<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(x) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1994
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
----- ----
Commission file number 0-9630
LIBERTY NATIONAL BANCORP, INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-0955936
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
416 West Jefferson Street
Louisville, Kentucky 40202-3244
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (502) 566-2000
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 ( )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common stock - 25,743,815 shares outstanding at April 28, 1994.
<PAGE>
PART I - FINANCIAL INFORMATION
The consolidated financial statements of Liberty National Bancorp, Inc.
("Liberty") and subsidiaries submitted herewith are unaudited. However,
in the opinion of management, all adjustments (consisting only of
adjustments of a normal recurring nature) necessary for a fair presentation
of the results for the interim periods have been made.
ITEM 1. FINANCIAL STATEMENTS
The following consolidated financial statements of Liberty and
subsidiaries are submitted herewith:
Consolidated balance sheet - March 31, 1994 and December 31, 1993
Consolidated statement of income - three months ended
March 31, 1994 and 1993
Consolidated statement of changes in stockholders' equity - three
months ended March 31, 1994 and 1993
Consolidated statement of cash flows - three months ended
March 31, 1994 and 1993
Notes to consolidated financial statements
<PAGE>
CONSOLIDATED BALANCE SHEET
Liberty National Bancorp, Inc., and Subsidiaries
<TABLE>
<CAPTION>
March 31 December 31
1994 1993
In thousands except share data ---------- ----------
<S> <C> <C>
Assets
Cash and due from banks................................. $361,968 $252,414
Interest bearing deposits with banks.................... 1,852 1,065
Federal funds sold and securities
purchased under agreements to resell.................. 13,175 116,650
Trading account securities.............................. 207 41
Mortgage loans held for sale............................ 5,513 6,364
Investment securities available for sale................ 203,519 -
Investment securities held to maturity (fair value
$628,971 in 1994; $826,654 in 1993)................... 626,714 811,918
Loans (net of unearned income of $36,269 in
1994; $36,014 in 1993)................................ 3,671,074 3,588,824
Less:
Allowance for loan losses............................. 48,811 49,101
---------- ----------
Net loans........................................... 3,622,263 3,539,723
Premises and equipment.................................. 73,582 72,393
Other assets............................................ 115,458 115,527
---------- ----------
Total............................................... $5,024,251 $4,916,095
========== ==========
Liabilities
Deposits
Non-interest bearing - domestic....................... $744,795 $818,978
Interest bearing - domestic........................... 3,088,514 3,199,158
Interest bearing - foreign............................ 211,076 61,083
---------- ----------
Total deposits...................................... 4,044,385 4,079,219
Federal funds purchased and securities
sold under agreements to repurchase................... 354,820 221,189
Commercial paper........................................ 4,712 5,072
Other short-term borrowings............................. 66,243 66,326
Other liabilities....................................... 41,581 41,147
Long-term debt.......................................... 103,377 103,610
---------- ----------
Total liabilities................................... 4,615,118 4,516,563
---------- ----------
Stockholders' Equity
Preferred stock
Authorized and unissued 10,000,000 shares............. - -
Common stock
Authorized 60,000,000 shares
Issued and outstanding 25,742,775 shares in
1994 and 25,729,935 shares in 1993.................... 47,008 46,863
Surplus................................................. 79,771 79,691
Retained earnings....................................... 282,035 272,978
Net unrealized gain on investment securities
available for sale.................................... 319 -
---------- ----------
Total stockholders' equity.......................... 409,133 399,532
---------- ----------
Total............................................... $5,024,251 $4,916,095
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
Liberty National Bancorp, Inc., and Subsidiaries
<TABLE>
<CAPTION>
Three Months Ended
March 31
1994 1993
In thousands except per share data ------- -------
<S> <C> <C>
Interest income
Loans (including fees).................... $68,869 $65,754
Federal funds sold and securities
purchased under agreements to resell.... 569 1,020
Deposits with banks....................... 10 1
U.S. Treasury and Federal agencies........ 6,908 8,124
Obligations of states and political
subdivisions............................ 3,578 3,500
Other securities.......................... 94 73
Mortgage loans held for sale.............. 86 59
Trading account securities................ 1 44
------- -------
Total interest income................... 80,115 78,575
------- -------
Interest expense
Deposits.................................. 28,587 28,343
Federal funds purchased and securities
sold under agreements to repurchase..... 2,485 2,964
Other short-term borrowings............... 425 296
Long-term debt............................ 1,784 635
------- -------
Total interest expense.................. 33,281 32,238
------- -------
Net interest income......................... 46,834 46,337
Provision for loan losses................. 2,885 5,627
Net interest income after provision for ------- -------
loan losses............................... 43,949 40,710
------- -------
Non-interest income
Trust income.............................. 3,581 3,261
Service charges on deposit accounts....... 4,689 4,128
Bankcard income........................... 1,339 1,308
Insurance premium income.................. 881 620
Commissions and trading account profits... 633 688
Investment securities gains............... 10 -
Other..................................... 4,506 3,051
------- -------
Total non-interest income............... 15,639 13,056
------- -------
Non-interest expense
Salaries and employee benefits............ 18,253 17,307
Net occupancy expense..................... 2,997 2,539
Equipment expense......................... 3,692 3,302
Other..................................... 15,025 13,151
------- -------
Total non-interest expense.............. 39,967 36,299
------- -------
Income before income taxes.................. 19,621 17,467
Income tax expense........................ 5,544 4,749
------- -------
Net income.................................. $14,077 $12,718
======= =======
Net income per share........................ $0.55 $0.51
Average shares outstanding.................. 25,733 25,055
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Liberty National Bancorp, Inc., and Subsidiaries
<TABLE>
<CAPTION>
1994 1993
In thousands except per share data -------- --------
<S> <C> <C>
Balance January 1,....................................... $399,532 $353,227
Net income............................................... 14,077 12,718
Cash dividends declared - 1994, $0.195 per
share; 1993, $0.16875 per share........................ (5,020) (4,227)
Exercise of stock options................................ 225 705
Net unrealized gain on investment securities
available for sale..................................... 319 -
-------- --------
Balance March 31,........................................ $409,133 $362,423
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Liberty National Bancorp, Inc., and Subsidiaries
<TABLE>
<CAPTION>
Three Months Ended
March 31
1994 1993
In thousands -------- --------
<S> <C> <C>
Cash flows from operating activities
Net income.................................................... $14,077 $12,718
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses................................. 2,885 5,627
Depreciation, amortization and accretion, net............. 5,415 4,637
Deferred income tax expense............................... 2,080 629
(Gain) on sales of trading account securities,
investment securities and mortgage loans held for sale.. (463) (799)
(Gain) on sales of premises and equipment................. (720) (23)
Decrease (increase) in trading account securities......... 207 (3,692)
Decrease in mortgage loans held for sale.................. 931 380
(Increase) decrease in accrued interest receivable........ (1,175) 981
Decrease in other assets.................................. 3,268 2,515
(Decrease) in accrued interest payable.................... (51) (2,445)
Increase in current income taxes payable.................. 2,298 3,742
(Decrease) in other liabilities........................... (1,953) (2,200)
-------- --------
Net cash provided by operating activities............... 26,799 22,070
-------- --------
Cash flows from investing activities
Net (increase) in interest bearing
deposits with banks......................................... (787) -
Net decrease in federal funds sold and
securities purchased under agreements to resell............. 103,475 10,025
Purchases of investment securities available for sale......... (39,163) -
Purchases of investment securities held to maturity........... (50,934) (78,676)
Proceeds from sales of investment
securities available for sale............................... 312 -
Proceeds from maturities of investment
securities available for sale............................... 28,713 -
Proceeds from maturities of investment
securities held to maturity................................. 41,266 110,301
Net (increase) in loans made to customers..................... (90,440) (59,233)
Purchases of premises and equipment........................... (3,699) (3,810)
Proceeds from sales of premises and equipment................. 769 63
-------- --------
Net cash (used) by investing activities..................... (10,488) (21,330)
-------- --------
Cash flows from financing activities
Net (decrease) increase in deposits........................... (34,834) 40,106
Net increase in federal funds purchased
and securities sold under agreements to repurchase.......... 133,631 84,688
Net (decrease) in commercial paper............................ (360) (758)
Net (decrease) in other short-term borrowings................. (83) (17,785)
Repayment of long-term debt................................... (236) (2,239)
Proceeds from issuance of common stock........................ 145 534
Cash dividends paid........................................... (5,020) (4,227)
-------- --------
Net cash provided by financing activities................... 93,243 100,319
-------- --------
Net increase in cash and cash equivalents....................... 109,554 101,059
Cash and cash equivalents at beginning of year.................. 252,414 252,817
-------- --------
Cash and cash equivalents at end of period...................... $361,968 $353,876
======== ========
Supplemental disclosure
Interest paid $33,332 $34,683
Income taxes paid 1,166 379
Noncash investing and financing activities 5,067 8,736
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Liberty National Bancorp, Inc., and Subsidiaries
1. Summary of Significant Matters and Accounting Policies
The accounting and reporting policies of Liberty National Bancorp, Inc.,
("Liberty"), and its subsidiaries conform to generally accepted accounting
principles and general practices within the banking industry.
The consolidated financial statements include the accounts of Liberty
and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
A description of other significant matters and accounting policies is
presented in the notes to the consolidated financial statements in the
December 31, 1993 annual report to stockholders. Such notes should be read
in conjunction with the consolidated financial statements presented herein.
2. Allowance for Loan Losses
An analysis of the changes in the allowance for loan losses follows:
<TABLE>
<CAPTION>
1994 1993
In thousands ------- -------
<S> <C> <C>
Balance January 1,................................... $49,101 $42,278
Additions:
Provision for loan losses.......................... 2,885 5,627
------- -------
51,986 47,905
Deductions: ------- -------
Charge-offs........................................ 5,749 5,506
Less recoveries.................................... 2,574 1,573
------- -------
Net charge-offs.................................. 3,175 3,933
------- -------
March 31,............................................ $48,811 $43,972
======= =======
</TABLE>
3. Investment Securities Gains
Income tax expense attributable to investment securities gains was $4,000
for the three months ended March 31, 1994.
4. Stockholders' Equity
On April 14, 1993, Liberty's Board of Directors declared a 4-for-3
common stock split in the form of a 33 1/3% stock dividend. The
shares were distributed May 17, 1993 to stockholders of record
on May 3, 1993. All average share and per share information herein
has been adjusted to reflect the stock split.
5. Pending merger
On November 3, 1993, Liberty and BANC ONE CORPORATION ("BANC ONE")
announced they had signed an agreement for the merger of Liberty with a
a subsidiary of BANC ONE.
Terms of the agreement call for Liberty shareholders to receive $35.00 in
value of BANC ONE stock if BANC ONE shares are trading between $37.79 and
$40.00 a share. If BANC ONE shares are trading at or below $37.79 per
share, Liberty shareholders will receive 0.9262 shares of BANC ONE stock
for each share of Liberty. If BANC ONE is trading at or above $40.00,
Liberty shareholders will receive 0.8750 shares of BANC ONE stock for
each Liberty share.
Under the terms of the agreement, Liberty has the right to terminate the
transaction if BANC ONE shares are trading below $34.55 per share and at or
above $31.82 per share, unless BANC ONE agrees to issue additional shares
to Liberty shareholders so that the value of BANC ONE shares received by
Liberty shareholders is not less than $32.00 per Liberty share. Under
further terms of the agreement, Liberty may terminate the transaction if
the BANC ONE shares are trading at less than $31.82 per BANC ONE share.
Liberty's right to terminate the transaction in these circumstances occurs
shortly prior to the anticipated closing of the transaction when BANC ONE
stock is valued for purposes of the transaction. The value of BANC ONE
stock will be determined by averaging trading prices during a 15-day
trading period ending eight trading days prior to the closing.
The BANC ONE share prices and exchange ratio discussed in the previous
paragraphs have been adjusted to reflect a 10% stock dividend paid
March 4, 1994 to BANC ONE shareholders of record as of February 16, 1994
which BANC ONE declared on January 25, 1994.
In connection with this agreement, Liberty has granted BANC ONE an option
to purchase up to 19.9% of its common stock under certain circumstances.
The transaction is subject to Liberty shareholder and regulatory approval
and is anticipated to be completed during the third quarter of 1994.
6. Change in Accounting Principle
Effective January 1, 1994, Liberty adopted the provisions of Statement
of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." This Statement requires that
investment securities be classified as either securities held to maturity,
which are reported at amortized cost; trading securities, which are
reported at fair value, with unrealized gains and losses included in net
income; or securities available for sale, which are reported at fair value,
with unrealized gains and losses excluded from net income and reported as a
separate component of stockholders' equity. The net unrealized gain on
investment securities available for sale at March 31, 1994 was $319,000.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following paragraphs discuss the results of operations for Liberty
and its subsidiaries for the three months ended March 31, 1994 and compare
that period with the same period of the previous year. In addition, the
discussion describes the significant changes in the relative financial
condition of Liberty that have occurred during the first three months of
1994 compared to the year ended December 31, 1993. The analysis focuses on
two key determinants of an institution's financial condition: liquidity and
capital. This discussion should be read in conjunction with the
consolidated financial statements and accompanying notes presented in
Part I, Item 1 of this report.
ACQUISITIONS
During 1993, Liberty completed the acquisition of two Kentucky banking
entities. The acquisitions included Financial Dominion of Kentucky
Corporation ("Financial Dominion"), holding company for Hardin County Bank
and Trust, Inc., in Radcliff ("Radcliff") and Farmers Deposit Bank in
Brandenburg ("Brandenburg") on March 31, 1993; and First Federal Savings
Bank located in Hopkinsville ("Hopkinsville") on November 30, 1993. The
Financial Dominion acquisition, which was recorded as of April 1, 1993 for
financial reporting purposes, was accounted for using the purchase method
of accounting and, accordingly, the results of operations of the acquired
banks prior to the acquisition date have not been included in the
accompanying consolidated statement of income. The Hopkinsville
acquisition was accounted for using the pooling-of-interests method of
accounting, except that prior periods have not been restated since the
effect was not material. Due to these acquisitions, any ratios or analyses
comparing periods before or after to the period of the individual
acquisition will not be comparable. The acquired banking entities
described above had combined total assets of approximately $202,000,000 at
their acquisition dates.
Radcliff and Brandenburg were merged with Liberty National Bank and
Trust Company of Hardin County during February 1994 to form Liberty
National Bank and Trust Company of Central Kentucky. Hopkinsville was
merged with Liberty National Bank of Madisonville during April 1994
to form Liberty National Bank and Trust Company of Western Kentucky.
PENDING MERGER
On November 3, 1993, Liberty and BANC ONE CORPORATION ("BANC ONE")
announced they had signed an agreement for the merger of Liberty with a
subsidiary of BANC ONE.
Terms of the agreement call for Liberty shareholders to receive $35.00
in value of BANC ONE stock if BANC ONE shares are trading between $37.79
and $40.00 a share. If BANC ONE shares are trading at or below $37.79 per
share, Liberty shareholders will receive 0.9262 shares of BANC ONE stock
for each share of Liberty. If BANC ONE is trading at or above $40.00,
Liberty shareholders will receive 0.8750 shares of BANC ONE stock for each
Liberty share.
Under the terms of the agreement, Liberty has the right to terminate
the transaction if BANC ONE shares are trading below $34.55 per share and
at or above $31.82 per share, unless BANC ONE agrees to issue additional
shares to Liberty shareholders so that the value of BANC ONE shares
received by Liberty shareholders is not less than $32.00 per Liberty share.
Under further terms of the agreement, Liberty may terminate the transaction
if the BANC ONE shares are trading at less than $31.82 per BANC ONE share.
Liberty's right to terminate the transaction in these circumstances occurs
shortly prior to the anticipated closing of the transaction when BANC ONE
stock is valued for purposes of the transaction. The value of BANC ONE
stock will be determined by averaging trading prices during a 15-day
trading period ending eight trading days prior to the closing.
The BANC ONE share prices and the exchange ratio discussed in the
previous paragraphs have been adjusted to reflect a 10% stock dividend paid
March 4, 1994 to BANC ONE shareholders of record as of February 16, 1994
which BANC ONE declared on January 25, 1994.
In connection with this agreement, Liberty has granted BANC ONE an
option to purchase up to 19.9% of its common stock under certain
circumstances. The transaction is subject to Liberty shareholder and
regulatory approval and is anticipated to be completed during the third
quarter of 1994.
STOCK SPLIT
On April 14, 1993, Liberty's Board of Directors declared a 4-for-3
common stock split in the form of a 33 1/3% stock dividend. The shares
were distributed May 17, 1993 to stockholders of record on May 3, 1993.
All average share and per share information in this report has been
adjusted to reflect the stock split.
RESULTS OF OPERATIONS
Net income was $14,077,000 for the first quarter of 1994, compared to
$12,718,000 for the same period in 1993. Net income per share was $0.55
for the first quarter of 1994, an increase of 7.8% compared to the $0.51
reported for the same period a year ago. Return on average assets and
return on average stockholders' equity were 1.15% and 14.19%, respectively,
for the first quarter of 1994, compared to 1.13% and 14.51%, respectively,
for the same period in 1993.
Net Interest Income
Taxable equivalent net interest income for the first three months of
1994 was $49,280,000, compared with $48,712,000 for the first three months
of 1993. The tax equivalent adjustment (which is net of the effect of the
nondeductible portion of interest expense) reflected in the following
schedule is based on a federal income tax rate of 35% for the first quarter
of 1994 and 34% for the first quarter of 1993. The discussion of factors
influencing net interest income which follows is based on taxable
equivalent income data.
<TABLE>
<CAPTION>
Three Months Ended
March 31
In thousands except percentages 1994 1993
------- -------
<S> <C> <C>
Interest income $80,115 $78,575
Tax equivalent adjustment 2,446 2,375
------- -------
Interest income 82,561 80,950
Interest expense 33,281 32,238
------- -------
Net interest income $49,280 $48,712
======= =======
Average earning assets $4,503,774 $4,132,900
Net interest spread (1) 3.86% 4.23%
Net interest margin (2) 4.44% 4.78%
</TABLE>
[FN]
(1) Yield on interest earning assets minus rate paid on interest
bearing liabilities.
(2) Net interest income annualized and stated on a taxable
equivalent basis, divided by average earning assets.
Net interest income increased $568,000, or 1.2%, for the quarter
compared to the same period in 1993. This increase is primarily due to
earning asset volume increases resulting from normal operations and the
acquisitions completed at the end of the first quarter and during the
fourth quarter of 1993. Liberty's net interest spread for the three-month
period in 1994 was 3.86%, compared to 4.23% for the same period in 1993.
Net interest margin was 4.44% for the first quarter of 1994, compared to
4.78% for the first quarter of 1993.
During the first three months of 1994, Liberty experienced a 51 basis
point reduction in the yield on earning assets while Liberty's cost of
funds decreased at a much slower pace (14 basis points). Liberty's earning
assets during the three month period were more interest sensitive than its
interest bearing liabilities and therefore Liberty experienced a larger
drop in the yield on earning assets compared to the reduction in the cost
of funds. Liberty also experienced higher liability cost because of step
rate certificates of deposit which provide higher rates of interest closer
to maturity. These were the primary reasons for the 34 basis point
decrease in the net interest margin.
Average earning assets increased $371 million, or 9.0%, for the first
quarter of 1994 compared to 1993. Interest bearing liabilities averaged
$3.783 billion for the three months ended March 31, 1994, an increase of
$258 million, or 7.3%, over the same period in 1993. A portion of these
increases was attributable to the 1993 acquisitions. Average earning
assets and average interest bearing liabilities would have increased 4.8%
and 3.1%, respectively, if those assets and liabilities attributable to the
1993 acquisitions were not considered.
Provision for Loan Losses
The provision for loan losses for the first quarter of 1994 was
$2,885,000, compared to $5,627,000 for the same period in 1993, a decrease
of $2,742,000. Net charge-offs for the first three months of 1994 were
$3,175,000, compared to $3,933,000 for 1993, a decrease of $758,000.
The decrease in net charge-offs is primarily attributable to a
reduction in charge-offs in Liberty National Bank and Trust Company of
Kentucky's commercial loan area and one other of Liberty's affiliate banks.
Liberty's allowance for loan losses totaled $48.8 million at March 31,
1994, representing a decrease of $0.3 million over the amount reported at
December 31, 1993. The allowance for loan losses was 235% of nonperforming
loans on March 31, 1994, an increase of 15 basis points over the 220%
reported as of December 31, 1993. Nonperforming loans represented 0.57% of
outstanding loans on March 31, 1994. Net charge-offs to average loans was
0.36% (annualized) for the three months ended March 31, 1994, compared to
0.46% for the year ended December 31, 1993.
The allowance for loan losses is based on senior management's
continuing review of (1) the overall quality of the portfolio, (2) previous
loss experience, (3) the size and composition of the portfolio, and (4) an
assessment of current economic conditions. During the first quarter of
1994, this review resulted in an allowance for loan losses to average loans
outstanding for the quarter and to period-end loans of 1.35% and 1.33%,
respectively, compared to 1.36% and 1.35%, respectively, for the first
quarter of 1993. Selected ratios follow:
<TABLE>
<CAPTION>
Three Months Ended
March 31
Amounts annualized 1994 1993
------- -------
<S> <C> <C>
Provision for loan losses
to average loans 0.32% 0.70%
Net charge-offs to
average loans 0.36 0.49
Allowance for loan losses
to average loans 1.35 1.36
Allowance for loan losses
to period-end loans 1.33 1.35
</TABLE>
Non-interest Income and Expense
Non-interest income increased $2,583,000, or 19.8%, for the first
quarter of 1994 compared to the same period in 1993. The increase in non-
interest income would have been 8.4% if non-interest income for the first
three months of 1994 which is attributable to the banks acquired at the end
of the first quarter and during the fourth quarter of 1993 but is not
comparable to the first quarter of 1993 and a $733,000 gain on the sale of
a fixed asset were not considered. Other factors contributing to the
increase in non-interest income were an increase in insurance premium
income due to increased activity levels and an increase in operating
revenues relating to revenue producing assets acquired in satisfaction of
loans at the end of 1992 and during the second quarter of 1993. Limiting
the amount of increase in non-interest income was a decrease in commissions
and trading account profits due to decreased activity levels.
Non-interest expense increased $3,668,000, or 10.1% for the first
three months of 1994 compared to the same period in 1993. The increase in
non-interest expense would have been 5.1% if non-interest expense for the
first three months of 1994 which is attributable to the banks acquired at
the end of the first quarter and during the fourth quarter of 1993 but is
not comparable to the first quarter of 1993 and other costs related to the
acquisitions were not considered. Other factors contributing to the
increase in non-interest expense, which were mentioned in the previous
paragraph, were an increase in expenses in Liberty's insurance subsidiary
due to increased activity levels and an increase in operating expenses
relating to revenue producing assets acquired in satisfaction of loans at
the end of 1992 and during the second quarter of 1993.
<TABLE>
<CAPTION>
Three Months Ended
March 31
In thousands 1994 1993
------- -------
<S> <C> <C>
Non-interest income
Trust income $3,581 $3,261
Service charges on deposit
accounts 4,689 4,128
Bankcard income 1,339 1,308
Insurance premium income 881 620
Commissions and trading
account profits 633 688
Investment securities gains 10 -
Other 4,506 3,051
------- -------
Total non-interest income $15,639 $13,056
======= =======
Non-interest expense
Salaries and employee benefits $18,253 $17,307
Net occupancy expense 2,997 2,539
Equipment expense 3,692 3,302
Other 15,025 13,151
------- -------
Total non-interest expense $39,967 $36,299
======= =======
</TABLE>
Income Taxes
Liberty had an income tax expense of $5,544,000 for the first quarter
of 1994 compared to an income tax expense of $4,749,000 for the first
quarter of 1993. These amounts represent effective tax rates of 28.3% and
27.2%, respectively, for the periods indicated above. The increase in the
effective tax rate is primarily due to a greater portion of Liberty's
income coming from taxable sources in 1994 and to the increase in the
federal income tax rate to 35% from 34%.
FINANCIAL CONDITION
Liquidity
A number of techniques are used to measure the liquidity position,
including the utilization of several ratios which follow:
<TABLE>
<CAPTION>
Three Months Ended Year Ended
Average balances March 31, 1994 December 31, 1993
----------------- -----------------
<S> <C> <C>
Total loans/total deposits 89.73% 87.60%
Total loans/total deposits less float 94.95 92.79
Net short-term borrowings/total assets 6.31 5.73
</TABLE>
The loan to deposit ratios increased during the first quarter of 1994
due to an increase in loan demand which exceeded the increase in deposit
activity. The net short-term borrowing ratio for the three months ended
March 31, 1994 reflects an increase in Liberty's leverage position compared
to the year 1993.
Nonperforming Assets
The following schedule provides a summary of nonperforming assets
along with several ratios using period-end data:
<TABLE>
<CAPTION>
March 31 Dec. 31
In thousands 1994 1993
------- -------
<S> <C> <C>
Nonaccrual loans $20,184 $21,633
Restructured loans 628 696
Other real estate 16,625 15,715
------- -------
Total nonperforming assets $37,437 $38,044
======= =======
</TABLE>
Nonperforming assets to total
loans (net of unearned income)
and other real estate 1.02% 1.06%
Nonperforming assets to total assets 0.75 0.77
Allowance for loan losses
to nonperforming loans 235 220
Liberty discontinues the accrual of interest on loans, except consumer
loans, which become 90 days past due as to principal or interest unless
they are adequately secured and in the process of collection. A loan
remains in a nonaccrual status until factors indicating doubtful collection
no longer exist. Consumer loans, when 120 days past due, are charged off
against the allowance for loan losses unless they are adequately secured
and in the process of collection. A loan is classified as a restructured
loan when the interest rate is materially reduced or the term is extended
beyond the original maturity date because of the inability of the borrower
to service the interest payments at market rates. Other real estate is
recorded at the lower of cost or fair value less estimated costs to sell.
Capital
During the first quarter of 1994, Liberty increased both its tier I
and total capital (as defined by the Federal Reserve Board under the
Board's risk-based capital guidelines). These increases were primarily the
result of internal capital generation, a decrease in disallowed amounts of
goodwill and other intangible assets and, affecting total capital only, an
increase in the allowable amount of the allowance for loan losses. As
displayed by the following table, Liberty's tier I capital at March 31, 1994
increased $9,693,000 over the year-end 1993 amount to $369,622,000, and
total capital reached $473,351,000 at March 31, 1994. Liberty's risk-based
capital and leverage ratios, also shown in the following table, exceed the
4.00% tier I, 8.00% total capital and 3.00% leverage minimums that are
required for each ratio. The leverage ratio compares tier I capital to
total average assets less disallowed amounts of goodwill and other
intangible assets.
<TABLE>
<CAPTION>
March 31 Dec. 31
In thousands 1994 1993 Change
-------- -------- -------
<S> <C> <C> <C>
Stockholders' equity $409,133 $399,532 $9,601
Less net unrealized gain on investment
securities available for sale 319 - 319
Less disallowed amounts of goodwill
and other intangible assets 39,192 39,603 (411)
-------- -------- -------
Tier I capital 369,622 359,929 9,693
-------- -------- -------
Allowable allowance for loan losses 48,811 47,815 996
Qualifying long-term debt 54,918 54,916 2
-------- -------- -------
Tier II capital 103,729 102,731 998
-------- -------- -------
Total capital $473,351 $462,660 $10,691
======== ======== =======
Total risk-weighted assets $3,907,174 $3,823,911 $83,263
========== ========== =======
Ratios
Tier I capital to risk-weighted assets 9.46% 9.41%
Total capital to risk-weighted assets 12.11 12.10
Leverage 7.52 7.46
</TABLE>
The Federal Deposit Insurance Corporation Improvement Act of 1991
established five capital categories for insured depository institutions
under its Prompt Corrective Action provisions. The categories vary from
"well capitalized" to "critically undercapitalized." A "well capitalized"
bank is defined as one with a total risk-based capital ratio of 10% or
above, a tier I risk-based capital ratio of 6% or above, a leverage ratio
of 5% or above and one not subject to any order, written agreement, capital
directive, or prompt corrective action directive to meet or maintain a
specific capital level. On March 31, 1994, each of Liberty's affiliate
banks, had total risk-based capital, tier I risk-based capital and leverage
ratios which exceeded the minimum requirements established for the "well
capitalized" category.
ACCOUNTING AND REGULATORY MATTERS
In May 1993, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 114 ("SFAS No. 114")
"Accounting by Creditors for Impairment of a Loan." The Statement requires
that impaired loans that are within the scope of SFAS No. 114 be measured
based on the present value of expected future cash flows, discounted at the
loan's effective interest rate; at the loan's observable market price; or
the fair value of the collateral, if the loan is collateral dependent.
Adoption of SFAS No. 114 is required in January 1995 with earlier adoption
permitted. Liberty has not determined the impact of SFAS No. 114 on
Liberty's financial condition and results of operations but expects it to
be immaterial.
Also in May 1993, the FASB issued Statement of Financial Accounting
Standards No. 115 ("SFAS No. 115") "Accounting for Certain Investments in
Debt and Equity Securities." This Statement requires that investment
securities be classified as either held-to-maturity securities, which are
reported at amortized cost; trading securities, which are reported at fair
value, with unrealized gains and losses included in net income; or available-
for-sale securities, which are reported at fair value, with unrealized
gains and losses excluded from net income and reported in a separate
component of stockholders' equity. SFAS No. 115 was required to be adopted
no later than January 1994. Liberty's adoption of SFAS No. 115 in January
1994 did not have a material impact on Liberty's financial condition or
results of operation.
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Liberty held its annual meeting of stockholders on April 27, 1994.
(b) George N. Gill, Nancy Lampton, Martin S. Margulis, Joseph W. Phelps,
Max L. Shapira and Dr. Robert L. Taylor were reelected directors of
Liberty. Malcolm B. Chancey, Jr.,Frank B. Hower, Jr., James W.
McDowell, Jr., John C. Nichols II, Gouverneur H. Nixon, Cyrus S.
Radford, Jr., Stanley S. Dickson, C. H. Dishman III, Wallace H.
Dunbar, Owsley Brown Frazier, George E. Gans III, R. K. Guillaume
and Leonard E. Lyles continued as directors of Liberty.
(c) Below is the vote count on the reelection of directors.
George N. Gill
For 21,605,517
Against 0
Withheld:
Broker non-votes 0
Abstentions 107,331
Nancy Lampton
For 21,633,546
Against 0
Withheld:
Broker non-votes 0
Abstentions 76,301
Martin S. Margulis
For 21,629,935
Against 0
Withheld:
Broker non-votes 0
Abstentions 77,613
Joseph W. Phelps
For 21,667,455
Against 0
Withheld:
Broker non-votes 0
Abstentions 42,392
Max L. Shapira
For 21,665,839
Against 0
Withheld:
Broker non-votes 0
Abstentions 44,008
Dr. Robert L. Taylor
For 21,627,405
Against 0
Withheld:
Broker non-votes 0
Abstentions 82,442
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(4.1) Rights Agreement dated August 19, 1992, between Liberty
National Bancorp, Inc. and Chemical Bank is incorporated
by reference to Exhibits 4 and 10.1 to Liberty's Current
Report on Form 8-K dated August 19, 1992.
(4.2) First Amendment dated as of November 2, 1993, to the Rights
Agreement dated August 19, 1992, between Liberty National
Bancorp, Inc. and Chemical Bank is incorporated by reference
to Exhibit 4.1 to Liberty's Current Report on Form 8-K dated
November 2, 1993.
(4.3) Instruments defining the rights of holders of long-term debt
of Liberty and its subsidiaries are not filed as Exhibits
because the amount of debt under each instrument is less
than 10% of the consolidated assets of Liberty. Liberty
undertakes to file these instruments with the United States
Securities and Exchange Commission (the "Commission") upon
request.
(b) Reports on Form 8-K
Liberty filed the following report on Form 8-K during the three
month period ended March 31, 1994:
A Form 8-K dated February 11, 1994 was filed with the Commission
relating to the pending merger of Liberty with an affiliate of BANC ONE
CORPORATION. A table was included which set forth the adjustments in
the exchange ratio of BANC ONE shares for Liberty shares and the adjusted
pro forma cash dividends per Liberty share due to BANC ONE's 10% stock
dividend announced January 25, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Liberty has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LIBERTY NATIONAL BANCORP, INC.
(Registrant)
Date: May 2, 1994 By: /s/ MALCOLM B. CHANCEY, JR.
---------------------------
MALCOLM B. CHANCEY, JR.
Chairman of the Board, President
and Chief Executive Officer
Date: May 2, 1994 By: /s/ CARL E. WEIGEL
---------------------------
CARL E. WEIGEL
Treasurer
(Principal Financial Officer)
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Paper (P) or
Number Brief Description Electronic (E)
- - --------- ----------------- -------------
<C> <S> <C>
(4.1) Rights Agreement dated August 19, 1992, between Liberty (P)
National Bancorp, Inc. and Chemical Bank is incorporated
by reference to Exhibits 4 and 10.1 to Liberty's Current
Report on Form 8-K dated August 19, 1992.
(4.2) First Amendment dated as of November 2, 1993, to the Rights (E)
Agreement dated August 19, 1992, between Liberty National
Bancorp, Inc. and Chemical Bank is incorporated by reference
to Exhibit 4.1 to Liberty's Current Report on Form 8-K dated
November 2, 1993.
(4.3) Instruments defining the rights of holders of long-term N/A
debt of Liberty and its subsidiaries are not filed as
Exhibits because the amount of debt under each instrument
is less than 10% of the consolidated assets of Liberty.
Liberty undertakes to file these instruments with the
United States Securities and Exchange Commission (the
"Commission") upon request.
</TABLE>
