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<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 4, 1994
FIRST UNITED BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
ARKANSAS 0-11916 71-0538646
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
Number)
</TABLE>
MAIN AND WASHINGTON STREETS, EL DORADO, ARKANSAS 71730
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (501) 863-3181
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
On June 16, 1994, First United Bancshares, Inc. ("First United") made
a current report under the cover of Form 8-K regarding its acquisition of all
of the issued and outstanding shares of common stock of InvestArk Bankshares,
Inc., Stuttgart, Arkansas. The Acquisition was consummated on June 14, 1994,
and done so pursuant to an Agreement and Plan of Reorganization, dated December
17, 1993. At the time of the filing of the current report on Form 8-K, it was
impracticable to provide the unaudited financial statements of InvestArk
Bankshares, Inc. for interim periods ended March 31, 1994 and 1993 and the pro
forma financial information of First United and InvestArk Bankshares, Inc. for
the interim periods ended March 31, 1994 and 1993. This amendment on Form
8-K/A provides such financial information as well as the InvestArk Bankshares,
Inc. financial statements as of December 31, 1993 and 1992 and for each of the
three years in the period ended December 31, 1993 and has been filed prior to
sixty (60) days subsequent to the date the Form 8-K must have been filed.
<PAGE> 3
PRO FORMA COMBINING BALANCE SHEET
<TABLE>
<CAPTION>
As of March 31, 1994
------------------------------------------------------
Pro Forma Pro Forma
First United InvestArk Adjustments(1) Combined
------------ --------- ------------- --------
(in thousands)
<S> <C> <C> <C> <C>
Assets
Cash and due from banks $44,346 $5,374 $ $49,720
Interest-bearing deposits in other banks 0 11,578 11,578
Short-term investments 40,954 450 41,404
Securities held for sale 302,929 0 302,929
Investment securities 130,803 87,471 218,274
Net loans 402,517 78,780 481,297
Premises and equipment 12,024 2,630 14,654
Goodwill 4,386 0 4,386
Other real estate owned 890 0 890
Other assets 11,467 2,823 14,290
-------- -------- ------ ----------
Total Assets $950,316 $189,106 $1,139,422
======== ======== ======= ==========
Liabilities
Total deposits $811,497 $168,335 $ $979,832
Federal funds purchased and securities
sold under agreements to repurchase 31,064 1,738 32,802
Other liabilities 6,573 866 7,439
Notes payable 7,214 0 7,214
-------- -------- ------ ----------
Total Liabilities $856,348 $170,939 $1,027,287
Capital Accounts
Preferred stock 0 0 0
Common stock 4,272 2,191 (2,191)(2) 5,158
886 (2)
Surplus 11,125 1,105 (1,105)(2) 13,405
2,280 (2)
Undivided Profits 78,040 14,251 92,291
Less: Treasury Stock 0 (130) 130 (2) 0
Unrealized Gains of Securities Available
for Sale 531 750 1,281
-------- -------- ------ ----------
Total Capital Accounts 93,968 18,167 112,135
-------- -------- ------ ----------
Total Liabilities and Capital Accounts $950,316 $189,106 $0 $1,139,422
======== ======== ======= ==========
</TABLE>
<PAGE> 4
PRO FORMA COMBINING INCOME STATEMENT(1)
<TABLE>
<CAPTION>
For the three months ended
March 31, 1994
------------------------------------
First Pro Forma
United InvestArk Combined
---------- --------- ---------
(in thousands, except for share data)
<S> <C> <C> <C>
Interest income $14,539 $2,977 $17,516
Interest expense 5,938 1,179 7,117
--------- ------- ---------
Net interest income 8,601 1,798 10,399
Provision for loan losses (45) 0 (45)
--------- ------- ---------
Net interest income after
provision for loan losses 8,556 1,798 10,354
Other income
Service charges on deposit accounts 709 83 792
Trust department income 253 92 345
Security gains 1 0 1
Other service charges and fees 0 79 79
Other operating income 455 39 494
--------- ------- ---------
Total other income 1,418 293 1,711
--------- ------- ---------
Other expense
Salaries 2,221 487 2,708
Pension and other employee benefits 652 118 770
Net occupancy expense 448 120 568
Equipment expense 212 126 338
Data processing expense 318 41 359
Other operating expenses 1,892 461 2,353
--------- ------- ---------
Total other expense 5,743 1,353 7,096
--------- ------- ---------
Income before income tax expense 4,231 738 4,969
Income tax expense 1,324 153 1,477
--------- ------- ---------
Income from continuing operations $2,907 $585 $3,492
========= ======= =========
$0.68 $2.71 $0.68
Earnings per share (3) ========= ======= =========
Weighted average shares outstanding 4,272,276 216,212 5,157,799
========= ======= =========
</TABLE>
<PAGE> 5
PRO FORMA COMBINING INCOME STATEMENT(1)
<TABLE>
<CAPTION>
For the three months ended
March 31, 1993
-------------------------------------
First Pro Forma
United InvestArk Combined
---------- --------- ----------
(in thousands, except for share data)
<S> <C> <C> <C>
Interest income $14,881 $3,210 $18,091
Interest expense 6,007 1,335 7,342
--------- ------- --------
Net interest income 8,874 1,875 10,749
Provision for loan losses (465) 0 (465)
--------- ------- --------
Net interest income after
provision for loan losses 8,409 1,875 10,284
Other income
Service charges on deposit accounts 720 93 813
Trust department income 251 74 325
Security gains 6 0 6
Other service charges and fees 0 86 86
Other operating income 281 150 431
--------- ------- --------
Total other income 1,258 403 1,661
--------- ------- --------
Other expense
Salaries 1,976 504 2,480
Pension and other employee benefits 337 156 493
Net occupancy expense 375 119 494
Equipment expense 207 125 332
Data processing expense 387 42 429
Other operating expenses 1,666 638 2,304
--------- ------- --------
Total other expense 4,948 1,584 6,532
--------- ------- --------
Income before income tax expense 4,719 694 5,413
Income tax expense 1,503 143 1,646
--------- ------- --------
$3,216 $551 $3,767
========= ======= ========
Income from continuing operations
$0.75 $2.55 $0.73
Earnings per share (3) ========= ======= =========
Weighted average shares outstanding 4,272,276 216,188 5,157,799
========= ======= =========
</TABLE>
<PAGE> 6
PRO FORMA COMBINING INCOME STATEMENT(1)
<TABLE>
<CAPTION>
For the year ended December 31, 1993
-------------------------------------
First Pro Forma
United InvestArk Combined
--------- --------- ------------
(in thousands, except for share data)
<S> <C> <C> <C>
Interest income $59,413 $12,555 $71,968
Interest expense 23,860 5,045 28,905
--------- ------- ----------
Net interest income 35,553 7,510 43,063
Provision for loan losses (1,215) (600) (1,815)
--------- ------ ---------
Net interest income after
provision for loan losses 34,338 6,910 41,248
Other income
Service charges on deposit accounts 2,932 348 3,280
Trust department income 1,000 515 1,515
Security gains 55 0 55
Other service charges and fees 0 90 90
Other operating income 1,168 556 1,724
--------- ------- ----------
Total other income 5,155 1,509 6,664
--------- ------- ----------
Other expense
Salaries 8,167 2,189 10,356
Pension and other employee benefits 2,454 758 3,212
Net occupancy expense 1,788 427 2,215
Equipment expense 814 454 1,268
Data processing expense 1,573 171 1,744
Other operating expenses 7,289 2,994 10,283
--------- ------- ----------
Total other expense 22,085 6,993 29,078
--------- ------- ----------
Income before income tax expense
and minority interest in net earnings of
consolidated subsidiaries 17,408 1,426 18,834
Income tax expense 5,471 148 5,619
--------- ------- ----------
Income from continuing operations $11,937 $1,278 $13,215
========= ======= ==========
Earnings per share (3) $2.79 $5.93 $2.46
========= ======= ==========
Weighted average shares outstanding 4,272,276 215,450 5,157,799
========= ======= ==========
</TABLE>
<PAGE> 7
PRO FORMA COMBINING INCOME STATEMENT(1)
<TABLE>
<CAPTION>
For the year ended December 31, 1992
------------------------------------
First Pro Forma
United InvestArk Combined
--------- ---------- ------------
(in thousands, except for share data)
<S> <C> <C> <C>
Interest income $63,381 $14,188 $77,569
Interest expense 28,690 6,369 35,059
--------- ------- ---------
Net interest income 34,691 7,819 42,510
Provision for loan losses (2,422) (64) (2,486)
--------- ------ --------
Net interest income after
provision for loan losses 32,269 7,755 40,024
Other income
Service charges on deposit accounts 2,831 380 3,211
Trust department income 919 488 1,407
Security gains 386 0 386
Other service charges and fees 0 68 68
Other operating income 1,379 568 1,947
--------- ------- ---------
Total other income 5,515 1,504 7,019
--------- ------- ---------
Other expense
Salaries 7,770 2,088 9,858
Pension and other employee benefits 2,611 454 3,065
Net occupancy expense 1,881 422 2,303
Equipment expense 605 433 1,038
Data processing expense 1,860 166 2,026
Other operating expenses 7,966 2,962 10,928
--------- ------- ---------
Total other expense 22,693 6,525 29,218
--------- ------- ---------
Income before income tax expense
and minority interest in net earnings of
consolidated subsidiaries 15,091 2,734 17,825
Income tax expense 4,648 501 5,149
--------- ------- ---------
Income from continuing operations $10,443 $2,233 $12,676
========= ======= =========
Earnings per share (3) $2.44 $10.37 $2.46
========= ======= =========
Weighted average shares outstanding 4,272,276 215,356 5,157,799
========= ======= =========
</TABLE>
<PAGE> 8
PRO FORMA COMBINING INCOME STATEMENT(1)
<TABLE>
<CAPTION>
For the twelve months ended
For the year ended December 31, 1991
------------------------------------
First Pro Forma
United InvestArk Combined
--------- --------- -----------
(in thousands, except for share data)
<S> <C> <C> <C>
Interest income $68,976 $15,960 $84,936
Interest expense 39,043 9,182 48,225
--------- ------- ----------
Net interest income 29,933 6,778 36,711
Provision for loan losses (3,250) (1,464) (4,714)
--------- ------- ----------
Net interest income after
provision for loan losses 26,683 5,314 31,997
Other income
Service charges on deposit accounts 2,669 397 3,066
Trust department income 886 470 1,356
Security gains 254 0 254
Other service charges and fees 0 82 82
Other operating income 1,137 666 1,803
--------- ------- ----------
Total other income 4,946 1,615 6,561
--------- ------- ----------
Other expense
Salaries 7,566 2,040 9,606
Pension and other employee benefits 2,279 412 2,691
Net occupancy expense 1,773 461 2,234
Equipment expense 623 370 993
Data processing expense 1,570 163 1,733
Other operating expenses 7,285 2,448 9,733
--------- ------- ----------
21,096 5,894 26,990
--------- ------- ----------
Total other expense
Income before income taxes 10,533 1,035 11,568
Income tax expense 2,986 128 3,114
--------- ------- ----------
Income from continuing operations $7,547 $907 $8,454
========= ======= ==========
Earnings per share(3) $1.77 $4.19 $1.64
========= ======= ==========
Weighted average shares outstanding 4,272,276 216,212 5,157,799
========= ======= ==========
</TABLE>
<PAGE> 9
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
(1) The adjustments to the Pro Forma Combining Financial Statements do
not include direct expenses related to the Merger, which will be
recorded at the time of the Merger. The pro forma data are not
necessarily indicative of the operating results or financial
position that would have occurred had the Merger been consummated
at the dates indicated, nor necessarily indicative of future
operating results of financial position.
(2) These adjustments reflect the issuance of the 885,523 shares of
First United Common Stock in exchange for all InvestArk common stock
and the retirement of InvestArk common stock held in treasury.
(3) Pro forma per share data are based on the number of shares of First
United Common Stock that would have been outstanding had the Merger
occurred at the beginning of the earliest period presented.
<PAGE> 10
INVESTARK BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
--------- ------------
Assets (in thousands)
<S> <C> <C>
Cash and Due from Banks $5,374 $7,214
-------- --------
Interest Bearing Deposits with
Other Banks 11,578 1,181
-------- --------
Federal Funds Sold 450 0
-------- --------
Investment Securities at Cost 87,471 87,864
-------- --------
Loans 80,244 84,525
Less: Unearned Interest (29)
Allowance for Loan Losses (1,464) (1,494)
-------- --------
Net Loans 78,780 83,002
-------- --------
Premises and Equipment 2,630 2,722
-------- --------
Accrued Interest Receivable
and Other Assets 2,823 2,921
-------- --------
Total Assets $189,106 $184,904
======== ========
Liabilities
Deposits:
Demand $27,947 $26,951
Savings and Interest Bearing
Demand 66,797 63,458
Time 73,591 72,890
-------- --------
Total Deposits 168,335 163,299
Borrowed Funds 1,738 3,912
Accrued Interest Payable and
Other Liabilities 850 813
Minority Interest in Subsidiaries 16 15
-------- --------
Total Liabilities 170,939 168,039
-------- --------
Capital Accounts
Common Stock (Par Value $10;
5,000,000 Shares Authorized
219,122 Shares Issued) 2,191 2,191
Surplus 1,105 1,105
Retained Earnings 14,251 13,720
Less: Treasury Stock-at Cost (130) (130)
Net Unrealized Gain on Securities 750 (21)
-------- --------
Total Capital 18,167 16,865
-------- --------
Total Liabilities and Capital Accounts $189,106 $184,904
======== ========
</TABLE>
<PAGE> 11
INVESTARK BANKSHARES, INC.
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1994 1993
--------- -----------
(in thousands)
<S> <C> <C>
Interest Income:
Interest and Fees on Loans $1,608 $1,657
Interest on Securities:
Taxable Securities 1,039 1,256
Nontaxable Securities 327 284
Interest on Federal Funds Sold and
Securities Purchased under Resell
Agreements 3 13
------ ------
Total Interest Income 2,977 3,210
Interest Expense:
Interest on Deposits 1,151 1,302
Other Interest Expense 28 33
------ ------
Total Interest Expense 1,179 1,335
------ ------
Net Interest Income 1,798 1,875
Provision for Credit Losses
------ ------
Net Interest Income after
Provision for Credit Losses 1,798 1,875
------ ------
Other Income:
Service Charges on Deposits 83 93
Trust Department Income 92 74
Other Fees and Charges 79 86
Other Income 39 150
------ ------
Total Other Income 293 403
------ ------
Other Expense:
Salaries Expense 487 504
Employee Benefits Expense 118 156
Net Occupancy Expense 120 119
Equipment Expense 126 125
Other Operating Expense 501 678
------ ------
Total Other Expense 1,352 1,582
------ ------
Income Before Income Taxes and Minority
Interest in Net Earnings of Consolidated
Subsididaries 739 696
Provision for Income Taxes 153 143
------ ------
Net Income Before Minority Interest
in Net Earnings of Consolidated Subsidiaries 586 553
Minority Interest in Net Earnings of
Consolidated Subsidiaries 1 2
------ ------
$585 $551
====== ======
</TABLE>
<PAGE> 12
INVESTARK BANKSHARES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1994 1993
---------- ----------
(in thousands)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $585 $551
-------- --------
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Depreciation 121 132
Net Amortization/(Accretion) on Securities 52 (8)
(Increase) Decrease in Interest Receivable &
Other Assets 99 409
Increase (Decrease) in Interest Payable
and Other Liabilities 38 (53)
Increase (Decrease) in Accrued Liabilities 1 0
-------- --------
Total Adjustments 311 480
-------- --------
Net Cash Provided (Used) by Investing Activities 896 1,031
-------- --------
Cash Flows from Investing Activities:
Cash Proceeds from the Sale of Investments 12,286 6,171
Cash Payments for the Purchase of Investments (21,572) (25,405)
Net (Increase) Decrease in Loans 4,222 6,792
Cash Payments for the Purchase of Property (29) (55)
-------- --------
Net Cash Provided (Used) by Investing Activities (5,093) (12,497)
-------- --------
Cash Flows from Financing Activities:
Net Increase in Demand, Now and Savings Deposits 4,335 5,306
Net Increase (Decrease) in Time Deposits 700 (2,359)
Net Short-Term Borrowings (2,174) 346
Dividends Paid (54) (43)
-------- --------
Net Cash Provided (Used) by Financing Activities 2,807 3,250
-------- --------
Net Increase (Decrease) in Cash and Equivalents (1,390) (8,216)
Cash and Cash Equivalents, Beginning of Year 7,214 13,363
-------- --------
Cash and Cash Equivalents, End of Year $5,824 $5,147
======== ========
</TABLE>
<PAGE> 13
INVESTARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Principles of Consolidation
The consolidated financial statements of InvestArk Bankshares, Inc. include
the accounts of the parent company and its bank subsidiaries, First
National Bank in Stuttgart, Stuttgart, Arkansas (99.7% owned) and the Bank
of North Arkansas, Melbourne, Arkansas (99.7% owned). All material
intercompany transactions have been eliminated
The consolidated statements of condition as of March 31, 1994 and the
related consolidated income statements for the three month period ended
March 31, 1994 and 1993 and the consolidated statements of cash flows for
the three month periods ended March 31, 1994 and 1993 are unaudited; in the
opinion of management, all adjustments necessary for fair presentation of
the financial statements are included.
Note 2: Results of Operations
The results of operations for the three month period ended March 31, 1994
are not necessarily indicative of the results for the entire year of 1994.
Note 3: Reclassifications
Certain reclassifications of 1993 amounts have been made to conform to the
1994 presentation.
Note 4: Pending Transaction
On October 21, 1993, InvestArk signed a letter of intent to be acquired by
First United Bancshares, Inc. El Dorado, Arkansas. Under the letter of
intent, InvestArk shareholders will receive $26.1 million in First United
common stock in exchange for all of the outstanding shares of InvestArk.
<PAGE> 14
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Investark Bankshares, Inc.
Stuttgart, Arkansas
We have audited the consolidated balance sheets of Investark Bankshares, Inc.
and subsidiaries at December 31, 1993 and 1992, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the
years in the three year period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform 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 Investark
Bankshares, Inc. and subsidiaries, at December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows for each of the
years in the three year period ended December 31, 1993, in conformity with
generally accepted accounting principles.
MARTIN & COMPANY
Certified Public Accountants
January 28, 1994
<PAGE> 15
INVESTARK BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1993 and 1992
ASSETS
------
<TABLE>
<CAPTION>
1993 1992
------------- ------------
<S> <C> <C>
Cash and due from banks $ 7,214,200 $ 12,938,041
Interest bearing deposits with other Banks 1,180,607 1,744,435
Federal funds sold 425,000
Investment securities - at amortized cost
(approximate fair value of $90,264,913 and
$85,407,531 at December 31, 1993 and 1992,
respectively) 87,863,744 82,461,782
Loans 84,524,871 87,025,647
Less: Unearned interest (29,095) (46,944)
Allowance for loan losses (1,493,554) (1,073,186)
------------- ------------
83,002,222 85,905,517
------------- ------------
Premises and equipment, less allowance for
depreciation 2,721,970 2,956,535
Accrued interest receivable and other assets 2,921,623 4,508,206
------------- ------------
$ 184,904,366 $190,939,516
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
Demand $ 26,951,112 $ 26,677,868
Savings and interest-bearing demand 63,458,333 62,423,952
Time deposits 72,890,494 81,000,303
------------- ------------
163,299,939 170,102,123
Borrowed funds 3,911,988 4,215,540
Accrued interest payable and other liabilities 812,027 745,669
Minority interest in subsidiaries 15,100 56,078
------------- ------------
Total liabilities 168,039,054 175,119,410
------------- ------------
Commitments and contingencies (Note 11)
Stockholders' equity:
Common stock, $10 par value;
5,000,000 shares authorized,
219,122 shares issued, 215,960
and 215,356 shares outstanding 2,191,220 2,191,220
Surplus 1,105,133 1,098,929
Retained earnings 13,719,965 12,690,099
Less: Treasury stock, 3,162 and
3,766 shares at cost (129,964) (157,144)
Net unrealized loss on marketable
equity securities (21,042) (2,998)
------------- ------------
Total stockholders' equity 16,865,312 15,820,106
------------- ------------
$ 184,904,366 $190,939,516
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 16
INVESTARK BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1993 1992 1991
------------- -------------- -------------
<S> <C> <C> <C>
Interest income:
Loans, including fees $ 6,577,419 $ 7,873,808 $ 9,240,762
U. S. Government obligations 852,087 864,223 658,113
Obligations of federal agencies and corporations 2,116,520 2,194,579 2,156,191
Obligations of states and political subdivisions 1,433,853 1,322,492 1,120,763
Other securities 1,553,915 1,867,193 2,633,943
Federal funds sold and securities purchased
under resell agreements 20,930 65,979 150,115
-------------- -------------- -------------
12,554,724 14,188,274 15,959,887
-------------- -------------- -------------
Interest expense:
Deposits 4,921,914 6,163,074 8,714,734
Borrowed funds 123,246 206,159 467,660
-------------- -------------- -------------
5,045,160 6,369,233 9,182,394
-------------- -------------- -------------
Net interest income 7,509,564 7,819,041 6,777,493
Provision for credit losses 600,000 64,491 1,463,398
-------------- -------------- -------------
Net interest income after provision for credit losses 6,909,564 7,754,550 5,314,095
-------------- -------------- -------------
Noninterest income:
Trust department fees 515,135 488,510 469,848
Service charges - deposits 347,725 380,190 397,121
Other service charges and fees 90,000 67,676 81,570
Other 555,787 567,535 666,435
-------------- -------------- -------------
1,508,647 1,503,911 1,614,974
-------------- -------------- -------------
Noninterest expense:
Salaries 2,188,969 2,088,131 2,039,672
Employee benefits 757,828 453,918 411,830
Net occupancy 427,220 422,272 460,821
Equipment 453,475 432,458 369,521
Other 3,160,034 3,119,775 2,608,291
-------------- -------------- -------------
6,987,526 6,516,554 5,890,135
-------------- -------------- -------------
Income before income taxes and minority interest in
net earnings of consolidated subsidiaries 1,430,685 2,741,907 1,038,934
Provision for income taxes 147,753 500,721 128,271
-------------- -------------- -------------
Income before minority interest in net earnings of
consolidated subsidiaries 1,282,932 2,241,186 910,663
Minority interest in net earnings of consolidated
subsidiaries 5,106 7,964 4,097
-------------- -------------- -------------
Net income $ 1,277,826 $ 2,233,222 $ 906,566
============== ============== =============
Net income per share $ 5.93 $ 10.33 $ 4.19
============== ============== =============
Average number of shares outstanding during the year 215,450 216,235 216,212
============== ============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 17
INVESTARK BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
Allowance for
Common Stock Unrealized losses
------------ Retained Treasury on Marketable
Shares Amount Surplus Earnings Stock Equity Securities Total
------ ------ ------- --------- --------- ----------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -
December 31, 1990 219,122 $2,191,220 $1,098,929 $ 9,949,919 $(118,624) $(19,589) $13,101,855
Net income 906,566 906,566
Cash dividends
$.90 per share (194,566) (194,566)
Sale of marketable equity
securities 19,589 19,589
------- ---------- ---------- ----------- --------- -------- -----------
Balance -
December 31, 1991 219,122 2,191,220 1,098,929 10,661,919 (118,624) 0 13,833,444
Net income 2,233,222 2,233,222
Cash dividends
$.95 per share (205,042) (205,042)
Increase in unrealized
loss on marketable
equity securities (2,998) (2,998)
Purchase 856 common
shares (38,520) (38,520)
------- ---------- ---------- ----------- --------- -------- -----------
Balance -
December 31, 1992 219,122 2,191,220 1,098,929 12,690,099 (157,144) (2,998) 15,820,106
Net income 1,277,826 1,277,826
Cash dividends
$1.15 per share (247,960) (247,960)
Increase in unrealized
loss of marketable
equity securities (18,044) (18,044)
Sale of 604 common
shares 6,204 27,180 33,384
------- ---------- ---------- ----------- --------- -------- -----------
Balance -
December 31, 1993 219,122 $2,191,220 $1,105,133 $13,719,965 $(129,964) $(21,042) $16,865,312
======= ========== ========== =========== ========= ======== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 18
INVESTARK BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ --------------
<S> <C> <C> <C>
Operating activities:
Net income $ 1,277,826 $ 2,233,222 $ 906,566
------------ ------------ --------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit losses 600,000 64,491 1,463,398
Depreciation 552,153 529,097 467,406
Writedown of other real estate and leased
equipment 205,927 454,170 364,236
Net amortization (accretion) of investment
security premiums (discounts) 22,144 (3,344) (135,264)
Net gain on disposition of investment securities (75,609) (15,771) (404,126)
Deferred income tax benefit (278,044) (6,315) (61,466)
Minority interest in subsidiaries'
undistributed income 5,106 7,964 4,097
(Increase) decrease in interest receivable and
other assets 415,887 687,464 (2,263,412)
Increase (decrease) in interest payable
and other liabilities 20,275 (784,344) (334,609)
------------- -------------- ---------------
Total adjustments 1,467,839 933,412 (899,740)
------------- -------------- ---------------
Net cash provided by operating activities 2,745,665 3,166,634 6,826
------------- -------------- ---------------
Cash flows from investing activities:
Proceeds from maturities of CD's - other banks 1,060,178 291,342 2,551,737
Purchase of CD's - other banks (496,000)
Proceeds from disposition of investment securities 29,638,082 20,440,815 22,433,415
Purchase of investment securities (35,004,973) (30,646,818) (19,103,182)
Net (increase) decrease in loans 2,303,295 775,175 (908,807)
Proceeds from sale of equipment and other
real estate 1,291,285 1,104,105 209,686
Purchase of premises and equipment (366,061) (236,121) (640,334)
------------- ------------- --------------
Net cash provided (used) by investing activities (1,574,194) (8,271,502) 4,542,515
------------- ------------- --------------
Cash flows from financing activities:
Net increase in demand deposits, NOW
and savings deposits 1,307,625 6,866,620 2,681,621
Net increase (decrease) in time deposits (8,109,809) (2,836,351) 3,454,392
Proceeds of long-term debt 860,764
Repayment of borrowings (851,034) (369,699)
Increase (decrease) in short-term borrowings (313,282) (3,365,602) 116,641
Payment on capital notes (300,000) (30,000)
Purchase of Treasury Stock (38,520)
Proceeds from sale of treasury stock 33,384
Cash dividends (247,960) (205,042) (194,566)
------------- ------------- --------------
Net cash provided (used) by financing activities (7,320,312) (248,594) 6,028,088
------------- -------------- --------------
Net increase (decrease) in cash and equivalents (6,148,841) (5,353,462) 10,577,429
Cash and cash equivalents at beginning of year 13,363,041 18,716,503 8,139,074
------------ ------------ --------------
Cash and cash equivalents at end of year $ 7,214,200 $13,363,041 $ 18,716,503
============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 19
INVESTARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Summary of significant accounting policies
The accounting principles and reporting policies followed by Investark
Bankshares, Inc. and its subsidiaries (the "Company") conform with
generally accepted accounting principles and with general practices
within the financial services industry. The following is a description
of the more significant of these policies:
Principles of consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries, First Stuttgart Bank and Trust Company
(formerly First National Bank in Stuttgart), Stuttgart, Arkansas (100%
owned) and of The Bank of North Arkansas, Melbourne, Arkansas (99.7%
owned). All significant intercompany balances and transactions have
been eliminated.
Cash flows
For purposes of reporting cash flows, cash and cash equivalents include
cash and due from banks, and federal funds sold.
Investment securities
Investment securities, except for investments in mutual funds, are
stated at cost adjusted for amortization of premiums and accretion of
discounts. Investments in mutual funds are carried at the lower of
cost or market. Gains and losses on the sale of investment securities
are computed using the specific identification method.
Allowance for loan losses
The allowance for loan losses is established through charges to expense
and is maintained at a level which, in management's judgement, is
necessary to provide for future losses from the current portfolios.
This judgement is based on analysis of the current and expected
economic conditions, risk characteristics of the loan portfolios and
prior loan loss experience in relation to loans outstanding.
Interest on loans
Interest on installment loans is recognized as income over the lives of
the loans by the sum-of-the-months-digits and simple interest methods.
The results of using the sum-of-the-months-digits method do not differ
materially from those obtained by using the interest method. Interest
on other loans is recognized based on the principal amounts
outstanding. The accrual of interest on loans is discontinued when, in
the opinion of management, there is doubt as to the ability of the
borrower to pay interest or principal. The balances of non-accrual
loans were $474,067 and $446,379 at December 31, 1993 and 1992.
Interest previously accrued but uncollected on these loans was $148,031
and $51,142 at December 31, 1993 and 1992.
<PAGE> 20
INVESTARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Summary of significant accounting policies (continued)
Premises and equipment
Premises and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed principally by the
straight-line method.
Real estate owned other than premises
Real estate owned other than premises consists primarily of property
acquired in settlement of loans These properties are initially
recorded at the lower of cost or fair value as determined by appraisal
at the date acquired. Losses arising from such acquisitions are
charged to the allowance for loan losses. Carrying values are
subsequently reduced through a charge to operations when current
appraisals indicate a decline in value. Fair value is based on the
estimated net amount realizable on disposition of the property.
Amounts included in other assets at December 31, 1993 and 1992, were
$142,874 and $1,241,534, respectively.
Income taxes
Provisions for income taxes are based on amounts reported in the
statements of income (after exclusion of non-taxable income such as
interest on state and municipal securities) and include deferred taxes
on temporary differences in the recognition of income and expense for
tax and financial statement purposes. Deferred taxes are computed
using the liability method as prescribed in SFAS No. 109, "Accounting
for Income Taxes."
Off-balance-sheet financial instruments
In the ordinary course of business the Company has entered into
off-balance-sheet financial instruments consisting of commitments to
extend credit, commitments under credit card arrangements, commercial
letters of credit and standby letters of credit. Such financial
instruments are recorded in the financial statements when they become
payable.
Trust Department assets
In accordance with the usual practice of banks, property other than
cash deposits held by the Company's subsidiary bank's Trust Department
in a fiduciary or agency capacity for customers, is not included in the
consolidated financial statements.
Reclassification
Certain 1992 amounts have been reclassified to conform with the 1993
presentation.
<PAGE> 21
INVESTARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2: Investment securities
The book and approximate market values of investment securities
are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1993
Book Unrealized Unrealized Approximate
Value Gains Losses Fair Value
----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U. S. Government $ 18,030,129 $ 555,924 $ (15,504) $ 18,570,549
Federal agencies and
corporations 23,773,613 236,020 (58,853) 23,950,780
States and political
subdivisions 24,699,566 1,138,754 (52,828) 25,785,492
Other securities 7,900,568 311,839 (5,043) 8,207,364
Mortgage-backed
securities 10,074,910 335,498 (23,596) 10,386,812
------------ ------------ ----------- ------------
Total debt securities 84,478,786 2,578,035 (155,824) 86,900,997
Federal Reserve Bank
stock and other
equity securities 3,384,958 (21,042) 3,363,916
------------ ------------ ----------- ------------
$ 87,863,744 $ 2,578,035 $ (176,866) $ 90,264,913
============ ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1992
Book Unrealized Unrealized Approximate
Value Gains Losses Fair Value
----------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
U. S. Government $ 14,742,329 $ 495,362 $ (4,973) $15,232,718
Federal agencies and
corporations 20,335,711 411,055 (98,673) 20,648,093
States and political
subdivisions 18,440,150 719,055 (39,473) 19,119,732
Other securities 16,612,521 1,065,524 (18,474) 17,659,571
Mortgage-backed
securities 11,872,671 456,403 (37,059) 12,292,015
------------ ------------ ----------- -----------
Total debt securities 82,003,382 3,147,399 (198,652) 84,952,129
Federal Reserve Bank
stock and other
equity securities 458,400 (2,998) 455,402
------------ ------------ ----------- -----------
$ 82,461,782 $ 3,147,399 $ (201,650) $85,407,531
============ ============ =========== ===========
</TABLE>
<PAGE> 22
INVESTARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2: Investment securities (continued)
The book and approximate market values of investment securities at
December 31, 1993 and 1992, by contractual maturity, are shown
below. Actual maturities may differ from contractual maturities
due to the existence of call or prepayment options.
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
Book Approximate Book Approximate
Value Fair Value Value Fair Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Due in one year or less $11,883,780 $12,063,150 $14,794,911 $15,008,930
Due after one year
through five years 49,692,189 50,900,606 37,230,012 38,798,851
Due after five years
through ten years 9,671,306 10,142,426 13,483,007 13,984,579
Due after ten years 3,156,601 3,408,003 4,622,783 4,867,753
Mortgage-backed
securities 10,074,910 10,386,812 11,872,669 12,292,016
----------- ----------- ----------- -----------
Total debt securities 84,478,786 86,900,997 82,003,382 84,952,129
Equity securities 3,384,958 3,363,916 458,400 455,402
----------- ----------- ----------- -----------
$87,863,744 $90,264,913 $82,461,782 $85,407,531
=========== =========== =========== ===========
</TABLE>
Proceeds from disposition of investment securities during 1993
and 1992 were as follows:
<TABLE>
<CAPTION>
1993 1992
----------- ------------
<S> <C> <C>
Proceeds from disposition (primarily
maturities and calls) $29,638,082 $20,440,815
Realized gains on disposition 76,826 21,773
Realized losses on disposition 1,217 6,002
</TABLE>
The Company has the intent and ability to hold securities which
may have book values greater than market values to their maturity
date.
Investment securities with carrying amounts of $31,289,667 and
$34,330,551 at December 31, 1993 and 1992, respectively, were
pledged to secure public deposits and for other purposes required
or permitted by law.
<PAGE> 23
INVESTARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3: Loans
Major classifications of loans are as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1993 1992
----------- -----------
<S> <C> <C>
Real estate $37,955,597 $35,492,564
Agricultural production 14,099,782 12,467,213
Commercial 19,800,236 24,262,093
Loans to individuals 11,318,623 12,420,292
Other (including overdrafts) 1,350,633 2,383,485
----------- -----------
84,524,871 87,025,647
Less: unearned interest 29,095 46,944
----------- -----------
Net loans 84,495,776 86,978,703
Less: allowance for possible
loan losses 1,493,554 1,073,186
----------- -----------
$83,002,222 $85,905,517
=========== ===========
</TABLE>
The Company's subsidiary banks grant agribusiness, commercial and
other loans throughout their market areas. Although they have
diversified loan portfolios, a substantial portion of their
borrowers' ability to honor their contracts is dependent upon the
agribusiness economic sector.
Note 4: Allowance for possible loan losses
Changes in the allowance for possible loan losses were as follows:
<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
Balance - Beginning of year $1,073,186 $1,184,181
Provision charged to operations 600,000 64,491
Recoveries 75,719 175,998
Loans charged-off (255,351) (351,484)
---------- ----------
Balance - End of year $1,493,554 $1,073,186
========== ==========
</TABLE>
<PAGE> 24
INVESTARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5: Premises and equipment
Major classifications of these assets are summarized as follows:
<TABLE>
<CAPTION>
Useful lives
1993 1992 (years)
----------- ----------- -----------
<S> <C> <C> <C>
Land $ 619,437 $ 627,937
Buildings and improvements 3,243,733 3,696,562 5 - 40
Furniture and equipment 2,250,439 3,219,031 3 - 15
----------- -----------
6,113,609 7,543,530
Less: allowance for depreciation 3,391,639 4,586,995
----------- -----------
$ 2,721,970 $ 2,956,535
=========== ===========
</TABLE>
Depreciation expense was $552,153, $529,097 and $467,406 in 1993,
1992 and 1991, respectively.
Note 6: Leases
First Stuttgart Bank is lessor of computer equipment under
operating leases which expire during 1994. Minimum future rental
payments receivable under these noncancellable leases are:
1994 $38,368
=======
The lessees are to provide all maintenance to the equipment under
the terms of the leases.
Note 7: Income taxes
The income tax provision, including taxes on securities gains and
losses consists of the following:
<TABLE>
<CAPTION>
1993 1992 1991
--------- ---------- ---------
<S> <C> <C> <C>
Federal income tax
Currently payable $ 425,797 $507,036 $189,737
Deferred (278,044) (6,315) (61,466)
--------- -------- --------
$ 147,753 $500,721 $128,271
========= ======== ========
</TABLE>
<PAGE> 25
INVESTARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7: Income taxes (continued)
The tax effect of the temporary differences which comprise
deferred income taxes are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Temporary differences in tax and book
reporting of bad debts $(195,799)
Temporary differences in tax and book
reporting of security transactions (917) $ (8,868) $(15,632)
Depreciation expense different for tax
and book purposes (61,201) 6,706 30,049
Temporary differences in tax and book
reporting for other real estate
transactions 11,450 (10,957) (75,883)
Effect of recognizing loss on pension
plan curtailment (73,100)
Other - net 41,523 6,804
--------- --------- --------
$(278,044) $ (6,315) $(61,466)
========= ========= ========
</TABLE>
The income tax provision differs from the statutory rate primarily
because of the income tax treatment of exempt income and provision
for loan losses and use of alternative minimum tax credits.
Note 8: Employee benefit plans
First Stuttgart Bank has a defined benefit pension plan which
covers substantially all its employees. The benefits are based on
years of service and the employee's compensation during the last
five years of employment. The funding policy is to contribute
annually an amount that does not exceed the maximum amount
deductible for federal income tax purposes. Contributions are
intended to provide not only for benefits attributed to service to
date but also for those expected to be earned in the future.
The following tables set forth the plan's funded status and
amounts recognized in the Bank's balance sheet at December 31,
1993 and 1992 (amounts in thousands):
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $860 and $770 $879 $781
==== ====
</TABLE>
<PAGE> 26
INVESTARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8: Employee benefit plans (continued)
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Projected benefit obligation for service
rendered to date $ 1,071 $ 957
Plan assets at fair value 1,117 1,008
-------- -------
Plan assets in excess of projected benefit
obligation 46 51
Unrecognized prior service cost (27) (28)
Unrecognized net obligation at January 1, 1993
and 1992, being recognized over 22 years (42) (45)
Unrecognized net loss 116 110
-------- -------
Prepaid pension cost $ 93 $ 88
======== =======
</TABLE>
Net pension cost for 1993, 1992 and 1991 included the following
components:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Service costs-benefits earned during the period $ 55 $ 55 $ 59
Interest cost on projected benefit obligation 67 59 53
Expected return on plan assets (71) (63) (60)
Amortization of:
Prior service cost (1) (1) (1)
Unrecognized net obligation existing
at January 1, 1993, 1992 and 1991 (3) (3) (3)
Gain 1 2 5
-------- ------- -------
Net pension cost $ 48 $ 49 $ 53
======== ======= =======
</TABLE>
The weighted-average discount rate and the rate of increase in
future compensation levels used in determining the actuarial
present value of the projected benefit obligation were 7.0 % and
4.5% respectively. The expected long-term rate of return on
assets was 7.0%.
In connection with the merger with First United Bancshares, First
Stuttgart Bank is to terminate its defined benefit plan during
1994. Under generally accepted accounting principles, if the net
effect of the termination is a loss, it should be recognized when
the termination is probable and the effects are reasonably
estimable. Accordingly, a loss of $215,000 on the termination of
this plan is included in the accompanying 1993 statement of
income.
The Bank of North Arkansas has a defined contribution employee
benefit plan, qualified under IRC Section 401(k) that covers all
employees, with the exception of employees who are highly
compensated. Contributions to the plan are based on the total
amount of salary reduction the employee elects to defer, a
discretionary matching contribution equal to a percentage of the
amount the employee elects to defer, which percentage will be
determined each year by the employer, and a discretionary amount
determined each year by the employer. To share in the matching
and discretionary contribution, the employee must complete a year
of service and be actively employed on the last day of the Plan
Year. The amount of pension expense was $13,345 and $15,606 for
1993 and 1992, respectively.
<PAGE> 27
INVESTARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9: Disclosures about fair value of financial instruments
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and due from banks and short-term investments:
For these short-term items, the carrying amount is a
reasonable estimate of fair value.
Investment securities:
Fair values are based on quoted market prices, if
available. If a quoted market price is not available,
fair value is estimated using quoted market prices for
similar securities.
Loans:
The fair value of loans is estimated by discounting the
expected future cash flows using current rates at which
similar loans would be made to borrowers with similar
credit ratings and for similar remaining maturities.
Deposit liabilities:
The fair value of demand deposits, savings accounts and
certain money market deposits is the amount payable on
demand at the reporting date. The fair value of fixed-
maturity certificates of deposit is estimated using the
rates currently offered for deposits with similar
remaining maturities.
Borrowed funds:
For borrowings with fixed interest rates, fair value is
estimated using the rates currently available to the
Company's subsidiary banks for debt with similar terms
and remaining maturities. For floating rate debt the
fair value approximates the recorded liability.
Commitments to extend credit and letters of credit:
The fair value of commitments is estimated using the
fees currently charged to enter into similar
arrangements, taking into account the remaining terms of
the agreements and the present creditworthiness of the
counterparties. For fixed rate loan commitments, fair
value also considers the difference between current
levels of interest rates and committed rates. The fair
value of letters of credit is based on the fees
currently charged for similar agreements or on the
estimated cost to terminate them or otherwise settle the
obligations with the counterparties at the reporting
date.
<PAGE> 28
INVESTARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9: Disclosures about fair values of financial instruments (continued)
The estimated fair values of the Company's financial instruments
at December 31, 1993 and 1992 are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
1993 1992
Carrying Fair Carrying Fair
Value Value Value Value
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Financial assets:
Cash and equivalents $ 7,214 $ 7,214 $13,363 $13,363
Short-term investments 1,181 1,181 1,744 1,744
Investment securities 87,864 90,286 82,461 85,410
Loans 84,496 84,682 86,979 88,730
Less: allowance for
loan losses (1,494) (1,494) (1,073) (1,073)
-------- -------- ------- -------
Net loans $83,002 $83,188 $85,906 $87,657
======== ======== ======= =======
Financial liabilities:
Deposits $163,300 $163,648 $170,102 $107,706
Borrowed funds 3,912 3,912 4,216 4,216
Off-balance-sheet instruments:
Commitments to extend
credit 21,637 21,637 18,375 18,375
Letters of credit 647 647 472 472
</TABLE>
Note 10: Notes payable
Borrowed funds at December 31, 1993 and 1992 include the following:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Note payable, 5.5% interest, due monthly through
May 2003, secured by pledge of assets $320,133
Note payable, 4.4% interest, due monthly through
May 1998, secured by pledge of assets 189,597
Note payable, 6% interest, due in annual install-
ments of $190,000 plus interest through 1998,
secured by 79,762 shares of stock of The Bank
of North Arkansas $500,000
-------- --------
$509,730 $500,000
======== ========
</TABLE>
<PAGE> 29
INVESTARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10: Notes payable (continued)
Scheduled maturities after December 31, 1993 are as follows:
<TABLE>
<CAPTION>
Year ended
December 31, Amount
------------ ------
<S> <C>
1994 $ 66,396
1995 69,698
1996 73,166
1997 76,809
1998 52,731
After 1998 170,930
---------
$ 509,730
=========
</TABLE>
Note 11: Commitments and contingencies
The consolidated financial statements do not reflect various
commitments and contingent liabilities which arise in the normal
course of the Company's business and which involve elements of
credit risk, interest rate risk and liquidity risk. These
commitments and contingent liabilities consist of commitments to
extend credit and letters of credit. A summary of the commitments
and contingent liabilities at December 31, 1993 and 1992 are
summarized below:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Commitments to extend credit $18,411,675 $15,725,759
Credit card arrangements 3,225,782 2,648,940
Letters of credit 646,938 472,038
----------- -----------
$22,284,395 $18,846,737
=========== ===========
</TABLE>
Commitments to extend credit, credit card arrangements and letters
of credit all include some exposure to credit loss in the event of
nonperformance of the customer. The Company's credit policies
and procedures for credit commitments and financial guarantees are
the same as those for extensions of credit that are recorded in
the consolidated financial statements. Because these instruments
have fixed maturity dates, and because many of them expire without
being drawn upon, they do not generally present any significant
liquidity risk to the Company.
<PAGE> 30
INVESTARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11: Commitments and contingencies (continued)
In the ordinary course of business, there are various legal
proceedings involving the Company and its subsidiaries, most of
which are considered litigation incidental to the conduct of
business. These proceedings include, among other matters,
defense of routine corporate, employment, banking and lender
liability related litigation. Management, after consulting with
legal counsel and based on the facts available and proceedings to
date, some of which are preliminary, is of the opinion that the
ultimate resolution of these proceedings will not have a material
adverse effect on the consolidated financial position of the
Company.
Note 12: Concentrations of credit
Substantially all of the Company's loans, commitments to loan and
letters of credit have been granted to customers in their trade
area who are also depositors of the Company. The concentrations
of credit by type of loan are set forth in Note 3. The
distribution of commitments to extend credit approximates the
distribution of loans outstanding.
Note 13: Dividend restrictions
As State Banks, First Stuttgart Bank and The Bank of North
Arkansas are each restricted in the amount of dividends they may
pay in any year without prior permission from the Arkansas Bank
Commissioner to fifty percent of its net income for the year. The
Banks' ability to pay dividends is also restricted by the minimum
capital requirement of their regulatory agencies which require
them to maintain at least an 8.25% risk-based capital ratio.
Note 14: Related party transactions
Some of the directors and executive officers and the companies in
which they had a significant interest were customers of and had
transactions with the Company's subsidiary banks. Such
transactions were made in the ordinary course of the Banks'
business on substantially the same terms and conditions, including
interest rates and collateral, as those prevailing at the same
time for comparable transactions with other customers and did not,
in the opinion of management, involve more than a normal credit
risk or present other unfavorable features. The aggregate amount
of loans to such related parties amounted to $2,212,481 and
$3,345,252 at December 31, 1993 and 1992, respectively.
Transactions during 1993 included new loans amounting to
$2,459,497 and repayments amounting to $3,592,268.
<PAGE> 31
INVESTARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15: Supplemental cash flow information
The Company paid $5,166,679 and $7,031,918 in interest on deposits
and other borrowings during 1993 and 1992, respectively, and
income taxes of $289,000 and $470,000 for 1993 and 1992.
Note 16: Pending merger
On December 17, 1993 the Company entered into an agreement to
merge with First United Bancshares, Inc. of El Dorado, Arkansas.
Under the terms of this agreement First United would acquire all
of the outstanding stock of Investark Bankshares, Inc. through
issuance of First United common stock valued at approximately
$26,125,000. This transaction is expected to be consummated in
the first half of 1994.
Note 17: Effects of recently adopted accounting standards
During 1993, the Financial Accounting Standards Board (FASB)
issued SFAS No. 114 (Accounting by Creditors for Impairment of a
Loan) which becomes effective beginning in 1995. This statement
requires that impaired loans that are within the scope of the
Statement essentially be measured based on the present value of
expected future cash flows discounted at the loan's effective
rate, or as a practical expedient, at the loan's observable market
price or the fair value of the collateral if the loan is
collateral dependent. Management has not determined the effect
this statement will have when adopted.
In 1993, the Financial Accounting Standards Board (FASB) issued
SFAS NO. 115, (Accounting for Certain Investments in Debt and
Equity Securities), that becomes effective for fiscal years
beginning after 1993. This Statement addresses the accounting and
reporting for investments in certain debt and equity securities.
Debt securities not classified as trading account securities or
investment securities expected to be held to maturity and all
equity securities will be classified as available for sale and are
reported at fair value, with net unrealized gains and losses
reported, net of tax, as a separate component of stockholders'
equity. Investark will apply the new rules starting in the first
quarter of 1994 and believes the impact of adopting this statement
will not be material to its financial position or results of
operations.
<PAGE> 32
INVESTARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 18: Condensed financial information of parent company
The financial position of Investark Bankshares, Inc. (parent
company only), its results of operations and cash flows are
summarized as follows:
<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
<S> <C> <C>
Condensed financial position:
Assets:
Cash $ 52,090 $ 94,395
Investment in subsidiaries 16,826,950 16,174,658
Other assets 185,811 137,195
----------- -----------
Total assets $17,064,851 $16,406,248
=========== ===========
Liabilities and capital accounts:
Long-term debt $ 500,000
Other liabilities $ 199,539 86,142
----------- -----------
Total liabilities 199,539 586,142
----------- -----------
Common stock 2,191,220 2,191,220
Surplus 1,105,133 1,098,929
Retained earnings 13,719,965 12,690,099
Treasury stock (129,964) (157,144)
Net unrealized loss on marketable equity
securities (21,042) (2,998)
----------- -----------
Total capital 16,865,312 15,820,106
----------- -----------
Total liabilities and capital $17,064,851 $16,406,248
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Condensed operating results:
Dividends from subsidiaries $ 703,072 $ 734,746 $245,766
Other income 2,726 3,790
---------- ---------- --------
703,072 737,472 249,556
---------- ---------- --------
Interest 15,133 55,437 73,924
Other expense 70,978 54,611 29,718
---------- ---------- --------
86,111 110,048 103,642
---------- ---------- --------
Income before tax benefit and equity in
undistributed income of subsidiaries 616,961 627,424 145,914
Income tax benefit (31,685) (35,412) (46,937)
---------- ---------- --------
Income before equity in undistributed
income of subsidiaries 648,646 662,836 192,851
Equity in undistributed income of subsidiaries 629,180 1,570,386 713,715
---------- ---------- --------
Net income $1,277,826 $2,233,222 $906,566
========== ========== ========
</TABLE>
<PAGE> 33
INVESTARK BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 18: Condensed financial information of parent company (continued)
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Condensed statements of cash flows:
Cash flows from operating activities:
Net income $ 1,277,826 $ 2,233,222 $ 906,566
Undistributed income (629,180) (1,570,386) (713,715)
Gain on sale of stock (1,896)
Amortization 3,011 3,011 2,814
(Increase) decrease in other assets (75,166) (26,103) 76,595
Increase (decrease) in other liabilities 139,948 (13,431) 5,909
------------ ------------ ----------
716,439 624,417 278,169
------------ ------------ ----------
Cash flows from investing activities:
Purchase First Stuttgart Bank stock (44,168)
Purchase Bank of North Arkansas stock (923) (13,756)
Proceeds from sale of stock 9,796
------------ ------------ ----------
(44,168) 8,873 (13,756)
------------ ------------ ----------
Cash flows from financing activities:
Sale of treasury stock 33,384
Purchase of treasury stock (38,520)
Proceeds from long-term debt 313,764
Repayment of borrowings (813,764) (369,699)
Dividends paid (247,960) (205,042) (194,566)
------------ ------------ ----------
(714,576) (613,261) (194,566)
------------ ------------ ----------
Net increase (decrease) in cash (42,305) 20,029 69,847
Cash beginning of year 94,395 74,366 4,519
------------ ------------ ----------
Cash at end of year $ 52,090 $ 94,395 $ 74,366
============ ============ ==========
Supplementary data for cash flows:
Interest paid $ 15,133 $ 55,437 $ 95,607
</TABLE>
<PAGE> 34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST UNITED BANCSHARES, INC.
(REGISTRANT)
By /s/ JOHN E. BURNS
John E. Burns, Vice President and
Chief Financial Officer
Date: August 12, 1994
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