<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, 1997
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
-------------------------------------------
(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, 1997: 40,743,822
<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,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 359,625 $ 385,009
Interest-bearing bank balances 1,623 1,732
Federal funds sold and securities
purchased under agreements to resell 61,280 47,640
Trading account securities 656 2,505
Securities available for sale 1,538,814 1,462,038
Investment securities (market value:
1997 - $150,611 ; 1996 - $152,412 ) 142,081 145,087
Loans, net of unearned income 4,255,996 3,979,877
Allowance for possible loan losses (69,416) (62,205)
----------- -----------
Net loans 4,186,580 3,917,672
Bank premises and equipment 164,761 148,327
Other assets 319,045 272,887
----------- -----------
TOTAL ASSETS $ 6,774,465 $ 6,382,897
=========== ===========
LIABILITIES
Deposits:
Noninterest-bearing $ 1,223,231 $ 1,160,914
Interest-bearing 4,209,201 3,864,835
----------- -----------
Total deposits 5,432,432 5,025,749
Federal funds purchased, securities
sold under agreements to repurchase
and other short-term borrowings 546,501 543,029
Long-term liabilities 99,414 99,405
Other liabilities 119,092 133,448
----------- -----------
TOTAL LIABILITIES 6,197,439 5,801,631
----------- -----------
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:
1997 - 40,743,822 shares; 1996 - 39,185,394
shares 22,194 21,491
Surplus 160,035 174,995
Retained earnings 406,245 383,211
Market valuation for securities available for
sale, net of income taxes (11,448) 1,569
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 577,026 581,266
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,774,465 $ 6,382,897
=========== ===========
</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,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 90,639 $ 77,138
Interest on investment securities:
Taxable 3,128 2,798
Exempt from Federal income tax 1 --
Interest on securities available for sale:
Taxable 23,459 19,970
Exempt from Federal income tax 2,652 2,758
Interest on trading account securities 22 119
Interest on Federal funds sold and securities
purchased under agreements to resell 1,065 1,977
Interest on bank balances 7 111
------------ ------------
TOTAL INTEREST INCOME 120,973 104,871
------------ ------------
INTEREST EXPENSE
Interest on deposits 41,140 37,376
Interest on Federal funds purchased, securities
sold under agreements to repurchase and
other short-term borrowings 6,910 8,331
Interest on long-term debt 1,477 --
------------ ------------
Total interest expense 49,527 45,707
------------ ------------
NET INTEREST INCOME 71,446 59,164
Provision for possible loan losses 1,875 1,335
------------ ------------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 69,571 57,829
------------ ------------
OTHER OPERATING INCOME
Service charges on deposit accounts 9,959 8,216
Fees for trust services 4,663 3,825
Gains (losses) on securities available for sale 86 (414)
Other service charges, commissions
and fees 14,802 14,036
Other 1,141 4,002
------------ ------------
TOTAL OTHER OPERATING INCOME 30,651 29,665
------------ ------------
OTHER OPERATING EXPENSE
Salaries and employee benefits 35,127 31,217
Net occupancy expense 4,702 3,665
Equipment expense 5,070 4,150
Service fees 3,269 3,009
Communication 3,039 2,453
FDIC assessment 164 2
Advertising and public relations 2,486 2,445
Other 12,459 9,463
------------ ------------
TOTAL OTHER OPERATING EXPENSE 66,316 56,404
------------ ------------
INCOME BEFORE INCOME TAXES 33,906 31,090
Income tax expense 11,293 9,601
------------ ------------
NET INCOME $ 22,613 $ 21,489
============ ============
NET INCOME PER SHARE $ 0.54 $ 0.56
WEIGHTED AVERAGE SHARES OUTSTANDING 42,200,610 38,652,426
</TABLE>
3
<PAGE> 4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 22,613 $ 21,489
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Provision for possible loan losses 1,875 1,335
Provision for possible losses on other real estate 157 7
Provision for depreciation and amortization 9,347 7,675
Provision for deferred income tax expense 596 406
Amortization (accretion) of premium (discount) on
investment securities, net (54) 67
Accretion of discount on securities available for sale, net (876) (1,308)
Accretion of discount on long-term debt 9 --
Deferred loan fees and costs (739) (482)
Increase in other liabilities 3,136 10,694
(Increase) decrease in other assets (7,229) 4,057
Net cash received from (paid for) loans held for resale 14,611 (56,193)
(Gains) losses on securities available for sale (86) 414
Other, net (6,759) 4,390
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 36,601 (7,449)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest-bearing bank balances 109 (25,903)
Proceeds from sales of securities available for sale 286,945 591,106
Proceeds from maturities and principal repayments of investment securities 5,379 13,492
Proceeds from maturities and principal repayments of securities available
for sale 37,794 216,670
Purchases of investment securities (1,490) (4,738)
Purchases of securities available for sale (337,626) (805,435)
Net decrease in Federal funds sold and securities
purchased under agreements to resell 45,905 97,599
Net increase in loans (10,177) (26,951)
Proceeds from sales of other real estate 721 1,113
Purchases of bank premises and equipment (7,378) (4,687)
Proceeds from sales of bank premises and equipment 66 20
Payment for purchase of common stock of acquired company
and other acquisition costs (10,017) --
Cash and due from banks of acquired company 32,851 --
----------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 43,082 52,286
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits (36,477) (44,828)
Net increase (decrease) in Federal funds purchased,
securities sold under agreements to repurchase,
and other short-term borrowings (4,330) 37,371
Proceeds from the exercise of common stock options 947 814
Purchases of common stock (57,357) (15,447)
Cash dividends paid (7,850) (4,952)
----------- -----------
NET CASH USED BY FINANCING ACTIVITIES (105,067) (27,042)
----------- -----------
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS (25,384) 17,795
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 385,009 343,706
----------- -----------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 359,625 $ 361,501
=========== ===========
</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 $66 thousand during the three month
period ended March 31, 1997. The Company received a net income tax refund of
$186 thousand during the three month period ended March 31, 1996.
INTEREST:
The Company paid $47.2 million and $46.5 million in interest on deposits and
other borrowings during the three month periods ended March 31, 1997 and 1996,
respectively.
ACQUISITIONS:
During the first quarter of 1997, the Company exchanged 1.760 million shares of
common stock, in a purchase business combination, for all the outstanding
common shares of Jefferson Guaranty Bancorp. The following reflects the assets
acquired and liabilities assumed (in thousands):
<TABLE>
<S> <C>
Fair value of assets acquired $ 336,188
Fair value of common stock issued and/or cash paid
for common stock and other acquisition costs (50,165)
-----------
Liabilities assumed ($ 286,023)
===========
</TABLE>
Also during the first quarter of 1997, the Company exchanged 1.568 million
shares of common stock, in a pooling of interests business combination, for all
the common shares of First Capital Bancorp, Inc. which had assets of
approximately $186 million at December 31, 1996.
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, Deposit Guaranty Arkansas Corp., G & W Life Insurance Co., and
Deposit Guaranty Louisiana Corp., 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 for
which DGNB is the trustee. 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. While the ultimate outcome of the
lawsuit cannot be predicted with certainty, 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.
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, 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 125
establishes accounting and reporting standards for transfers and servicing of
financial assets and extinguishment of liabilities. It further requires that an
entity recognize the financial and servicing assets it controls and the
liabilities it has incurred, derecognize financial assets when control has been
surrendered, and derecognize liabilities when extinguished. Consistent
standards are provided by this statement for
6
<PAGE> 7
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings. This statement, as amended by SFAS No. 127, "Deferral
of the Effective Date of Certain Provisions of FASB Statement No. 125," is
effective for transfers and servicing of financial assets and extinguishments
of liabilities occurring after December 31, 1996, and is effective after
December 31, 1997, for repurchase agreements, dollar-roll agreements,
securities lending, and similar transactions. The effect of this statement on
the March 31, 1997 financial statements, was not material.
NOTE D - ACQUISITIONS
On January 3, 1997, the Company exchanged a combination of 1,759,688 shares
of its common stock and $10 million in cash for all of the outstanding shares of
Jefferson Guaranty Bancorp, a $300 million asset bank holding company
headquartered in Metairie, Louisiana, in a transaction accounted for as a
purchase business combination. The results of operations of this acquired
company, which are not material, are included in the 1997 financial statements
from the date of purchase.
On March 31, 1997, the Company exchanged 1,568,466 shares of its common stock
for all of the outstanding shares of First Capital Bancorp, Inc., a $186
million asset bank holding company headquartered in Monroe Louisiana, in a
transaction accounted for as a pooling of interests. The results of operations
of this acquired company, which are not material, are included in the 1997
financial statements from January 1, 1997. Prior years' financial statements
were not restated as the changes would have been immaterial.
On February 20, 1997, a definitive agreement was reached to acquire NBC
Financial Corporation, a bank holding company located in Baton Rouge,
Louisiana, with approximately $70 million in total assets. The transaction,
which will be accounted for as a purchase business combination, is subject to
the approval of the stockholders of NBC Financial Corporation and regulatory
authorities and is expected to be consummated during the second quarter of
1997.
On March 31, 1997, a definitive agreement was reached to acquire CitiSave
Financial Corporation of Baton Rouge, La. CitiSave Financial Corporation is the
parent company of Citizens Savings Association, F.A., which has six offices in
Baton Rouge and $75 million in total assets. Under the terms of the agreement,
the Company will pay $20.50 cash for each outstanding share of CitiSave
Financial Corporation. The transaction, which will be accounted for as a
purchase business combination, is subject to the approval of the stockholders
of CitiSave Financial Corporation and regulatory authorities and is expected to
be consummated during the third quarter of 1997.
7
<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, 1997, and the related
condensed consolidated statements of earnings and cash flows for the three-month
periods ended March 31, 1997 and 1996.
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, 1996, 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 5,
1997 (February 20, 1997 as to Note 3), 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, 1996, 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 15, 1997
8
<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
ended March 31, 1997 and 1996. This discussion should be read in conjunction
with the condensed consolidated financial statements included in Part I, Item
I.
Subsequent to the first quarter of 1996, the Company acquired Bank of Gonzales
Holding Company with $126 million in total assets, McAfee Mortgage and
Investment Company with approximately $240 million in annual mortgage loan
originations, and Tuscaloosa Bancshares, Inc. with total assets of $41 million.
During the first quarter of 1997, the Company acquired Jefferson Guaranty
Bancorp with total assets of approximately $300 million. These transactions
were accounted for as purchases and the results of operations of
these entities are included in the financial statements from the acquisition
dates. On March 31, 1997, the Company acquired First Capital Bancorp, Inc., a
bank holding company with $186 million in total assets. This transaction was
accounted for as a pooling of interests transaction and is included in the
financial statements as of January 1, 1997. The aforementioned acquisitions
affect the comparability of the financial statements.
BALANCE SHEET
Total assets increased $391 million to $6.774 billion at March 31, 1997,
compared to $6.383 billion at December 31, 1996. The increase in total assets
for March 31, 1997 as compared to December 31, 1996 is primarily related to
acquisitions. Securities increased $74 million, or 5%, to $1.681 billion at
March 31, 1996 primarily as a result of acquisitions. Total loans increased $276
million, or 7%, to $4.256 billion at March 31, 1997. Excluding the effect of the
acquisitions, total loans would have been flat, reflecting a slowdown in the
steady growth pace of loans in prior periods. Federal funds sold and securities
purchased under agreements to resell increased 29% to $61.3 million at March 31,
1997. Total deposits increased $407 million, or 8%, to $5.432 billion at March
31, 1997. Excluding the effect of the acquisitions, total deposits exhibited a
slight decrease from December 31, 1996 to March 31, 1997. Other liabilities
decreased $14 million, or 11%, to $119 million at March 31, 1997 compared to
December 31, 1996.
Total stockholders' equity decreased $4 million to $577 million at March 31,
1997. Stockholders' equity decreased $57 million due to the repurchase of
shares offsetting the shares issued for the acquisitions. Additionally, the
market valuation of securities available for sale, net of income taxes,
decreased $13 million. These decreases were offset by increases of $15 million
as a result of earnings retained and $51 million due to purchase accounting
acquisitions.
9
<PAGE> 10
As of March 31, 1997, the Company had interest rate swap contracts with a total
notional value of $122 million compared to $123 million at December 31, 1996
and $104 million at March 31, 1996. During the first three months of 1997, the
Company was a counterparty to several short-term option contracts and
recognized $236 thousand in noninterest income, compared to $835 thousand for
the first quarter of 1996, resulting from the premiums received on written
covered call options.
NET INCOME
Net income for the first quarter of 1997 increased $1.1 million to $22.6
million due to an increase in net interest income caused by a 13% increase in
earning assets and a 29 basis point improvement in interest spreads. On a per
share basis, earnings decreased by $.02 as average shares outstanding increased
as a result of acquisitions. Earnings for the first quarter of 1996 included an
after-tax gain of approximately $1.75 million, or $.05 per share, relating to
the disposition of assets under expired lease financing transactions. Excluding
this gain, noninterest income increased $2.1 million, or 10%, to $30.7 million
in the first quarter of 1997 compared to the same period in 1996, while
noninterest expense increased $9.9 million, or 18%.
The return on average assets for the first three months of 1997 was 1.36%
compared to 1.44% for the same period in 1996. The return on average equity for
the first three months of 1997 was 14.55% compared to 15.97% for 1996.
NET INTEREST INCOME
Net interest income for the first quarter of 1997 was $71.4 million, an
increase of $12.3 million from the first quarter of 1996 primarily resulting
from a 13% growth in average interest-earning assets primarily in loans. Average
loan volume during the first quarter of 1997 increased $620 million, or 17%,
compared to the first quarter of 1996. Loan growth from acquisitions represented
approximately 60% of the increase in average loan volumes. Average total loans,
the most profitable interest-earning asset, as a percentage of total
interest-earning assets increased from 68% during the first quarter of 1996 to
70% during the same period in 1997. The net interest margin for the first
quarter of 1997 was 4.91%, increasing from 4.62% for the first quarter of 1996.
This increase is primarily due to a 29 basis point increase in the interest
spread, the difference between the yield on interest-earning assets and the rate
paid on interest-bearing liabilities, as the yields on loans and securities
increased while rates paid on deposits and other funding sources declined.
OTHER OPERATING INCOME
Other operating income for the first quarter of 1997 increased slightly to
$30.7 million compared to $29.7 million for the first quarter of 1996.
Comparability between the first quarters of 1996 and 1997 is impacted by a $2.7
million gain from the disposition of assets from expired lease financing
transactions in 1996.
10
<PAGE> 11
The increase in other operating income, excluding the $2.7 million gain in
1996, is primarily the result of acquisitions and some growth in core
business lines. Approximately $2.5 million of the first quarter 1997 other
operating income represents an increase due to acquisitions occurring after the
first quarter of 1996.
OTHER OPERATING EXPENSE
Other operating expense for the first quarter of 1997 was $66.3 million, an
increase of $9.9 million, or 18%, over the first quarter of 1996 primarily as a
result of acquisitions. Excluding the $6.6 million increase due to
acquisitions, other operating expense increased approximately $3.3 million, or
6% in 1997 compared to 1996. This increase was primarily as a result of
underlying increases in salaries and other expense. Salaries expense, excluding
acquisitions, for the first quarter of 1997 increased $642 thousand compared to
the first quarter of 1996, primarily as a result of annual merit increases. The
increase in salaries expense was partially offset by decreases of $228 thousand
in employee benefits for the first quarter of 1997. Included in merger costs
was the amortization of goodwill and core deposit intangibles for the first
quarter of 1997 which was $1.6 million and $1.1 million, respectively.
CREDIT QUALITY
The provision for possible loan losses was $1.9 million for the first quarter
of 1997 compared to a $1.3 million provision for the first quarter of 1996. The
allowance for possible loan losses at March 31, 1997, was $69.4 million or
1.63% of total loans and 330% of nonperforming loans outstanding compared to
$62.2 million or 1.56% of total loans and 364% of nonperforming loans at
December 31, 1996. Net charge-offs for the first quarter of 1997 were $1.5
million, or .14% of average loans, compared to first quarter 1996 net
charge-offs of $1.1 million, or .13% of average loans. Nonperforming loans
increased $4 million to $21.1 million at March 31, 1997, compared to $17.1
million at December 31, 1996.
CAPITAL
Total stockholders' equity decreased $4.2 million to $577.0 million at March
31, 1997 compared to $581.3 million at December 31, 1996. This decrease in
stockholders' equity was primarily due to a decrease of $13.0 million in the
market valuation of available for sale securities, net of income taxes, and the
Company's repurchase of 1,818,330 shares of its common stock for $57.4 million.
The Company's common stock repurchase program is for the purpose of offsetting
the shares issued in specific purchase accounting acquisitions. The decrease in
stockholders' equity was somewhat offset by an increase of $50.9 million due to
acquisitions and by the Company's earnings retained of $14.7 million for the
first quarter of 1997.
11
<PAGE> 12
The Company maintains risk-based capital levels well in excess of the minimum
guidelines 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, 1997
were 10.21% and 11.46%, respectively. This compares to a tier 1 capital ratio of
11.42% and total risk-based capital ratio of 12.67% at December 31, 1996. The
Company's leverage ratio was 7.17% at March 31, 1997 compared to 7.76% at
December 31, 1996.
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. Deposit Guaranty National Bank's leverage,
tier 1 and total risk-based capital ratios were 8.71%, 12.54%, and 13.79%,
respectively for March 31, 1997 compared to 8.96%, 12.07%, and 13.32% at
December 31, 1996. Commercial National Bank's leverage, tier 1 and total
risk-based capital ratios were 8.95%, 12.74%, and 14.00%, respectively for
March 31, 1997 compared to 9.05%, 11.54%, and 12.79% at December 31, 1996.
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.
ACCOUNTING CHANGES
In February, 1997, the FASB issued SFAS No. 128, "Earnings per Share." This
Statement establishes standards for computing and presenting earnings per share
by simplifying the standards previously found in APB Opinion No. 15, "Earnings
per Share." SFAS No. 128 replaces the presentation of primary earnings per
share with a presentation of basic earnings per share and requires dual
presentation of basic and diluted earnings per share on the face of the income
statement. It further requires a reconciliation of the numerator and
denominator of the basic earnings per share computation to the numerator and
denominator of the diluted earnings per share computation. SFAS No. 128 is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods. The adoption of this statement is not expected
to have a material impact on the Company's financial statements.
Also in February, 1997, the FASB issued SFAS No. 129, "Disclosure of
Information about Capital Structure" which establishes standards for disclosing
information about an entity's capital structure. SFAS No. 129, eliminates the
exemption of nonpublic entities from certain disclosure requirements of APB
Opinion No. 15. This Statement is effective for financial statements for
periods ending after December 31, 1997. The adoption of this statement will not
require a change in the Company's financial statement disclosures.
12
<PAGE> 13
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 fiscal year ended December 31, 1996 and in Part
II., Item 1 of the Quarterly Report on Form 10-Q for the quarter ended March
31, 1997.
13
<PAGE> 14
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) N/A
Articles of incorporation (3) N/A
Instruments defining the rights of
security holders, including indentures (4) N/A
Material Contracts (10) N/A
Statements re: computation of per share
earnings (11) 16
Letters re: unaudited interim financial
information (15) 17
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) 18
Additional exhibits (99) N/A
</TABLE>
- ----------------
(b) No reports on Form 8-K have been filed during the quarter ended March 31,
1997.
14
<PAGE> 15
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, 1997 /s/ STEPHEN E. BARKER
----------------------------
Stephen E. Barker
Controller and Principal
Accounting Officer
15
<PAGE> 16
INDEX TO EXHIBITS
Exhibit
No. Item
------- ----
11 Statements re: computation of per share
earnings
15 Letters re: unaudited interim financial
information
27 Financial data schedule
<PAGE> 1
Deposit Guaranty Corp.
Computation of Net Income Per Share
March 31, 1997
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
Primary Fully Diluted
------------ --------------
<S> <C> <C>
Computation of weighted average shared outstanding:
Common stock outstanding,
beginning balance 39,185,394 39,185,394
Common stock issued due
to mergers 3,289,210 3,289,210
Common stock issued due to
exercise of options 32,657 32,657
Shares purchased by
the Company (306,852) (306,852)
------------ ------------
Weighted average shares
outstanding 42,200,610 42,200,610
============ ============
Computation of net income:
Net income $ 22,613,000 $ 22,613,000
============ ============
Computation of net income per
share:
Net income divided by weighted
average shares outstanding $ .54 $ .54
============ ============
</TABLE>
Note: For the three-months ended March 31, 1997, additional weighted average
shares outstanding for options under the Company's incentive stock plan were
317,988 and 305,894 for calculating primary and fully diluted net income per
share, respectively. The dilutive effect of such options was, therefore, not
material.
16
<PAGE> 1
Deposit Guaranty Corp.
Jackson, Mississippi
Gentlemen:
RE: March 31, 1997 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 15,1997 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, 1997
17
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 359,625
<INT-BEARING-DEPOSITS> 1,623
<FED-FUNDS-SOLD> 61,280
<TRADING-ASSETS> 656
<INVESTMENTS-HELD-FOR-SALE> 1,538,814
<INVESTMENTS-CARRYING> 142,081
<INVESTMENTS-MARKET> 150,611
<LOANS> 4,255,996
<ALLOWANCE> (69,416)
<TOTAL-ASSETS> 6,774,465
<DEPOSITS> 5,432,432
<SHORT-TERM> 546,501
<LIABILITIES-OTHER> 119,092
<LONG-TERM> 99,414
0
0
<COMMON> 21,194
<OTHER-SE> 554,832
<TOTAL-LIABILITIES-AND-EQUITY> 6,774,465
<INTEREST-LOAN> 90,639
<INTEREST-INVEST> 29,240
<INTEREST-OTHER> 1,094
<INTEREST-TOTAL> 120,973
<INTEREST-DEPOSIT> 41,140
<INTEREST-EXPENSE> 49,527
<INTEREST-INCOME-NET> 71,446
<LOAN-LOSSES> 1,875
<SECURITIES-GAINS> 86
<EXPENSE-OTHER> 30,565
<INCOME-PRETAX> 33,906
<INCOME-PRE-EXTRAORDINARY> 33,906
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,613
<EPS-PRIMARY> 0.54
<EPS-DILUTED> 0.54
<YIELD-ACTUAL> 4.91
<LOANS-NON> 20,355
<LOANS-PAST> 11,939
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 256
<ALLOWANCE-OPEN> 64,704
<CHARGE-OFFS> 3,470
<RECOVERIES> 6,327
<ALLOWANCE-CLOSE> 69,436
<ALLOWANCE-DOMESTIC> 69,436
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 14,415
</TABLE>
