<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, 1996
Commission File Number 0-4518
DEPOSIT GUARANTY CORP.
(Exact Name Of Registrant As Specified In Charter)
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<S> <C>
Mississippi 64-0472169
- ------------------------------- -----------------------------
(State or other Jurisdiction of (IRS Employer Identification Incorporation or Organization)
Number)
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210 East Capitol Street, Jackson, MS 39201
(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, 1996: 19,097,343
<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)
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<CAPTION>
MARCH 31, December 31,
1996 1995
-------------- -------------
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ASSETS
Cash and due from banks $361,501 $343,706
Interest-bearing bank balances 25,903 --
Federal funds sold and securities
Purchased under agreements to resell 343,416 441,015
Trading account securities 3,084 3,381
Securities available for sale 1,176,851 1,199,391
Investment securities (market value:
1996 - $137,032 ; 1995 - $141,649 ) 130,137 139,033
Loans, net of unearned income 3,661,516 3,579,302
Allowance for possible loan losses (58,914) (58,719)
-------------- ------------
Net loans 3,602,602 3,520,583
Bank premises and equipment 144,576 144,340
Other assets 225,668 234,750
-------------- ------------
TOTAL ASSETS $6,013,738 $6,026,199
============== ============
LIABILITIES
Deposits:
Noninterest-bearing $1,037,818 $1,094,627
Interest-bearing 3,698,013 3,686,032
-------------- ------------
Total deposits 4,735,831 4,780,659
Federal funds purchased, securities
sold under agreements to repurchase
and other short-term borrowings 636,853 599,482
Other liabilities 120,629 107,005
-------------- ------------
TOTAL LIABILITIES 5,493,313 5,487,146
-------------- ------------
STOCKHOLDERS' EQUITY
Cumulative preferred stock, no par value,
authorized: 25,000,000 shares of class A
voting; and 25,000,000 shares of class B
non-voting; issued and outstanding: none -- --
Common stock, no par value, authorized
100,000,000 shares; issued and outstanding:
1996 - 19,097,343 shares; 1995 - 19,379,643
shares 20,948 21,257
Surplus 157,287 171,073
Retained earnings 342,701 327,633
Market valuation for securities available for
sale, net of income taxes (511) 19,090
-------------- ------------
TOTAL STOCKHOLDERS' EQUITY 520,425 539,053
-------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,013,738 $6,026,199
============== ===========
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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)
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<CAPTION>
Three Months Ended
March 31,
---------------------------------
1996 1995
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Interest income
Interest and fees on loans $77,264 $65,080
Interest on investment securities:
Taxable 2,798 22,177
Exempt from Federal income tax 0 2,286
Interest on securities available for sale:
Taxable 19,970 183
Exempt from Federal income tax 2,758 25
Interest on trading account securities 119 53
Interest on Federal funds sold and securities
purchased under agreements to resell 1,980 1,441
Interest on bank balances 111 1,142
-------- ---------
Total interest income 105,000 92,387
-------- ---------
Interest expense
Interest on deposits 37,376 32,773
Interest on Federal funds purchased, securities
sold under agreements to repurchase and
other short-term borrowings 8,332 5,727
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Total interest expense 45,708 38,500
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Net interest income 59,292 53,887
Provision for possible loan losses 1,335 --
-------- ---------
Net interest income after provision for
possible loan losses 57,957 53,887
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Other operating income
Service charges on deposit accounts 8,216 7,572
Fees for trust services 3,825 3,500
Losses on securities available for sale (414) (5)
Other service charges, commissions
and fees 13,922 8,894
Other income 3,988 1,062
-------- ---------
Total other operating income 29,537 21,023
-------- ---------
Other operating expense
Salaries and employee benefits 31,217 26,219
Net occupancy expense 3,665 3,193
Equipment expense 4,149 3,820
Service fees 2,987 2,448
Communication 2,452 2,106
FDIC assessment 2 2,389
Advertising and public relations 2,445 2,217
Other expense 9,487 6,147
-------- ---------
Total other operating expense 56,404 48,539
-------- ---------
Income before income taxes 31,090 26,371
Income tax expense 9,601 8,399
-------- ---------
Net income $21,489 $17,972
======== =========
Net income per share $1.11 $0.93
Weighted average shares outstanding 19,326,213 19,313,252
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3
<PAGE> 4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
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<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------------
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 21,489 $ 17,972
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Provision for possible 1,335 --
loan losses
Provision for possible 7 (1)
losses on other real
estate
Provision for 7,675 5,429
depreciation and
amortization
Provision for deferred 406 1,531
income taxes
Amortization (accretion)
of premium (discount) on
investment securities, 67 (8,381)
net
Accretion of discount on (1,308) (15)
securities available for
sale, net
Deferred loan fees and (482) (657)
costs
Increase (decrease) in 10,694 (1,045)
other liabilities
(Increase) decrease in 4,057 (1,265)
other assets
Net cash received from (56,193) 1,063
(paid for) loans held for
resale
Losses on securities 414 5
available for sale
Other, net 4,390 5,423
------------------- ------------------
NET CASH PROVIDED (7,449) 20,059
(USED) BY OPERATING ------------------- ------------------
ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest-bearing (25,903) 135,298
bank balances
Proceeds from sales of securities available for sale 591,106 15,661
Proceeds from maturities and principal repayments of investment 13,492 33,782
securities
Proceeds from maturities and principal repayments of securities available
for sale 216,670 220
Purchases of investment securities (4,738) (165,377)
Purchases of securities available for sale (805,435) --
Net decrease in Federal funds sold and securities
purchased under agreements to resell 97,599 165,645
Net increase in loans (26,951) (108,973)
Proceeds from sales of other real estate 1,113 845
Purchases of bank premises and equipment (4,687) (7,331)
Proceeds from sales of bank premises and equipment 20 67
Cash and due from banks of acquired companies -- 12,309
------------------- ------------------
NET CASH PROVIDED BY 52,286 82,146
INVESTING ACTIVITIES ------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (44,828) 51,362
Net increase (decrease) in Federal funds purchased,
securities sold under agreements to repurchase,
and other short-term borrowings 37,371 (136,799)
Proceeds from the exercise of common stock options 814 121
Purchases of common stock (15,447) (16,379)
Cash dividends paid (4,952) (4,944)
------------------- ------------------
NET CASH USED BY (27,042) (106,639)
FINANCING ACTIVITIES ------------------- ------------------
INCREASE (DECREASE) IN 17,795 (4,434)
CASH AND DUE FROM BANKS
CASH AND DUE FROM BANKS 343,706 326,768
AT BEGINNING OF PERIOD ------------------- ------------------
CASH AND DUE FROM BANKS $ 361,501 $ 322,334
AT END OF PERIOD =================== ==================
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<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 received a net income tax refund of $186 thousand during the three
month period ended March 31, 1996. The Company made income tax payments of $2.5
million during the three month period ended March 31, 1995.
INTEREST:
The Company paid $46.5 million and $36.9 million in interest on deposits and
other borrowings during the three month periods ended March 31, 1996 and 1995,
respectively.
<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, Deposit Guaranty Arkansas Corp., 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, 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, 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 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. Management denies all liability and
believes that the ultimate resolution of this matter will not have a material
effect on the Company's consolidated financial statements.
DGNB is a defendant in a class action lawsuit involving collateral protection
insurance. The lawsuit generally alleges that DGNB violated various banking
statutes and breached common law duties owed to the plaintiffs. While denying
liability, DGNB has negotiated a settlement of the class action lawsuit, which
has been presented to and approved by the court. The court's approval of the
settlement may be appealed. The settlement terms provide for a settlement fund
of cash and loan credits of approximately $4 million and an injunction
concerning DGNB's collateral protection insurance programs, including a
prohibition against collecting outstanding collateral protection insurance
premiums or interest thereon from members of the class. In 1995, $3.5 million
was accrued for this settlement.
Management believes that this lawsuit will be resolved without a
material adverse effect on the financial condition of the Company.
<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, 1996, the Company 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." SFAS No.
121 requires that long-lived assets and certain identifiable intangibles to be
held and used by the Company 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 is 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 did not have a material impact on the consolidated financial
statements.
Effective January 1, 1996, the Company adopted the provisions of SFAS No. 122,
"Accounting for Mortgage Servicing Rights, an Amendment of SFAS No. 65." SFAS
No. 122 provides guidance for recognition of mortgage servicing rights as an
asset when a mortgage loan is sold or securitized and servicing rights
retained. This statement also requires that impairment of mortgage servicing
rights be measured as the difference between the carrying amount of the
servicing rights and their current fair values. SFAS No. 122 is applied
prospectively; therefore, the Company's prior period financial statements will
not reflect the adoption of this pronouncement. The effect of this change
during the first quarter was to increase net income by approximately $750
thousand.
NOTE D - ACQUISITIONS
On February 6, 1996, the Company and Bank of Gonzales Holding Company, located
in Gonzales, Louisiana, signed a definitive agreement for the Company to
acquire Bank of Gonzales. At March 31, 1996, Bank of Gonzales had total assets
of approximately $124 million. The agreement requires the Company to issue
634,000 shares of its common stock in exchange for all of the common shares of
Bank of Gonzales Holding Company. The acquisition, which is expected to close
in the second quarter of 1996, will be accounted for using the purchase
accounting method.
NOTE E - SUBSEQUENT EVENTS
On April 16, 1996, the stockholders of the Company approved an amendment to
Article Four of the Articles of Incorporation. This amendment increased the
number of shares of Common Stock, no par value, Class A Voting Preferred, no
par value, and Class B Non-voting Preferred, no par value, which the Company
has authority to issue to 100,000,000, 25,000,000 and 25,000,000, respectively.
<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 March 31, 1996, and the related condensed
consolidated statements of earnings and cash flows for the three-month periods
ended March 31, 1996 and 1995.
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, 1995, 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 6,
1996, 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, 1995, 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 16, 1996
<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 periods
ending March 31, 1996 and 1995. This discussion should be read in conjunction
with the condensed consolidated financial statements included in Part I, Item
I. During the second quarter of 1995, the Company acquired Citizens National
Bank with assets of $193 million in a transaction accounted for as a pooling of
interests. As a result of this transaction, the Company restated its 1995
financial statements to include Citizens National Bank as of January 1, 1995;
therefore, comparability of the financial statements should not be affected.
During the third quarter of 1995, the Company acquired First Mortgage Corp.
with a $1.1 billion dollar servicing portfolio and Merchants National Bank with
total assets of $280 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
1995 and the first three months of 1996.
BALANCE SHEET
Total assets were $6.014 billion at March 31, 1996, compared to $6.026 billion
at December 31, 1995. Total loans increased $82 million from $3.579 billion
at December 31, 1995 to $3.662 billion at March 31, 1996. This increase in
loans was the result of an increase in mortgage loans held for resale due to
favorable rates in the market combined with increased consumer loan demand.
Interest-bearing bank balances increased $25.9 million at March 1996 compared
to December 31, 1995. In correlation with the increases in loans and
interest-bearing bank balances, were decreases in securities and Federal funds
sold and securities purchased under agreements to resell. Securities decreased
$31 million from $1.338 billion at December 31, 1995 to $1.307 billion at March
31, 1996. Federal funds sold and securities purchased under agreements to
resell decreased 22% from $441 million at December 31, 1995 to $343 million at
March 31, 1996. Total deposits decreased from $4.781 billion at December 31,
1995 to $4.736 billion at March 31, 1996 as a result of a seasonal decline in
noninterest-bearing deposits. Total stockholders' equity decreased to $520.4
million at March 31, 1996 compared to $539.1 million at December 31, 1995 as a
result of the Company's repurchase of 337 thousand shares of the Company's
common stock for $15.4 million in the first quarter of 1996 and due to a $19.6
million decrease in market valuation for securities available for sale, net of
income taxes. This common stock repurchase program is for the purpose of
offsetting the shares anticipated to be issued in the acquisition of the Bank
of Gonzales Holding Company.
As of March 31, 1996, the Company had interest rate swap contracts with a total
notional value of $104 million compared to $154 million at December 31, 1995.
During the first quarter of 1996, the Company was a counterparty to several
short-term option contracts and recognized $835 thousand in noninterest income
resulting from the premiums received on exercised written covered call options.
During the first quarter of 1995, the Company sold interest rate 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,
<PAGE> 10
NET INCOME
Net income for the first quarter of 1996 was $21.5 million compared to $18.0
million for the first quarter of 1995. Net income per share was $1.11 for the
first quarter of 1996 compared to $.93 for the same period in 1995. This
increase in earnings was primarily due to an increase in net interest income
and noninterest related sources of income. The increase in net interest income
was largely due to a 19% increase in loan volume bringing average total loans
to $3.6 billion, up $597 million over first quarter last year. Noninterest
income increased $8.5 million, or 41%, in the first quarter of 1996 compared to
1995. Of this increase, $2.7 million was a gain resulting from the disposition
of assets related to lease financing transactions, $1.2 million from the
adoption of a new accounting pronouncement related to mortgage servicing
rights, $1.8 million attributable to acquisitions, and the remaining increase
represents a 13% growth in noninterest income in core business lines. The
return on average assets for the first quarter of 1996 was 1.44% compared to
1.39% for the same period in 1995. The return on average equity for the first
three months of 1996 was 15.97% compared to 15.10% for 1995.
NET INTEREST INCOME
Net interest income for the first quarter of 1996 was $59.3 million, an
increase of 10%, from $53.9 million for the first quarter of 1995 due to a
13.5% increase in average interest-earning assets. Of the increase in
interest-earning assets, 94% of the increase was due to an increase in average
loan volumes which increased 19% to $3.7 billion in 1996 as compared to $3.1
billion in 1995. This increase in average loan volumes can be attributed to
internal growth in loans of 14% primarily in commercial and consumer loans, and
a 5% increase in loans due to acquisitions. The largest part of this growth
was in the last three quarters of 1995; however, during the first quarter of
1996 commercial loan growth has slowed. Average total loans, the most
profitable interest-earning asset, as a percentage of total interest-earning
assets increased from 64% during the first quarter of 1995 to 68% during the
same period in 1996. The net interest margin for the first quarter of 1996 was
4.62%, decreasing from 4.78% for the first quarter of 1995. This decrease in
the margin is primarily due to a decrease in the interest spread and an
increase 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, decreased from 3.92% in 1995 to 3.86% in 1996 due
to the yields on interest earning assets increasing at a slower pace than the
Company increased interest rates paid on many of its deposit accounts.
Liability funding, the percentage of interest-earning assets funded by
interest-bearing liabilities increased from 81.1% in the first quarter of 1995
to 81.8% in the first quarter of 1996.
OTHER OPERATING INCOME
Other operating income for the first quarter of 1996 was $29.5 million compared
to $21.0 million for the first quarter of 1995. The increase in other
operating income is primarily the result of acquisitions, gains on lease
financing transactions, the adoption of a new accounting pronouncement, and
growth in core business lines. Approximately $1.8 million of the first quarter
1996 other operating income represents an increase due to acquisitions
occurring in the third quarter of 1995. The first quarter of 1996 included a
gain of $2.7 million resulting from the disposition of assets related to lease
financing transactions.
<PAGE> 11
The Company's adoption of SFAS No. 122 in January 1996, resulted in an increase
in mortgage loan origination income of $1.2 million in the first quarter of
1996 as compared to the same period in 1995. The remaining increase in
noninterest income for the first quarter of 1995 to the first quarter of 1996
represents a 13% growth in fees from core business lines.
OTHER OPERATING EXPENSE
Other operating expense for the first quarter of 1996 was $56.4 million, an
increase of $7.9 million or 16% over the first quarter of 1995. Approximately
$5.9 million of this increase is related to 1995 acquisitions occurring after
the first quarter. The remaining increase of $2.6 million, net of a $2.4
million decrease in FDIC assessment, is primarily the result of increases in
salaries and employee benefits, consultant fees, and decreases in gains on the
sales of other real estate. Excluding the effects of the acquisitions,
salaries and employee benefits increased $2.6 million in the first quarter of
1996 compared to 1995 as a result of annual merit increases, employee incentive
cost and employee benefit costs. Consultant fees increased $472 thousand for
the first quarter of 1995 compared to 1996, primarily as a result of the cost
of profit enhancement projects. Gains on the sale of other real estate
decreased $394 thousand during the first quarter of 1996 as compared to the
same period in 1995.
These overall increases in noninterest expense were somewhat offset by a
decrease in the FDIC assessment from $2.4 million for the first quarter of 1995
to $2 thousand for the first quarter of 1996 resulting from lower premium rates
on insured deposits.
CREDIT QUALITY
As a result of management's assessment of the adequacy of the allowance, the
Company determined that a provision to the allowance for possible loan losses
of $1.3 million was necessary for the first quarter of 1996 compared to no
provision in 1995.
The allowance for possible loan losses at March 31, 1996, was $58.9 million or
1.61% of total loans and 266% of nonperforming loans outstanding compared to
$58.7 million or 1.64% of total loans and 262% of nonperforming loans at
December 31, 1995. Net charge-offs for the first quarter of 1996 were $1.1
million, or .13% of average loans, compared to first quarter 1995 net
recoveries of $54 thousand. Nonperforming loans decreased to $27.9 million at
March 31, 1996, compared to $28.9 million at December 31, 1995 and $32.1
million at March 31, 1995.
CAPITAL
Total stockholders' equity decreased from $539.1 million at December 31, 1995
to $520.4 million at March 31, 1996 primarily as a result of the market
valuation on securities available for sale and the Company's common stock
repurchase plan. The Company had an unrealized loss on securities available
for sale, net of deferred income taxes, of $511 thousand at March 31, 1996
compared to a net unrealized gain of $19.1 million at December 31, 1995.
<PAGE> 12
The Company has been authorized to purchase up to 634 thousand shares of its
common stock under a repurchase plan for the purpose of offsetting the shares
anticipated to be issued in the acquisition of the Bank of Gonzales Holding
Company. At March 31, 1996, the Company had repurchased 337 thousand shares
for $15.4 million under the plan.
The Company maintains risk-based capital levels well in excess of the 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, 1996
were 11.12% and 12.38%, respectively. This compares to a tier 1 capital ratio
of 11.05% and total risk-based capital ratio of 12.30% at December 31, 1995.
The Company's leverage ratio was 7.76% at March 31, 1995 compared to 7.87% at
December 31, 1995.
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.
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 the loan to deposit
ratio of 76.9% at March 31, 1996, has been lower than desired. Loan volume has
continued to increase for the first three months of 1996 and was funded largely
by a reduction in short-term investments.
The Company issued $100 million in fixed rate long-term notes during April
1996. These notes have original maturities of ten years and will be included
in long-term debt. The proceeds from the sale of the notes will be used for
general corporate purposes, including reductions in short-term borrowings and
for current and potential future acquisitions.
ACCOUNTING CHANGES
In October, 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." This Statement provides accounting and reporting standards for
stock-based employee compensation plans and also applies to transactions in
which the Company acquires goods and services from nonemployees in exchange for
the Company's equity instruments. SFAS No. 123 defines a fair value based
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all employee
stock compensation plans.
<PAGE> 13
Entities electing to continue using the accounting treatment outlined in APB
Opinion No. 25, "Accounting for Stock Issued to Employees" are required to make
pro forma disclosures of net income and net income per share, as if the fair
value based method had been adopted. The accounting and disclosure
requirements of this Statement are effective for transactions entered into in
fiscal years beginning after December 15, 1995. The adoption of this statement
is not expected to have a material impact on the consolidated financial
statements because the Company expects to continue following the accounting
treatment outlined in APB Opinion No. 25.
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Deposit Guaranty is a defendant in a case, Marion Bentley v. Deposit
Guaranty and Prudential Property & Casualty Insurance Co., Civil Action No.
9:95CV292PS, filed in the United States District Court for the Southern
District of Mississippi, Hattiesburg Division on August 18, 1995. The plaintiff
sued the defendants on behalf of himself and all others similarly situated with
respect to collateral protection insurance obtained by Deposit Guaranty. The
plaintiff claims causes of action for breach of duties of good faith and fair
dealing, violation of the Fair Debt Collection Practices Act, violation of
federal antitrust laws, breach of fiduciary duty, fraud, failure to comply with
Regulation Z, infliction of emotional distress, and damage to credit
reputation. Deposit Guaranty has negotiated a settlement of the class action
lawsuit, which has been presented to and approved by the Court. The court's
approval of the settlement may be appealed. The terms of the settlement include
a settlement fund of approximately $4 million which includes both cash payments
by Deposit Guaranty and credits to Deposit Guaranty's customers who are
indebted to Deposit Guaranty. The punitive damages component of the settlement
is mandatory and the class members may not opt out of the class settlement and
pursue punitive damages in a separate action. The settlement is not mandatory
with respect to compensatory damages. Class members may opt out of the
settlement with respect to compensatory damages and pursue a separate claim for
compensatory damages. Approximately 52 class members opted out of the class
settlement with respect to compensatory damages.
The Dear, Dickerson, Welch and Lott lawsuits have been settled and
dismissed with prejudice. The court's final judgment approving the settlement
in Bentley renders moot any potential claim against Deposit Guaranty National
Bank in the Hoskins case.
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the April 16, 1996 Annual Meeting of Stockholders, in addition to the
election of directors, the stockholders approved an amendment to the Articles
of Incorporation of the Registrant increasing the number of authorized shares
of Common Stock, Class A Voting Preferred Stock and Class B Non-Voting
Preferred Stock of the Registrant from 50,000,000, 10,000,000 and 10,000,000,
respectively, to 100,000,000, 25,000,000 and 25,000,000, respectively. Of the
19,308,651 shares entitled to vote at the meeting, 10,312,344 shares voted in
favor of the amendment, 1,974,165 shares voted against the amendment, and
142,229 shares abstained.
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
<TABLE>
<CAPTION>
Table Sequential
Exhibit Number Page Number
------- ------ -----------
<S> <C> <C>
Plan of acquisition, reorganization,
arrangement, liquidation or succession (2) A copy of the Agreement and Plan of Merger dated February 5,
1996 by and among the Company, Commercial National Corporation,
Bank of Gonzales Holding Company, and Bank of Gonzales was part
of the Proxy Statement/Prospectus included in the S-4
Registration Statement of the Company, File Number 333-03051,
and is incorporated by reference herein.
Amended articles of incorporation (3.a) 22
Instruments defining the rights of
security holders, including indentures (4) The Form of 7-1/4% Senior Notes due May 1, 2006 the Principal Amount of
$100,000,000 (the Notes) was filed as Exhibit 4.01 to the Current Report
on Form 8-K dated April 23, 1996 and is incorporated by reference herein.
The Form of Indenture between the Company and SunTrust Bank, Atlanta, as
Trustee, relating to the Noes was filed as Exhibit 4.02 to
the Current Report on Form 8-K dated April 23, 1996 and is incorporated
by reference herein.
Material Contracts (10) N/A
Statements re: computation of per share
earnings (11) 19
Letters re: unaudited interim financial
information (15) 20
</TABLE>
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (Continued)
(a) Exhibit Index (Continued)
<TABLE>
<CAPTION>
Table Sequential
Exhibit Number Page Number
------- ------ -----------
<S> <C> <C>
Letter re: change in accounting
principles (18) N/A
Report furnished to security holders (19) N/A
Published report regarding matters
submitted to vote of security holders (22) N/A
Consent of experts and counsel (23) N/A
Power of attorney (24) N/A
Financial data schedule (27) 21
Additional exhibits (99) N/A
</TABLE>
________________________________________
(b) No reports on Form 8-K have been filed during the quarter ended March 31,
1996.
<PAGE> 18
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.
<TABLE>
<S> <C> <C>
DEPOSIT GUARANTY CORP.
--------------------------------
(Registrant)
DATE: May 15, 1996 /s/ Stephen E. Barker
----------------- ------------------------
Stephen E. Barker
Controller and Principal
Accounting Officer
</TABLE>
<PAGE> 19
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
(3.a) Amended articles of Incorporation
11 Statement re: computation of per share earnings
15 Letters re: unaudited interim financial information
27 Financial data schedule
<PAGE> 1
EXHIBIT (3.a)
ARTICLES OF INCORPORATION
DEPOSIT GUARANTY CORP.
(Amended April 16, 1996)
<PAGE> 2
ARTICLES OF INCORPORATION
DEPOSIT GUARANTY CORP.
FIRST: The name of the Corporation is DEPOSIT GUARANTY CORP.
SECOND: The period of its duration is ninety-nine (99) years.
THIRD: The specific purposes for which the Corporation is organized stated
in general terms are:
To acquire, receive, hold and own, to the extent not prohibited by law, the
stock and securities of commercial banks with or without trust powers, and the
stock and securities of other businesses which are incidental or related to the
business of banking or to the furnishing of financial services.
To acquire the whole or any part of the business, goodwill, rights or other
assets of any corporation, firm, organization, association or other entity, and
to undertake or assume in connection therewith the whole or any part of the
liabilities and obligation thereof, to effect any such acquisition in whole or
in part by delivery of cash or other property, including securities issued by
the Corporation, or by any other lawful means.
To cause to be organized one or more corporations, firms, organizations,
associations or other entities and to cause the same to be dissolved, wound up,
liquidated, merged or consolidated.
To make, establish and maintain investments in securities and to supervise
and manage such investments.
To furnish goods and to render service, assistance, and advice to, and act
as representative or agent in the management and operation of any corporation,
firm, organization, association or other entity.
To engage in any business activity not prohibited by law.
The Corporation shall possess and may exercise all powers necessary or
convenient to effect any or all of the foregoing purposes, and the enumeration
herein of any specific purposes or powers shall not be held to limit or
restrict in any manner the exercise by the Corporation of the general powers
now or hereafter conferred by the laws of the State of Mississippi upon
corporations formed under the Mississippi Business Corporation Act.
(Article FOURTH was amended by the shareholders of the Corporation on
April 16, 1996.)
FOURTH: The aggregate number of shares which the Corporation is authorized
to issue is 150,000,000 divided into three (3) classes. The designation of
each class, the number of shares of each class and the par value, if any, of
each class are as follows:
<TABLE>
<CAPTION>
Number of Shares Class Par Value, if any
---------------- ----- -----------------
<S> <C> <C>
100,000,000 Common Stock No par value
25,000,000 Class A Voting Preferred No par value
25,000,000 Class B Non-Voting Preferred No par value
</TABLE>
The preferences and relative rights in respect of the shares of each
class and the variations in the relative rights and preferences as between
series of any preferred class in series are as follows:
<PAGE> 3
Each share of Common Stock and of Class A Voting Preferred stock shall
entitle the holder thereof to full voting rights. A holder of Class B
Non-Voting Preferred stock shall have no voting rights as a holder of such
stock, except as specifically required by law.
The holders of Class A Voting Preferred stock and Class B Non-Voting
Preferred stock (together "preferred stock") shall be entitled to receive
dividends, subject to statutory restrictions, when and as declared by the Board
of Directors. Such dividends shall be payable at such periods as shall be
fixed by the Board of Directors at the rate specified in the resolution of the
Board of Directors authorizing the issuance of the particular series of
preferred stock, and no more, before any dividend shall be paid or set apart
for payment upon the Common Stock.
Dividends on the preferred stock shall be cumulative, so that if for
any period the same shall not be paid, the right thereto shall accumulate as
against the Common Stock, and all arrears so accumulated shall be paid before
any dividend shall be paid upon the Common Stock.
Whenever all accumulated dividends on the outstanding preferred stock
for all previous periods shall have been declared and shall have become
payable, and the Corporation shall have paid such accumulated dividends for
such previous periods, or shall have set aside from its legally available funds
a sum sufficient therefor, the Board of Directors may declare dividends on the
Common Stock, payable then or thereafter out of any remaining legally available
funds.
Each class of preferred stock shall be divided into and issued from
time to time by resolution of the Board of Directors in one or more series,
each series being so designated as to distinguish the shares thereof from the
shares of all other series and classes. All or any of the series of any such
class and the variations and the relative rights and preferences as between
different series may be fixed and determined by resolution of the Board of
Directors, but all shares of the same class shall be identical except as to the
following relative rights and preferences, as to which there may be variations
between different series:
(a) the rate of dividend;
(b) whether shares may be redeemed and, if so, the redemption
price and terms and conditions of redemption;
(c) the amount payable upon shares in the event of voluntary and
involuntary liquidation;
(d) sinking fund provisions, if any, for the redemption or
purchase of shares; and
(e) the terms and conditions, if any, on which shares may be
converted.
FIFTH: The shareholders of this Corporation shall have no preemptive
right to acquire unissued or treasury shares of the Corporation, or obligations
of the Corporation convertible into such shares.
Articles SIXTH through NINTH were adopted by the shareholders of the
Corporation on April 15, 1986:
SIXTH: The business and affairs of the Corporation shall be managed
by or under the direction of a Board of Directors consisting of not less than
nine nor more than twenty-five directors, the exact number of directors to be
determined from time to time by resolution adopted by affirmative vote of a
majority of the entire Board of Directors. The directors shall be divided into
three (3) classes, designated Class A, Class B
<PAGE> 4
and Class C. Each class shall consist, as nearly as may be possible, of
one-third of the total number of directors constituting the entire Board of
Directors. Directors shall be elected only at annual meetings of stockholders,
and any vacancy in the Board of Directors, however created, shall be filled at
the annual meeting succeeding the creation of such vacancy. At the 1986 annual
meeting of stockholders, Class A directors shall be elected for a one-year
term, Class B directors for a two-year term and Class C directors for a
three-year term. At each succeeding annual meeting of stockholders beginning
in 1987, successors to the class of directors whose term expires at that annual
meeting shall be elected for a three-year term. If the number of directors is
changed (other than as a result of prior death, retirement or resignation by
directors), any increase or decrease shall be apportioned among the classes so
as to maintain the number of directors in each class as nearly equal as
possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that
shall coincide with the remaining term of that class, but in no case will a
decrease in the number of director shorten the term of any incumbent director.
A director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office.
No member of the Board of Directors may be removed, with or without
cause, except at a meeting called in accordance with the Bylaws expressly for
that purpose and except upon a vote in favor of such removal of the holders of
80% of the shares then entitled to vote at an election of directors; and in the
event that less than the entire Board is to be removed, no one of the directors
may be removed if the votes case against his removal would be sufficient to
elect him if then cumulatively voted at an election of the class of directors
of which he is a part.
The vote of shareholders required to alter, amend or repeal this
Article Six, or to alter, amend or repeal any other Article of the Articles of
Incorporation in any respect which would or might have the effect, direct or
indirect, of modifying, permitting any action inconsistent with, or permitting
circumvention of this Article Six, shall be by the affirmative vote of at least
80% (excluding shares beneficially owned by an Interested Shareholder as
defined in Article Seven, except for purposes of determining whether a quorum
is present) of the total voting power of all classes of shares of stock of the
Corporation entitled to vote in the election of directors, considered for
purposes of this Article as one class.
Such affirmative vote required to alter, amend or repeal this Article
Six shall be in addition to the vote required by any particular class or series
of Preferred Stock.
SEVENTH: A. In addition to any affirmative vote required by law or
these Articles of Incorporation or by Bylaws of the Corporation, and except as
otherwise expressly provided in Section B of this Article Seven, a Business
Combination (as hereinafter defined) with, or proposed by or on behalf of, any
Interested Shareholder (as hereinafter defined) or any Affiliate or Associate
(as hereinafter defined) of any Interested Shareholder or any person who
thereafter would be an Affiliate or Associate of such Interested Shareholder
shall require the affirmative vote of not less than eighty percent (80%) of the
votes entitled to be cast by the holders of all the then outstanding shares of
Voting Stock (as hereinafter defined) voting together as a single class,
excluding Voting Stock beneficially owned by such Interested Shareholder. Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage or separate class vote may be specified,
by law or in any agreement with any national securities exchange or otherwise.
B. The provisions of Section A of this Article Seven shall not be
applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote, if any, as is required by
law or by any other provision of these Articles of Incorporation or the Bylaws
of the Corporation, or any agreement with any national securities exchange, if
all of the conditions specified in either of the following
<PAGE> 5
Paragraphs 1 and 2 are met or, in the case of a Business Combination not
involving the payment of consideration to the holders of the Corporation's
outstanding Capital Stock (as hereinafter defined), if the condition specified
in the following Paragraph 1 is met:
1. The Business Combination shall have been approved, either
specifically or as a transaction which is within an approved
category of transactions, by a majority (whether such approval
is made prior to or subsequent to the acquisition of, or
announcement or public disclosure of the intention to acquire,
beneficial ownership of the Voting Stocks that caused the
Interested Shareholder to become an Interested Shareholder) of
the Continuing Directors (as hereinafter defined).
2. All of the following conditions shall have been met:
a. The aggregate amount of cash and the Fair Market
Value (as hereinafter defined), as of the date of the
consummation of the Business Combination, of
consideration other than cash to be received per
share by holders of Common Stock as defined below in
such Business Combination shall be at least equal to
the highest amount determined under clauses (i), (ii)
and (iii) below:
(i) (if applicable) the highest per share
price (including any brokerage
commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the
Interested Shareholder for any share of
Common Stock in connection with the
acquisition by the Interested Shareholder
of beneficial ownership of shares of
Common Stock (x) within the two-year
period immediately prior to the first
public announcement of the proposed
Business Combination (the "Announcement
Date") or (y) in the transaction in which
it became an Interested Shareholder,
whichever is higher, in either case as
adjusted for any subsequent stock split,
stock dividend, subdivision or
reclassification with respect to Common
Stock;
(ii) the Fair Market Value per share of Common
Stock on the Announcement Date or on the
date on which the Interested Shareholder
became an Interested Shareholder (the
"Determination Date"), whichever is
higher, as adjusted for any subsequent
stock split, stock dividend, subdivision
or reclassification with respect to Common
Stock;
(iii) (if applicable) the price per share equal
to the Fair Market Value per share of
Common Stock determined pursuant to the
immediately preceding clause (ii)
multiplied by the ratio of (x) the highest
per share price (including any brokerage
commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the
Interested Shareholder for any share of
Common Stock in connection with the
acquisition by the Interested Shareholder
of beneficial ownership of shares of
Common Stock within the two-year period
immediately prior to the Announcement
Date, as adjusted for any subsequent stock
split, stock dividend, subdivision or
reclassification with respect to Common
Stock to (y) the Fair Market Value per
share of Common Stock on the first day in
such two-year period on which the
Interested Shareholder acquired beneficial
ownership of any share of Common Stock, as
adjusted for any subsequent stock split,
stock dividend, subdivision or
reclassification
<PAGE> 6
with respect to Common Stock.
b. The aggregate amount of cash and the Fair Market
Value, as of the date of the consummation of the
Business Combination, of consideration other than
cash to be received per share by holders of shares of
any class or series of outstanding Capital Stock,
other than Common Stock, shall be at least equal to
the highest amount determined under clauses (i),
(ii), (iii) and (iv) below:
(i) (if applicable) the highest per share
price (including any brokerage
commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the
Interested Shareholder for any share of
such class or series of Capital Stock in
connection with the acquisition by the
Interested Shareholder of beneficial
ownership of shares of such class or
series of Capital Stock (x) within the
two-year period immediately prior to the
Announcement Date or (y) in the
transaction in which it became an
Interested Shareholder, whichever is
higher, in either case as adjusted for any
subsequent stock split, stock dividend,
subdivision or reclassification with
respect to such class or series of Capital
Stock;
(ii) the Fair Market Value per share of such
class or series of Capital Stock on the
Announcement Date or on the Determination
Date, whichever is higher, as adjusted for
any subsequent stock split, stock
dividend, subdivision or reclassification
with respect to such class or series of
Capital Stock;
(iii) (if applicable) the price per share equal
to the Fair Market Value per share of such
class or series of Capital Stock
determined pursuant to the immediately
preceding clause (ii) multiplied by the
ratio of (x) the highest per share price
(including any brokerage commissions,
transfer taxes and soliciting dealers'
fees) paid by or on behalf of the
Interested Shareholder for any share of
such class or series of Capital Stock in
connection with the acquisition by the
Interested Shareholder of beneficial
ownership of shares of such class or
series of Capital Stock within the
two-year period immediately prior to the
Announcement Date, as adjusted for any
subsequent stock split, stock dividend,
subdivision or reclassification with
respect to such class or series of Capital
Stock to (y) the Fair Market Value per
share of such two-year period on which the
Interested Shareholder acquired beneficial
ownership of any share for any subsequent
stock split, stock dividend, subdivision
or reclassification with respect to such
class or series of Capital Stock;
(iv) (if applicable) the highest preferential
amount per share to which the holders of
shares of such class or series of Capital
Stock would be entitled in the event of
any voluntary or involuntary liquidation,
dissolution or winding up of the affairs
of the Corporation regardless of whether
the Business Combination to be consummated
constitutes such an event.
The provisions of this Paragraph 2 shall be required
to be met with respect to every class or series of
outstanding Capital Stock, whether or not the
Interested Shareholder has previously acquired
beneficial ownership of any shares of a particular
class or series of Capital Stock.
<PAGE> 7
c. The consideration to be received by holders of a
particular class or series of outstanding Capital
Stock shall be in cash or in the same form as
previously has been paid by or on behalf of the
Interested Shareholder in connection with its direct
or indirect acquisition of beneficial ownership of
shares of such class or series of Capital Stock. If
the consideration so paid for shares of any class or
series of Capital Stock varies as to form, the form
of consideration for such class or series of capital
stock shall be either cash or the form used to
acquire beneficial ownership of the largest number of
shares of such class or series of Capital Stock
previously acquired by the Interested Stockholder.
d. After the Determination Date and prior to the
consummation of such Business Combination: (i)
except as approved by a majority of the Continuing
Directors, there shall have been no failure to
declare and pay at the regular date therefor any full
quarterly dividends (whether or not cumulative)
payable in accordance with the terms of any
outstanding Capital Stock; (ii) there shall have been
no reduction in the annual rate of dividends paid on
the Common Stock (except as necessary to reflect any
stock split, stock dividend or subdivision of the
Common Stock), except as approved by a majority of
the Continuing Directors, (iii) there shall have been
an increase in the annual rate of dividends paid on
the Common Stock as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar
transaction that has the effect of reducing the
number of outstanding shares of Common Stock, unless
the failure so to increase such annual rate is
approved by a majority of the Continuing Directors;
and (iv) such Interested Shareholder shall not have
become the beneficial owner of any additional shares
of Capital Stock except as part of the transaction
that results in such Interested Shareholder becoming
an Interested Shareholder and except in a transaction
that, after giving effect thereto, would not result
in any increase in the Interested Shareholder's
percentage beneficial ownership of any class or
series of Capital Stock.
e. Such Interested Shareholder shall not have made any
major change in the Corporation's business or equity
capital structure without the approval of a majority
of the Continuing Directors.
C. The following definitions shall apply with respect to this
Article Seven:
1. The term "Business Combination" shall mean:
a. any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (i) any
Interested Shareholder or (ii) any other company
(whether or not itself an Interested Shareholder)
which is or after such merger or consolidation would
be an Affiliate or Associate of an Interested
Shareholder; or
b. any sale, lease, exchange, mortgage, pledge, transfer
or other disposition or security agreement,
investment, loan, advance, guarantee to purchase,
agreement to pay, extension of credit, joint venture,
participation or other arrangement (in one
transaction or a series of transactions) with or for
the benefit of any Interested Shareholder or any
Affiliate or Associate of any Interested Shareholder
involving any assets, securities or commitments of
the Corporation, any Subsidiary or any Interested
Shareholder or any Affiliate or Association of any
Interested Shareholder which (except for any
<PAGE> 8
arrangement, whether as employee, consultant or
otherwise, other than as a director, pursuant to
which any Interested Shareholder or any Affiliate or
Associate thereof shall, directly or indirectly, have
any control over or responsibility for the management
of any aspect of the business or affairs of the
Corporation, with respect to which arrangements the
value tests set forth below shall not apply),
together with all other such arrangements (including
all contemplated future events), has an aggregate
Fair Market Value and/or involves aggregate
commitments of $10,000,000 or more or constitutes
more than five percent (5%) of the shareholders'
equity (in the case of transactions in capital stock)
of the entity in question (the "Substantial Part"),
as reflected in the most recent fiscal year-end
consolidated balance sheet of such entity existing at
the time the shareholders of the Corporation would be
required to approve or authorize the Business
Combination involving the assets, securities and/or
commitments constituting any Substantial Part; or
c. the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation or for
any amendment to the Corporation's Bylaws; or
d. any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other
transaction (whether or not with or otherwise
involving an Interested Shareholder) that has the
effect, directly or indirectly, of increasing the
proportionate share of any class or series of Capital
Stock, or any securities convertible into Capital
Stock, or into equity securities of any Subsidiary,
that is beneficially owned by any Interested
Shareholder or any Affiliate or Associate of any
Interested Shareholder; or
e. any agreement, contract or other arrangement
providing for any one or more of the actions
specified in the foregoing clauses (a) to (d).
2. The term "Capital Stock" shall mean all capital stock of the
Corporation authorized to be issued from time to time under
Article Fourth of these Articles of Incorporation, and the
term "Voting Stock" shall mean all Capital Stock which by its
terms may be voted on all matters submitted to shareholders of
the Corporation generally.
3. The term "Common Stock" shall refer to the Corporation's
common stock, no par value per share.
4. The term "Person" shall mean any individual, firm, company or
other entity and shall include any group comprised of any
person and any other person with whom such person or any
Affiliate or Associate of such person has any agreement,
arrangement or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting or disposing of Capital
Stock.
5. The term "Interested Shareholder" shall mean any person (other
than the Corporation or any Subsidiary and other than any
profit-sharing employee stock ownership or other employee
benefit plan of the Corporation or any Subsidiary or other
trustee of or fiduciary with respect to any such plan when
acting in such capacity) who (a) is or has announced or
publicly disclosed a plan or intention to become the
beneficial owner of Voting Stock representing ten percent
(10%) or more of the votes entitled to be cast by the holders
of all then outstanding shares of Voting Stock; or (b) is an
Affiliate or Associate of the Corporation and at any time
within the
<PAGE> 9
two-year period immediately prior to the date in question was
the beneficial owner of Voting Stock representing ten percent
(10%) or more of the votes entitled to be cast by the holders
of all then outstanding shares of Voting Stock.
6. A person shall be a "beneficial owner" of any Capital Stock
(a) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; (b) which such
person or any of its Affiliates or Associates has, directly or
indirectly, (i) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding
or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding; or
(c) which is beneficially owned, directly or indirectly, by
any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding voting or
disposing of any shares of Capitol Stock. For the purposes of
determining whether a person is an Acquiring Person pursuant
to Paragraph 1 of this Section 1, the number of shares of
Capital Stock deemed to be outstanding shall include shares
deemed beneficially owned by such person through application
of this Paragraph C of Section 1, but pursuant to any
agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
7. The terms "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 under
the Act as in effect on January 21, 1986, (the term
"Registrant" in said Rule 12b-2 meaning in this case the
Corporation).
8. The term "Subsidiary" means any company of which a majority of
any class of equity security is beneficially owned by the
Corporation; provided, however, that for the purposes of the
definition of Interested Shareholder set forth in Paragraph 4
of this Section C. the term "Subsidiary" shall mean only a
company of which a majority of each class of equity security
is beneficially owned by the Corporation.
9. The term "Continuing Director" means any member of the Board
of Directors of the Corporation (the "Board of Directors"),
while such person is a member of the Board of Directors, who
is not an Affiliate or Associate or representative of the
Interested Shareholder and (i) was a member of the Board of
Directors prior to the time that the Interested Shareholder
became an Interested Shareholder or (ii) was and has
continuously been a director since the effective date of this
Article, and any successor of a Continuing Director while such
successor is a member of the Board of Directors, who is not an
Affiliate or Associate or representative of the Interested
Shareholder and is recommended or elected to succeed the
Continuing Director by a majority of Continuing Directors.
10. "Fair Market Value" means (a) in the case of cash, the amount
of such cash; (b) in the case of stock, the highest closing
sale price during the 30-day period immediately preceding the
date in question of a share of such stock on the Composite
Tape for New York Stock Exchange-Listed Stocks, or, if such
stock is not quoted on the Composite Tape, on the New York
Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act on which such
stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a
share of such stock during the 30-day period preceding the
date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any similar
system then in use, or if no such quotations are available,
the fair market value on the date in
<PAGE> 10
question of a share of such stock as determined by a majority
of the Continuing Directors in good faith; and (c) in the case
of property other than cash or stock, the fair market value of
such property on the date in question as determined in good
faith by a majority of the continuing Directors.
11. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than
cash to be received" as used in Paragraphs 2.a and 2.b of
Section B of this Article Seven shall include the shares of
Common Stock and/or the shares of any other class or series of
Capital Stock retained by the holders of such shares.
D. A majority of the Continuing Directors shall have the power and
duty to determine for the purposes of this Article Seven, on the basis of
information known to them after reasonable inquiry, all questions arising under
this Article Seven, including without limitation, (a) whether a person is an
Interested Shareholder, (b) the number of shares of Capital Stock or other
securities beneficially owned by any person, (c) whether a person is an
Affiliate or Associate of another, (d) whether a Proposed Action is with, or
proposed by, or on behalf of an Interested Shareholder, (e) whether the assets
that are the subject of any Business Combination have, or the consideration to
be received for the issuance or transfer of securities by the Corporation or
any Subsidiary in any Business Combination has, an aggregate Fair Market Value
of $10,000,000 or more, and (f) whether the assets or securities that are the
subject of any Business Combination constitutes a Substantial Part. Any such
determination made in good faith shall be binding and conclusive on all
parties.
E. Nothing contained in this Article Seven shall be construed to
relieve any Interested Shareholder from any fiduciary obligation imposed by
law.
F. The fact that any Business Combination complies with the
provisions of Section B of this Article Seven shall not be construed to impose
any fiduciary duty, obligation or responsibility on the Board of Directors, or
any member thereof, to approve such Business Combination or recommend its
adoption or approval to the shareholders of the Corporation, nor shall such
compliance limit, prohibit or otherwise restrict in any manner the Board of
Directors, or any member thereof, with respect to evaluations of or actions and
responses taken with respect to such Business Combination.
G. For the purposes of this Article Seven, a Business Combination is
presumed to have been proposed by, or on behalf of, an Interested Shareholder
or a person who thereafter would become such if (1) after the Interested
Shareholder became such, the Business Combination is proposed following the
election of any director of the Corporation who, with respect to such
Interested Shareholder, would not qualify to serve as a Continuing Director, or
(2) such Interested Shareholder, Affiliate, Associate or person votes for or
consents to the adoption of any such Business Combination, unless as to such
Interested Shareholder, Affiliate, Associate or person a majority of the
Continuing Directors makes a good faith determination that such Business
Combination is not proposed by by or on behalf of such Interested Shareholder,
Affiliate, Associate or person, based on information known to them after
reasonable inquiry.
H. The vote of shareholders required to alter, amend or repeal this
Article Seven, or to alter, amend or repeal any other Article of the Articles
of Incorporation in any respect which would or might have the effect, direct or
indirect, of modifying, permitting any action inconsistent with, or permitting
circumvention of this Article Seven, shall be by the affirmative vote of at
least eighty percent (80%) (excluding shares beneficially owned by an
Interested Shareholder, except for purposes of determining whether a quorum is
present) of the total voting power of all classes of shares of stock of the
Corporation entitled to vote in the election of directors, considered for
purposes of this Article as one class. Such affirmative vote required to
alter, amend or repeal this Article Seven shall be in addition to the vote
required by any particular class or series of
<PAGE> 11
Preferred Stock.
EIGHTH: The Board of Directors of the Corporation shall, in
connection with the exercise of its judgment in determining what is in the best
interest of the Corporation and its shareholders when evaluating any proposed
Major Business Transaction (as defined below), in addition to considering the
adequacy of the amount to be paid in connection with such transaction, consider
all of the following factors and any other factors which it deems relevant:
(a) the social and economic effects of the transaction on the
Corporation, any Subsidiary (as defined in Article Seven),
depositors, loan and other customers, creditors and employees
of the Corporation and its Subsidiaries, and other elements of
the community in which the Corporation and its Subsidiaries
operate or are located;
(b) the business, financial condition and earnings prospects of
the acquiring person, including, but not limited to, debt
service and other existing or likely financial obligations of
the acquiring person, and the possible effect of such
conditions upon the Corporation, its Subsidiaries and the
other elements of the community in which the Corporation and
its Subsidiaries operate or are located; and
(c) the competence, experience and integrity of the acquiring
person and its management.
For purposes of this Article, the term "Major Business Transaction"
shall mean (i) any merger or consolidation of the Corporation or any
Subsidiary, (ii) any sale, exchange, transfer or other disposition of all or
substantially all of the Corporation's or any Subsidiary's assets, (iii) any
offer to purchase any or all of the Corporation's securities, (iv) any
solicitation of proxies for election of directors of the Corporation, or (v)
any similar transaction or event.
NINTH. A. Subject to Section C of this Article Ninth, the
Corporation shall indemnify any person who was or is a party or is threatened
to be made party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Corporation) by reason of the fact
that he is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interest
of the Corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create
a presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. This
indemnification provision shall not extend to those suits instituted by any
such director, officer, employee or agent unless and to the extent such
indemnification is authorized by the Board of Directors.
B. Subject to Section C of this Article Ninth, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
the Corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise
<PAGE> 12
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
C. Any indemnification under this Article Ninth (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Section A or Section B of this Article Ninth, as the
case may be. Such determination shall be made (i) by the Board of Directors by
a majority vote of a quorum of the entire Board of Directors, which majority
and quorum must consist of directors who were not parties to or otherwise
interested in such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, by independent legal counsel in a written opinion, or (iii) by the
stockholder. Directors "parties to or otherwise interested in" an action, suit
or proceeding shall include, for purposes of the preceding sentence, (i) any
director instituting such action, suit or proceeding, whether in his capacity
as director or stockholder (an "Instituting Director") and (ii) any other
director nominated (x) by an Instituting Director (and not by the Board of
Directors), (y) as part of the same slate of nominees as an Instituting
Director (if not nominated by the Board of Directors), or (z) by the same
stockholder or any of the same stockholders who nominated an Instituting
Director. To the extent, however, that a director, officer, employee or agent
of the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding described above, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith, without the necessity of authorization in the specific case.
Notwithstanding any of the provisions of this Article Ninth, in no event shall
any person be indemnified against expenses (including attorneys' fees),
judgments, fines and amounts due or paid in connection with any action, suit or
proceeding instituted by any such director, officer, employee or agent unless
and to the extent such indemnification is authorized by the Board of Directors,
or against expenses, penalties, or other payments incurred in an administrative
proceeding or action instituted by an appropriate bank regulatory agency which
proceeding or action results in a final order assessing civil money penalties
or requiring affirmative action by an individual or individuals in the form of
payments to the Corporation.
D. For purposes of a determination under Section C of this Article
Ninth, a person shall be deemed to have acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, or with respect to any criminal action or proceeding, to have had
no reasonable cause to believe his conduct was unlawful, if his action is based
on the records or books of account of the Corporation or another enterprise, or
on information supplied to him by the officers of the Corporation or another
enterprise in the course of their duties, or on the advice of legal counsel for
the Corporation or another enterprise or on information or records given or
reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section D shall mean any other corporation or any
partnership, joint venture, trust or other enterprise of which such person is
or was serving at the request of the Corporation as a director, officer,
employee or agent. The provisions of this Section D shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth in Sections A
or B of this Article Ninth, as the case may be.
<PAGE> 13
E. Notwithstanding any contrary determination in the specific case
under Section C of this Article Ninth, and notwithstanding the absence of any
determination thereunder, any director, office, employee or agent may apply to
any court of competent jurisdiction in the State of Mississippi for
indemnification to the extent otherwise permissible under Sections A and B of
this Article Ninth. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standards of conduct set forth in Sections A and B of this Article
Ninth, as the case may be. Notice of any application for indemnification
pursuant to this Section E shall be given to the Corporation promptly upon the
filing of such application.
F. Expenses incurred in defending or investigating a threatened or
pending action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding as authorized by the
Board of Directors in the specific case upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount unless
it shall ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Article Ninth.
G. The indemnification provided by this Article Ninth shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under any Bylaw, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of
any court of competent jurisdiction or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, it being the policy of the Corporation that indemnification of the
persons specified in Sections A and B of this Article Ninth shall be made to
the fullest extent permitted by law. The provisions of this Article Ninth
shall not be deemed to preclude the indemnification of any person who is not
specified in Sections A or B of this Article Ninth, but whom the Corporation
has the power or obligation to indemnify under the provisions of applicable
federal or state law, or otherwise. The indemnification provided by this
Article Ninth shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of heirs, executors
and administrators of such person.
H. The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him,
and incurred by him, in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article
Ninth, provided that the Corporation shall not purchase or maintain insurance
coverage for a formal order by a bank regulatory agency assessing civil money
penalties against a director or employee of the Corporation.
I. For purposes of this Article Ninth, references to "the
Corporation" shall include, in addition to the resulting company, any
constituent company (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article Ninth
with respect to the resulting or surviving company as he would have with
respect to such constituent company if its separate existence had continued.
<PAGE> 1
Deposit Guaranty Corp.
Computation of Net Income Per Share
March 31, 1996
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------------
Primary Fully Diluted
------------------ -----------------
<S> <C> <C>
Computation of weighted average
shared outstanding:
Common stock outstanding,
beginning balance 19,379,643 19,379,643
Common stock issued due to
exercise of options 20,724 20,724
Shares purchased by
the Company ( 74,154) ( 74,154)
----------- ----------
Weighted average shares
outstanding 19,326,213 19,326,213
=========== ===========
Computation of net income:
Net income $21,489,000 $21,489,000
=========== ===========
Computation of net income per
share:
Net income divided by weighted
average shares outstanding $ 1.11 $ 1.11
============ ============
</TABLE>
Note: For the three-months ended March 31, 1996, additional weighted average
shares outstanding for options under the Company's incentive stock plan were
181,953 and 190,538 for calculating primary and fully diluted net income per
share, respectively. The dilutive effect of such options was, therefore, not
material.
<PAGE> 1
EXHIBIT 15
Deposit Guaranty Corp.
Jackson, Mississippi
Gentlemen:
RE: March 31, 1996 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 16, 1996 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 LLP
----------------------------
KPMG PEAT MARWICK LLP
Jackson, Mississippi
May 15, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 361,501
<INT-BEARING-DEPOSITS> 25,903
<FED-FUNDS-SOLD> 343,416
<TRADING-ASSETS> 3,084
<INVESTMENTS-HELD-FOR-SALE> 1,176,851
<INVESTMENTS-CARRYING> 130,137
<INVESTMENTS-MARKET> 137,932
<LOANS> 3,661,516
<ALLOWANCE> (58,914)
<TOTAL-ASSETS> 6,013,738
<DEPOSITS> 4,735,831
<SHORT-TERM> 636,853
<LIABILITIES-OTHER> 120,629
<LONG-TERM> 0
<COMMON> 0
0
20,948
<OTHER-SE> 499,477
<TOTAL-LIABILITIES-AND-EQUITY> 6,013,738
<INTEREST-LOAN> 77,264
<INTEREST-INVEST> 25,645
<INTEREST-OTHER> 2,091
<INTEREST-TOTAL> 105,000
<INTEREST-DEPOSIT> 37,376
<INTEREST-EXPENSE> 45,708
<INTEREST-INCOME-NET> 59,292
<LOAN-LOSSES> 1,335
<SECURITIES-GAINS> (414)
<EXPENSE-OTHER> 29,537
<INCOME-PRETAX> 31,090
<INCOME-PRE-EXTRAORDINARY> 31,090
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,489
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.11
<YIELD-ACTUAL> 4.62
<LOANS-NON> 22,178
<LOANS-PAST> 7,508
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 491
<ALLOWANCE-OPEN> 58,719
<CHARGE-OFFS> 2,921
<RECOVERIES> 1,782
<ALLOWANCE-CLOSE> 58,914
<ALLOWANCE-DOMESTIC> 58,914
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 13,542
</TABLE>
