<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1994
Commission File Number 0-4518
DEPOSIT GUARANTY CORP.
--------------------------------------------------
(Exact Name Of Registrant As Specified In Charter)
Mississippi 64-0472169
- - ------------------------------- ----------------------------
(State or other Jurisdiction of (IRS Employer Identification
Incorporation or Organization) Number)
210 East Capitol Street, Jackson, MS 39201
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(Address Of Principal Executive Offices)
(Zip Code)
(601) 354-8564
-------------------------------
(Registrant's Telephone Number)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----
Shares Of Common Stock, No Par Value, Outstanding
As Of June 30, 1994: 17,668,852
<PAGE> 2
10-Q
PART I. Financial Information
ITEM 1. Financial Statements
Deposit Guaranty Corp. and Subsidiaries
Condensed Consolidated Statements of Condition
(In Thousands Except Share Data)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Assets
Cash and due from banks $ 296,718 $ 293,894
Interest-bearing bank balances 125,063 70,000
Federal funds sold and securities
purchased under agreements to resell 257,697 208,140
Trading account securities 1,010 596
Securities available for sale (market value:
1994 - $981,726; 1993 - $1,477,875) 981,726 1,365,728
Investment securities (market value:
1994 - $526,045; 1993 - $431,519) 512,089 316,858
Loans 2,642,826 2,439,041
Less: Unearned income (20,589) (20,456)
Allowance for possible loan losses (57,657) (62,032)
------------ ------------
Net loans 2,564,580 2,356,553
Bank premises and equipment 127,480 125,506
Other assets 160,257 160,805
------------ ------------
Total assets $ 5,026,620 $ 4,898,080
============ ============
Liabilities
Deposits:
Noninterest-bearing $ 952,995 $ 875,288
Interest-bearing 3,114,017 3,045,853
------------ ------------
Total deposits 4,067,012 3,921,141
Federal funds purchased, securities
sold under agreements to repurchase
and other short-term borrowings 466,990 509,496
Other liabilities 66,537 71,555
------------ ------------
Total liabilities 4,600,539 4,502,192
------------ ------------
Stockholders' equity
Cumulative preferred stock, no par value,
authorized: 10,000,000 shares of class A
voting; and 10,000,000 shares of class B
non-voting; issued and outstanding: none -- --
Common stock, no par value, authorized
50,000,000 shares; issued and outstanding:
1994 - 17,668,852 shares; 1993 - 17,651,314
shares 19,384 19,383
Surplus 155,340 155,318
Retained earnings 246,647 221,187
Market valuation for securities available for
sale, net of income taxes 4,710 --
------------ ------------
Total stockholders' equity 426,081 395,888
------------ ------------
Total liabilities and stockholders' equity $ 5,026,620 $ 4,898,080
============ ============
</TABLE>
2
<PAGE> 3
10Q
PART I. Financial Information
ITEM 1. Financial Statements (Continued)
Deposit Guaranty Corp. and Subsidiaries
Condensed Consolidated Statements of Earnings
(In Thousands Except Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $ 48,848 $ 44,752 $ 93,420 $ 88,196
Interest on investment securities:
Taxable 7,615 6,604 11,616 14,635
Exempt from Federal Income tax 2,268 2,325 4,388 4,667
Interest on securities available for sale:
Taxable 9,253 19,376 27,071 35,485
Exempt from Federal income tax 3 58 7 142
Interest on trading account securities 73 43 113 97
Interest on Federal funds sold and securities
purchased under agreements to resell 3,444 1,944 5,891 5,421
Interest on bank balances 1,652 101 2,565 1,080
----------- ----------- ----------- -----------
Total interest income 73,156 75,203 145,071 149,723
----------- ----------- ----------- -----------
Interest expense
Interest on deposits 26,388 28,075 51,871 56,622
Interest on Federal funds purchased, securities
sold under agreements to repurchase and
other short-term borrowings 3,791 3,742 7,353 7,713
----------- ----------- ----------- -----------
Total interest expense 30,179 31,817 59,224 64,335
----------- ----------- ----------- -----------
Net interest income 42,977 43,386 85,847 85,388
Provision for possible loan losses (2,750) (11,000) (2,750) (11,000)
----------- ----------- ----------- -----------
Net interest income after provision for
possible loan losses 45,727 54,386 88,597 96,388
----------- ----------- ----------- -----------
Other operating income
Service charges on deposit accounts 6,827 6,870 13,183 12,592
Fees for trust services 3,338 3,172 6,674 6,263
Securities available for sale gains 1,088 137 9,820 10
Other service charges, commissions
and fees 7,476 7,642 15,975 16,197
Other income 2,589 1,134 3,625 1,841
----------- ----------- ----------- -----------
Total other operating income 21,318 18,955 49,277 36,903
----------- ----------- ----------- -----------
Other operating expense
Salaries and employee benefits 24,427 22,724 48,183 44,982
Net occupancy expense 3,141 2,893 6,061 5,548
Equipment expense 3,286 3,009 6,540 6,222
Service fees 2,972 2,792 5,415 5,272
Communication 1,954 1,882 3,698 3,635
FDIC assessment 2,224 2,190 4,403 4,380
Advertising and public relations 2,118 1,575 4,172 3,617
Other expense 4,152 5,831 8,960 10,083
----------- ----------- ----------- -----------
Total other operating expense 44,274 42,896 87,432 83,739
----------- ----------- ----------- -----------
Income before income taxes 22,771 30,445 50,442 49,552
Income tax expense 7,065 9,269 16,066 14,455
----------- ----------- ----------- -----------
Net income $ 15,706 $ 21,176 $ 34,376 $ 35,097
=========== =========== =========== ===========
Net income per share $ .89 $ 1.20 $ 1.95 $ 1.99
Weighted average shares outstanding 17,668,852 17,643,229 17,668,509 17,635,526
</TABLE>
3
<PAGE> 4
10Q
PART I. Financial Information
ITEM 1. Financial Statements (Continued)
Deposit Guaranty Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In Thousands Except Share Data)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1994 1993
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 34,376 $ 35,097
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses (2,750) (11,000)
Provision for possible losses on other real estate 14 (602)
Provision for depreciation and amortization 8,726 14,997
Accretion of discount on investment securities, net (3,458) (594)
Amortization (accretion) of premium (discount) on securities
available for sale, net (1,821) 1,012
Deferred loan fees and costs (1,640) (1,369)
Decrease in other liabilities (10,082) (3,801)
(Increase) decrease in other assets 41,355 (5,878)
Net cash received from (paid for) loans held for resale 53,792 (10,292)
Gain on sales of securities available for sale (9,820) (10)
Other, net 3,134 2,683
---------- ----------
Net cash provided by operating activities 111,826 20,243
---------- ----------
Cash flows from investing activities:
Net (increase) decrease in interest-bearing bank balances (55,062) 135,096
Proceeds from sales of securities available for sale 1,264,892 205,236
Proceeds from maturities of investment securities 110,411 149,465
Proceeds from maturities of securities available for sale 162,484 71,276
Purchases of investment securities (312,611) (18,552)
Purchases of securities available for sale (946,982) (642,842)
Net (increase) decrease in Federal funds sold and securities
purchased under agreements to resell (49,042) 190,172
Net increase in loans (162,250) (11,246)
Proceeds from sales of other real estate 3,035 3,240
Purchases of bank premises and equipment (8,069) (13,722)
Proceeds from sales of bank premises and equipment 2,533 26
Payment for purchase of common stock of
First Columbus Financial Corporation (49,343) --
Cash and due from banks from acquired banks 14,072 --
---------- ----------
Net cash provided (used) by investing activities (25,932) 68,149
---------- ----------
Cash flows from financing activities:
Net decrease in deposits (24,251) (125,589)
Net decrease in Federal funds purchased,
securities sold under agreements to repurchase,
and other short-term borrowings (50,005) (11,494)
Cash dividends paid (8,834) (7,571)
Proceeds from the exercise of common stock options 20 1,111
---------- ----------
Net cash used by financing activities (83,070) (143,543)
---------- ----------
Increase (decrease) in cash and due from banks 2,824 (55,151)
Cash and due from banks at beginning of period 293,894 331,905
---------- ----------
Cash and due from banks at end of period $ 296,718 $ 276,754
========== ==========
</TABLE>
4
(Continued)
<PAGE> 5
10Q
PART I. Financial Information
ITEM 1. Financial Statements (Continued)
Deposit Guaranty Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In Thousands Except Share Data)
INCOME TAXES:
The Company made income tax payments of $17.7 million and $8.2 million
during the six month periods ended June 30, 1994 and 1993, respectively.
INTEREST:
The Company paid $60.2 million and $65.0 million in interest on deposits and
other borrowings during the six month periods ended June 30, 1994 and 1993,
respectively.
ACQUISITION:
During the second quarter of 1994, the Company purchased substantially all
of the common stock of First Columbus Financial Corporation for $49.3 million.
In conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired 228,652
Cash paid for the common stock 49,343
--------
Liabilities assumed $179,309
========
5
<PAGE> 6
PART I. Financial Information
ITEM 1. Financial Statements
Deposit Guaranty Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and, therefore,
do not include all information and footnotes necessary for a fair presentation
of financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. All adjustments which, in the
opinion of management, are necessary for a fair presentation of financial
position and results of operations have been made. These adjustments consist
only of normal, recurring adjustments with the exception of the items discussed
in Note C.
The condensed consolidated financial statements of Deposit Guaranty Corp.
include the financial statements of Deposit Guaranty National Bank, a 98%-owned
subsidiary, G & W Life Insurance Co., a 79%-owned subsidiary, Commercial
National Corporation, a wholly- owned subsidiary, and First Columbus Financial
Corporation, a 99%-owned subsidiary. All significant intercompany accounts and
transactions have been eliminated in consolidation.
NOTE B - CONTINGENCIES
The Company's subsidiary, Commercial National Bank (CNB), is a defendant in
litigation arising out of a Louisiana Housing Finance Agency Municipal Bond
Issue. CNB was trustee for the issue and, in general, it is claimed that fraud
was practiced on the bondholders in that the proceeds of the issue were not
used for the purpose stated in the official statement. Additionally, the claim
alleges conspiracy and improper conduct concerning CNB's role as trustee. In
addition, some of the codefendants of CNB have asserted claims against CNB for
contribution in the event those defendants are found to be liable to plaintiff.
Likewise, CNB has asserted contribution claims against its codefendants.
Although the litigation currently involves only one bondholder, certification
as a class action suit has been requested. The claims do not specify damages,
but involve a $150 million bond issue. While the ultimate outcome of the
lawsuit at this time cannot be predicted with certainty, management believes
that CNB has good and meritorious defenses and should prevail.
<PAGE> 7
The Company's subsidiary, Deposit Guaranty National Bank (DGNB), is a defendant
in a case in which the plaintiffs are some of the beneficiaries of a trust and
DGNB is the trustee of the trust. The plaintiffs claim that DGNB was
negligent in its dealings with the trust property, breached its trust duties by
allegedly abusing its discretion and negligently handling trust assets, engaged
in self dealing, and was grossly negligent in its handling of the trust. The
case seeks $180 million as actual damages for waste of trust assets and loss of
profits, $180 million as punitive damages, and attorney fees and court costs.
While the ultimate outcome of the lawsuit cannot be predicted with certainty,
management believes that the ultimate resolution of this matter will not have a
material effect on the Company's consolidated financial statements.
NOTE C - ACCOUNTING CHANGES
Effective January 1, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Under SFAS No. 115, securities
available for sale are reported at fair value with unrealized gains and losses
excluded from earnings and reported as a separate component of stockholders'
equity, net of related deferred income taxes. Previously, available for sale
securities were stated at the lower of amortized cost or market value. The
effect of this change at January 1, 1994 was to increase stockholders' equity
by $31.6 million.
NOTE D - ACQUISITION
On May 18, 1994, Deposit Guaranty Corp. acquired 99% of the outstanding common
stock of First Columbus Financial Corporation for $49.3 million cash. The
transaction was accounted for as a purchase. The results of operations of this
acquired bank, which are not material, are included in the financial statements
from the acquisition date.
On August 8, 1994, Deposit Guaranty Corp. entered into an agreement of merger
with LBO Bank Corp. Under the terms of this agreement, The Louisiana Bank, a
wholly-owned subsidiary of LBO Bank Corp. will be merged with Commercial
National Bank, a wholly-owned subsidiary of Deposit Guaranty Corp. Deposit
Guaranty Corp. will exchange approximately 680 thousand shares of common stock
for all of LBO Bank Corp.'s common shares outstanding.
<PAGE> 8
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Deposit Guaranty Corp.:
We have reviewed the condensed consolidated statement of condition of Deposit
Guaranty Corp. and subsidiaries as of June 30, 1994, the related condensed
consolidated statements of earnings for the three-month and six-month periods
ended June 30, 1994 and 1993, and the related condensed consolidated statements
of cash flows for the six-month periods ended June 30, 1994 and 1993. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of condition of Deposit Guaranty Corp.
and consolidated subsidiaries as of December 31, 1993, and the related
consolidated statements of earnings, changes in stockholders' equity, and cash
flows for the year then ended (not presented herein); and in our report dated
February 4, 1994, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated statement of condition as of December 31,
1993, is fairly presented, in all material respects, in relation to the
consolidated statement of condition from which it has been derived.
/s/ KPMG PEAT MARWICK
KPMG PEAT MARWICK
Jackson, Mississippi
July 18, 1994
<PAGE> 9
PART I. Financial Information
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Deposit Guaranty Corp. and Subsidiaries
The following discussion reviews the financial condition and the results of
operations of Deposit Guaranty Corp. (the Company) for the three-month and
six-month periods ending June 30, 1994 and 1993. This discussion should be
read in conjunction with the condensed consolidated financial statements
included in Part I, Item I.
BALANCE SHEET
Total assets were $5.026 billion at June 30, 1994, compared to $4.898 billion
at December 31, 1993. Securities available for sale decreased $384 million
from $1.366 billion at December 31, 1993 to $982 million at June 30, 1994. Due
to the increasing interest rate environment, a substantial portion of the
fixed-rate securities available for sale were either sold or converted to
floating- rate securities during the first quarter of 1994. In correlation
with the decrease in securities available for sale were increases in
interest-bearing bank balances and Federal funds sold and securities purchased
under agreements to resell of $55.1 million and $49.6 million, respectively, as
the funds were reinvested. The increases in these short-term accounts continue
to reflect the Company's strategy to maintain flexibility in the near term in
order to take advantage of rising interest rates and reinvest in
higher-yielding, longer-term securities in the future. Total loans increased
from $2.419 billion at December 31, 1993 to $2.622 billion at June 30, 1994.
This increase in total loans was largely a result of increases in commercial
and installment loans of $112 million and $129 million, respectively. Total
deposits increased from $3.921 billion at December 31, 1993 to $4.067 billion
at June 30, 1994 as a result of growth in both interest bearing and
noninterest-bearing deposits. Total stockholders' equity was $426.1 million at
June 30, 1994 compared to $395.9 million at December 31, 1993. This increase
in stockholder's equity is due primarily to the level of net income retained in
1994 and also reflects unrealized gains, net of deferred income taxes on
available for sale securities as a result of implementing SFAS No. 115.
Effective January 1, 1994, the Company adopted the provisions of SFAS No. 115,
which addresses the accounting and reporting for marketable equity securities
and all debt securities. As a result of SFAS No. 115, investments are
classified into three categories and accounted for as follows: securities
held-to-maturity reported at amortized cost; trading securities reported at
fair value with unrealized gains and losses included in earnings; and
securities available for sale reported at fair value with unrealized gains and
losses excluded from earnings and reported as a separate component of
shareholders' equity. Securities available for sale had previously been
accounted for at the lower of cost or market with aggregate unrealized losses,
if any, included in earnings.
<PAGE> 10
With the adoption of SFAS No. 115, the impact on the June 30, 1994 second
quarter consolidated statement of condition was to increase stockholders'
equity by approximately $4.7 million, net of deferred income taxes.
NET INCOME
Net income for the second quarter of 1994 was $15.7 million compared to $21.2
million for the second quarter of 1993. Fully diluted net income per share was
$.89 for the second quarter of 1994 compared to $1.20 for the same period in
1993. This decrease in 1994 second quarter net income was primarily the result
of an $11.0 million negative provision for possible loan losses during the
second quarter of 1993 compared to a $2.75 million negative provision during
the second quarter of 1994.
Net income for the six months ended June 30, 1994 was $34.4 million with fully
diluted net income per share of $1.95 compared to net income of $35.1 million
and fully diluted net income per share of $1.99 for the same period in 1993.
Year-to-date net income for 1994 includes gains on the sales of securities
available for sale and the negative provision which increased net income
by $6.2 million and $1.8 million respectively, while 1993 includes the
aforementioned $11.0 million negative provision which increased net income by
$7.0 million. For the first six months of 1994, the return on average assets
was 1.41% compared to 1.45% for the same period in 1993. The return on average
equity for the first six months of 1994 was 16.39% compared to 19.89% for 1993.
NET INTEREST INCOME
Net interest income for the second quarter of 1994 was $43.0 million, a
decrease from $43.4 million for the second quarter of 1993. The net interest
margin for the second quarter of 1994 was 4.02%, decreasing from 4.14% for the
second quarter of 1993 largely as a result of a decrease in the interest
spread. The interest spread, the difference between the yield on
interest-earning assets and the rate paid on interest-bearing liabilities,
decreased from 3.51% in 1993 to 3.35% in 1994, resulting from an increase in
the rates paid on interest-bearing deposits due to the increase in market
interest rates and the decrease in yields earned on investment securities as
the Company temporarily maintains a higher balance of shorter-term,
lower-yielding assets as a part of its investment portfolio repositioning
strategy. This investment strategy has the effect of decreasing net interest
income in the near term until the funds are ultimately reinvested in
higher-yielding, longer-term securities as interest rates rise. Partially
offsetting the negative effect of this repositioning strategy were increases in
loan volumes and an improvement in the liability funding ratio. Average loan
volumes increased 11.03% to $2.5 billion in 1994 as compared to
1993. Average total loans as a percentage of interest-earning assets
increased from 52.08% during the second quarter of 1993 to 56.74% during the
same period in 1994. Liability funding, the percentage of interest-earning
assets funded by interest-bearing liabilities, decreased from 83.80% in the
second quarter of 1993 to 80.13% in the second quarter of 1994. This decrease
can primarily be attributed to the increase of $134 million in average
noninterest-bearing deposits from $778 million during the second quarter of
1993 to $913 million during the same period in 1994.
<PAGE> 11
Net interest income for the six months ended June 30, 1994 was $85.8 million
compared to $85.4 million for the same period in 1993. The tax equivalent net
interest margin decreased from 4.09% in 1993 to 4.05% in 1994. This decrease
in the margin is primarily the result of a decrease in the interest spread as
rates earned on interest-earning assets declined more rapidly than rates paid
on interest-bearing liabilities from 1993 to 1994. The reduction in rates
earned on interest-earning assets was largely a result of the portfolio
repositioning in the first quarter of 1994.
OTHER OPERATING INCOME
Other operating income for the second quarter of 1994 was $21.3 million
compared to $19.0 million for the second quarter of 1993. Other operating
income for 1994 included a gain of $1.1 million on the sales of securities
available for sale and a related interest rate swap used to hedge these
securities. Also included in second quarter 1994 other income was $1.7 million
for the reimbursement of legal fees related to bond trustee activity which had
been expensed in prior periods.
Other operating income for the six months ended June 30, 1994 was $49.3 million
compared to $36.9 million for the same period in 1993. Fees for trust services
for the first six months increased $400 thousand as a result of new business.
Other operating income in the first six months of 1994 included gains of $9.8
million on the sales of securities available for sale and related derivative
contracts resulting from the repositioning of the available for sale portfolio.
Other income increased $1.7 million in the first six months of 1994 compared to
the same period in 1993 due to the reimbursement of legal fees.
OTHER OPERATING EXPENSE
Other operating expense for the second quarter of 1994 was $44.3 million, an
increase of $1.4 million or 3.2% over the second quarter of 1993. This
increase in other operating expense is primarily due to an increase in salaries
and employee benefits of $1.7 million which represents normal salary increases.
Other expense for the second quarter of 1994 decreased to $4.2 million from
$5.8 million in the second quarter of 1993 as a result of 1993 including $1.5
million in additional amortization of purchased mortgage servicing rights
resulting from higher paydowns.
Other operating expense for the six months ended June 30, 1994 was $87.4
million compared to $83.7 million for the same period in 1993. This increase
is primarily due to a $3.2 million increase in salaries and employee benefits
due to normal salary increases.
<PAGE> 12
Advertising and public relations expense increased from $3.6 million during the
first six months of 1993 to $4.2 million for the first six months of 1994
primarily as a result of an increase in target marketing strategies. Other
expense decreased from $10.1 million for the six months ended June 30, 1993 to
$9.0 million for the same period in 1994 as a result of additional amortization
on the purchased mortgage servicing rights during the first six months of 1993.
INCOME TAXES
Income tax expense was $16.1 million for the first six months of 1994 compared
to $14.5 million for the same period in 1993. This increase in second quarter
income taxes results primarily from increased pretax income, an increase in the
federal income tax rate from 34% to 35% during the third quarter of 1993, and
the first quarter 1993 recognition of a $657 thousand tax benefit resulting
from the adoption of SFAS No. 109, "Accounting for Income Taxes".
CREDIT QUALITY
In the second quarter of 1994, as a result of continued positive trends in
credit quality and management's assessment of the adequacy of the allowance,
the Company reduced the allowance for possible loan losses by $4.0 million at
CNB. An addition to the allowance of $1.3 million was recorded at First
Columbus in the second quarter of 1994 bringing the methodology for determining
the level of the allowance of this newly acquired subsidiary in line with that
of the Company. This adjustment, which was anticipated as a result of the due
diligence performed prior to the acquisition and was considered in determining
the purchase price, has been charged to earnings in accordance with generally
accepted accounting principles.
The allowance for possible loan losses at June 30, 1994 was $57.7 million or
2.20% of total loans and 241% of nonperforming loans outstanding compared to
$62.0 million or 2.56% of total loans and 204% of nonperforming loans at
December 31, 1993. Nonperforming loans decreased to $23.9 million at June 30,
1994 compared to $30.5 million at December 31, 1993 largely due to a charge-off
of $6.0 million on a nonaccrual credit.
As a result of the $6.0 million charge-off in the second quarter of 1994, net
charge-offs for the second quarter of 1994 were $5.2 million compared to second
quarter 1993 net charge-offs of $ .4 million. Year-to-date net charge-offs
were $2.8 million for 1994 compared to net recoveries of $.7 million for 1993.
CAPITAL
The Company's tier 1 capital and total risk-based capital ratios at June 30,
1994 were 12.45% and 13.71%, respectively. This compares to a tier 1 capital
ratio of 13.28% and total risk-based capital ratio of 14.54% at December 31,
1993. The decrease in capital ratios from December 31, 1993 to June 30, 1994
is primarily due to an increase in intangibles and total risk-based assets, as
a result of the acquisition of First Columbus Financial Corporation.The
Company's leverage ratio was 7.99% at June 30, 1994 compared to 8.13% at
December 31, 1993. The Company's banking subsidiaries have maintained
leverage, tier 1 and total risk-based capital ratios well above the 5%, 6% and
10% minimum guidelines necessary to be categorized as "well capitalized"
insured depository institutions under the guidelines set forth by the Federal
Deposit Insurance Corporation Improvement Act of 1991 (FDICIA).
<PAGE> 13
At June 30, 1994, Deposit Guaranty National Bank's leverage ratio was 8.31%,
tier 1 capital ratio was 12.47% and its total risk-based capital ratio was
13.72%. At June 30, 1994, Commercial National Bank's leverage, tier 1 and
total capital ratios were 9.68%, 16.82% and 18.09%, respectively. First
Columbus National Bank's leverage, tier 1 and total capital ratios were 12.07%,
20.95%, and 22.52%, respectively.
LIQUIDITY
Liquidity is the Company's ability to ensure that funds are available to meet
the cash flow demands of the Company's business. Liquidity is maintained
through the Company's ability to convert assets into cash, manage the
maturities of liabilities and generate funds on a short-term basis, either
through the national Federal funds market, backup lines of credit, or through
the National CD market. The Company relies largely on core deposits to fund
loan demand and long-term investments. During recent years, the Company has
maintained a high level of liquidity as loans have been at a lower than desired
level as a percent of interest-earning assets. Loan demand has increased
steadily for the first six months of 1994 and the percentage of loans to
interest-earning assets reflect improvement. For the six months ended June 30,
1994, loans were 57% of interest-earning assets as compared to 52% for the same
period in 1993. Short-term money market assets have increased an average of
$46 million in 1994 as compared to 1993. This increase was a result of the
repositioning of the investment portfolio and temporarily holding funds in
short-term liquid assets.
ACCOUNTING CHANGES
In May 1993, the Financial Accounting Standards Board issued SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan". SFAS No. 114 requires a
creditor to measure impaired and restructured loans at the present value of
expected future cash flows, discounted at the loan's effective interest rate.
For purposes of this Statement, a loan is considered impaired when it is
probable that a creditor will be unable to collect all amounts due according to
the contractual terms of the loan agreement. SFAS No. 114 is effective for
fiscal years beginning after December 15, 1994. Adoption of this Statement is
not expected to have a material impact on the consolidated financial
statements.
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material changes to the legal proceedings described
in Item 3 of the Registrant's annual report on Form 10-K (file number 0-4518)
filed with the Commission for fiscal year ended December 31, 1993, except as
follows:
In Peterson and Winters v. DGNB, Civil Action No. 1:93cv287-S-D,
pending in the United States District Court for the Northern District of
Mississippi, the case has been dismissed without prejudice. The state court
action involving the same allegations, Winters v. DGNB, Civil Action No.
93-77-77 will continue.
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
Table Sequential
Exhibit Number Page Number
------- ------ -----------
Plan of acquisition, reorganization,
arrangement, liquidation or succession (2) N/A
Instruments defining the rights of
security holders, including indentures (4) N/A
Material Contracts (10) N/A
Statements re: computation of per share
earnings (11) 18
Letters re: unaudited interim financial
information (15) 19
Letter re: change in certifying (16) N/A
accountant
Letter re: change in accounting
principles (18) N/A
Previously unfiled documents (19) N/A
Report furnished to security holders (20) N/A
Published report regarding matters
submitted to vote of security holders (23) N/A
Consent of experts and counsel (24) N/A
Power of attorney (25) N/A
Additional exhibits (28) N/A
________________________________________
(b) No reports on Form 8-K have been filed during the quarter ended June 30,
1994.
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DEPOSIT GUARANTY CORP.
(Registrant)
DATE: August 15, 1994 /s/ Stephen E. Barker
Stephen E. Barker
Controller and Principal
Accounting Officer
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Table Sequential
Exhibit Number Page Number
------- ------ -----------
<S> <C> <C>
Plan of acquisition, reorganization,
arrangement, liquidation or succession (2) N/A
Instruments defining the rights of
security holders, including indentures (4) N/A
Material Contracts (10) N/A
Statements re: computation of per share
earnings (11) 18
Letters re: unaudited interim financial
information (15) 19
Letter re: change in certifying (16) N/A
accountant
Letter re: change in accounting
principles (18) N/A
Previously unfiled documents (19) N/A
Report furnished to security holders (20) N/A
Published report regarding matters
submitted to vote of security holders (23) N/A
Consent of experts and counsel (24) N/A
Power of attorney (25) N/A
Additional exhibits (28) N/A
</TABLE>
<PAGE> 1
Deposit Guaranty Corp.
Computation of Net Income Per Share
June 30, 1994
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
Primary and Primary and
Fully Diluted Fully Diluted
------------------ ----------------
<S> <C> <C>
Computation of weighted average
shared outstanding:
Common stock outstanding,
beginning balance 17,668,852 17,667,852
Common stock issued due to
exercise of options - 657
----------- -----------
Weighted average shares
outstanding 17,668,852 17,668,509
=========== ===========
Computation of net income:
Net income $15,706,000 $34,376,000
=========== ===========
Computation of net income per
share:
Net income divided by weighted
average shares outstanding $ .89 $ 1.95
=========== ===========
</TABLE>
Note: For the six-months ended June 30, 1994, additional weighted average
shares outstanding for options under the Company's incentive stock plan were
124,513 and 136,070 for calculating primary and fully diluted net income per
share, respectively. The dilutive effect of such options was, therefore, not
material.
<PAGE> 1
Deposit Guaranty Corp.
Jackson, Mississippi
Gentlemen:
RE: June 30, 1994 Quarterly Report on Form 10-Q
With respect to the subject Quarterly Report, we acknowledge our awareness of
the use therein of our report dated July 18, 1994 related to our review of
interim financial information.
Pursuant to Rule 436(c) under the Securities Act, such report is not considered
a part of a Registration Statement prepared or certified by an accountant or a
report prepared or certified by an accountant within the meaning of Sections 7
and 11 of the Act.
Very truly yours,
/s/ KPMG PEAT MARWICK
KPMG PEAT MARWICK
Jackson, Mississippi
August 15, 1994
