<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 MARCH 31, 1995
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 March 31, 1995: 18,336,575
<PAGE> 2
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>
MARCH 31, DECEMBER 31,
1995 1994
------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 315,023 $ 326,768
Interest-bearing bank balances - 135,298
Federal funds sold and securities
purchased under agreements to resell 50,090 224,109
Trading account securities 2,069 4,531
Securities available for sale 9,166 8,631
Investment securities (market value:
1995 - $1,521,459 ; 1994 - $1,332,142 ) 1,503,347 1,330,171
Loans 3,030,627 2,877,746
Less: Unearned income (16,988) (18,348)
Allowance for possible loan losses (56,857) (55,873)
---------------- ---------------
Net loans 2,956,782 2,803,525
Bank premises and equipment 137,756 131,621
Other assets 179,044 166,243
---------------- ---------------
TOTAL ASSETS $ 5,153,277 $ 5,130,897
================ ===============
LIABILITIES
Deposits:
Noninterest-bearing $ 902,600 $ 947,511
Interest-bearing 3,272,033 3,091,039
---------------- ---------------
Total deposits 4,174,633 4,038,550
Federal funds purchased, securities
sold under agreements to repurchase
and other short-term borrowings 429,586 564,789
Other liabilities 89,812 84,009
---------------- ---------------
TOTAL LIABILITIES 4,694,031 4,687,348
---------------- ---------------
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:
1995 - 18,336,575 shares; 1994 - 17,648,052
shares 20,114 19,361
Surplus 173,784 154,726
Retained earnings 281,677 269,508
Market valuation for securities available for
sale, net of income taxes 2,069 1,973
Treasury Stock (1995 - 579,500 shares;
1994 - 70,000 shares) (18,398) (2,019)
---------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 459,246 443,549
---------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,153,277 $ 5,130,897
================ ===============
</TABLE>
2
<PAGE> 3
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
MARCH 31,
--------------------------------------
1995 1994
--------------------------------------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 63,012 $ 44,572
Interest on investment securities:
Taxable 21,183 4,001
Exempt from Federal income tax 2,087 2,120
Interest on securities available for sale:
Taxable 144 17,818
Exempt from Federal income tax 25 4
Interest on trading account securities 53 40
Interest on Federal funds sold and securities
purchased under agreements to resell 1,304 2,447
Interest on bank balances 1,141 913
--------------- ----------------
TOTAL INTEREST INCOME 88,949 71,915
--------------- ----------------
INTEREST EXPENSE
Interest on deposits 31,484 25,483
Interest on Federal funds purchased,
securities
sold under agreements to repurchase and
other short-term borrowings 5,732 3,562
--------------- ----------------
TOTAL INTEREST EXPENSE 37,216 29,045
--------------- ----------------
NET INTEREST INCOME 51,733 42,870
Provision for possible loan losses - -
--------------- ----------------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 51,733 42,870
--------------- ----------------
OTHER OPERATING INCOME
Service charges on deposit accounts 7,142 6,356
Fees for trust services 3,500 3,336
Securities available for sale gains (losses) (5) 8,732
Other service charges, commissions
and fees 8,946 8,499
Other income 1,076 1,036
--------------- ----------------
TOTAL OTHER OPERATING INCOME 20,659 27,959
--------------- ----------------
OTHER OPERATING EXPENSE
Salaries and employee benefits 25,397 23,756
Net occupancy expense 3,085 2,920
Equipment expense 3,732 3,254
Service fees 2,627 2,443
Communication 2,048 1,744
FDIC assessment 2,294 2,179
Advertising and public relations 2,189 2,054
Other expense 5,686 4,808
--------------- ----------------
TOTAL OTHER OPERATING EXPENSE 47,058 43,158
--------------- ----------------
INCOME BEFORE INCOME TAXES 25,334 27,671
Income tax expense 8,113 9,001
--------------- ----------------
NET INCOME $ 17,221 $ 18,670
=============== ================
NET INCOME PER SHARE $ .96 $ 1.06
WEIGHTED AVERAGE SHARES OUTSTANDING 17,930,408 17,668,163
</TABLE>
3
<PAGE> 4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 17,221 $ 18,670
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and amortization 5,343 4,336
Provision for deferred income tax expense 1,531 4,029
Accretion of discount on investment securities, net (8,381) (653)
Amortization of premium on securities available for sale, net 1 896
Deferred loan fees and costs (657) (780)
Increase (decrease) in other liabilities (916) 2,195
(Increase) decrease in other assets (1,931) 20,131
Net cash received from loans held for resale 1,063 33,863
Securities available for sale (gains) losses 5 (8,732)
Other, net 5,452 (1,643)
--------- ---------
Net cash provided by operating activities 18,731 72,312
--------- ---------
Cash flows from investing activities:
Net (increase) decrease in interest-bearing bank balances 135,298 (160,008)
Proceeds from sales of securities available for sale 7,569 800,233
Proceeds from maturities of investment securities 33,464 57,491
Proceeds from maturities of securities available for sale 220 42,302
Purchases of investment securities (165,377) (280,976)
Purchases of securities available for sale -- (375,962)
Net (increase) decrease in Federal funds sold and securities
purchased under agreements to resell 175,550 (104,210)
Net increase in loans (107,552) (35,383)
Proceeds from sales of other real estate 845 228
Purchases of bank premises and equipment (7,331) (3,533)
Proceeds from sales of bank premises and equipment 67 32
Cash and due from banks of acquired bank and branch operations 4,437 --
--------- ---------
Net cash provided (used) by investing activities 77,190 (59,786)
--------- ---------
Cash flows from financing activities:
Net increase in deposits 50,335 58,283
Net decrease in Federal funds purchased, securities sold under
agreements to repurchase, and other short-term borrowings (136,799) (77,441)
Proceeds from the exercise of common stock options 121 20
Purchases of treasury stock (16,379) --
Cash dividends paid (4,944) (4,417)
--------- ---------
Net cash used by financing activities (107,666) (23,555)
--------- ---------
Decrease in cash and due from banks (11,745) (11,029)
Cash and due from banks at beginning of period 326,768 293,894
--------- ---------
Cash and due from banks at end of period $ 315,023 $ 282,865
========= =========
</TABLE>
4
<PAGE> 5
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS EXCEPT SHARE DATA)
INCOME TAXES:
The Company made income tax payments of $2.5 million during the three
month period ended March 31, 1995. The Company made no income tax payments
during the three month period ended March 31, 1994.
INTEREST:
The Comapny paid $36.9 million, and $29.6 million in interest on deposits
and other borrowings during the three month periods ended March 31, 1995 and
1994, respectively.
SECURITIES:
During the first quarter of 1994, the Company transferred securities
available for sale with a carrying value of $139.5 million to its investment
securities portfolio. These securities had an unrealized holding gain of $2.7
million at the transfer date, net of deferred income taxes, reported as a
separate component of shareholders' equity.
ACQUISITION:
During the first quarter of 1995, the Company recognized the exchange of
680 thousand shares of common stock for all the outstanding common shares of LBO
BanCorp, Inc. The following reflects the assets acquired and liabilities assumed
(in thousands):
Fair value of assets acquired $109,336
Fair value of common stock issued 19,736
--------
Liabilities assumed $ 89,600
========
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.
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., and Commercial National Corporation,
wholly-owned subsidiaries. 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.
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. In an amended complaint, 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 trusts. The case seeks actual damages for waste of trust assets and loss
of income and punitive damages, both in an unspecified amount to be proven at
trial, 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.
<PAGE> 7
In addition, the Company is subject to numerous other pending and threatened
legal actions arising in the normal course of business and management believes
that the ultimate resolution of these matters will not have a material effect
on the Company's consolidated financial statements.
NOTE C - ACCOUNTING CHANGES
Effective January 1, 1995, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 114, "Accounting by Creditors for
Impairment of a Loan", as amended by SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures." As required by
SFAS No. 114, a loan is impaired when, based on current information and events,
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 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
or, as a practical expedient, at the loan's observable market price or the fair
value of the collateral if the loan is collateral dependent. SFAS No. 118
amends SFAS No. 114 by eliminating the income recognition provisions outlined
in SFAS No. 114 and allowing creditors to use existing methods for recognizing
interest income on impaired loans. The adoption of these Statements did not
have a material impact on the consolidated financial statements.
Effective January 1, 1995, the Company adopted the provisions of SFAS No. 116,
"Accounting for Contributions Received and Contributions Made." SFAS No. 116
requires that contributions made by the Company, including unconditional
promises to give, be recognized as expenses at their fair values in the period
made. Conditional promises to give are recognized when the conditions are
substantially met. Adoption of this Statement did not have a material impact
on the consolidated financial statements.
NOTE D - LOANS
The following table summarizes the activity in the allowance for possible loan
losses for the first quarter of 1995 (in thousands).
<TABLE>
<S> <C>
Balance at December 31, 1994 $55,873
Charge-offs (2,165)
Recoveries 2,267
-------
Net recoveries 102
Provision for loan losses -
Allowance of acquired bank 882
-------
Balance at March 31, 1995 $56,857
=======
</TABLE>
<PAGE> 8
The total recorded investment in impaired loans at the end of the first
quarter of 1995 was $19.0 million of which $8.1 million has a related allowance
of $1.9 million for estimated credit losses determined in accordance with the
provisions of SFAS No. 114. The remaining $10.9 million of the impaired loans
do not require an allowance under the provisions of SFAS No. 114 since the
estimated future cash flows or the collateral value is considered sufficient to
cover any future deficiencies in loan payments. However, a general allowance
for possible loan losses is available to absorb losses on these loans. The
average recorded investment in impaired loans for the first quarter of 1995 was
$19.5 million.
The Company continues to use the nonaccrual method for the recognition of
interest income on impaired loans. Using this method, the accrual of interest
is discontinued on loans when management believes there is reasonable
uncertainty as to the collectability of the contract amount, or when the loan is
contractually 90 days or more past due, or not well secured and not in the
process of collection. There was no interest income recognized in the first
quarter of 1995 on loans identified as impaired.
NOTE E - ACQUISITIONS
On December 31, 1994, the Company exchanged 680 thousand shares of common stock
for all of the outstanding common shares of LBO Bancorp, Inc., a bank holding
company, in a purchase business combination. The fair value of assets acquired
was $109 million. The acquisition, which was not material, was reflected in
the financial statements beginning January 1, 1995.
On March 10, 1995, the Company consummated the purchase of the Coahoma County,
Mississippi operations of a local Mississippi bank. This acquisition added
assets of approximately $82 million.
On December 2, 1994, the Company and Citizens National Bancshares, Inc. in
Hammond, La., signed a definitive agreement for the Company to acquire Citizens
National Bancshares, Inc. At March 31, 1995, Citizens National Bancshares,
Inc. had total assets of approximately $190 million. The agreement requires
the Company to issue at least 1,393,442 shares and no more than 1,491,228
shares of common stock in exchange for all of the common shares of Citizens
National Bancshares, Inc. The acquisition, which is expected to close in the
1995 second quarter, will be accounted for as a pooling of interests.
<PAGE> 9
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 March 31, 1995, and the related condensed
consolidated statements of earnings and cash flows for the three-month periods
ended March 31, 1995 and 1994.
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 subsidiaries as of December 31, 1994, 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 3,
1995, 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, 1994, 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 LLP
KPMG PEAT MARWICK LLP
Jackson, Mississippi
April 18, 1995
<PAGE> 10
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 periods
ending March 31, 1995 and 1994. This discussion should be read in conjunction
with the condensed consolidated financial statements included in Part I, Item
I. During the second and fourth quarters of 1994, the Company acquired First
Columbus Financial Corporation, a $209 million asset bank holding company, and
LBO Bancorp, Inc., with total assets of $109 million. During the first quarter
of 1995, the Company acquired the Coahoma County operations of a local
Mississippi bank with total assets of approximately $82 million. These
transactions were accounted for as purchases and, as such, the results of
operations of these entities are included in the financial statements from
the acquisition date and will affect the comparability of the financial
statements for the first three months of 1994 and the first three months of
1995.
BALANCE SHEET
Total assets were $5.153 billion at March 31, 1995, compared to $5.131 billion
at December 31, 1994. Total loans increased $154 million from $2.859 billion
at December 31, 1994 to $3.013 billion at March 31, 1995. This increase in
loans was the result of higher loan demand in the Company's market area and the
first quarter acquisitions. Approximately, $86 million of the increase in
loans results from the acquisitions of LBO Bancorp, Inc. and the Coahoma County
branches. Investment securities increased $173 million from $1.330 billion at
December 31, 1994 to $1.503 billion at March 31, 1995. Correlating with the
increases in loans and investment securities were decreases in interest-bearing
bank balances, Federal funds sold and securities purchased under agreements to
resell, and trading account securities of $135.3 million, $174.0 million, and
$2.5 million, respectively. Total deposits increased from $4.039 billion at
December 31, 1994 to $4.175 billion at March 31, 1995 as a result of growth in
interest-bearing deposits. The acquisitions of LBO Bancorp, Inc. and the
Coahoma County branches increased deposits by $86 million and $82 million,
respectively. Total stockholders' equity increased to $459.2 million at March
31, 1995 compared to $443.6 million at December 31, 1994.
As of March 31, 1995, the Company had interest rate swap contracts with a total
notional value of $105 million compared to $265 million at December 31, 1994.
During the first quarter of 1995, the Company sold interest swap contracts with
notional amounts totaling $65 million for a net gain of $792 thousand. These
swaps were hedging money market deposit accounts; therefore, the gain is being
amortized over the original life of the terminated swap contracts. During the
first quarter of 1995, the Company exercised its option not to extend the
maturity on a callable swap.
<PAGE> 11
NET INCOME
Net income for the first quarter of 1995 was $17.2 million compared to $18.7
million for the first quarter of 1994. Net income per share was $.96 for the
first quarter of 1995 compared to $1.06 for the same period in 1994. Net
income for 1994 includes gains on the sales of securities available for sale of
$5.4 million, net of income taxes. Excluding these securities gains, net
income for the first quarter of 1995 increased $3.9 million compared to the
first quarter of 1994. For the first three months of 1995, the return on
average assets was 1.38% compared to 1.54% for the same period in 1994. The
return on average equity for the first three months of 1995 was 15.19% compared
to 17.86% for 1994.
NET INTEREST INCOME
Net interest income for the first quarter of 1995 was $51.7 million, an
increase of 20.5%, from $42.9 million for the first quarter of 1994 due to a 3%
increase in average interest-earning assets and an increase in the net interest
margin. The increase in interest-earning assets is primarily due to an
increase in loan volume. Average loan volumes increased 22% to $2.9 billion in
1995 as compared to $2.4 billion in 1994. Average total loans as a percentage
of interest-earning assets increased from 54.76% during the first quarter of
1994 to 64.91% during the same period in 1995. The net interest margin for the
first quarter of 1994 was 4.76%, increasing from 4.07% for the first quarter of
1994. This increase in the margin is primarily due to an increase in the
interest spread and a decrease in the liability funding ratio. The interest
spread, the difference between the yield on interest-earning assets and the
rate paid on interest-bearing liabilities, increased from 3.48% in 1994 to
3.91% in 1995 due to the improved mix of earning assets and the Company
increasing interest rates paid on many of its deposit accounts at a slower pace
than the increase in yields on interest-earning assets. Liability funding, the
percentage of interest-earning assets funded by interest-bearing liabilities
decreased from 81.80% in the first quarter of 1994 to 81.25% in the first
quarter of 1995.
OTHER OPERATING INCOME
Other operating income for the first quarter of 1995 was $20.7 million compared
to $28.0 million for the first quarter of 1994. The decrease in other
operating income is primarily the result of gains on available for sale
securities of $8.7 million during the first quarter of 1994 compared to a loss
of $5 thousand for the same period in 1995. Approximately $670 thousand of the
first quarter 1995 other operating income represents an increase due to the
acquisition of First Columbus National Bank and LBO Bancorp, Inc. in the second
and fourth quarters of 1994, respectively. Service charges on deposits and
fees for trust services for the first quarter of 1995 increased $359 thousand
and $161 thousand, respectively, from the first quarter of 1994, as a result of
new business. Other operating income also increased approximately $300
thousand as a result of increased fees received on credit insurance related to
installment loans. These increases were somewhat offset by a $402 thousand
decrease in income recognized on futures and expired option contracts during
the first quarter of 1995 compared to the same period in 1994.
<PAGE> 12
OTHER OPERATING EXPENSE
Other operating expense for the first quarter of 1995 was $47.1 million, an
increase of $3.9 million or 9.03% over the first quarter of 1994.
Approximately $2.0 million of this increase is related to the acquisitions of
First Columbus National Bank and LBO Bancorp, Inc. in the second and fourth
quarters of 1994. The remaining increase of $1.9 million is primarily the
result of increases in salaries and employee benefits, depreciation expense,
and additional merger costs. Salaries and employee benefits increased 3% or
$711 thousand in 1995 compared to 1994 as a result of normal salary increase.
Merger costs increased $550 thousand due to increased activity in this area.
CREDIT QUALITY
As a result of management's assessment of the adequacy of the allowance, the
Company determined that no provision to the allowance for possible loan losses
was necessary for the first quarter of 1995 or 1994.
The allowance for possible loan losses at March 31, 1995, was $56.9 million or
1.89% of total loans and 183% of nonperforming loans outstanding compared to
$55.9 million or 1.95% of total loans and 174% of nonperforming loans at
December 31, 1994. Net recoveries for the first quarter of 1995 were $102
thousand compared to first quarter 1994 net recoveries of $2.4 million.
Nonperforming loans decreased to $21.7 million at March 31, 1995, compared to
$22.8 million at December 31, 1994 and $29.0 million at March 31, 1994, as a
result of improving credit quality.
CAPITAL
The Company maintains risk-based capital levels in excess of the 8% minimum
guideline adopted by the Federal Reserve Board for bank holding companies. The
Company's tier 1 capital and total risk-based capital ratios at March 31, 1995
were 11.92% and 13.18%, respectively. This compares to a tier 1 capital ratio
of 12.49% and total risk-based capital ratio of 13.75% at December 31, 1994.
The Company's leverage ratio was 8.28% at March 31, 1995 compared to 8.43% at
December 31, 1994.
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. At March 31, 1995, Deposit Guaranty
National Bank's leverage ratio was 7.99%, tier 1 capital ratio was 11.12% and
its total risk-based capital ratio was 12.37%. At March 31, 1995, Commercial
National Bank's leverage, tier 1 and total capital ratios were 8.18%, 16.14%
and 17.40%, respectively.
<PAGE> 13
LIQUIDITY
Liquidity for a financial institution can be expressed in terms of maintaining
sufficient funds available to meet both expected and unanticipated obligations
in a cost effective manner. 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.
The Company has maintained a high level of liquidity as loans have been at a
lower than desired level. Loan demand has continued to increase for the first
three months of 1995 and was funded by a reduction in short-term investments.
ACCOUNTING CHANGES
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of". SFAS No. 121, requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Measurement of an
impairment loss for long-lived assets and identifiable intangibles that an
entity expects to hold and use should be based on the fair value of the asset.
This statement requires that the majority of long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell. SFAS No. 121 is effective for fiscal
years beginning after December 15, 1995. The Company is currently analyzing the
impact that adoption of this statement will have on its 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 the year ended December 31, 1994.
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
<TABLE>
<CAPTION>
Table Sequential
Exhibit Number Page Number
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<S> <C> <C>
Plan of acquisition, reorganization,
arrangement, liquidation or succession (2) A copy of the Agreement and Plan of Merger dated
December 2, 1994, as amended effective March 27,
1995 and April 11, 1995, by and among the Company,
Commercial National Corporation, and Citizens
National Bancshares, Inc. was part of the Proxy
Statement/Prospectus included in the S-4
Registration Statement of the Company, File Number
33-58427, and is incorporated by reference herein.
A copy of the Agreement and Plan of Merger dated
August 8, 1994, by and among the Company, Commercial
National Bank, CNC Acquisition Corp., LBO Bancorp,
Inc. and Louisiana Bank was part of the Proxy
Statement/Prospectus included in the S-4
Registration Statement of the Company, File Number
33-56041, and is incorporated by reference herein.
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
Financial data schedule (27) 20
Additional exhibits (28) N/A
</TABLE>
________________________________________
(b) No reports on Form 8-K have been filed during the quarter ended March 31,
1995.
<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: May 15, 1995 /s/ Stephen E. Barker
Stephen E. Barker
Controller and Principal
Accounting Officer
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - - - - - - ------- -----------
<S> <C>
(2) Plan of acquisition, reorganization,
arrangement, liquidation or succession
(4) Instruments defining the rights of
security holders, including indentures
(10) Material Contracts
(11) Statements re: computation of per share
earnings
(15) Letters re: unaudited interim financial
information
(16) Letter re: change in certifying
accountant
(18) Letter re: change in accounting
principles
(19) Previously unfiled documents
(20) Report furnished to security holders
(23) Published report regarding matters
submitted to vote of security holders
(24) Consent of experts and counsel
(25) Power of attorney
(27) Financial data schedule
(28) Additional exhibits
</TABLE>
<PAGE> 1
Deposit Guaranty Corp.
Computation of Net Income Per Share
March 31, 1995
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------------
Primary Fully Diluted
----------- -------------
<S> <C> <C>
Computation of weighted average
shared outstanding:
Common stock outstanding,
beginning balance 17,578,052 17,578,052
Common stock issued to
acquire LBO Bancorp, Inc. 680,421 680,421
Common stock issued due to
exercise of options 4,129 4,129
Shares purchased by
the Company 332,194 332,194
----------- -----------
Weighted average shares
outstanding 17,930,408 17,930,408
=========== ===========
Computation of net income:
Net income $17,221,000 $17,221,000
=========== ===========
Computation of net income per
share:
Net income divided by weighted
average shares outstanding $ .96 $ .96
=========== ===========
</TABLE>
Note: For the three-months ended March 31, 1995, additional weighted average
shares outstanding for options under the Company's incentive stock plan were
150,815 and 163,443 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: March 31, 1995 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 April 18, 1995 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 LL
KPMG PEAT MARWICK LLP
Jackson, Mississippi
May 15, 1995
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 315,023
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 50,090
<TRADING-ASSETS> 2,069
<INVESTMENTS-HELD-FOR-SALE> 9,166
<INVESTMENTS-CARRYING> 1,503,347
<INVESTMENTS-MARKET> 1,521,459
<LOANS> 3,030,627
<ALLOWANCE> (56,857)
<TOTAL-ASSETS> 5,153,277
<DEPOSITS> 4,174,633
<SHORT-TERM> 429,586
<LIABILITIES-OTHER> 89,812
<LONG-TERM> 0
<COMMON> 20,114
0
0
<OTHER-SE> 439,132
<TOTAL-LIABILITIES-AND-EQUITY> 5,153,277
<INTEREST-LOAN> 63,012
<INTEREST-INVEST> 23,492
<INTEREST-OTHER> 2,445
<INTEREST-TOTAL> 88,949
<INTEREST-DEPOSIT> 31,484
<INTEREST-EXPENSE> 37,216
<INTEREST-INCOME-NET> 51,733
<LOAN-LOSSES> 0
<SECURITIES-GAINS> (5)
<EXPENSE-OTHER> 20,659
<INCOME-PRETAX> 25,334
<INCOME-PRE-EXTRAORDINARY> 17,221
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,221
<EPS-PRIMARY> .96
<EPS-DILUTED> .96
<YIELD-ACTUAL> 4.76
<LOANS-NON> 24,246
<LOANS-PAST> 4,927
<LOANS-TROUBLED> 370
<LOANS-PROBLEM> 287
<ALLOWANCE-OPEN> 55,873
<CHARGE-OFFS> 2,165
<RECOVERIES> 2,267
<ALLOWANCE-CLOSE> 56,857
<ALLOWANCE-DOMESTIC> 56,857
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 6,925
</TABLE>
