meet cash
requirements for deposit withdrawals, to make new loans and satisfy loan
commitments, to take advantage of attractive investment opportunities, and to
repay borrowings when they mature. As discussed previously, Union Planters'
primary sources of liquidity are its deposit base, available for sale
securities, and money-market investments. Liquidity is also achieved through
short-term borrowings, borrowing under available lines of credit, and issuance
of securities and debt instruments in the financial markets. Note 9 to the
financial statements on page 54 presents information regarding the various types
of borrowings Union Planters uses to provide liquidity.
Parent company liquidity is achieved and maintained by dividends received
from subsidiaries, interest on advances to subsidiaries, and interest on the
available for sale investment securities portfolio. At December 31, 1999, the
parent company had cash and cash equivalents totaling $264.3 million, which
compares to $315.6 million at December 31, 1998. Net working capital (total
assets maturing within one year less similar liabilities) was $296.5 million
compared to $358.2 million at December 31, 1998. The decline in liquidity at the
parent company relates to the share purchase plan and acquisitions by the parent
company in 1999.
At January 1, 2000, the parent company could have received dividends from
subsidiaries of $106.6 million without prior regulatory approval. The payment of
dividends by Union Planters' subsidiaries will be dependent on their future
earnings and capital and liquidity considerations. 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The disclosures regarding the fair value of financial instruments are
included in Note 19 to the financial statements on page 69 along with a summary
of the methods and assumptions used by management in determining fair value. The
differences between the fair values and book values were primarily caused by
differences between contractual and market interest rates at the respective year
ends. Fluctuations in the fair values will occur from period to period due to
changes in the composition of the balance sheet and changes in market interest
rates.
EFFECTS OF INFLATION
Since the majority of assets and liabilities of a financial institution are
monetary in nature, a financial institution differs greatly from most commercial
and industrial companies, which have significant investments in fixed assets and
inventories. However, inflation does have an important impact on growth of total
assets in the banking industry and the resulting need to increase equity capital
at higher costs in order to maintain an appropriate shareholders' equity to
total assets ratio. Inflation also affects other expenses that tend to rise
during periods of general inflation.
Management believes the most significant impact of inflation on financial
results is Union Planters' ability to react to changes in interest rates. As
discussed previously, management is attempting to maximize net interest income
within acceptable levels of interest rate risk and liquidity.
FOURTH QUARTER RESULTS
Net earnings for the fourth quarter of 1999 were $97.4 million compared to
$27.6 million for the fourth quarter of 1998. On a diluted per share basis, net
earnings were $.69 compared to $.19 a year ago. Table 14 on page 40 presents
29
<PAGE> 30
selected quarterly financial data for 1999 and 1998.
Net interest income (FTE) was $330.3 million for the fourth quarter of 1999
compared to $306.7 million for the same period in 1998. The net interest margin
and the interest rate spread for the fourth quarter of 1999 were 4.39% and
3.75%, respectively, compared to 4.24% and 3.46%, respectively, for the same
quarter a year ago. The growth in net interest income was attributable to growth
of earning assets, which increased $1.2 billion to $29.9 billion for the fourth
quarter of 1999. Lower yields on earning assets were more than offset by lower
rates paid on interest-bearing liabilities.
The provision for losses and loans for the fourth quarter of 1999 was $19.7
million, a decrease of $56.9 million from the same quarter last year. The
decrease is attributable to higher provisions by acquired institutions and to
higher provisions related to two asset-based loans that deteriorated during the
fourth quarter of 1998.
For the fourth quarter of 1999, noninterest income was $122.7 million
compared to $197.8 million in 1998. The decrease is attributable to the sale of
the credit card portfolio in the fourth quarter of 1998, which resulted in a
gain of $72.7 million, and investment securities gains of $6.0 million in the
fourth quarter of 1998 related to gains on the sale of equity securities
contributed to a charitable foundation. Excluding these items, noninterest
income increased $3.3 million, with the increases relating to service charges on
deposit accounts, ATM usage fees, annuity sales income, trust service income,
and insurance commissions. Partially offsetting these increases was a $1.5
million loss from an equity investment in FundsXpress, Inc., the online banking
provider to Union Planters.
Noninterest expenses for the fourth quarter of 1999 were $277.1 million,
down $84.9 million from the same quarter in 1998. The decrease relates to
merger-related and charter consolidation charges totaling $71.4 million, $11.1
million related to an employee benefit change, and $7.6 million of contribution
expense related to a contribution of equity securities to a charitable
foundation established by Union Planters. Excluding these items, noninterest
expenses increased $5.2 million. The increase relates to 1999 acquisitions,
higher than normal miscellaneous charge-offs, increased advertising expense, and
higher goodwill amortization expense. Partially offsetting the increase was a
$7.2 million reversal of severance reserves established in prior periods related
to acquisitions and charter consolidation (see the "Noninterest Expense"
discussion on page 20 in this report).
Y2K
Union Planters Corporation did not experience any significant problems
relating to the change to the year 2000. Efforts to make changes to systems and
establishing contingency plans were effective. Additionally, external parties
supplying services to Union Planters experienced no significant problems. As of
March 6, 2000, no significant losses were incurred related to any customer as a
direct result of Y2K. Union Planters intends to continue to monitor computer
date sensitive issues. It is possible, although management does not consider it
likely, that other dates in the year 2000 may further affect computer software
and systems or that a year 2000 problem has not yet been discovered by Union
Planters, or third parties with which Union Planters conducts business.
30
<PAGE> 31
TABLE 1. SUMMARY OF CONSOLIDATED RESULTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest income.............................. $2,297,932 $2,314,381 $2,264,485 $2,126,230 $1,908,150
Interest expense............................. 1,041,401 1,107,148 1,064,586 1,011,241 897,649
---------- ---------- ---------- ---------- ----------
NET INTEREST INCOME................. 1,256,531 1,207,233 1,199,899 1,114,989 1,010,501
PROVISION FOR LOSSES ON LOANS................ 74,045 204,056 153,100 86,381 50,696
---------- ---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR LOSSES ON LOANS............... 1,182,486 1,003,177 1,046,799 1,028,608 959,805
NONINTEREST INCOME
Service charges on deposit accounts........ 170,052 156,445 157,256 152,942 145,343
Mortgage banking revenues.................. 96,785 89,965 80,658 72,764 65,868
Bank card income........................... 26,880 38,562 39,497 31,866 27,234
Factoring commissions...................... 29,504 30,630 30,140 26,066 19,519
Trust service income....................... 23,920 24,116 24,029 20,351 18,937
Profits and commissions from trading
activities............................... 4,321 5,402 7,323 5,768 12,364
Other income............................... 139,097 130,075 110,670 81,297 79,782
---------- ---------- ---------- ---------- ----------
Total noninterest income............ 490,559 475,195 449,573 391,054 369,047
---------- ---------- ---------- ---------- ----------
NONINTEREST EXPENSE
Salaries and employee benefits............. 502,279 468,675 440,511 413,640 393,818
Net occupancy expense...................... 88,122 75,974 74,750 75,331 71,899
Equipment expense.......................... 81,720 72,718 62,736 60,531 56,620
Goodwill and other intangibles
amortization............................. 56,388 29,333 21,386 17,910 17,360
Other expense.............................. 353,925 344,919 333,186 297,997 309,571
---------- ---------- ---------- ---------- ----------
Total noninterest expense........... 1,082,434 991,619 932,569 865,409 849,268
---------- ---------- ---------- ---------- ----------
EARNINGS BEFORE MERGER-RELATED AND
OTHER SIGNIFICANT ITEMS AND INCOME
TAXES............................. 590,611 486,753 563,803 554,253 479,584
MERGER-RELATED AND OTHER SIGNIFICANT ITEMS
Net gain on sale of the credit card
portfolio................................ 3,335 70,100 -- -- --
Net gain on securitization and sale of
FHA/VA loans............................. 5,317 19,605 -- -- --
Net gain on sale of ARM loans.............. 5,041 -- -- -- --
Net gain on sale of corporate trust
business................................. 2,417 -- -- -- --
Net gain on sales of branches and other
selected assets.......................... 3,913 6,345 16,290 7,511 1,925
Investment securities gains (losses)....... 2,128 (9,074) 4,888 4,934 2,288
Merger-related, charter consolidation, and
other expenses related to ongoing
integration of operations, net........... 7,153 (182,253) (64,854) (52,786) (12,114)
Expenses related to employee benefit plan
changes.................................. -- (11,090) -- -- --
Contribution of equity securities to a
charitable foundation.................... -- (7,609) -- -- --
Special regulatory assessment to
recapitalize the SAIF.................... -- -- -- (30,044) --
Write-off of mortgage servicing rights,
goodwill, and other intangibles.......... -- (1,800) (2,778) (19,579) --
Additional provisions for losses on FHA/VA
foreclosure claims of acquired entity.... -- -- -- (19,800) --
Other, net................................. (1,083) 945 (1,500) 1,268 (146)
---------- ---------- ---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES........ 618,832 371,922 515,849 445,757 471,537
Income taxes................................. 208,834 146,316 176,014 153,055 156,718
---------- ---------- ---------- ---------- ----------
NET EARNINGS........................ $ 409,998 $ 225,606 $ 339,835 $ 292,702 $ 314,819
========== ========== ========== ========== ==========
NET EARNINGS................................. $ 409,998 $ 225,606 $ 339,835 $ 292,702 $ 314,819
Merger-related and other significant items,
net of income taxes........................ (17,243) 98,971 32,241 71,607 5,311
---------- ---------- ---------- ---------- ----------
NET OPERATING EARNINGS....................... 392,755 324,577 372,076 364,309 320,130
Goodwill and other intangibles amortization,
net of income taxes........................ 47,582 27,289 20,400 16,924 16,373
---------- ---------- ---------- ---------- ----------
CASH OPERATING EARNINGS...................... $ 440,337 $ 351,866 $ 392,476 $ 381,233 $ 336,503
========== ========== ========== ========== ==========
</TABLE>
31
<PAGE> 32
TABLE 2. CONTRIBUTION TO DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net interest income -- FTE........................... $ 8.99 $ 8.72 $ 8.89 $ 8.58 $ 8.18
Provision for losses on loans........................ (0.51) (1.43) (1.11) (0.65) (0.40)
-------- -------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR
LOSSES ON LOANS -- FTE.................... 8.48 7.29 7.78 7.93 7.78
NONINTEREST INCOME
Service charges on deposit accounts................ 1.18 1.10 1.14 1.15 1.14
Mortgage banking revenues.......................... 0.67 0.63 0.58 0.55 0.52
Bank card income................................... 0.19 0.27 0.29 0.24 0.21
Factoring commissions.............................. 0.20 0.21 0.22 0.20 0.15
Trust service income............................... 0.17 0.17 0.17 0.16 0.15
Profits and commissions from trading activities.... 0.03 0.04 0.05 0.04 0.10
Investment securities gains (losses)............... 0.01 (0.06) 0.04 0.04 0.02
Other income....................................... 1.11 1.63 0.93 0.66 0.64
-------- -------- -------- -------- --------
Total noninterest income.................... 3.56 3.99 3.42 3.04 2.93
-------- -------- -------- -------- --------
NONINTEREST EXPENSE
Salaries and employee benefits..................... 3.49 3.36 3.19 3.10 3.09
Net occupancy expense.............................. 0.61 0.53 0.54 0.56 0.56
Equipment expense.................................. 0.57 0.51 0.45 0.45 0.44
Goodwill and other intangibles amortization........ 0.39 0.21 0.15 0.13 0.14
Other expense...................................... 2.42 3.80 2.92 3.15 2.53
-------- -------- -------- -------- --------
Total noninterest expense................... 7.48 8.41 7.25 7.39 6.76
-------- -------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES -- FTE......... 4.56 2.87 3.95 3.58 3.95
Income taxes -- FTE.................................. 1.71 1.29 1.48 1.37 1.47
-------- -------- -------- -------- --------
NET EARNINGS................................ 2.85 1.58 2.47 2.21 2.48
Less preferred stock dividends....................... -- -- -- -- (0.01)
-------- -------- -------- -------- --------
DILUTED EARNINGS PER SHARE.................. $ 2.85 $ 1.58 $ 2.47 $ 2.21 $ 2.47
======== ======== ======== ======== ========
Change in net earnings applicable to diluted earnings
per share using previous year average shares
outstanding........................................ $ 1.29 $ (0.84) $ 0.35 $ (0.14) $ 0.76
Change in average shares outstanding................. (0.02) (0.05) (0.09) (0.12) (0.05)
-------- -------- -------- -------- --------
Change in net earnings........................... $ 1.27 $ (0.89) $ 0.26 $ (0.26) $ 0.71
======== ======== ======== ======== ========
AVERAGE DILUTED SHARES (IN THOUSANDS)................ 143,983 142,693 138,220 133,452 127,416
======== ======== ======== ======== ========
</TABLE>
- ---------------
FTE -- Fully taxable-equivalent
TABLE 3. BALANCE SHEET IMPACT OF ACQUISITIONS
<TABLE>
<CAPTION>
1999
---------------------------------------------------
INDIANA BRANCH 1998 1997
REPUBLIC PURCHASE OTHERS TOTAL TOTAL TOTAL
---------- -------------- -------- ---------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing deposits at
financial institutions..... $ 656 $ 745,321 $ 24,078 $ 770,055 $ 8,204 $ 41,573
Loans, net of unearned
income..................... 960,672 850,463 469,934 2,281,069 8,391,384 2,651,579
Allowance for losses on
loans...................... (21,244) (14,500) (6,960) (42,704) (131,571) (49,797)
---------- ---------- -------- ---------- ----------- ----------
Net loans............. 939,428 835,963 462,974 2,238,365 8,259,813 2,601,782
Investment securities........ 128,543 -- 137,978 266,521 3,666,746 395,550
Intangible assets............ 269,247 282,770 79,392 631,409 326,825 15,274
Cash and cash
equivalents(1)............. (34,071) 12,565 (956) (22,462) 1,810,613 338,978
Other real estate, net....... 1,418 -- 476 1,894 10,140 11,990
Premises and equipment....... 47,888 23,047 12,492 83,427 213,191 64,734
Other assets................. 28,989 3,753 21,328 54,070 271,429 122,418
---------- ---------- -------- ---------- ----------- ----------
TOTAL ASSETS.......... $1,382,098 $1,903,419 $737,762 $4,023,279 $14,566,961 $3,592,299
========== ========== ======== ========== =========== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits..................... $1,318,405 $1,697,690 $633,128 $3,649,223 $11,843,051 $2,392,854
Other interest-bearing
liabilities................ 49,526 197,964 14,625 262,115 1,457,471 571,774
Other liabilities............ 14,167 7,765 11,629 33,561 139,583 327,940
Shareholders' equity......... -- -- 78,380 78,380 1,126,856 299,731
---------- ---------- -------- ---------- ----------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS'
EQUITY.............. $1,382,098 $1,903,419 $737,762 $4,023,279 $14,566,961 $3,592,299
========== ========== ======== ========== =========== ==========
</TABLE>
- ---------------
(1) Cash paid for acquisitions has been netted with cash and cash equivalents.
32
<PAGE> 33
TABLE 4. AVERAGE BALANCE SHEET AND AVERAGE INTEREST RATES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
1999 1998
--------------------------------- ---------------------------------
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..... $ 67,831 $ 2,763 4.07% $ 36,131 $ 1,807 5.00%
Federal funds sold and
securities purchased under
agreements to resell....... 82,098 4,014 4.89 327,630 18,823 5.75
Trading account assets....... 247,181 15,970 6.46 223,122 14,197 6.36
Investment securities(1)(2)
Taxable securities......... 6,817,453 421,162 6.18 6,102,670 373,934 6.13
Tax-exempt securities...... 1,320,134 102,438 7.76 1,114,510 94,352 8.47
----------- ---------- ----------- ----------
Total investment
securities........... 8,137,587 523,600 6.43 7,217,180 468,286 6.49
Loans, net of unearned
income(1)(3)(4)............ 21,141,576 1,789,563 8.46 20,498,773 1,848,569 9.02
----------- ---------- ----------- ----------
TOTAL EARNING
ASSETS(1)(2)(3)(4)... 29,676,273 2,335,910 7.87 28,302,836 2,351,682 8.31
Cash and due from banks...... 1,018,264 951,819
Premises and equipment....... 605,512 544,024
Allowance for losses on
loans...................... (353,198) (334,304)
Goodwill and other
intangibles................ 783,709 282,733
Other assets................. 1,171,810 997,218
----------- -----------
TOTAL ASSETS........... $32,902,370 $30,744,326
=========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Money market accounts........ $ 4,225,158 $ 125,182 2.96% $ 3,128,028 $ 122,081 3.90%
Savings deposits............. 4,730,703 95,586 2.02 4,524,807 96,061 2.12
Certificates of deposit of
$100,000 and over.......... 2,274,323 118,760 5.22 2,810,295 163,415 5.81
Other time deposits.......... 9,481,751 471,883 4.98 9,525,197 514,505 5.40
Short-term borrowings
Federal funds purchased and
securities sold under
agreements to
repurchase............... 1,980,674 91,459 4.62 1,454,025 75,191 5.17
Short-term senior notes.... -- -- -- -- -- --
Other...................... 929,335 50,477 5.43 62,471 4,224 6.76
Long-term debt
Federal Home Loan Bank
advances................. 301,773 15,631 5.18 907,689 47,979 5.29
Subordinated capital
notes.................... 478,369 31,103 6.50 419,789 28,249 6.73
Medium-term senior notes... 91,356 6,160 6.74 123,986 8,252 6.66
Trust Preferred
Securities............... 199,027 16,511 8.30 198,991 16,511 8.30
Other...................... 234,668 18,649 7.95 352,541 30,680 8.70
----------- ---------- ----------- ----------
TOTAL INTEREST-BEARING
LIABILITIES.......... 24,927,137 1,041,401 4.18 23,507,819 1,107,148 4.71
Noninterest-bearing demand
deposits................... 4,315,708 -- 3,594,978 --
----------- ---------- ----------- ----------
TOTAL SOURCES OF
FUNDS................ 29,242,845 1,041,401 27,102,797 1,107,148
Other liabilities............ 678,861 709,826
Shareholders' equity
Preferred stock............ 22,318 32,331
Common equity.............. 2,958,346 2,899,372
----------- -----------
TOTAL SHAREHOLDERS'
EQUITY............... 2,980,664 2,931,703
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS'
EQUITY............... $32,902,370 $30,744,326
=========== ===========
NET INTEREST INCOME(1)....... $1,294,509 $1,244,534
========== ==========
NET INTEREST SPREAD(1)....... 3.69% 3.60%
==== ====
NET INTEREST MARGIN(1)....... 4.36% 4.40%
==== ====
TAXABLE-EQUIVALENT
ADJUSTMENTS
Loans...................... $ 5,078 $ 6,144
Investment securities...... 32,900 31,157
---------- ----------
Total.................. $ 37,978 $ 37,301
========== ==========
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1997
-----------------------------------
INTEREST FTE
AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE
----------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Interest-bearing deposits at
financial institutions..... $ 63,671 $ 3,207 5.04%
Federal funds sold and
securities purchased under
agreements to resell....... 340,231 19,149 5.63
Trading account assets....... 204,765 14,956 7.30
Investment securities(1)(2)
Taxable securities......... 5,336,847 348,247 6.53
Tax-exempt securities...... 937,539 76,733 8.18
----------- ----------
Total investment
securities........... 6,274,386 424,980 6.77
Loans, net of unearned
income(1)(3)(4)............ 19,992,626 1,830,965 9.16
----------- ----------
TOTAL EARNING
ASSETS(1)(2)(3)(4)... 26,875,679 2,293,257 8.53
Cash and due from banks...... 926,586
Premises and equipment....... 514,306
Allowance for losses on
loans...................... (284,131)
Goodwill and other
intangibles................ 183,714
Other assets................. 972,651
-----------
TOTAL ASSETS........... $29,188,805
===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Money market accounts........ $ 2,908,405 $ 106,066 3.65%
Savings deposits............. 4,201,403 97,825 2.33
Certificates of deposit of
$100,000 and over.......... 2,545,210 145,357 5.71
Other time deposits.......... 9,239,875 504,673 5.46
Short-term borrowings
Federal funds purchased and
securities sold under
agreements to
repurchase............... 1,392,670 70,517 5.06
Short-term senior notes.... 119,493 6,973 5.84
Other...................... 214,475 11,263 5.25
Long-term debt
Federal Home Loan Bank
advances................. 1,011,275 60,972 6.03
Subordinated capital
notes.................... 197,569 14,229 7.20
Medium-term senior notes... 135,000 8,943 6.62
Trust Preferred
Securities............... 198,956 16,511 8.30
Other...................... 272,511 21,257 7.80
----------- ----------
TOTAL INTEREST-BEARING
LIABILITIES.......... 22,436,842 1,064,586 4.74
Noninterest-bearing demand
deposits................... 3,328,821 --
----------- ----------
TOTAL SOURCES OF
FUNDS................ 25,765,663 1,064,586
Other liabilities............ 667,933
Shareholders' equity
Preferred stock............ 66,188
Common equity.............. 2,689,021
-----------
TOTAL SHAREHOLDERS'
EQUITY............... 2,755,209
-----------
TOTAL LIABILITIES AND
SHAREHOLDERS'
EQUITY............... $29,188,805
===========
NET INTEREST INCOME(1)....... $1,228,671
==========
NET INTEREST SPREAD(1)....... 3.79%
====
NET INTEREST MARGIN(1)....... 4.57%
====
TAXABLE-EQUIVALENT
ADJUSTMENTS
Loans...................... $ 5,160
Investment securities...... 23,612
----------
Total.................. $ 28,772
==========
</TABLE>
- ---------------
(1) Fully taxable-equivalent yields are calculated assuming a 35% Federal income
tax rate.
(2) Yields are calculated on historical cost and exclude the impact of the
unrealized gains (losses) on available for sale securities.
(3) Includes loan fees in both interest income and the calculation of the yield
on income.
(4) Includes loans on nonaccrual status.
33
<PAGE> 34
TABLE 5. ANALYSIS OF VOLUME AND RATE CHANGES
<TABLE>
<CAPTION>
1999 VERSUS 1998 1998 VERSUS 1997
--------------------------------- --------------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO CHANGE DUE TO CHANGE
IN:(1) IN:(1)
-------------------- TOTAL ------------------- TOTAL
AVERAGE AVERAGE INCREASE AVERAGE AVERAGE INCREASE
VOLUME RATE (DECREASE) VOLUME RATE (DECREASE)
-------- --------- ---------- -------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits at
financial institutions............. $ 1,342 $ (386) $ 956 $ (1,377) $ (23) $(1,400)
Federal funds sold and securities
purchased under agreements to
resell............................. (12,354) (2,455) (14,809) (719) 393 (326)
Trading account assets............... 1,551 222 1,773 1,270 (2,029) (759)
Investment securities -- FTE......... 59,253 (3,939) 55,314 61,760 (18,454) 43,306
Loans, net of unearned
income -- FTE...................... 56,765 (115,771) (59,006) 45,912 (28,308) 17,604
-------- --------- -------- -------- -------- -------
TOTAL INTEREST INCOME......... 106,557 (122,329) (15,772) 106,846 (48,421) 58,425
-------- --------- -------- -------- -------- -------
INTEREST EXPENSE
Money market accounts................ 36,705 (33,604) 3,101 8,300 7,715 16,015
Savings deposits..................... 4,269 (4,744) (475) 7,221 (8,985) (1,764)
Certificates of deposit of $100,000
and over........................... (29,095) (15,560) (44,655) 15,373 2,685 18,058
Other time deposits.................. (2,337) (40,285) (42,622) 15,457 (5,625) 9,832
Short-term borrowings................ 68,317 (5,796) 62,521 (10,978) 1,640 (9,338)
Long-term debt....................... (39,489) (4,128) (43,617) 14,655 (4,896) 9,759
-------- --------- -------- -------- -------- -------
TOTAL INTEREST EXPENSE........ 38,370 (104,117) (65,747) 50,028 (7,466) 42,562
-------- --------- -------- -------- -------- -------
CHANGE IN NET INTEREST INCOME -- FTE... $ 68,187 $ (18,212) $ 49,975 $ 56,818 $(40,955) $15,863
======== ========= ======== ======== ======== =======
PERCENTAGE INCREASE IN NET INTEREST
INCOME (FTE) OVER PRIOR PERIOD....... 4.02% 1.29%
======== =======
</TABLE>
- ---------------
FTE -- Fully taxable-equivalent
(1) The change due to both rate and volume has been allocated to change due to
volume and change due to rate in proportion to the relationship of the
absolute dollar amounts of the change in each.
34
<PAGE> 35
TABLE 6. AVERAGE DEPOSITS (1)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Noninterest-bearing demand.............. $ 4,315,708 $ 3,594,978 $ 3,328,821 $ 3,085,490 $ 2,900,790
Money market(2)......................... 4,225,158 3,128,028 2,908,405 2,876,970 2,674,304
Savings(3).............................. 4,730,703 4,524,807 4,201,403 3,980,936 3,901,681
Other time(4)........................... 9,481,751 9,525,197 9,239,875 8,977,580 8,445,621
----------- ----------- ----------- ----------- -----------
TOTAL AVERAGE CORE DEPOSITS.... 22,753,320 20,773,010 19,678,504 18,920,976 17,922,396
Certificates of deposit of $100,000 and
over.................................. 2,274,323 2,810,295 2,545,210 2,123,133 1,724,245
----------- ----------- ----------- ----------- -----------
TOTAL AVERAGE DEPOSITS......... $25,027,643 $23,583,305 $22,223,714 $21,044,109 $19,646,641
=========== =========== =========== =========== ===========
</TABLE>
- ---------------
(1) Table 4 presents the average rate paid on the above deposit categories for
the three years in the period ended December 31, 1999.
(2) Includes money market savings accounts and super NOW accounts.
(3) Includes regular savings accounts, NOW accounts, and premium savings
accounts.
(4) Includes certificates of deposit of less than $100,000, investment savings
deposits, IRAs, and Holiday accounts.
TABLE 7. COMPOSITION OF THE LOAN PORTFOLIO
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial, financial, and
agricultural.......................... $ 4,799,840 $ 3,543,925 $ 3,397,348 $ 3,078,268 $ 2,993,409
Foreign................................. 374,814 197,120 208,081 145,483 127,623
Accounts receivable -- factoring........ 555,128 615,952 579,067 452,522 319,487
Real estate -- construction............. 1,581,164 1,195,779 1,074,279 865,031 768,872
Real estate -- mortgage
Secured by 1-4 family residential..... 5,554,943 5,647,520 5,704,490 5,531,747 5,183,332
FHA/VA government-insured/guaranteed.. 519,213 759,911 1,331,993 1,569,027 1,006,397
Other mortgage........................ 4,591,110 4,386,182 4,226,944 3,455,693 2,938,334
Home equity............................. 584,546 482,665 452,870 365,945 328,961
Consumer
Credit cards and related plans........ 82,998 96,091 617,113 700,584 490,919
Other consumer........................ 2,752,016 2,622,402 2,685,845 2,631,352 2,452,983
Direct lease financing.................. 78,726 63,621 66,039 75,218 77,333
----------- ----------- ----------- ----------- -----------
TOTAL LOANS.................... 21,474,498 19,611,168 20,344,069 18,870,870 16,687,650
Less: Unearned income................... (28,098) (34,342) (41,100) (59,429) (73,619)
----------- ----------- ----------- ----------- -----------
TOTAL LOANS, NET OF UNEARNED
INCOME....................... $21,446,400 $19,576,826 $20,302,969 $18,811,441 $16,614,031
=========== =========== =========== =========== ===========
</TABLE>
35
<PAGE> 36
TABLE 8. ALLOCATION OF THE ALLOWANCE FOR LOSSES ON LOANS BY CATEGORY OF LOANS
AND THE PERCENTAGE OF LOANS BY CATEGORY TO TOTAL LOANS OUTSTANDING
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------------------------
1999 1998 1997 1996
---------------------- ---------------------- ---------------------- --------
PERCENTAGE PERCENTAGE PERCENTAGE
OF LOANS TO OF LOANS TO OF LOANS TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT
-------- ----------- -------- ----------- -------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial,
financial, and
agricultural....... $ 97,328 26% $ 86,275 22% $ 77,618 21% $ 59,372
Foreign.............. 5,525 2 3,500 1 3,150 1 1,300
Real estate --
construction....... 36,720 8 19,672 6 14,079 6 10,092
Real estate --
mortgage........... 136,287 48 160,728 54 129,573 52 119,878
Consumer............. 64,770 16 50,043 17 99,129 20 78,806
Direct lease
financing.......... 1,670 -- 1,258 -- 925 -- 991
-------- --- -------- --- -------- --- --------
Total........ $342,300 100% $321,476 100% $324,474 100% $270,439
======== === ======== === ======== === ========
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1995
----------- ----------------------
PERCENTAGE PERCENTAGE
OF LOANS TO OF LOANS TO
TOTAL LOANS AMOUNT TOTAL LOANS
----------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Commercial,
financial, and
agricultural....... 21% $ 69,236 21%
Foreign.............. 1 1,400 1
Real estate --
construction....... 5 11,755 5
Real estate --
mortgage........... 52 101,750 52
Consumer............. 21 69,767 21
Direct lease
financing.......... -- 1,195 --
--- -------- ---
Total........ 100% $255,103 100%
=== ======== ===
</TABLE>
- ---------------
The allocation of the allowance is presented based in part on evaluations of
specific loans, past history, and economic conditions within specific industries
or geographic areas. Since all of these factors are subject to change, the
current allocation of the allowance is not necessarily indicative of the
breakdown of future losses. FHA/VA government-insured/guaranteed loans are
excluded from the loan percentage calculation.
TABLE 9. NONACCRUAL, RESTRUCTURED, AND PAST DUE LOANS AND FORECLOSED PROPERTIES
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans(1)
Domestic.................................................. $127,080 $150,378 $138,800 $118,791 $106,601
Foreign................................................... 686 -- 96 96 2,072
Restructured loans.......................................... 1,878 5,612 15,250 17,097 14,656
-------- -------- -------- -------- --------
TOTAL NONPERFORMING LOANS........................... 129,644 155,990 154,146 135,984 123,329
-------- -------- -------- -------- --------
Foreclosed properties
Other real estate, net.................................... 35,943 23,937 31,914 40,680 35,598
Other foreclosed properties............................... 1,921 2,670 5,062 2,167 2,823
-------- -------- -------- -------- --------
TOTAL FORECLOSED PROPERTIES......................... 37,864 26,607 36,976 42,847 38,421
-------- -------- -------- -------- --------
TOTAL NONPERFORMING ASSETS.......................... $167,508 $182,597 $191,122 $178,831 $161,750
======== ======== ======== ======== ========
LOANS PAST DUE 90 DAYS OR MORE AND STILL ACCRUING
INTEREST.................................................. $ 92,834 $ 48,626 $ 51,128 $ 45,467 $ 34,540
======== ======== ======== ======== ========
FHA/VA GOVERNMENT-INSURED/GUARANTEED LOANS
Loans past due 90 days or more and still accruing
interest................................................ $240,799 $355,124 $517,124 $724,691 $558,038
Nonaccrual................................................ 6,613 9,232 14,933 77 404
</TABLE>
- ---------------
(1) In the third quarter of 1999, Union Planters changed its policy related to
placing single family residential mortgage loans on nonaccrual status to
conform to industry practice. Previously, single family residential mortgage
loans were automatically placed on nonaccrual status after they became past
due 90 days or more. Prospectively, these loans are being placed on
nonaccrual status if the loan is not in the process of collection or is not
well secured. The impact of this change was to reduce single family
residential mortgage loans on nonaccrual status approximately $50 million
with loans past due 90 days or more and still accruing interest increasing
by a corresponding amount. Prior period amounts do not reflect this change.
36
<PAGE> 37
TABLE 10. ALLOWANCE FOR LOSSES ON LOANS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE AT BEGINNING OF PERIOD.......... $ 321,476 $ 324,474 $ 270,439 $ 255,103 $ 248,482
LOANS CHARGED OFF
Commercial, financial, and
agricultural........................ 67,649 65,815 41,881 24,045 21,540
Foreign............................... 459 1,831 -- 3,391 743
Real estate -- construction........... 3,330 3,714 400 765 529
Real estate -- mortgage............... 28,076 28,654 10,618 10,245 12,881
Consumer.............................. 45,089 64,435 35,425 30,081 20,196
Credit cards and related plans........ 4,158 50,723 52,177 30,542 15,082
Direct lease financing................ 396 125 30 48 52
----------- ----------- ----------- ----------- -----------
Total charge-offs.............. 149,157 215,297 140,531 99,117 71,023
----------- ----------- ----------- ----------- -----------
RECOVERIES ON LOANS PREVIOUSLY CHARGED
OFF
Commercial, financial, and
agricultural........................ 23,266 8,931 8,259 8,569 9,263
Foreign............................... 77 20 10 -- 1,632
Real estate -- construction........... 670 310 546 64 557
Real estate -- mortgage............... 7,639 5,825 3,620 3,555 4,449
Consumer.............................. 18,805 9,812 4,916 7,350 6,374
Credit cards and related plans........ 2,278 4,113 6,903 2,209 1,122
Direct lease financing................ 126 5 27 4 52
----------- ----------- ----------- ----------- -----------
Total recoveries............... 52,861 29,016 24,281 21,751 23,449
----------- ----------- ----------- ----------- -----------
Net charge-offs......................... (96,296) (186,281) (116,250) (77,366) (47,574)
Provisions charged to expense........... 74,045 204,056 153,100 86,381 50,696
Allowance related to the sale of certain
loans................................. -- (36,693) -- (1,628) --
Increase due to acquisitions............ 43,075 15,920 17,185 7,949 3,499
----------- ----------- ----------- ----------- -----------
BALANCE AT END OF PERIOD................ $ 342,300 $ 321,476 $ 324,474 $ 270,439 $ 255,103
=========== =========== =========== =========== ===========
Total loans, net of unearned income, at
end of period......................... $21,446,400 $19,576,826 $20,302,969 $18,811,441 $16,614,031
Less: FHA/VA government-
insured/guaranteed loans.............. 519,213 759,911 1,331,993 1,569,027 1,006,397
----------- ----------- ----------- ----------- -----------
LOANS USED TO CALCULATE RATIOS........ $20,927,187 $18,816,915 $18,970,976 $17,242,414 $15,607,634
=========== =========== =========== =========== ===========
Average total loans, net of unearned
income, during period................. $21,141,576 $20,498,773 $19,992,626 $17,888,375 $16,162,983
Less: Average FHA/VA government-
insured/guaranteed loans.............. 597,944 958,921 1,500,120 1,300,065 881,082
----------- ----------- ----------- ----------- -----------
AVERAGE LOANS USED TO CALCULATE
RATIOS.............................. $20,543,632 $19,539,852 $18,492,506 $16,588,310 $15,281,901
=========== =========== =========== =========== ===========
CREDIT QUALITY RATIOS(1)
Allowance for losses on loans/loans,
net of unearned income.............. 1.64% 1.71% 1.71% 1.57% 1.63%
Allowance for losses on loans/average
loans, net of unearned income....... 1.67 1.65 1.75 1.63 1.67
Allowance for losses on
loans/nonperforming loans........... 264 206 210 199 207
Net charge-offs/average loans, net of
unearned income..................... .47 .95 .63 .47 .31
Provision for losses on loans/average
loans, net of unearned income....... .36 1.04 .83 .52 .33
Nonperforming loans/loans............. .62 .83 .81 .79 .79
Nonperforming assets/loans plus
foreclosed properties............... .80 .97 1.01 1.03 1.03
Loans past due 90 days or more and
still accruing interest/loans....... .44 .26 .27 .26 .22
</TABLE>
- ---------------
(1) Ratio calculations exclude FHA/VA government-insured/guaranteed loans since
they represent minimal credit risk to Union Planters. See the "Loans"
discussion on page 23 for additional information regarding the FHA/VA
government-insured/guaranteed loans and Table 9 for the detail of
nonperforming assets.
37
<PAGE> 38
TABLE 11. RATE SENSITIVITY ANALYSIS AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTEREST-SENSITIVE WITHIN(1)(7)
------------------------------------------------------------------------------------------
0-90 91-180 181-366 1-3 3-5 5-15 OVER NONINTEREST-
DAYS DAYS DAYS YEARS YEARS YEARS 15 YEARS BEARING TOTAL
------- ------- ------- ------ ------ ------ -------- ------------ -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans and
leases(2)(3)(4)........ $ 7,330 $ 1,770 $ 2,696 $5,722 $2,808 $ 671 $ 35 $ 442 $21,474
Investment
securities(5)(6)....... 494 212 367 1,601 1,766 2,941 304 (213) 7,472
Other earning assets..... 791 56 21 3 -- -- -- -- 871
Other assets............. -- -- -- -- -- -- -- 3,463 3,463
------- ------- ------- ------ ------ ------ ------ ------- -------
TOTAL ASSETS....... $ 8,615 $ 2,038 $ 3,084 $7,326 $4,574 $3,612 $ 339 $ 3,692 $33,280
======= ======= ======= ====== ====== ====== ====== ======= =======
SOURCES OF FUNDS
Money market
deposits(7)(8)......... $ 1,527 $ -- $ 1,527 $1,849 $ -- $ -- $ -- $ -- $ 4,903
Savings deposits(7)(8)... 1,283 -- -- 1,283 -- 1,323 -- -- 3,889
Other time deposits...... 2,392 2,121 2,351 1,427 249 39 3 -- 8,582
Certificates of deposit
of $100,000 and over... 676 437 564 247 36 3 -- -- 1,963
Short-term borrowings.... 5,419 1 2 -- -- -- -- -- 5,422
Short and medium-term
bank notes............. -- -- -- 60 -- -- -- -- 60
Federal Home Loan Bank
advances............... 200 -- 1 1 -- 1 -- -- 203
Other long-term debt..... 176 1 1 2 75 401 199 -- 855
Noninterest-bearing
deposits............... -- -- -- -- -- -- -- 4,035 4,035
Other liabilities........ -- -- -- -- -- -- -- 592 592
Shareholders' equity..... -- -- -- -- -- -- -- 2,776 2,776
------- ------- ------- ------ ------ ------ ------ ------- -------
TOTAL SOURCES OF
FUNDS............ $11,673 $ 2,560 $ 4,446 $4,869 $ 360 $1,767 $ 202 $ 7,403 $33,280
======= ======= ======= ====== ====== ====== ====== ======= =======
INTEREST-RATE SENSITIVITY
GAP...................... $(3,058) $ (522) $(1,362) $2,457 $4,214 $1,845 $ 137 $(3,711)
CUMULATIVE INTEREST RATE
SENSITIVITY GAP(8)....... (3,058) (3,580) (4,942) (2,485) 1,729 3,574 3,711 --
CUMULATIVE GAP AS A
PERCENTAGE OF TOTAL
ASSETS(8)................ (9)% (11)% (15)% (7)% 5% 11% 11% --%
POLICY GUIDELINES.......... none 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 are estimated based on the currently
prevailing principal prepayment patterns of comparable mortgage-backed
securities.
(4) Delinquent FHA/VA loans are scheduled based on foreclosure and repayment
patterns.
(5) The scheduled maturities of mortgage-backed securities and CMOs assume
principal prepayment of these securities on dates estimated by management,
relying primarily upon current and consensus interest-rate forecasts in
conjunction with the latest consensus prepayment schedules.
(6) Securities are generally scheduled according to their call dates when valued
at a premium to par.
(7) Money market deposits and savings deposits that have no contractual
maturities are scheduled according to management's best estimate of their
repricing in response to changes in market rates. The impact of changes in
market rates would be expected to vary by product type and market.
(8) If all money market and savings deposits had been included in the 0-90 Days
category, the cumulative gap as a percentage of total assets would have been
negative (27%), (29%), (28%) and (11%) for the 0-90 Days, 91-180 Days,
181-366 Days, and 1-3 Years categories and positive 1%, 11%, and 11%,
respectively, for the 3-5 Years, 5-15 Years, and over 15 Years categories at
December 31, 1999.
38
<PAGE> 39
TABLE 12. INVESTMENT SECURITIES AND OTHER EARNING ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
U.S. Government obligations
U.S. Treasury............................................. $ 164,543 $ 396,287 $1,160,451
U.S. Government agencies.................................. 4,016,038 4,842,792 3,752,796
---------- ---------- ----------
Total U.S. Government obligations.................. 4,180,581 5,239,079 4,913,247
Obligations of states and political subdivisions............ 1,273,145 1,345,666 1,033,944
Other investment securities................................. 2,018,729 1,716,958 467,006
---------- ---------- ----------
Total investment securities........................ 7,472,455 8,301,703 6,414,197
Interest-bearing deposits at financial institutions......... 73,062 47,583 38,128
Federal funds sold and securities purchased under agreements
to resell................................................. 51,117 94,568 265,890
Trading account assets...................................... 315,734 275,992 187,419
Loans held for resale....................................... 430,690 441,214 175,699
---------- ---------- ----------
Total investment securities and other earning
assets........................................... $8,343,058 $9,161,060 $7,081,333
========== ========== ==========
</TABLE>
TABLE 13. RISK-BASED CAPITAL
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1999 1998 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
TIER 1 CAPITAL
Shareholders' equity...................................... $ 2,776,109 $ 2,984,078 $ 2,874,473
Trust Preferred Securities and minority interest in
consolidated subsidiaries............................... 202,232 202,197 214,360
Less: Goodwill and other intangibles...................... (971,770) (381,601) (186,894)
Disallowed deferred tax asset........................ (1,053) (1,144) (1,651)
Unrealized (gain) loss on available for sale
securities........................................... 134,217 (57,245) (52,964)
----------- ----------- -----------
TOTAL TIER 1 CAPITAL............................... 2,139,735 2,746,285 2,847,324
TIER 2 CAPITAL
Allowance for losses on loans............................. 282,149 258,173 247,518
Qualifying long-term debt................................. 445,590 461,110 174,232
Other adjustments......................................... -- 218 (71)
----------- ----------- -----------
TOTAL CAPITAL BEFORE DEDUCTIONS.................... 2,867,474 3,465,786 3,269,003
Less: investment in unconsolidated subsidiaries........... (10,289) (10,736) (10,628)
----------- ----------- -----------
TOTAL CAPITAL...................................... $ 2,857,185 $ 3,455,050 $ 3,258,375
=========== =========== ===========
RISK-WEIGHTED ASSETS........................................ $22,511,772 $20,590,574 $19,879,568
=========== =========== ===========
RATIOS
Shareholders' equity/total assets......................... 8.34% 9.42% 9.59%
Leverage ratio(1)......................................... 6.65 8.86 9.62
Tier 1 capital/risk-weighted assets(1).................... 9.50 13.34 14.32
Total capital/risk-weighted assets(1)..................... 12.69 16.78 16.39
</TABLE>
- ---------------
(1) Regulatory minimums for institutions considered "well capitalized" are 5%,
6%, and 10% for the leverage, Tier 1 capital to risk-weighted assets, and
Total capital to risk-weighted assets ratios, respectively. As of December
31, 1999, all of Union Planters' banking subsidiaries were considered "well
capitalized" for purposes of FDIC deposit insurance assessments. See Note 12
to the financial statements on page 59 for a comparison of Union Planters'
capital levels and ratios to the regulatory minimums for "adequately
capitalized" and "well capitalized."
39
<PAGE> 40
TABLE 14. SELECTED QUARTERLY DATA
<TABLE>
<CAPTION>
1999 QUARTERS ENDED(1)
------------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
----------- ----------- ------------ ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net interest income........... $ 295,697 $ 311,589 $ 328,229 $ 321,016 $ 1,256,531
Provision for losses on
loans....................... (16,279) (17,740) (20,365) (19,661) (74,045)
Investment securities
gains (losses).............. 11 3,181 (1,224) 160 2,128
Noninterest income............ 126,243 137,535 124,306 122,498 510,582
Noninterest expense........... (258,239) (275,009) (265,999) (277,117) (1,076,364)
----------- ----------- ----------- ----------- -----------
Earnings before income
taxes....................... 147,433 159,556 164,947 146,896 618,832
Income taxes.................. (50,083) (53,792) (55,413) (49,546) (208,834)
----------- ----------- ----------- ----------- -----------
Net earnings.................. $ 97,350 $ 105,764 $ 109,534 $ 97,350 $ 409,998
=========== =========== =========== =========== ===========
PER COMMON SHARE DATA
Net earnings................
Basic..................... $ .68 $ .74 $ .77 $ .69 $ 2.88
Diluted................... .67 .73 .76 .69 2.85
Dividends(2)................ .50 .50 .50 .50 2.00
UPC COMMON STOCK DATA(3)
High trading price.......... $ 48.75 $ 45.31 $ 49.00 $ 46.06 $ 49.00
Low trading price........... 43.00 40.31 39.19 38.56 38.56
Closing price at quarter
end....................... 43.94 44.69 40.75 39.44 39.44
Trading volume (in
thousands)(4)............. 17,337 18,209 18,485 17,291 71,322
KEY FINANCIAL DATA
Return on average assets.... 1.22% 1.29% 1.31% 1.17% 1.25%
Return on average common
equity.................... 13.39 14.19 14.43 13.16 13.80
Expense ratio(5)............ 1.61 1.64 1.53 1.66 1.61
Efficiency ratio(6)......... 58.13 58.46 54.36 57.63 57.14
Shareholders' equity/total
assets (period end)....... 9.04 9.22 8.90 8.34 8.34
Average earning assets...... $29,336,591 $29,637,625 $29,867,142 $29,855,930 $29,676,273
Interest income -- FTE...... 564,031 574,907 597,805 599,167 2,335,910
Yield on average earning
assets -- FTE............. 7.80% 7.78% 7.94% 7.96% 7.87%
Average interest-bearing
liabilities............... $24,427,846 $24,819,027 $25,144,226 $25,305,421 $24,927,137
Total interest expense...... 258,888 253,712 259,973 268,828 1,041,401
Rate on average interest-
bearing liabilities....... 4.30% 4.10% 4.10% 4.21% 4.18%
Net interest
income -- FTE............. $ 305,143 $ 321,195 $ 337,832 $ 330,339 $ 1,294,509
Net interest
margin -- FTE............. 4.22% 4.35% 4.49% 4.39% 4.36%
Net interest
spread -- FTE............. 3.50% 3.68% 3.84% 3.75% 3.69%
</TABLE>
40
<PAGE> 41
TABLE 14. SELECTED QUARTERLY DATA -- (CONTINUED)
<TABLE>
<CAPTION>
1998 QUARTERS ENDED(1)
------------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
----------- ----------- ------------ ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net interest income......... $ 303,750 $ 306,826 $ 302,717 $ 293,940 $ 1,207,233
Provision for losses on
loans..................... (33,212) (43,038) (51,222) (76,584) (204,056)
Investment securities
gains(losses)............. 5,854 (22,584) 1,635 6,021 (9,074)
Noninterest income.......... 120,905 142,009 123,148 191,771 577,833
Noninterest expense......... (237,002) (257,119) (343,836) (362,057) (1,200,014)
----------- ----------- ----------- ---------- -----------
Earnings before income
taxes..................... 160,295 126,094 32,442 53,091 371,922
Income taxes................ (55,834) (46,690) (18,292) (25,500) (146,316)
----------- ----------- ----------- ---------- -----------
Net earnings................ $ 104,461 $ 79,404 $ 14,150 $ 27,591 $ 225,606
=========== =========== =========== ========== ===========
PER COMMON SHARE DATA
Net earnings
Basic................... $ .76 $ .57 $ .10 $ .19 $ 1.61
Diluted................. .74 .56 .10 .19 1.58
Dividends(2).............. .50 .50 .50 .50 2.00
UPC COMMON STOCK DATA(3)
High trading price........ $ 67.31 $ 62.56 $ 61.94 $ 50.25 $ 67.31
Low trading price......... 58.38 53.94 40.25 43.19 40.25
Closing price at quarter
end..................... 62.19 58.81 50.25 45.31 45.31
Trading volume (in
thousands)(4)........... 12,901 14,013 31,000 20,927 78,841
KEY FINANCIAL DATA
Return on average
assets.................. 1.41% 1.04% .18% .35% .73%
Return on average common
equity.................. 14.87 10.97 1.84 3.66 7.71
Expense ratio(5).......... 1.52 1.53 1.54 1.74 1.58
Efficiency ratio(6)....... 53.17 54.53 56.10 60.07 55.96
Shareholders' equity/total
assets (period end)..... 9.60 9.38 9.59 9.42 9.42
Average earning assets.... $27,588,514 $28,338,325 $28,566,359 $28,703,013 $28,302,836
Interest income -- FTE.... 582,478 595,367 591,331 582,506 2,351,682
Yield on average earning
assets -- FTE........... 8.56% 8.43% 8.21% 8.05% 8.31%
Average interest-bearing
liabilities............. $22,998,653 $23,526,625 $23,678,710 $23,816,423 $23,507,819
Total interest expense.... 270,500 279,879 280,975 275,794 1,107,148
Rate on average interest-
bearing liabilities..... 4.77% 4.77% 4.71% 4.59% 4.71%
Net interest
income -- FTE........... $ 311,978 $ 315,488 $ 310,356 $ 306,712 $ 1,244,534
Net interest
margin -- FTE........... 4.59% 4.47% 4.31% 4.24% 4.40%
Net interest
spread -- FTE........... 3.79% 3.66% 3.50% 3.46% 3.60%
</TABLE>
- ---------------
FTE -- Fully taxable-equivalent basis
(1) Certain quarterly amounts have been reclassified to conform to current
financial reporting presentation.
(2) See Note 12 to the financial statements on page 59 for a description of
dividend restrictions.
(3) Union Planters common stock is listed on the New York Stock Exchange (NYSE)
and is traded under the symbol UPC. All share prices represent closing
prices as reported by the NYSE. There were approximately 35,200 registered
holders of Union Planters common stock as of December 31, 1999.
(4) Trading volume represents total volume for the period shown as reported by
NYSE.
(5) The expense ratio equals noninterest expense minus noninterest income
(excluding significant nonrecurring revenues and expenses, investment
securities gains and losses, and goodwill and other intangibles
amortization) divided by average assets.
(6) The efficiency ratio is calculated excluding the same items as in the
expense ratio calculation, dividing noninterest expense by net interest
income (FTE) plus noninterest income.
41
<PAGE> 42
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1999 1998
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks................................... $ 1,127,902 $ 1,271,614
Interest-bearing deposits at financial institutions....... 73,062 47,583
Federal funds sold and securities purchased under
agreements to resell.................................... 51,117 94,568
Trading account assets.................................... 315,734 275,992
Loans held for resale..................................... 430,690 441,214
Available for sale investment securities (amortized cost:
$7,685,096 and $8,208,570, respectively)................ 7,472,455 8,301,703
Loans..................................................... 21,474,498 19,611,168
Less: Unearned income................................... (28,098) (34,342)
Allowance for losses on loans...................... (342,300) (321,476)
----------- -----------
Net loans.......................................... 21,104,100 19,255,350
Premises and equipment, net............................... 637,628 553,251
Accrued interest receivable............................... 287,231 293,066
FHA/VA claims receivable.................................. 108,618 126,164
Mortgage servicing rights................................. 122,110 101,466
Goodwill and other intangibles............................ 975,432 386,994
Other assets.............................................. 574,274 542,988
----------- -----------
TOTAL ASSETS....................................... $33,280,353 $31,691,953
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing..................................... $ 4,035,189 $ 4,194,402
Certificates of deposit of $100,000 and over............ 1,963,347 2,614,694
Other interest-bearing.................................. 17,373,580 18,087,359
----------- -----------
Total deposits..................................... 23,372,116 24,896,455
Short-term borrowings..................................... 5,422,504 1,648,039
Short-and medium-term senior notes........................ 60,000 105,000
Federal Home Loan Bank advances........................... 203,032 279,992
Other long-term debt...................................... 854,738 1,053,740
Accrued interest, expenses, and taxes..................... 202,303 278,237
Other liabilities......................................... 389,551 446,412
----------- -----------
TOTAL LIABILITIES.................................. 30,504,244 28,707,875
----------- -----------
Commitments and contingent liabilities (Notes 14, 17, and
20)..................................................... -- --
Shareholders' equity
Convertible preferred stock............................. 20,875 23,353
Common stock, $5 par value; 300,000,000 shares
authorized; 138,487,381 issued and outstanding
(141,924,958 in 1998).................................. 692,437 709,625
Additional paid-in capital.............................. 755,306 691,789
Retained earnings....................................... 1,453,468 1,516,712
Unearned compensation................................... (11,760) (14,646)
Accumulated other comprehensive income -- unrealized
gain (loss) on available for sale securities, net...... (134,217) 57,245
----------- -----------
TOTAL SHAREHOLDERS' EQUITY......................... 2,776,109 2,984,078
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY......... $33,280,353 $31,691,953
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
42
<PAGE> 43
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1999 1998 1997
------------- ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans.............................. $ 1,760,250 $ 1,828,340 $ 1,817,748
Interest on investment securities
Taxable............................................... 421,162 373,934 348,247
Tax-exempt............................................ 69,538 63,195 53,121
Interest on deposits at financial institutions.......... 2,763 1,807 3,207
Interest on federal funds sold and securities purchased
under agreements to resell............................ 4,014 18,823 19,149
Interest on trading account securities.................. 15,970 14,197 14,956
Interest on loans held for resale....................... 24,235 14,085 8,057
------------ ------------ ------------
Total interest income............................ 2,297,932 2,314,381 2,264,485
------------ ------------ ------------
INTEREST EXPENSE
Interest on deposits.................................... 811,411 896,062 853,921
Interest on short-term borrowings....................... 141,936 79,415 88,753
Interest on long-term debt.............................. 88,054 131,671 121,912
------------ ------------ ------------
Total interest expense........................... 1,041,401 1,107,148 1,064,586
------------ ------------ ------------
NET INTEREST INCOME.............................. 1,256,531 1,207,233 1,199,899
PROVISION FOR LOSSES ON LOANS............................. 74,045 204,056 153,100
------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON
LOANS.......................................... 1,182,486 1,003,177 1,046,799
------------ ------------ ------------
NONINTEREST INCOME
Service charges on deposit accounts..................... 170,052 156,445 157,256
Mortgage banking revenues............................... 96,785 89,965 80,658
Bank card income........................................ 26,880 38,562 39,497
Factoring commissions................................... 29,504 30,630 30,140
Trust service income.................................... 23,920 24,116 24,029
Profits and commissions from trading activities......... 4,321 5,402 7,323
Investment securities gains (losses).................... 2,128 (9,074) 4,888
Other income............................................ 159,120 232,713 126,960
------------ ------------ ------------
Total noninterest income......................... 512,710 568,759 470,751
------------ ------------ ------------
NONINTEREST EXPENSE
Salaries and employee benefits.......................... 502,279 479,765 440,511
Net occupancy expense................................... 88,122 75,974 74,750
Equipment expense....................................... 81,720 72,718 62,736
Goodwill and other intangible amortization.............. 56,388 29,333 21,386
Other expense........................................... 347,855 542,224 402,318
------------ ------------ ------------
Total noninterest expense........................ 1,076,364 1,200,014 1,001,701
------------ ------------ ------------
EARNINGS BEFORE INCOME TAXES..................... 618,832 371,922 515,849
Income taxes.............................................. 208,834 146,316 176,014
------------ ------------ ------------
NET EARNINGS..................................... $ 409,998 $ 225,606 $ 339,835
============ ============ ============
NET EARNINGS APPLICABLE TO COMMON SHARES......... $ 408,240 $ 223,532 $ 334,893
============ ============ ============
EARNINGS PER COMMON SHARE
Basic................................................... $ 2.88 $ 1.61 $ 2.53
Diluted................................................. 2.85 1.58 2.47
AVERAGE COMMON SHARES OUTSTANDING
Basic................................................... 141,854,254 139,034,412 132,451,476
Diluted................................................. 143,982,511 142,692,842 138,219,919
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
43
<PAGE> 44
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
ADDITIONAL ON AVAILABLE
PREFERRED COMMON PAID-IN RETAINED UNEARNED FOR SALE
STOCK STOCK CAPITAL EARNINGS COMPENSATION SECURITIES TOTAL
--------- -------- ---------- ---------- ------------ ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997............ $ 83,809 $625,157 $ 388,419 $1,443,100 $(10,499) $ 27,131 $2,557,117
Comprehensive income
Net earnings.................... -- -- -- 339,835 -- -- 339,835
Other comprehensive income, net
of taxes
Net change in net unrealized
gain on available for sale
securities.................. -- -- -- -- -- 25,409 25,409
----------
Total comprehensive
income.................... -- -- -- -- -- -- 365,244
Cash dividends
Common stock, $1.495 per
share......................... -- -- -- (108,003) -- -- (108,003)
Preferred stock................. -- -- -- (4,939) -- -- (4,939)
Pooled institutions prior to
pooling....................... -- -- -- (53,044) -- -- (53,044)
Common stock issued under employee
benefit plans and dividend
reinvestment plan, net of stock
exchanged....................... -- 6,477 32,824 (5,595) (3,865) -- 29,841
Issuance of stock for
acquisitions.................... -- 5,704 (2,289) 22,897 -- 424 26,736
Other stock transactions of pooled
institutions prior to pooling... -- 31,407 130,319 (58,053) -- -- 103,673
Conversion of preferred stock..... (29,100) 7,275 21,822 -- -- -- (3)
Common stock purchased and
retired......................... -- (3,362) (8,101) (30,686) -- -- (42,149)
-------- -------- --------- ---------- -------- --------- ----------
BALANCE, DECEMBER 31, 1997.......... 54,709 672,658 562,994 1,545,512 (14,364) 52,964 2,874,473
Comprehensive income
Net earnings.................... -- -- -- 225,606 -- -- 225,606
Other comprehensive income, net
of taxes
Net change in net unrealized
gain on available for sale
securities.................. -- -- -- -- -- 3,893 3,893
----------
Total comprehensive
income.................... 229,499
Cash dividends
Common stock, $2.00 per share... -- -- -- (217,613) -- -- (217,613)
Preferred stock................. -- -- -- (2,072) -- -- (2,072)
Pooled institutions prior to
pooling....................... -- -- -- (36,768) -- -- (36,768)
Common stock issued under employee
benefit plans and dividend
reinvestment plan, net of stock
exchanged....................... -- 10,869 53,210 (279) 184 -- 63,984
Issuance of stock for
acquisitions.................... -- 26,936 128,264 50,400 (466) 388 205,522
Other stock transactions of pooled
institutions prior to pooling... -- -- 9,446 (10,998) -- -- (1,552)
Conversion of preferred stock..... (31,356) 7,839 23,515 -- -- -- (2)
Common stock purchased and
retired......................... -- (13,035) (100,985) (37,076) -- -- (151,096)
Conversion of debt of acquired
entity.......................... -- 4,358 15,345 -- -- -- 19,703
-------- -------- --------- ---------- -------- --------- ----------
BALANCE, DECEMBER 31, 1998.......... 23,353 709,625 691,789 1,516,712 (14,646) 57,245 2,984,078
Comprehensive income
Net earnings.................... -- -- -- 409,998 -- -- 409,998
Other comprehensive income, net
of taxes
Net change in net unrealized
gain (loss) on available for
sale securities............. -- -- -- -- -- (191,462) (191,462)
----------
Total comprehensive
income.................... -- -- -- -- -- -- 218,536
Cash dividends
Common stock, $2.00 per share... -- -- -- (284,965) -- -- (284,965)
Preferred stock................. -- -- -- (1,758) -- -- (1,758)
Common stock issued under employee
benefit plans and dividend
reinvestment plan, net of stock
exchanged....................... -- 3,014 18,100 -- 2,886 -- 24,000
Issuance of stock for
acquisitions.................... -- 7,024 71,340 4,120 -- -- 82,484
Conversion of preferred stock..... (2,478) 619 1,858 -- -- -- (1)
Common stock purchased and
retired......................... -- (29,103) (31,063) (190,639) -- -- (250,805)
Conversion of debt of acquired
entity.......................... -- 1,258 3,282 -- -- -- 4,540
-------- -------- --------- ---------- -------- --------- ----------
BALANCE, DECEMBER 31, 1999.......... $ 20,875 $692,437 $ 755,306 $1,453,468 $(11,760) $(134,217) $2,776,109
======== ======== ========= ========== ======== ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
44
<PAGE> 45
UNION PLANTERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1999 1998 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings.............................................. $ 409,998 $ 225,606 $ 339,835
Reconciliation of net earnings to net cash provided by
operating activities:
Provision for losses on loans, other real estate, and
FHA/VA foreclosure claims, net of decrease............ 75,024 174,254 164,572
Depreciation and amortization of premises and
equipment............................................. 69,625 63,424 56,609
Amortization and write-offs of intangibles.............. 76,182 53,772 41,276
Provisions for merger-related, charter consolidation,
and other expenses.................................... -- 50,806 44,831
Net amortization (accretion) of investment securities... 6,153 5,969 (4,077)
Net realized (gains) losses on sales of investment
securities............................................ (2,128) 9,074 (4,888)
Deferred income tax expense (benefit)................... 28,171 (33,476) (3,208)
(Increase) decrease in assets
Trading account assets and loans held for resale... (23,591) (354,088) 11,472
Other assets....................................... 130,967 (122,217) 15,290
Increase (decrease) in accrued interest, expenses,
taxes, and other liabilities.......................... (167,926) 18,937 (38,544)
Other, net.............................................. 6,872 9,631 (4,569)
----------- ----------- -----------
Net cash provided by operating activities.......... 609,347 101,692 618,599
----------- ----------- -----------
INVESTING ACTIVITIES
Net decrease in short-term investments.................... 744,576 14,989 242
Proceeds from sales of available for sale securities...... 1,171,870 1,497,976 1,423,237
Proceeds from maturities, calls, and prepayments of
available for sale securities........................... 4,711,359 4,780,164 2,525,859
Purchases of available for sale securities................ (5,098,264) (7,974,518) (3,874,273)
Net (increase) decrease in loans.......................... 281,349 1,418,766 (523,148)
Net cash received from (paid for) acquired institutions... (45,302) 1,306,523 16,907
Purchases of premises and equipment, net.................. (67,407) (82,052) (73,558)
Other, net................................................ -- -- (22,446)
----------- ----------- -----------
Net cash provided (used) by investing activities... 1,698,181 961,848 (527,180)
----------- ----------- -----------
FINANCING ACTIVITIES
Net increase (decrease) in deposits....................... (5,173,562) (244,689) 324,896
Net increase (decrease) in short-term borrowings.......... 3,515,085 (189,827) (63,875)
Proceeds from long-term debt, net......................... 186 671,200 484,072
Repayment of long-term debt............................... (320,301) (1,091,478) (550,753)
Proceeds from issuance of common stock.................... 20,660 42,364 33,944
Purchase and retirement of common stock, including stock
transactions of acquired entities prior to
acquisition............................................. (250,805) (151,096) (42,814)
Cash dividends paid....................................... (286,756) (256,871) (165,036)
Other, net................................................ 802 -- (23,398)
----------- ----------- -----------
Net cash used by financing activities.............. (2,494,691) (1,220,397) (2,964)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents........ (187,163) (156,857) 88,455
Cash and cash equivalents at the beginning of the period.... 1,366,182 1,523,039 1,434,584
----------- ----------- -----------
Cash and cash equivalents at the end of the period.......... $ 1,179,019 $ 1,366,182 $ 1,523,039
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES
Cash paid for
Interest................................................ $ 1,057,553 $ 1,102,454 $ 1,076,148
Taxes................................................... 169,612 183,979 194,039
Unrealized gain (loss) on available for sale securities... (212,641) 93,133 85,400
</TABLE>
NONCASH ACTIVITIES. See Notes 1, 2, and 10, respectively, regarding other real
estate transfers, acquisitions, and conversions of preferred stock.
The accompanying notes are an integral part of these consolidated financial
statements.
45
<PAGE> 46
UNION PLANTERS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
BUSINESS. Union Planters Corporation (Union Planters or the Company) is a
multi-state bank holding company headquartered in Memphis, Tennessee. Union
Planters operates three banking subsidiaries with 868 banking offices and 1,018
ATMs in Alabama, Arkansas, Florida, Illinois, Indiana, Iowa, Kentucky,
Louisiana, Mississippi, Missouri, Tennessee, and Texas. At December 31, 1999,
Union Planters had consolidated total assets of $33.3 billion, making it the
27th largest bank holding company based in the United States and the largest
headquartered in Tennessee. Through its subsidiaries, Union Planters provides a
diversified range of financial services in the communities in which it operates
including consumer, commercial, and corporate lending; retail banking; and other
ancillary financial services traditionally furnished by full-service financial
institutions. Additional services offered include factoring operations; mortgage
origination and servicing; investment management and trust services; the
issuance of debit cards; the offering of credit cards; the origination,
packaging, and securitization of loans, primarily the government-guaranteed
portion of Small Business Administration (SBA) loans; the collection of
delinquent FHA/VA government-insured/guaranteed loans purchased from third
parties and from GNMA pools serviced for others; full-service and discount
brokerage; and the sale of annuities and bank-eligible insurance products.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES. The accounting and reporting policies of Union Planters
and its subsidiaries conform with generally accepted accounting principles and
general practices within the financial services industry. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. The most
significant estimate relates to the adequacy of the allowance for losses on
loans. Actual results could differ from those estimates. Following are summaries
of the more significant accounting policies of Union Planters.
BASIS OF PRESENTATION. The consolidated financial statements include the
accounts of Union Planters and its subsidiaries after elimination of significant
intercompany accounts and transactions. Prior period consolidated financial
statements have been restated to include the accounts of acquisitions accounted
for using the pooling of interests method of accounting. Business combinations
accounted for as purchases are included in the consolidated financial statements
from their respective dates of acquisition. Assets and liabilities of financial
institutions accounted for as purchases are adjusted to their fair values as of
their dates of acquisition. Certain 1997 and 1998 amounts have been reclassified
to conform with the 1999 financial reporting presentation.
STATEMENT OF CASH FLOWS. Cash and cash equivalents include cash and due
from banks and federal funds sold in the amounts of $51 million, $95 million,
and $266 million at December 31, 1999, 1998, and 1997, respectively. Noncash
transfers to foreclosed properties from loans for the years ended December 31,
1999, 1998, and 1997 were $42.7 million, $28.0 million, and $35.7 million,
respectively. Other noncash transactions are detailed in Notes 2 and 10.
SECURITIES AND TRADING ACCOUNT ASSETS. Debt and equity securities that are
bought and principally held for the purpose of selling them in the near term are
classified as trading securities. These consist primarily of the
government-guaranteed portion of SBA loans and SBA participation certificates.
Gains and losses on sales and fair-value adjustments of trading securities are
included in profits and commissions from trading activities.
Debt securities that Union Planters has the positive intent and ability to
hold to maturity are classified as held to maturity securities and carried at
cost, adjusted for the amortization of premium and accretion of discount using
the level-yield method. Generally, the held to maturity portfolios of acquired
entities are reclassified to the available for sale portfolio upon acquisition.
At December 31, 1999 and 1998, Union Planters had no securities classified as
held to maturity.
Debt and equity securities which Union Planters has not classified as held
to maturity or trading are classified as available for sale securities and, as
such, are reported at fair value, with unrealized gains and losses, net of
deferred taxes, reported as a component of shareholders' equity. Gains or losses
from sales of available for sale securities are computed using the specific
identification method and are included in investment securities gains (losses)
together with impairment losses considered other than temporary.
LOANS HELD FOR RESALE. Loans held for resale include mortgage and other
loans and are carried at the lower of cost or fair value on an aggregate basis.
46
<PAGE> 47
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
LOANS. Loans are carried at the principal amount outstanding. Interest
income on loans is recognized using constant yield methods except for unearned
income which is recorded as income using a method which approximates the
interest method. Loan origination fees and direct loan origination costs are
deferred and recognized over the life of the related loans as adjustments to
interest income.
NONPERFORMING LOANS. Nonperforming loans consist of nonaccrual loans and
restructured loans. Loans, other than consumer loans, are generally placed on
nonaccrual status and interest is not recorded if, in management's opinion,
payment in full of principal or interest is not expected or when payment of
principal or interest is past due 90 days or more, unless the loan is both
well-secured and in the process of collection. Reference is made to Note 5 for a
description of a change in the application of the nonaccrual policy related to
single family residential mortgages. Consumer loans are automatically
charged-off when they become 120 days past due. In the interim, consumer loans
are placed on nonaccrual status upon the occurrence of certain events, such as
bankruptcy. FHA/VA government-insured/guaranteed loans which are past due 90
days or more are placed on nonaccrual status when interest claim reimbursements
are likely to be denied due to missed filing dates in the foreclosure process.
ALLOWANCE FOR LOSSES ON LOANS. The allowance for losses on loans
represents management's best estimate of losses inherent in the existing loan
portfolio. The allowance for losses on loans is increased by the provision for
losses on loans charged to expense and reduced by loans charged off, net of
recoveries. The provision for losses on loans is determined based on
management's assessment of several factors: reviews and evaluations of specific
loans, changes in the nature and volume of the loan portfolio, current and
anticipated economic conditions and the related impact on specific borrowers and
industry groups, historical loan loss experience, the level of classified and
nonperforming loans, and the results of regulatory examinations.
Loans are considered impaired if based on current information and events,
it is probable that Union Planters will be unable to collect the scheduled
payments of principal or interest when due according to the contractual terms of
the loan agreement. The measurement of impaired loans is generally based on the
present value of expected future cash flows discounted at the historical
effective interest rate, except that all collateral-dependent loans are measured
for impairment based on the fair value of the collateral.
PREMISES AND EQUIPMENT. Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation expense is computed
using the straight-line method and is charged to operating expense over the
estimated useful lives of the assets. Depreciation expense has been computed
principally using estimated lives of five to forty years for premises and two to
ten years for furniture and equipment. Leasehold improvements are amortized
using the straight-line method over the shorter of the initial term of the
respective lease or the estimated useful life of the improvement. Costs of major
additions and improvements are capitalized. Expenditures for maintenance and
repairs are charged to operations as incurred.
GOODWILL AND OTHER INTANGIBLES. The unamortized costs in excess of the
fair value of acquired net tangible assets are included in goodwill and other
intangibles. Identifiable intangibles, except for premiums on purchased deposits
which are amortized on a straight-line method over periods up to 15 years, are
amortized over the estimated periods benefited. The remaining costs (goodwill)
are generally amortized on a straight-line basis over periods up to 25 years.
For acquisitions where the fair value of net assets acquired exceeds the
purchase price, the resulting negative goodwill is allocated proportionally to
noncurrent, nonmonetary assets.
IMPAIRMENT OF CERTAIN ASSETS. Union Planters has adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which requires impairment losses to be recorded on long-lived assets used in
operations and certain related identifiable intangibles when indications of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. Additionally,
long-lived assets and related identifiable intangibles to be disposed of are
reported at the lower of carrying amount or fair value, less selling costs.
Union Planters has adopted this methodology for evaluating impairment of
goodwill and other intangibles separate from any associated long-lived assets.
In applying this methodology, Union Planters evaluates the carrying value of the
goodwill and other intangibles against undiscounted after-tax cash flows from
the acquired assets. If such cash flows exceed the carrying value, no impairment
adjustment is recorded. If such cash flows are less than the carrying values,
the cash flows are then discounted and the carrying values are adjusted to the
amount of the discounted cash flows. Additionally, the fair value
47
<PAGE> 48
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
of the assets/business is also considered in evaluating the carrying value of
the goodwill.
MORTGAGE SERVICING RIGHTS. Mortgage servicing rights are accounted for
under the provisions of SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," which became effective
January 1, 1997. SFAS No. 125 superseded SFAS No. 122, "Accounting for Mortgage
Servicing Rights," but did not significantly change the methodology used to
account for servicing rights. Union Planters had adopted SFAS No. 122 and at the
time of adoption began capitalizing originated servicing rights. The adoption
did not have a material impact on financial position or results of operations.
Prior to that date, capitalization had been limited to purchased servicing. The
servicing rights capitalized are amortized in proportion to and over the period
of estimated servicing income. Management stratifies servicing rights based on
origination period and interest rate and evaluates the recoverability in
relation to the impact of actual and anticipated loan portfolio prepayment,
foreclosure, and delinquency experience. Union Planters did not have a valuation
allowance associated with the mortgage servicing rights portfolio as of December
31, 1999 or 1998.
OTHER REAL ESTATE. Properties acquired through foreclosure and unused bank
premises are stated at fair value, reduced by estimated selling costs.
Write-downs of the foreclosed assets at, or prior to, the date of foreclosure
are charged to the allowance for losses on loans. Subsequent write-downs, income
and expense incurred in connection with holding such assets, and gains and
losses realized from the sales of such assets are included in noninterest income
and expense.
STOCK COMPENSATION. Union Planters has elected not to adopt the
recognition provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," which requires a fair-value-based method of accounting for stock
options and similar equity awards. Union Planters continues to apply Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations in accounting for its stock compensation plans and,
accordingly, does not recognize compensation cost, except for stock grants. See
Note 14 for a summary of the pro forma effect if the accounting provisions of
SFAS No. 123 had been elected.
INCOME TAXES. Union Planters files a consolidated Federal income tax
return which includes all of its subsidiaries except for a credit life insurance
company and certain pass-through entities. Income tax expense is allocated among
the parent company and its subsidiaries as if each had filed a separate return.
The provision for income taxes is based on income reported for consolidated
financial statement purposes and includes deferred taxes resulting from the
recognition of certain revenues and expenses in different periods for
tax-reporting purposes. Deferred tax assets and liabilities are measured using
the enacted tax rates expected to apply to taxable income in the year in which
those temporary differences are expected to be realized or settled. Recognition
of certain deferred tax assets is based upon management's belief that, based
upon historical earnings and anticipated future earnings, normal operations will
continue to generate sufficient future taxable income to realize these benefits.
A valuation allowance is established for deferred tax assets when, in the
opinion of management, it is "more likely than not" that the asset will not be
realized.
RECENT ACCOUNTING PRONOUNCEMENTS
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. In June
1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." The provisions of this statement require that derivative
instruments be carried at fair value on the balance sheet. The statement
continues to allow derivative instruments to be used to hedge various risks and
sets forth specific criteria to be used to determine when hedge accounting can
be used. The statement also provides for offsetting changes in fair value or
cash flows of both the derivative and the hedged asset or liability to be
recognized in earnings in the same period; however, any changes in fair value or
cash flow that represent the ineffective portion of a hedge are required to be
recognized in earnings and cannot be deferred. For derivative instruments not
accounted for as hedges, changes in fair value are required to be recognized in
earnings.
The provisions of this statement become effective for quarterly and annual
reporting beginning January 1, 2001. The statement allows for early adoption but
Union Planters has no plans to adopt the provisions of SFAS No. 133 prior to the
effective date. The impact of adopting the provisions of this statement on Union
Planters' financial position, results of operations and cash flow subsequent to
the effective date is not currently estimable and will depend on the financial
position of Union Planters and the nature and purpose of the derivative
instruments in use by management at that time.
48
<PAGE> 49
NOTE 2. ACQUISITIONS
POOLINGS OF INTERESTS. Union Planters consummated in the three-year period
ended December 31, 1999 the following acquisitions which were accounted for as
pooling of interests. The information below is as of the date of acquisition.
<TABLE>
<CAPTION>
DATE COMMON
ACQUIRED SHARES ISSUED TOTAL ASSETS TOTAL EQUITY
-------- ------------- ------------ ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
1998 ACQUISITIONS
Magna Group, Inc....................................... 7/1/98 33,398,818 $ 7,683 $ 643
Peoples First Corporation.............................. 7/1/98 6,031,031 1,427 151
C B & T, Inc........................................... 7/7/98 1,449,127 278 34
First National Bancshares of Wetumpka, Inc............. 7/31/98 835,709 202 23
Merchants Bancshares, Inc.............................. 7/31/98 2,018,744 565 62
Alvin Bancshares, Inc.................................. 8/1/98 423,869 117 12
AMBANC Corp............................................ 8/31/98 3,387,548 740 75
Transflorida Bank...................................... 8/31/98 1,655,371 334 40
Southeast Bancorp, Inc................................. 12/31/98 1,203,942 324 20
FSB, Inc............................................... 12/31/98 907,177 145 17
Ready State Bank....................................... 12/31/98 3,196,954 622 50
Other acquisitions (four acquisitions)................. Various 1,773,968 456 45
---------- ------- ------
Total......................................... 56,282,258 $12,893 $1,172
========== ======= ======
1997 ACQUISITIONS
Capital Bancorp........................................ 12/31/97 6,494,889 $ 2,156 $ 145
Magna Bancorp, Inc..................................... 11/1/97 7,103,272 1,191 128
Other acquisitions (three acquisitions)................ Various 1,081,552 242 25
---------- ------- ------
Total......................................... 14,679,713 $ 3,589 $ 298
========== ======= ======
</TABLE>
PURCHASE ACQUISITIONS. Union Planters consummated in the three-year period
ended December 31, 1999, the following acquisitions that were accounted for as
purchases.
<TABLE>
<CAPTION>
DATE RESULTING
INSTITUTION ACQUIRED CONSIDERATION TOTAL ASSETS INTANGIBLES TOTAL EQUITY
----------- -------- -------------------- ------------ ----------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
First Mutual Bancorp.................. 1/31/99 1,404,816 shares of $ 403 $ 37 $ 79
common stock
First & Farmers Bancshares, Inc....... 2/1/99 $76 million in cash 411 42 N/A
Purchase of 56 branches, $850 million
of loans, and assumption of $1.7
billion of deposits of First Chicago
NBD Corporation in Indiana (Indiana
Branch Purchase).................... 3/5/99 $283 million in cash 1,903 283 N/A
Republic Banking Corporation of
Florida............................. 7/16/99 $410 million in cash 1,792 269 N/A
Sho-Me Financial Corp................. 1/1/98 1,153,459 shares of 374 29 61
common stock
Duck Hill Bank........................ 8/1/98 42,396 shares of 21 1 3
common stock
Purchase of 24 branches and assumption
of $1.5 billion of deposits of
California Federal Bank in Florida
(Florida Branch Purchase)........... 9/11/98 $110 million in cash 1,389 110 N/A
PFIC Corporation...................... 2/27/97 59,992 shares of 4 3 3
common stock
-------- ---- ----
Total........................ $ 6,297 $774 $146
======== ==== ====
</TABLE>
Because all of the above purchase acquisitions, in the aggregate, are
insignificant to the consolidated results of Union Planters, pro forma
information has been omitted. Additionally, pro forma information for the
Indiana and Florida Branch Purchases is not available due to lack of information
available for operation of the branches on a historical basis.
NOTE 3. RESTRICTIONS ON CASH AND DUE FROM BANKS
Union Planters' banking subsidiaries are required to maintain
noninterest-bearing average reserve balances with the Federal Reserve Bank.
Average balances required to be maintained for such purposes during 1999 and
1998 were $42 million and $118 million, respectively.
49
<PAGE> 50
NOTE 4. INVESTMENT SECURITIES
The following is a summary of Union Planters' investment securities, all of
which were classified as "available for sale:"
<TABLE>
<CAPTION>
DECEMBER 31, 1999
--------------------------------------------
UNREALIZED
AMORTIZED ------------------ FAIR
COST GAINS LOSSES VALUE
---------- ------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
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>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------------------------
UNREALIZED
AMORTIZED ------------------ FAIR
COST GAINS LOSSES VALUE
---------- -------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Government obligations
U.S. Treasury............................................. $ 390,538 $ 5,809 $ 60 $ 396,287
U.S. Government agencies
Collateralized mortgage obligations..................... 2,581,446 12,908 6,051 2,588,303
Mortgage-backed......................................... 733,224 13,970 819 746,375
Other................................................... 1,491,394 17,695 975 1,508,114
---------- -------- ------- ----------
Total U.S. Government obligations.................. 5,196,602 50,382 7,905 5,239,079
Obligations of states and political subdivisions............ 1,293,257 53,558 1,149 1,345,666
Other stocks and securities................................. 1,718,711 4,168 5,921 1,716,958
---------- -------- ------- ----------
Total available for sale securities................ $8,208,570 $108,108 $14,975 $8,301,703
========== ======== ======= ==========
</TABLE>
The following table presents the gross realized gains and losses on
available for sale investment securities for the years ended December 31, 1999,
1998, and 1997.
<TABLE>
<CAPTION>
1999 1998 1997
------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Realized gains....... $ 5,785 $ 26,088 $ 9,080
Realized losses...... (3,657) (35,162) (4,192)
</TABLE>
During the second quarter of 1998, Union Planters recorded a pretax loss of
$22.8 million which is included in realized losses above. The loss was
attributable to the premium write-down of certain high-coupon mortgage-backed
securities of an acquired entity resulting from the acceleration and anticipated
acceleration of prepayments of the underlying loans.
OTHER COMPREHENSIVE INCOME. The following table presents a reconciliation
of the net change in unrealized gains (losses) on available for sale securities:
<TABLE>
<CAPTION>
BEFORE-TAX TAX (EXPENSE) NET OF
AMOUNT BENEFIT TAX AMOUNT
---------- ------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
1999
Change in the unrealized losses on available for sale
securities.............................................. $(303,646) $113,484 $(190,162)
Less: Reclassification for gains included in net
earnings................................................ 2,128 (828) 1,300
--------- -------- ---------
Net change in the unrealized losses on available for sale
securities.............................................. $(305,774) $114,312 $(191,462)
========= ======== =========
1998
Change in the unrealized gains on available for sale
securities.............................................. $ 823 $ (320) $ 503
Less: Reclassification for losses included in net
earnings................................................ (9,074) 5,684 (3,390)
--------- -------- ---------
Net change in the unrealized gains on available for sale
securities.............................................. $ 9,897 $ (6,004) $ 3,893
========= ======== =========
1997
Change in the unrealized gains on available for sale
securities.............................................. $ 46,663 $(18,152) $ 28,511
Less: Reclassification for gains included in net
earnings................................................ 4,888 (1,786) 3,102
--------- -------- ---------
Net change in the unrealized gains on available for sale
securities.............................................. $ 41,775 $(16,366) $ 25,409
========= ======== =========
</TABLE>
50
<PAGE> 51
NOTE 4. INVESTMENT SECURITIES (CONTINUED)
Investment securities having a fair value of approximately $2.8 billion and
$3.1 billion at December 31, 1999 and 1998, 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 fair values,
contractual maturities, and weighted average yields of available for sale
investment securities as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
MATURING
-------------------------------------------------------------------------------
WITHIN ONE AFTER ONE BUT AFTER FIVE BUT
YEAR WITHIN FIVE YEARS WITHIN TEN YEARS AFTER TEN YEARS TOTAL
---------------- ------------------ ------------------ ------------------ ------------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
-------- ----- ---------- ----- ---------- ----- ---------- ----- ---------- -----
(FULLY TAXABLE-EQUIVALENT BASIS/DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
obligations
U.S. Treasury........... $ 81,929 6.05% $ 83,207 5.70% $ 197 6.61% $ 2 --% $ 165,335 5.88%
U.S. Government agencies
Collateralized
mortgage
obligations......... 465 7.15 2,591 6.83 451,942 6.09 1,985,303 6.10 2,440,301 6.10
Mortgage-backed....... 15,120 5.38 102,758 6.51 231,598 6.59 300,649 7.10 650,125 6.78
Other................. 153,702 6.20 659,114 5.89 102,455 6.39 132,909 7.09 1,048,180 6.14
-------- ---------- ---------- ---------- ----------
Total U.S.
Government
obligations..... 251,216 6.10 847,670 5.95 786,192 6.28 2,418,863 6.28 4,303,941 6.20
Obligations of states and
political
subdivisions............ 63,009 8.79 204,156 8.47 505,473 8.40 530,450 7.79 1,303,088 8.18
Other stocks and
securities Federal
Reserve Bank and Federal
Home Loan Bank stock.... -- -- -- -- -- -- 203,828 7.44 203,828 7.44
Bonds, notes, and
debentures............ 3,080 6.49 2,855 10.76 5,200 8.00 -- -- 11,135 8.29
Collateralized mortgage
obligations........... 50,000 6.48 79,212 5.65 155,578 6.07 1,549,275 6.88 1,834,065 6.75
Other................... 1,436 1.39 4,255 7.53 1,150 6.76 22,198 5.29 29,039 5.48
-------- ---------- ---------- ---------- ----------
Total other stocks
and securities.. 54,516 6.35 86,322 5.91 161,928 6.14 1,775,301 6.92 2,078,067 6.81
-------- ---------- ---------- ---------- ----------
Total amortized
cost of
available for
sale securities. $368,741 6.60 $1,138,148 6.40 $1,453,593 7.00 $4,724,614 6.69 $7,685,096 6.70
======== ========== ========== ========== ==========
Total fair
value........... $368,768 $1,123,733 $1,425,049 $4,554,905 $7,472,455
======== ========== ========== ========== ==========
</TABLE>
The weighted average yields are calculated by dividing the sum of the
individual security yield weights (effective yield times book value) by the
total book value of the securities. The weighted average yield for obligations
of states and political subdivisions is adjusted to a taxable-equivalent yield,
using a federal income tax rate of 35%. Expected maturities of securities will
differ from contractual maturities because some borrowers have the right to call
or prepay obligations without prepayment penalties. The investment securities
portfolio is expected to have a principal weighted average life of approximately
5.23 years.
51
<PAGE> 52
NOTE 5. LOANS
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1999 1998
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Commercial, financial, and agricultural..................... $ 4,799,840 $ 3,543,925
Foreign..................................................... 374,814 197,120
Accounts receivable -- factoring............................ 555,128 615,952
Real estate -- construction................................. 1,581,164 1,195,779
Real estate -- mortgage
Secured by 1-4 family residential......................... 5,554,943 5,647,520
FHA/VA government-insured/guaranteed...................... 519,213 759,911
Other mortgage............................................ 4,591,110 4,386,182
Home equity................................................. 584,546 482,665
Consumer
Credit cards and related plans............................ 82,998 96,091
Other consumer............................................ 2,752,016 2,622,402
Direct lease financing...................................... 78,726 63,621
----------- -----------
Total loans........................................ $21,474,498 $19,611,168
=========== ===========
</TABLE>
Nonperforming loans are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1999 1998
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Nonaccrual loans............................................ $127,766 $150,378
Restructured loans.......................................... 1,878 5,612
-------- --------
Total.............................................. $129,644 $155,990
======== ========
</TABLE>
At December 31, 1999 and 1998, Union Planters had $6.6 million and $9.2
million, respectively, of FHA/VA government-insured/guaranteed loans on
nonaccrual status. Since these loans are government-insured/guaranteed, Union
Planters does not expect any loss of principal. The loans were placed on
nonaccrual status because the contractual payment of interest by FHA/VA had
stopped.
In the third quarter of 1999, Union Planters changed its policy related to
placing single family residential mortgage loans on nonaccrual status to conform
to industry practice. Previously, single family residential mortgage loans were
automatically placed on nonaccrual status after they became past due 90 days or
more. Prospectively, these loans are being placed on nonaccrual status if the
loan is not in process of collection or is not well secured. The impact of the
change was to reduce single family residential mortgage loans on nonaccrual
status approximately $50 million with loans past due 90 days or more and still
accruing interest increasing by a corresponding amount.
The impact on net interest income of nonperforming loans was not material
for the three years ended December 31, 1999. Also, there were no significant
outstanding commitments to lend additional funds at December 31, 1999.
Certain of Union Planters' bank subsidiaries, principally Union Planters
Bank, National Association (UPB), have granted loans to Union Planters'
directors, executive officers, and their affiliates. These loans were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unrelated persons and
does not involve more than normal risks of collectability. The aggregate dollar
amount of these loans was $19.4 million and $21.9 million at December 31, 1999
and 1998, respectively. During 1999, $14.5 million of new loans and advances
under credit lines were made to related parties, including $107,000 added for a
new relationship not included in the 1998 balance; repayments totaled
approximately $14.3 million. Additionally, the balance at December 31, 1998 was
reduced $2.7 million for loans related to former directors and other loans no
longer considered related parties.
In March 1999, UPB securitized and sold approximately $132 million of
FHA/VA government insured-guaranteed loans, which resulted in a pretax gain of
$5.3 million. In 1998, a similar sale of $380 million of FHA/VA government-
insured/guaranteed loans resulted in a pretax gain of $19.6 million. A sale of
$290 million of ARM loans in June 1999 resulted in a pretax gain of $5.0
million. In October 1998, Union Planters sold substantially all of its credit
card portfolio, approximately $440 million of loans, to a third party, which
resulted in a pretax gain of $72.7 million. An additional gain of $3.3 million
was recognized in 1999 related to the sale of the remaining, approximately $20
million, credit card portfolio.
52
<PAGE> 53
NOTE 6. ALLOWANCE FOR LOSSES ON LOANS
The changes in the allowance for losses on loans are summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance, January 1.......................................... $ 321,476 $ 324,474 $ 270,439
Increase due to acquisitions.............................. 43,075 15,920 17,185
Decrease due to the sale of certain loans................. -- (36,693) --
Provision for losses on loans............................. 74,045 204,056 153,100
Recoveries of loans previously charged off................ 52,861 29,016 24,281
Loans charged off......................................... (149,157) (215,297) (140,531)
--------- --------- ---------
Balance, December 31........................................ $ 342,300 $ 321,476 $ 324,474
========= ========= =========
</TABLE>
At December 31, 1998, Union Planters had an impaired loan totaling $11.9
million, which had a valuation reserve recorded in the fourth quarter of 1998 of
$7 million. In 1999, this loan was substantially charged-off and no valuation
reserve remains.
NOTE 7. PREMISES AND EQUIPMENT
A summary of premises and equipment follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1999 1998
---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 130,146 $ 108,307
Buildings and improvements.................................. 509,728 451,633
Leasehold improvements...................................... 49,138 47,243
Equipment................................................... 419,068 368,373
Construction in progress.................................... 11,867 19,751
---------- ---------
1,119,947 995,307
Less accumulated depreciation and amortization.............. (482,319) (442,056)
---------- ---------
Total premises and equipment....................... $ 637,628 $ 553,251
========== =========
</TABLE>
NOTE 8. INTEREST-BEARING DEPOSITS
The following table presents the maturities of interest-bearing deposits at
December 31, 1999 (Dollars in thousands):
<TABLE>
<S> <C>
2000........................................................ $ 8,541,271
2001........................................................ 1,268,383
2002........................................................ 405,497
2003........................................................ 184,938
2004........................................................ 99,707
2005 and after.............................................. 45,071
-----------
Total time deposits................................... 10,544,867
Interest-bearing deposits with no stated maturity..... 8,792,060
-----------
Total interest-bearing deposits.................... $19,336,927
===========
</TABLE>
53
<PAGE> 54
NOTE 9. BORROWINGS
SHORT-TERM BORROWINGS. Short-term borrowings includes short-term FHLB
advances, federal funds purchased and securities sold under agreements to
repurchase, and other short-term borrowings having original maturities of one
year or less. Short-term FHLB advances are generally overnight borrowings from
the FHLB, which are secured by mortgage-backed securities and mortgage loans.
Federal funds purchased arise primarily 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>
DECEMBER 31,
------------------------
1999 1998
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
YEAR-END BALANCES
Short-term FHLB advances.................................. $3,000,000 $ --
Federal funds purchased................................... 945,869 313,662
Securities sold under agreements to repurchase............ 1,476,142 1,333,587
Other short-term borrowings............................... 493 790
---------- ----------
Total short-term borrowings........................ $5,422,504 $1,648,039
========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1999 1998 1997
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS
TO REPURCHASE
Daily average balance..................................... $1,980,674 $1,454,025 $1,392,670
Weighted average interest rate............................ 4.62% 5.17% 5.06%
Maximum outstanding at any month end...................... $2,422,011 $1,892,426 $1,731,605
Weighted average interest rate at December 31............. 4.65% 4.58% 5.44%
SHORT-TERM FHLB ADVANCES
Daily average balance..................................... $ 928,493 N/A $ 284,274
Weighted average interest rate............................ 5.42% N/A 5.99%
Maximum outstanding at any month end...................... $3,000,000 N/A $ 386,552
Weighted average interest rate at December 31............. 5.92% N/A 5.72%
</TABLE>
- ---------------------
N/A -- Not applicable
BANK NOTES. In December 1998, UPB established a $5 billion senior and
subordinated bank note program. Under the program UPB may issue senior bank
notes with maturities ranging from 30 days to one year from their respective
issue dates (Short-Term Senior Notes), senior bank notes with maturities 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 December 31,
1999 and 1998, only Medium-Term Senior Notes were outstanding. A summary of
these notes follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1999 1998
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Balances at year end........................................ $ 60,000 $ 105,000
Average balance for the year................................ 91,356 123,986
Weighted average interest rate.............................. 6.74% 6.66%
Weighted average interest rate at year end.................. 6.79 6.67
Fixed rate notes............................................ $ 60,000 $ 105,000
Range of maturities......................................... 8/01-10/01 10/99-10/01
</TABLE>
The principal maturities of Medium-Term Senior Notes subsequent to December
31, 1999 are $60 million in 2001.
FEDERAL HOME LOAN BANK ADVANCES. Certain of Union Planters' banking and
thrift subsidiaries have advances from the FHLB under Blanket Agreements for
Advances and Security Agreements (the Agreements). These advances have an
original maturity of greater than one year. The Agreements enable these
subsidiaries to borrow funds from the FHLB to fund mortgage loan programs and to
satisfy certain other funding needs. The value of the mortgage-backed securities
and mortgage loans pledged under the Agreements must be maintained at not less
than 115% and 150%, respectively, of the advances outstanding. At December 31,
1999, Union Planters' subsidiaries had an adequate amount of mortgage-
54
<PAGE> 55
NOTE 9. BORROWINGS (CONTINUED)
backed securities and loans to satisfy the collateral requirements. A summary of
the advances is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1999 1998
------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Balances at year end........................................ $ 203,032 $ 279,992
Range of interest rates..................................... 1.75%-6.85% 3.25%-8.36%
Range of maturities......................................... 2000-2015 1999-2015
</TABLE>
The principal maturities of FHLB advances subsequent to December 31, 1999
are $200.2 million in 2000, $1.0 million in 2001, $.8 million in 2002, $.1
million in 2003, $.4 million in 2004, and $.5 million after 2004.
OTHER LONG-TERM DEBT. Union Planters' other long-term debt is summarized
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
--------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Corporation-Obligated Mandatorily Redeemable Capital
Pass-through Securities of Subsidiary Trust holding solely
a Corporation-Guaranteed Related Subordinated Note (Trust
Preferred Securities)..................................... $199,044 $ 199,009
Variable rate asset-backed certificates..................... 175,000 275,000
6.75% Subordinated Notes due 2005........................... 99,655 99,595
6.25% Subordinated Notes due 2003........................... 74,800 74,748
6.50% Putable/Callable Subordinated Notes due 2018.......... 301,055 301,716
Revolving loan.............................................. -- 74,500
Subordinated notes of acquired entities due 1998 and
1999...................................................... -- 4,896
Other long-term debt........................................ 5,184 24,276
-------- ----------
Total other long-term debt......................... $854,738 $1,053,740
======== ==========
</TABLE>
Corporation-Obligated Mandatorily Redeemable Capital Pass-through
Securities of Subsidiary Trust holding solely a Corporation-Guaranteed Related
Subordinated Note represents Capital Securities issued by Union Planters Capital
Trust A (the UPC Trust). In 1996, the UPC Trust issued $200 million liquidation
amount of 8.20% Capital Trust Pass-through Securities(SM) (Trust Preferred
Securities) at 99.468% which represented an undivided beneficial interest in the
assets of the UPC Trust, a statutory business trust created under the laws of
the state of Delaware. Union Planters owns all of the common securities of the
UPC Trust representing an undivided beneficial interest in the assets of the UPC
Trust. The sole asset of the UPC Trust is $206.2 million (carrying value of
$205.2 million at December 31, 1999 and 1998) of 8.20% Junior Subordinated
Deferrable Interest Debentures of Union Planters issued at 99.468%, which will
mature on December 15, 2026. The distributions payable on the Trust Preferred
Securities are a fixed rate per annum, 8.20% of the stated liquidation amount,
and are cumulative from the date of issuance.
Union Planters has the right, at any time, subject to certain conditions,
to defer payments of interest on the Subordinated Debentures, in which case
distributions on Trust Preferred Securities would likewise be deferred. Upon
electing to defer such interest payments, Union Planters will be prohibited from
paying dividends on its common and preferred stock and interest on certain
outstanding borrowings. The Subordinated Debt and therefore, the Trust Preferred
Securities are redeemable by Union Planters at a call price, plus accrued and
unpaid interest to the date of redemption, in whole or in part and from
time-to-time on or after December 15, 2006, subject to certain conditions. In
certain limited circumstances, primarily related to certain tax events, the
Subordinated Debt and therefore, the Trust Preferred Securities are redeemable
at par, plus accrued interest to date of redemption. The Trust Preferred
Securities qualify as Tier 1 regulatory capital and are reported in Federal
Reserve regulatory reports as a minority interest in a consolidated subsidiary.
In June 1994, December 1994, and July 1995, Capital Factors, Inc., a wholly
owned subsidiary, through a wholly owned financing trust subsidiary, issued $100
million, $25 million, and $50 million, respectively, of Variable Rate
Asset-Backed Certificates (Certificates) with maturity dates of December 1999,
June 2000, and January 2001. The senior certificates bear an interest rate of
LIBOR plus 1.25%. The interest rates on December 31, 1999 and 1998 were 7.71%
and 6.79%, respectively. The senior certificates may not be redeemed prior to
their stated
55
<PAGE> 56
NOTE 9. BORROWINGS (CONTINUED)
maturity. The Certificates issued in June 1994 were repaid in September 1999 in
accordance with the terms of the issue. In April 1997, a fourth series of
variable rate asset-backed certificates (the Variable Funding Certificates) that
mature in June 2004 were issued. Unlike the previously issued Certificates which
were fixed as to principal amount, the Variable Funding Certificates provide for
a monthly settlement of principal, which may increase or decrease the
outstanding amount. The fourth series includes the issuance of $95.25 million of
senior Variable Funding Certificates and $4.75 million of senior subordinated
Variable Funding Certificates which bear interest rates of LIBOR plus 0.75% and
LIBOR plus 1.50%, respectively. The interest rates on December 31, 1999 were
7.21% and 7.96%, respectively, and 6.29% and 7.04%, respectively, at December
31, 1998. Interest on all certificates is payable monthly. The senior
certificates are collateralized by interest-earning advances to factoring
clients which totaled approximately $252.5 million at December 31, 1999. Such
advances are made on receivables before they are due or collected by Capital
Factors, Inc., which services and administers these advances and related
receivables under an agreement with another financial institution. The senior
certificates are subject to acceleration if certain collateral requirements are
not maintained. Remaining deferred issuance costs of $570,000 are being
amortized over the terms of the related series. Such costs are included in other
assets on the balance sheets. A cash collateral account is required pursuant to
the terms of the aforementioned agreement. Such restricted cash collateral
amounted to $6.4 million and $10.1 million at December 31, 1999 and 1998,
respectively.
During November 1993, Union Planters issued in a public offering $75
million of 6.25% Subordinated Capital Notes due 2003 at 99.305%. In November
1995, Union Planters issued in another public offering $100 million of 6.75%
Subordinated Capital Notes due 2005 at 99.408%. The notes qualify as Tier 2
regulatory capital.
In March 1998, UPB issued $300 million of 6.50% Putable/Callable
Subordinated Notes due March 15, 2018, Putable/Callable March 15, 2008. These
notes were issued at 99.306% and interest is payable semiannually. The notes are
subject to mandatory redemption from the holders on March 15, 2008 through
either the exercise of the call option by the callholder or in the event the
callholder does not exercise the call option or for any reason fails to pay the
call price, the automatic exercise of the put option. If the callholder elects
to purchase the notes, the notes will be acquired by the callholder from the
holders on March 15, 2008 at 100% of the entire principal amount thereof. If the
callholder does not elect to purchase the notes or fails to make the payment of
the call price, UPB will be required to repurchase the entire principal amount
of the notes from the holders thereof on March 15, 2008 at 100% of the principal
amount. Except in limited circumstances, the notes are not subject to redemption
by UPB prior to March 15, 2018. The notes are unsecured debt obligations of UPB
and are subordinated to the claims of UPB's depositors and general creditors.
The notes qualify for Tier 2 capital for regulatory purposes.
Capital Factors had a $75 million revolving loan payable to another
financial institution. At December 31, 1998, $74.50 million was outstanding
under the revolving line. Interest accrued on the line at LIBOR plus 1.25%
(6.88% at December 31, 1998). The loan matured in March 1999.
Included in other long-term debt at December 31, 1998 was a privately
placed $10.0 million 7.95% subordinated note issued in connection with Capital
Factors' securitized financing. This note was repaid in 1999.
The subordinated notes of acquired entities represented two issues. One of
these issues matured in 1998 and one issue matured in 1999.
The principal maturities of other long-term debt subsequent to December 31,
1999 are $29.5 million in 2000, $50.5 million in 2001, $.1 million in 2002,
$74.8 million in 2003, $100.0 million in 2004, and $599.8 million after 2004.
The ability of Union Planters to service its long-term debt obligations is
dependent upon the future profitability of its banking subsidiaries and their
ability to pay dividends to Union Planters (see Note 12).
NOTE 10. SHAREHOLDERS' EQUITY
COMMON STOCK. At Union Planters' 1998 annual meeting, shareholders
approved an increase in the number of authorized common shares from 100 million
to 300 million.
DIVIDENDS. The payment of dividends is determined by the Board of
Directors (the Board) taking into account the earnings, capital levels, cash
requirements, and the financial condition of Union Planters and its
subsidiaries, applicable government regulations and policies, and other factors
deemed relevant by the Board, including the amount of dividends payable to Union
Planters by its subsidiaries. Various federal laws, regulations, and policies
limit the ability of Union Planters' subsidiary banks to pay dividends. See Note
12, "Regulatory Capital and Restrictions on Dividends and Loans from
Subsidiaries."
56
<PAGE> 57
NOTE 10. SHAREHOLDERS' EQUITY (CONTINUED)
PREFERRED STOCK. Union Planters' preferred stock is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1999 1998
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
PREFERRED STOCK, WITHOUT PAR VALUE, 10,000,000 SHARES
AUTHORIZED FOR ALL ISSUES:
Series E Preferred Stock.................................. $20,875 $23,353
Series F Preferred Stock.................................. -- --
------- -------
Total preferred stock.............................. $20,875 $23,353
======= =======
</TABLE>
SERIES A PREFERRED STOCK (SHAREHOLDER RIGHTS PLAN). In 1989, the Board of
Union Planters adopted a Share Purchase Rights Plan and distributed a dividend
of one Preferred Share Purchase Right for each outstanding share of Union
Planters' $5 par value Common Stock and for each share to be issued thereafter.
This plan expired January 19, 1999 and a new plan became effective (see Series F
Preferred Stock).
SERIES E PREFERRED STOCK. At December 31, 1999 and 1998, 835,006 and
934,128 shares, respectively, of Union Planters' 8% Cumulative, Convertible,
Preferred Stock, Series E (Series E Preferred Stock) were issued and
outstanding. Such shares have a stated value of $25 per share on which dividends
accrue at the rate of 8% per annum; dividends are cumulative and are payable
quarterly. The Series E Preferred Stock is not subject to any sinking fund
provisions and has no preemptive rights. Such shares have a liquidation
preference of $25 per share plus unpaid dividends accrued thereon, and with the
prior approval of the Federal Reserve, may be redeemed by Union Planters in
whole or in part at any time after March 31, 1997 at $25 per share. At any time
prior to redemption, each share of Series E Preferred Stock is convertible, at
the option of the holder, into 1.25 shares of Union Planters' common stock.
Holders of Series E Preferred Stock have no voting rights except for those
provided by law and in certain other limited circumstances.
SERIES F PREFERRED STOCK (SHAREHOLDER RIGHTS PLAN). The Board has adopted
a new Shareholder Rights Plan, which became effective upon the expiration of the
former Shareholder Rights Plan on January 19, 1999. Under the new plan, each
share of common stock received a tax-free dividend of one Preferred Share
Purchase Right (Right). The Rights are not exercisable unless a third party
acquires 15% of the common stock, or an offer is commenced for 15% or more of
the common stock. At that time, the Rights can be exercised to purchase Units of
Union Planters' Series F Preferred Stock. Each Unit has the same voting and
dividend rights as one share of the common stock, and each Right entitles the
holder to purchase one Unit at a 50% discount from the then market value of one
share of the common stock. If a third party merges with or otherwise acquires
Union Planters, each Right can be exercised to purchase one share of common
stock of the acquiring company at a 50% discount from the then market value of
that stock. Rights held by the potential acquiring company cannot be exercised.
The Board may extend the time period before the Rights become exercisable or
redeem the Rights at $.01 per Right. These provisions give the Board the
flexibility to negotiate a transaction with a potential acquiring company in the
best interests of the shareholders. The new Plan will expire on January 19,
2009. Union Planters authorized 300,000 shares of Series F Preferred Stock for
issuance under the Plan, none of which has been issued.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN. The Dividend Reinvestment
and Stock Purchase Plan (the Plan) authorizes the issuance of 4,000,000 shares
(1,959,364 issued through December 31, 1999) of common stock to shareholders who
choose to invest all or a portion of their cash dividends or make optional cash
purchases. On certain investment dates, shares may be purchased with reinvested
dividends and optional cash payments without brokerage commissions. Shares
issued under the Plan totaled 433,693, 337,804, and 271,615 in 1999, 1998, and
1997, respectively.
57
<PAGE> 58
NOTE 11. UNION PLANTERS CORPORATION
(PARENT COMPANY ONLY)
FINANCIAL INFORMATION
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1999 1998
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and cash equivalents at subsidiary banks............. $ 264,283 $ 315,632
Investment securities available for sale.................. 95,490 171,999
Advances to and receivables from subsidiaries............. 2,048 2,144
Investment in bank and bank holding company
subsidiaries............................................ 2,733,158 2,811,643
Investment in nonbank subsidiaries........................ 17,099 17,817
Other assets.............................................. 98,612 109,291
---------- ----------
TOTAL ASSETS....................................... $3,210,690 $3,428,526
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Long-term debt............................................ $ 379,656 $ 384,404
Loans from and payables to subsidiaries................... 21,825 22,747
Other liabilities......................................... 33,100 37,297
Shareholders' equity...................................... 2,776,109 2,984,078
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY......... $3,210,690 $3,428,526
========== ==========
</TABLE>
CONDENSED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INCOME
Dividends from bank and bank holding company
subsidiaries............................................ $490,115 $234,632 $233,990
Dividends from nonbank subsidiaries....................... 3,965 2,459 3,355
Fees and interest from subsidiaries....................... 8,273 21,889 73,919
Interest and dividends on investments, loans, and
interest-bearing
deposits at other financial institutions................ 8,930 11,279 8,265
Other income.............................................. 2,096 3,590 1,775
-------- -------- --------
Total income....................................... 513,379 273,849 321,304
-------- -------- --------
EXPENSES
Interest expense.......................................... 28,782 28,953 28,776
Salaries and employee benefits............................ -- -- 34,413
Other expense............................................. 7,012 24,880 42,911
-------- -------- --------
Total expenses..................................... 35,794 53,833 106,100
-------- -------- --------
EARNINGS BEFORE INCOME TAXES AND EQUITY IN
UNDISTRIBUTED
EARNINGS (LOSS) OF SUBSIDIARIES.................. 477,585 220,016 215,204
Tax benefit................................................. (7,299) (8,502) (10,283)
-------- -------- --------
EARNINGS BEFORE EQUITY IN UNDISTRIBUTED EARNINGS
(LOSS) OF SUBSIDIARIES........................... 484,884 228,518 225,487
Equity in undistributed earnings (loss) of subsidiaries..... (74,886) (2,912) 114,348
-------- -------- --------
NET EARNINGS....................................... $409,998 $225,606 $339,835
======== ======== ========
</TABLE>
58
<PAGE> 59
NOTE 11. UNION PLANTERS CORPORATION
(PARENT COMPANY ONLY)
FINANCIAL INFORMATION (CONTINUED)
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings.............................................. $ 409,998 $ 225,606 $ 339,835
Equity in undistributed (earnings) loss of subsidiaries... 74,886 2,912 (114,348)
Deferred income tax benefit............................... (8,314) (6,446) (8,660)
Other, net................................................ 17,276 1,865 (1,018)
--------- --------- ---------
Net cash provided by operating activities.......... 493,846 223,937 215,809
--------- --------- ---------
INVESTING ACTIVITIES
Purchases of available for sale securities................ (41,322) (288,039) (122,802)
Proceeds from sales of available for sale securities...... 115,758 249,381 205,029
Net (increase) decrease in investment in and receivables
from subsidiaries....................................... (102,578) 32,026 (34,259)
Purchases of premises and equipment, net.................. 204 1,946 (3,981)
Net cash received from acquired entities.................. -- -- 18,384
Other, net................................................ -- 951 --
--------- --------- ---------
Net cash provided (used) by investing activities... (27,938) (3,735) 62,371
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt, net............. -- 4,896 439
Repayment of long-term debt............................... (356) (541) (488)
Net repayments of loans from and payables to
subsidiaries............................................ -- (5,324) (3,060)
Proceeds from issuance of common stock, net............... 20,660 34,834 22,781
Purchase and retirement of common stock................... (250,805) (151,279) (35,009)
Cash dividends paid....................................... (286,756) (220,103) (105,151)
Other, net................................................ -- -- 633
--------- --------- ---------
Net cash used by financing activities.............. (517,257) (337,517) (119,855)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents...... (51,349) (117,315) 158,325
Cash and cash equivalents at the beginning of the year.... 315,632 432,947 274,622
--------- --------- ---------
Cash and cash equivalents at the end of the year.......... $ 264,283 $ 315,632 $ 432,947
========= ========= =========
</TABLE>
- ---------------
NONCASH ACTIVITIES. See Note 2 and Note 10, respectively, regarding
acquisitions in 1999, 1998, and 1997 and the conversions of Series E Preferred
Stock.
NOTE 12. REGULATORY CAPITAL AND RESTRICTIONS ON DIVIDENDS AND LOANS FROM
SUBSIDIARIES
REGULATORY CAPITAL. Union Planters and its banking subsidiaries are
subject to various regulatory capital requirements administered by the federal
banking agencies. Failure to meet minimum capital requirements can initiate
certain mandatory and possibly additional discretionary actions by regulators
that, if undertaken, could have a direct material effect on Union Planters or
its banking subsidiaries' financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, Union
Planters and its banking subsidiaries must meet specific capital guidelines that
involve quantitative measures of Union Planters' and its banking subsidiaries'
assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. Union Planters' and its banking subsidiaries'
capital amounts and classifications are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require Union Planters and its banking subsidiaries to maintain minimum amounts
and ratios (set forth in the table below for Union Planters and its significant
subsidiary, UPB) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined), and Tier 1 capital (as defined) to average
assets (as defined). As of December 31, 1999, management believes that Union
Planters, UPB, and Union Planters' other banking subsidiaries met all capital
adequacy requirements to which they are subject.
At December 31, 1999, the most recent notification from the Office of the
Comptroller of
59
<PAGE> 60
NOTE 12. REGULATORY CAPITAL AND RESTRICTIONS
ON DIVIDENDS AND LOANS FROM
SUBSIDIARIES (CONTINUED)
the Currency (OCC) categorized UPB as well capitalized under the regulatory
framework for prompt corrective action. Additionally, all of Union Planters'
other banking subsidiaries were categorized as well capitalized and Union
Planters' capital levels and ratios would be considered well capitalized. To be
categorized as well capitalized, an institution must maintain Tier 1 leverage,
Tier 1 risk-based, and Total risk-based capital ratios as set forth in the table
below. There are no conditions or events since the latest notification that
management believes have changed any of the institutions' categories. The
capital and ratios of Union Planters and UPB are presented in the table below.
<TABLE>
<CAPTION>
MINIMUM TO BE WELL
ACTUAL CAPITAL ADEQUACY CAPITALIZED(1)
--------------- ----------------- ---------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------- ------ ------ -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1999:
LEVERAGE (TIER 1 CAPITAL TO AVERAGE ASSETS)
Union Planters............................... $2,140 6.65% $1,287 4.00% N/A N/A
UPB.......................................... 1,878 5.95 1,263 4.00 $1,579 5.00%
TIER 1 CAPITAL (TO RISK-WEIGHTED ASSETS)
Union Planters............................... $2,140 9.50% $ 900 4.00% N/A N/A
UPB.......................................... 1,878 8.49 885 4.00 $1,328 6.00%
TOTAL CAPITAL (TO RISK-WEIGHTED ASSETS)
Union Planters............................... $2,857 12.69% $1,801 8.00% N/A N/A
UPB.......................................... 2,456 11.10 1,770 8.00 $2,213 10.00%
AS OF DECEMBER 31, 1998:
LEVERAGE (TIER 1 CAPITAL TO AVERAGE ASSETS)
Union Planters............................... $2,746 8.86% $1,240 4.00% N/A N/A
UPB.......................................... 2,072 7.71 1,075 4.00 $1,344 5.00%
TIER 1 CAPITAL (TO RISK-WEIGHTED ASSETS)
Union Planters............................... $2,746 13.34% $ 823 4.00% N/A N/A
UPB.......................................... 2,072 11.45 724 4.00 $1,085 6.00%
TOTAL CAPITAL (TO RISK-WEIGHTED ASSETS)
Union Planters............................... $3,455 16.78% $1,647 8.00% N/A N/A
UPB.......................................... 2,599 14.37 1,447 8.00 $1,809 10.00%
</TABLE>
- ---------------
(1) Not applicable (N/A) for bank holding companies such as Union Planters.
RESTRICTIONS ON DIVIDENDS AND LOANS FROM SUBSIDIARIES. The amount of
dividends which Union Planters' subsidiaries may pay is limited by applicable
laws and regulations. For the subsidiary national banks, prior regulatory
approval is required if dividends to be declared in any year would exceed net
earnings of the current year (as defined under the National Bank Act) plus
retained net profits for the preceding two years. The payment of dividends by
state-chartered bank subsidiaries is regulated by applicable state laws and the
regulations of the Federal Deposit Insurance Corporation (FDIC). The payment of
dividends by savings and loan subsidiaries is subject to the regulations of the
Office of Thrift Supervision (OTS). At January 1, 2000, its banking subsidiaries
could have paid dividends to Union Planters aggregating $106.6 million without
prior regulatory approval. Future dividends will be dependent on the level of
earnings and capital and liquidity considerations of the subsidiary financial
institutions.
Union Planters' banking subsidiaries are limited by federal law in the
amount of credit which they may extend to their nonbank affiliates, including
Union Planters. Loans and other extensions of credit (loans) to a single nonbank
affiliate may not exceed 10% nor shall loans to all nonbank affiliates exceed
20% of an individual bank's capital plus its allowance for losses on loans. Such
loans must be collateralized by assets having market values of 100% to 130% of
the loan amount depending on the nature of the collateral. The law imposes no
restrictions upon extensions of credit between FDIC-insured banks which are
80%-owned subsidiaries of Union Planters. At December 31, 1999 Union Planters
had no such loans outstanding.
60
<PAGE> 61
NOTE 13. OTHER NONINTEREST INCOME AND EXPENSE
The major components of other noninterest income and expense are summarized
as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OTHER NONINTEREST INCOME
ATM transaction fee....................................... $ 25,002 $ 19,312 $ 15,703
Insurance commissions..................................... 17,812 14,078 12,851
Brokerage fee income...................................... 17,606 19,009 10,056
Annuity sales income...................................... 17,544 7,818 10,500
Letter of credit fees..................................... 6,773 6,580 5,830
Gain on sale of FHA/VA loans.............................. 5,317 19,605 --
Gain on sale of ARM loans................................. 5,041 -- --
Gain on sale of branches/deposits and other selected
assets.................................................. 3,914 4,123 16,290
Gain on sale of credit card portfolio..................... 3,335 72,680 --
Earnings (loss) of equity method investments.............. (2,599) 3,819 2,332
Other income.............................................. 59,375 65,689 53,398
-------- -------- --------
Total other noninterest income..................... $159,120 $232,713 $126,960
======== ======== ========
OTHER NONINTEREST EXPENSE
Communications............................................ $ 34,295 $ 25,980 $ 20,652
Other contracted services................................. 32,885 30,811 23,681
Postage and carrier....................................... 31,910 29,271 26,421
Stationery and supplies................................... 31,523 27,773 29,736
Advertising and promotion................................. 29,807 25,037 22,900
Amortization of mortgage servicing rights................. 19,794 21,963 17,506
Other personnel services.................................. 19,057 15,628 10,815
Merchant interchange fees................................. 18,055 12,987 9,329
Miscellaneous charge-offs................................. 14,727 11,698 11,602
Legal fees................................................ 13,335 12,528 13,115
Travel.................................................... 11,699 10,002 8,218
Consultant fees........................................... 8,487 11,108 10,110
Taxes other than income................................... 6,941 11,781 11,409
FDIC insurance............................................ 6,104 3,014 4,768
Federal Reserve fees...................................... 5,666 4,269 3,469
Other real estate expense................................. 5,383 9,737 10,158
Brokerage and clearing fees on trading activities......... 4,848 5,153 4,339
Dues, subscriptions, and contributions.................... 4,536 15,589 8,583
Accounting and audit fees................................. 4,498 5,501 5,729
Insurance................................................. 2,850 4,480 5,545
Provision for losses on FHA/VA foreclosure claims......... 1,177 4,700 8,016
Write-off of mortgage servicing rights, goodwill, and
other intangibles....................................... -- 1,800 2,778
Merger-related, charter consolidation, and ongoing
integration expenses(1)................................. (7,153) 183,082 64,854
Other expense............................................. 47,431 58,332 68,585
-------- -------- --------
Total other noninterest expense.................... $347,855 $542,224 $402,318
======== ======== ========
</TABLE>
- ---------------
(1) Includes amounts for employment contract payments, severance, postretirement
benefit expenses, and pension expense of acquired entities; write-downs of
office buildings and equipment including assets to be sold, lease buyouts,
assets determined to be obsolete or no longer of use and equipment not
compatible with Union Planters' equipment; write-off of data processing
equipment; professional fees including legal, accounting, consulting, and
financial advisory services; and other expenses including write-off of
assets, charge-offs of prepaid expenses, and miscellaneous merger-related
and charter consolidation expenses. The $7.2 million credit to expense in
1999 related to the reversal of severance reserves established in prior
periods and was made upon completion of a substantial portion of the
consolidation and conversion activities. The primary reason for reversal was
higher than projected employee attrition and employees whose jobs were being
eliminated transferred to fill new positions created by a larger
organization.
NOTE 14. EMPLOYEE BENEFIT PLANS
401(K) RETIREMENT SAVINGS PLAN. Union Planters' 401(k) Retirement Savings
Plan (401(k) Plan) is available to employees having one or more years of service
and who work in excess of 1,000 hours per year. Employees may voluntarily
contribute 1 to 16 percent of their gross compensation on a pretax basis up to a
maximum of $10,000 in 1999 and Union Planters makes a matching contribution of
50 to 100 percent of the amounts contributed by the employee
61
<PAGE> 62
NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED)
(up to 6% of compensation) depending upon his or her eligible years of service.
Union Planters' contributions to the 401(k) Plan for 1999, 1998, and 1997 were
$8.1 million, $5.4 million, and $4.0 million, respectively.
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST. The Employee Stock Ownership Plan
and Trust (ESOP) is noncontributory and covers employees having one or more
years of service and who work in excess of 1,000 hours per year. The amounts of
contributions to the ESOP are determined annually at the discretion of the Board
of Directors and were $6.0 million, $4.5 million, and $3.5 million for 1999,
1998, and 1997, respectively. At December 31, 1999, the ESOP held 1,381,354
shares of Union Planters' common stock which were allocated to participants and
274,500 unallocated shares which will be allocated to participants as the
related debt is paid. The debt is related to the leveraged ESOP of an acquired
institution which was merged with Union Planters' ESOP effective January 1,
1998. Included in unearned compensation in shareholders' equity at December 31,
1999 and 1998, respectively, is $1.8 million and $2.3 million, which represents
the ESOP's debt to Union Planters. The $4.0 million market value of shares
allocated to participants during 1999 is included in the $6.0 million ESOP
contribution expense.
STOCK INCENTIVE PLANS. Employees and directors of Union Planters and its
subsidiaries are eligible to receive options or restricted grants under the
following plans:
The 1992 Stock Incentive Plan allows for a maximum of 13 million shares of
Union Planters' common stock to be issued through the exercise of nonstatutory
or incentive stock options and as restricted stock awards to employees and
directors of Union Planters. The option price is the fair value of Union
Planters' shares at the date of grant. Options granted generally become
exercisable immediately or in installments of 20% to 33% each year beginning one
year from the date of grant and expire ten years after the date of grant.
The 1998 Stock Incentive Plan for Officers and Employees was adopted in
October 1998. The Board of Directors authorized 3.5 million shares in 1998 and
1.5 million shares in 1999 of Union Planters' common stock to be issued through
the exercise of nonstatutory stock options to all officers (except executive
officers) and employees of Union Planters and its subsidiaries who were employed
on date of grant. The option price is the fair value of Union Planters' shares
at the date of grant. Options granted become exercisable three years after the
date of grant and expire ten years after the date of grant.
Additional options under a former plan and options assumed in connection
with various acquisitions remain outstanding; however, no further options will
be granted under such plans. Additional information with respect to the number
of shares of Union Planters' common stock which are subject to stock options is
as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
1999 1998 1997
--------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
PRICE NUMBER PRICE NUMBER PRICE NUMBER
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Options
Outstanding, beginning of year....... $41.88 9,186,223 $30.32 6,139,321 $21.55 5,834,471
Granted.............................. 40.77 3,057,499 49.36 5,792,064 50.66 1,546,240
Exercised............................ 28.27 (993,516) 31.11 (2,623,439) 13.82 (1,186,000)
Canceled or surrendered.............. 46.68 (800,073) 46.12 (121,723) 28.81 (55,390)
---------- ---------- ----------
Outstanding at year end.............. 42.48 10,450,133 41.88 9,186,223 30.32 6,139,321
========== ========== ==========
Options exercisable at year end........ $40.41 4,617,826 $34.37 3,685,460 $24.38 3,912,638
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF WEIGHTED AVERAGE OUTSTANDING AVERAGE
RANGE OF SHARES REMAINING WEIGHTED AVERAGE SHARES EXERCISE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE PRICE
--------------- ----------- ---------------- ---------------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 6.56 - $26.85......... 1,381,495 4.88 $18.46 1,344,135 $18.36
$28.08 - $41.06......... 3,728,313 8.81 $38.81 1,259,353 $36.87
$41.50 - $45.63......... 463,554 7.08 $45.03 256,982 $45.10
$45.75 - $46.94......... 3,261,018 8.74 $46.92 302,469 $46.84
$47.38 - $67.88......... 1,615,753 7.59 $61.78 1,454,687 $61.68
---------- ---------
10,450,133 8.00 $42.48 4,617,626 $40.41
========== =========
</TABLE>
Restricted stock grants aggregating 327,000 shares ($16.5 million fair
value) were awarded in 1998. Restrictions on the grants generally lapse in
annual increments over twelve years. Certain
62
<PAGE> 63
NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED)
grants related to acquisitions lapse over shorter periods. The market value of
the restricted stock grants is charged to expense as the restrictions lapse.
During 1998, Union Planters approved the vesting (lapse of restrictions) of the
annual increments which would otherwise not have vested until after the 62nd
birthday for applicable executive officers. Total amounts expensed for 1999,
1998, and 1997 were $2.0 million, $11.2 million, and $490,000, respectively; and
the ending balances at December 31, 1999 and 1998 were $10 million and $12
million, respectively, which are included in unearned compensation in
shareholders' equity.
Had compensation cost for Union Planters' stock option plans been
consistently determined based upon the fair value at the grant date for awards
under the methodology prescribed under SFAS No. 123, Union Planters' net income
and earnings per share would have been reduced as shown in the table below. The
fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions in 1999, 1998,
and 1997, respectively; expected dividend yield 4.92%, 4.12%, and 2.50%;
expected volatility of 25.91%, 24.73%, and 22.79%; risk-free interest rate of
6.40%, 4.70%, and 5.89%; and an expected life of 4.7, 4.8, and 4.0 years.
Forfeitures are recognized as they occur. This schedule excludes the earnings
impact of options acquired and accelerated through acquisitions.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1999 1998 1997
------ ------ ------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net earnings -- as reported................................. $410.0 $225.6 $339.8
Net earnings -- pro forma................................... 396.9 214.7 332.8
Earnings per share -- as reported
Basic..................................................... 2.88 1.61 2.53
Diluted................................................... 2.85 1.58 2.47
Earnings per share -- pro forma
Basic..................................................... 2.79 1.53 2.48
Diluted................................................... 2.76 1.50 2.42
</TABLE>
Due to the inclusion of option grants since January 1, 1995, the effects of
applying SFAS No. 123 may not be representative of the pro forma impact in
future years.
RETIREE HEALTHCARE AND LIFE INSURANCE. Union Planters provides certain
healthcare and life insurance benefits to retired employees who had completed 20
years of unbroken full-time service immediately prior to retirement and who have
attained age 60 or more. Healthcare benefits are provided partially through an
insurance company (for retirees age 65 and above) and partially through direct
payment of claims.
The following table reflects Union Planters' net periodic postretirement
benefit costs for 1999, 1998, and 1997 which were determined assuming a discount
rate of 7.5% for 1999, 6.5% for 1998 and 7% for 1997 and an expected return on
Plan assets of 5%.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1999 1998 1997
------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost................................................ $ 425 $ 299 $ 330
Interest cost of accumulated postretirement benefit
obligation................................................ 884 860 919
Expected return on plan assets.............................. (503) (511) (509)
Recognized net actuarial gain............................... (229) (292) (113)
----- ----- -----
Total.............................................. $ 577 $ 356 $ 627
===== ===== =====
</TABLE>
63
<PAGE> 64
NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table reflects the change in the benefit obligation and
change in the fair value of plan assets:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------------
1999 1998
------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Change in benefit obligation:
Balance at beginning of year.............................. $14,009 $12,996
Service cost.............................................. 425 299
Interest cost............................................. 884 860
Acquisitions.............................................. 455 2,507
Actuarial gains........................................... (945) (947)
Plan participants' contributions.......................... 637 573
Benefits paid............................................. (3,334) (2,279)
------- -------
Balance at year end....................................... $12,131 $14,009
======= =======
Change in fair value of plan assets:
Balance at beginning of year.............................. $10,615 $10,968
Actual return on plan assets.............................. 54 397
Employer contributions.................................... 1,463 956
Plan participants' contributions.......................... 637 573
Benefits paid............................................. (3,334) (2,279)
------- -------
Balance at year end....................................... $ 9,435 $10,615
======= =======
Funded status............................................... $(2,696) $(3,394)
Unrecognized net actuarial gain............................. (5,662) (4,927)
------- -------
Accrued benefit cost at year end............................ $(8,358) $(8,321)
======= =======
</TABLE>
The assumed discount rate used to measure the accumulated postretirement
benefit obligation (APBO) was 7.5% for 1999 and 6.5% for 1998. The weighted
average healthcare cost trend rate in 1999 was 7.0%, gradually declining to an
ultimate projected rate in 2001 of 5%. A one percent increase or decrease in the
assumed healthcare cost trend rate would have changed the total of the 1999
service and interest cost components by $165,000 and ($135,000), respectively,
and would have changed the APBO as of December 31, 1999 by $1.1 million and
($1.0 million), respectively.
ACQUIRED INSTITUTIONS. Certain of the acquired institutions have sponsored
various employee benefit and retirement plans. Such plans have been or are in
the process of being terminated and their employees now participate in Union
Planters' benefit and retirement plans. At December 31, 1999, certain
institutions acquired in 1999 had outstanding plans including defined benefit
pension plans and 401(k) plans. The liabilities, if any, for such terminations
have been recorded as of December 31, 1999.
NOTE 15. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CURRENT TAX EXPENSE
Federal................................................... $176,970 $169,577 $166,737
State..................................................... 3,693 21,803 13,111
-------- -------- --------
Total current tax expense.......................... 180,663 191,380 179,848
-------- -------- --------
DEFERRED TAX EXPENSE (BENEFIT)
Federal................................................... 17,356 (33,606) (5,930)
State..................................................... 10,815 (11,458) 2,096
-------- -------- --------
Total deferred tax expense (benefit)............... 28,171 (45,064) (3,834)
-------- -------- --------
Total income tax................................... $208,834 $146,316 $176,014
======== ======== ========
</TABLE>
64
<PAGE> 65
NOTE 15. INCOME TAXES (CONTINUED)
Deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1999 1998
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX ASSETS
Allowance for losses on loans and other real estate....... $122,181 $114,144
Employee benefit plans.................................... 19,925 25,360
Goodwill and intangibles.................................. 10,587 9,191
Deferred compensation plans............................... 13,953 13,853
Premises and equipment.................................... 4,931 15,229
Allowance for losses on FHA/VA foreclosure claims......... 10,237 9,912
Mortgage servicing rights................................. -- 3,410
Unrealized loss on available for sale securities.......... 78,424 --
Other..................................................... 24,204 44,772
-------- --------
Total deferred tax assets.......................... 284,442 235,871
-------- --------
DEFERRED TAX LIABILITIES
Basis difference on FHLB stock............................ 16,804 16,227
Mortgage servicing rights................................. 4,268 --
Unrealized gain on available for sale securities.......... -- 35,896
Other..................................................... 8,634 23,134
-------- --------
Total deferred tax liabilities..................... 29,706 75,257
-------- --------
Deferred tax asset, net............................ $254,736 $160,614
======== ========
</TABLE>
The change in the net deferred tax asset during the year is a result of the
addition of net deferred tax assets of acquired companies, the net change in
unrealized gain (loss) on available for sale securities, and the current period
deferred tax expense.
A reconciliation of income tax expense computed at the applicable statutory
income tax rate of 35% to actual income tax expense is computed below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax..................................... $216,591 $130,173 $180,547
State income taxes, net of federal tax benefit.............. 9,431 6,724 10,811
Tax-exempt interest, net.................................... (24,680) (22,795) (19,779)
Nondeductible merger charges................................ 292 28,526 3,283
Other, net.................................................. 7,200 3,688 1,152
-------- -------- --------
Income tax expense................................. $208,834 $146,316 $176,014
======== ======== ========
</TABLE>
Income tax expense (benefit) applicable to securities transactions was
$828,000 for 1999, ($5,684,000) for 1998, and $1,786,000 for 1997.
65
<PAGE> 66
NOTE 16. EARNINGS PER SHARE
The following table sets forth the computation of basic net earnings per
share and diluted net earnings per share.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1999 1998 1997
------------- ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
BASIC:
Net earnings.............................................. $ 409,998 $ 225,606 $ 339,835
Less preferred dividends.................................. (1,758) (2,074) (4,942)
------------ ------------ ------------
Net earnings applicable to common shares.................. $ 408,240 $ 223,532 $ 334,893
============ ============ ============
Average common shares outstanding......................... 141,854,254 139,034,412 132,451,476
============ ============ ============
Net earnings per common share -- basic.................... $ 2.88 $ 1.61 $ 2.53
============ ============ ============
DILUTED:
Net earnings.............................................. $ 409,998 $ 225,606 $ 339,835
Less dividends on nonconvertible preferred stock.......... -- -- (3)
Elimination of interest on convertible debt............... 36 220 1,892
------------ ------------ ------------
Net earnings applicable to common shares.................. $ 410,034 $ 225,826 $ 341,724
============ ============ ============
Average common shares outstanding......................... 141,854,254 139,034,412 132,451,476
Stock option adjustment................................... 883,575 1,696,869 1,967,208
Preferred stock adjustment................................ 1,115,884 1,591,565 2,581,482
Effect of other dilutive securities....................... 128,798 369,996 1,219,753
------------ ------------ ------------
Average common shares outstanding......................... 143,982,511 142,692,842 138,219,919
============ ============ ============
Net earnings per common share -- diluted.................. $ 2.85 $ 1.58 $ 2.47
============ ============ ============
</TABLE>
NOTE 17. FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK
In the normal course of business, Union Planters becomes a party to various
types of financial instruments in order to meet the financing needs of its
customers and to reduce its exposure to fluctuations in interest rates. These
instruments involve, to varying degrees, elements of credit and interest-rate
risk and are not reflected in the accompanying consolidated financial
statements. For these instruments, the exposure to credit loss is limited to the
contractual amount of the instrument. Union Planters follows the same credit
policies in making commitments and contractual obligations as it does for
on-balance-sheet instruments. In addition, controls for these instruments
related to approval, monetary limits, and monitoring procedures are established
by Union Planters' Directors' Loan Committee. The following table presents the
contractual amounts of these types of instruments.
<TABLE>
<CAPTION>
CONTRACT AMOUNT
DECEMBER 31,
----------------------
1999 1998
-------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C>
FINANCIAL INSTRUMENTS WHOSE CONTRACT AMOUNTS REPRESENT
CREDIT RISK
Commitments to extend credit.............................. $4,355 $3,282
Standby, commercial, and similar letters of credit........ 408 402
</TABLE>
Commitments to extend credit are legally binding agreements to extend
credit to customers for specific purposes, at stipulated rates, with fixed
expiration and review dates if the conditions in the agreement are met, and may
require payment of a fee. Since many of the commitments normally expire without
being drawn upon, the total commitment amounts do not necessarily represent
future cash requirements. Collateral held, if any, varies but may include
accounts receivable; inventory; property; plant and equipment; income producing
properties; or securities. Loan commitments with an original maturity of one
year or less or which are unconditionally cancelable totaled $3.2 billion and
loan commitments with a maturity over one year which are not unconditionally
cancelable totaled $1.2 billion.
Letters of credit are conditional commitments issued by Union Planters to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. Union Planters in some cases holds
various types of collateral to support those commitments for which collateral is
deemed necessary. The outstanding letters of credit expire between 2000 and
2009.
66
<PAGE> 67
NOTE 17. FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK (CONTINUED)
Other outstanding off-balance-sheet instruments are forward contracts,
interest-rate swap agreements, and commitments to purchase or sell when-issued
securities. The following table presents the notional amounts of these types of
instruments.
<TABLE>
<CAPTION>
NOTIONAL AMOUNT
DECEMBER 31,
---------------------
1999 1998
------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C>
FINANCIAL INSTRUMENTS WHOSE NOTIONAL CONTRACT AMOUNTS EXCEED
THE AMOUNTS OF ACTUAL CREDIT RISK
Forward contracts......................................... $659 $669
When-issued securities
Commitments to sell..................................... 47 4
Commitments to purchase................................. 95 --
</TABLE>
Forward contracts are contracts for delayed delivery of securities or money
market instruments in which the seller agrees to make delivery at a specified
future date of a specified instrument, at a specified price or yield. Risks
arise from the possible inability of the counterparties to meet the terms of
their contracts and from market movements in securities values and interest
rates. Union Planters as seller utilizes short-term forward commitments to
deliver mortgages to protect Union Planters against the risk of rate changes
which could impact the value of mortgage originations to be securitized or
otherwise sold to investors. Such commitments to deliver mortgages generally
have maturities of 90 days or less.
Union Planters has a policy for its use of derivative products, including
interest-rate swaps, which has been approved and is monitored by the Funds
Management Committee and the Board of Directors. Union Planters is not currently
trading derivative products. The policy requires that individual positions for
derivative products shall not exceed $100-million notional amount and that open
positions in the aggregate shall not exceed 10% of consolidated total assets.
Any exceptions to the policy must be approved by the Board of Directors. The
policy requires open positions to be reviewed monthly by the Funds Management
Committee to ensure compliance with established policies. At December 31, 1999
and 1998, Union Planters had no interest-rate swap/cap agreements outstanding.
When-issued securities are commitments to either purchase or sell
securities when, as, and if they are issued. The trades are contingent upon the
actual issuance of the security. These transactions represent conditional
commitments made by Union Planters and risk arises from the possible inability
of the counterparties to meet the terms of their contracts and from market
movements in securities values and interest rates.
MORTGAGE LOAN SERVICING. Union Planters was acting as servicing agent for
residential mortgage loans totaling approximately $12.2 billion at December 31,
1999 compared to $12.0 billion at December 31, 1998 and $10.9 billion at
December 31, 1997. The loans serviced for others are not included in Union
Planters' consolidated balance sheet. The following table presents a
reconciliation of the changes in mortgage servicing rights for each of the three
years ended December 31, 1999.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Beginning balance........................................... $101,466 $ 62,726 $ 67,490
Additions................................................... 40,438 62,503 12,742
Write-off of servicing rights............................... -- (1,800) --
Amortization of servicing rights............................ (19,794) (21,963) (17,506)
-------- -------- --------
Ending balance.............................................. $122,110 $101,466 $ 62,726
======== ======== ========
</TABLE>
In its capacity as servicer of certain of these loans, Union Planters is
responsible for foreclosure and the related costs of foreclosure. These costs
are estimated each period based on historical loss experience and are shown as
provisions for losses on FHA/VA foreclosure claims in noninterest expense. At
December 31, 1999 and 1998, Union Planters had reserves for these losses of
$28.0 million and $27.5 million, respectively.
In the normal course of business, Union Planters sells mortgage loans and
makes certain limited representations and warranties to the purchaser.
Management does not expect any significant losses to arise from these
representations and warranties.
67
<PAGE> 68
NOTE 18. LINES OF BUSINESS REPORTING
Union Planters operates only one major line of business, Banking. Other
lines of business are evaluated by management, although none of the other
operations qualify as a separate reportable business segment.
Banking includes the traditional deposit taking and lending functions of a
bank, including consumer, commercial and corporate lending, retail banking, and
consumer services normally furnished by a bank. The Banking unit is managed
along regional geographic lines. Nontraditional services such as mortgage, SBA
loan trading, trust, financial services (annuities, insurance products, and
brokerage services), factoring operations, bank cards, and FHA/VA operations are
managed separately but do not meet the test for a business segment.
The accounting policies of the Banking unit are the same as those of Union
Planters described in Note 1. Cost of funds are allocated between funds
providers and funds users. Transactions between business units are primarily
conducted at book value. Banking and other operating units are evaluated based
on results before merger-related and other significant items.
The following tables present selected segment information for Banking, the
Other Operating Units, and the Parent Company. The Parent Company is primarily
the funding source for acquisition activities.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
---------------------------------------------------------
OTHER PARENT CONSOLIDATED
BANKING OPERATING UNITS COMPANY(1) TOTAL
----------- --------------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net interest income.............................. $ 1,204,479 $ 61,031 $ (8,979) $ 1,256,531
Provision for losses on loans.................... (56,311) (17,734) -- (74,045)
Noninterest income............................... 291,588 200,899 (1,928) 490,559
Noninterest expense.............................. (897,892) (177,530) (7,012) (1,082,434)
Merger-related and other significant items,
net............................................ 16,050 10,746 1,425 28,221
----------- ---------- -------- -----------
Earnings before income taxes..................... $ 557,914 $ 77,412 $(16,494) $ 618,832
=========== ========== ======== ===========
Average assets................................... $30,025,209 $2,667,352 $209,809 $32,902,370
=========== ========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
---------------------------------------------------------
OTHER PARENT CONSOLIDATED
BANKING OPERATING UNITS COMPANY(1) TOTAL
----------- --------------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net interest income.............................. $ 1,106,927 $ 99,910 $ 396 $ 1,207,233
Provision for losses on loans.................... (142,406) (61,650) -- (204,056)
Noninterest income............................... 285,639 182,147 7,409 475,195
Noninterest expense.............................. (818,726) (164,580) (8,313) (991,619)
Merger-related and other significant items,
net............................................ (163,157) 64,893 (16,567) (114,831)
----------- ---------- -------- -----------
Earnings before income taxes..................... $ 268,277 $ 120,720 $(17,075) $ 371,922
=========== ========== ======== ===========
Average assets................................... $27,253,006 $2,939,797 $551,523 $30,744,326
=========== ========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------
OTHER PARENT CONSOLIDATED
BANKING OPERATING UNITS COMPANY(1) TOTAL
----------- --------------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net interest income.............................. $ 1,091,206 $ 105,444 $ 3,249 $ 1,199,899
Provision for losses on loans.................... (86,450) (66,650) -- (153,100)
Noninterest income............................... 293,294 154,525 1,754 449,573
Noninterest expense.............................. (775,678) (143,476) (13,415) (932,569)
Merger-related and other significant items,
net............................................ (34,225) -- (13,729) (47,954)
----------- ---------- -------- -----------
Earnings before income taxes..................... $ 488,147 $ 49,843 $(22,141) $ 515,849
=========== ========== ======== ===========
Average assets................................... $25,322,742 $3,261,992 $604,071 $29,188,805
=========== ========== ======== ===========
</TABLE>
- ---------------
(1) Parent Company noninterest income and earnings before taxes are net of the
intercompany dividend eliminations of $494 million in 1999, $237 million in
1998, and $237 million in 1997.
68
<PAGE> 69
NOTE 19. FAIR VALUE OF FINANCIAL
INSTRUMENTS
The carrying values and fair values of Union Planters' financial
instruments are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------- -------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and short-term investments................... $ 1,252,081 $ 1,252,081 $ 1,413,765 $ 1,413,765
Trading account assets............................ 315,734 315,734 275,992 275,992
Loans held for resale............................. 430,690 430,690 441,214 441,214
Investment securities -- available for sale....... 7,472,455 7,472,455 8,301,703 8,301,703
Net loans......................................... 21,104,100 20,951,848 19,255,350 19,442,499
Mortgage servicing rights......................... 122,110 184,109 101,466 149,249
FINANCIAL LIABILITIES
Noninterest-bearing............................... $ 4,035,189 $ 4,035,189 $ 4,194,402 $ 4,194,402
Interest-bearing.................................. 19,336,927 19,361,515 20,702,053 20,800,166
Short-term borrowings............................. 5,422,504 5,421,748 1,648,039 1,647,202
Short- and medium-term notes...................... 60,000 59,501 105,000 106,832
Federal Home Loan Bank advances................... 203,032 203,089 279,992 280,328
Other long-term debt, excluding capital lease
obligations..................................... 853,947 877,638 1,052,783 1,064,985
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Forward contracts................................. -- 9,325 -- (584)
</TABLE>
The following methods and assumptions were used by Union Planters in
estimating the fair value for financial instruments:
CASH AND SHORT-TERM INVESTMENTS. The carrying amount for cash and
short-term investments approximates the fair value of the assets. Included in
this classification are cash and due from banks (non-earning assets), federal
funds sold, securities purchased under agreements to resell, and
interest-bearing deposits at financial institutions.
TRADING ACCOUNT ASSETS. These instruments are carried in the consolidated
balance sheet at values which approximate their fair values based on quoted
market prices of similar instruments.
LOANS HELD FOR RESALE. These instruments are carried in the consolidated
balance sheet at the lower of cost or fair value. The fair values of these
instruments are based on subsequent liquidation values of the instruments which
did not result in any significant gains or losses.
INVESTMENT SECURITIES. Fair values of these instruments are based on
quoted market prices, where available. If quoted market prices are not
available, fair values are based on the quoted values of similar instruments.
LOANS. The fair values of loans are estimated using discounted cash flow
analyses and using interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality and risk. The fair value of
nonaccrual loans and the allowance for losses on loans are approximated by their
book values.
MORTGAGE SERVICING RIGHTS. The fair values of mortgage servicing rights
are estimated using discounted cash flow analyses.
DEPOSITS. The fair values of demand deposits (i.e., checking accounts,
savings accounts, money market deposit accounts, and NOW accounts) are, by
definition, equal to the amount payable on demand at the reporting date (i.e.,
their carrying amount). The fair values of time deposits (i.e., certificates of
deposit, IRAs, investment savings, etc.) are estimated using a discounted cash
flow calculation that applies interest rates currently being offered on these
instruments to a schedule of aggregated expected monthly maturities on time
deposits.
SHORT-TERM BORROWINGS. The carrying amounts of short-term FHLB advances,
federal funds purchased, overnight time deposits, and other short-term
borrowings approximate their fair values. The fair value of securities sold
under agreements to repurchase is estimated using discounted cash flow analyses
and using current federal funds rates.
SHORT- AND MEDIUM-TERM SENIOR NOTES. The fair value of these notes is
estimated using discounted cash flow analyses and using current LIBOR-based
indices.
FEDERAL HOME LOAN BANK ADVANCES. The carrying value of variable
rate/LIBOR-based advances approximates their fair values. The fair value of
fixed-rate advances is estimated using discounted cash flow and using the FHLB
quoted rates of borrowing for advances with similar terms.
69
<PAGE> 70
NOTE 19. FAIR VALUE OF FINANCIAL
INSTRUMENTS (CONTINUED)
OTHER LONG-TERM DEBT. The carrying value of variable rate/LIBOR-based debt
instruments approximates their fair values. The fair value of fixed-rate
long-term debt was estimated from market quotes. If market quotes were not
available, fair values were based on quoted values of similar instruments.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS. Fair values of off-balance-sheet
instruments are based on current settlement values for forward contracts. The
fair value of commitments to extend credit and letters of credit (see Note 17)
is not presented, since management believes the fair value to be insignificant.
NOTE 20. CONTINGENT LIABILITIES
Union Planters and/or its subsidiaries are parties to various legal
proceedings that have arisen in the ordinary course of business and are parties
to various pending civil actions, all of which are being defended vigorously.
Certain proceedings previously outstanding have been substantially settled
within previously based estimates. Management is of the opinion, based upon
present information, including evaluations by outside counsel, 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.
70
<PAGE> 71
REPORT OF MANAGEMENT
The accompanying financial statements and related financial information
were prepared by the management of Union Planters Corporation (Union Planters)
in accordance with generally accepted accounting principles and, where
appropriate, reflect management's best estimates and judgment. Management is
responsible for the integrity, objectivity, consistency, and fair presentation
of the financial statements and all financial information contained in this
annual report.
Management maintains and depends upon internal accounting systems and
related internal controls. Internal controls are designed to ensure that
transactions are properly authorized and recorded in Union Planters' financial
records and to safeguard Union Planters' assets from material loss or misuse.
Union Planters utilizes internal monitoring mechanisms and an extensive external
audit to monitor compliance with, and assess the effectiveness of the internal
controls. Management believes Union Planters' internal controls provide
reasonable assurance that Union Planters' assets are safeguarded and that its
financial records are reliable.
The Audit Committee of the Board of Directors meets periodically with
representatives of Union Planters' independent accountants, the audit director,
and management to review accounting policies, control procedures, and audit and
regulatory examination reports. The independent accountants and audit director
have free access to the Committee, with and without the presence of management,
to discuss the results of their audit work and their evaluation of the internal
controls and the quality of financial reporting.
The financial statements have been audited by PricewaterhouseCoopers LLP,
independent accountants, who were engaged to express an opinion as to the
fairness of presentation of such financial statements.
Memphis, Tennessee
January 20, 2000
<TABLE>
<S> <C>
/s/ BENJAMIN RAWLINS, JR. /s/ JACK W. PARKER
Benjamin W. Rawlins, Jr. Jack W. Parker
Chairman and Executive Vice President and
Chief Executive Officer Chief Financial Officer
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Union Planters Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of earnings, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Union Planters Corporation (Union Planters) and its subsidiaries at December 31,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of Union Planters' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Memphis, Tennessee
January 20, 2000
71
<PAGE> 72
UNION PLANTERS CORPORATION
EXECUTIVE OFFICERS
BENJAMIN W. RAWLINS, JR.
Chairman and Chief Executive Officer
JACKSON W. MOORE
President and Chief Operating Officer
JACK W. PARKER
Executive Vice President and
Chief Financial Officer
LLOYD B. DEVAUX
Executive Vice President
Chief Information Officer
MICHAEL B. RUSSELL
Executive Vice President and
Senior Lending Officer
M. KIRK WALTERS
Senior Vice President, Treasurer, and
Chief Accounting Officer
BOARD OF DIRECTORS
ALBERT M. AUSTIN
Chairman
Cannon, Austin & Cannon, Inc.
GEORGE W. BRYAN
Senior Vice President
Sara Lee Corporation
JAMES E. HARWOOD
President
Sterling Equities
C. E. HEILIGENSTEIN
Attorney (Retired)
Heiligenstein and Badgley
CARL G. HOGAN
Chairman
Hogan Motor Leasing, Inc.
S. LEE KLING
Chairman
Kling, Rechter & Company
PARNELL S. LEWIS, JR.
Member
River Investments, LLC
C. J. LOWRANCE, III
President
Lowrance Brothers & Company, Inc.
JACKSON W. MOORE
President and Chief Operating Officer
Union Planters Corporation and
Union Planters Bank
BENJAMIN W. RAWLINS, JR.
Chairman and Chief Executive Officer
Union Planters Corporation and
Union Planters Bank
DR. V. LANE RAWLINS
President
The University of Memphis
DONALD F. SCHUPPE
Owner
DFS Service Company
DAVID M. THOMAS
President (Retired)
Magnolia Federal Bank for Savings
RICHARD A. TRIPPEER, JR.
President
R. A. Trippeer, Inc.
SPENCE L. WILSON
President
Kemmons Wilson, Inc.
72
<PAGE> 73
(Union Planters Corporation Logo)
CORPORATE INFORMATION
Annual Meeting
Thursday, April 20, 2000 at 10 a.m. EDT
Union Planters Bank
Media Room, 7th Floor
2800 Ponce de Leon Boulevard
Coral Gables, Florida 33134
CORPORATE OFFICES
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
CORPORATE MAILING ADDRESS
P. O. Box 387
Memphis, Tennessee 38147
INTERNET
http://www.unionplanters.com
TRANSFER AGENT AND REGISTRAR
Union Planters Bank
Corporate Trust
7650 Magna Drive
Belleville, IL 62223
(800) 900-4548
DIVIDEND PAYING AGENT
Union Planters Bank
Corporate Trust
7650 Magna Drive
Belleville, IL 62223
(800) 900-4548
STOCK AND OPTION LISTINGS
Common
NYSE Symbol: UPC
Wall Street Journal: UnPlantr
Series E Convertible Preferred
NASDAQ NMS Symbol: UPCPO
Wall Street Journal: UnPlantr pfE
Options
Philadelphia Stock Exchange
Indexes
S&P 500
NYSE Composite
Russell 3000
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
FOR FINANCIAL INFORMATION
Jack W. Parker
Executive Vice President and
Chief Financial Officer
(901) 580-6781 or
Union Planters web site at
http://www.unionplanters.com
and click on Financials
FORM 10-K
Copies of Union Planters'
Annual Report on Form 10-K
as filed with the Securities
and Exchange Commission are
available on request by
calling the Corporate Marketing
Division at (901) 580-6604.
DIVIDEND REINVESTMENT AND
STOCK PURCHASE PLAN
The Plan allows Union Planters
shareholders to reinvest their
dividends in Union Planters
Common Stock. No brokerage
commissions or service charges
are paid by shareholders.
The Plan also permits those
participating in the Plan to
buy additional shares
with optional cash payments
and no brokerage commissions.
Full details are available
by calling (800) 900-4548 or
writing Union Planters Bank
Corporate Trust at the address
shown.
Union Planters' banking
subsidiaries are members of the
FDIC and are Equal Housing
Lenders. UPC and its subsidiaries
are Equal Opportunity Employers.
(UPC Listed NYSE the New York Stock Exchange Logo)
<PAGE> 1
EXHIBIT 21
PAGE 1 OF 2
UNION PLANTERS CORPORATION, REGISTRANT
A REGISTERED BANK HOLDING COMPANY AND A SAVINGS AND LOAN HOLDING COMPANY
<TABLE>
<CAPTION>
STATE OR PERCENTAGE
JURISDICTION OF VOTING
UNDER LAWS OF SECURITIES
NAME OF REGISTRANT AND SUBSIDIARIES WHICH ORGANIZED OWNED
- ----------------------------------- --------------- -----------
<S> <C> <C>
Union Planters Corporation (Registrant) Tennessee
Union Planters Holding Corporation(a) Tennessee 100.00%
Union Planters Bank, National Association (b) United States 100.00%
Leader Enterprises, Inc. (c & g) Tennessee 100.00%
Leader Services, Inc.(c & g) Tennessee 100.00%
Leader Federal Mortgage, Inc. (c & g) Tennessee 100.00%
ASMI, LLC (d) Indiana 50.00%
Leader Leasing, Inc.(c) Delaware 100.00%
Leader Funding Corporation III (c) Delaware 100.00%
PFIC Corporation (c) Tennessee 100.00%
PFIC Securities Corporation (e) Tennessee 100.00%
PFIC Alabama Agency, Inc. (e) Alabama 100.00%
PFIC Georgia Agency, Inc. (e) Georgia 100.00%
PFIC Agency New Mexico, Inc.(e) New Mexico 100.00%
PFIC Corporation of Kentucky (e) Kentucky 100.00%
PFIC Agency, Inc.(e) Illinois 100.00%
PFIC Arkansas Agency, Inc.(e) Arkansas 100.00%
PFIC Mississippi Agency, Inc. (e) Mississippi 100.00%
PFIC Michigan Agency, Inc.(e) Michigan 100.00%
PFIC Wisconsin Agency, Inc.(e) Wisconsin 100.00%
PFIC Wisconsin Agency, Inc.(e Louisiana 100.00%
PFIC Missouri Agency, Inc.(e) Missouri 100.00%
PFIC Virginia Agency, Inc.(e) Virginia 100.00%
PFIC Oregon Agency, Inc.(e) Oregon 100.00%
PFIC Ohio Agency, Inc.(e) Ohio 100.00%
PFIC Nevada Agency, Inc.(e) Nevada 100.00%
PFIC New York Agency, Inc. (e) New York 100.00%
PFIC Tennessee Agency, Inc. (e) Tennessee 100.00%
PFIC Arizona Agency, Inc. (e) Arizona 100.00%
Union Planters Insurance Agency, Inc. (e) Alabama 100.00%
Navigator Agency Incorporated (e) Texas 100.00% indirectly
PFIC Indiana Agency, Inc. (e) Indiana 100.00%
PFIC Florida Agency, Inc. (e) Florida 100.00%
PFIC Pennsylvania Agency, Inc. (e) Pennsylvania 100.00%
Union Planters Insurance Agency, Inc.(e and g) Arkansas 100.00%
Union Planters Insurance Agency, Inc. (e) Tennessee 100.00%
MarTech, Inc. (v) Ohio 22.00%
Union Planters Insurance Agency of Florida, Inc. (e) Florida 100.00%
MGI Group, Inc. (e) Missouri 100.00%
Magna Invest, Inc. (n and g) Missouri 100.00%
Magna Insurance Agency, Inc. (n and g) Missouri 100.00%
Inbank Group, Inc. (e) Missouri 100.00%
Inbank Insurance Agency (o) Missouri 100.00%
Union Planters Insurance Agency, Inc.(e) Mississippi 100.00%
Magna Insurance Company (e) Mississippi 100.00%
PFIC Iowa Agency, Inc. (e) Iowa 100.00%
</TABLE>
<PAGE> 2
EXHIBIT 21
PAGE 2 OF 2
UNION PLANTERS CORPORATION, REGISTRANT
A REGISTERED BANK HOLDING COMPANY AND A SAVINGS AND LOAN HOLDING COMPANY
<TABLE>
<CAPTION>
STATE OR PERCENTAGE
JURISDICTION OF VOTING
UNDER LAWS OF SECURITIES
NAME OF REGISTRANT AND SUBSIDIARIES WHICH ORGANIZED OWNED
- ----------------------------------- --------------- -----------
<S> <C> <C>
Union Planters Insurance Agency, Inc. (e) Iowa 100.00%
Union Planters Mortgage Finance Corporation (c) Delaware 100.00%
Colonial Loan Association (c) Tennessee 100.00%
Union Planters PMAC, Inc.(c) Mississippi 100.00%
Capital Equity Corporation (c) Louisiana 100.00%
Millcreek Development Partnership, LP (c) Tennessee 49.50%
Colonial Apartments LTD (c) Florida 98.00%
Interdevco, Inc. (c) Florida 100.00%
Capital Factors Holding, Inc.(c) Florida 100.00%
Capital Factors, Inc. (j) Florida 100.00%
CF Funding Corp (k) Delaware 100.00%
Capital Tempfunds, Inc. (k) North Carolina 100.00%
CF One, Inc. (j) Delaware 100.00%
CF Investor Corp (j) Delaware 100.00%
CF Two, LLC (l) Delaware 100.00%
TFB Properties, Inc. (c) Florida 100.00%
Magna Data Services, Inc. (c) Missouri 100.00%
Quatre, Corp. (c) Missouri 100.00%
UPB Investments, Inc.(c) Tennessee 100.00%
MICB, Inc. (p) Delaware 100.00%
UPIB, Inc. (p) Delaware 100.00%
Peoples First Acquisition Corp. (b) Kentucky 100.00%
Franklin Financial Group, Inc. (a) Tennessee 100.00%
Union Planters Bank of the Lakeway Area (f) Tennessee 100.00%
Union Planters Bank of Northwest TN FSB (a) United States 100.00%
Tennessee Equity Mortgage Corporation (a and g) Tennessee 100.00%
Guardian Realty Company (a and g) Alabama 100.00%
Union Planters Capital Trust A (a) Delaware 100.00%
</TABLE>
- --------------------------
(a) Subsidiary of Union Planters Corporation
(b) Subsidiary of Union Planters Holding Corporation
(c) Subsidiary of Union Planters Bank, National Association
(d) Subsidiary of Leader Federal Mortgage, Inc.
(e) Subsidiary of PFIC Corporation
(f) Subsidiary of Franklin Financial Group
(g) Inactive subsidiary
(j) Subsidiary of Capital Factors Holding, Inc
(k) Subsidiary of Capital Factors, Inc.
(l) Subsidiary of CF Investor Corp.
(n) Subsidiary of MGI Group, Inc.
(o) Subsidiary of Inbank Group, Inc.
(p) Subsidiary of UPB Investments, Inc.
(v) Subsidiary of Union Planters Insurance Agency, Inc.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (Nos. 333-02377, 333-11817, 33-27814, 333-83025, and
333-85231) and Form S-8 (Nos. 333-74955, 333-76417, 333-89719, 333-67301,
333-59911, 333-71171, 333-67591, 333-71253, 333-41089, 333-28507, 333-17363,
333-13207, 333-13205, 333-02363, 2-87392, 33-23306, 33-35928, 33-53454,
33-55257, 33-56269, and 33-65467) of Union Planters Corporation of our report
dated January 20, 2000 relating to the consolidated financial statement which
appears on page 71 of the 1999 Annual Report to Shareholders, which is
incorporated in this Annual Report on Form 10-K.
/s/PRICEWATERHOUSECOOPERS LLP
Memphis, Tennessee
March 22, 2000
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF UNION PLANTERS CORPORATION FOR THE YEAR ENDED DECEMBER
31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 1,127,902
<INT-BEARING-DEPOSITS> 73,062
<FED-FUNDS-SOLD> 51,117
<TRADING-ASSETS> 315,734
<INVESTMENTS-HELD-FOR-SALE> 7,472,455
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 21,877,090
<ALLOWANCE> 342,300
<TOTAL-ASSETS> 33,280,353
<DEPOSITS> 23,372,116
<SHORT-TERM> 5,422,504
<LIABILITIES-OTHER> 591,854
<LONG-TERM> 1,117,770
0
20,875
<COMMON> 692,437
<OTHER-SE> 2,062,797
<TOTAL-LIABILITIES-AND-EQUITY> 33,280,353
<INTEREST-LOAN> 1,784,485
<INTEREST-INVEST> 490,700
<INTEREST-OTHER> 22,747
<INTEREST-TOTAL> 2,297,932
<INTEREST-DEPOSIT> 811,411
<INTEREST-EXPENSE> 1,041,401
<INTEREST-INCOME-NET> 1,256,531
<LOAN-LOSSES> 74,045
<SECURITIES-GAINS> 2,128
<EXPENSE-OTHER> 1,076,364
<INCOME-PRETAX> 618,832
<INCOME-PRE-EXTRAORDINARY> 409,998
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 409,998
<EPS-BASIC> 2.88
<EPS-DILUTED> 2.85
<YIELD-ACTUAL> 7.87
<LOANS-NON> 134,379
<LOANS-PAST> 333,633
<LOANS-TROUBLED> 1,878
<LOANS-PROBLEM> 48,098
<ALLOWANCE-OPEN> 321,476
<CHARGE-OFFS> 149,157
<RECOVERIES> 52,861
<ALLOWANCE-CLOSE> 342,300
<ALLOWANCE-DOMESTIC> 342,300
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
