FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-10974
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FIRST PULASKI NATIONAL CORPORATION
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(Exact name of registrant as specified in its charter)
Tennessee 62-1110294
- -----------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
206 South First Street, Pulaski, Tennessee 38478
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: 931-363-2585
---------------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X . No .
------- -------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by this
report:
Common Stock, $1.00 par value -- 1,575,715 Shares Outstanding
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
June 30, December 31,
ASSETS 1999 1998
------ ------------ ------------
<S> <C> <C>
Cash and due from banks $8,707,710 $9,427,069
Federal funds sold 3,074,808 12,970,075
------------ ------------
Cash and cash equivalents 11,782,518 22,397,144
Securities available for sale 53,300,193 45,972,651
Securities held to maturity 33,251,621 25,589,675
Net loans and leases 169,454,302 166,715,527
Bank premises and equipment 7,378,586 7,521,071
Accrued interest receivable 3,567,968 3,340,417
Prepayments and other assets 2,977,070 3,275,581
Other real estate owned 114,984 192,911
------------ ------------
TOTAL ASSETS $281,827,242 $275,004,977
============ ============
LIABILITIES
-----------
Deposits
Non-interest bearing balances $37,321,842 $36,187,911
Interest bearing balances 203,569,115 197,611,615
------------ ------------
240,890,957 233,799,526
Other borrowed funds 1,940,004 2,028,120
Accrued taxes 232,584 111,768
Accrued interest on deposits 1,898,598 1,909,612
Accrued profit sharing expense 107,219 120,392
Other liabilities 278,439 349,364
------------ ------------
TOTAL LIABILITIES 245,347,801 238,318,782
------------ ------------
STOCKHOLDERS' EQUITY
--------------------
Common Stock, $1.00 par; authorized 10,000,000
shares; 1,575,715 and 1,573,515 shares issued
and outstanding, respectively 1,575,715 1,573,515
Capital Surplus 7,172,614 7,105,124
Retained Earnings 28,164,130 27,590,464
Accumulated other comprehensive income, net
of tax of $221,782 and $216,154,
respectively in 1999 and 1998. (433,018) 417,092
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 36,479,441 36,686,195
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $281,827,242 $275,004,977
============ ============
*See accompanying notes to consolidated financial statements (unaudited).
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements. (Continued)
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
For Three Months Ended For Six Months Ended
June 30, June 30,
---------------------- ----------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including
fees $4,294,684 $4,606,011 $8,518,026 $9,150,691
Investment
securities 1,205,925 1,038,354 2,243,067 2,108,986
Deposits 0 0 0 0
Federal funds sold 133,341 195,692 322,088 325,889
---------- ---------- ---------- ----------
5,633,950 5,840,057 11,083,181 11,585,566
INTEREST EXPENSE:
Interest on deposits:
NOW accounts 104,942 97,365 208,671 194,907
Savings and MMDA 194,129 189,045 376,247 374,961
Time 1,942,899 2,055,660 3,908,143 4,107,096
Borrowed funds 31,915 34,606 64,519 69,858
---------- ---------- ---------- ----------
2,273,885 2,376,676 4,557,580 4,746,822
---------- ---------- ---------- ----------
NET INTEREST INCOME BEFORE
PROVISION FOR CREDIT LOSSES 3,360,065 3,463,381 6,525,601 6,838,744
Provision for credit losses 165,040 233,518 329,328 413,518
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES 3,195,025 3,229,863 6,196,273 6,425,226
---------- ---------- ---------- ----------
OTHER INCOME:
Service charges on
deposit accounts 429,205 412,469 846,723 805,286
Other service
charges and fees 93,539 96,782 182,165 198,729
Security gains
(losses) 0 0 0 0
Other 167,107 74,896 199,399 130,254
---------- ---------- ---------- ----------
689,851 584,147 1,228,287 1,134,269
---------- ---------- ---------- ----------
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements. (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY (UNAUDITED)
For Three Months Ended For Six Months Ended
June 30, June 30,
---------- ---------- ---------- ----------------------
1999 1998 1999 1998
---- ---- ---- ----
OTHER EXPENSES:
Salaries and
employee benefits 1,088,079 1,135,113 2,212,652 2,220,118
Occupancy, net 237,861 193,960 445,556 414,578
Furniture and
equipment 170,985 196,840 335,053 384,377
Advertising and
public relations 127,336 118,610 220,386 245,553
Other operating 724,474 369,473 1,436,093 744,828
---------- ---------- ---------- ----------
2,348,735 2,013,996 4,649,740 4,009,454
---------- ---------- ---------- ----------
Income before
income taxes $1,536,141 $1,800,014 $2,774,820 $3,550,041
Applicable income
taxes 490,627 650,652 909,744 1,299,561
---------- ---------- ---------- ----------
NET INCOME $1,045,514 $1,149,362 $1,865,076 $2,250,480
========== ========== ========== ==========
PER SHARE DATA:
Net income per
share $0.66 $0.74 $1.18 $1.45
Dividends per share $0.40 $0.41 $0.78 $0.82
Number of average
shares for period 1,574,666 1,555,437 1,574,326 1,554,311
========== ========== ========== ==========
</TABLE>
<PAGE>
*See accompanying notes to consolidated financial statements (unaudited).
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements. (Continued)
<TABLE>
<CAPTION>
STATEMENT OF STOCKHOLDER'S EQUITY
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY (UNAUDITED)
For the Six Months Ended June 30, 1999
Unrealized
Gains/<Losses>
Common Capital Retained on Securities Total
Stock Surplus Earnings Net of Taxes
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1998 $1,573,515 $7,105,124 $27,590,464 $417,092 $36,686,195
Comprehensive Income:
Net Income 1,865,076
Net change in
unrealized gains on
securities, net of
tax of $437,936 (850,110)
Comprehensive Income 1,014,966
Cash Dividends
($0.82 per share) (1,291,410) (1,291,410)
Common Stock Issued 2,200 67,490 69,690
---------- ---------- ----------- ----------- -----------
Balance,
June 30, 1999 $1,575,715 $7,172,614 $28,164,130 ($433,018) $36,479,441
========== ========== =========== =========== ===========
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements. (Continued)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY (UNAUDITED)
For Six Months Ended
June 30,
1999 1998
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $1,865,076 $2,250,480
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:
Provision for loan losses 329,328 413,518
Depreciation of premises and equipment 351,809 384,377
Amortization and accretion of investment
securities, net 71,924 53,030
Deferred income tax expense (benefit) (62,029) 0
(Gains) losses from sale of other assets (108) 0
(Gains) losses from sale of other real estate (2,698) 9,019
Increase in interest receivable (227,614) (3,496)
Decrease in prepayments/other 810,349 786,049
Decrease in accrued interest payable (11,014) (35,090)
Increase in accrued taxes 94,019 52,920
Increase (decrease) in other liabilities (69,261) 3,699
----------- ------------
Net Cash From Operating Activities 3,149,781 3,914,506
Cash Flows from Investing Activities:
Proceeds from maturity of investment
securities 11,852,123 5,522,527
Proceeds from sale of other real estate 120,007 27,931
Purchase of investment securities (28,201,580) (5,718,233)
Net increase in loans (3,112,880) (602,394)
Capital expenditures (209,174) (408,396)
Proceeds from sale of other assets 5,504 0
----------- ------------
Net Cash Used by Investing Activities (19,546,000) (1,178,565)
Cash Flows From Financing Activities:
Net increase in deposits 7,091,431 5,388,116
Cash dividends paid (1,291,410) (1,213,614)
Proceeds from issuance of common stock 69,689 223,983
Borrowings repaid (88,116) (82,776)
----------- ------------
Net Cash From Financing Activities 5,781,594 4,315,709
----------- ------------
Net Increase in Cash and Cash Equivalents (10,614,625) 7,051,650
Cash and Cash Equivalents at Beginning of Period 22,397,143 16,292,171
----------- ------------
Cash and Cash Equivalents at End of Period $11,782,518 $23,343,821
=========== ============
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements. (Continued)
Note to Consolidated Financial Statements
The interim financial statements furnished under this item reflect
all adjustments which are, in the opinion of management, necessary for
a fair presentation of the results of operations for the interim periods
presented. All such adjustments are of a normal recurring nature.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting procedures have been condensed or omitted, as allowed under
rules and regulations of the Securities and Exchange Commission for
interim period presentation. The results for interim periods are not
necessarily indicative of results to be expected for the complete
fiscal year.
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations.
The following analysis should be read in conjunction with the
financial statements set forth in Part I, Item 1, immediately preceding
this section.
Reference is made to the report of the registrant on Form 10-K
for the year ending December 31, 1998, which report was filed with the
Securities and Exchange Commission on or about March 30, 1999.
This Form 10-Q contains certain forward-looking statements
regarding, among other things, the anticipated financial and operating
results of the registrant. Investors are cautioned not to place undue
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
reliance on these forward-looking statements, which speak only as of
the date hereof. The registrant undertakes no obligation to publicly
release any modifications or revisions of these statements to reflect
events or circumstances occurring after the day hereof, or to reflect
the occurrence of unanticipated events.
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the registrant cautions
investors that future financial and operating results may differ
materially from those projected in forward-looking statements made by,
or on behalf of, the registrant. Such forward-looking statements
involve known and unknown risks and uncertainties, including, but not
limited to, adverse changes in interest rates, bad debt of a material
amount, loss of key personnel, and interruptions in operations caused
by the Y2K issue. These risks and uncertainties may cause the actual
results or performance of the registrant to be materially different
from any future results or performance expressed or implied by such
forward-looking statements.
(a) Results of Operations
Net income of the registrant was $1,865,076 in the first six
months of 1999. This amounted to a decrease of $385,404, or 17.1 percent,
compared to the first six months of 1998. For the three month period
ended June 30, 1999, net income decreased $103,848, or 9.0 percent, as
compared to the three months ended June 30, 1998. Net income was
lower as compared to the same period last year largely due to an
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
approximately $640,000 increase in operating expenses, discussed
below, and an approximately $300,000 decrease in net interest income
(see below) offset by an approximately $390,000 decrease in income
taxes paid.
Net interest income, the largest component of net income for the
registrant, is the difference between income earned on loans and
investments and interest paid on deposits and other sources of funds.
Net interest income, exclusive of the provision for credit losses, of
the registrant for the six month period ending June 30, 1999
decreased by $313,143, or 4.6 percent, as compared to the same period in
1998, mainly due to a decrease in interest and fee income on loans with
a slight decrease in interest on federal funds sold. For the three month
period ended June 30, 1999, net interest income decreased by $103,316, or
3.0% as compared to the three months ended June 30, 1998. Interest income
on investment securities increased approximately $134,000 for the first
six months of 1999. The increase was mainly reflected by an increase
of $167,571 in investment securities during the second quarter of 1999
as compared to the same period last year. Total interest expense was
lower in the first six months of 1999 compared to the same period in 1998
primarily because of a decrease in interest paid on time deposits. These
same factors attributed to interest expense for the three months ended
June 30, 1999 in comparison with the second quarter of 1998.
Total other expenses increased $640,286, or 16.0 percent, for the
six months ending June 30, 1999 as compared to same period last year.
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
For the three months ended June 30, 1999, the increase in other expenses
over last year was $334,739, or 16.6 percent. This was primarily due to
increased other operating costs. These costs included a loss from the
uninsured portion of an insurance claim for misappropriated funds and
additional costs involving pending litigation. Part II, Item 1 of this
report discusses this further.
The provision for credit losses for the six months ended June 30,
1999, decreased $84,190, or 20.4 percent, over the same period in 1998.
For the three month period ended June 30, 1999, the decrease in the
provision was $68,478, or 29.3 percent compared to the same three months
in 1998.
Income before taxes decreased by $775,221, or 21.8 percent, as
compared to the same period from the prior year. For the three month
period, the decrease in income before taxes was $263,873, or 14.7%, as
compared to the second quarter in 1998. The decrease in applicable
income taxes was $389,817, or 30.0 percent for the six month period
and $160,025, or 24.6% for the three month period as compared to the
same periods in 1998.
On a per share basis, net income was $1.18 per share based on
1,574,326 shares for the first six months of 1999 as compared to $1.45
per share on 1,554,311 shares for the first six months of 1998.
(b) Financial Condition
The registrant's total assets increased 2.5% to $281,827,242
during the six months ending June 30, 1999, from $275,004,977 at
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
December 31, 1998. Loans and leases, net of allowance for credit
losses, totaled $169,454,302 at June 30, 1999, a 1.6 % increase
compared to $166,715,527 at December 31, 1998. Securities, both
available for sale and held to maturity, increased $14,989,488, or
20.9%, to $86,551,814 at June 30, 1999, from $71,562,326 at year-end 1998.
The unrealized loss on securities of $422,018 at period ended June 30,
1999 is simply a result of the interest rate risk in the market. As of
this date, the market has since led to a decrease in the unrealized loss
on the registrant's securities portfolio. The increase in securities
was primarily a result of management's decision to shift federal funds
into the registrant's investment portfolio. Federal funds sold decreased
$9,895,267 to $3,074,808 at June 30, 1999, from $12,970,075 at
December 31, 1998.
Total liabilities increased by 2.9% to $245,347,801 for the six
months ended June 30, 1999, compared to $238,318,782 at December 31,
1998. This increase was composed primarily of a $5,957,500 increase
in interest bearing deposits (a 3.0% increase).
Non-performing assets increased 8.0% to 3,908.3 thousand for the
six months ended June 30, 1999 compared to 3,618.6 thousand at December
31, 1998. Non-performing assets at December 31, 1998 included $192.9
thousand in other real estate owned, $3,173.1 thousand in non-accrual
loans, and $252.6 thousand in loans past due ninety days or more as to
interest or principal payment. Additionally, there were no restructured
loans at year-end. At June 30, 1999, the corresponding figures were
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
$115.0 thousand in other real estate owned, $3,489.0 thousand in non-
accrual loans, 304.3 thousand in loans past due ninety days or more, and
no loans restructured. Nonaccrual loans in both periods are largely due
to the result of the default on the loans to persons and entities related
to the registrant's former CEO. Management has begun to review problem
loans more closely and more frequently and as a result, additional
loans have been placed in nonaccrual status, thus accounting for the
increase since year-end.
The registrant has computed allowances for credit losses which
management believes to be sufficient. Although there was an increase
in nonaccrual loans from December 31, 1998, the allowance for credit
losses totaling $3,153.7 thousand, or 1.83% of total loans outstanding
is deemed sufficient by management to cover potential losses in the
loan portfolio.
(c) Liquidity
Liquidity is the ability to fund increases in loan demand or to
compensate for decreases in deposits and other sources of funds, or
both. Maintenance of adequate liquidity is an essential component
of the financial planning process. The objective of asset/liability
management is to provide an optimum balance of liquidity and earnings.
The registrant seeks to generate adequate cash flows to meet its
needs without sacrificing income or taking undue risks. Cash and
cash equivalents decreased 10,614.6 thousand as of the end of the second
quarter in 1999 due to management's decision to shift federal funds into
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
the registrant's investment portfolio.
Marketable investment securities, particularly those of short
maturities, are the principal source of asset liquidity. Securities
maturing in one year or less amounted to $19,285,439 at June 30,
1999, representing 22.3 percent of the registrant's investment portfolio
as compared to 18.7 percent one year earlier. Management classifies
a majority of the investment portfolio in the available-for-sale
category and reports these securities at fair value. These securites
may be sold in response to changes in interest rates, changes in
prepayment risk, the need to increase regulatory capital, or asset/
liability strategy.
Other sources of liquidity include maturing loans and federal funds
sold.
The registrant knows of no unusual demands, commitments, or
events which could adversely impact the liquidity of the registrant.
(d) Capital Adequacy
The Federal Reserve Board, the Office of the Comptroller of the
Currency and the FDIC have established 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 banks.
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 credit loss reserve). Assets are assigned risk weights ranging from
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
0 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. Banking
institutions are expected to maintain a Tier I capital to risk-weighted
assets ratio of at least 4.00 percent, a total capital (Tier I plus
Tier II) to total 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 June 30, 1999 and December 31, 1998.
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
(in thousands of dollars)
<S> <C> <C>
Tier I Capital to Risk-Weighted Assets:
Tier I capital 36,910 36,267
Risk-weighted assets 201,711 191,059
Tier I capital to risk-weighted assets 18.30% 18.98%
Regulatory requirement 4.00% 4.00%
Total Capital to Risk-Weighted Assets:
Total capital (Tier I plus Tier II) 39,439 38,662
Risk-weighted assets 201,711 191,059
Total capital to risk-weighted assets 19.55% 20.24%
Regulatory requirement 8.00% 8.00%
Tier I Capital to Total Assets (Leverage Ratio)
Tier I capital 36,910 36,267
Total assets 281,827 275,005
Tier I capital to total assets 13.10% 13.19%
Regulatory requirement 3.00% 3.00%
</TABLE>
YEAR 2000
The registrant continues its effort to assure that it is ready
for Year 2000. The registrant has adopted a broad-based approach
designed to encompass all areas whereby the registrant must be
ready or have contingencies in place.
The registrant's Year 2000 Steering Committee, active since 1997,
meets monthly and reports on a quarterly basis to the Board of
Directors regarding the status of any of the registrant's Year 2000
risks. The areas being addressed by the Steering Committee include:
* Subsidary bank's primary data processing system. This software
and hardware is of the highest priority for day to day
operations, accounting and success of the subsidiary bank.
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
* Government systems, such as the Federal Reserve Bank for
check clearing, wire transfers and the free flow of exchange
of funds between institutions.
* The internal PC hardware and software systems within the
subsidiary bank.
* Credit administration, i.e., the risk associated with the
Year 2000 status of the subsidiary bank's loan customers and
depositors.
The Steering Committee has adopted a Year 2000 Plan which has
five phases: awareness, assessment and planning, renovation, testing,
and implementation. The registrant has completed the first four
of these phases and is currently in the Y2K Plan's final phase. The
registrant has completed its assessment of its hardware, software
and other information technologies system and has found no
irregularities. Consequently, at March 31, 1999, the Year 2000
Steering Committee has determined that substantially all of the
registrant's core systems will operate properly in the Year 2000.
The registrant has been in constant dialog with key vendors
and service providers with whom the registrant has a material
relationship and is performing due diligence over their redemption
and testing efforts in connection with their Y2K readiness. All
mission-critical vendors have informed the registrant that they
are Y2K compliant.
The registrant will continue to monitor its vendors and
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
suppliers to seek to minimize risks to the registrant and its
customers.
Customer awareness of the registrant's Y2k readiness is critical.
Steps taken by the registrant's subsidiary bank to prepare for the
Year 2000 will be shared with customers through newsletters,
statement stuffers, and the Y2K training of employees. The
registrant believes customers must have a high confidence level
in the subsidiary bank at the end of 1999 to avoid mass withdrawals
of funds from the registrant. The registrant is working toward
a comprehensive customer awareness program during the 1999 year.
The registrant has required Y2K readiness information from all
of its major borrowers and funds providers. The registrant
believes commercial borrowers must realize the impact that the Y2K
issue could have on their respective businesses. Based upon
information received from these borrowers, the registrant has both
designated a specific additional amount in its allowance for loan
losses and implemented a plan to monitor the Y2K readiness of
borrowers not currently in compliance.
Based on the registrant's current estimate, the registrant has
allocated $137,400 in total to fund testing and replacement costs
in connection with Year 2000 issues. This estimate excludes
internal personnel costs, as the registrant does not track and
specifically assign these costs. To date, the registrant has paid
approximate 52% of these projected costs. At this time, management
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
does not believe these costs will have a material effect on the
operations or financial performance of the registrant. The cost
expected to be incurred the remaining portion of the year will be
used to finalize and test the registrant's contingency plan and
to finalize Year 2000 compliance of any non-critical technology
systems currently not in compliance, if any.
The registrant believes that the reasonably likely worse case
scenario that could occur as a result of the year 2000 issue is loss
of electricity and telephone services. Deposit, withdrawal and
other transaction processing for customers of the subsidiary bank
depend directly on the registrant's information technology systems,
and also on the use of electricity as well as telephone services.
While the registrant believes its own systems to be Y2K ready,
loss of power could significantly delay the subsidiary bank's
ability to adequately process bank and customer transactions, thus
adversely impacting the registrant's operations. The registrant
has developed a Year 2000 Contingency Plan to address the possibility
of power outages and telephone service disruption, as well as other
operational risks that could occur as a result of the Y2K issue.
The Contingency Plan was approved by the Board of Directors
in January 1999 and has since been amended to add more detail. The
Plan was designed to assure that mission-critical systems will
continue in the event that one or more systems should fail. The
Contingency Plan addresses all aspects of the registrant's
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
operation systems identifying those systems as mission critical,
semi-critical, or non-critical. Alternatives are in place for
many of the systems identified detailing information on
contingency processes, their capabilities, and the personnel that
are responsible for addressing and correcting system issues and
supervising alternative plans. For example, certain personnel
are identified to test electricity and telephone services
Saturday, January 1, 2000. The Contingency Plan also identifies
contact individuals' phone numbers and addresses. The Plan further
provides both on-site and off-site locations, materials, personnel,
and procedures to implement back up transaction processing in the
event electricity is not restored by Monday, January 3, 2000, going
forward. The contingency plan will be updated continually as final
testing of each mission-critical and other system applications have
been completed.
The above discussion of Year 2000 as used includes numerous
forward-looking statements reflecting management's current
assessment and estimates with respect to the registrant's Year 2000
compliance efforts and the impact of Year 2000 issues on the
registrant's business and operations. Statements are based on
information currently available to management. Various factors
could cause actual results to differ materially from those
contemplated by such estimates and forward-looking statements,
including many factors that are beyond control of the registrant.
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
These factors include, but are not limited to the success of the
registrant in identifying systems and programs that are not Year 2000
compliant, the continuing availability of experienced consultants
and information technology personnel, the ability of third parties
to complete their own Year 2000 remediations, and the ability of
the registrant to implement contingency plans.
Item 3. Quantitative and Qualitative Disclosures About Market Risks.
The registrant's primary component of market risks is interest
rate volatility. Fluctuations in interest rates will ultimately impact
both the level of income and expense recorded on a large portion of the
registrant's assets and liabilities, and the market value of all
interest-earning assets and interest-bearing liabilities, other than
those which possess a short term to maturity. Based upon the nature
of the registrant's operations, the registrant is not subject to foreign
currency exchange or commodity price risk.
Interest rate risk management focuses on the earnings risk
associated with changing interest rates. Management seeks to maintain
profitability in both immediate and long term earnings through funds
management and interest rate risk management. The registrant's rate
sensitive position has an important impact on earnings. Management of
the registrant meets regularly to analyze the rate sensitivity position,
focusing on the spread between the cost of funds and interest yields
generated primarily through loans and investments.
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 3. Quantitative and Qualitative Disclosures About Market Risks.
(Continued)
There have been no material changes in reported market risks
during the six months ended June 30, 1999.
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings.
The registrant and its subsidiary are involved, from time to time,
in ordinary routine litigation incidental to the banking business.
Neither the registrant nor its subsidiary is involved in any material
pending legal proceedings, except as follows:
The registrant has filed suits in Giles County, Tennessee,
Chancery Court against Carroll M. Curry, John T. Curry, Connie Curry,
Cathy Curry, C & C Partnership and C & T Partnership (the "Curry
Debtors") to collect promissory notes on which such persons are liable
as makers or guarantors. The Curry Debtors filed a counter-complaint
in March 1999 against our bank subsidiary, First National Bank of Pulaski
(the "Bank"), alleging (I) that the Bank knew or should have known of
certain activities of Mike Curry, the Bank's former Chairman and Chief
Executive Officer, and that the Bank had a duty to inform the Currys of
of these activities, (ii) that the Bank was negligent and reckless in
placing Mike Curry in a position to commit fraud on the Currys and
(iii) the Bank, through its officers, and directors and employees,
intentionally, recklessly and fraudulently concealed Mike Curry's
fraudulent conduct from the Currys. The counter claim also alleges
violations of Federal Banking Law, the Tennessee Consumer Protection
Act and alleges that certain Curry Debtor obligations were the result
of coersion and duress. The Curry Debtors have also filed a third party
complaint making these same allegations against 27 current and former
officers and directors of the registrant. The registrant is obligated
to indemnify the individual defendants to the full extent provided under
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings. (Continued)
Tennessee law. The counter claim and third party complaint seek
$8 million in compensatory and $20 million in punitive damages. The
registrant will continue to vigorously contest all claims asserted by the
Currys in their counter-complaint, which the Bank believes are totally
without merit.
AmSouth Bank has filed suit in the United States Bankruptcy Court
case of Robert M. Curry to recover for alleged breaches of presentment
and warranty claims arising under the Uniform Commercial Code, for
conversion of collateral allegedly pledged to AmSouth and for an
equitable subordinate of the Bank's claims in the Curry bankruptcy case
and subordination of the Bank's security interest in Curry Debtors'
stock. The Bank will continue to vigorously contest all claims in this
case.
Item 2. Changes in Securities and Use of Proceeds
In addition to stock issued under the 1994 Outside Directors Stock
Option Plan, two Giles County investors, under Section 3(a)(11) of the
Securities Act of 1933, each purchased 25 shares of common stock of and
from the Corporation in January, 1999, for a total of 50 shares at
$35.00 per share.
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of stockholders on April 29, 1999, there
were 770,410 shares represented in person and 448,619 represented by
proxy, for a total of 1,219,029 shares represented. The number of shares
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders(Continued)
required for a quorum was 787,033. Of the 448,619 shares voted by proxy
for the election of directors, the number of shares against and
abstaining were as follows:
Against Abstaining
David Bagley 98,589 950
Johnny Bevill 89,569 950
James K.Blackburn,IV 19,004 950
Wade D. Boggs 87,549 950
James H. Butler 87,549 950
Thomas L. Cardin 88,779 950
Joyce F. Chaffin 87,549 950
James T. Cox 1,369 950
Parmenas Cox 1,369 950
Gregory G. Dugger 89,669 950
Charles D. Haney 87,624 950
Morris Ed Harwell 89,719 950
James Rand Hayes 98,919 950
D. Clayton Lee 87,799 950
Kenneth R. Lowry 1,369 950
Beatrice J. McElroy 89,719 950
William A. McNairy 87,549 950
William H. Murrey 101,009 950
Bill Yancey 12,409 950
A voice vote of those shareholders present for the meeting,
representing a total of 770,410 shares, resulted in only one "no" vote
for the slate of directors, representing 21,190 shares. On the basis of
these figures, the above named directors were declared duly elected.
Also brought to a vote was the ratification of the selection of
Puman and Hancock, Certified Public Accountants, as external auditors
for the ensuing year. Of the 448,619 shares represented by proxy, there
were 48,295 shares against and 2,415 shares abstaining. In a voice vote
of those shareholders present for the meeting, representing a total of
770,410 shares, there were no "no" votes cast. On the basis of these
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders(Continued)
figures, the selection of Putman and Hancock, Certified Public Accounts,
was declared ratified.
Item 6. Exhibits and Reports on Form 8-K.
(a) Following the signature page of this report on Form 10-Q is
an Index of Exhibits listed according to the numbers assigned to such
exhibits as shown on Table II of Regulation S-K.
(b) No Form 8-K Reports were required to be filed during the
second quarter of 1999.
<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
Date: August 12, 1999 /s/ James T. Cox
---------------- ---------------------------------------
James T. Cox, President and Chief
Executive Officer
Date: August 12, 1999 /s/ Harold Bass
---------------- ---------------------------------------
Harold Bass, Secretary/Treasurer
(The Corporation's Principal Financial
Officer and Principal Accounting
Officer)
<PAGE>
INDEX TO EXHIBITS FOR THE FIRST PULASKI NATIONAL CORPORATION
------------------------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
------------------------------------------------
(3.1) Charter, incorporated by reference to the registrant's
Annual Report on Form 10-K for the year ended December
31, 1998 filed March 31, 1999.
(3.2) Bylaws, incorporated by reference to the registrant's
Annual Report on Form 10-K for the year ended December
31, 1998 filed March 31, 1999.
(4.1) Article 9 of the Charter (included in Exhibit 3.1).
(4.2) Articles II and VI of the Bylaws (included in Exhibit 3.2).
(11) Statement regarding computation of per share earnings
(27) Financial Data Schedules
<PAGE>
[TYPE] EX-11
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS OF
------------------------------------
FIRST PULASKI NATIONAL CORPORATION
----------------------------------
Computation of per share earnings relative to the common capital
stock of First Pulaski National Corporation is calculated by dividing
the net income of the registrant by the weighted average of the then
outstanding shares of common capital stock ($1.00 par value) during
the quarter.
For the quarter ended June 30, 1999, 1,574,326 shares were used
in the computation; 1,554,311 shares were used in the computation for
the quarter ended June 30, 1998.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 10-Q FOR PERIOD ENDING JUNE 30, 1999 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-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 8,707,710
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,074,808
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 53,300,193
<INVESTMENTS-CARRYING> 33,251,621
<INVESTMENTS-MARKET> 32,965,473
<LOANS> 172,607,958
<ALLOWANCE> 3,153,656
<TOTAL-ASSETS> 281,827,242
<DEPOSITS> 240,890,957
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,516,840
<LONG-TERM> 1,940,004
0
0
<COMMON> 1,575,715
<OTHER-SE> 34,903,726
<TOTAL-LIABILITIES-AND-EQUITY> 281,827,242
<INTEREST-LOAN> 8,518,026
<INTEREST-INVEST> 2,243,067
<INTEREST-OTHER> 322,088
<INTEREST-TOTAL> 11,083,181
<INTEREST-DEPOSIT> 4,493,061
<INTEREST-EXPENSE> 4,557,580
<INTEREST-INCOME-NET> 6,525,601
<LOAN-LOSSES> 329,328
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,649,740
<INCOME-PRETAX> 2,774,820
<INCOME-PRE-EXTRAORDINARY> 1,865,076
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,865,076
<EPS-BASIC> 1.18
<EPS-DILUTED> 1.18
<YIELD-ACTUAL> 2.52
<LOANS-NON> 3,489,001
<LOANS-PAST> 304,263
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,935,534
<CHARGE-OFFS> 299,640
<RECOVERIES> 188,432
<ALLOWANCE-CLOSE> 3,153,656
<ALLOWANCE-DOMESTIC> 3,153,656
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
