<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 30549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1995
Commission File No. 0-10657
FIRST NATIONAL BANCORP
(Exact name of registrant as specified in its charter)
Georgia 58-1415138
(State of incorporation)(I.R.S. Employer Identification No.)
303 Jesse Jewell Parkway, Suite 700
Gainesville, Georgia 30501
(Address of principal executive offices)
(770) 503-2000
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding twelve months (or for such shorter period that
the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past 90 days.
Yes /X/ No / /
On August 7, 1995, 20,482,193 shares of Registrant's common
stock, $1.00 par value, were outstanding.
<PAGE>
FIRST NATIONAL BANCORP
FORM 10-Q
TABLE OF CONTENTS
Part I. Financial Information Page
Item 1.Financial Statements (unaudited)
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2.Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. Other Information
Item 4. Submission of Matters to a Vote
of Security Holders 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
<PAGE>
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
(unaudited)
June 30 December 31 June 30
1995 1994 1994
ASSETS
Cash and due from banks $ 81,153 $ 84,260 $ 72,710
Federal funds sold 23,395 28,908 22,270
Cash and cash equivalents 104,548 113,168 94,980
Interest-bearing deposits in other 12,883 16,259 31,046
financial institutions
Investment securities available-for-sale 596,309 549,432 504,956
Investment securities held-to-maturity
(market value $166,328, $156,044 and
$154,635, respectively) 161,888 157,567 149,587
Loans, net of unearned income 1,475,360 1,424,246 1,386,575
Allowance for loan losses (20,036) (20,441) (24,397)
Net loans 1,455,324 1,403,805 1,362,178
Premises and equipment, net 56,433 57,004 56,128
Other assets 76,558 83,313 87,983
Total assets $2,463,943 $2,380,548 $2,286,858
LIABILITIES
Deposits:
Noninterest-bearing demand deposits $ 323,786 $ 331,521 $ 302,990
Interest-bearing checking deposits 182,583 199,645 184,631
Money market deposits 72,516 87,818 93,697
Certificates of deposit less than $100 558,811 480,248 438,119
Certificates of deposit greater 209,543 189,431 179,515
than $100
Other interest-bearing deposits 650,893 654,601 662,797
Total deposits 1,998,132 1,943,264 1,861,749
Federal funds purchased 37,915 44,485 34,677
Securities sold under agreements
to repurchase 60,298 54,217 35,113
Other short-term borrowings 12,257 6,427 11,738
Long-term debt 79,906 80,238 90,858
Other liabilities 27,430 24,960 29,671
Total liabilities 2,215,938 2,153,591 2,063,806
SHAREHOLDERS' EQUITY
Common stock, par value $1 per share, authorized
30,000,000; issued and outstanding 16,573,275
16,540,495 and 16,434,033 shares, 16,573 16,540 16,434
respectively
Additional paid-in capital 68,011 67,606 65,856
Retained earnings 161,567 155,541 147,652
Net unrealized holding gains (losses) on
investment securities available-for-sale 1,854 (12,730) (6,890)
Total shareholders' equity 248,005 226,957 223,052
Total liabilities and
shareholders' equity $2,463,943 $2,380,548 $2,286,858
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans (including fees) $ 35,698 $ 30,155 $ 69,137 $ 58,328
Interest-bearing deposits in other
financial institutions 246 422 473 1,050
Investment securities:
Tax-exempt 2,655 2,571 5,328 5,097
Taxable 9,282 6,800 18,147 12,627
Federal funds sold 462 328 890 627
Total interest income 48,343 40,276 93,975 77,729
INTEREST EXPENSE
Deposits, including interest expense on
certificates
of deposit of $100 or more of $2,171,
$1,663
$4,153 and $3,317, respectively. 19,794 14,148 37,444 27,891
Federal funds purchased and securities
sold under agreements to repurchase 1,567 726 2,986 1,356
Other short-term borrowings 75 56 156 117
Long-term debt 1,111 1,053 2,257 1,851
Total interest expense 22,547 15,983 42,843 31,215
NET INTEREST INCOME 25,796 24,293 51,132 46,514
Provision for loan losses 564 (343) 1,043 23
Net interest income after provision for 25,232 24,636 50,089 46,491
loan losses
NONINTEREST INCOME
Service charges on deposit accounts 2,855 2,758 5,564 5,032
Mortgage loan and other related fees 1,454 2,382 2,655 3,787
Fees for trust services 630 613 1,176 1,155
Credit card fees 411 409 813 783
Insurance premiums and commissions 316 331 621 637
Net gains on sale of investment 214 24 221 187
securities
Other noninterest income 1,225 1,196 2,308 3,028
Total noninterest income 7,105 7,713 13,358 14,609
NONINTEREST EXPENSE
Salaries and employee benefits 11,444 11,051 23,922 21,797
Furniture and equipment 1,380 1,494 2,769 2,892
Postage, telephone and stationary 1,333 1,264 2,663 2,505
Net occupancy 1,229 1,222 2,454 2,371
FDIC insurance premiums 1,103 992 2,199 1,983
Data processing 731 647 1,467 1,237
Promotional 687 751 1,227 1,119
Other noninterest expense 5,088 4,872 9,096 8,760
Total noninterest expense 22,995 22,293 45,797 42,664
Income before income taxes 9,342 10,056 17,650 18,436
Income tax expense 2,562 2,767 4,791 4,693
NET INCOME $ 6,780 $ 7,289 $ 12,859 $
13,743
Weighted-average shares outstanding 16,571 16,416 16,564 16,304
Net income per share $ .41 $ .44 $ .78 $
.84
Dividends declared per share .2075 .1925 .4125 .3825
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 12,859 $ 13,743
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Provision for loan losses 1,043 23
Provision for other real estate losses 495 116
Depreciation 2,697 2,878
(Accretion) amortization, net (3,412) 555
Deferred income tax benefit (918) (4,694)
Net gains on sales of investment securities (221) (187)
Gains on sales of mortgage loan servicing rights --- (2,275)
Gains on sales of assets acquired in foreclosure (529) (282)
Gains on sales of other assets (33) (10)
Excess servicing fees receivable resulting from mortgage loan sales (302) (235)
(Increase) decrease in mortgage loans held-for-sale (14,382) 50,521
Other, net (2,802) 6,606
Net cash (used in) provided by operating activities (5,505) 66,759
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales/calls of investment securities held-to-maturity 5,001 2,887
Proceeds from principal collections on and maturities of
investment securities held-to-maturity 3,275 3,517
Purchases of investment securities held-to-maturity (10,809) (14,778)
Proceeds from sales of investment securities available-for-sale 28,259 5,977
Proceeds from principal collections on and maturities of
investment securities available-for-sale 157,425 88,865
Purchases of investment securities available-for-sale (206,294) (196,001)
Net decrease in interest-bearing deposits in
other financial institutions 3,376 37,707
Net increase in loans (38,972) (39,837)
Proceeds from sales of mortgage loan servicing rights --- 3,168
Purchases of mortgage loan servicing rights (441) (9,750)
Purchases of premises and equipment (2,355) (1,534)
Proceeds from sales of equipment 196 117
Proceeds from sales of assets acquired in foreclosure 4,392 2,305
Net cash and cash equivalents acquired in the purchase of bank --- 24,563
subsidiary
Net cash used in investing activities (56,947) (92,794)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 54,868 (34,724)
Net increase in short-term borrowings 5,341 4,342
Proceeds from the issuance of long-term debt 10,000 33,000
Payments on long-term debt (10,332) (330)
Proceeds from issuance of common stock for stock options exercised 438 1,195
Cash dividends paid on common stock (6,483) (5,438)
Net cash provided by (used in) financing activities 53,832 (1,955)
Net decrease in cash and cash equivalents (8,620) (27,990)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 113,168 122,970
CASH AND CASH EQUIVALENTS AT END OF PERIOD $104,548 $ 94,980
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 42,306 $ 30,737
Income taxes paid $ 5,124 $ 6,779
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions for Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the interim periods are not necessarily indicative
of the results that may be expected for the full year or any other
interim period. Certain reclassifications have been made to amounts
previously presented to conform with current period presentations. Such
reclassifications had no effect on net income. For further information,
refer to the consolidated financial statements and footnotes thereto
incorporated by reference in the Company's annual report on Form 10-K
for the year ended December 31, 1994.
2.BUSINESS COMBINATION
On July 3, 1995, the Company completed its acquisition of FF Bancorp,
Inc. ("FF Bancorp"), New Smyrna Beach, Florida. FF Bancorp was the
holding company of First Federal Savings Bank of New Smyrna Beach,
Florida, a $318 million asset thrift institution, First Federal Savings
Bank of Citrus County, Florida, a $214 million asset thrift
headquartered in Inverness, Florida, and Key Bank of Florida, a $66
million asset commercial bank located in Tampa, Florida. The Company
exchanged 3,884,870 shares of its common stock for all of the 4,706,163
shares of FF Bancorp stock outstanding. No cash, except for 406.55
fractional shares, was paid in the transaction. As of June 30, 1995,
total consolidated assets and equity of FF Bancorp and its subsidiaries
were $631 million and $50 million respectively. The transaction was
accounted for as a pooling-of-interests and, accordingly, a complete set
of all prior period financials will be restated beginning with the
Company's September 30, 1995 Form 10-Q, or earlier, if filing
circumstances so warrant. The following unaudited pro forma combined
balance sheet information of the Company and FF Bancorp at June 30,
1995, gives effect to the acquisition of FF Bancorp:
<TABLE>
<CAPTION>
First FF Pro Forma Pro Forma
National Bancorp Adjustments Consolidated
<S> <C> <C> <C> <C> <C>
Cash and due from banks $ 81,153 $ 10,505 $ (8) (A) $ 91,650
Federal funds sold 23,395 22,120 --- 45,515
Interest-bearing deposits in other financial 12,883 93,742 --- 106,625
institutions
Investment securities available-for-sale 596,309 48,638 --- 644,947
Investment securities held-to-maturity 161,888 2,974 --- 164,862
Loans, net 1,455,324 438,225 --- 1,893,549
Premises and equipment, net 56,433 10,020 --- 66,453
Other assets 76,558 4,944 --- 81,502
Total assets $2,463,943 $631,168 $ (8) $3,095,103
Deposits $1,998,132 $578,720 $ --- $2,576,852
Federal funds purchased and securities sold under
agreements
to repurchase, and other short-term borrowings 110,470 --- --- 110,470
Long-term debt 79,906 --- --- 79,906
Other liabilities 27,430 2,598 --- 30,028
Total liabilities 2,215,938 581,318 --- 2,797,256
SHAREHOLDERS' EQUITY
Common stock 16,573 47 3,838 (A) 20,458
Additional paid-in capital 68,011 21,059 (3,846)(A) 85,224
Retained earnings 161,567 27,723 --- 189,290
Net unrealized holding gains on
investment securities available-for-sale 1,854 1,021 --- 2,875
Total shareholders' equity 248,005 49,850 (8) 297,847
Total liabilities and shareholders' equity $2,463,943 $631,168 $ (8) $3,095,103
</TABLE>
(A) Reflects the acquisition and elimination of 4,706,163 shares of FF
Bancorp common stock.
<PAGE>
The following unaudited pro forma condensed combined statements of
income of the Company and FF Bancorp for each of the three month and six
month periods ended June 30, 1995, give effect to the acquisition of FF
Bancorp:
<TABLE>
<CAPTION>
Three Three Months Ended Six Month Ended
Months Ended June 30 June 30
June 30, 1995 1995 1994 1995 1994
First FF
National Bancorp Pro Forma Combined
<S> <C> <C> <C> <C> <C> <C>
Interest income $ 48,343 $12,149 $60,492 $51,187 $117,545 $98,158
Interest expense 22,547 6,405 28,952 20,987 54,799 40,716
Net interest income 25,796 5,744 31,540 30,200 62,746 57,442
Provision for loan losses 564 --- 564 (343) 1,043 23
Noninterest income 7,105 476 7,581 8,299 14,232 15,491
Noninterest expense 22,995 4,265 27,260 25,381 53,150 48,109
Income before income taxes 9,342 1,955 11,297 13,461 22,785 24,801
Income tax expense 2,562 696 3,258 3,775 6,739 6,794
Net income $ 6,780 $ 1,259 $ 8,039 $ 9,686 $ 16,046 $18,007
Net income per share based on
weighted average shares $ .39 $ .48 $ .78 $ .89
Weighted average number of
outstanding shares 20,456 20,301 20,449 20,189
</TABLE>
Columnar historical information for the Company and FF Bancorp
individually for each period is not presented in the table above since
there are no adjustments which are applicable to the statements of
income and the information presented is simply a result of combined
statement of income numbers of each organization.
3. LOANS
In May 1993, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("FAS") 114, "Accounting
for Creditors by Impairment of a Loan." FAS 114 requires impaired loans
to be measured based on the present value of expected future cash flows,
discounted at the loan's effective interest rate, or at the loan's
observable market price, or the fair value of the collateral if the loan
is collateral dependent, beginning in 1995. In October 1994, the FASB
issued FAS 118, "Accounting by Creditors for Impairment of Loan-Income
Recognition and Disclosures," which amends the requirements of FAS 114
regarding interest income recognition and related disclosure
requirements. On January 1, 1995, the Company adopted FAS 114 and FAS
118. At June 30, 1995, pursuant to the definition within FAS 114, the
Company had approximately $16,369,000 of impaired loans, all of which
are classified as nonaccrual. A valuation reserve in the amount of
$419,000 has been established for approximately $5,734,000 of these
impaired loans.
In May 1995, the FASB issued FAS 122, "Accounting for Mortgage Servicing
Rights and Excess Servicing Receivables and for Securitization of
Mortgage Loans," as an amendment to FAS 65, "Accounting for Certain
Mortgage Banking Activities." This statement is effective for fiscal
years beginning after December 15, 1995, however earlier adoption is
permitted. The Company adopted FAS 122 effective April 1, 1995. FAS
122 requires that a mortgage banking enterprise recognize as separate
assets, rights to service mortgage loans for others regardless of
whether their servicing rights are acquired through either the purchase
or origination of mortgage loans. The statement also requires that the
mortgage banking enterprise assess its capitalized mortgage servicing
rights for impairment based upon the fair value of those rights,
including those rights purchased before adoption of FAS 122. Impairment
should be recognized through a valuation allowance. As a result of the
adoption of FAS 122, the Company recognized a gain of $252,000 during
the three month period ended June 30, 1995. During the three month
period ended June 30, 1995, the Company capitalized all mortgage
servicing rights. At June 30, 1995, the fair value of the Company's
capitalized mortgage servicing rights was $18,321,000 and the valuation
allowance was $266,000. Fair value was estimated by determining the
present value of the estimated future cash flows using discount rates
commensurate with the risks involved. In determining the present value,
the Company stratifies its mortgage servicing rights based on risk
characteristics such as loan type, note rates, origination dates, and
note term.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion will cover results of operations, asset quality,
financial position and capital resources. The information included in this
discussion is intended to assist readers in their analysis of, and should
be read in conjunction with, the consolidated financial statements
presented elsewhere in this report, and the Company's annual report on Form
10-K for the year ended December 31, 1994.
Selected Financial Data
(in thousands, except per share data)
1995 1994 Change %Change
Quarter Ended June 30:
Net income $ 6,780 $ 7,289 $ (509) (7.0)
Net interest income 25,796 24,293 1,503 6.2
Net interest income (FTE) 27,388 25,860 1,528 5.9
Noninterest income 7,105 7,713 (608) (7.9)
Noninterest expense 22,995 22,293 702 3.1
Provision for loan losses 564 (343) 907 264.4
Net income per share .41 .44 (.03) (6.8)
Dividends declared per share .2075 .1925 .015 7.8
Book value per share 14.96 13.57 1.39 10.3
Tangible book value per share 13.48 11.85 1.63 13.8
Weighted average shares 16,571 16,416
outstanding
Shares outstanding at quarter-end 16,573 16,434
Financial Ratios:
Return on average assets 1.13 % 1.28 %
Return on average shareholders' 11.34 13.11
equity
Net interest margin 4.93 4.95
Primary capital to adjusted
assets:
Including intangibles 10.79 10.71
Excluding intangibles 10.47 10.32
Allowance for loan losses to loans,
net of unearned income 1.36 1.76
Selected Balances as of June 30:
Total assets $2,463,943 $2,286,858 $177,085 7.7
Earning assets 2,269,835 2,094,434 175,401 8.4
Loans, net of unearned income 1,475,360 1,386,575 88,785 6.4
Allowance for loan losses 20,036 24,397 (4,361) (17.9)
Securities 758,197 654,543 103,654 15.8
Deposits 1,998,132 1,861,749 136,383 7.3
Short-term borrowings 110,470 81,528 28,942 35.5
Long-term borrowings 79,906 90,858 (10,952) (12.1)
Shareholders' equity 248,005 223,052 24,953 11.2
Six Month Period Ended June 30:
Net income 12,859 13,743 (884) (6.4)
Net income per share .78 .84 (.06) (7.1)
Dividends declared per share .4125 .3825 .03 7.8
Weighted average shares 16,564 16,304
outstanding
Return on average assets 1.09 % 1.25 %
Return on average shareholders' 11.06 12.43
equity
Net interest margin 4.99 4.90
<PAGE>
PERFORMANCE OVERVIEW
In the second quarter of 1995, the Company reported net income of
$6,780,000, a decrease of $509,000, or 7.0%, from the $7,289,000 reported
in the second quarter of 1994. Earnings per share in the second quarter of
1995 were $.41, compared with $.44 reported for the second quarter of 1994,
a decrease of 6.8%. On a year-to-date basis, the Company reported net
income of $12,859,000, a decrease of $884,000, or 6.4%, from the
$13,743,000 reported for the first six months of 1994. Earnings per share
in 1995 were $.78, compared with $.84 reported for the same period in 1994,
a decrease of 7.1%.
Net income in the second quarter produced a return on average assets of
1.13%, compared to the 1.28% reported for second quarter 1994. Return on
average equity was 11.34% for the three months ended June 30, 1995,
compared to 13.11% for the same period in 1994.
Weighted average shares outstanding for the second quarter of 1995
increased to 16,571,450, compared with 16,416,367 reported in the second
quarter of 1994. For the first six months of 1995, weighted average
shares outstanding increased to 16,563,676, compared with 16,304,023 for
the same period in 1994. A majority of the increase in average shares
outstanding for the first six months of 1995 versus 1994 is the result of
the 266,414 shares issued in the acquisition of Metro Bancorp, Inc.
("Metro") on February 28, 1994.
Second quarter and year to date earnings were negatively impacted by
$851,000 of pre-tax, non recurring expenses associated with the Company's
mortgage servicing portfolio business. The majority of the expenses are
due to the recognition of impairment on the recorded value of mortgage loan
servicing rights. The Company considers such expense non recurring, since
in July 1995 it entered into a contract to sell the portion of its
servicing portfolio which comprised purchased loans, retaining only local
retail production. Additionally, in April 1995, Richard A. McNeece,
chairman and chief executive officer of the Company announced that he would
leave the Company on June 30, 1995. While recorded in the first quarter of
1995, earnings for the first six months of 1995 reflect the full
recognition of expenses related to Mr. McNeece's resignation. Additional
increases in income and expenses, including personnel related expenses in
1995, when compared to 1994, are due to the 1994 acquisition of Metro.
Metro was acquired on February 28, 1994, and was accounted for under the
purchase method of accounting, thereby excluding the first two months of
Metro's operations in 1994 results when compared to 1995.
The remainder of this discussion provides a more detailed explanation of
factors affecting the change in results of operations and the change in
financial position of the Company for the reported periods.
NET INTEREST INCOME
Net interest income is the most significant component of earnings. For
analytical purposes, interest earned on tax exempt assets, such as
industrial development revenue bonds and state and municipal obligations,
is adjusted to a fully-taxable equivalent (FTE) basis. This adjustment is
based upon the federal corporate income tax rate, and any interest expense
which is disallowed as a deduction in connection with carrying tax exempt
assets.
Net interest income on an FTE basis increased to $54,328,000 in the first
six months of 1995, compared with $49,603,000 for the same period of 1994.
The increase in interest income (FTE) between periods was primarily rate
driven, as opposed to volume driven, as interest rates on loans increased
from an average of 8.70% in the first six months of 1994 to 9.72% for the
same period in 1995, an increase of 102 basis points. Offsetting this
increase was an increase in total interest expense, driven by the average
increase in time deposits rates from 4.33% during the first six months of
1994 to 5.51% in the first six months of 1995, an increase of 118 basis
points. The Company's net interest margin for the six months ended June
30, 1995, was 4.99% , up nine basis points from the 4.90% reported for the
same period in 1994. Margin pressure continues to impact rate spreads, as
the first six months of 1994 provided a rate spread of 4.27%, but declined
to 4.20% for the same period in 1995.
Comparing volume changes in average asset and liability balances for the
first six months of 1995 to the first six months of 1994, average loans
increased $82,656,000, or 6.1%, average investment securities increased
$106,130,000, or 17.4% and federal funds sold increased $2,889,000, or
10.6%. The net result was a $154,193,000 increase in average earning
assets between periods. Average interest-bearing deposits increased
$95,820,000, or 6.2%, and federal funds purchased and securities sold under
agreements to repurchase increased $32,136,000, or 46.6%, resulting in a
$134,300,000, or 7.9% increase in average interest-bearing liabilities
between the first six months of 1995 and 1994. A majority of the increases
in average asset and liability balances are the result of the acquisition
of Metro during the first quarter of 1994.
<PAGE>
Management anticipates that loan volumes will continue to increase, while
interest rates remain at low levels. Provided the region's economy remains
strong and stable, customers will continue to maintain their savings in
higher yielding deposit accounts. Current margin levels, while under
significant pressure, may be sustainable during the next few quarters, due
to continued improvements in asset quality, current loan pricing strategies
and management's emphasis in pursuing core asset growth.
The following table provides the sources of interest income and expenses
between the periods and the variances resulting from fluctuations in
interest rate (rate) and changes in the amount (volume) of earning assets
and interest-bearing liabilities.
Changes in Net Interest Income-Taxable Equivalent Basis
(dollars in thousands)
<TABLE>
<CAPTION>
1995-1994
Average Balances Average Rates Interest Income/
Six Months Ended Six Month Ended Six Months Ended Expense Volume Rate
6/30/95 6/30/94 6/30/95 6/30/94 6/30/95 6/30/94 Variance Variance Variance
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans, net $1,434,333 $1,351,677 9.72% 8.70% $69,137 $58,328 $10,809 $3,710 $ 7,099
Interest-bearing
deposits in other
financial institutions 14,784 52,266 6.45% 4.05% 473 1,050 (577) (997) 420
Investment securities:
Tax-exempt 158,402 149,141 10.85% 11.07% 8,524 8,186 338 501 (163)
Taxable 558,379 461,510 6.55% 5.52% 18,147 12,627 5,520 2,913 2,607
Federal funds sold 30,241 27,352 5.93% 4.62% 890 627 263 71 192
Total earning 2,196,139 2,041,946 8.92% 7.98% 97,171 80,818 16,353 6,198 10,155
Allowance for loan losses (20,578) (24,268)
Cash and due from banks 67,981 68,197
Premises and equipment, net 57,066 54,311
Other assets 83,050 82,179
Total assets $2,383,658 $2,222,366
Savings, IMMA deposits $ 597,923 $ 610,550 3.03% 2.60% 8,996 7,861 1,135 (166) 1,301
Time deposits 1,040,337 931,890 5.51% 4.33% 28,440 20,030 8,418 2,521 5,897
Federal funds purchased
and securities sold under
agreements to repurchase 101,047 68,911 5.96% 3.97% 2,986 1,356 1,630 785 845
Other borrowed funds 89,844 83,500 5.42% 4.75% 2,413 1,968 445 157 288
Total interest-
bearing liabilities 1,829,151 1,694,851 4.72% 3.71% 42,843 31,215 11,628 3,297 8,331
Demand deposits 294,688 279,278
Other liabilities 25,441 25,351
Shareholders' equity 234,378 222,886
Total liabilities and
shareholders' equity $2,383,658 $2,222,366
Rate spread 4.20% 4.27%
Net interest mragin 4.99% 4.90% $54,328 $49,603 $4,725 $2,901 $1,824
</TABLE>
Changes in interest due to volume and rate were defined as follows: Volume
variance-change in average balance multiplied by prior year rate; Rate
variance-change in rate multiplied by prior year average balance. The
change in interest due to both rate and volume has been allocated
proportionately to volume variance and rate variance based on the
relationship of the absolute dollar change in each.
<PAGE>
NONINTEREST INCOME AND EXPENSE
Noninterest income decreased $608,000, to $7,105,000, in the second quarter
of 1995, from $7,713,000 for the second quarter of 1994. Income from
mortgage related activity decreased significantly between quarters, with a
decrease of $928,000, or 39.0% in the second quarter of 1995 compared with
the second quarter of 1994, which included a gain of approximately
$2,200,000 from the sale of certain mortgage loan servicing rights. For
the six months ended June 30, 1995, noninterest income decreased
$1,251,000, or 8.6% from the $14,609,000 reported for the six months ended
June 30, 1994. Service charges on deposit accounts increased $532,000, or
10.6%, over the $5,032,000 reported for the six months ended June 30, 1994.
As described previously, the decline in noninterest income was primarily
the result of decreases in mortgage loan related income during 1995. The
Company continues to analyze opportunities available through current fee
structures, the expansion of trust, credit card, and annuity products, as a
source for generating additional noninterest income.
During the second quarter of 1995, the Company signed a letter of intent to
sell $1.1 billion of purchased mortgage servicing rights in the third
quarter. This sale is expected to lower 1995 servicing income by $1.7
million and reduce amortization expense by $1.5 million. In addition, this
transaction will eliminate future potential impairment and reduce the
volatility of earnings from mortgage operations. The Company intends to
continue originating and selling first mortgages but has decided to reduce
the amount of mortgage servicing rights held on its books. Consequently,
on a periodic basis, the Company intends to sell the rights to most non-
originated mortgage loans and remove the capitalized servicing rights from
its books. The sale should be completed during the third quarter.
Noninterest expense increased to $22,995,000 in the second quarter of 1995,
compared to $22,293,000 in the second quarter of 1994, an increase of
$702,000, or 3.1%. Specific categories which increased in second quarter
1995 over the same period in 1994 included personnel related expenses,
increasing $393,000, or 3.6% over the previous year, and FDIC insurance
premiums of $111,000, or 11.1% for the same period in 1994. Second quarter
and year to date 1995 expenses were also impacted by $851,000 of pre-tax,
non-recurring expenses associated with the Company's mortgage servicing
business. Noninterest expense reported for the six months ended June 30,
1995, increased $3,133,000, or 7.3% over the $42,664,000 reported for the
first six months of 1994. Personnel related expenses, which makes up the
largest category of noninterest expense, increased $2,125,000, or 9.7%,
between the first six months of 1995 and the first six months of 1994. As
described elsewhere in this report, a majority of this increase is the
result of the first quarter 1994 acquisition of Metro, which is included
for all six months of 1995, but for only four months of 1994, and expenses
related to the resignation of Mr. McNeece.
The Company's efficiency ratio (noninterest expense as a percentage of
total FTE net interest income and noninterest income, excluding securities
gains or losses) was impacted by these changes in income and expenses
between periods, resulting in an increase of 63 basis points, from 66.45%
in second quarter 1994 to 67.08% in the second quarter of 1995. Efficiency
ratios for the first six months of 1995 increased 124 basis points, from
the 66.64% reported for the first six months of 1994 to 67.88%.
Management continues to evaluate its options for lowering expenses in its
effort to be a low cost provider of financial services in the communities
its affiliates operate. As part of its strategic evaluation of current
operations and future opportunities, management has been involved in a long-
term project to analyze its fee income opportunities. The impact of these
evaluations are expected to become evident by the fourth quarter of 1995.
INCOME TAXES
Income tax expense was $2,562,000 for the second quarter of 1995, a
decrease of $205,000, or 7.4%, over the same period in 1994. For the first
six months of 1995, income tax expense was $4,791,000, an increase of
$98,000 over the $4,693,000 reported for the first six months of 1994. The
effective tax rate for the six months ended June 30, 1995 was 27.14%, an
increase over the 25.46% reported in 1994. This year to date increase was
due primarily to deferred tax benefits recorded in 1994, which were not
available in 1995.
ASSET QUALITY AND ALLOWANCE FOR LOAN LOSSES
One of the more significant risks of loss of any financial institution is
derived from its loan portfolio. The Company manages its loan portfolio to
limit risk through initial review of credit applications, approval of loans
by experienced and trained personnel, loan documentation and compliance
procedures. The Company's loan portfolio is well diversified with no
excessive concentration in any one industry. In accordance with regulatory
standards, loans are placed in nonaccrual status when they reach a
prescribed
<PAGE>
delinquency stage, generally when payments are 90 days past due
or when other events occur which make the collection of all principal and
interest on the loan questionable.
As the following table indicates, the Company has had significant success
in improving core asset quality since June 30, 1994, and these improvements
in asset quality are expected to continue. Since management has placed
emphasis on asset quality procedures and training, the level of
nonperforming loans and assets has shown improvement. Continued
improvement will be largely dependent on the continuing economic strength
in the markets the Company serves. Management anticipates a continuation
of a relatively strong economy, and due to continued problem asset
remediation, expects continued improvement in nonperforming loans, assets,
and applicable asset quality ratios for the remainder of 1995.
Risk Elements
(dollars in thousands)
6/30/95 12/31/94 6/30/94
[S]
Nonperforming loans:
Nonaccrual loans $16,311 $18,936 $18,154
Renegotiated loans 58 45 1,811
Total nonperforming loans 16,369 18,981 19,965
Other real estate 8,089 9,813 11,490
Total nonperforming assets $24,458 $28,794 $31,455
Loans past due 90 days or more $ 195 $ 214 $ 215
Nonperforming loans as a percentage
of loans, net of unearned income 1.11% 1.33% 1.44%
Nonperforming assets as a percentage
of loans, net of unearned income, plus
other real estate owned 1.65% 2.01% 2.25%
Allowance for loan losses as a
percentage of nonperforming loans 122.40% 107.69% 122.20%
Allowance for loan losses as a
percentage of nonperforming assets
and loans past due 90 days or more 81.27% 70.47% 77.04%
During both the first and second quarters of 1995, the Company has reduced
its level of loan loss reserves from levels seen for the same periods in
1994. This reduction was due to the impact of $1,448,000 in net charge
offs, offset by a $1,043,000 provision expense. The current level of
provision expense has been warranted by increased loan volumes and a return
to normalized provision levels from previous quarters. Improvement in
asset quality since 1993 contributed to the record low charge-off ratios.
Activity in the allowance for loan losses, including the contribution from
the acquisition of Metro during the first quarter of 1994, is provided
below.
Loan Charge-off Analysis
(dollars in thousands)
<TABLE>
<CAPTION>
For Three Months Ended For the Six Months Ended
6/30/95 6/30/94 6/30/95 6/30/94
<S> <C> <C> <C> <C>
Allowance for loan losses,
beginning of the period $20,139 $25,650 $20,441 $21,539
Charge-offs 1,202 1,562 2,568 2,478
Recoveries on loans charged-off 535 652 1,120 1,273
Net charge-offs 667 910 1,448 1,205
Provision for loan losses 564 (343) 1,043 23
Allowance of subsidiary bank acquired --- --- --- 4,040
Allowance for loan losses,
end of the period $20,036 $24,397 $20,036 $24,397
Net loans charged-off as a percentage
of average loans, net of unearned
income (annualized) .18% .26% .20% .18%
</TABLE>
<PAGE>
EARNING ASSETS AND FUNDING SOURCES
Management classifies earning assets into two categories, core and
incremental. Core earning assets are defined as loans relative to the
business of banking, while incremental earning assets are all other earning
assets, including mortgage loans held-for-sale, investments, and interest-
bearing deposits with other financial institutions. The following table
provides the Company's allocation between these categories and the changes
between each category for the periods presented.
Analysis of Period End
Balance Sheet Changes
(dollars in thousands)
<TABLE>
<CAPTION>
Change From Change From
12/31/94 to 6/30/94 to
6/30/95 6/30/95
6/30/95 12/31/94 6/30/94 $ % $ %
<S> <C> <C> <C> <C> <C> <C> <C>
Earning Assets:
Core earning assets:
Commercial loans $702,337 $682,541 $681,404 19,796 2.9 20,933 3.1
Retail loans 669,001 664,321 636,196 4,680 .7 32,805 5.2
Other core loans 76,121 63,865 54,135 12,256 19.2 21,986 40.6
Total core earning assets 1,447,459 1,410,727 1,371,735 36,732 2.6 75,724 5.5
Incremental earning assets:
Mortgage loans held-for-sale 27,901 13,519 14,840 14,382 106.4 13,061 88.0
Investment securities 758,197 706,999 654,543 51,198 7.2 103,654 15.8
Interest-bearing deposits
with financial institutions 12,883 16,259 31,046 (3,376) (20.8)(18,163) (58.5)
Federal funds sold 23,395 28,908 22,270 (5,513) (19.1) 1,125 5.1
Total incremental
earning assets 822,376 765,685 722,699 56,691 7.4 99,677 13.8
Total earning assets $2,269,835 $2,176,412 $2,094,434 93,423 4.3 175,401 8.4
Deposits and Funds:
Core funds:
Demand deposits $ 323,786 $ 331,521 $ 302,990 (7,735) (2.3) 20,796 6.9
Interest-bearing checking 182,583 199,645 184,631 (17,062) (8.5) (2,048) (1.1)
Century Service and IMMA 282,556 315,859 326,336 (33,303) (10.5) (43,780)(13.4)
Statement savings 108,964 115,148 124,932 (6,184) (5.4) (15,968)(12.8)
Certificates less than
$100 and IRAs 714,382 628,162 584,826 86,220 13.7 129,556 22.2
Total core funds 1,612,271 1,590,335 1,523,715 21,936 1.4 88,556 5.8
Incremental funds:
Certificates over $100 209,543 189,431 179,516 20,112 10.6 30,027 16.7
Other large deposits 176,318 163,498 158,518 12,820 7.8 17,800 11.2
Federal funds purchased 37,915 44,485 34,677 (6,570) (14.8) 3,238 9.3
Repurchase agreements 60,298 54,217 35,113 6,081 11.2 25,185 71.7
Other short-term borrowings 12,257 6,427 11,738 5,830 90.7 519 4.4
Long-term debt 79,906 80,238 90,858 (332) (.4)(10,952) (12.1)
Total incremental funds 576,237 538,296 510,420 37,941 7.0 65,817 12.9
Total funds $2,188,508 $2,128,631 $2,034,135 59,877 2.8 154,373 7.6
</TABLE>
Total earning assets at June 30, 1995, were $2,269,835,000, up 4.3% from
the $2,176,412,000 at December 31, 1994, and up 8.4% from $2,094,434,000 at
June 30, 1994. Total core earning assets increased 2.6% to $1,447,459,000
over the $1,410,727,000 reported at December 31, 1994, while incremental
earning assets increased 7.4% to $822,376,000, from $765,685,000 reported
at December 31, 1994, and increased from $722,699,000, or 13.8% over
incremental earning assets at June 30, 1994. The most significant
increase from December 31, 1994 and June 30, 1994 can be attributed to the
increase in investment securities. Investment securities increased
$51,198,000, or 7.2%, of which approximately $23,791,000, or 46.5% of the
increase, is related to the gross impact of unrealized gains on securities
available-for-sale since December 31, 1994.
<PAGE>
Federal funds sold, interest-bearing deposits with financial institutions,
and short-term U.S. Treasury and federal agency securities are held
primarily for liquidity purposes while mortgage-backed securities are held
for income purposes. The amortized cost and fair value of securities at
June 30, 1995, are summarized as follows:
Securities - Amortized Cost and Market Value
(in thousands)
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Investment securities
available-for-sale:
U.S. Treasury and U.S.
Government Agencies $ 245,912 $ 1,185 $ 354 $ 246,743
Mortgage-backed securities 337,725 5,193 3,073 339,845
State and municipal-taxable 884 33 --- 917
Other investments 8,861 32 89 8,804
Total $ 593,382 $ 6,443 $ 3,516 $ 596,309
Investment securities
held-to-maturity:
State and municipal-
tax exempt $ 161,888 $ 5,824 $ 1,384 $ 166,328
Similar to earning assets, management classifies funding sources into core
and incremental categories. Core funding sources are primarily deposits
held, including demand deposits, but excluding certificates of deposit
greater than $100,000 and other large deposits. Incremental funds are
defined as all other funding sources, including federal funds purchased and
other borrowings.
Total funds at June 30, 1995, were $2,188,508,000, up 2.8% from the
$2,128,631,000 at December 31, 1994, and up 7.6% from the $2,034,135,000 at
June 30, 1994. Total core funds increased to $1,612,271,000, or 1.4%, at
June 30, 1995 from the $1,590,335,000 reported at December 31, 1994, and
increased 5.8% from the $1,523,715,000 reported at June 30, 1994. Total
incremental funds increased 7.0%, or $37,941,000, to $576,237,000 at June
30, 1995, from the $538,296,000 reported at December 31, 1994. Incremental
funds increased $65,817,000, or 12.9% between June 30, 1994 and June 30,
1995, with the largest increase the result of increases in short-term
borrowings such as securities sold under agreements to repurchase and
certificates of deposits greater than $100,000. Interest rates on
deposits, although stabilizing, have provided customers opportunities to
obtain higher rates on deposits by moving balances from lower earning
savings accounts to higher yielding certificates of deposit.
LIQUIDITY
The Company manages its liquidity position to ensure sufficient cash to
service net new loan demand and potential deposit and funds withdrawals.
In this regard, the composition and maturity structure of earning assets
and funding is evaluated by the asset liability management committee as is
the availability of off-balance-sheet funding sources and the potential for
liquidation of selected earning assets without a significant short or
longer-term negative impact to profitability. Although numerous standards
are applied, the Company measures and manages its liquidity profile based
on core funding and incremental funding objectives.
It is also the Company's objective for core liabilities to equal at least
100% of core earning assets and incremental funds not to exceed 40% of
total funding. These objectives may be changed depending on management's
evaluation of the maturity distribution of funding and earning assets and
the nature of those assets and funding. At June 30, 1995, core funding to
core earning assets equaled 111.39%, down from the 112.73% reported at
December 31, 1994, and up from the 111.08% reported at June 30, 1994.
Incremental funding to total funding equaled 26.33% at June 30, 1995, up
slightly from the 25.29% at December 31, 1994, and 25.09% at June 30, 1994.
These ratios are all well below the Company's maximum tolerance.
Through its lead affiliate bank, the Company maintains upstream overnight
federal funds lines of credit of $80,000,000. These lines have
occasionally been used to fund peak balances in mortgage loans held-for-
sale. In June 1992, the parent Company secured a
<PAGE>
revolving line of credit
totaling $3,000,000. Management knows of no demands, commitments or events
that will result in, or that are likely to result in, the Company's
liquidity increasing or decreasing in any material way.
INTEREST RATE SENSITIVITY MANAGEMENT
Interest rate sensitivity is defined as the exposure to variability in net
interest income resulting from changes in market-based interest rates. It
is the Company's philosophy to protect net interest income against
unexpected changes in interest rates through a controlled assumption of
interest rate risk for profit. This potential variability is closely
monitored by the Company's traditional and beta adjusted gap positions.
Since all interest rates and yields do not adjust in the same degree, the
traditional and beta adjusted gap analysis is only a general indicator of
rate sensitivity and net interest income volatility. Consequently, the
Company relies heavily on simulation analysis and modeling of the Company's
balance sheet in varying interest rate environments to gauge net income
volatility and develop appropriate balance sheet strategies to assure
attainment of the Company's objective. The Company's interest rate
sensitivity at June 30, 1995, is as follows:
Interest Rate Sensitivity
(dollars in thousands)
<TABLE>
<CAPTION>
Assets and Liabilities Repricing Within
0-3 4-12 1-5 Over 5
Months Months Years Years Total
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans, net of unearned income $ 618,860 $251,369 $553,289 $ 51,842 $1,475,360
Investment securities available-for-sale 166,699 213,026 153,342 63,242 596,309
Investment securities held-to-maturity 175 14,551 40,778 106,384 161,888
Interest-bearing deposits in
other financial institutions 7,449 5,055 111 268 12,883
Federal funds sold 23,395 --- --- --- 23,395
Total interest-earning assets $ 816,578 $484,001 $747,520 $221,736 $2,269,835
Interest-bearing liabilities:
IMMA and savings deposits $ 183,611 $ --- $ --- $ --- $ 183,611
Time deposits 582,921 525,900 380,766 1,148 1,490,735
Federal funds purchased and securities
sold under agreements to repurchase 75,074 18,970 1,606 2,563 98,213
Other borrowings 12,502 20,465 53,280 5,916 92,163
Total interest-bearing liabilities $ 854,108 $565,335 $435,652 $ 9,627 $1,864,722
Interest sensitive gap $(37,530)$(81,334)$311,868 $212,109 $ 405,113
Cumulative interest sensitive gap $(37,530)$(118,864)$193,004$405,113 $
Cumulative interest sensitivity gap as a
percentage of interest sensitive assets (%) (4.60) (9.14) 9.42 17.85
</TABLE>
Management is of the opinion that the current rate sensitivity profile
meets the Company's objectives. No material changes in the interest rate
sensitivity profile are anticipated during the remainder of 1995.
<PAGE>
CAPITAL RESOURCES AND ADEQUACY
It is the Company's risk management policy to maintain a capital base
sufficient to support anticipated asset growth, merger activity and
management's estimation of long-term earnings risk. Capital standards
assume that the Company's risk profiles in liquidity, rate sensitivity and
asset quality are in line with internal risk management objectives. The
Company's risk-based capital position is well in excess of minimum
regulatory standards. Consequently, management anticipates no change in
asset allocation strategies to complement risk-based capital requirements.
Additionally, the Company's leverage capital position is well in excess of
the regulatory requirements. The Company's standards and capital levels at
June 30, 1995, are provided below:
Analysis of Capital Adequacy
(dollars in thousands)
<TABLE>
<CAPTION>
Regulatory Internal
6/30/95 Guidelines Standards
<S> <C> <C> <C>
Risk-based capital ratios:
Tier 1 capital to risk-adjusted assets 14.17 % 4.00 % 9.00 % (minimum)
Tier 2 capital to risk-adjusted assets 1.20 4.00 2.00 (maximum)
Total capital to risk-adjusted assets 15.37 8.00 9.00 (minimum)
Leverage ratios:
Capital to assets 10.07 % 6.50 (minimum)
Primary capital to adjusted assets 10.79 5.50 % 8.00 % (minimum)
Primary tangible capital to adjusted assets 10.47 6.00 (minimum))
Risk-based capital:
Tier 1 capital $ 237,364
Tier 2 capital 20,036
Total capital $ 257,400
Risk-adjusted assets $1,674,989
</TABLE>
Management anticipates that risk-based and leverage ratios will remain
above minimum regulatory standards. The Company has met all of its capital
requirements through retained earnings while steadily increasing regulatory
and internally defined capital ratio objectives.
The Company's internal capital generation and the factors that influence it
are provided below:
Internal Capital Generation Rate
For the Six Months Ended
6/30/95 6/30/94
Return on average assets 1.09 % 1.25 %
divided by
Average equity as a % of average assets 9.85 10.06
equals
Return on average equity 11.06 12.43
times
Earnings retained 47.12 54.46
equals
Internal capital growth 5.21 6.77
Cash dividends declared for the second quarter of 1995 equaled $.2075, a
7.8% increase over the $.1925 declared for the second quarter of 1994. For
the first six months ended June 30, 1995, dividends totaled $.4125,
compared to the $.3825 declared for the first six months ended June 30,
1994. Management is of the opinion that, given the Company's dividend
policy, asset growth can be funded internally while maintaining the
integrity of the Company's capital position.
<PAGE>
Quarterly Averages, Interest and Rates
(dollars in thousands)
<TABLE>
<CAPTION>
For the Three Months Ended
6/30/95 6/30/94
Average Average
Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Loans, net $1,451,471 $35,698 9.86 % $1,381,007 $30,155 8.76 %
Interest-bearing deposits
other financial institutions 14,420 246 6.84 41,374 422 4.09
Investment securities, taxable 574,481 9,282 6.48 489,832 6,800 5.57
Investment securities, tax-exempt 158,134 4,247 10.77 150,461 4,138 11.03
Federal funds sold 31,080 462 5.96 33,218 328 3.96
Total earning assets 2,229,586 49,935 8.98 2,095,892 41,843 8.01
Other assets 81,047 83,954
Cash and due from banks 67,671 70,965
Premises and equipment, net 56,893 56,696
Less allowance for loan losses (20,438) (25,516)
Total assets $2,414,759 $2,281,991
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Savings and IMMA accounts $ 580,989 4,382 3.03 $ 635,087 4,141 2.62
Time deposits 1,071,313 15,412 5.77 932,847 10,007 4.30
Federal funds purchased
and securities sold under
agreements to repurchase 104,905 1,567 5.99 75,128 726 3.88
Other borrowed funds 86,358 1,186 5.51 92,812 1,109 4.79
Total interest-bearing liabilities 1,843,565 22,547 4.91 1,735,874 15,983 3.69
Noninterest-bearing
demand deposits 304,042 296,343
Other liabilities 27,281 26,830
Total liabilities 2,174,888 2,059,047
Total shareholders' equity 239,871 222,944
Total liabilities and
shareholders' equity $2,414,759 $2,281,991
Net interest income $ 27,388 $ 25,860
Interest rate spread 4.07 % 4.32 %
Net interest margin 4.93 % 4.95 %
</TABLE>
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Shareholders' Meeting was held on April 19,
1995. A majority of the shareholders, representing 10,331,930
shares, either in person or by proxy, approved the election of
Directors, approved a proposal to establish the 1995 Employee Stock
Option Plan and ratified the appointment of KPMG Peat Marwick LLP as
the Company's independent auditors for the year ended December 31,
1995.
The twenty-two (22) Directors elected by shareholders to serve for
the 1995-1996 year are as follows:
Jane Wood Banks Peter D. Miller W. Woodrow Stewart
Thomas S. Cheek Loy D. Mullinax Bobby M. Thomas
John A. Ferguson, Jr. J. Kenneth Nix, Sr. James A. Walters
James H. Harris, Jr. Edwin C. Poss M.G. West
Ray C. Jones Paul J. Reeves J. Michael Womble
Arthur J. Kunzer, Jr. A. Roy Roberts,Jr. Joe Wood, Jr.
W. L. Lester Richard L. Shockley
Richard A. McNeece Harold L. Smith
The following schedule provides the allocation of the 10,314,980
voting shares for, against, or abstaining on Proposal
No. 2, 1995 Employee Stock Option Plan, and the 10,331,929 voting
shares for, against, or abstaining on No. 3, ratification of the
appointment of KPMG Peat Marwick LLP:
<TABLE>
<CAPTION>
Vote For Vote Against Vote Abstained
Shares Percent Shares Percent Shares Percent
<S> <C> <C> <C> <C> <C> <C>
1995 Employee Stock Option Plan 9,804,872 95.1 % 219,689 2.1 % 290,419 2.8 %
KPMG Peat Marwick LLP 10,174,415 98.5 14,564 .1 142,950 1.4
Independent Auditors
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Number Description of Exhibits
11.1 Statement Re Computation of Per Share Earnings
27.1 Financial Data Schedule
(b) Dated and filed on April 11, 1995, a Form 8-K was filed pursuant to
the announcement by the Company of the resignation of Richard A.
McNeece, chairman and chief executive officer of the Company,
effective June 30, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST NATIONAL BANCORP
Dated: August 10, 1995
By: /s/ Peter D. Miller
Peter D. Miller
President, Chief Administrative,
and Chief Financial Officer
By: /s/ J. Reid Moore
J. Reid Moore
Group Vice President and
Controller
</TABLE>
EXHIBIT 11.1
Statement RE Computation of Per Share Earnings
(dollars in thousands, except for per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30 June 30 June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Earnings per share:
Weighted average shares outstanding 16,571,450 16,416,367 16,563,676 16,304,023
Net income per share $0.41 $0.44 $0.78 $0.84
Primary earnings per share:
Weighted average shares outstanding 16,571,450 16,416,367 16,563,676 16,304,023
Dilutive stock options 137,534 139,343 133,014 131,311
16,708,984 16,555,710 16,696,690 16,435,334
Net income per share $0.41 $0.44 $0.77 $0.84
Fully diluted earnings per share:
Weighted average shares outstanding 16,571,450 16,416,367 16,563,676 16,304,023
Dilutive stock options 142,797 131,311 151,952 131,311
16,714,247 16,547,678 16,715,628 16,435,334
Net income per share $0.41 $0.44 $0.77 $0.84
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S
JUNE 30, 1995, QUARTERLY REPORT, AS FILED ON FORM 10-Q WITH THE SECURITIES AND
EXCHANGE COMMISSION, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 81153
<INT-BEARING-DEPOSITS> 12883
<FED-FUNDS-SOLD> 23395
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 596309
<INVESTMENTS-CARRYING> 161888
<INVESTMENTS-MARKET> 166328
<LOANS> 1475360
<ALLOWANCE> 20036
<TOTAL-ASSETS> 2463943
<DEPOSITS> 1998132
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0
0
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