UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1996
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-09424
FIRST M & F CORPORATION
(exact name of Registrant as specified in its charter)
MISSISSIPPI 64-0636653
(State or other jurisdiction of I.R.S. Employer
incorporation of organization) Identification Number)
221 East Washington Street, Kosciusko, Mississippi 39090
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (601-289-5121)
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes No X
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 if 1934 during the preceding 12 months
(or for such shorted 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
Registrant's classes of common stock, as of the latest
practicable date.
Class Outstanding at
March 4, 1997
Common stock ( $5.00 par value ) 3,394,656 Shares
Based on bid price for shares on March 4, 1997, the
aggregate market value of the voting stock held by nonaffiliates
of the Registrant was $61,787,600
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by
reference to Part I, II, and III of the Form 10-K report: (1)
Registrant's 1996 Annual Report to Shareholders (Parts I and II),
and (2) Proxy Statement dated March 19, 1997 for Registrant's
Annual Meeting of Shareholders to be held April 9, 1997 (Part
III).
<PAGE>
FIRST M & F CORPORATION
FORM 10-K
INDEX
PART I
Item 1. Business 3
Item 2. Properties 13
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of
Security Holders 13
Part II
Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters 13
Item 6. Selected Financial Data 13
Item 7. Managements's Discussion and Analysis of
Financial Condition and Results of
Operations 13
Item 8. Financial Statements and Supplementary
Data 13
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 13
Part III
Item 10. Directors and Executive Officers of the
Registrant 14
Item 11. Executive Compensation 14
Item 12. Security Ownership of Certain
Beneficial Owners and Management 14
Item 13. Certain Relationships and Related
Transactions 14
Part IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 15
SIGNATURES 16-17
EXHIBIT INDEX 18
<PAGE>
FIRST M & F CORPORATION
FORM 10-K
PART I
ITEM 1. BUSINESS
GENERAL
First M & F Corporation (Company) is a one-bank holding
company chartered and organized under Mississippi laws in 1979.
The company engages exclusively in the banking business through
its wholly-owned subsidiary, Merchants and Farmers Bank of
Kosciusko (The Bank).
The Bank was chartered and organized under the laws of the
State of Mississippi in 1890, and accounts for substantially all
of the total assets and revenues of the Company. The Bank is the
ninth largest bank in the state, having total assets of
approximately $524 million at December 31, 1996. The Bank offers
a complete range of commercial and consumer services through its
main office and two branches in Kosciusko and its branches in
fourteen other markets within central Mississippi. These markets
include Ackerman, Bruce, Brandon, Canton, Durant, Lena, Madison,
Oxford, Pearl, Philidelphia, Puckett, Ridgeland, Starkville,
Grenada and Weir, Mississippi.
The Bank has three wholly-owned subsidiary operations, M & F
Financial Services, Inc., which operates four finance company
operations; First M & F Insurance Company, Inc., a credit life
insurance company; and, Merchants and Farmers Bank Securities
Corporation, a real estate property management company.
The Company 's primary means of growth over the past several
years has been an aggressive lending program funded by
exceptional deposit growth. Additionally, the Company acquired
the deposits of several locations from the Resolution Trust
Corporation in 1994. Effective with the close of business on
December 31, 1995, the Company also merged with Farmers and
Merchants Bank of Bruce, Mississippi. This merger involved the
exchange of 450,000 shares of the Company's common stock for all
of the issued and outstanding shares of Farmers and Merchant's
Bank and has been accounted for as a pooling of interests.
Farmers and Merchants had total assets at December 31, 1995 of
$32 million.
The banking system offers a variety of deposit, investment
and credit products to customers. The Bank provides these
services to middle market and professional businesses, ranging
from payroll checking, business checking, corporate savings and
secured and unsecured lines of credit. Additional services
include direct deposit payroll, sweep accounts and letters of
credit. The Bank also offers credit card services to its
customers, to include check debit cards and automated teller
machine cards through several networks. Trust services are also
offered in the Kosciusko main office.
As of January 31, 1997, the Company and its subsidiary
employed 240 full-time equivalent employees
COMPETITION
The Company competes generally with other banking
institutions, savings associations, credit unions, mortgage
banking firms, consumer finance companies, mutual funds,
insurance companies, securities brokerage firms, and other
finance related institutions, many of which have greater
resources than those available to the Company. The competition is
primarily related to areas of interest rates, the availability
and quality of services and products, and the pricing of those
services and products.
SUPERVISION AND REGULATION
The Company is a registered bank holding company under the
Bank Holding Act of 1956, as amended. As such, the Company is
required to file an annual report and such other information as
the Board of Governors of the Federal Reserve System may require.
The Bank Holding Company Act generally prohibits the Company from
engaging in activities other than banking or managing or
controlling banks or other permissible subsidiaries or from
acquiring or obtaining direct or indirect control of any company
engaged in activities not closely related to banking. The Board
of Governors has by regulation determined that a number of
activities are closely related to banking within the meaning of
the Act. In addition, the Company is subject to regulation by
the State of Mississippi under its laws of incorporation.
The Bank is subject to various requirements of federal and
state banking authorities including the Federal Deposit Insurance
Corporation (FDIC) and the Mississippi Department of Banking.
Areas subject to regulation include loans, reserves, investments,
establishment of branches, loans to directors, executive officers
and their related interests, relationships with correspondent
banks, consumer and depositor protection, and others. In
addition, state banks such as the Bank are subject to state
approval of the amount of earnings that may be paid as dividends
to shareholders.
In December 1991, the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA) was inacted. This Act
substantially revised the funding provisions of the Federal
Deposit Insurance Act and required regulators to take prompt
corrective action whenever financial institutions failed to meet
minimum capital requirements. Also the Act created restrictions
on capital distributions that would leave a depository
institution undercapitalized.
In May 1993, the FDIC adopted the final rule implementing
Section 112 of FDICIA. This regulation and new requirements
mandated new audit and reporting procedures, as well as required
certain documentation on existing internal controls. This
regulation became effective for fiscal years ending after
December 31, 1992.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Registrant including their
positions with the Registrant, their ages and their principal
occupations for the last five years are as follows:
Hugh S. Potts, Jr., 51, Director, Chairman of the Board and
Chief Executive Officer, First M & F Corporation and
Merchants and Farmers Bank, since 1994. Vice Chairman,
First M & F Corporation, prior to 1994.
Scott M. Wiggers, 52, Director, President, First M & F
Corporation and Merchants and Farmers Bank of Kosciusko,
since 1990.
STATISTICAL DISCLOSURES
The statistical disclosures for the Company are contained in
Tables 1 through 12.
<PAGE>
FIRST M & F CORPORATION
STATISTICAL DISCLOSURES
TABLE 1 - COMPARATIVE AVERAGE BALANCES - YIELDS AND RATES
The table below shows the average balances for all assets and
liabilities for the Company at each year-end for the past three
years, the interest income or expense associated with these
assets and liabilities and the computed yields or rates for each
<TABLE>
<CAPTION>
DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
---- ---- ----
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average assets
Federal funds
sold $ 12,839 $ 685 5.34% $ 9,846 $ 596 6.05% $ 6,813 $ 279 4.10%
Loans, net 317,013 31,346 9.89% 275,422 27,310 9.92% 230,693 20,907 9.06%
Bank balances 3,934 205 5.21% 2,790 165 5.91% 2,376 82 3.45%
Taxable
securities 120,356 7,394 6.14% 121,291 7,300 6.02% 122,003 6,983 5.72%
Tax-exempt
securities 38,324 2,988 7.80% 40,472 3,221 7.96% 37,191 3,009 8.09%
------------------------------------------------------------------------------------------
Total interest
earning 492,466 42,618 8.65% 449,821 38,592 8.58% 399,076 31,260 7.83%
Noninterest
assets 34,535 30,800 30,774
------------------------------------------------------------------------------------------
Total average
assets $527,001 $42,618 8.09% $480,621 $38,592 8.03% $429,850 $31,260 7.27%
==========================================================================================
Liabilities
and capital
DDA and
savings $175,383 $ 6,140 3.50% $144,970 $ 4,578 3.16% $144,942 $ 3,772 2.60%
Time deposits 220,038 12,082 5.49% 191,290 10,186 5.32% 160,288 6,985 4.36%
Short-term
funds 19,330 965 4.99% 45,850 2,551 5.56% 36,213 1,448 4.00%
FHLB advances 5,937 354 5.96% 3,482 195 5.60% 4,868 259 5.32%
-------------------------------------------------------------------------------------------
Total interest
bearing 420,688 19,541 4.65% 385,592 17,510 4.54% 346,311 12,464 3.60%
Noninterest
bearing
and capital 106,313 95,029 83,539
-------------------------------------------------------------------------------------------
Total average
Liabilities
and capital $527,001 $19,541 3.71% $480,621 $17,510 3.64% $429,850 $12,464 2.90%
===========================================================================================
Net interest
margin $23,077 4.69% $21,082 4.69% $18,796 4.71%
Less tax
equiv adj
Investments 1,016 1,095 1,023
Loans 106 80 80
------------------------------------------------------------------------------------------
Net interest
margin
Per annual
report $21,955 $19,907 $17,693
==========================================================================================
</TABLE>
Nonaccruing loans have been included in the average loan balances
and interest collected prior to these loans being placed on
nonaccrual has been included in interest income. Yield and rates
have been calculated on a fully tax equivalent basis using a tax
rate of 34% for all years.
TABLE 2 - VOLUME AND YIELD/RATE VARIANCE ANALYSIS
The Volume and Yield/Rate Table shown below reflects the change
from year to year for each component of the tax equivalent net
interest margin classified into those occurring as a result of
changes in volume and those resulting from yield/rate changes.
(Tax Equivalent Basis - $ in thousands)
<TABLE>
<CAPTION>
1996 COMPARED TO 1995 1995 COMPARED TO 1994
INCREASE (DECREASE) DUE TO: INCREASE (DECREASE) DUE TO:
------------------------------------------------------------------------
YIELD/ YIELD/
------------------------------------------------------------------------
VOLUME RATE NET VOLUME RATE NET
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Fed funds sold $ 181 ($ 92) $ 89 $ 124 $ 193 $ 317
Loans, net 4,124 ( 88) $4,036 4,064 2,323 $6,387
Bank balances 68 ( 28) $ 40 15 70 $ 85
Taxable securities ( 56) 157 $ 101 ( 41) 358 $ 317
Tax-exempt securities ( 171) ( 62) ($ 233) 265 ( 53) $ 212
------------------------------------------------------------------------
Total interest-earning assets 4,146 ( 113) $4,033 4,427 2,891 $7,318
Interest paid on:
Demand deposits and savings 960 602 $1,562 2 806 $ 808
Time deposits 1,531 365 $1,896 1,351 1,850 $3,201
Short-term funds (1,476) ( 103) ($1,579) 385 718 $1,103
FHLB advances 138 21 $ 159 ( 74) 10 ($ 64)
-----------------------------------------------------------------------
Total interest-bearing liabilities 1,153 885 $2,038 1,664 3,384 $5,048
-----------------------------------------------------------------------
Change in net income on a
tax equivalent basis $2,993 ($ 998) $1,995 $2,763 ($ 493) $2,270
=======================================================================
</TABLE>
Tax-exempt income has been adjusted to a tax equivalent basis
using a tax rate of 34%. The balances of nonaccrual loans and
related income recognized have been included for purposes of
these computations.
TABLE 3 - SECURITIES AVAILABLE FOR SALE AND SECURITIES HELD TO
MATURITY
The table below indicates amortized cost or carrying value of
securities available for sale and those held to maturity by type
at year-end for each of the last three years ($ in thousands).
December 31,
------------------------------
1996 1995 1994
------------------------------
Securities available for sale
- ------------------------------
U.S. Treasury $21,682 $ 38,440 $25,991
Government agencies $15,922 $ 39,028 $12,455
Obligations of states
and political subdivisions 18,230 24,331 14,551
Other securities 30,610 26,391 21,202
-----------------------------
Total securities available
for sale $86,444 $128,190 $74,199
=============================
December 31,
-----------------------------
1996 1995 1994
-----------------------------
Securities held to maturity
- ----------------------------
U.S. Treasury $ 1,050 $ 1,051 $13,010
Government agencies 13,980 14,152 $12,268
Obligations of states and
political subdivisions 24,235 18,321 27,402
Other securities 17,888 19,290 26,352
----------------------------
Total securities held to
maturity $57,153 $52,814 $79,032
=============================
TABLE 4 - MATURITY DISTRIBUTION AND YIELDS OF SECURITIES
AVAILABLE FOR SALE AND SECURITIES HELD TO MATURITY
The following table details the maturities and weighted average
yield for each range of maturities of securities December 31,
1996 (tax equivalent yield - $ in thousands).
<TABLE>
After One After Five
But Within But Within After
One Year Yield Five Years Yield Ten Years Yield Ten Years Yield
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities available for sale
- ------------------------------
U.S. Treasury $ 4,658 6.03% $17,024 5.85%
Government agencies 14,422 6.36% $ 1,500 7.28%
Obligations of states and
political subsdivisions 3,777 7.41% 7,980 7.93% 6,387 8.68% 86 13.64%
Other securities 1,713 7.01% 17,542 6.73% 2,679 6.82% 8,676 6.36%
---------------------------------------------------------------------------------------
Total $10,148 5.95% $56,968 6.14% $10,566 8.91% $8,762 7.43%
=======================================================================================
Securities held to maturity
- -----------------------------
U.S. Treasury $ 1,050 6.00%
Government agencies $ 1,199 7.91% 11,781 6.73% $ 1,000 7.30%
Obligations of states and
political subdivisions 1,897 6.91% 10,401 6.81% 10,760 7.51% 1,177 8.35%
Other securities 136 7.72% 2,310 6.34% 8,525 6.08% 6,917 6.02%
---------------------------------------------------------------------------------------
Total $ 3,232 6.23% $25,542 6.13% $20,285 7.27% $ 8,094 7.60%
=======================================================================================
</TABLE>
At December 31, 1996 the Company did not hold any securities of
any issuer with a carrying value exceeding ten percent of total
stockholders' equity.
TABLE 5 - COMPOSITION OF THE LOAN PORTFOLIO
The table below shows the carrying value of the loan portfolio at
the end of each of the last five years ($ in thousands).
December 31,
--------------------------------------------
1996 1995 1994 1993 1992
--------------------------------------------
Commercial, financial
and agricultural $113,909 $94,906 $89,316 $75,685 $69,069
Real estate-construction 26,356 27,194 18,749 8,328 5,996
Real estate-mortgage 106,198 85,497 77,568 67,092 56,246
Consumer loans 98,638 84,134 76,174 56,950 45,078
Lease financing 137 271 247 492 571
-----------------------------------------------
$345,238 $292,002 $262,054 $208,547 $176,960
===============================================
TABLE 6 - LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST
RATES
The table below shows the amounts of loans in several categories
at December 31, 1996, along with the scheduled repayments of
principal in the periods indicated ($ in thousands).
Maturing
-------------------------------------------
One Year
Within Through After
One Year Five Five
Or Less Years Years Total
-------------------------------------------
Commercial and real estate $172,645 $ 61,259 $12,697 $246,601
Installment loans to
individuals 18,657 76,049 3,931 $98,637
-------------------------------------------
$191,302 $137,308 $16,628 $345,238
===========================================
The following table shows all loans due after one year according
to their sensitivity to changes in interest rates ($ in
thousands)
Maturing
------------------------------
One Year
Though After
Five Five
Year Years Total
------------------------------
Above loans due after one
year which have:
Predetermined interest
rates $124,717 $28,932 $153,649
Floating interest rates 287 0 $ 287
------------------------------
Total $125,004 $28,932 $153,936
==============================
TABLE 7 - NONPERFORMING ASSETS AND PAST DUE LOANS
The table below shows the Company's nonperforming assets and past
due loans at the end of each of the last five years ($ in
thousands)
December 31,
---------------------------------------
1996 1995 1994 1993 1992
---------------------------------------
Loans accounted for on
a nonaccrual basis $206 $84 $253 $ 519 $ 730
Restructured loans 0 0 0 0 0
---------------------------------------
Total nonperforming
loans 206 84 253 519 730
Other real estate owned 724 148 869 1,061 1,076
----------------------------------------
Total nonperforming
assets 930 232 1,122 1,580 1,806
Accruing loans past due
90 days or more 968 707 394 788 482
----------------------------------------
Total nonperforming
assets and loans $1,898 $ 939 $ 1,516 $2,368 $2,288
========================================
Interest which would have been accrued on nonaccrual loans had
they been in compliance with their original terms and conditions
is immaterial.
At December 31, 1996, the Company did not have any concentration
of loans greater than ten percent of total loans except those
shown in Table 5.
It is the Company's policy that interest not be accrued on any
loan for which payment in full of interest and principal is not
expected, on any loan which is seriously delinquent unless the
obligation is both well secured and in the process of collection,
or on any loan that is maintained on a cash basis. At December
31, 1996, the Company has no loans about which Management has
serious doubts as to their collectibility other than those
disclosed above.
TABLE 8 - ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
The table below summarizes the Company's loan loss experience for
each of the last five years ($ in thousands).
Year Ended December 31,
---------------------------------------------
1996 1995 1994 1993 1992
---------------------------------------------
Amount of loan loss reserve
at beginning of period $ 4,250 $ 3,374 $ 2,866 $ 2,451 $2,131
Loans charged off
Commercial, financial and
agricultural (235) (117) (22) (95) (205)
Real estate (174) (53) (124) (391) (572)
Consumer (738) (707) (478) (458) (421)
---------------------------------------------
Total (1,147) (877) (624) (944)(1,198)
Recoveries
Commercial, financial and
agricultural 8 14 12 31 38
Real estate 14 106 40 44 33
Consumer 129 124 198 214 173
---------------------------------------------
Total 151 244 250 289 244
Net charge offs (996) (633) (374) (655) (954)
Provision for loan losses
charged to expense 1,221 1,509 882 1,070 1,274
---------------------------------------------
Amount of loan loss reserve
at end of period $4,475 $4,250 $3,374 $2,866 $2,451
=============================================
The allowance for loan losses is established through a provision
charged to expense. Loans are charged against the allowance when
Management believes that the collection of the principal is
unlikely.
The allowance for loan losses is maintained at a level which
Management and the Board of Directors believe to be adequate to
absorb estimated losses inherent in the loan portfolio, and is
reviewed quarterly using specific criteria required by regulatory
authority as well as various analytical devices which
incorporates historical loss experience, trends, and current
economic conditions.
TABLE 9 - ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The table below is a summary of the allocation categories used by
the Company for its allowance for loan loss at December 31, 1996.
These allocations are determined by internal formulas based upon
an analysis of the various types of risk associated with the loan
portfolio ($ in thousands).
Allocation for pools of
risk-rated loans $3,965
Additional allocation for
risk-rated consumer loans 200
Discretionary 310
--------
$4,475
========
The Company maintains the allowance at a level considered by
Management and the Board of Directors to be sufficient to absorb
potential losses. Loss percentages were uniformly applied to the
various pools of risk that exist within the loan portfolio based
upon accepted analysis procedures and current economic
conditions. Additional allocations were made for particular
areas based upon recommendations of lending and asset review
personnel.
The remaining $310,000 is discretionary and serves as added
protection in the event that any of the above specific components
are determined to be inadequate. Due to the imprecision in most
estimates, Management continues to take a prudent, yet
conservative approach to the evaluation of the adequacy of the
allowance.
TABLE 10 - TIME DEPOSITS OF $100,000 OR MORE
The table below shows maturities of outstanding time deposits of
$100,000 or more at December 31, 1996. ($ in thousands)
Certificates
of deposits
-------------
Three months or less $17,144
Over three months through
six months 5,833
Over six months through twelve
months 14,424
Over twelve months 10,825
---------
Total $48,226
=========
TABLE 11 - SELECTED RATIOS
The following table reflects ratios for the Company for the last
three years.
1996 1995 1994
----------------------------
Return on average assets 1.40% 1.32% 1.15%
Return on average equity 15.80% 15.79% 14.43%
Dividend payout ratio 34.44% 32.37% 31.47%
Equity to assets ratio 8.87% 8.35% 7.94%
TABLE 12 - SHORT-TERM BORROWING
The table below presents certain information regarding the
Company's short-term borrowing for each of the last three years
($ in thousands).
1996 1995 1994
----------------------------
Outstanding at end of period $ 70 $48,294 $44,822
Maximum outstanding at
any month-end during the
period 51,236 58,482 48,082
Average outstanding during
the period 19,576 46,785 36,213
Interest paid 939 2,551 1,448
Weighted average rate
during each period 4.80% 5.45% 4.00%
<PAGE>
ITEM 2. PROPERTIES
The Bank's main office, located at 221 East Jefferson
Street, Kosciusko, Mississippi, is a two story, brick building
with drive-up facilities. The Bank owns its main office building
and nineteen of its branch facilities. The remaining facilities
are occupied under lease agreements, terms of which range from
month to month to five years. It is anticipated that all leases
will be renewed.
ITEM 3. LEGAL PROCEEDING
The Bank is involved in various legal matters and claims
which are being defended and handled in the ordinary course of
business. None of these matters are expected, in the opinion of
Management, to have a material adverse effect on the financial
position or results of operations of the Bank or the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to the Company's
shareholders during the fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
At March 4, 1997, there were 561 shareholders of record of
the Company's common stock. Effective September 1, 1996, the
Company's common stock was listed with the National Association
of Securities Dealers, Inc. Automated Quotation National Market
System (NASDAQ) and became subject to trading and reporting over
the counter with most securities dealers. Prior to the date of
registration with NASDAQ, the stock was traded on a limited basis
and no securities firm was acting as a market maker. Other
information for this item can be found in Note 17, "Dividends"
and the table captioned "Principal Markets and Prices of the
Company's Stock" included in the Registrant's 1996 Annual Report
to Shareholders and is incorporated herein by reference. (pages
29 and 34)
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item can be found in the
table captioned "Selected Financial Data" in the Registrant's
1996 Annual Report to Shareholders and is incorporated herein by
reference. (page 33)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this item can be found in
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in the Registrant's 1996 Annual
Report to Shareholders and is incorporated herein by reference.
(pages 36-40)
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Registrant and
the accompanying notes to the financial statements along with
the report of the independent public accountants are contained in
the Registrant's 1996 Annual Report to Shareholders and are
incorporated herein by reference. (pages 11-32)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no change in accountants within the two year
period ended December 31,1996.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information on the directors of the Registrant can be found
on pages 2 - 4, "Election of Directors," and page 5, "Director
Compensation," contained in the Proxy Statement to shareholders
dated March 19, 1997, and is incorporated herein by reference.
Information on the Registrants executive officers is included on
page 6, "Executive Compensation," in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item can be found on page 6,
"Executive Compensation," and page 7, "Director Compensation," of
the Proxy Statement dated March 19, 1997, and is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information regarding security ownership of certain
beneficial owners and Management can be found on page 4,
"Beneficial Ownership Reporting Compliance," and page 6,
"Principal Shareholder," in the Proxy Statement to shareholders
dated March 19, 1997, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related
transactions can be found on page 9 under the caption
"Transactions with Management," in the Proxy Statement to
shareholders dated March 19, 1997, and is incorporated herein by
reference.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
A-1. Financial Statements
The report of Shearer, Taylor & Co., P. A.,
independent auditors, and the following consolidated financial
statements of First M & F Corporation and Subsidiary are included
in the Registrant's 1996 Annual Report to Shareholders and are
incorporated into Part II, Item 8, herein by reference.
Report of Independent Certified Public Accountants
Consolidated Statements of Condition as of
December 31, 1996 and 1995
Consolidated Statements of Income for the
Years ended December 31, 1996, 1995, and 1994
Consolidated Statements of Stockholders' Equity for the
Years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the
Years ended December 31, 1996, 1995 and 1994
Notes to the Consolidated Financial Statements
Selected Financial Data and Principal Markets and
Prices of the Company's Stock
A-2. Financial Statement Schedules
The schedules to the consolidated financial statements set
forth by Article 9 of Regulation S-X are not required under the
related instructions or are inapplicable and therefore have been
omitted.
A-3. Exhibits
The exhibits listed in the Exhibit Index are filed herewith
or are incorporated herein by reference.
B. Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
FIRST M & F CORPORATION
BY: /S/ HUGH S. POTTS, JR. BY: /S/ SCOTT M. WIGGERS
HUGH S. POTTS, JR SCOTT M. WIGGERS
CHAIRMAN OF THE BOARD AND PRESIDENT
CHIEF EXECUTIVE OFFICER
DATE: MARCH 21, 1997 DATE: MARCH 21, 1997
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated:
DATE: March 21, 1997 BY: /S/ HUGH S. POTTS, JR., DIRECTOR
DATE: March 21, 1997 BY: /S/ SCOTT M. WIGGERS, DIRECTOR
DATE: March 21, 1997 BY /S/ FRED A. BELL, JR., DIRECTOR
DATE: March 21, 1997 BY: /S/ JON A. CROCKER, DIRECTOR
DATE: March 21, 1997 BY: /S/ CHARLES T. ENGLAND, DIRECTOR
DATE: March 21, 1997 BY: /S/ TOXEY HALL III, DIRECTOR
DATE: March 21, 1997 BY: /S/ BARBARA K. HAMMOND, DIRECTOR
DATE: March 21, 1997 BY: /S/ J. MARLIN IVEY, DIRECTOR
DATE: March 21, 1997 BY: /S/ JOE IVEY, DIRECTOR
DATE: March 21, 1997 BY: /S/ R. DALE McBRIDE, DIRECTOR
DATE: March 21, 1997 BY: /S/ SUSAN P. McCAFFERY, DIRECTOR
DATE: March 21, 1997 BY: /S/ WILLIAM M. MYERS, DIRECTOR
DATE: March 21, 1997 BY: /S/ OTHO E. PETIT, JR., DIRECTOR
DATE: March 21, 1997 BY: /S/ CHARLES W. RITTER, JR., DIRECTOR
DATE: March 21, 1997 BY: /S/ W.C. SHOEMAKER, DIRECTOR
DATE: March 21, 1997 BY: /S/ EDWARD G. WOODARD, DIRECTOR
<PAGE>
EXHIBIT INDEX
3(A) Articles of Incorporation, as amended. Filed as Exhibit 3
to the Company's Form S-1(File no. 33-08751) September 15,
1986, incorporated herein by reference.
3(B) Bylaws, as amended. Filed as Exhibit 3-b to the Company's
Form S-1(File no. 33-08751) September 15, 1986,
incorporated herein by reference.
13 Only those portions of the Registrant's Annual Report to
Shareholders expressly incorporated by reference herein
are included in this exhibit and, therefore, are filed as
a part of this report of Form 10-K.
21 Only those portions of the Proxy Statement dated March 19,
1997 for Registrant's Annual Meeting of Shareholders to be
held April 9, 1997 expressly incorporated by reference
herein are included in this exhibit and, therefore, are
filed as a part of this report of Form 10-K.
27 Financial Data Schedule.
All other exhibits are omitted as they are inapplicable or
are not required by the related instructions.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FIRST M&F CORPORATION AND SUBSIDIARY
SHEARER
TAYLOR
& CO.
A Professional Association
The Board of Directors and Shareholders
First M&F Corporation
Kosciusko, Mississippi
We have audited the accompanying consolidated statements of
condition of First M&F Corporation and subsidiary as of December
31, 1996 and 1995, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1996. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform an audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
consolidated financial position of First M&F Corporation and
subsidiary as of December 31, 1996 and 1995, the results of their
consolidated operations and their consolidated cash flows for
each of the years in the three-year period ended December 31,
1996, in conformity with generally accepted accounting
principles.
/s/ Shearer, Taylor & Co. P.A.
Jackson, Mississippi
January 24, 1997
CERTIFIED PUBLIC ACCOUNTANTS
6360 I-55 NORTH
SUITE 330
P. O. DRAWER 13157
JACKSON, MS 39236-3157
TELEPHONE 601/956-0093
<PAGE>
CONSOLIDATED STATEMENTS OF CONDITION
FIRST M&F CORPORATION AND SUBSIDIARY
December 31, 1996 1995
ASSETS
Cash and due from banks $ 20,213,398 $ 18,823,519
Interest bearing bank
balances 149,794 314,603
Federal funds sold 500,000 1,000,000
Securities available for
sale 86,443,833 128,189,968
Investment securities,
market value of
$57,536,000 and $53,210,000 57,152,860 52,814,271
Loans 363,266,911 306,138,127
Unearned income (18,028,671) (14,513,713)
Allowance for possible loan
losses (4,475,000) (4,250,000)
------------------------------
Net loans 340,763,240 287,374,414
------------------------------
Bank premises and equipment 8,008,727 7,536,916
Accrued interest receivable 4,963,438 4,975,448
Other assets 5,565,176 4,528,488
------------------------------
$ 523,760,466 $ 505,557,627
==============================
LIABILITIES AND STOCKHOLDERS
EQUITY
LIABILITIES:
Deposits $ 464,094,123 $ 405,862,826
Securities sold under
agreements to repurchase
and other short-term
borrowings 70,000 48,293,668
Other borrowings 6,561,402 3,005,497
Accrued interest payable 2,434,230 2,529,304
Other liabilities 1,512,131 1,346,902
------------------------------
Total liabilities 474,671,886 461,038,197
------------------------------
STOCKHOLDERS' EQUITY:
Preferred stock:
Class A; 500,000 shares
authorized - -
Class B; 500,000 shares
authorized - -
Common stock of $5.00 par
value. 5,000,000 shares
authorized; 3,394,656
shares issued 16,973,280 16,973,280
Additional paid-in capital 10,698,388 10,653,316
Retained earnings 21,087,077 16,242,675
Net unrealized gain on
securities available for
sale,net of income taxes 329,835 698,987
------------------------------
49,088,580 44,568,258
Treasury stock, 3,756 shares,
at cost in 1995 - (48,828)
------------------------------
Net stockholders'
equity 49,088,580 44,519,430
------------------------------
$ 523,760,466 $ 505,557,627
==============================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL
STATEMENTS.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
First M&F Corporation and Subsidiary
Years Ended December 31, 1996 1995 1994
----------------------------------
INTEREST INCOME:
Interest and fees on loans $ 31,239,462 $27,230,315 $20,827,545
Taxable investments 7,393,926 7,300,273 6,983,314
Tax-exempt investments 1,972,186 2,125,596 1,985,649
Federal funds sold 684,974 595,769 278,925
Interest bearing bank
balances 205,377 165,365 81,528
-----------------------------------
Total interest income 41,495,925 37,417,318 30,156,961
-----------------------------------
INTEREST EXPENSE:
Time deposits of
$100,000 or more 1,703,444 1,684,676 1,355,013
Other deposits 16,507,650 13,079,184 9,401,723
Securities sold under
agreements to repurchase
and other short-term
borrowings 939,123 2,551,256 1,447,990
Other borrowings 391,091 195,137 259,318
-----------------------------------
Total interest expense 19,541,308 17,510,253 12,464,044
-----------------------------------
Net interest income 21,954,617 19,907,065 17,692,917
Provision for possible loan
losses 1,220,536 1,508,853 881,911
-----------------------------------
Net interest income
after provision for
possible loan losses 20,734,081 18,398,212 16,811,006
-----------------------------------
OTHER OPERATING INCOME:
Service charges on
deposit accounts 3,457,679 3,116,512 2,765,695
Gain (loss) on securities
available for sale 12,877 (118,673) (231,966)
Credit insurance income 465,323 428,929 432,223
Other income 499,822 813,521 478,104
---------------------------------
Total other operating
income 4,435,701 4,240,289 3,444,056
---------------------------------
OTHER OPERATING EXPENSES:
Salaries and employee
benefits 7,865,799 7,102,960 6,234,752
Net occupancy expenses 989,017 897,290 865,618
Equipment and data
processing expenses 1,751,978 1,599,754 1,732,783
Other 4,309,153 4,770,240 4,988,569
--------------------------------
Total other
operating expenses 14,915,947 14,370,244 13,821,722
--------------------------------
Income before income
taxes 10,253,835 8,268,257 6,433,340
Income taxes 2,864,335 2,017,996 1,589,733
---------------------------------
NET INCOME $ 7,389,500 $6,250,261 $ 4,843,607
==================================
EARNINGS PER SHARE $ 2.18 $ 1.90 $ 1.55
==================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL
STATEMENTS.
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FIRST M&F CORPORATION AND SUBSIDIARY
<TABLE>
<CAPTION>
Years Ended December 31, 1996, 1995, and 1994
ADDITIONAL
COMMON PAID-IN RETAINED UNREALIZED TREASURY
STOCK CAPITAL EARNINGS GAIN (LOSS) STOCK NET
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 1, 1994
As originally reported $15,623,280 $ 8,485,804 $8,905,489 $ - $ (41,316) $32,973,257
Prior period adjustment - - (190,342) - - (190,342)
------------------------------------------------------------------------------------
As restated 15,623,280 8,485,804 8,715,147 - (41,316) 32,782,915
------------------------------------------------------------------------------------
Net adjustment to beginning
balance for change in
accounting method - - - 1,471,070 - 1,471,070
Net income - - 4,843,607 - - 4,843,607
Cash dividends
($0.49 per share) - - (1,535,450) - - (1,535,450)
Treasury stock:
Purchases - - - - (128,702) (128,702)
Sales - 7,512 - - 121,190 128,702
Net change in unrealized
gain (loss) - - - (3,078,303) - (3,078,303)
-------------------------------------------------------------------------------------
December 31, 1994 15,623,280 8,493,316 12,023,304 (1,607,233) (48,828) 34,483,839
-------------------------------------------------------------------------------------
Net income - - 6,250,261 - - 6,250,261
Cash dividends
($0.62 per share) - - (2,030,890) - - (2,030,890)
Sale of 270,000 shares of
common stock 1,350,000 2,160,000 - - - 3,510,000
Net change in unrealized
gain (loss) - - - 2,306,220 - 2,306,220
December 31, 1995 16,973,280 10,653,316 16,242,675 698,987 (48,828) 44,519,430
----------------------------------------------------------------------------------
Net income - - 7,389,500 - - 7,389,500
Sale of treasury stock - 45,072 - - 48,828 93,900
Cash dividends
($0.75 per share) - - (2,545,098) - - (2,545,098)
Net change in unrealized
gain (loss) - - - (369,152) - (369,152)
- ----------------------------------------------------------------------------------
December 31, 1996 $16,973,280 $10,698,388 $21,087,077 $ 329,835 $ - $49,088,580
==================================================================================
NET INCOME - - 7,389,500 - - 7,389,500
SALE OF TREASURY STOCK - 45,072 - - 48,828 93,900
CASH DIVIDENDS ($0.75 PER SHARE) - - (2,545,098) - - (2,545,098)
NET CHANGE IN UNREALIZED GAIN
(LOSS) - - - (369,152) - (369,152)
DECEMBER 31, 1996 $16,973,280 $10,698,388 $21,087,077 $329,835 $ - $49,088,580
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL
STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOW
FIRST M&F CORPORATION AND SUBSIDIARY
Years Ended December 31, 1996 1995 1994
-----------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,389,500 $6,250,261 $ 4,843,607
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation and amortization 1,174,809 981,396 1,088,286
Provision for possible loan losses 1,220,536 1,508,853 881,911
Deferred income taxes (150,786) (207,417) (202,361)
(Increase) decrease in interest
receivable 12,010 (970,906) (870,567)
Increase (decrease) in interest
payable (95,074) 1,031,223 345,075
Other, net 250,732 159,156 888,334
-------------------------------------------
Net cash provided by operating
activities 9,801,727 8,752,566 6,974,285
-------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available
for sale (52,497,658) (35,055,066) (16,196,900)
Sales of securities available
for sale 12,462,456 8,658,674 8,714,823
Maturities of securities
available for sale 81,031,995 13,868,734 23,994,689
Purchases of investment securities (11,756,845) (15,725,275) (27,273,501)
Maturities of investment securities 7,322,310 3,645,734 6,233,324
Net (increase) decrease in:
Interest bearing bank balances 164,809 91,631 4,622,155
Federal funds sold 500,000 - 11,950,000
Loans (56,484,357) (30,772,007) (55,621,939)
Bank premises and equipment (1,476,495) (1,469,115) (1,127,513)
Other, net 1,209,601 758,894 977,041
-------------------------------------------
Net cash used in
investing activities (19,524,184) (55,997,796) (43,727,821)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in:
Non-interest bearing
deposits $ 3,955,964 $2,084,752 $ 6,879,204
Money market, NOW and
savings deposits 32,288,569 9,202,701 (1,206,826)
Certificates of deposit 21,986,764 35,731,155 23,663,601
Securities sold under
agreements to repurchase
and other short-term
borrowings (48,223,668) 3,471,643 7,017,930
Proceeds from other borrowings 11,848,000 - 3,500,000
Repayments of other borrowings (8,292,095) (2,226,198) (1,677,138)
Cash dividends (2,545,098) (2,030,890) (1,535,450)
Proceeds from sale of stock - 3,510,000 -
Treasury stock transactions 93,900 - -
------------------------------------------
Net cash provided by
financing activities 11,112,336 49,743,163 36,641,321
-------------------------------------------
Net increase (decrease)
in cash and due from
banks 1,389,879 2,497,933 (112,215)
Cash and due from banks at January 1 18,823,519 16,325,586 16,437,801
-------------------------------------------
CASH AND DUE FROM BANKS AT DECEMBER 31 $20,213,398 $18,823,519 $16,325,586
===========================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST M&F CORPORATION AND SUBSIDIARY
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
The accounting and reporting policies of First M&F
Corporation (the Company) which materially affect the
determination of financial position and results of operations
conform to generally accepted accounting principles and general
practices within the banking industry. A summary of these
significant accounting and reporting policies is presented below.
ORGANIZATION AND OPERATIONS
The Company is a one-bank holding company that owns 100% of
the common stock of Merchants and Farmers Bank (the Bank) of
Kosciusko, Mississippi. The Bank is a commercial bank and
provides a full range of banking services through its offices in
central Mississippi. As a state chartered commercial bank, the
Bank is subject to Federal and state regulations and undergoes
periodic examinations by those regulatory authorities.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of First M&F
Corporation include the accounts of the Company and its wholly
owned subsidiary, Merchants and Farmers Bank, and the accounts of
the Bank's wholly owned finance subsidiary, credit insurance
subsidiary and real estate subsidiary. All significant
intercompany balances and transactions have been eliminated in
consolidation.
INVESTMENTS
The Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting For Certain Investments in
Debt and Equity Securities" effective January 1, 1994. SFAS 115
requires that debt and equity securities be classified into one
of three categories; held to maturity, available for sale, or
trading.
Securities, which are available to be sold prior to maturity
are classified as securities available for sale and are carried
at market value. Unrealized holding gains and losses are reported
net of taxes as a separate component of stockholders' equity.
Realized gains and losses on the sale of securities available for
sale are determined using the specific identification method.
Investment securities are those securities which the Company
has the ability and intent to hold until maturity and are carried
at cost, adjusted for amortization of premiums and accretion of
discounts. The adjusted cost of the specific security sold is
used to compute realized gain or loss on the sale of investment
securities.
LOANS
Loans are stated at the principal amount outstanding.
Unearned income on installment loans is recognized as income
principally using the interest method. Interest on all other
loans is calculated by using the simple interest method on daily
balances of the principal amount outstanding. The Bank
discontinues the accrual of interest on loans and recognizes
income only as received when, in the judgment of management, the
collection of interest, but not necessarily principal, is
doubtful.
ALLOWANCE FOR LOAN LOSSES
The Bank provides for loan losses through an allowance for
loan losses established through a provision charged to expense.
Accordingly, all loan losses are charged to the allowance for
loan losses and all recoveries are credited to it. The allowance
for loan losses is based on the evaluation of the collectibility
of loans, past loan loss experience and other factors which, in
management's judgment, deserve consideration in estimating
possible loan losses. Such other factors considered by management
include changes in the nature and volume of the loan portfolio,
current economic conditions that may affect a borrower's ability
to pay, review of specific problem loans, and the relationship of
the allowance to outstanding loans.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less
accumulated depreciation and amortization. Provisions for
depreciation and amortization are computed principally using the
straight-line method and charged to operating expenses over the
estimated useful lives of the assets. Costs of major additions
and improvements are capitalized. Expenditures for maintenance
and repairs are charged to expense as incurred.
OTHER REAL ESTATE
Other real estate acquired through partial or total
satisfaction of loans is carried at the lower of market or the
recorded loan balance at date of acquisition (foreclosure). Any
loss incurred at the date of acquisition is charged to the
reserve for possible loan losses. Gains or losses incurred
subsequent to the date of acquisition are reported in current
operations. Related operating income and expenses are reported in
current operations. Amortization
The Company's costs in excess of net Bank assets acquired in
1980 are being amortized on a straight-line basis over forty
years. The Bank's costs in excess of net assets acquired in
branch acquisitions are being amortized on a straight-line basis
over five and ten years.
AMORTIZATION
The Company's costs in excess of net Bank assets acquired in
1980 are being amortized on a straight-line basis over forty
years. The Bank's costs in excess of net assets acquired in
branch acquisitions are being amortized on a straight-line basis
over five and ten years.
INCOME TAXES
The Company, the Bank and the Bank's finance and real estate
subsidiaries file consolidated Federal and state income tax
returns. Deferred income taxes reflect the net tax effect of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting and income tax purposes.
Deferred income tax expense (benefit) is the result of changes in
deferred tax assets and liabilities between reporting periods.
STOCK SPLIT
On August 9, 1995, the Company effected a two for one stock
split in the form of a dividend. All per share computations have
been retroactively restated.
TREASURY STOCK
The Company accounts for treasury stock at cost, using the
first-in first- out basis of accounting. The excess of sales
proceeds on treasury stock sales over the cost of the shares sold
is recorded as additional paid in capital.
EARNINGS PER SHARE
Earnings per share calculations are based on the weighted
average number of shares outstanding during the year of 3,393,209
in 1996, 3,294,736 in 1995, and 3,120,786 in 1994, adjusted
retroactively for stock splits, and business combinations.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 and
1994 financial statements to be consistent with 1996
presentation.
STATEMENTS OF CASH FLOWS
In the accompanying consolidated statements of cash flows,
the Company and subsidiary have defined cash equivalents as those
amounts included in the statement of condition caption "Cash and
Due from Banks." The following supplemental disclosures are made
related to the consolidated statements of cash flows:
1996 1995 1994
----------------------------------------
Interest paid $19,636,000 $16,479,000 $12,119,000
Federal and state
income taxes paid 3,242,000 2,333,000 1,638,000
Federal income tax
refunds 60,000 162,000 -
Other real estate
and repossessions
acquired in noncash
foreclosures 1,875,000 227,000 1,185,000
=======================================
NOTE 2: BUSINESS COMBINATION
On December 31, 1995, Farmers and Merchants Bank of Bruce,
Mississippi was merged with the Bank. The stockholders of Farmers
and Merchants received 450,000 shares of common stock of the
Company in exchange for all of the issued and outstanding common
shares of Farmers and Merchants. All financial data of the
Company has been restated to reflect the business combination
using the pooling of interests method of accounting. There were
no material adjustments to the net assets of Farmers and
Merchants as a result of adopting the same accounting methods as
the Company.
NOTE 3: INVESTMENTS
The following is a summary of the amortized cost and market
value (book value) of securities available for sale:
GROSS UNREALIZED
AMORTIZED ----------------- MARKET
COST GAIN LOSS VALUE
----------------------------------------------
DECEMBER 31, 1996:
U. S. Treasury securities $ 21,728,000 $ 44,000 $ 90,000 $21,682,000
U. S. Government agencies
and corporations 15,961,000 29,000 68,000 15,922,000
Mortgage-backed investments 29,086,000 116,000 112,000 29,090,000
Obligations of states
and political subdivisions 17,649,000 587,000 6,000 18,230,000
Other 1,520,000 - - 1,520,000
----------------------------------------------
$ 85,944,000 $ 776,000 $276,000 $86,444,000
==============================================
December 31, 1995:
U. S. Treasury securities $ 38,310,000 $ 207,000 $ 77,000 $38,440,000
U. S. Government agencies
and corporations 38,982,000 130,000 84,000 39,028,000
Mortgage-backed investments 24,482,000 209,000 129,000 24,562,000
Obligations of states and
political subdivisions 23,534,000 800,000 3,000 24,331,000
Other 1,822,000 7,000 - 1,829,000
-----------------------------------------------
$127,130,000 $1,353,000 $ 293,000$128,190,000
===============================================
The following is a summary of the amortized cost (book
value) and market value of investment securities:
AMORTIZED GROSS UNREALIZED MARKET
------------------
COST GAIN LOSS VALUE
------------------------------------------
DECEMBER 31, 1996:
U. S. Treasury securities $ 1,050,000 $ 8,000 $ 4,000 $1,054,000
U. S. Government agencies
and corporations 13,980,000 185,000 25,000 14,140,000
Mortgage-backed investments 17,888,000 34,000 140,000 17,782,000
Obligations of states and
political subdivisions 24,235,000 373,000 48,000 24,560,000
----------------------------------------------
$ 57,153,000 $600,000 $217,000 $57,536,000
===============================================
December 31, 1995:
U. S. Treasury securities $ 1,051,000 $ 12,000 $ 5,000 $1,058,000
U. S. Government agencies
and corporations 14,152,000 328,000 39,000 14,441,000
Mortgage-backed investments 19,290,000 58,000 149,000 19,199,000
Obligations of states and
political subdivisions 18,321,000 276,000 85,000 18,512,000
----------------------------------------------
$ 52,814,000 $674,000 $ 278,000 $53,210,000
==============================================
The amortized cost and market values of securities available
for sale and investment securities at December 31, 1996, by
contractual maturity, are shown below. Actual maturities may
differ from contractual maturities because borrowers may have the
right to call or prepay certain obligations with, or without,
call or prepayment penalties.
<TABLE>
<CAPTION>
AVAILABLE FOR SALE INVESTMENT SECURITIES
--------------------------------------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
--------------------------------------------------
<S> <C> <C> <C> <C>
One year or less $10,111,000 $10,148,000 $ 3,232,000 $3,256,000
Over one through five
years 56,868,000 56,968,000 25,542,000 25,767,000
Over five through ten
years 10,084,000 10,566,000 20,285,000 20,400,000
After ten years 8,881,000 8,762,000 8,094,000 8,113,000
--------------------------------------------------
$85,944,000 $86,444,000 $57,153,000 $57,536,000
==================================================
</TABLE>
The following is a summary of the amortized cost and market
value of securities available for sale and investment securities
which were pledged to secure public deposits, short-term
borrowings and for other purposes required or permitted by law.
<TABLE>
<CAPTION>
AVAILABLE FOR SALE INVESTMENT SECURITIES
-----------------------------------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
-----------------------------------------------
<C> <C> <C> <C> <C>
DECEMBER 31, 1996 $ 54,394,000 $ 54,592,000 $ 33,770,000 $34,025,000
==================================================
December 31, 1995 $113,943,000 $114,692,000 $ 36,615,000 $36,752,000
==================================================
</TABLE>
The following is a summary of gross realized gains and
losses on sales of securities available for sale:
1996 1995 1994
-----------------------------------------
Gross realized gains $ 30,000 $ 48,000 $ 19,000
Gross realized losses (17,000) (167,000) (251,000)
-----------------------------------------
$ 13,000 $ (119,000) $(232,000)
==========================================
In accordance with "A Guide to Implementation of Statement
115 on Accounting for Certain Investments in Debt and Equity
Securities" (the Guide), which was issued in November, 1995, by
the Financial Accounting Standards Board, the Bank reclassified
certain investments classified as held to maturity as securities
available for sale in December, 1995. The amortized cost of these
investments was $38,145,000 and the market value was $38,545,000
at the date of the reclassification.
NOTE 4: LOANS
The Bank's loan portfolio includes commercial, consumer,
agribusiness and residential loans throughout the State of
Mississippi, but primarily in its market area in Central
Mississippi. The composition of the Company's loan portfolio, net
of unearned income, follows:
1996 1995
--------------------------
Commercial, financial and agricultural $ 44,409,000 $ 35,409,000
Residential real estate 88,601,000 75,964,000
Non-residential real estate 113,590,000 96,782,000
Consumer loans 98,638,000 83,469,000
--------------------------
$345,238,000 $291,624,000
==========================
The Bank has made, and expects in the future to continue to
make, in the ordinary course of business, loans to directors and
executive officers of the Company and the Bank and to affiliates
of these directors and officers. In the opinion of management,
these transactions were made on substantially the same terms as
those prevailing at the time for comparable transactions with
other persons and did not involve more than normal risk of
collectibility or contain any other unfavorable features. An
analysis of such outstanding loans follows:
1996 1995
-----------------------------
Loans outstanding at January 1 $ 2,561,000 $ 3,350,000
New loans 2,098,000 2,432,000
Repayments and removals (1,711,000) (3,221,000)
-----------------------------
Loans outstanding at December 31 $ 2,948,000 $ 2,561,000
=============================
NOTE 5: ALLOWANCE FOR POSSIBLE LOAN LOSSES
Transactions in the allowance for possible loan losses are
summarized as follows:
1996 1995 1994
-----------------------------------
Balance at January 1 $ 4,250,000 $ 3,374,234 $ 2,866,227
Loans charged-off (1,146,713) (876,588) (623,767)
Recoveries 151,177 243,501 249,863
--------------------------------------
Net charge-offs (995,536) (633,087) (373,904)
--------------------------------------
Provision for possible
loan losses 1,220,536 1,508,853 881,911
--------------------------------------
Balance at December 31 $ 4,475,000 $ 4,250,000 $ 3,374,234
=======================================
NOTE 6: BANK PREMISES AND EQUIPMENT
A summary of bank premises and equipment follows:
1996 1995
------------------------------
Land and buildings $ 9,048,625 $ 8,875,315
Furniture, fixtures and
equipment 7,323,190 6,301,338
Leasehold improvements 334,079 334,079
------------------------------
16,705,894 15,510,732
Less accumulated depreciation
and amortization 8,920,684 8,054,129
------------------------------
7,785,210 7,456,603
Construction in progress,
estimated costs to complete
of $889,000 in 1996 and
$660,000 in 1995 223,517 80,313
------------------------------
$ 8,008,727 $ 7,536,916
==============================
Amounts charged to other operating expenses for depreciation
and amortization of bank premises and equipment were
approximately $1,005,000 in 1996, $800,000 in 1995, and $864,000
in 1994.
NOTE 7: OTHER ASSETS
A summary of other assets follows:
1996 1995
-----------------------------
Company's cost in excess of net
Bank assets acquired in 1980,
less accumulated amortization
of $1,630,961 and $1,533,900 $ 2,246,107 $ 2,343,168
Bank's costs in excess of net
assets acquired in branch
acquisitions,less accumulated
amortization of $1,207,756 and
$1,134,692 442,867 515,931
Other real estate, net 723,748 148,176
Deferred income tax, net 976,722 635,969
Other 1,175,732 885,244
------------------------------
$ 5,565,176 $ 4,528,488
==============================
Other expenses include amortization of intangible
assets as follows:
1996 1995 1994
-------------------------------------
Company's costs in excess of
net Bank assets acquired
in 1980 $ 97,061 $ 97,061 $ 97,061
Bank's cost of asset
acquisitions in 1983
and 1984 allocated to
values associated
with the future earning
potential of deposit assumed - - 23,185
Bank's costs in excess of
net assets acquired in
branch acquisitions 73,064 84,273 104,660
-------------------------------------
$170,125 $ 181,334 $ 224,906
=====================================
Changes in the valuation allowance for other real estate for
the years ended December 31, 1996, 1995 and 1994, are summarized
as follows:
1996 1995 1994
-------------------------------------
Balance at beginning of year $ 61,000 $ 35,500 $ 15,700
Provision charged to expense 9,000 60,000 19,800
Writedowns (20,288) (34,500) -
-------------------------------------
Balance at end of year $ 49,712 $ 61,000 $ 35,500
=====================================
NOTE 8: DEPOSITS
The following is a summary of deposits at December 31, 1996
and 1995:
1996 1995
---------------------------------
Non-interest bearing $ 56,116,144 $ 52,160,180
Interest bearing:
Money market accounts 41,880,446 44,371,828
NOW accounts 68,299,070 54,832,550
Savings accounts 72,286,668 50,973,237
Time deposits of
$100,000 or more 48,225,640 42,371,467
Other time deposits 177,286,155 161,153,564
---------------------------------
Total interest bearing 407,977,979 353,702,646
---------------------------------
Total deposits $ 464,094,123 $405,862,826
=================================
At December 31, 1996, the scheduled maturities of
certificates of deposit of $100,000 or more are as follows:
1997 $ 36,348,818
1998 6,650,097
1999 1,577,782
2000 2,933,943
2001 715,000
----------------
$ 48,225,640
================
NOTE 9: SHORT-TERM BORROWINGS
The following is a summary of information related to
securities sold under agreements to repurchase and other
short-term borrowings for the years ended December 31, 1996, 1995
and 1994:
<TABLE>
<CAPTION>
BALANCE OUTSTANDING WEIGHTED AVERAGE RATE
---------------------------------------------------------------------------
MAXIMUM AVERAGE AT YEAR DURING
MONTH END DAILY END YEAR AT YEAR END
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996:
Federal funds
purchased $ - $ 58,297 $ - 6.95% -%
Securities sold
under agreements
to repurchase 50,986,252 19,272,070 - 4.78% -%
Other short-term
borrowings
by the Company 250,000 245,171 70,000 6.41% 6.50%
------------------------------------------- ==========================
$51,236,252 $ 19,575,538 $ 70,000
===========================================
1995:
Federal funds
purchased $ 2,700,000 $ 218,630 $ 2,700,000 5.62% 5.63%
Securities sold
under agreements
to repurchase 54,847,108 45,631,025 44,658,602 5.32% 5.33%
Other short-term
borrowings
by the Company 935,066 935,000 935,066 8.36% 8.25%
------------------------------------------- ==========================
$58,482,174 $ 46,784,655 $48,293,668
===========================================
1994:
Federal funds
purchased $ 2,650,000 $ 360,000 $ 1,950,000 4.38% 5.50%
Securities sold
under agreements
to repurchase 43,404,266 33,998,172 41,939,078 3.87% 5.34%
Other short-term
borrowings
by the Company 2,027,590 1,854,728 932,947 6.29% 7.85%
--------------------------------------------==========================
$48,081,856 $36,212,900 $44,822,025
============================================
</TABLE>
Federal funds purchased represent primarily overnight
borrowings. Securities sold under agreements to repurchase
primarily represented a relationship with a public university
under a contract that expired on June 30, 1996. These borrowings
reprice on a monthly basis. Other short-term borrowings by the
Company represent unsecured borrowings from various individuals
and entities.
NOTE 10: OTHER BORROWINGS
The following is a summary of other borrowings at December
31, 1996 and 1995:
1996 1995
---------------------------
Line of credit in the amount of
$9,000,000,renewable annually;
secured by approximately 29% of
the Bank's common stock; interest
payable semi-annually at the
lender's prime rate $275,000 $ -
Advances from Federal Home Loan
Bank of Dallas secured by first
mortgage loans and Federal
Home Loan Bank stock 5.56% advance
in the amount of $1,000,000;
interest is payable monthly and
principal is payable on
September 23, 2000 1,000,000 1,000,000
5.90% advance in the amount of
$2,500,000; principal and
interest are payable in monthly
installments of approximately
$28,000 through June 1, 2003 1,786,402 2,005,497
6.05% advance in the amount of
$6,000,000; payable in monthly
installments of $500,000,
plus interest through July 1,
1997 3,500,000 -
-----------------------------
$6,561,402 $ 3,005,497
=============================
Scheduled principal payments on the advances from Federal
Home Loan Bank of Dallas are as follows:
1997 $ 3,732,376
1998 246,464
1999 261,404
2000 1,277,251
2001 294,059
After 2001 474,848
---------------
$ 6,286,402
===============
NOTE 11: EMPLOYEE BENEFIT PLANS
The Bank has a defined benefit pension plan covering
substantially all full time employees of the Bank and
subsidiaries. Benefits under this plan are based on years of
service and average annual compensation for a five year period.
The Bank's funding policy for the plan is to contribute annually
in an amount not to exceed the amount that can be deducted for
Federal income tax purposes. Contributions of $120,000, $80,000
and $40,000 were made to the plan in 1996, 1995 and 1994,
respectively.
Net pension cost (benefit) included the following
components:
1996 1995 1994
---------------------------------------
Service cost $ 128,229 $ 112,017 $ 103,993
Interest cost 190,065 170,012 161,276
Actual return on
plan assets (199,214) (240,638) (195,175)
Net amortization
and deferral (34,854) 29,618 (34,672)
---------------------------------------
$ 84,226 $ 71,009 $ 35,422
=======================================
The following table sets forth the plan's funded status and
amounts recorded in the consolidated statements of condition:
1996 1995
----------------------------
Actuarial present value of:
Vested benefit obligation $ 2,238,866 $ 1,818,872
Non-vested benefit obligation 30,464 31,484
----------------------------
Total benefit obligation $ 2,269,330 $ 1,850,356
=============================
Projected benefit obligation $(2,680,982) $(2,427,944)
Market value of plan assets 2,472,599 2,388,025
---------------------------
Plan assets in excess of
(less than) projected benefit
obligation (208,383) (39,919)
Unrecognized net loss during
the year 450,076 400,510
Remaining unrecognized net
asset at transition date (173,356) (208,028)
Contributions after measurement
date 120,000 -
----------------------------
Net pension asset $ 188,337 $ 152,563
=============================
The weighted average discount rate and rate of increase in
future compensation levels used in determining the actuarial
present value of the projected benefit obligation were 8% and 4%,
respectively. The expected long-term rate of return on plan
assets was 8%. Plan assets consist primarily of U. S. Government
securities and bank certificates of deposit.
The Bank has a profit and savings plan which includes
features such as an Employee Stock Option Plan and a 401(k) plan
which provides for certain salary deferrals, covering
substantially all full time employees of the Bank and
subsidiaries. Prior to 1996 the Bank did not match employee
contributions, but made contributions to the plan only at the
discretion of the Board of Directors. Discretionary contributions
to this plan were $25,000 in 1996, $40,000 in 1995 and $25,000 in
1994. In addition, in 1996 the Bank began to match employees
401(k) contributions equal to 50% of the employee's first 5% of
salary deferral. Total matching contributions amounted to
approximately $95,000 in 1996.
At December 31, 1996, the profit and savings plan owned
108,101 shares of the Company's common stock and the pension plan
owned 3,600 shares of the Company's common stock.
NOTE 12: OTHER OPERATING EXPENSE
Significant components of other operating expense are
summarized as follows:
1996 1995 1994
--------------------------------------
Regulatory insurance and fees $ 88,592 $ 510,220 $847,441
Advertising and promotion 500,538 399,452 382,281
Stationery and supplies 494,244 417,554 425,036
Professional fees 320,797 533,401 302,606
Communications 475,557 428,424 435,978
Postage and carriers 521,070 438,414 428,703
Other 1,908,355 2,042,775 2,166,524
--------------------------------------
$4,309,153 $ 4,770,240 $4,988,569
======================================
NOTE 13: INCOME TAXES
The components of income tax expense (benefit) are as
follows:
FEDERAL STATE TOTAL
----------------------------------------
1996:
CURRENT $ 2,928,859 $ 86,262 $ 3,015,121
DEFERRED (3,991) (146,795) (150,786)
------------------------------------------
TOTAL $ 2,924,868 $ (60,533) $ 2,864,335
===========================================
1995:
Current $ 2,225,413 $ - $ 2,225,413
Deferred (207,417) - (207,417)
-------------------------------------------
Total $ 2,017,996 $ - $ 2,017,996
============================================
1994:
Current $ 1,792,094 $ - $ 1,792,094
Deferred (202,361) - (202,361)
------------------------------------------
Total $ 1,589,733 $ - $ 1,589,733
===========================================
The differences between actual income tax expense and
expected income tax expense are summarized as follows:
1996 1995 1994
--------------------------------------
Amount computed using the
statutory rates on income
before income taxes $ 3,485,500 $ 2,811,300 $2,187,400
Increase (decrease) resulting
from:
Tax exempt income,
net of disallowed interest
deduction (609,400) (662,100) (649,400)
State income tax benefit,
net of Federal effect (40,000) - -
Small life insurance company
deduction - (68,100) (51,700)
Amortization of intangible
assets 33,000 36,900 54,600
Other, net (4,765) (100,004) 48,833
----------------------------------------
$2,864,335 $ 2,017,996 $1,589,733
==========================================
The components of deferred income tax expense (benefit) are
as follows:
1996 1995 1994
----------------------------------------
Financial loan loss provision
in excess of tax provision $ (229,100) $ (279,600) $(159,100)
Tax depreciation greater (less)
than financial depreciation (600) 8,100 (26,000)
Life insurance income 12,500 (19,200) 3,100
Other real estate 2,200 27,500 (3,800)
Federal Home Loan Bank stock
dividends 37,800 33,600 33,200
Accrued expenses (70,600) (32,400) (18,600)
Prior period adjustment 128,547 (12,645) (17,847)
Other, net (31,533) 67,228 (13,314)
----------------------------------------
$(150,786) $ (207,417) $(202,361)
=========================================
The components of the recorded net deferred tax asset at
December 31, 1996 and 1995, consist of the following:
1996 1995
-------------------------------
Allowance for possible loan
losses $ 1,287,100 $ 1,058,000
Depreciation (206,400) (207,000)
Prepaid pension asset (70,100) (51,900)
Life insurance income 36,900 49,400
Other real estate 18,800 21,000
Federal Home Loan Bank stock
dividends (104,600) (66,800)
Market valuation for securities
available for sale (169,915) (359,883)
Accrued expenses 121,600 51,000
Prior period adjustment - 128,547
Other, net 63,337 13,605
------------------------------
$ 976,722 $ 635,969
==============================
NOTE 14: PREFERRED STOCK
The Company is authorized to issue 500,000 shares of
cumulative Class A voting preferred stock of no par value and
500,000 shares of cumulative Class B non- voting preferred stock
of no par value. Dividend rates, redemption terms and conversion
terms may be set by the Board of Directors.
NOTE 15: COMMITMENTS AND CONTINGENCIES
The Company and Bank, in the normal course of business, are
defendants in certain legal claims. Management and legal counsel
are of the opinion that these actions will not have a material
effect on the Company's consolidated financial position.
The consolidated financial statements do not reflect various
commitments and contingent liabilities which arise in the normal
course of business and which involve elements of credit risk,
interest rate risk and liquidity risk. The Bank makes commitments
to extend credit and issues standby and commercial letters of
credit in the normal course of business to fulfill the financing
needs of its customers.
Commitments to extend credit are agreements to lend money to
customers pursuant to certain specified conditions and generally
have fixed expiration dates or other termination clauses. Credit
card arrangements represent the amount that preapproved credit
limits exceed actual balances. Since many of these commitments
are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements. When making these commitments, the Bank applies the
same credit policies and standards as it does in the normal
lending process. Collateral is obtained based upon the Bank's
assessment of a customer's credit worthiness.
Standby and commercial letters of credit are conditional
commitments issued by the Bank to guarantee the performance of a
customer to a third party. When issuing letters of credit, the
Bank applies the same credit policies and standards as it does in
the normal lending process. Collateral is obtained based upon the
Bank's assessment of a customer's credit worthiness.
The maximum credit exposure in the event of nonperformance
for loan commitments and standby letters of credit and credit
card arrangements is represented by the contract amount of the
instruments.
A summary of commitments and contingent liabilities at
December 31, 1996, is as follows:
Commitments to extend credit $ 25,912,000
Standby letters of credit 1,224,000
Credit card arrangements 3,450,000
--------------
$ 30,586,000
==============
NOTE 16: REGULATORY MATTERS
Federal banking regulations require that the Bank maintain
certain cash reserves based on a percent of deposits. This
requirement was approximately $7,728,000 at December 31, 1996.
The Company and its subsidiary bank are subject to various
regulatory capital requirements administered by Federal banking
agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary
actions by regulators that, if undertaken, could have a direct
material effect on the financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt
corrective action, specific capital guidelines that involve
quantitative measures of assets, liabilities and certain
off-balance-sheet items are calculated under regulatory
accounting practices must be met. The capital amounts and
classification are also subject to qualitative judgments by the
regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure
capital adequacy require the maintenance of minimum amounts and
ratios (set forth in the table below) of Total and Tier I Capital
(as defined in the regulations) to risk- weighted assets (as
defined), and of Tier I Capital (as defined) to average assets
(as defined). Management believes, as of December 31, 1996, that
all capital adequacy requirements have been met.
As of December 31, 1995, the date of the most recent
examination by the Federal Deposit Insurance Corporation, the
Bank was categorized as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well
capitalized the Bank must maintain minimum total risk- based,
Tier I risk-based, Tier I leverage ratios as set forth in the
table. There are not conditions or events since that notification
that management believes have changed the category.
The Company's actual capital amounts and ratios as of
December 31, 1996, are also presented in the table (in thousands
of dollars):
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
_________________________________________________________________________
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Total capital
(to risk weighted assets) $ 50,509 14.22% $ 28,410 8.00% $ 35,512 10.00%
Tier I capital
(to risk weighted assets) 46,070 12.97% 14,205 4.00% 21,307 6.00%
Tier I capital
(to average assets) 46,070 8.73% 21,098 4.00% 26,372 5.00%
=========================================================================
</TABLE>
NOTE 17: DIVIDENDS
Cash dividends as disclosed in the consolidated statements
of stockholders' equity for 1995 and 1994, include dividends paid
by the Company to its shareholders and by Farmers and Merchants
Bank to its shareholders prior to the pooling transaction. Per
share amounts are based on the total combined dividend and the
weighted average number of shares outstanding after giving effect
to the 1995 stock split and pooling transaction. A summary of
dividends follows:
1995 1994
---------------------------
First M&F Corporation $ 1,730,890 $ 1,335,450
Farmers and Merchants Bank 300,000 200,000
---------------------------
$ 2,030,890 $ 1,535,450
============================
Dividends paid by the Bank are the primary source of funds
available to the Company for payment of dividends to its
shareholders and other cash needs. Applicable Federal and state
statutes and regulations impose restrictions on the amounts of
dividends that may be declared by the Bank. In addition to the
formal statutes and regulations, regulatory authorities also
consider the adequacy of the Bank's total capital in relation to
its assets, deposits and other such items and, as a result,
capital adequacy considerations could further limit the
availability of dividends from the Bank. These restrictions are
not anticipated to have a material effect on the ability of the
Bank to pay dividends to the Company.
NOTE 18: PRIOR PERIOD ADJUSTMENT
The Company has restated its previously issued 1995 and 1994
financial statements to correct an error in the computer loan
master file of the Bank's finance company subsidiary that
resulted in the write off of loan balances of the finance
company. The error occurred due to incorrect coding procedures on
loans that had been charged off that allowed the unearned income
associated with these loans to continue to amortize and be
recognized as income from 1990 forward. The amounts that were
amortized were incorrectly reflected as loan principal on the
previously issued financial statements.
As a result of this correction, previously reported retained
earnings as of January 1, 1994, were reduced by $190,342, which
is net of applicable income taxes of $98,055. The effect of this
adjustment on previously reported financial statements is as
follows:
1995 1994
------------------------------
Income before income taxes:
As previously reported $ 8,305,448 $ 6,485,830
As restated 8,268,257 6,433,340
==============================
Net income:
As previously reported $ 6,274,807 $ 4,878,250
As restated 6,250,261 4,843,607
==============================
Earnings per share:
As previously reported $ 1.90 $ 1.56
As restated 1.90 1.55
==============================
Retained earnings at
December 31:
As previously reported $16,492,206 $12,248,289
As restated 16,242,675 12,023,304
==============================
NOTE 19: FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 (SFAS
107), "Disclosures about Fair Value of Financial Instruments"
requires that the Company disclose estimated fair value for its
financial instruments. However, such disclosures may be deemed
not to be practicable for certain classes of financial
instruments. A summary of financial instruments and related
disclosures follows:
Cash and due from banks, interest bearing deposits with
banks and Federal funds sold - The net book value of these
financial instruments approximates fair value due to the
immediate availability on short maturity of these investments.
Investments -- Fair value of these financial instruments is
considered to be their quoted market value as disclosed in note
3.
Loans -- The fair value of variable rate loans that reprice
frequently, and with no significant changes in credit risk, are
based on carrying values. The fair value of fixed rate loans is
estimated by discounting the future cash flows, using the current
rates at which these loans would currently be made to borrowers
with similar credit ratings and similar maturities. The carrying
value of loans, net of the reserve for possible loan losses, is
approximately $340,763,000 and $287,374,000 and the estimated net
fair value of loans is $339,399,000 and $285,178,000 at December
31, 1996 and 1995.
Deposits -- The fair value of demand deposits, NOW accounts,
money market accounts and savings deposits is the carrying amount
at the reporting date. The fair value of certificates of deposit
is estimated by discounting the future cash flows, using current
market rates for deposits of similar maturities. The carrying
value of deposits is approximately $464,094,000 and $405,863,000
and the estimated net fair value of deposits is $463,428,000 and
$406,204,000 at December 31, 1996 and 1995.
Short-term and other borrowings -- The net book value of
these financial instruments approximates fair value due to the
short term nature of these items or their applicable interest
rates and repricing and repayment terms.
Commitments to extend credit -- As disclosed in note 15, the
Bank has certain commitments to extend credit at December 31,
1996. These commitments include different types of borrowers,
collateral requirements, maturity dates, interest rates and
repricing schedules. Due to the effort and difficulty in
implementing a valuation model to estimate the fair value of
these commitments, the Bank does not consider the disclosure to
be practicable for these items. However, due to the pricing,
terms and conditions for the outstanding commitments to extend
credit, in the opinion of management, the estimated fair value of
commitments to extend credit is not materially different from the
stated amounts as disclosed in note 15.
NOTE 20: SUMMARIZED FINANCIAL INFORMATION OF FIRST M&F
CORPORATION
Summarized financial information of First M & F Corporation
(parent company only) is as follows:
STATEMENTS OF CONDITION 1996 1995
ASSETS -------------------------
Cash $ 5,038 $ 185,164
Investment in subsidiary 49,317,454 45,211,454
Other investments 22,500 22,500
Other assets 18,030 -
Land and building 70,558 73,476
-------------------------
$49,433,580 $45,492,594
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 70,000 $ 935,066
Note payable to bank 275,000 -
Other liabilities - 38,098
Stockholders' equity 49,088,580 44,519,430
-------------------------
$49,433,580 $45,492,594
=========================
STATEMENTS OF INCOME 1996 1995 1994
INCOME:
Dividends received from
subsidiary $3,000,000 $ 2,450,000 $1,600,000
Equity in undistributed
earnings of subsidiary,
net of amortization 4,475,208 3,931,154 3,314,807
Other income 6,770 6,141 13,410
-----------------------------------
Total income 7,481,978 6,387,295 4,928,217
-----------------------------------
EXPENSES:
Interest 53,341 109,737 116,743
Other expenses 79,511 67,395 8,578
-----------------------------------
Total expenses 132,852 177,132 125,321
-----------------------------------
Income before income
taxes 7,349,126 6,210,163 4,802,896
Income tax benefit 40,374 40,098 40,711
-----------------------------------
Net income $7,389,500 $6,250,261 $4,843,607
===================================
STATEMENTS OF CASH FLOWS
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $7,389,500 $6,250,261 $4,843,607
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Equity in undistributed
earnings of subsidiary (4,475,208) (3,931,154) (3,314,807)
Other, net (53,154) (67,394) (7,716)
------------------------------------
Net cash provided by
operating activities 2,861,138 2,251,713 1,521,084
------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additional investment in
subsidiary - (3,500,000) -
----------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase (decrease) in:
Short-term borrowings (865,066) 2,119 (1,144,643)
Note payable to bank 275,000 (502,000) 500,000
Cash dividends (2,545,098) (1,730,890)(1,335,450)
Proceeds from sale of stock - 3,510,000 -
Treasury stock transactions 93,900 - -
Net cash provided by -----------------------------------
(used in) financing
activities (3,041,264) 1,279,229 (1,980,093)
-----------------------------------
Net increase (decrease)
in cash (180,126) 30,942 (459,009)
Cash at January 1 185,164 154,222 613,231
----------------------------------
CASH AT DECEMBER 31 $ 5,038 $ 185,164 $ 154,222
==================================
<PAGE>
SELECTED FINANCIAL DATA
FIRST M&F CORPORATION AND SUBSIDIARY
(In Thousands, Except Per Share and Dividend Data)
<TABLE>
Year Ended December 31, 1996 1995 1994 1993 1992
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME
Total interest income $ 41,496 $ 37,417 $ 30,157 $27,749 $ 29,109
Total interest expense 19,541 17,510 12,464 11,127 12,711
Net interest income 21,955 19,907 17,693 16,622 16,398
Provision for loan losses 1,221 1,509 882 1,070 1,274
Other operating income 4,436 4,240 3,444 3,222 3,905
Other operating expense 14,916 14,370 13,821 13,058 12,999
Income taxes 2,864 2,018 1,590 1,418 604
Net income $ 7,390 $ 6,250 $ 4,844 $ 4,288 $ 5,426
Earnings per share $ 2.18 $ 1.90 $ 1.55 $ 1.37 $ 1.75
=======================================================
Dividends per share $ 0.75 $ 0.62 $ 0.49 $ 0.49 $ 0.43
=======================================================
Weighted shares outstanding 3,393,209 3,294,736 3,120,786 3,120,414 3,109,194
=======================================================
SELECTED BALANCES
Total assets $ 523,760 $ 505,558 $ 446,255 $405,961 $ 373,693
Investment securities 143,597 181,004 153,231 151,875 163,747
Net loans 340,763 287,374 258,339 204,783 171,911
Earning assets 489,484 473,943 412,976 374,537 349,037
Deposits 464,094 405,863 358,844 329,509 347,110
Short-term borrowings 70 48,294 44,822 37,804 3,744
Other borrowings 6,561 3,005 5,232 3,409 2
Stockholders' equity 49,089 44,519 34,484 32,784 29,975
SELECTED RATIOS
Return on average assets(1) 1.40% 1.32% 1.15% 1.12% 1.49%
Return on average equity(1) 15.80% 15.79% 14.43% 13.80% 19.59%
Average capital to
average assets(1) 8.87% 8.35% 7.94% 8.11% 7.64%
Dividend payout 34.44% 32.37% 31.47% 34.86% 23.97%
</TABLE>
(1) Exclusive of valuation allowance for securities available
for sale.
<PAGE>
PRINCIPAL MARKETS AND PRICES OF THE COMPANY'S COMMON STOCK
FIRST M&F CORPORATION AND SUBSIDIARY
Effective September 1, 1996, the Company's common stock was
listed with the National Association of Securities Dealers, Inc.
Automated Quotation National Market System (NASDAQ) and became
subject to trading and reporting over the counter with most
securities dealers under the symbol "FMFC". The following table
sets forth the high and low closing prices of the common stock as
reported since September, 1996, on the NASDAQ market. Prices
prior to that date were based upon transactions as reported to
the Company.
Low High
1996
First Quarter $ 22.00 $ 24.00
Second Quarter $ 24.00 $ 26.00
Third Quarter $ 26.00 $ 28.00
Fourth Quarter $ 25.00 $ 29.00
1995
First Quarter $ 13.00 $ 13.00
Second Quarter $ 13.00 $ 13.00
Third Quarter $ 13.00 $ 13.00
Fourth Quarter $ 20.00 $ 22.00
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
FIRST M&F CORPORATION AND SUBSIDIARY
FINANCIAL CONDITION
The purpose of this discussion is to focus on significant
changes in financial condition and results of operations of the
Company and its banking subsidiary during the past three years.
The discussion and analysis is intended to supplement and
highlight information contained in the accompanying consolidated
financial statements and selected financial data presented
elsewhere in this report. Prior year information has been
restated to reflect 1995 acquisitions accounted for using the
pooling-of-interest accounting method and prior period per share
data has been restated to reflect a 2-for-1 stock split effected
through the issuance of a 50 percent stock dividend in August,
1995.
SUMMARY
The performance for the Company during 1996 was the best in
the history of the organization. Net income for 1996 was $7.390
million, an 18% increase over the previous high of $6.250 million
in 1995. Net income for 1995 was 29% higher than 1994 net income
of $4.844 million. The increases in net income per common share
for 1996 and 1995 were 15% and 22%, respectively. Net income per
common share increased 13% during 1994. Pretax income for 1996
was up $1.99 million or 24% over 1995 while income tax expense
increased approximately 42% or $846 thousand due to increase in
the effective tax rate from 24.4% in 1995 to 27.9% in 1996,
primarily as a result of an increase in the Company's income
subject to taxation.
A significant factor in the growth of the Company was the
acquisition of Farmers and Merchants Bank of Bruce, Mississippi
on December 31, 1995, which brought approximately $32 million of
assets in a transaction accounted for as a pooling-of-interest.
Additionally, 1996 operations include the full year's performance
of new branch locations constructed, staffed and opened in the
Starkville, Philidelphia, and Grenada market areas in late 1995
which have contributed to the loan and deposit growth of the
Company in these markets.
At year end 1996, total assets were $524.0 million, an
increase of 3.60% over year end 1995 and 17.37% over 1994. The
return on average assets for 1996 was 1.40% as compared to 1.32%
for 1995 and 1.15% in 1994. The return on average equity in 1996
was 15.80% as compared to 15.79% in 1995 and 14.43% in 1994. All
general banking ratios supported the overall improved performance
of the company during 1996.
The average equity/average assets ratio for the Company at
December 31, 1996, of 8.87%, reflecting the additional capital
infusion of approximately $3.5 million through the sale of
270,000 shares of common stock during 1995, and the acquisition
discussed above, places the Company well above the minimum
capital guidelines. The tier-1 and total risk-based capital
ratios of 12.97% and 14.22%, respectively, at December 31, 1996,
categorize the bank subsidiary of the Company as "well
capitalized" according to the Federal Deposit Insurance
Corporation Act of 1991 (FDICIA).
FINANCIAL CONDITION
The Company's trend in growth and mix of assets and
liabilities is illustrated by the following summary of average
balances by major portfolios and components of interest earning
assets and interest bearing liabilities (in thousands of
dollars):
<TABLE>
1996 1995
-------------------------------------------------------------------------------------
AVERAGE INCREASE PERCENT AVERAGE INCREASE PERCENT
AVERAGE ASSETS BALANCE (DECREASE) CHANGE BALANCE (DECREASE) CHANGE
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold $ 12,839 $ 2,993 30.40% $ 9,846 $ 3,032 44.50%
Loans, net of unearned
discount 317,013 41,591 15.10% 275,422 44,729 19.39%
Interest bearing bank
balances 3,934 1,444 41.00% 2,790 414 17.42%
Taxable investment
securities 120,356 (935) -0.77% 121,291 (713) -0.58%
Tax-exempt investment
securities 38,324 (2,148) -5.13% 40,472 3,281 8.82%
-------------------------------------------------------------------------------------
Total interest
earning assets 492,466 42,645 9.48% 449,821 50,743 12.72%
Non interest earning
assets 34,535 3,735 12.13% 30,800 26 0.08%
-------------------------------------------------------------------------------------
Total average assets $ 527,001 $ 46,380 9.65% $ 480,621 $ 50,769 11.81%
=====================================================================================
AVERAGE LIABILITIES AND
CAPITAL
DDA and savings $ 175,383 $ 30,413 20.98% 144,970 $ 28 0.02%
Time deposits 220,038 28,748 15.03% 191,290 31,002 19.34%
Short-term funds 19,330 (26,520) -57.84% 45,850 9,637 26.61%
Federal home loan bank
advances 5,937 2,455 70.51% 3,482 (1,387) -28.49%
-------------------------------------------------------------------------------------
Total interest
bearing liabilities 420,688 35,096 9.10% 385,592 39,280 11.34%
Non interest bearing
liabilities and capital 106,313 11,284 11.87% 95,029 11,489 13.75%
-------------------------------------------------------------------------------------
Total average
liabilities and
capital $ 527,001 $ 46,380 9.65% $ 480,621 $ 50,769 11.81%
=====================================================================================
</TABLE>
EARNING ASSETS
Average earnings asset mix for 1996 was 60% for loans and
30% for investment securities. This mix compared to 57% for loans
and 34% for investment securities in 1995 and 54% loans and 37%
investments in 1994. The shift in average earning assets has been
a result of the Company being able to increase and expand its
operations in several key Mississippi markets -- Oxford,
Starkville, Philidelphia and Madison/Rankin Counties -- while
reducing the investment securities portfolio. Average balances of
federal funds sold have reflected a general increase over the
three-year period in support of the funding requirements
necessitated by this change in mix.
Additionally, during 1996, the Company absorbed the loss of
a major state university deposit/overnight repurchase
relationship that had existed over a six-year period and had
provided a significant source of funding for the Company. The
payout of this relationship involved securities specifically
purchased with maturities in June, July and August, 1996, to
effect the roll-out of approximately $47 million in funds during
those months.
The mix of earning assets is monitored on a continuous basis
in order to react to interest rate movements and to maximize
returns on earnings assets.
LOANS
Average loans in 1996 increased 15% over 1995; 1995 average
loans increased 19% over 1994. Total loans outstanding at year
end 1996 increased 18% over previous year end levels. The growth
in the portfolio resulted from the Company's ongoing efforts to
increase the portfolio through concerted loan origination
programs. Additionally, the Company has placed emphasis on
securing quality paper from indirect lending with automobile
dealers in Central Mississippi.
In 1996, commercial, financial and agricultural lending
increased 25% over 1995; residential real estate increased 17%;
non-residential real estate increased 18%; and, consumer lending
increased 18%. These continue to reflect the diversity of the
markets served, and the general condition of the economy during
the year. Management does not anticipate this level of lending
and growth to continue during 1997, due to the industry trends in
overall loan quality and the increasing levels of consumer
bankruptcies.
INVESTMENT SECURITIES
The composition of the total investment securities portfolio
reflects the Company's strategy of maximizing portfolio yields
commensurate with risk and liquidity considerations. The primary
objectives of this strategy are to maintain an appropriate level
of liquidity and provide a tool to assist in controlling the
Company's interest rate position while producing an adequate
level of interest income. As discussed above, the average
balances of the portfolio was significantly influenced by the
loss of a major contractual deposit relationship which was paid
out over approximately three to four months as securities
purchased for this purpose matured. The portfolio, since
reconstructed through an aggressive deposit gathering campaign
and minimal advances from The Federal Home Loan Bank of Dallas,
performed well during 1996, contributing interest income at a
fully taxable equivalent rate of 6.55%, as compared to 6.50% for
1995 and 6.28% for 1994. The portfolio continues to be maintained
on a relatively short life (2.7 year average maturity) at
December 31, 1996, as compared to slightly shorter duration in
1995 and 1994 as a result of structured maturities to facilitate
the maturity of the contractual deposit relationship. The Company
continues to place emphasis on tax-exempts and believes this
investment strategy sound in light of tax planning and local
community and statewide tax-exempt investment opportunities. The
Company's tax equivalent yield on this component of the portfolio
was 7.80% for 1996, compared to 7.96% in 1995 and 8.09% in 1994.
The mix of the portfolio continues to reflect diversity in
strategy. At December 31, 1996, the mix reflected 15.8% in
treasuries; 20.9% in agencies; 26.9% in municipals and 29.4% in
mortgage-backs. Gains and losses in the securities available for
sale segment of the portfolio reflected a minor amount of gain
for 1996 as compared to 1995 and 1994 where repositioning losses
were taken as a strategy to improve overall long-term yields.
Summaries of carrying values and market values by major
components of the portfolio can be seen in the footnotes to the
consolidated financial statements. The footnotes also reflect
summaries of maturities and unrealized gains and losses in the
portfolio by years.
DEPOSITS AND BORROWED FUNDS
Changes in the Company's markets, the loss of the
contractual funds relationship, and in general, the overall good
economy enjoyed by most banking institutions, influenced not only
the asset mix, but the deposit mix of the company during 1996.
Average interest-bearing deposit and savings accounts increased
21% and time deposits increased 15% during 1996. Short-term
funds, represented by the contract overnight repurchase
agreement, as explained above, terminated July 1,1996, and
resulted in a loss of approximately $47 million in funds. To
respond, the Company introduced a new savings product, The
Liberty Fund, in July, 1996, and a certificate of deposit sales
campaign in late fall 1996, both of which were highly successful
in attracting new deposit monies. Cost of funds were not
materially affected as a result of this repositioning of the mix
of deposits. The average cost of interest bearing funds for 1996,
including advances from The Federal Home Loan Bank of Dallas, was
4.65%. This compared to 4.54% for 1995 and 3.60% for 1994. Data
relative to short-term borrowings are shown in the detail
footnotes to the consolidated financial statements.
LIQUIDITY MANAGEMENT
Liquidity is the ability of a bank to convert assets into
cash and cash equivalents without significant loss and to raise
additional funds by increasing liabilities. Liquidity management
involves maintaining the Company's ability to meet the day-to-day
cash flow requirements of customers, whether they wish to
withdraw funds or to borrow funds to meet their capital needs.
Asset liability management functions not only assure adequate
liquidity in order for the bank to meet the needs of customers,
but also to maintain the appropriate sensitivity between interest
earning assets and interest bearing liabilities. Daily monitoring
of the sources and uses of funds is necessary to maintain an
acceptable cash position that meets these requirements. As
disclosed in the consolidated statement of cash flows, the cash
provided and cash used in the various activities of bank
operations is reflected for the years, 1996, 1995 and 1994.
INTEREST RATE SENSITIVITY MANAGEMENT
Interest rate sensitivity is a function of the repricing
characteristics of the Company's portfolio of assets and
liabilities. Interest rate sensitivity management focuses on
repricing relationships of these during periods of changing
market interest rates. Effective management seeks to minimize the
effect of interest rate movement on net interest income. At
December 31, 1996, the Company's various assets and liabilities
that were subject to repricing indicated a cumulative gap of net
assets of $26.079 or 4.97% repricing within 90-days. At the
180-day frame, the Company's cumulative gap of net assets
repricing was $15.665 million or 2.98%. The Company's asset
liability committee, comprised of executive management, sets the
day-to-day guidelines and approves strategies affecting net
interest income within the policy limits approved by the board of
directors.
CAPITAL RESOURCES
Capital adequacy is continuously monitored by the Company to
promote depositor and investor confidence and provide a solid
foundation for future growth of the organization. Dividends paid
investors of $2.545 million or $0.75 per common share during 1996
represents a 21% increase over 1995 and a dividend payout ratio
of 34%. The dividend payout for 1995 was 32%. The Company intends
to continue a dividend payout ratio that is competitive in the
banking industry, dependent on future earnings, the assessment of
future capital needs, and such other factors which may affect the
Company.
The Company has satisfied its capital requirements
principally through the retention of earnings, however, the
acquisition at December 31, 1995 and the 1995 capital infusion
assisted in strengthening this position. Average shareholder
equity for 1996 was 8.87% compared to 8.35% for 1995.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income is the largest component of the
Company's net income and represents the interest earned on
interest earning assets less the cost of interest bearing
liabilities. Net interest income for 1996 was $22.0 million as
compared to $19.9 million for 1995 and $17.7 million for 1994.
The approximate 10% increase for 1996 was attributable to several
factors including an increase in average loans, a closer
attention to funding costs of deposits, and the improved mix of
funding sources. Additionally, as a result of the loss of the
contract deposit relationship, a slight improvement in net margin
occurred in 1996. During 1995 and 1994, a slight liquidation and
repositioning in the securities portfolio, in an attempt to
improve overall portfolio yield, was accomplished. Although these
factors contributed to the Company being able to control and
monitor the net interest margin, the other contributors have been
the steady local economies in which the Company participates and
the demand for consumer and commercial loans.
PROVISION FOR LOAN LOSSES
During 1996 the Company's provision for loan losses was
$1.221 million, a decrease of 19% over 1995's provision of $1.509
million. The provision for 1994 was $1.070 million. The total
provision for 1996 was approximately $300 thousand over estimated
budget targets for 1996, as credit quality deteriorated slightly
in the fourth quarter of 1996 as past dues, charge-offs and
bankruptcies increased. Additionally, credit card quality was
noted to be slightly down, while repossessions increased.
Management reacted to these indicators and made provision during
the fourth quarter. The overall condition of the loan portfolio
from a credit quality standpoint is considered superior
considering the various indicators available, such as past dues,
collections, and other factors. Management has budgeted for the
1997 monthly loss provision, not only as an assessment of
adequacy, but for the general growth of the loan portfolio as
well. The ratio of the allowance for possible loan losses to
outstanding loans at December 31, 1996, was 1.30%, compared to
1.46% for 1995, and 1.29% for 1994.
NONINTEREST INCOME
One of the Company's key long-term strategies is to boost
its growth in noninterest income. Management continues to
emphasize this area of operations through increased focus and
budget/incentive programs. Total other operating income for 1996
was $4.436 million as compared to $4.240 for 1995 and $3.444 for
1994. Service charge on deposit related products accounted for
the majority of this category in all years presented and, during
1996, increased 11% over 1995. Credit insurance income of $465
thousand for 1996 represented an 8% increase over 1995's level of
$429.
NONINTEREST EXPENSE
Another strategy of the Company is to contain noninterest
expense within an overall company growth discipline. At December
31, 1996, the Company's efficiency ratio, an indicator of control
of noninterest expense, was 56% and compared favorable with a
similar ratio of 56% for 1995. These levels have been achieved as
a result of improvements in the overall monitoring and control of
expense through the budgeting and review process.
Salaries and benefits comprise the largest portion of
noninterest expense and reflected an increase of approximately
11% for 1996. This compared to an increase of 14% for 1995 and
10% for 1994. Both 1996 and 1995 reflect the increases in
staffing and compliment required as the result of new branch
facilities completed in late 1995. Additional staffing has also
been required in several locations as a result of increased
volume and demand. Details of additional changes in levels of
other expenses have been shown in the footnotes to the
consolidated financial statements and in the statements
themselves.
INCOME TAXES
The Company's effective tax rate for 1996 was 27.9%,
compared to 24.4% for 1995 and 24.7% for 1994. This change was
primarily the result of a reduction in tax exempt income and the
loss of the small life insurance company exemption in 1996 as a
result of exceeding $500 million in consolidated assets.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM 1996 CONSOLIDATED AUDITED FINANCIAL STATEMENTS AND GUIDE 3
SUMMARY FINANCIAL DATA FILED AS PART OF FORM 10-K FOR THE YEAR
ENDED DEC 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH DATA.
</LEGEND>
<MULTIPLIER> 1,000
<C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 20,213
<INT-BEARING-DEPOSITS> 150
<FED-FUNDS-SOLD> 500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 86,444
<INVESTMENTS-CARRYING> 57,153
<INVESTMENTS-MARKET> 57,536
<LOANS> 345,238
<ALLOWANCE> 4,475
<TOTAL-ASSETS> 523,760
<DEPOSITS> 464,094
<SHORT-TERM> 3,286
<LIABILITIES-OTHER> 3,946
<LONG-TERM> 3,345
<COMMON> 16,973
0
0
<OTHER-SE> 523,760
<TOTAL-LIABILITIES-AND-EQUITY> 523,760
<INTEREST-LOAN> 31,239
<INTEREST-INVEST> 9,366
<INTEREST-OTHER> 891
<INTEREST-TOTAL> 41,496
<INTEREST-DEPOSIT> 18,211
<INTEREST-EXPENSE> 19,541
<INTEREST-INCOME-NET> 21,955
<LOAN-LOSSES> 1,221
<SECURITIES-GAINS> 13
<EXPENSE-OTHER> 14,916
<INCOME-PRETAX> 10,254
<INCOME-PRE-EXTRAORDINARY> 10,254
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,390
<EPS-PRIMARY> 2.18
<EPS-DILUTED> 2.18
<YIELD-ACTUAL> 4.46
<LOANS-NON> 206
<LOANS-PAST> 968
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,250
<CHARGE-OFFS> 1,147
<RECOVERIES> 151
<ALLOWANCE-CLOSE> 4,475
<ALLOWANCE-DOMESTIC> 4,165
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 310
</TABLE>
