U. S. 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 [Fee Required]
For the fiscal year ended December 31, 1995.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from ______________________ to ______________________.
Commission File Number 0-10974
FIRST PULASKI NATIONAL CORPORATION
State of incorporation: Tennessee IRS Employer ID No.: 62-1110294
206 South First Street, Pulaski, Tennessee 38478
Registrant's telephone number: 615-363-2585
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock Par Value $1.00 Per Share
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 past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate 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. [ X ]
The aggregate market value (computed on the basis of the most recent trades of
which the Registrant was aware) of shares of Common Stock, par value $1 per
share, held by nonaffiliates of the Registrant as of February 15, 1996 was
$30,416,166. The market value calculation assumes that all shares beneficially
owned by members of the Board of Directors of the Registrant are shares owned
by "affiliates", a status which each of the directors individually disclaims.
Documents Incorporated by Reference: None
<PAGE>
PART I
ITEM 1: BUSINESS
First Pulaski National Corporation, (the Corporation) is a financial corporation
engaged in general commercial and retail banking business which operates through
one subsidiary bank.
The Corporation was organized under the laws of the State of Tennessee and its
only significant asset is the common stock of First National Bank of Pulaski
(the Bank), headquartered in Pulaski, Tennessee.
All of the common stock of the Bank is owned by the Corporation. At December 31,
1995, the Corporation and its subsidiary had combined total assets of
$241,551,726.
The Corporation currently has long-term indebtedness of $1,312,788 in the form
of notes payable to the Federal Home Loan Bank of Cincinnati. Note G to
Financial Statements, Part II, Item 8, includes a detailed analysis of this
debt. The Bank derives its primary source of funds from deposits and is the
largest independent financial institution in Giles County, Tennessee. It has
recently established two branches in adjacent Lincoln County, Tennessee.
As of February 15, 1996 the First National Bank of Pulaski had 153 employees,
23 of whom were part-time. The Corporation has no employees other than those
employed by the Bank.
FIRST PULASKI NATIONAL CORPORATION
The Corporation is a bank holding company within the meaning of the Bank Holding
Company Act of 1956 (BHC Act), and is registered as such with the Board of
Governors of the Federal Reserve System (FRB). The Corporation is subject to
examination by the FRB and is restricted in its acquisitions.
Under the BHC Act, a bank holding company is, with limited exceptions,
prohibited from (i) acquiring direct or indirect ownership or control of more
than 5% of the voting shares of any company which is not a bank or (ii) engaging
in any activity other than managing or controlling banks. With the prior
approval of the FRB, however, a bank holding company may own more than 5% of the
voting shares of a company engaged in activities which the FRB determines to be
so closely related to banking or managing or controlling banks as to be a proper
incident thereto.
The Corporation, through its subsidiary, projects a diversified range of
financial services to its customers. These include activities related to
general banking business with complete services in the commercial, corporate and
retail banking field.
FIRST NATIONAL BANK OF PULASKI
The First National Bank of Pulaski is subject to the supervision of and regular
examination by the Office of the Comptroller of the Currency (OCC) and the FDIC.
The OCC has broad supervisory authority over national banks and conducts regular
periodic examinations of the Bank. The Bank is also subject to provisions of
the Federal Reserve Act which limits loans or extensions of credit to, and
investments in the stock of, the Corporation, as well as the amount of loans or
advances that may be made to third parties secured by the securities or
obligations of the Corporation and its subsidiary. The Securities Exchange Act
of 1934 imposes regulatory requirements on various securities activities
conducted by banks. First National Bank of Pulaski is registered with the
<PAGE>
Securities Exchange Commission as a transfer agent for First Pulaski National
Corporation's stock and must comply with various recordkeeping and reporting
requirements.
ITEM 2: PROPERTIES
The Corporation and the Bank are headquartered at 206 South First Street,
Pulaski, Tennessee, in Giles County. The banking facility housing the
corporation headquarters was built in 1966 and underwent an extensive renovation
and expansion project in 1986. Another major expansion and renovation to this
facility was completed in early 1995, at a cost of approximately $2,700,000 for
building construction, parking facilities and landscaping. Furniture and
equipment expense, which included the new imaging system and a new IBM AS/400
computer system, amounted to an additional $1,060,000. An expansion and
renovation of the Bank's Industrial Park Road office in Pulaski is scheduled for
completion in early 1996, at a cost of approximately $110,000, including
furniture and fixtures. Other banking facilities owned by the Bank include
offices at Minor Hill Road, also in Pulaski, at Ardmore in the southeastern
corner of Giles County and at Fayetteville and Park City in adjacent Lincoln
County, Tennessee. The Minor Hill Road office operates in a facility which was
completed in 1985. This property, previously occupied under lease, was acquired
by the Bank in 1991 at a cost of $240,000. Renovations to this facility
amounting to approximately $6,000 were completed in 1995. The Ardmore office
was enlarged during 1984 at a cost of approximately $340,000, including
furniture and fixtures. A subsequent renovation and expansion of this facility
was completed in early 1993, at a cost of approximately $453,000, including
furniture and fixtures. A new community room was built adjacent to the Ardmore
Branch during 1988 at a cost of approximately $110,000. A new Lincoln County
branch, opened in Fayetteville, Tennessee in September of 1991, operates in a
leased facility which the bank has enlarged and renovated at a cost of
approximately $775,000, including furniture and fixtures. In addition, a second
Lincoln County branch was opened in the spring of 1993 in Park City,
approximately seven miles south of Fayetteville. This facility was located in
a temporary facility which had been renovated for use as a banking facility at
an approximate cost of $372,000, including furniture and fixtures. Property
adjacent to the Park City facility is owned by the Bank as other real estate for
future expansion of the Park City facility. Planning is currently underway for
the location of a permanent banking facility on this site. Additional
properties for parking, storage and expansion are also leased under terms as
long as to the year 2015. Rental expenses for these properties during the year
1995 amounted to $53,707.
ITEM 3: LEGAL PROCEEDINGS
Neither the Corporation nor its subsidiary is a party to any legal proceedings,
which in management's judgement would have a material adverse effect on the
consolidated financial position of the Corporation and its subsidiary.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None required to be described.
<PAGE
PART II
ITEM 5: MARKET AND DIVIDEND INFORMATION
Common stock of First Pulaski National Corporation is not traded through an
organized exchange but is traded between local individuals. The following
trading prices for 1995 and 1994 represent trades of which the Corporation was
aware and do not necessarily include all trading transactions for the period and
may not necessarily reflect actual stock values.
<TABLE>
<CAPTION>
Range of Cash
Trading Dividends
Prices Paid
<S> <C> <C>
1st Quarter, 1995 $132.00 $1.25
2nd Quarter, 1995 $129.00 $1.50
3rd Quarter, 1995 $129.00 $1.50
4th Quarter, 1995 $128.00 $2.25
ANNUAL DIVIDEND, 1995..................... $6.50
1st Quarter, 1994 $127.00 $1.25
2nd Quarter, 1994 $131.00 $1.25
3rd Quarter, 1994 $129.00 $1.25
4th Quarter, 1994 $148.00 $2.25
ANNUAL DIVIDEND, 1994..................... $6.00
</TABLE>
There are approximately 1,100 stockholders of the Corporation's common stock as
of February 15, 1996.
ITEM 6: SELECTED FINANCIAL DATA
Per share figures in the tables which follow are based on weighted average
numbers of shares outstanding of 306,449 shares for 1995, 302,290 shares for
1994, 296,347 shares for 1993, 292,525 shares for 1992, and 291,839 shares for
1991, after giving retroactive effect to the 100 percent stock distribution
which was paid on July 1, 1991.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED SELECTED FINANCIAL DATA
For Year Ended December 31,
-------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(Amounts in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Total interest income. $19,776 $16,715 $15,842 $15,887 $16,626
Net interest income... 11,342 10,750 10,472 9,741 8,610
Loan loss provision... 259 225 365 757 569
Net income............ 3,705 3,848 3,811 3,330 2,949
Per Share Data:
Net income.......... 12.09 12.73 12.86 11.38 10.10
Cash dividends paid. 6.50 6.00 5.00 4.25 3.63
Total average equity.. 28,822 26,394 23,977 21,500 19,521
Total average assets.. 234,714 217,482 201,022 183,630 168,113
Total year-end assets. 241,552 219,102 207,415 192,576 173,133
Total year-end long-
term debt........... 1,313 1,161 200 0 0
Ratios:
Assets to equity.... 7.96 8.24 8.38 8.54 8.61
Return on average
equity........... 12.85% 14.58% 15.89% 15.49% 15.11%
Return on average
assets........... 1.58% 1.77% 1.90% 1.81% 1.75%
</TABLE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
First Pulaski National Corporation is a one-bank holding company with its only
subsidiary being First National Bank of Pulaski, Tennessee. The following
analysis reviews important factors affecting the financial condition and results
of operations of the Corporation for the periods indicated. This review should
be read in conjunction with the consolidated financial statements and related
notes.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income is the difference between interest and fees earned on loans,
securities and other interest-earning assets (interest income) and interest paid
on deposits and borrowed funds (interest expense). In 1995, net interest income
increased by 5.5 percent following an increase of 2.7 percent in 1994. The net
increase is attributable primarily to increased volumes, offsetting the
reduction in earnings due to reduced rates. The total 1995 increase in net
interest income of $518 thousand, on a taxable equivalent basis, resulted from
an increase of $630 thousand due to increased volumes and a decrease of $112
thousand due to decreased rates.
Net interest earnings is a function of the average balances of interest-earning
assets and interest-bearing liabilities and the yields earned and rates paid on
those balances. Management must maintain the spread between the yields earned
and rates paid in managing the margin.
<PAGE>
The following tables summarize the changes in interest earned and interest paid
for the given time periods and indicate the factors affecting these changes.
The first table presents, by major categories of assets and liabilities, the
average balances, the components of the taxable equivalent net interest
earnings/spread, and the yield or rate for the years 1995, 1994 and 1993.
<TABLE>
<CAPTION>
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS'
EQUITY: INTEREST RATES AND INTEREST DIFFERENTIAL
December 31,
----------------------------------------------------------------
1995 1994 1993
-------------------------- -------------------------- --------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
---------- -------- ------ ---------- -------- ------ ---------- -------- ------
ASSETS
- ------
Interest-Earning Assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans and lease financing........... $142,825 $15,719 11.01% $129,067 $12,533 9.71% $117,336 $11,501 9.80%
Taxable investment securities....... 47,148 2,809 5.96% 53,425 3,323 6.22% 51,084 3,468 6.79%
Non-taxable investment
securities........................ 10,057 654 6.50% 10,848 823 7.59% 8,738 810 9.27%
Federal funds sold.................. 13,280 816 6.14% 6,720 310 4.61% 9,890 321 3.25%
Time deposits in other banks........ 44 1 2.27% 404 23 5.69% 750 57 7.60%
------- ------- ------ ------- ------- ------ ------- ------ ------
Total Interest-Earning Assets......... 213,354 19,999 9.37% 200,464 17,012 8.49% 187,798 16,157 8.60%
Non-interest Earning Assets:
Cash and due from banks............. 8,583 9,280 7,638
Premises and equipment, net......... 7,312 5,676 4,137
Other Assets........................ 7,563 4,102 3,429
Less allowance for loan losses...... (2,098) (2,040) (1,980)
------- ------- -------
Total Non-Interest-Earning Assets..... 21,360 17,018 13,224
------- ------- -------
TOTAL........................... $234,714 $217,482 $201,022
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Interest-Bearing Liabilities:
Demand deposits..................... $20,407 $560 2.74% $21,549 $523 2.43% $18,326 $446 2.41%
Savings deposits.................... 28,562 776 2.72% 30,424 817 2.69% 28,900 786 2.72%
Time deposits....................... 126,164 7,029 5.57% 111,696 4,587 4.11% 105,993 4,138 3.90%
Other borrowed money.................. 1,165 69 5.92% 727 38 5.23% 31 0 0.00%
------- ------- ------ ------- ------- ------ ------- ------- ------
Total Interest-Bearing
Liabilities......................... 176,298 8,434 4.78% 164,396 5,965 3.63% 153,420 5,370 3.50%
Non-Interest-Bearing Liabilities:
Demand deposits..................... 26,885 25,103 22,150
Other liabilities................... 2,709 1,589 1,475
------- ------- -------
Total Non-Interest Bearing
Liabilities......................... 29,594 26,692 23,625
Shareholders' Equity.................. 28,822 26,394 23,977
------- ------- -------
TOTAL........................... $234,714 $217,482 $201,022
======== ======== ========
Net interest earnings/spread,
on a taxable equivalent basis....... $11,565 5.42% $11,047 5.51% $10,787 5.74%
Taxable equivalent adjustments:
Loans............................... 66 63 68
Investment securities............... 157 234 247
------- ------- -------
Total taxable equivalent adjustment... 223 297 315
------- ------- -------
Net interest earnings................. $11,342 $10,750 $10,472
======= ======= =======
Note: The taxable equivalent adjustment has been computed based on a 34%
federal income tax rate and has given effect to the disallowance of interest
expense, for federal income tax purposes, related to certain tax-free assets.
Loans include nonaccrual loans for all years presented.
</TABLE>
The following table shows the change from year to year for each component of the
taxable equivalent net interest margin separated into the amount generated by
volume changes and the amount generated by changes in the yields earned or rates
paid.
<PAGE>
<TABLE>
<CAPTION>
1995 Compared to 1994 1994 Compared to 1993
Increase (Decrease) Due to Increase (Decrease) Due to
------------------------------ ------------------------------
Volume Rate Net Volume Rate Net
-------- -------- -------- -------- -------- --------
(in thousands of dollars) (in thousands of dollars)
Interest Earned on:
<S> <C> <C> <C> <C> <C> <C>
Loans and lease financing............ $1,336 1,850 $3,186 $1,150 ($118) $1,032
Taxable investment securities........ (390) (124) (514) 159 (304) (145)
Non-taxable investment securities.... (60) (109) (169) 196 (183) 13
Federal funds sold................... 330 203 506 (103) 92 (11)
Time deposits........................ (20) (2) (22) (26) (8) (34)
-------- -------- -------- -------- -------- --------
Total Interest-Earning Assets $1,169 $1,818 $2,987 $1,376 ($521) $855
======== ======== ======== ======== ======== ========
Interest Paid On:
Demand deposits...................... ($28) $65 $37 $74 $3 $77
Savings deposits..................... (50) 9 (41) 41 (10) 31
Time deposits........................ 594 1,848 2,442 223 226 449
Other borrowed money................. 23 8 31 0 38 38
-------- -------- -------- -------- -------- --------
Total Interest-Bearing Liabilities..... $539 $1,930 $2,469 $338 $257 $595
======== ======== ======== ======== ======== ========
Net Interest Earnings, on a taxable
equivalent basis..................... $630 ($112) $518 $1,038 ($778) $260
======== ======== ======== ========
Less: taxable equivalent adjustment.... (74) (18)
-------- --------
Net Interest Earnings.................. $592 $278
======== ========
</TABLE>
The change in interest due to volume has been determined by applying the rate
from the earlier year to the change in average balances outstanding from one
year to the next. The change in interest due to rate has been determined by
applying the change in rate from one year to the next to the average balances
outstanding in the later year. The computation of the taxable equivalent
adjustment has given effect to the disallowance of interest expense, for federal
income tax purposes, related to certain tax-free assets.
SOURCES AND USES OF FUNDS
The following table outlines the sources and uses of funds for each of the years
1995, 1994 and 1993, with the percent of change in each category from year to
year.
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------- ------------------------------- ---------
Increase Increase
Average (Decrease) Percent Average (Decrease) Percent Average
Balance Amount Change Balance Amount Change Balance
--------- --------- --------- --------- --------- --------- ---------
(in thousands of dollars, except percents)
FUNDING USES:
Interest earning assets:
<S> <C> <C> <C> <C> <C> <C> <C>
Loans-domestic..................... $142,825 $13,758 10.7% $129,067 $11,731 10.0% $117,336
Taxable investment securities...... 47,148 (6,277) -11.7% 53,425 2,341 4.6% 51,084
Non-taxable investment
securities....................... 10,057 (791) -7.3% 10,848 2,110 24.1% 8,738
Federal funds sold................. 13,280 6,560 97.6% 6,720 (3,170) -32.1% 9,890
Time deposits in other
banks-domestic................... 44 (360) -89.1% 404 (346) -46.1% 750
--------- --------- --------- --------- --------- --------- ---------
Total Interest Earning Assets.......... $213,354 $12,890 6.4% $200,464 $12,666 6.7% $187,798
========= ========= ========= ========= ========= ========= =========
FUNDING SOURCES:
Demand deposits - non-interest
bearing............................ $26,885 $1,782 7.1% $25,103 $2,953 13.3% $22,150
Demand deposits - interest bearing... 20,407 (1,142) -5.3% 21,549 3,053 16.5% 18,496
Savings deposits..................... 28,562 (1,862) -6.1% 30,424 1,524 5.3% 28,900
Time deposits........................ 126,164 14,468 13.0% 111,696 5,703 5.4% 105,993
Other................................ 11,336 (356) -3.0% 11,692 (567) -4.6% 12,259
--------- --------- --------- --------- --------- --------- ---------
Total Sources.......................... $213,354 $12,890 6.4% $200,464 $12,666 6.7% $187,798
========= ========= ========= ========= ========= ========= =========
</TABLE>
NON-INTEREST INCOME
Non-interest income amounted to $2,081 thousand in 1995, an increase of 2.5
percent from 1994. Non-interest income in 1994 decreased by 2.1 percent from
1993. Included in non-interest income in all three years were gains or losses
on security transactions. Net losses realized totaled $56.2 thousand and $136.3
thousand in 1995 and 1994, respectively. Net gains of $9.5 thousand were
realized in 1993.
<PAGE>
NON-INTEREST EXPENSE
Non-interest expense in 1995 was $7,538 thousand, up 8.5 percent from 1994.
Non-interest expense for 1994 had increased by 6.3 percent over the previous
year. The increase in non-interest expense is attributable to increased
operating costs reflecting increases in personnel costs, occupancy expense,
furniture and equipment expense, advertising and public relations. Expenditures
associated with the remodeling and expansion of the main office and the
acquisition of the new computer system resulted in additional depreciation
expense which accounts for a significant amount of the increase in non-interest
expense. Other operating expenses were slightly lower due to decreased FDIC
Insurance premium costs.
LOAN LOSS PROVISION
The provision for loan losses is the charge to earnings which management feels
is necessary to maintain the allowance for loan losses at a level considered
adequate to absorb potential future losses on existing loans. The adequacy of
the allowance for loan losses is determined by a continuous evaluation of the
loan portfolio. The Bank utilizes an independent loan review function which
considers loans on their own merits based on factors which include past loan
experience, collateral value, off-balance sheet credit risk, and possible
effects of prevailing economic conditions. Findings are presented regularly to
management, where other factors such as actual loan loss experience relative to
the size and characteristics of the loan portfolio, deteriorations in
concentrations of credit, trends in portfolio volumes, delinquencies and
non-performing loans and, when applicable, reports of the regulatory agencies
are considered. Bank management performs calculations for the minimum allowance
level needed and a final evaluation is made.
The provision for loan losses was $258.6 thousand in 1995 compared to $225.0
thousand in 1994 and $365.0 thousand in 1993. Net loan losses were $223.9
thousand in 1995, $208.2 thousand in 1994, and $205.2 thousand in 1993. The
1995 provision for loan losses exceeded the current year-end loan losses by
$34.7 thousand.
The composition of net loan <losses> recoveries for 1995 consists of agriculture
loans <$6.0 thousand>, personal loans <$236.0 thousand>, real estate loans $8.1
thousand, and commercial and industrial loans $10.1 thousand. The allowance at
the end of 1995 is $2,058 thousand, or 1.35 percent of outstanding loans and
leases, as compared to $2,024 thousand or 1.48 percent and $2,007 thousand or
1.65 percent in 1994 and 1993 respectively.
The following table sets out respectively the allocation of the Allowance for
Loan Losses and the percentage of loans by category to total loans outstanding
at the end of each of the years indicated.
<PAGE>
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(amounts in thousands of dollars)
Allowance applicable to:
<S> <C> <C> <C> <C> <C>
Real estate loans... $634 $482 $575 $577 $324
Installment loans... 1,147 1,197 1,144 1,087 960
Commercial loans.... 277 345 288 183 216
-------- -------- -------- -------- --------
Total............... $2,058 $2,024 $2,007 $1,847 $1,500
======== ======== ======== ======== ========
Percentages of loans by
category to total loans:
Real estate loans... 51.11% 51.50% 55.12% 57.26% 57.11%
Installment loans... 26.00% 25.95% 23.83% 25.67% 26.93%
Commercial loans.... 22.89% 22.55% 21.05% 17.07% 15.96%
-------- -------- -------- -------- --------
Total............... 100.00% 100.00% 100.00% 100.00% 100.00%
======== ======== ======== ======== ========
</TABLE>
RETURN ON EQUITY AND ASSETS
The ratio of net income to average stockholders' equity and to average total
assets, and certain other ratios, are as follows:
<TABLE>
<CAPTION>
For Year Ended December 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Percentage of net income to:
Average stockholders' equity.......... 12.85% 14.58% 15.89%
Average total assets.................. 1.58% 1.77% 1.90%
Percentage of dividends declared
per common share to net income
per common share...................... 53.84% 47.26% 38.88%
Percentage of average stockholders'
equity to average total assets........ 12.28% 12.14% 11.93%
</TABLE>
Results of operations can be measured by various ratio analyses. Two widely
recognized performance indicators are the return on equity and the return on
assets. The Corporation's return on average equity was 12.85 percent in 1995
and 14.58 percent in 1994. The return on average assets was 1.58 percent in
1995 and 1.77 percent in 1994.
INCOME TAXES
Income tax expense includes federal and state taxes on earnings. Income taxes
were $1,920,362, $1,758,243, and $1,832,260 in 1995, 1994 and 1993,
respectively. The effective tax rates were 34.14 percent, 31.36 percent and
32.47 percent respectively. Note H to Financial Statements, Part II, Item 8,
provides a detailed analysis of the components of income tax expense.
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
Quarter-by-quarter income and expense data for the years 1995 and 1994 are
presented in the following table.
<TABLE>
<CAPTION>
For The Three Months Ended
--------------------------------------
Mar 31 Jun 30 Sep 30 Dec 31
-------- -------- -------- --------
(In Thousands, Except Per Share Amounts)
1995:
<S> <C> <C> <C> <C>
Total interest income......... $4,565 $4,955 $5,120 $5,136
Total interest expense........ 1,823 2,143 2,215 2,254
Net interest income........... 2,742 2,812 2,905 2,882
Provision for loan losses..... 41 38 64 116
Other income.................. 493 634 465 489
Other expense................. 1,910 1,981 1,772 1,875
Income before income tax...... 1,284 1,427 1,534 1,380
Income taxes.................. 473 471 535 441
Net income.................... 811 956 999 939
Net income per share.......... $2.66 $3.13 $3.25 $3.05
1994:
Total interest income......... $3,968 $4,196 $4,316 $4,235
Total interest expense........ 1,352 1,459 1,540 1,614
Net interest income........... 2,616 2,737 2,776 2,621
Provision for loan losses..... 30 30 65 100
Other income.................. 452 496 451 630
Other expense................. 1,600 1,587 1,652 2,109
Income before income tax...... 1,438 1,616 1,510 1,042
Income taxes.................. 520 541 513 185
Net income.................... 919 1,075 997 857
Net income per share.......... $3.07 $3.57 $3.28 $2.81
</TABLE>
The fourth quarter 1995 provision for loan losses shown in the table above was
increased significantly from amounts set aside during the prior three quarters
of the year. This was a result of an increase in past due loans in the latter
part of 1995 and management's identification of additional exposure related to
some problem loans. In addition, net charge-offs were significantly higher
during the last three months, resulting in a decision by the Bank's management
to increase the provision for loan losses accordingly.
REVIEW OF REPORT OF CONDITION
LOANS
Loan growth during 1995 resulted primarily from increases in commercial and
industrial loans and in consumer installment loans. Management's focus is to
promote loan growth in the bank's target market, emphasizing the expansion of
business and the enhancement of the quality of life in the bank's trade area.
Efforts are taken to maintain a fairly diversified portfolio without significant
concentration of risk.
A comparison over the last three years showed that average total loans and
leases increased by $13.8 million or 10.7 percent in 1995, by $11.7 million or
10.0 percent in 1994 and by $10.2 million or 9.5 percent in 1993. The growth
in deposits has been used to support the continuing increase in loan demand.
<PAGE>
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes loan and lease balances at the end of each period
and monthly averages, changes in the allowance for possible losses arising from
loans charged off and recoveries on loans previously charged off, and additions
to the allowance which have been charged to expense.
<TABLE>
<CAPTION>
For Year Ended December 31,
------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(in thousands of dollars)
<S> <C> <C> <C> <C> <C>
Amount of net loans
and lease financing
outstanding at end
of period............. $152,993 $136,371 $121,504 $112,888 $99,502
======== ======== ======== ======== ========
Monthly average amount
of loans and leases... $142,825 $129,067 $117,336 $107,147 $94,538
======== ======== ======== ======== ========
Balance of allowance
for possible loan
losses at beginning
of period............. $2,024 $2,007 $1,847 $1,500 $1,268
Loans charged off..... 433 367 380 595 543
Recoveries of loans
previously charged off 209 159 175 185 206
-------- -------- -------- -------- --------
Net loans charged off. 224 208 205 410 337
-------- -------- -------- -------- --------
Additions to allowance
charged to expense.... 258 225 365 757 569
-------- -------- -------- -------- --------
Balance at end of
period................ $2,058 $2,024 $2,007 $1,847 $1,500
======== ======== ======== ======== ========
Ratio of net charge
offs during period to
average loans
outstanding........... 0.16% 0.16% 0.18% 0.38% 0.34%
======== ======== ======== ======== ========
</TABLE>
Reference is made to Note C to Financial Statements, Part II, Item 8, for
further detail regarding charge-offs and recoveries by category.
LOAN QUALITY
The loan portfolio has been diversified so that there is no concentration of
loans by category or within a category. In general, loan loss risks have been
minimized by extending loans within the trade area of the Bank, only with
adequate cash flow to service the debt, upon sufficient collateral, and with
short maturities. The loan portfolio does not include loans secured only by
speculative collateral. Because the local economy is not concentrated in any
particular industry, the loan portfolio is not subjected to significant risks
when one industry is experiencing problems. Net loans charged off during 1995
amounted to $223.9 thousand, as compared to $208.2 thousand in 1994 and $205.2
thousand in 1993. Percentages of net charge-offs to average total loans and
leases were 0.16 percent in 1995, 0.16 percent in 1994 and 0.18 percent in 1993.
<PAGE>
The amounts of loans and leases outstanding at the indicated dates are shown in
the following table according to type of loan.
<TABLE>
<CAPTION>
LOAN PORTFOLIO
December 31,
------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(in thousands of dollars)
<S> <C> <C> <C> <C> <C>
Construction and land
development......... $2,929 $3,530 $1,429 $1,317 $2,182
Commercial, industrial 17,911 14,650 13,058 9,693 7,629
Agricultural.......... 12,503 10,956 9,341 5,664 4,770
Real est. farmland.... 15,615 13,535 10,232 8,584 6,591
Real est. residential. 37,811 35,418 35,829 34,351 29,930
Real est. commercial.. 26,410 22,690 22,106 22,892 21,352
Installment-individual 40,610 36,105 29,453 29,460 27,158
Lease financing....... 0 0 23 51 127
Other loans........... 2,402 2,229 2,202 2,947 1,594
-------- -------- -------- -------- --------
TOTAL $156,191 $139,113 $123,673 $114,959 $101,333
======== ======== ======== ======== ========
</TABLE>
Loans included in the other loans category above include student loans,
non-taxable loans, overdrafts, and all other loans not included in any of the
designated categories.
The following table presents the maturity distribution and interest sensitivity
of selected loan categories (excluding residential mortgage, home equity,
consumer loans, and lease financing).
<TABLE>
<CAPTION>
Due in
1 year Due after
or less 1 year Total
-------- -------- --------
(in thousands of dollars)
<S> <C> <C> <C>
Construction, land development............ $2,787 $142 $2,929
Commercial, industrial.................... 13,433 4,478 $17,911
Agricultural.............................. 10,517 1,986 $12,503
Real estate farmland...................... 9,952 5,663 $15,615
Real estate commercial.................... 16,061 10,349 $26,410
-------- -------- --------
Total selected loans...................... $52,750 $22,618 $75,368
======== ======== ========
</TABLE>
The table below summarizes the percentages of the loans selected for use in the
preceding table falling into each of the indicated maturity ranges, and the
sensitivity of such loans to interest rate changes for those with maturities
greater than one year.
<PAGE>
<TABLE>
<CAPTION>
Due in
1 year Due after
or less 1 year Total
-------- -------- --------
<S> <C> <C> <C>
Percent of total selected loans........... 69.99% 30.01% 100.00%
Cumulative percent of total............... 69.99% 100.00%
Sensitivity of loans to changes
in interest rates - loans due after 1 year:
Fixed rate loans........................ $20,232 $20,232
Variable rate loans..................... 2,386 2,386
-------- --------
$22,618 $22,618
======== ========
</TABLE>
NON-PERFORMING ASSETS
Non-performing assets include non-accrual loans, loans restructured because of
debtor's financial difficulties, other real estate owned, and loans past due
ninety days or more as to interest or principal payment.
From 1994 to 1995, non-accruing loans decreased by 23.4 percent to $208.1
thousand following an increase of 26.5 percent in 1994 from 1993. There were
no restructured loans at year-end 1995. Restructured loans had shown decreases
over the previous two years, down 73.4 percent in 1994 and 60.1 percent in 1993.
Other real estate owned, consisting of properties acquired through foreclosures
or deeds in lieu thereof and in-substance foreclosures, totaled $110.1 thousand
for a decrease of 40.7 percent, following decreases of 33.3 percent in 1994 and
3.5 percent in 1993. Loans past due ninety days or more totaled $210.1 thousand
for an increase of 30.3 percent over 1994, following an increase of 41.2 percent
in 1994. All major credit lines and troubled loans are reviewed regularly by
a committee of the Board of Directors. Non-performing loans are not
concentrated in any particular category of loans and contain no losses that
would materially affect the allowance.
The following table summarizes the company's non-performing assets and loans
past due ninety days or more.
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1994 1993
-------- -------- --------
(in thousands of dollars)
<S> <C> <C> <C>
Non-accrual loans......................... $208 $272 $215
Troubled debt restructurings.............. $0 $29 $109
Other real estate owned................... $110 $186 $278
Loans past due ninety days or more as to
interest or principal payment........... $210 $161 $114
</TABLE>
As of December 31, 1995, management was not aware of any specifically identified
loans, other than those included in the categories discussed above, that
represent significant potential problems. The Corporation maintains high audit
standards, exercises extensive internal controls and conducts regular and
thorough loan reviews. However, the risk inherent in the lending business
results in periodic charge-offs of loans. The corporation maintains an
allowance for loan losses which it believes to be adequate to absorb reasonably
foreseeable losses in the loan portfolio. The executive officers of the
subsidiary bank evaluate, on a quarterly basis, the risk in the portfolio to
determine an adequate allowance for loan losses. The evaluation includes
<PAGE>
analyses of historical performance, the level of nonperforming and rated loans,
specific analyses of problem loans, loan activity since the previous quarter,
loan review reports, consideration of current economic conditions and other
pertinent information. The evaluation is reviewed by the Audit Committee.
As a matter of bank policy, internal classifications of loans are performed on
a routine and continuing basis. Relative to the classification of loans for
regulatory purposes, it is management's position that those loans classified,
internally or externally, as loss, doubtful, substandard or special mention (i)
do not represent or result from trends or uncertainties which they expect to
materially impact operating results, liquidity, or capital resources, and (ii)
do not represent material credits about which there is any information which
would cause serious doubts as to the ability of such borrowers to comply with
the loan repayment terms.
SECURITIES
The securities portfolio consists primarily of U.S. Treasury obligations,
federal agency securities and marketable bonds of states, counties and
municipalities. Management uses investment securities to assist in maintaining
proper interest rate sensitivity in the balance sheet, to provide securities to
pledge as collateral for certain public funds and to provide an alternative
investment for available funds.
The following table sets forth the carrying amount of securities at the dates
indicated:
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1994 1993
-------- -------- --------
(in thousands of dollars)
<S> <C> <C> <C>
Available-for-sale
- ----------------------
U. S. Treasury securities............ $20,406 $33,631
U.S. Government Agencies............. 21,128 13,381
------- -------
$41,534 $47,012
------- -------
Held-to-maturity
- ----------------------
States and political subdivisions.... $13,347 $10,930 $9,885
U. S. Treasury securities............ 28,713
U.S. Government Agencies............. 17,726
Other securities..................... 4,042 4,517 2,511
------- ------- -------
$17,389 $15,447 $58,835
------- ------- -------
TOTAL $58,923 $62,459 $58,835
======= ======= =======
</TABLE>
The Corporation adopted statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities", on
January 1, 1994. Prior to the adoption of SFAS 115, the investment securities
were treated similarly to the held-to-maturity classification. Therefore, the
carrying amounts of securities owned at December 31, 1993 have been classified
in that category as shown above.
The following table sets forth the maturities of securities at December 31, 1995
and the average yields of such securities (calculated on the basis of the cost
and effective yields).
<PAGE>
<TABLE>
<CAPTION>
US Treasuries, State and
and Government Political
Agencies Subdivisions Other Total
-------------- ------------ ----- -------
(in thousands of dollars)
<S> <C> <C> <C> <C>
Available-for-sale
- ----------------------
Within one year:
Amount........................ $9,088 $9,088
Yield......................... 5.48% 5.48%
After one but within five years:
Amount........................ $32,370 $32,370
Yield......................... 6.19% 6.19%
After ten years:
Amount........................ $76 $76
Yield......................... 8.09% 8.09%
Held-to-maturity
- ----------------------
Within one year:
Amount........................ $2,618 $3,009 $5,627
Yield......................... 7.96% 6.24% 7.04%
After one but within five years:
Amount........................ $10,370 $1,391 $11,761
Yield......................... 6.79% 6.98% 6.81%
After five but within ten years:
Amount........................ $1 $1
Yield......................... 6.00% 6.00%
After ten years:
Amount........................ $0
Yield......................... 0.00%
</TABLE>
Total average securities decreased by $7.1 million or 11.0 percent during 1995
as compared to the previous year. Average taxable investment securities
decreased by $6.3 million or 11.7 percent and average non-taxable investment
securities decreased by $0.8 million or 7.3 percent, to account for the overall
decrease in average investments. The total securities portfolio was $3.5
million or 5.7 percent less at the end of 1995 than at the end of 1994. This
decrease resulted primarily from the increase in loan demand.
DEPOSITS
The Bank's primary source of funds are customer deposits, including large
certificates of deposits. Aggregate average deposits increased by $13.2 million
in 1995, by $13.2 million in 1994 and by $15.7 million in 1993. Continuing a
trend which began with deregulation and the advent of interest-bearing demand
deposit accounts, most of the deposit growth experienced by the Bank has been
in accounts which are interest sensitive.
The average amount of deposits for the periods indicated is summarized in the
following table:
<PAGE>
<TABLE>
<CAPTION>
For Year Ended December 31,
----------------------------
1995 1994 1993
-------- -------- --------
(in thousands of dollars)
<S> <C> <C> <C>
Demand deposits - non-interest bearing.... $26,885 $25,103 $22,150
Demand deposits - interest bearing........ 20,407 21,549 18,496
Savings deposits.......................... 28,562 30,424 28,900
Time deposits (excluding time CD's
of $100,000 or more).................... 87,643 78,909 77,159
Time CD's of $100,000 or more............. 38,520 32,786 28,834
-------- -------- --------
TOTAL................................ $202,017 $188,771 $175,539
======== ======== ========
</TABLE>
Remaining maturities of time certificates of deposits of $100,000 or more
outstanding at December 31, 1995, are summarized as follows (in thousands of
dollars):
<TABLE>
<S> <C>
3 months or less............................... $13,752
Over 3 months through 6 months................. $10,070
Over 6 months through 12 months................ $11,999
Over 12 months................................. $4,948
--------
TOTAL.......................................... $40,769
========
</TABLE>
Other funds were invested in other earning assets such as federal funds and bank
time deposits at minimum levels necessary for operating needs for liquidity.
LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT
The primary functions of asset/liability management are to assure adequate
liquidity and maintain an appropriate balance between interest sensitive earning
assets and interest bearing liabilities. Liquidity management involves the
ability to meet the cash flow requirements of customers who may be either
depositors wanting to withdraw funds or borrowers needing assurance that
sufficient funds will be available to meet their credit needs. Interest rate
sensitivity management seeks to avoid fluctuating net interest margins and to
enhance consistent growth of net interest income through periods of changing
interest rates.
Marketable investment securities, particularly those of shorter maturities, are
the principal source of asset liquidity. Securities maturing in one year or
less amounted to $14.7 million at December 31, 1995, representing 25.0 percent
of the investment securities portfolio, a decrease from the 27.7 percent level
of 1994. The average maturity in the investment portfolio at December 31, 1995
was 2 years and 0.4 months. Other assets such as federal fund sold and maturing
loans and time deposits in other banks are additional sources of liquidity.
Interest rate sensitivity varies with different types of interest earning assets
and interest bearing liabilities. Overnight federal funds on which rates change
daily and loans which are tied to the prime rate differ considerably from long
term investment securities and fixed rate loans. Similarly, time deposits over
$100,000 and money market certificates are much more interest sensitive than are
savings accounts, even following the deregulation of savings rates. At December
31, 1995 the Bank had a total of $35.8 million in certificates of $100,000 or
more which would mature in one year or less. In addition, consumer certificates
<PAGE>
of smaller amounts generally mature every six months, while money market deposit
accounts mature on demand.
Simulation modeling is used to evaluate both the level of interest rate
sensitivity as well as potential balance sheet strategies. Important elements
in this modeling process include the mix of floating rate versus fixed rate
assets and liabilities; the repricing/maturing volumes and rates of the existing
balance sheet; and assumptions regarding future volumes, maturity patterns and
pricing under varying interest rate scenarios.
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY GAPS
December 31, 1995 0-30 31-90 91-365 1 Year
$ in thousands Days Days Days or More
- -------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest-sensitive assets:
Installment loans and leases.. $3,591 $5,708 $32,601 $51,558
Commercial loans.............. 19,474 8,457 22,338 2,219
Investments, other securities. 1,141 1,715 11,854 45,450
Federal funds sold............ 10,232 0 0 0
------- ------- ------- -------
Total......................... $34,438 $15,880 $66,793 $99,227
Interest-sensitive liabilities:
Certificates of deposit....... $26,129 $22,571 $54,151 $15,411
Regular savings accounts...... 18,479 0 0 0
IRA accounts.................. 8,648 548 2,295 1,686
NOW accounts.................. 20,203 0 0 0
Money Market deposit accounts. 10,368 0 0 0
------- ------- ------- -------
Total......................... $83,827 $23,119 $56,446 $17,097
Interest sensitivity gap........ ($49,389) ($7,239) $10,347 $82,130
Cumulative gap.................. ($49,389) ($56,628) ($46,281) $35,849
Ratio of cumulative gap to
earning assets................ -22.83% -26.18% -21.39% 16.57%
</TABLE>
The primary interest sensitive assets and liabilities in this maturity range are
commercial loans and large certificates of deposit. The Bank is in a negative
gap position in each of the intervals, with the exception of those with
maturities of one year or more, indicating that it has more rate sensitive
liabilities which it can reprice in the indicated time span than it has rate
sensitive assets. This normally indicates that the Bank would be in position
to reprice its rate-sensitive liability accounts (deposits) more quickly than
it would its rate-sensitive assets (loans and investments). During periods of
declining interest rates the negative gap works to the Bank's advantage,
widening the net interest spread between assets and liabilities. To the
contrary, however, during periods of rising rates the negative gap would be to
the Bank's disadvantage, with the net interest spread shrinking. Theoretically,
a gap position of near zero would produce minimum fluctuations of the net
interest spread over long periods of time, negating the effect of rising and
falling interest rate environments. A positive gap position would essentially
reverse the effects of rising and falling rates.
It is management's objective to minimize this gap through the asset/liability
management process. The gap position is closely monitored, and investment
decisions and deposit and loan pricing structures are configured with the gap
position in mind.
<PAGE>
CAPITAL RESOURCES, CAPITAL AND DIVIDENDS
Regulatory requirements place certain constraints on the Corporation's capital.
In order to maintain appropriate ratios of equity to total assets, a
corresponding level of capital growth must be achieved. Growth in total average
assets was 7.9 percent in 1995 and 8.2 percent in 1994. The corresponding
percentage increase in average equity amounted to 9.2 percent in 1995 and 10.1
percent in 1994.
The Corporation's equity capital was $30,331,795 at December 31, 1995,
$27,049,026 at December 31, 1994, and $25,086,049 at December 31, 1993, for an
increase of 20.9 percent over the two-year period. At December 31, 1995, the
Corporation's equity-to-asset ratio was 12.6 percent, as compared to 12.3
percent at December 31, 1994 and 12.1 percent at December 31, 1993. The
maintenance of this ratio during the year 1995 reflects the fact that the
earnings the company experienced during the year were sufficient to keep pace
with the growth in total assets. The Corporation plans to maintain a capital
to asset ratio which reflects financial strength and conforms to current
regulatory guidelines. The ratio of dividends to net income was 53.9 percent
in 1995, 47.3 percent in 1994, and 38.9 percent in 1993.
The Federal Reserve Board, the Office of the Comptroller of the Currency and the
FDIC have issued risk-based capital guidelines for U.S. banking organizations.
These guidelines provide a uniform capital framework that is sensitive to
differences in risk profiles among banking companies.
Under these guidelines, total capital consists of Tier I capital (core capital,
primarily stockholders' equity) and Tier II capital (supplementary capital,
including certain qualifying debt instruments and the loan loss reserve).
Assets are assigned risk weights ranging from 0 percent to 100 percent depending
on the level of credit risk normally associated with such assets. Off-balance
sheet items (such as commitments to make loans) are also included in assets
through the use of conversion factors established by regulators and are assigned
risk weights in the same manner as on-balance sheet items. By the end of 1992,
banking institutions were expected to achieve a Tier I capital to risk-weighted
assets ratio of at least 4.00 percent, a total capital (Tier I plus Tier II) to
risk-weighted assets ratio of at least 8.00 percent, and a Tier I capital to
total assets ratio (leverage ratio) of at least 3.00 percent. The following
table sets out the appropriate regulatory standards as well as First Pulaski
National Corporation's actual ratios at December 31, 1995, 1994, and 1993.
<PAGE>
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1994 1993
-------- -------- --------
(in thousands of dollars)
<S> <C> <C> <C>
Tier I Capital to Risk-Weighted Assets:
Tier I capital.......................... 30,034 27,894 25,086
Risk-weighted assets.................... 164,697 145,033 128,290
Tier I capital to risk-weighted assets.. 18.24% 19.23% 19.55%
Regulatory requirement.................. 4.00% 4.00% 4.00%
Total Capital to Risk-Weighted Assets:
Total capital (Tier I + Tier II)........ 32,092 29,707 26,690
Risk-weighted assets.................... 164,697 145,033 128,290
Total capital to risk-weighted assets... 19.49% 20.48% 20.80%
Regulatory requirement.................. 8.00% 8.00% 8.00%
Tier I Capital to Total Assets (Leverage
Ratio):
Tier I capital.......................... 30,034 27,894 25,086
Total assets............................ 241,552 219,102 207,415
Tier I capital to total assets.......... 12.43% 12.73% 12.09%
Regulatory requirement.................. 3.00% 3.00% 3.00%
Subsequent to the implementation of the requirements outlined above, Section 131
of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
established a capital-based supervisory system of prompt corrective action (PCA)
for all insured depository institutions, including national banks. Accompanying
regulations establish the capital levels which determine a bank's PCA capital
category. The five capital categories which were established are: (1) well
capitalized, (2) adequately capitalized, (3) undercapitalized, (4) significantly
undercapitalized, and (5) critically undercapitalized. The risk-based capital
ratios and the leverage ratio are the determinants used in determining the
category into which a bank will be placed. Further, no bank which is under a
capital order or directive will ever be placed in the "well capitalized"
category, regardless of its ratios. When a bank's capital ratios fall below the
"well capitalized" level, it becomes subject to a series of increasingly
restrictive actions. For example, no bank that is undercapitalized may pay a
dividend. Additionally, undercapitalized banks must submit capital restoration
plans within 45 days of becoming undercapitalized. Other restrictions may be
imposed on banks through the issuance of PCA directives which order banks to
take certain actions or stop certain activities. The First National Bank of
Pulaski is under no such directives or capital orders, and is well capitalized
according to the standards.
FINANCIAL ACCOUNTING STANDARDS BOARD RELEASES
On January 1, 1994, the Company adopted Statement of Financial Accounting
Standards("SFAS") No. 115 as explained in Note A to Financial Statements, Part
II, Item 8. As a result of Adopting SFAS 115, the carrying value of securities
at December 31, 1995 increased by $455.2 thousand in unrealized gains. Total
stockholders' equity increased by $298.0 thousand which represented the
unrealized gain less deferred taxes. Management has classified a majority of
the investment portfolio in the available-for-sale category and reports these
investments at fair value. Management does not anticipate the sale of a
material amount of investment securities classified as available-for-sale in the
foreseeable future. However, these securities may be sold in response to
changes in the interest rates, changes in prepayment risk, the need to increase
regulatory capital or asset/liability strategy.
On January 1, 1995, the Company adopted FASB Statements No. 114 and No. 118,
<PAGE>
both of which deal with accounting by creditors for impairment of loans.
Statements No. 114 and No. 118, explained in Note A to Financial Statements,
Part II, Item 8, provide new rules for measuring impairment losses on loans.
As of the fourth quarter of 1995, the Company has identified those loans which
it deems to be impaired and has computed allowances which management believes
to be sufficient for those loans. The adoption of these statements had no
material effect on the earnings or financial condition of the Company.
Management is not aware of any known trends, events, uncertainties or current
recommendations by the regulatory authorities which will have a material effect
on the Corporation's liquidity, capital resources or operations.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated financial statements for First Pulaski National Corporation
and its subsidiary, First National Bank of Pulaski, appear on the following
pages.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
1995 1994
<S> <C> <C>
Cash and due from banks $8,767,525 $8,783,095
Federal funds sold 10,231,642 1,525,929
Total cash and cash equivalents 18,999,167 10,309,024
Interest bearing deposits with banks 100,000 -
Securities available for sale 41,533,475 47,012,477
Securities held to maturity (fair value - $17,492,384 and $15,367,795) 17,389,119 15,446,504
Loans 156,191,063 139,113,281
Unearned income (3,198,480) (2,742,608)
Loans net of unearned income 152,992,583 136,370,673
Allowance for loan losses (2,058,456) (2,023,681)
Total net loans 150,934,127 134,346,992
Bank premises and equipment 7,239,935 7,035,901
Accrued interest receivable 3,383,798 2,347,930
Prepayments and other assets 1,862,047 2,417,617
Other real estate owned 110,058 185,570
TOTAL ASSETS $241,551,726 $219,102,015
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest bearing $27,784,716 $26,374,760
Interest bearing 179,624,823 163,294,365
Total deposits 207,409,539 189,669,125
Other borrowed funds 1,312,788 1,160,584
Accrued taxes 111,713 58,434
Accrued interest on deposits 1,792,560 969,657
Accrued profit sharing expense 131,341 111,234
Other liabilities 461,990 83,955
TOTAL LIABILITIES 211,219,931 192,052,989
STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized - 1,800,000 shares;
308,261 and 304,910 shares issued and outstanding 308,261 304,910
Capital surplus 6,145,969 5,720,392
Retained earnings 23,579,610 21,869,084
Net unrealized gains (losses) on securities available for sale, net of tax 297,955 (845,360)
TOTAL STOCKHOLDERS' EQUITY 30,331,795 27,049,026
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $241,551,726 $219,102,015
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
<S> <C> <C> <C>
INTEREST INCOME
Loans, including fees $15,652,718 $12,470,157 $11,432,602
Investment securities:
Taxable 2,809,325 3,323,225 3,467,611
Non-taxable 496,781 588,762 563,400
Interest bearing deposits with banks 919 22,913 56,678
Federal funds sold 816,498 309,648 321,410
Total Interest Income 19,776,241 16,714,705 15,841,701
INTEREST EXPENSE
Interest on deposits:
Transaction accounts 560,093 523,027 445,674
Money market deposit accounts 313,385 279,214 278,268
Other savings deposits 462,729 537,841 507,543
Time certificates of deposit of $100,000 or more 2,275,145 1,368,081 1,123,609
All other time deposits 4,754,481 3,219,252 3,014,616
Borrowed funds 68,756 37,645 463
Total Interest Expense 8,434,589 5,965,060 5,370,173
NET INTEREST INCOME 11,341,652 10,749,645 10,471,528
Provision for loan losses 258,649 225,000 365,000
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 11,083,003 10,524,645 10,106,528
OTHER INCOME
Service charges on deposit accounts 1,367,109 1,361,372 1,298,953
Commissions and fees 357,945 342,709 468,690
Other service charges and fees 153,819 102,179 85,167
Security gains (losses), net (56,198) (136,349) 9,465
Gain on sale of assets 32,067 104,151 8,999
Dividends 177,658 159,903 72,203
Mortgage banking fees 48,343 96,166 129,811
Total Other Income 2,080,743 2,030,131 2,073,288
OTHER EXPENSES
Salaries and employee benefits 3,877,850 3,636,127 3,318,902
Occupancy expense, net 880,265 704,305 669,451
Furniture and equipment expense 699,622 484,549 428,612
Advertising and public relations 521,528 450,675 499,785
Other operating expenses 1,558,725 1,672,793 1,619,811
Total Other Expenses 7,537,990 6,948,449 6,536,561
Income before income taxes 5,625,756 5,606,327 5,643,255
Applicable income taxes 1,920,362 1,758,243 1,832,260
NET INCOME $3,705,394 $3,848,084 $3,810,995
Earnings per common share $12.09 $12.73 $12.86
3
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,705,394 $3,848,084 $3,810,995
Adjustments to reconcile net income to net cash
provided by operating activities-
Provision for loan losses 258,649 225,000 365,000
Depreciation and amortization 742,772 498,947 442,099
Amortization and accretion of investment securities, net 371,685 434,110 444,240
Deferred income tax expense (benefits) 62,388 (64,519) (70,517)
Gain on sales of other assets (32,067) (104,151) (8,999)
Security (gains) losses 56,198 136,349 (9,465)
Loans acquired for resale (2,593,755) (3,619,124) (4,861,890)
Proceeds from sale of loans 2,685,755 4,283,384 4,451,830
(Increase) decrease in interest receivable (1,035,868) (296,355) 10,533
(Increase) in prepayments and other assets (100,580) (49,013) (14,580)
Increase (decrease) in accrued interest on deposits 822,903 218,199 (16,825)
Increase (decrease) in accrued taxes 58,060 (85,844) (18,367)
Increase (decrease) in other liabilities 398,143 (72,918) 57,022
Cash Provided by Operating Activities, net 5,399,677 5,352,149 4,581,076
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in interest bearing deposits with banks (100,000) 750,000 -
Purchases of securities available for sale (18,983,237) (24,564,820) -
Proceeds from sales of securities available for sale 11,100,506 7,765,131 -
Proceeds from maturities of securities available for sale 14,510,359 14,314,703 -
Purchases of securities held to maturity (6,851,464) (7,026,994) (35,924,703)
Proceeds from maturities of securities held to maturity 5,064,636 3,975,000 28,931,259
Net increase in loans (16,945,597) (15,994,742) (8,461,549)
Principal payments received under leases - 23,503 27,625
Capital expenditures (946,806) (3,063,848) (1,198,287)
Proceeds from sale of other real estate 115,392 262,429 124,792
Cash Used by Investing Activities, net (13,036,211) (23,559,638) (16,500,863)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowing 240,000 1,000,000 200,000
Borrowings repaid (87,797) (39,416) -
Net increase in deposits 17,740,414 8,871,988 12,178,749
Cash dividends paid (1,994,868) (1,818,435) (1,481,860)
Proceeds from issuance of common stock 428,928 778,688 109,650
Cash Provided by Financing Activities, net 16,326,677 8,792,825 11,006,539
INCREASE (DECREASE) IN CASH, net 8,690,143 (9,414,664) (913,248)
CASH AND CASH EQUIVALENTS, beginning of year 10,309,024 19,723,688 20,636,936
CASH AND CASH EQUIVALENTS, end of year $18,999,167 $10,309,024 $19,723,688
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1995, 1994 and 1993
Unrealized
Gains/(Losses)
Common Stock Capital Retained on Securities,
Shares Amount Surplus Earnings Net of Taxes Total
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 294,299 $294,299 $4,842,665 $17,510,300 - $22,647,264
Net income - - - 3,810,995 - 3,810,995
Cash dividends paid $5.00
per share - - - (1,481,860) - (1,481,860)
Common stock issued 2,090 2,090 107,560 - - 109,650
-------- -------- ---------- ----------- ----------- -----------
Balance at December 31, 1993 296,389 296,389 4,950,225 19,839,435 - 25,086,049
Cumulative effect, net of
taxes, of a change in
accounting for securities - - - - 852,483 852,483
Net income - - - 3,848,084 - 3,848,084
Cash dividends paid $6.00
per share - - - (1,818,435) - (1,818,435)
Common stock issued 8,521 8,521 770,167 - - 778,688
Change in unrealized gains
(losses) on securities,
net of tax - - - - (1,697,843) (1,697,843)
------- -------- ---------- ----------- ---------- -----------
Balance at December 31, 1994 304,910 304,910 5,720,392 21,869,084 (845,360) 27,049,026
Net income - - - 3,705,394 - 3,705,394
Cash dividends paid $6.50
per share - - - (1,994,868) - (1,994,868)
Common stock issued 3,351 3,351 425,577 - - 428,928
Change in unrealized gains
(losses) on securities,
net of tax - - - - 1,143,315 1,143,315
------- -------- ---------- ----------- --------- -----------
Balance at December 31, 1995 308,261 $308,261 $6,145,969 $23,579,610 $297,955 $30,331,795
======= ======== ========== =========== ========= ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
First Pulaski National Corporation (the "Corporation") is a one-bank holding
company organized under the laws of Tennessee in 1981 and registered under the
Bank Holding Company Act of 1956, as amended. The Corporation through its
subsidiary bank provides domestic financial services in Giles and Lincoln
County, Tennessee, to customers who are predominantly small and middle-market
businesses and middle-income individuals. The accounting and reporting policies
of the Corporation and its subsidiary conform to generally accepted accounting
principles and to general practices within the banking industry. A description
of the significant accounting policies is presented below.
Note A - Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of First Pulaski
National Corporation and its wholly-owned bank subsidiary First National Bank of
Pulaski. All significant intercompany balances and transactions have been
eliminated in consolidation.
Securities
Effective January 1, 1994, the Corporation adopted Statement of Financial
Accounting Standards No. 115 Accounting for Certain Investments in Debt and
Equity Securities. Under this statement, the Corporation s securities are
classified as either held to maturity or available for sale.
Held to maturity securities are securities for which management has the ability
and intent to hold on a long-term basis or until maturity. These securities are
carried at amortized cost, adjusted for amortization of premiums and accretion
of discount.
Securities available for sale represent those securities intended to be held for
an indefinite period of time, including securities that management intends to
use as part of its asset/liability strategy, or that may be sold in response to
changes in interest rates, changes in prepayment risk, the need to increase
regulatory capital or other similar factors. Securities available for sale are
recorded at fair value with unrealized gains and losses net of any tax effect,
added or deducted directly from shareholders equity.
Realized and unrealized gains and losses are based on the specific
identification method.
Loans and Allowance for Loan Losses
Loans which the Corporation has the positive intent and ability to hold to
maturity are stated at the principal amount outstanding, net of unearned income.
Loans also include loans held for resale at December 31, 1995, totaling $92,000.
These loans are recorded at cost, which approximates market value.
The allowance for loan losses is maintained at a level which, in management's
judgment, is adequate to absorb credit losses inherent in the loan portfolio.
The amount of the allowance is based on management's evaluation of the
collectibility of the loan portfolio, including the nature of the portfolio,
credit concentrations, trends in historical loss experience, specific impaired
loans, and economic conditions. Allowances for impaired loans are generally
determined based on collateral values or the present value of estimated cash
flows. Because of uncertainties associated with the regional economic
conditions, collateral values, and future cash flows on impaired loans, it is
reasonably possible that management's estimate of credit losses inherent in the
loan portfolio and the related allowance may change materially in the near term.
The allowance is increased by a provision for loan losses, which is charged to
expense and reduced by charge-offs, net of recoveries.
<PAGE>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Note A - Summary of Significant Accounting Policies - (Continued)
Loans and Allowance for Loan Losses - (Continued)
In 1993, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 114, Accounting by Creditors for Impairment of a Loan
(SFAS No. 114), which was amended in 1994 by Statement of Financial Accounting
Standards No. 118, Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosure (SFAS) No. 118. These standards address the
accounting for certain loans when it is probable that all amounts due pursuant
to the contractual terms of the loan will not be collected. Individually
identified impaired loans are measured based on the present value of payments
expected to be received, using the historical effective loan rate as the
discount rate. Loans that are to be foreclosed or that are solely dependent on
the collateral for repayment may alternatively be measured based on the fair
value of the collateral for such loans. Measurement may also be based on
observable market prices. If the recorded investment in the loan exceeds the
measure of fair value, a valuation allowance is established as a component of
the allowance for loan losses. The Corporation adopted SFAS 114 and SFAS 118
effective January 1, 1995. The Corporation had previously measured the
allowance for loan losses using methods similar to those prescribed in SFAS
No. 114. As a result of adopting these statements, no additional allowance for
loan losses was required as of January 1, 1995.
Loans are generally placed on nonaccrual when a loan is specifically determined
to be impaired or when principal or interest is delinquent for 90 days or more
or when doubt as to timely collection of principal or interest exists unless
such loans are well secured and in the process of collection. The decision to
place a loan on non-accrual status is based on an evaluation of the borrower's
financial condition, collateral, liquidation value, and other factors that
affect the borrower s ability to pay. Generally, at the time a loan is placed
on a non-accrual status, all interest accrued and uncollected on the loan in the
current fiscal year is reversed from income, and all interest accrued and
uncollected from the prior year is charged off against the allowance for loan
losses. Thereafter, interest on non-accrual loans is recognized in interest
income only to the extent that cash is received and future collection of
principal is not in doubt. If the collectibility of outstanding principal is
doubtful, such interest received is applied as a reduction of principal.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed on the straight-line
and various accelerated methods at rates calculated to amortize the cost of
assets over their estimated useful lives. Cost of major additions and
improvements are capitalized. Expenditures for maintenance and repairs are
charged to expense as incurred.
Other Real Estate Owned
Other real estate owned consists of properties acquired through foreclosures and
premises not used for business operations. These properties are valued at the
lower of cost or estimated net realizable value. Cost includes loan principal,
accrued interest, and foreclosure expense. Estimated net realizable value is
the estimated selling price in an orderly disposition reduced by estimated
selling costs and future carrying costs. The excess of cost over net realizable
value at the time of foreclosure is charged to the allowance for loan losses.
<PAGE>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Note A - Summary of Significant Accounting Policies - (Continued)
Loan Income and Fees
Interest income on discounted installment loans is recognized by the sum-of-the
months digits method, which approximates the "interest" method. Interest on all
other loans is accrued and recognized as income based upon the principal amount
outstanding. Fees on loans are recognized as income in accordance with
Statement of Financial Accounting Standards No. 91, "Accounting for Non-
refundable Fees and Costs associated with Originating or Acquiring Loans and
Initial Direct Costs of Leases", which requires that loan origination fees and
direct loan origination costs for a completed loan be deferred and amortized as
an adjustment to yield.
Income Taxes
The Corporation adopted the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes," (SFAS No. 109), effective
January 1, 1993. The Corporation's adoption of SFAS No. 109 had no effect on
the provision for income taxes.
Current income tax provisions approximate taxes to be paid or refunded for the
applicable period.
Balance sheet amounts of deferred taxes are recognized on the temporary
differences between the basis of assets and liabilities as measured by tax laws
and their basis as reported in the financial statements. Deferred tax expense
or benefit is then recognized for the change in deferred tax liabilities or
assets between periods.
Recognition of deferred tax assets is based on management's belief that it is
more likely than not that the tax benefit associated with certain temporary
differences will be realized.
First Pulaski National Corporation files a consolidated income tax return.
However, income taxes are computed by the subsidiary on a separate basis, and
taxes currently payable are remitted to First Pulaski National Corporation.
Statements of Cash Flows
For the purpose of the presentation in the consolidated statements of cash
flows, the Corporation considers cash equivalents as those amounts included in
the balance sheet captions "Cash and due from banks" and "Federal funds sold."
Cash flows from operating activities reflect interest paid of $7,611,656,
$5,709,217 and $5,386,535 and income taxes paid of $1,899,000, $1,909,235 and
$1,908,041 for the years ended December 31, 1995, 1994, and 1993, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Reclassifications
Certain 1994 and 1993 financial information has been reclassified to conform its
presentation with the 1995 financial statements.
<PAGE>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Note B - Securities
The following is a summary of the amortized cost and fair value of securities at
December 31:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
1995 Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available for Sale
- ------------------
U.S. Treasury securities $20,235,663 $197,811 $27,702 $20,405,772
U.S. Government agencies 20,842,577 285,126 - 21,127,703
----------- -------- ------- -----------
41,078,240 482,937 27,702 41,533,475
----------- -------- ------- -----------
Held to Maturity
- ----------------
Obligations of states and
political subdivisions 13,347,233 99,602 28,051 13,418,784
Other debt securities 4,041,886 32,309 595 4,073,600
----------- -------- ------- -----------
17,389,119 131,911 28,646 17,492,384
----------- -------- ------- -----------
TOTAL $58,467,359 $614,848 $56,348 $59,025,859
=========== ======== ======= ===========
1994
Available for Sale
- ------------------
U.S. Treasury securities $34,612,024 $3,698 $984,284 $33,631,438
U.S. Government agencies 13,677,513 33,281 329,755 13,381,039
----------- -------- ---------- -----------
48,289,537 36,979 1,314,039 47,012,477
----------- -------- ---------- -----------
Held to Maturity
Obligations of states and
political subdivisions 10,929,858 140,681 166,844 10,903,695
Other debt securities 4,516,646 - 52,546 4,464,100
----------- -------- ---------- -----------
15,446,504 140,681 219,390 15,367,795
----------- -------- ---------- -----------
TOTAL $63,736,041 $177,660 $1,533,429 $62,380,272
=========== ======== ========== ===========
</TABLE>
The following is a summary of the amortized cost and fair value of debt
securities by contractual maturity at December 31, 1995:
<TABLE>
<CAPTION>
Available for Sale Held to Maturity
------------------ ----------------
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
<S> <C> <C> <C> <C>
Due in one year or less $9,083,497 $9,088,124 $5,627,095 $5,658,167
Due after one year through five years 31,921,867 32,370,032 11,761,024 11,833,217
Due after five years through ten years - - 1,000 1,000
Due after ten years 72,876 75,319 - -
----------- ----------- ----------- -----------
TOTAL $41,078,240 $41,533,475 $17,389,119 $17,492,384
=========== =========== =========== ===========
</TABLE>
<PAGE>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Note B - Securities (Continued)
Net gains realized from securities transactions for 1995, 1994 and 1993 were:
<TABLE>
<CAPTION>
Book Gross Realized Net
1995 Proceeds Value Gains Losses Realized
---- -------- ----- ----- ------ --------
<S> <C> <C> <C> <C> <C>
Securities sold $11,100,506 $11,166,340 - $65,834 ($65,834)
Securities called or redeemed 19,569,659 19,565,359 4,300 - 4,300
Securities recovered* 5,336 - 5,336 - 5,336
$30,675,501 $30,731,699 $9,636 $65,834 ($56,198)
1994
Securities sold $7,765,131 $8,000,046 - $234,915 ($234,915)
Securities called or redeemed 9,343,372 9,246,925 96,447 - 96,447
Securities recovered* 2,119 - 2,119 - 2,119
$17,110,622 $17,246,971 $98,566 $234,915 ($136,349)
1993
Securities called or redeemed $46,125 $45,000 $1,125 $- $1,125
Securities recovered* 8,340 - 8,340 - 8,340
$54,465 $45,000 $9,465 $- $9,465
*Previously written off
</TABLE>
Income tax expense (benefit) attributable to securities transactions was
$(22,479), $(54,540) and $3,786 for 1995, 1994 and 1993, respectively.
Securities with a book value of $17,492,706 at December 31, 1995 and
$20,768,376 at December 31, 1994 were pledged to secure public monies and for
other purposes as required or permitted by law.
There were no investments in obligations of state and political subdivisions
that were payable from and secured by the same source of revenue or taxing
authority that exceeded 10% of consolidated shareholders' equity at December
31, 1995 or 1994.
Note C - Loans and Allowance for Loan Losses - The following is a summary of
loans at December 31:
<TABLE>
<CAPTION>
&A
1995 1994
---- ----
<S> <C> <C>
Construction and land development $2,928,706 $3,530,170
Commercial and industrial 17,911,213 14,650,249
Agricultural 12,502,723 10,955,898
Real estate loans secured by:
Farmland 15,614,677 13,534,923
Residential property 37,811,008 35,418,548
Nonresidential, nonfarm 26,410,563 22,689,602
Loans to individuals secured by:
Automobiles 19,291,909 16,955,040
Retail, consumer and personal expenditures 21,318,235 19,149,669
Other loans 2,402,029 2,229,182
------------ ------------
156,191,063 139,113,281
Unearned income (3,198,480) (2,742,608)
------------ ------------
TOTAL $152,992,583 $136,370,673
============ ============
</TABLE>
<PAGE>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Note C - Loans and Allowance for Loan Losses (Continued)
The following is a summary of loan maturities carrying fixed and variable
interest rates as of December 31, 1995:
<TABLE>
<CAPTION>
Within Over
One Year One Year Total
-------- -------- -----
<S> <C> <C> <C>
Fixed rate loans $89,281,271 $46,453,867 $135,735,138
Variable rate loans 20,341,622 114,303 20,455,925
------------ ----------- ------------
TOTAL $109,622,893 $46,568,170 $156,191,063
============ =========== ============
</TABLE>
At December 31, 1995 and 1994, nonaccrual and restructured loans totaled
$208,063 and $300,586 respectively. The amount of interest income actually
recognized on these loans during 1995 and 1994 was $937 and $2,298 respectively.
The additional amount of interest income that would have been recorded during
1995 and 1994 if the above amounts had been current in accordance with their
original terms was $16,962 and $10,586 respectively.
As of December 31, 1995, the Corporation s recorded investment in impaired loans
and the related valuation allowance calculated under SFAS No. 114 are as
follows:
<TABLE>
<CAPTION>
Recorded Valuation
Investment Allowance
---------- ---------
<S> <C> <C>
Impaired Loans-
Valuation allowance required $133,228 $42,769
No valuation allowance required 74,835 -
-------- -------
Total Impaired Loans $208,063 $42,769
======== =======
</TABLE>
The valuation allowance is included in the allowance for loan losses on the
balance sheet.
The average recorded investment in impaired loans for the year 1995 was
$260,256.
Loans past due 90 days or more and accruing interest were $210,137 and $161,233
at December 31, 1995 and 1994 respectively.
Certain related parties (principally directors, including their families and
companies in which they are principal owners) are loan customers of the
Corporation's bank subsidiary. Related party loans are made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with unrelated persons and do not involve more
than a normal risk of collectibility. The following table summarizes the
changes in related party loans for 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Balance at beginning of year $7,660,907 $6,718,566
Additions 3,387,327 3,978,102
Repayments (2,541,303) (3,035,761)
---------- ----------
Balance at end of year $8,506,931 $7,660,907
========== ==========
</TABLE>
<PAGE>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Note C - Loans and Allowance for Loan Losses (Continued)
Transactions in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Balance at beginning of year $2,023,681 $2,006,864 $1,847,037
---------- ---------- ----------
Less-Charge-offs:
Real estate -
Residential 4,287 10,000 7,394
Nonresidential, nonfarm - - 44,410
Commercial 63,659 33,064 9,020
Agricultural 22,276 73,721 4,609
Individuals 342,459 250,220 310,949
Others - - 3,197
---------- ---------- ----------
432,681 367,005 379,579
---------- ---------- ----------
Add-Recoveries:
Real estate -
Residential 10,720 5,752 43,837
Nonresidential, nonfarm 1,657 1,338 334
Commercial 73,721 16,071 26,109
Agricultural 16,252 37,917 4,153
Individuals 106,457 97,744 98,644
Others - - 1,329
---------- ---------- ----------
208,807 158,822 174,406
---------- ---------- ----------
Net Charge-offs 223,874 208,183 205,173
---------- ---------- ----------
Add-Provision charged to operations 258,649 225,000 365,000
---------- ---------- ----------
Balance at end of year $2,058,456 $2,023,681 $2,006,864
========== ========== ==========
Ratio of net charge-offs to average
loans outstanding during the year 0.16% 0.16% 0.18%
---- ---- ----
</TABLE>
<PAGE>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Note D - Bank Premises and Equipment
The following is a summary of bank premises and equipment at December 31:
<TABLE>
<CAPTION>
Accumulated
Depreciation & Carrying
1995 Cost Amortization Amount
- ----
<S> <C> <C> <C>
Land $441,812 - $441,812
Buildings 7,217,868 2,459,991 4,757,877
Furniture and equipment 4,417,899 2,732,291 1,685,608
Leasehold improvements 400,442 45,804 354,638
----------- ---------- ----------
TOTAL $12,478,021 $5,238,086 $7,239,935
=========== ========== ==========
1994
- ----
Land $423,112 - $423,112
Buildings 6,755,371 2,102,919 4,652,452
Furniture and equipment 3,984,713 2,391,726 1,592,987
Leasehold improvements 400,442 33,092 367,350
----------- ---------- ----------
TOTAL $11,563,638 $4,527,737 $7,035,901
=========== ========== ==========
</TABLE>
The following is a summary of non-cancelable minimum operating lease
commitments for real property, excluding cancelable short-term commitments,
principally for equipment.
<TABLE>
<CAPTION>
Annual Annual
Year Commitments Year Commitments
<C> <C> <C> <C>
1996 $52,122 2001 - 2005 $53,222
1997 52,122 2006 - 2010 30,000
1998 52,122 2011 - 2014 20,500
1999 52,122
2000 51,932
</TABLE>
Note E - Prepayments and Other Assets
The following is a summary of prepayments and other assets at December 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Prepaid expenses $92,663 $77,872
Federal Home Loan Bank stock 712,200 655,700
Federal Reserve Bank stock 112,500 112,500
Investment in single premium whole life insurance 504,553 483,536
Investment in insurance limited partnership and co 81,850 81,850
Deferred income tax benefits 352,331 1,003,700
Other 5,950 2,459
---------- ----------
TOTAL $1,862,047 $2,417,617
========== ==========
</TABLE>
<PAGE>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Note E - Prepayments and Other Assets (Continued)
In a prior year the Corporation entered into a salary continuation agreement
with a key employee which becomes effective upon retirement. Life insurance
policies were purchased to finance this liability. The appreciation in value of
the policy exceeded the current year accrued deferred expense computed using the
present value method by $21,018.
Note F - Deposits
The following is a summary of deposits at December 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Noninterest bearing:
Demand $27,784,716 $26,374,760
Interest bearing:
Demand 20,167,217 28,611,996
Savings 28,639,237 19,681,879
Other time 90,250,759 82,291,106
Certificates of deposit $100,000 and over 40,567,610 32,709,384
------------ ------------
TOTAL $207,409,539 $189,669,125
============ ============
</TABLE>
Note G - Other Borrowed Funds
The following is a summary of other borrowed funds at December 31:
<TABLE>
<CAPTION> &A
1995 1994
<S> <C> <C>
Notes payable to Federal Home Loan Bank:
Dated 11-17-93, matures 12-01-08
payable $1,682 per month including
interest at 5.95% $182,444 $191,482
Dated 6-22-94, matures 07-01-04, payable
$11,077 per month including interest
at 5.95% 891,753 969,102
Dated 10-16-95, matures 11-01-05,
payable $2,750 per month including
interest at 6.70% 238,591 -
---------- ----------
TOTAL $1,312,788 $1,160,584
</TABLE>
The notes are secured by a pledge of Federal Home Loan Bank stock with a par
value of $712,200 and a blanket pledge of $1,969,181 first mortgage loans
against single family, 1-4 unit residential properties.
Notes payable are scheduled to mature December 31:
<TABLE>
<C> <C>
1996 $109,212
1997 116,030
1998 123,274
1999 130,971
2000 139,151
Thereafter 694,150
----------
$1,312,788
==========
</TABLE>
<PAGE>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Note H - Income Taxes
The components of income taxes for the three years ended December 31 are as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Federal
Current $1,553,931 $1,520,738 $1,674,978
Deferred tax (benefit) 62,388 (64,519) (70,517)
1,616,319 1,456,219 1,604,461
State 304,043 302,024 227,799
---------- ---------- ----------
Provision for Income Taxes $1,920,362 $1,758,243 $1,832,260
========== ========== ==========
</TABLE>
Income taxes varied from the amount computed at the statutory federal income tax
rate for the years ended December 31 as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Federal taxes at statutory rate $1,912,757 $1,906,151 $1,918,707
Increase (decrease) resulting from
tax effect of:
Tax exempt interest on obligations
of states and political subdivsions (168,405) (237,184) (226,856)
State income taxes, net of federal
income tax benefit 200,668 199,336 150,347
Dividend received deduction (27,171) (28,681) (13,343)
Excess capital loss (12,354) (36,132) (2,916)
Others, net 14,867 (45,247) 6,321
---------- ---------- ----------
Provision for Income Taxes $1,920,362 $1,758,243 $1,832,260
========== ========== ==========
</TABLE>
Significant components of the Corporation s deferred tax assets and
liabilities on December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $513,686 $501,863
Leases - 705
Other real estate 5,904 6,940
Securities available for sale - 434,201
Loan fees and expenses - 73,613
Deferred compensation 18,633 18,633
--------- ----------
Gross Deferred Tax Assets 538,223 1,035,955
--------- ----------
Deferred tax liabilities:
Investment securities 31,112 32,255
Securities available for sale 154,780 -
--------- ----------
Gross Deferred Tax Liabilities 185,892 32,255
--------- ----------
Net Deferred Tax Assets $352,331 $1,003,700
========= ==========
</TABLE>
<PAGE>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Note I - Other Operating Expenses
The following table summarizes the components of other operating expenses for
the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Directors' fees $159,030 $178,125 $169,145
Stationery and supplies 184,332 169,314 177,247
FDIC insurance 225,087 418,242 384,554
Other insurance 57,465 63,419 59,601
Postage 122,308 123,272 122,112
Telephone 97,758 86,538 85,471
Other 712,745 633,883 621,681
---------- ---------- ----------
$1,558,725 $1,672,793 $1,619,811
========== ========== ==========
</TABLE>
Note J - Profit Sharing Plan
The Corporation's bank subsidiary has a non-contributory trusteed profit sharing
retirement plan covering all officers and employees who have completed a year of
service and are over the age of 21. The bank subsidiary s total payroll in 1995
was $3,031,062. Contributions for the current year were calculated using the
base salary amount of $2,694,587. The bank subsidiary s contribution is based,
in general, on 10% of earnings before taxes, not to exceed 15% of the total
salary of all the participants. The plan expense was $404,188, $395,755 and
$354,610 in 1995, 1994 and 1993, respectively.
Note K - Other Financial Instruments, Commitments and Contingencies
The Corporation's bank subsidiary is a party to financial instruments with off-
balance-sheet-risk in the normal course of business to meet the financing needs
of its customers. These financial instruments include commitments to extend
credit, standby letters of credit and residential mortgage loans sold with
certain repurchase requirements. Those instruments involve, to varying degrees,
elements of credit risk in excess of the amount recognized in the balance sheet.
The contract or notional amounts of those instruments reflect the extent of
involvement the bank subsidiary has in those particular financial instruments.
The following summarizes the bank subsidiary's involvement in financial
instruments with off-balance-sheet risk as of December 31:
<TABLE>
<CAPTION>
Contract or Notional
Amount
--------------------------
1995 1994
<S> <C> <C>
Commitments to extend credit $13,111,542 $12,270,223
Standby letters of credit 687,725 998,230
Mortgage loans sold with repurchase
requirements outstanding 1,097,528 976,991
</TABLE>
<PAGE>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Note K - Other Financial Instruments, Commitments and Contingencies (Continued)
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The bank subsidiary evaluates each
customer's credit worthiness on a case-by-case basis. The amount of collateral
obtained upon extension of credit is based on management's credit evaluation.
Collateral held varies but may include certificates of deposits, accounts
receivable, inventory, property, plant and equipment, and income-producing
commercial properties.
Standby letters of credit are conditional commitments issued by the bank
subsidiary to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing, and similar
transactions. All letters of credit are due within one year of the original
commitment date. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
The bank subsidiary may be required to repurchase residential mortgage loans
sold if a default occurs with respect to the payment of any of the first four
installments of principal and interest after a loan is sold and the default
continues for a period of 90 days.
The bank subsidiary primarily serves customers located in Giles County and
Lincoln County, Tennessee. As such, loans, commitments and stand-by letters of
credit have been granted to customers in that area. Concentration of credit by
type of loan is presented in Note C.
In the normal course of business, the Corporation is involved in various legal
proceedings. Management has concluded, based upon advice of legal counsel, that
the result of these proceedings will not have a material effect on the
Corporation's financial condition or results of operations.
Note L - Earnings Per Share
Earnings per common share are based on the weighted average number of shares
outstanding of 306,449, 302,290, and 296,347 for 1995, 1994 and 1993,
respectively. Options granted under the stock option plans are not included in
the computation since their dilutive effect is not material.
<PAGE>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Note M - First Pulaskial Corporation (Parent Company Only) Financial
Information
<TABLE>
<CAPTION>
BALANCE SHEETS
December 31,
ASSETS 1995 1994
<S> <C> <C>
Cash $2,397,343 $1,944,511
Investment in bank subsidiary, at equity 27,826,607 25,001,451
Other assets 107,845 103,064
TOTAL ASSETS $30,331,795 $27,049,026
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' Equity
Common stock, $1 par value; authorized - 1,800,000
shares; 308,261 and 304,910 shares issued
and outstanding $308,261 $304,910
Capital surplus 6,145,969 5,720,392
Retained earnings 23,579,610 21,869,084
Net unrealized gains (losses) on securities available for sale, net of tax 297,955 (845,360)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $30,331,795 $27,049,026
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
Years Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
INCOME
Dividends from subsidiary $1,994,868 $1,818,435 $1,481,860
Other dividends 114,166 120,509 56,150
----------- ---------- ----------
2,109,034 1,938,944 1,538,010
EXPENSES
Education 22,012 13,906 14,955
Directors' fees 52,200 64,900 54,775
Stockholder's meeting 15,277 13,171 0
Other 21,986 7,359 395
---------- ---------- ----------
111,475 99,336 70,125
Income before applicable income taxes and equity in
undistributed earnings of subsidiary 1,997,559 1,839,608 1,467,885
Reduction in consolidated income taxes arising from
parent company tax operating loss 25,995 21,214 18,094
---------- ---------- ----------
Income before equity in undistributed earnings of
subsidiary 2,023,554 1,860,822 1,485,979
Equity in undistributed earnings of subsidiary 1,681,840 1,987,262 2,325,016
---------- ---------- ----------
NET INCOME $3,705,394 $3,848,084 $3,810,995
========== ========== ==========
</TABLE>
<PAGE>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Note M - First Pulaski National Corporation (Parent Company Only) Financial
Information (Continued)
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Years Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,705,394 $3,848,084 $3,810,995
Adjustments to reconcile net income to net cash provided
by operating activities -
Equity in undistributed earnings of subsidiary (1,681,840) (1,987,262) (2,325,016)
(Increase) decrease in other assets (4,782) (3,120) (11,626)
Cash Provided by Operating Activities 2,018,772 1,857,702 1,474,353
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (1,994,868) (1,818,435) (1,481,860)
Proceeds from issuance of common stock 428,928 778,688 109,650
Cash Used by Financinig Activities (1,565,940) (1,039,747) (1,372,210)
INCREASE IN CASH 452,832 817,955 102,143
CASH, beginning of year 1,944,511 1,126,556 1,024,413
CASH, end of year $2,397,343 $1,944,511 $1,126,556
</TABLE>
Note N - Regulatory Requirements and Restrictions
The Corporation's bank subsidiary is required to maintain average reserve
balances with the Federal Reserve Bank. The average amount of those reserve
requirements was approximately $1,320,000 and $1,310,700 for the years ended
December 31, 1995 and 1994, respectively.
The primary source of funds for payment of dividends by the Corporation to its
shareholders is dividends received from its bank subsidiary. The amount of
dividends that a bank subsidiary may pay in any year is subject to certain
regulatory restrictions. The amount available for payment of dividends
without prior regulatory approval at December 31, 1995, to the Parent Company
was $6,205,536. The Corporation is also required to maintain mimimum amounts
of capital to total "risk weighted" assets, as defined by the banking
regulators. At December 31, 1995, the Corporation is required to have minimum
Tier 1 and Total capital ratios of 4.00% and 8.00%, respectively. The
Corporation's actual ratios at that date were 18.24% and 19.49% ,
respectively. The Corporation's leverage ratio at December 31, 1995, was
12.38%.
Note O - Stock Option and Stock Purchase Plans
Under the Corporation's stock option and employee stock purchase plans, non-
employee directors and bank subsidiary employees may be granted options or
rights to purchase shares of the Corporation's common stock. The option or
purchase price under all plans is equal to the fair market value of the stock
at the date of grant.
Shares available for grants of options or rights to purchase at December 31,
1995 include 11,500 shares under the 1987 stock option plan, 25,628 shares
under the 1994 employee purchase plan, and 24,332 shares under the 1994
outside directors stock option plan.
<PAGE>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Note O - Stock Option and Stock Purchase Plans (Continued)
The 1987 plan permits the Board of Directors to grant options to key employees.
A total of 20,000 shares were reserved under this plan of which 8,500 shares
have been granted and 8,000 shares have been exercised. Options expire 10 years
after the date of grant.
The 1994 outside directors stock option plan permits the granting of stock
options to non-employee directors. A total of 30,000 shares were reserved under
this plan. An option to purchase 100 shares is granted upon becoming a member
of the Board of Directors, of which 50 shares is immediately exercisable and the
remaining 50 shares are exercisable upon the first annual meeting of
shareholders following the date of grant provided the optionee is still serving
as an outside director. In addition, each outside director receives an
immediately exercisable option to purchase 500 shares, less the number of shares
of stock previously beneficially owned. Options under this plan expire ten
years from their date of grant.
The 1994 employee stock purchase plan permits the granting of stock options to
eligible employees of the Corporation. A total of 30,000 shares were reserved
under this plan. The Board has established the following guidelines as to the
number of shares employees are allowed to purchase on July 1, each year:
<TABLE>
<CAPTION>
Number of Shares
Under 10 years Over 10 years
Years of Service
<S> <C> <C>
Vice-Presidents and above 40 50
All other Officers 25 35
Non-Officers 15 25
</TABLE>
Stock option and purchase plans activity for 1995, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
Stock Option Plans Employee Purchase Plan
Shares Shares Shares
Available Under Available Shares
for Option Option for Purchase Purchased
<S> <C> <C> <C> <C>
Balance, January 1, 1993 12,000 6,000 - -
Exercised - (2,000) - -
Balance, December 31, 1993 12,000 4,000 - -
Additions 30,000 - 30,000 -
Granted (3,700) 3,700 (2,425) 2,425
Exercised - (5,600) - (2,425)
Balance December 31, 1994 38,300 2,100 27,575 -
Additions - - - -
Granted (2,468) 2,468 (1,947) 1,947
Exercised - (1,270) - (1,947)
Balance December 31, 1995 35,832 3,298 25,628 -
Exercisable at December 31, 1995 2,248
</TABLE>
<PAGE>
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Note P - Fair Values of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" (SFAS No. 107),, requires entities to disclose
the estimated fair value of its financial instrument assets and liabilities.
Management is concerned that the required disclosures under SFAS No. 107 may
lack reasonable comparability between financial institutions due to the wide
range of permitted valuation techniques and numerous estimates which must be
made given the absence of active secondary markets for many of the financial
instruments. This lack of uniform valuation methodologies also introduces a
greater degree of subjectivity to these estimated fair values.
The following methods and assumptions were used by the Corporation in estimating
its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the balance sheet
for cash and short-term instruments approximate those assets' fair values.
Securities: Fair values for securities are based on quoted market prices, where
available. If quoted market prices are not available, fair values are based on
quoted market prices of comparable instruments.
Loans: For variable-rate loans that reprice frequently and with no significant
change in credit risk, fair values are based on carrying values. The fair
values for other loans are estimated using discounted cash flow analyses, using
interest rates currently being offered for loans with similar terms to borrowers
of similar credit quality.
Deposit liabilities: The fair values disclosed for demand deposits (e.g.,
interest and non-interest checking, savings, and certain types of money market
accounts) are, by definition, equal to the amount payable on demand at the
reporting date (i.e., their carrying amounts). The carrying amounts for
variable-rate, fixed-term money market accounts and certificates of deposits
approximate their fair values at the reporting date. Fair values for fixed-rate
certificates of deposit are estimated using a discounted cash flow calculation
that applies interest rates currently being offered on certificates to a
schedule of aggregated expected monthly maturities on time deposits.
Other borrowed funds: Market quotes are used for Federal Home Loan Bank
borrowings.
The estimated fair values of the Corporation s financial instruments on December
31 were (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
Carrying Amount Fair Value Carrying Amount Fair Value
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term investments $19,099 $19,099 $10,309 $10,309
Securities 58,923 59,026 62,459 62,380
Loans 152,993 153,380 136,371 138,107
Less: allowance for loan losses (2,058) 0 (2,024) 0
Financial liabilities:
Deposits 207,410 207,657 189,699 190,329
Other borrowed funds 1,313 1,301 1,161 1,109
Unrecognized financial instruments:
Standby letters of credit 0 (2) 0 (3)
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
Stockholders and Board of Directors
First Pulaski National Corporation
Pulaski, Tennessee
We have audited the accompanying consolidated balance sheets of First Pulaski
National Corporation and Subsidiary as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Corporation'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 the 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 that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of First Pulaski
National Corporation and Subsidiary as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in Note A to the consolidated financial statements, effective
January 1, 1994, the Corporation changed its method of accounting for investment
securities.
/s/ Putman & Hancock
Fayetteville, Tennessee
February 23, 1996
<PAGE>
STATEMENT OF MANAGEMENT RESPONSIBILITY
The management of First Pulaski National Corporation and its only
subsidiary, First National Bank of Pulaski, is responsible for the content and
integrity of the financial statements and all other financial information
included in this annual report. Management believes that the statements have
been prepared in conformity with generally accepted accounting principles and,
as such, include amounts based on informed estimates and judgements of
management with respect to certain events and transactions.
Management is further responsible for maintaining a system of internal
accounting controls, designed to provide reasonable assurance that the books
and records reflect the transactions of the Company and that its established
policies and procedures are carefully followed. Management reviews and
modifies the system of internal accounting controls to improve its
effectiveness, and the system is augmented by written policies, the careful
selection and training of qualified personnel, and a program of internal audit.
Management believes that the system of internal accounting control provides
reasonable assurance that assets are safeguarded and the financial information
is objective and reliable.
Independent public accountants are engaged to audit the financial
statements of the Company and issue a report thereon. They have informed
management that the audits were conducted in accordance with generally accepted
auditing standards which require a review of and evaluation of internal
accounting controls to determine the nature, timing and extent of audit
testing.
The Board of Directors, through its Audit Committee (comprised of four
non-management directors), is responsible for providing reasonable assurance
that management fulfills its responsibilities in the preparation of the
financial statements and in the maintenance of the system of internal
accounting control. The Audit Committee annually selects the independent
public accountants and submits its selection to the Board of Directors for
approval. The Audit Committee meets with management, the independent public
accountants and the internal auditors, approves the overall scope of audit work
and reviews audit reports and findings.
/s/ Robert M. Curry /s/ William R. Horne /s/Glen Lamar
Robert M. Curry William R. Horne Glen Lamar
Chairman & CEO President Secretary/Treasurer
<PAGE>
ITEM 9: DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None required to be described.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
10(a) Identification of Directors
The following named persons are current directors. The table includes names,
ages, date of original election to the Board of Directors of the Corporation
or of the Bank which pre-existed the Corporation, and the position held with
the Corporation. All directors are elected to an annual term.
<TABLE>
<CAPTION>
Served as Principal Occupation
Director Office in or Employment for
Directors Age Since Corporation Last Five (5) Years
- ------------------------------------------------------------------------
<S> <C> <C> <S> <C>
David E. Bagley 42 4-22-93 Director President, Bagley &
Bagley Ins., Inc.
Johnny Bevill 60 2-05-70 Director Owner, Davis &
Eslick Market
James K. Blackburn IV 53 4-07-83 Director Owner, Lairdland
Farm; Real Estate
Broker
Wade Boggs 32 4-20-95 Director Owner WashMaster
Car Wash and Boggs'
Properties
James H. Butler 49 4-05-84 Director Real Estate Agent,
Butler Realty
Thomas L. Cardin 64 2-05-70 Director President,
Cardin Distrib.
Company
Joyce F. Chaffin 64 4-01-82 Assistant Retired Vice-
Secretary President, First
& Director National Bank
Parmenas Cox 84 1-13-44 Senior Senior Chairman,
Chairman First National Bank
Robert M. Curry 46 4-02-81 Chairman Board Chairman, CEO,
& Director First National Bank
Gregory G. Dugger 46 4-22-93 Director Dentist
Joe Dunavant 72 2-05-70 Director Farmer, Dunavant &
Dunavant
Charles D. Haney 41 4-22-93 Director Physician
Gary Harrison 45 4-02-87 Director Vice-President,
First National Bank
<PAGE>
Morris Ed Harwell 65 4-07-83 Director President, Harwell
Enterprises
R. M. Harwell 92 1-13-49 Director Vice-President,
Harwell Enterprises
James Rand Hayes 59 4-07-83 Director Owner, Hayes
Properties
William R. Horne 48 4-02-81 President President,
& Director First National Bank
Glen Lamar 49 10-19-81 Sec/Treas Senior Vice-Pres.,
& Director and Cashier,
First National Bank
D. Clayton Lee 71 1-09-62 Director Attorney-at-Law,
Retired
Kenneth R. Lowry 66 2-06-69 Director Retired Supt.,
Genesco, Pulaski,
Tennessee Plant
Beatrice J. McElroy 71 4-05-79 Director Real Estate
Investments
William A. McNairy 63 4-04-91 Director Owner, McNairy's
Flowerama & Gifts
W. Harwell Murrey, MD 61 2-05-70 Director Physician;
President,
Physicians &
Surgeons, Inc.
Stephen F. Speer 50 10-19-81 Director Attorney, Partner
Henry, Henry, Stack,
Garner & Speer
W. E. Walters, Jr. 74 3-14-77 Director Farmer
Bill Yancey 51 4-04-91 Director Farmer
</TABLE>
Director Stephen F. Speer and other members of the law firm of Henry, Henry,
Stack, Garner & Speer, P.C., rendered legal services to the Corporation and its
subsidiary during the current year.
10(b) Identification of Executive Officers
Parmenas Cox, Senior Chairman of the Board, is 84 years old and has been with
the subsidiary bank since its beginning in January, 1938. He began work on
January 13, 1938 as an Assistant Cashier, and was promoted to Vice-President
and Cashier on January 10, 1946. In January, 1949 he was elected First Active
Vice-President, and on January 8, 1952 he was promoted to President. In
January, 1963 he was made Chairman of the Board of First National Bank and in
October, 1981 was named Chairman of the Board of the newly formed Pulaski
National Corporation, the one-bank holding company which was created to own
First National Bank. In April, 1988 he was named Senior Chairman of the Board.
Robert M. Curry, Chairman of the Board and CEO, is 46 years old and came to
work for First National Bank in June, 1973. Prior to his employment here, he
worked at Hamilton National Bank, Knoxville, Tennessee as Assistant Cashier and
<PAGE>
Assistant Branch Manager from March, 1972 until May, 1973. He is a 1972
graduate of the University of Tennessee with a degree in business. In January,
1974, he was elected Assistant Cashier and was promoted to Assistant
Vice-President in January, 1975. In December, 1976, he was promoted to
Vice-President and was elected Executive Vice-President of First National Bank
in December, 1977. He was elected Treasurer of First Pulaski National
Corporation in October of 1981, and was elevated to the position of
Vice-Chairman in April, 1988. In April of 1990 he was named Chairman of the
Board and CEO for both First Pulaski National Corporation and First National
Bank. He is a graduate of the School of Banking of the South, Louisiana State
University.
William R. Horne, President, is 48 years old and has been with the subsidiary
bank since June, 1969, when he graduated from college. He worked part-time
with the Bank while a student. On February 4, 1971 he was named Assistant
Cashier. On February 1, 1973 he was named Assistant Vice-President. In
January, 1974 he was promoted to Vice-President and in December, 1977 was made
Executive Vice-President of First National Bank. In October, 1981 he was named
Vice-President of First Pulaski National Corporation. In April, 1988 he was
elevated to the position of President of First Pulaski National Corporation.
Since April 5, 1990 he has also served as President of First National Bank.
He is a graduate of the School of Banking of the South, Louisiana State
University.
Glen Lamar, Secretary-Treasurer, is 49 years old and joined the staff of First
National Bank in July, 1976. Prior to that time, he was a financial auditor
for the Dekalb County Board of Education in Atlanta, Georgia. He is a 1972
graduate of Oglethorpe University, Atlanta, with a degree in business
administration. He was elected Comptroller in 1976 and was promoted to Cashier
in December, 1977. In October, 1981, he was elected Secretary of First Pulaski
National Corporation. In April, 1988 he was named Secretary-Treasurer. He
also currently serves as Senior Vice-President and Cashier of First National
Bank. He is a graduate of the School of Banking of the South, Louisiana State
University.
Gayle C. Gower, Assistant Secretary, is 51 years of age and was employed by
First National Bank in August, 1974. She was promoted to Assistant Cashier in
December, 1978. She was promoted to the position of Vice-President in
September, 1985. She was elected Assistant Secretary of First Pulaski National
Corporation in April, 1995.
10(c) Identification of Certain Significant Employees
None requiring identification.
10(d) Family Relationships
None requiring identification.
10(e) Business Experience
See table given in part 10(a).
10(f) Involvement in Certain Legal Proceedings
None requiring description.
<PAGE>
ITEM 11: EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by the
Corporation during the fiscal years 1995, 1994 and 1993 for (i) the Chief
Executive Officer of the Corporation and (ii) the President of the Corporation
(collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------
Name and Fiscal All Other
Principal Position Year Salary Bonus Compensation(1)
- ---------------------- ------ -------- -------- ---------------
<S> <C> <C> <C> <C>
Robert M. Curry, 1995 $102,708 $0 $16,749
Chief Executive Office 1994 $102,708 $3,989 $17,186
of the Corporation 1993 96,712 1,871 15,801
William R. Horne, 1995 $102,708 $0 $16,755
President of the 1994 $102,708 $3,996 $17,338
Corporation 1993 96,712 1,879 16,164
(1) Represents (i) Corporation contributions to a defined contribution
plan in the amount of $15,110, $15,682 and $14,463 for Mr. Curry in
fiscal 1995, 1994 and 1993, respectively, and $15,181, $15,753 and
$14,563 for Mr. Horne in fiscal 1995, 1994 and 1993, respectively;
(ii) premiums paid by the Corporation with respect to life insurance
policies on the life of the Named Executive Officers payable to
beneficiaries designated by the Named Executive Officers of $1,410,
$1,406 and $1,266 in fiscal 1995, 1994 and 1993, respectively, for Mr.
Curry and $1,574, $1,570 and $1,529 in fiscal 1995, 1994 and 1993,
respectively, for Mr. Horne; and (iii) interest paid by the Bank (for
which the named Executive Officers serve as Executive Officers) on
loans to the named Executive Officers arranged by the Bank, the
proceeds of which were used to purchase Common Stock of the
Corporation, in the amount of $229, $98 and $72 in fiscal 1995, 1994
and 1993, respectively, for Mr. Curry and $0, $15 and $72, in fiscal
1995, 1994 and 1993, respectively for Mr. Horne.
</TABLE>
DIRECTOR COMPENSATION
The Directors of the Corporation were compensated at the rate of $300.00,
effective with the second meeting of the year, for each Directors meeting
attended. The Directors of the Corporation who serve on the Board of Directors
of First National Bank of Pulaski also serve on the Executive and Loan
Committee for the Bank and are compensated at the rate of $225.00 per Directors
meeting and Executive and Loan Committee meeting. Additionally, Directors who
serve on the Audit Committee receive $100.00 per meeting. All other Directors
who serve on other committees receive $50.00 per meeting. Inside Directors
(Bank employees) only receive Director fees for regular Board of Director
meetings and Executive and Loan Committee meetings.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists all current directors, the number of shares
beneficially owned and the nature of beneficial ownership, and the percent of
class.
<PAGE>
<TABLE>
<CAPTION>
Shares beneficially owned Percentage of
Directors as of Feb. 15, 1996 class owned
- ---------------------- ------------------------- -------------
<S> <C> <C>
David E. Bagley 690 (1) 0.23%
Johnny Bevill 3,926 (2) 1.30%
James K. Blackburn, IV 1,696 (3) 0.56%
Wade Boggs 182 (4) 0.06%
James H. Butler 892 (5) 0.29%
Thomas L. Cardin 4,513 (6) 1.49%
Joyce F. Chaffin 1,050 (7) 0.35%
Parmenas Cox 3,209 1.06%
Robert M. Curry 8,032 (8) 2.65%
Gregory G. Dugger 816 (9) 0.27%
Joe Dunavant 1,928 (10) 0.64%
Charles D. Haney 2,870 (11) 0.95%
W. Gary Harrison 4,605 (12) 1.52%
R. M. Harwell 3,036 (13) 1.00%
Morris Ed Harwell 2,368 (14) 0.78%
James Rand Hayes 2,170 (15) 0.72%
William R. Horne 6,116 (16) 2.02%
Glen Lamar 5,634 (17) 1.86%
D. Clayton Lee 10,300 (18) 3.40%
Kenneth R. Lowry 2,318 (19) 0.77%
Beatrice J. McElroy 3,241 (20) 1.07%
William A. McNairy 100 (21) 0.03%
W. Harwell Murrey, M. D. 7,305 (22) 2.41%
Stephen F. Speer 4,646 (23) 1.53%
W. E. Walters, Jr. 2,180 (24) 0.72%
Bill Yancey 650 (25) 0.21%
TOTAL 82,411 (26) 27.21%
(1) Includes 100 shares held jointly with wife, 40 shares held as Trustee
for two children, and 450 shares held by Prudential Securities, Inc.
for benefit of David Bagley.
(2) Includes 1,963 shares held by wife.
<PAGE>
(3) Includes 346 shares held by wife.
(4) Includes 98 shares held with wife and 84 shares held with father.
(5) Includes 802 shares held jointly with wife and 90 shares held jointly
with children.
(6) Includes 2,173 shares held as administrator for Cardin Distributing
Company Profit Sharing Plan, 500 shares held by James Clarence Cardin
Testamentary Trust, and 469 shares held by wife.
(7) Includes 525 shares held jointly with husband.
(8) Includes 1,556 shares held jointly with wife, 1,236 shares held
jointly with two brothers as equal partners, and 126 shares held
jointly with wife as Trustee for four children.
(9) Includes 20 shares held jointly with wife as Trustee for child and 333
shares held by FAMCO, a profit sharing plan for the employees of his
dentistry office.
(10) Includes 214 shares held jointly with wife.
(11) Includes 748 shares held jointly with wife, 60 shares held jointly
with wife as Trustee for 3 children, and 2,062 shares held in trust
for employees of Physicians and Surgeons, Inc.
(12) Includes 18 shares held by wife as Trustee for child and 4,587 shares
held jointly with wife.
(13) Includes 130 shares held by wife and does not include shares held by
his son, Morris Ed Harwell.
(14) Includes 20 shares held by wife and does not include shares held by
his father, R. M. Harwell.
(15) Includes 2,020 shares held jointly with wife.
(16) Includes 1,052 shares held jointly with wife.
(17) Includes 4,588 shares held jointly with wife and 188 shares held as
Custodian for two children.
(18) Includes 5,618 shares held by wife.
(19) Includes 690 shares held jointly with wife.
(20) Includes 108 shares held by husband, 210 shares held jointly with
husband, 232 shares held jointly with two children and 528 shares as
Trustee for two children.
(21) Held jointly with wife.
(22) Includes 2,062 shares held in trust for employees of Physicians &
Surgeons, Inc., and 3,500 shares held by wife.
(23) Includes 72 shares held by Henry, Henry, Stack, Garner & Speer, P.C.
Retirement Plan.
(24) Includes 218 shares held by wife and 348 shares held jointly with
wife.
(25) Held jointly with wife.
<PAGE>
(26) Total has been reduced by the 2,062 shares held in trust for the
employees of Physicians and Surgeons, Inc. which is reflected twice in
the individual totals above, with the holdings of Charles D. Haney and
W. H. Murrey.
</TABLE>
The following table sets forth information concerning persons who are the
beneficial owners of more than five percent of the Corporation's common stock
(its only class of voting securities). The information shown below is as of
February 15, 1995 and is based on the Corporation's stock records or the
ownership data filed with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
Name and address of Number of shares Percentage
beneficial owner(s) beneficially owned of class
- ------------------- ------------------ ----------
<S> <C> <C>
First National Bank 19,842 6.55%
of Pulaski, Tennessee
Profit Sharing Plan
</TABLE>
The following table shows the ownership of the Corporation's equity securities
beneficially owned by all directors and executive officers of the Corporation
and its subsidiary (a total of 26 persons including those listed before) as a
group on February 15, 1996.
<TABLE>
<CAPTION>
Title of Number of shares Percentage
class beneficially owned of class
- -------------- -------------------- ----------
<S> <C> <C>
Common Stock 82,411 27.21%
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1995 the Corporation paid the law firm of Henry, Henry, Stack, Garner and
Speer legal fees of $24,833. Stephen F. Speer is a partner in the above firm
and is also a director of the Corporation.
Some of the Corporation's officers and directors are at present, as in the
past, customers of the Corporation's subsidiary bank, and some of the
Corporation's officers and directors are directors or officers of corporations
or members of partnerships which are customers of the Corporation's subsidiary
bank. As such customers, they had transactions in the ordinary course of
business in 1995 with said bank, including borrowings, all of which were
substantially on the same terms, including interest rates and collateral, as
those prevailing at the same time for comparable transactions with other
persons and did not involve more than normal risk of collectability or present
any other unfavorable features.
<PAGE>
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
14(a) (1) and (2) Financial Statements and Financial Statement Schedules
The following consolidated financial statements of the Corporation and its
subsidiary are included in Part II, Item 8:
Consolidated Balance Sheets--December 31, 1995 and 1994.
Consolidated Statement of Income--Years Ended December 31, 1995, 1994
and 1993.
Consolidated Statements of Cash Flows--Years Ended December 31, 1995,
1994, and 1993.
Consolidated and Parent Company Statements of Changes in Stockholders'
Equity.
The following parent company only financial statements for the First Pulaski
National Corporation are included in Part II, Item 8:
Balance Sheets--December 31, 1995 and 1994.
Statements of Income--Years Ended December 31, 1995, 1994 and 1993.
Statements of Cash Flows--Years Ended December 31, 1995, 1994 and 1993.
14(a) (3) Listing of Exhibits
Statement Regarding Computation of Per Share Earnings - Included in Note L to
Financial Statements, Part II, Item 8.
Consent of Putman & Hancock, Certified Public Accountants - Included in items
referenced in paragraph (c) of this item, on following pages.
14(b) Reports on Form 8-K
During the last quarter of 1995, no Form 8-K reports were required to be filed.
14(c) Exhibits
Exhibits are attached following signature pages.
14(d) Other Financial Statement Schedules
All other schedules to the consolidated financial statements required by
Article 9 of Regulation S-X and all other schedules to the financial statements
of the registrant required by Article 5 of Regulation S-X are not required
under the related instructions or are inapplicable and therefore have been
omitted.
<PAGE>
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 Pulaski National Corporation
----------------------------------
(Registrant)
Date: 3-12-96 By: /s/ Parmenas Cox
----------------- ------------------------------
Parmenas Cox, Senior Chairman
Date: 3-12-96 By: /s/ Robert M. Curry
----------------- ------------------------------
Robert M. Curry, Chairman
Date: 3-12-96 By: /s/ Glen Lamar
----------------- ------------------------------
Glen Lamar, Secretary/Treasure
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below and on the succeeding page by the following
persons on behalf of the registrant and in the capacities indicated.
/s/ David E. Bagley /s/ Johnny Bevill
- ------------------------------ ------------------------------
David E. Bagley, Director Johnny Bevill, Director
/s/ James K. Blackburn IV /s/ Wade Boggs
- ------------------------------ ------------------------------
James K. Blackburn IV, Director Wade Boggs, Director
/s/ James H. Butler /s/ Thomas L. Cardin
- ------------------------------ ------------------------------
James H. Butler, Director Thomas L. Cardin, Director
/s/ Joyce F. Chaffin /s/ Parmenas Cox
- ------------------------------ ------------------------------
Joyce F. Chaffin, Director Parmenas Cox, Director
<PAGE>
/s/ Robert M. Curry /s/ G. G. Dugger DDS
- ------------------------------ ------------------------------
Robert M. Curry, Director Greg G. Dugger DDS, Director
/s/ Joe Dunavant /s/ Charles D. Haney MD
- ------------------------------ ------------------------------
Joe Dunavant, Director Charles D. Haney MD, Director
/s/ Gary Harrison /s/ Morris Ed Harwell
- ------------------------------ ------------------------------
Gary Harrison, Director Morris Ed Harwell, Director
/s/ R. M. Harwell /s/ James Rand Hayes
- ------------------------------ ------------------------------
R. M. Harwell, Director James Rand Hayes, Director
/s/ William R. Horne /s/ Glen Lamar
- ------------------------------ ------------------------------
William R. Horne, Director Glen Lamar, Director
/s/ D. Clayton Lee /s/ Kenneth R. Lowry
- ------------------------------ ------------------------------
D. Clayton Lee, Director Kenneth R. Lowry, Director
/s/ Beatrice J. McElroy /s/ William A. McNairy
- ------------------------------ ------------------------------
Beatrice J. McElroy, Director William A. McNairy, Director
/s/ W. Harwell Murrey MD /s/ Stephen F. Speer
- ------------------------------ ------------------------------
W. Harwell Murrey MD, Director Stephen F. Speer, Director
/s/ W. E. Walters /s/ Bill Yancey
- ------------------------------ ------------------------------
W. E. Walters, Director Bill Yancey, Director
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER PAGE
- ------- ----
24 Consent of Putman & Hancock, Certified Public
Accountants........................................ 54
27 Financial Data Schedule............................ 55
<PAGE>
</TABLE>
EXHIBIT 24
CONSENT OF INDEPENDENT AUDITORS
- -------------------------------
Board of Directors and Stockholders
First Pulaski National Corporation
Pulaski, Tennessee
We consent to the incorporation by reference in Registration Statement
No. 33-20652 on Form S-8 dated March 18, 1988 of our report on the financial
statements and schedules included in the Annual Report on Form 10-K of First
Pulaski National Corporation for the year ended December 31, 1995.
/s/ Puman & Hancock
Fayetteville, Tennessee
February 23, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 10-K FOR PERIOD ENDING DECEMBER 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND THE NOTES THERETO.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 8,767,525
<INT-BEARING-DEPOSITS> 100,000
<FED-FUNDS-SOLD> 10,231,642
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 41,533,475
<INVESTMENTS-CARRYING> 17,389,119
<INVESTMENTS-MARKET> 17,492,384
<LOANS> 152,992,583
<ALLOWANCE> 2,058,456
<TOTAL-ASSETS> 241,551,726
<DEPOSITS> 207,409,539
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,497,604
<LONG-TERM> 1,312,788
0
0
<COMMON> 308,261
<OTHER-SE> 30,023,534
<TOTAL-LIABILITIES-AND-EQUITY> 241,551,726
<INTEREST-LOAN> 15,652,718
<INTEREST-INVEST> 3,306,106
<INTEREST-OTHER> 817,417
<INTEREST-TOTAL> 19,776,241
<INTEREST-DEPOSIT> 8,365,833
<INTEREST-EXPENSE> 8,434,589
<INTEREST-INCOME-NET> 11,341,652
<LOAN-LOSSES> 258,649
<SECURITIES-GAINS> (56,198)
<EXPENSE-OTHER> 7,537,990
<INCOME-PRETAX> 5,625,756
<INCOME-PRE-EXTRAORDINARY> 3,705,394
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,705,394
<EPS-PRIMARY> 12.09
<EPS-DILUTED> 12.09
<YIELD-ACTUAL> 5.10
<LOANS-NON> 208,063
<LOANS-PAST> 210,137
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,023,681
<CHARGE-OFFS> 432,681
<RECOVERIES> 208,807
<ALLOWANCE-CLOSE> 2,058,456
<ALLOWANCE-DOMESTIC> 2,058,456
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<PAGE>
</TABLE>
