U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For Quarter ended September 30, 1995 COMMISSION FILE NUMBER 0-10898
-------------------- ---------
MERCHANTS CAPITAL CORPORATION
------------------------------
(Exact name of registrant as specified in charter)
MISSISSIPPI 64-0655603
- ------------------ -------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
820 South Street 39180
Vicksburg, Mississippi ------------
-------------------------- (Zip Code)
(address of principal executive offices)
Registrant's telephone number, including area code (601) 636-3752
---------------
Not Applicable
- -----------------------------------------------------------------------------
Former name, former address and former fiscal year; if changed since last
report
Indicate by check mark whether the registrants (1) has filed all reports
required to be filed by Sections 13 or 15 (d) of the Securities 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
674,054 common shares were outstanding as of September 30, 1995.
1
MERCHANTS CAPITAL CORPORATION
INDEX
Page
Number
Part 1. Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition 3
September 30, 1995 (Unaudited) and December 31, 1994
(Unaudited)
Consolidated Statements of Income
Three Months Ended and Nine Months Ended 4
September 30, 1995 and 1994 (Unaudited)
Consolidated Statements of Changes in Stockholders'
Equity, Nine Months Ended September 30, 1995 and 1994 5
(Unaudited)
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1995 and 1994 6
(Unaudited)
Notes to Consolidated Financial Statements 7
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
Part 2. Other Information
Item 1. Legal Proceedings 20
Item 6. Exhibits and Reports on Form 8-K 20
2
MERCHANTS CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
Sept. 30, 1995 Dec. 31, 1994
(Unaudited) (Unaudited)
--------------- -------------
ASSETS:
Cash & due from banks $8,013,537 $9,945,350
Investment securities:
Held -to-maturity ($21,750,908 est. market 21,814,724 21,722,246
value in 1995 and $21,236,335 in 1994)
Available-for-sale 30,725,074 22,127,650
Federal funds sold 5,300,000 13,625,000
Loans - net 121,351,655 99,555,905
Bank premises & equipment - net 2,642,331 2,477,772
Other real estate 88,419 154,114
Accrued interest receivable 2,050,258 1,448,035
Other assets 727,135 1,000,757
Premuim paid on purchased assets &
deposits less amortization 562,883 243,900
------------- -------------
TOTAL ASSETS $193,276,016 $172,300,729
============= =============
LIABILITIES & STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Non-interest bearing deposits $21,004,429 $20,486,461
Interest bearing deposits 149,755,476 133,655,515
------------- -------------
Total Deposits 170,759,905 154,141,976
Securities Sold Under Repurchase Agreement 5,920,045 3,348,103
Accrued interest payable 709,066 640,480
Accrued taxes and other liabilities 662,240 463,326
------------- -------------
TOTAL LIABILITIES 178,051,256 158,593,885
STOCKHOLDERS' EQUITY:
Common stock, $5 par value per share:
Authorized - 1,000,000 shares
Issued & outstanding 674,054 shares 3,370,270 3,064,940
Additional paid-in capital 11,852,971 10,784,316
Unrealized gain (loss) on securities AFS (113,440) (534,954)
Retained earnings 114,959 392,542
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 15,224,760 13,706,844
------------- -------------
TOTAL LIABILITIES and STOCKHOLDERS' EQUITY $193,276,016 $172,300,729
============= =============
See notes to consolidated financial statements.
3
<TABLE>
MERCHANTS CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Interest Income: ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Interest and fees on loans $2,966,391 $2,204,287 $8,016,609 $6,246,538
Interest on investment securities
Taxable interest income 793,329 785,163 2,320,706 2,315,057
Interest income exempt from
federal income taxes 48,565 20,218 109,188 61,346
Interest on federal funds sold 69,771 54,858 300,171 214,889
------------- ------------- ------------ ------------
TOTAL INTEREST INCOME 3,878,056 3,064,526 10,746,674 8,837,830
Interest Expense:
Interest on deposits 1,585,953 1,197,712 4,514,974 3,439,780
Interest on fed funds pur & sec sold u/repo 69,148 48,982 161,968 93,343
Interest on capital lease oblig. - 106 - 766
------------- ------------- ------------ ------------
TOTAL INTEREST EXPENSE 1,655,101 1,246,800 4,676,942 3,533,889
------------- ------------- ------------ ------------
NET INTEREST INCOME 2,222,955 1,817,726 6,069,732 5,303,941
Provision for loan losses 40,000 50,000 80,000 150,000
------------- ------------- ------------ ------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,182,955 1,767,726 5,989,732 5,153,941
Other Income:
Service charges on deposits 300,588 239,722 890,695 711,455
Trust service income 123,115 76,761 274,801 251,750
Insurance premium and commissions 89,098 99,416 262,740 338,694
Other 63,091 38,221 162,618 151,820
------------- ------------- ------------ ------------
TOTAL OTHER INCOME 575,892 454,120 1,590,854 1,453,719
Other Expenses:
Salaries 815,721 679,037 2,188,564 1,904,297
Employee benefits 154,963 162,741 488,758 505,041
Net occupancy expense 138,142 126,869 379,146 354,203
Equipment expense 148,974 146,177 455,317 449,892
Other 478,438 593,567 1,697,606 1,653,429
------------- ------------- ------------ ------------
TOTAL OTHER EXPENSES 1,736,238 1,708,391 5,209,391 4,866,862
------------- ------------- ------------ ------------
INCOME BEFORE INCOME TAXES 1,022,609 513,455 2,371,195 1,740,798
INCOME TAX PROVISION 354,386 196,383 779,282 598,532
------------- ------------- ------------ ------------
NET INCOME $668,223 $317,072 $1,591,913 $1,142,266
============= ============= ============ ============
Net income per common share (Note 6) $0.99 $0.47 $2.36 $1.69
Dividends per common share $0.25 $0.23 $0.73 $0.66
Average number of shares of common
stock outstanding 674,054 674,054 674,054 674,054
See notes to consolidated financial statements.
4
</TABLE>
<TABLE>
MERCHANTS CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unadited)
<CAPTION>
Additional Unrealized
Common Paid-In Gain (Loss) Retained
Stock Capital on Sec. AFS Earnings Total
------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1994 $2,787,320 $9,673,836 - $984,284 $13,445,440
Net income 1,142,266 1,142,266
Cash dividends declared
(.66 per share) (445,860) (445,860)
Stock dividend (10%) 277,620 1,110,480 (1,388,100) -
Fractional shares
purchased (222.4 shares
@ $25 per share) (5,560) (5,560)
Unrealized gain (loss)
on securities AFS (427,648) (427,648)
------------ ------------- ------------- ------------ ------------
BALANCE, September 30, 1994 $3,064,940 $10,784,316 ($427,648) $287,030 $13,708,638
============ ============= ============= ============ ============
BALANCE, January 1, 1995 $3,064,940 $10,784,316 (534,954) $392,542 $13,706,844
Net income 1,591,913 1,591,913
Cash dividends declared
(.73 per share) (490,273) (490,273)
Stock dividend (10%) 305,330 1,068,655 (1,373,985) -
Fractional shares
purchased (232.8 shares
@ $22.50 per share) (5,238) (5,238)
Unrealized gain (loss)
on securities AFS 421,514 421,514
------------ ------------- ------------- ------------ ------------
BALANCE, September 30, 1995 $3,370,270 $11,852,971 ($113,440) $114,959 $15,224,760
============ ============= ============= ============ ============
See notes to consolidated financial statements.
5
</TABLE>
<TABLE>
MERCHANTS CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1995 1994
OPERATING ACTIVITIES: ------------- ------------
<S> <C> <C>
Net income $1,591,913 $1,142,266
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 80,000 150,000
Provision for depreciation and amortization 404,653 363,223
Gain on sale of securities (8,207) (6,306)
Net premium amortization (accretion) on HTM securities 48,508 89,142
Net premium amortization (accretion) on AFS securities (149,436) (38,598)
Increase in accrued interest receivable (602,223) (116,779)
(Increase) decrease in other assets (280,176) 77,223
Increase (decrease) in accrued interest payable 68,586 (107,304)
Increase (decrease) in taxes and other liabilities 183,648 (452,312)
------------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,337,266 1,100,555
------------- ------------
INVESTING ACTIVITIES:
Decrease in federal funds sold 8,325,000 1,500,000
Proceeds from sales of investment securities-HTM 761,795 -
Proceeds from maturities of investment securities-HTM 1,783,119 3,235,131
Purchase of investment securities-HTM (2,677,693) (1,991,250)
Proceeds from sales of investment securities-AFS - 17,185,249
Proceeds from maturities of investment securities-AFS 24,221,967 32,394,559
Purchase of investment securities-AFS (31,978,947) (43,162,960)
Net increase in loans (21,875,750) (9,831,757)
Purchases of premises and equipment (538,196) (334,094)
------------- ------------
NET CASH USED BY INVESTING ACTIVITIES (21,978,705) (1,005,122)
------------- ------------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits 16,617,929 (3,082,252)
Cash dividends paid (475,007) (445,859)
Payment of fractional shares from 10% stock dividend (5,238) (5,560)
Net increase in Sec. sold under repurchase agreement 2,571,942 3,235,903
------------- ------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 18,709,626 (297,768)
------------- ------------
DECREASE IN CASH AND CASH EQUIVALENTS (1,931,813) (202,335)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 9,945,350 8,761,044
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $8,013,537 $8,558,709
============= ============
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Dividends declared but not paid $168,513 $153,247
Total (decrease) increase in unrealized loss on
securities available for sale net of deferred taxes ($421,514) $427,648
Stock dividends declared $1,373,985 $1,388,100
See notes to consolidated financial statements.
6
</TABLE>
MERCHANTS CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Consolidated Financial Statements
The consolidated financial statement include Merchants Capital
Corporation and its wholly owned subsidiary, Merchants Bank and its
wholly owned subsidiary Merchants Credit Company. All intercompany
profits, transactions and balances have been eliminated.
The consolidated financial statements have been prepared by the Company
without an audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly
the financial position, results of their operations and their cash flows
as of September 30, 1995, and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The results of
operations for the periods ended September 30, 1995, are not necessarily
indicative of operating results for the full year. It is suggested these
financial statements be read in conjunction with the Company's Annual
Report and proxy statements filed with its Form 10-KSB for the year ended
December 31, 1994.
2. Acquisitions
On April 1, 1995, Merchants Bank purchased certain assets and assumed
certain liabilities of the Bank of Edwards, Edwards, Mississippi, for a
premium of $350,000 which will be amortize over a fifteen year period.
3. Nonperforming Assets
Nonperforming assets at September 30,1995 and December 31, 1994, were
as follows:
9-30-95 12-31-94
------------- -------------
Nonaccrual loans $450,539 $667,633
Ninety days or more past due 687,075 35,335
------------- -------------
Total nonperforming loans $1,137,614 $702,968
Other real estate owned (net) 88,419 154,114
------------- -------------
Total nonperforming assets $1,226,033 $857,082
============= =============
Nonperforming loans as a
percent of loans, net of
unearned interest 0.92% 0.69%
7
4. Allowance for Loan Losses
The following table reflects the transactions in the allowance for
loan losses for the nine month periods ended September 30,1995 and 1994:
1995 1994
------------- -------------
Balance at beginning of year $1,273,160 $1,232,881
Provision charged to operations 80,000 150,000
Charge offs 749,555 241,043
Recoveries 310,714 164,614
------------- -------------
Net recoveries (charge offs) ($358,841) $73,571
Adjustments due to acquisition 1,101,180 -
------------- -------------
Balance at end of period $2,015,499 $1,306,452
============= =============
Allowance for loan losses as a
percent of loans, net of unearned
interest 1.63% 1.29%
5. Impaired Loans and Troubled Debt Restructuring
The Bank adopted SFAS No.114, "Accounting by Creditors for Impairment of
a Loan," and SFAS No.118, "Accounting by Creditors for Impairment of a Loan-
Income Recognition and Disclosures," as of January 1, 1995. SFAS No.114
requires that certain impaired loans be measured based on the present value
of expected future cash flows discounted at the loan's original effective
interest rate. As a practical expedient, impairment may be measured based
on the loan's observable market price or the fair value of the collateral
if the loan is collateral dependent. When the measure of the impaired loan
is less than the recorded investment in the loan, the impairment is recorded
through a valuation allowance.
The Bank had previously measured the allowance for credit losses using
methods similar to those prescribed in SFAS No. 114. As a result of adopting
these statements, no additional allowance for loan losses was required
as of January 1, 1995.
6. Net Income Per Share of Common Stock
Net income per share of common stock is based on the weighted
average number of share outstanding during each period, after giving
retroactive effect to stock dividends.
8
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Changes In Financial Position and Liquidity
- -------------------------------------------
In the nine months ended September 30, 1995, assets increased by
$20,975,287 or 12.17%. This resulted from increases of $8,689,902 in
investment securities, approximately $3,000,000 due to Bank of Edwards
acquisition; $21,795,750 in net loans, approximately $6,000,000 due to Bank
of Edwards acquisition; $164,559 in bank premises and equipment; $602,223
in accrued interest receivable; and $318,983 in premium paid on purchased
assets and deposits. These increases were offset by a decrease of
$1,931,813 in cash and due from banks, $8,325,000 in federal funds sold,
$65,695 in other real estate and $273,622 in other assets. The increase
in assets was a result of net increases of $16,617,929 in deposits,
$2,571,942 in securities sold under repurchase agreement, $68,586 in
accrued interest payable, $198,914 in accrued taxes and other liabilities,
and $1,373,985 in common stock and surplus. These increases were offset
by a decrease of $277,583 in retained earnings resulting from year-to-
date net income of $1,591,913 less cash dividends declared of $490,273 less
10% stock dividend of $1,379,223. Assets and shareholders equity were
increased by $421,514 due to a decrease in net unrealized loss on securities
available for sale.
Nonperforming loans as of September 30, 1995 were $1,137,614 compared
to $702,968 as of Dec. 31, 1994. The nonaccrual loans decreased by $217,094
as compared to December 31, 1994, while the ninety days or more past due
loans increased by $651,740. The nonperforming loans as a percent of loans,
net of unearned income, was .92% at September 30, 1995 compared to .69%
at December 31, 1994. This increase in nonperforming loans is due to the
loans acquired from the Bank of Edwards. Management is in the process
of working the loans to determine their future status for the Bank.
The allowance for loan losses was $2,015,499 as of September 30, 1995
compared to $1,306,452 as of December 31, 1994. The ratio of the allowance
for possible losses to loans, net of unearned income increased to 1.63%
as of September 30,1995 compared to 1.29% as of December 30, 1994. There
was an adjustment of $1,101,180 to the provision for loan losses due to
the acquisition of the Bank of Edwards' loan portfolio. Management regularly
reviews the level of the allowance for possible loan losses and is of the
opinion that it is adequate at September 30, 1995.
Results of Operations
- ---------------------
In the third quarter ended September 30, 1995, net income increased by
$351,151 or 110.75% over the third quarter income of 1994. Net interest income
increased by $405,229 or 22.29% as a result of an increase of $813,530 or
26.55% in interest income and an increase of $408,301 or 32.75% in interest
expense. The provision for loan losses decreased by $10,000 or 20.0%. Other
income increased by $121,772 or 26.81%, so did other expenses by $27,847 or
1.63%. The income tax provision increased by $158,003 or 80.46%.
9
ITEM 2. (Continued)
The nine months ended September 30, 1995, resulted in an increased of
$449,647 or 39.36% in net income in comparison with the first nine months of
1994. Net interest income increased by $765,791 or 14.44% as a result of an
increase of $1,908,844 or 21.60% in interest income and an increase of
$1,143,053 or 32.35% in interest expense. The provision for loan losses
decreased by $70,000 or 46.67%. Other income increased by $137,135 or 9.43%,
so did other expenses by $342,529 or 7.04%. The income tax provision increased
by $180,750 or 30.20%.
Capital Adequacy
- ----------------
The Company and the Bank must maintain certain levels of capitalization as
prescribed by the various regulators. The Company and the Bank must maintain
minimum amounts of capital to total "risk weighted" assets, as outlined under
the regulators' 1992 risk-based capital guidelines. The Company and the Bank
are required to have minimum Tier I and total capital ratios of 4% and 8%,
respectively. The actual ratios at September 30, 1995, were 11.54% and 12.79%.
(Company) and 11.03% and 12.28% (Bank), respectively. The Company and the
Bank's leverage ratios at September 30, 1995, were 7.64% and 7.30%,
respectively. The minimum required leverage ratio is 3%-5% with an internal
target ratio set at 6% by management.
The main source of capital expansion for the Company and the Bank
continues to be the retention of earnings. However, if the need arises again,
the Company can use its borrowing ability to inject needed capital into the
Bank. The net change in stockholders' equity of $1,517,916 in the first nine
months was the result of the retention of earnings and a decrease of the
unrealized loss on securities available for sale. At the present time, there
are no planned capital expenditures which would materially restrict capital
growth.
<TABLE>
MERCHANTS CAPITAL CORPORATION
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST RATES AND INTEREST DIFFERENTIAL
<CAPTION>
Nine months ended September 30,
1995 1994
------------ ------------
Average Average
Average Income/ Yield/ Average Income/ Yield/
ASSETS Balance Expense Rate Balance Expense Rate
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans (1) 109,254,763 7,736,916 7.08% 96,496,239 6,039,521 6.26%
Investment Securities:
U. S. government & other 51,769,310 2,349,374 4.54% 56,032,477 2,315,058 4.13%
State & municipal 1,943,829 80,520 4.14% 719,846 29,815 4.14%
------------------------ --------------------------
Total investment securities 53,713,139 2,429,894 4.52% 56,752,323 2,344,873 4.13%
Federal funds sold 6,880,976 300,171 4.36% 7,909,965 214,889 2.72%
------------------------ --------------------------
Total earning assets 169,848,878 10,466,980 6.16% 161,158,527 8,599,283 5.34%
Allowance for loan losses (1,662,664) (1,284,926)
Cash & Due from banks 6,800,660 7,873,335
Bank premises & equipment 2,554,351 2,529,230
Other assets 6,443,468 4,783,391
------------ --------------
TOTAL ASSETS 183,984,693 175,059,557
============ ==============
LIABILITIES & RETAINED EARNINGS
Interest bearing deposits:
Interest bearing deposits 69,945,096 2,064,682 2.95% 53,179,334 1,275,097 2.40%
Savings 12,220,380 254,348 2.08% 13,756,165 281,519 2.05%
Certificates of deposit 59,434,500 2,195,944 3.69% 65,152,938 1,883,164 2.89%
------------------------ --------------------------
Total interest bearing deposits 141,599,976 4,514,974 3.19% 132,088,437 3,439,780 2.60%
Other borrowings 4,928,568 161,968 3.29% 3,480,202 93,343 2.68%
------------------------ --------------------------
Total interest bearing liabilities 146,528,544 4,676,942 3.19% 135,568,639 3,533,123 2.61%
Non-interest bearing deposits 20,407,361 23,181,943
Other liabilities 2,691,452 2,601,962
Shareholders' equity 14,357,337 13,707,013
------------ --------------
Total liabilities & shareholders' equity 183,984,694 175,059,557
==============
Interest income and rate earned 10,466,980 6.16% 8,599,283 5.34%
Interest expense and rate paid 4,676,942 3.19% 3,533,123 2.61%
Interest rate spread 2.97% 2.73%
NET INTEREST INCOME & NET YIELD ON
AVERAGE EARNING ASSETS 5,790,038 3.41% 5,066,160 3.14%
(1) Nonaccrual loans are included in average balances for yield computations
11
</TABLE>
<TABLE>
MERCHANTS CAPITAL CORPORATION
INVESTMENT PORTFOLIO
<CAPTION>
September 30, 1995
Due in 1 year Due after 1 year Due after 5 years Due after
or less through 5 years through 10 years 10 years Total
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
Available for sale:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Securities 1,243,047 5.01% 7,233,563 5.35% 8,476,610 5.30%
U.S. Government Agencies 9,947,288 5.30% 2,526,137 6.01% 936,393 7.07% 7,994,296 7.11% 21,404,114 6.13%
Other 320,450 6.00% 523,900 4.70% 844,350 5.19%
-------------
Held for maturity: 30,725,074
U.S. Government Agencies 16,564,837 5.81% 1,238,035 7.62% 900,726 8.10% 18,703,598 6.05%
State & Municipals 333,345 4.43% 1,674,114 5.04% 469,246 5.97% 634,421 5.55% 3,111,126 5.26%
-------------
21,814,724
-------------
52,539,798
=============
September 30, 1994
Due in 1 year Due after 1 year Due after 5 years Due after
or less through 5 years through 10 years 10 years Total
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
Available for sale:
U.S. Government Securities 3,987,500 6.21% 10,985,547 4.70% 14,973,047 5.10%
U.S. Government Agencies 3,051,497 7.44% 8,883,891 5.18% 86,294 7.38% 1,666,883 5.71% 13,688,565 5.75%
Other 270,750 6.00% 523,900 4.50% 794,650 5.01%
-------------
Held for maturity: 29,456,262
U.S. Government Agencies 19,023,308 5.92% 712,919 8.14% 1,458,862 7.99% 21,195,089 6.14%
State & Municipals 67,000 4.91% 383,528 5.13% 247,000 6.14% 697,528 5.47%
-------------
21,892,617
-------------
51,348,879
(1) Yields on tax exempt obligations have been computed on a tax equivalent
basis.
There were no obligations of state and political subdivisions exceeding ten
percent (10%) of stockholders' equity at September 30, 1995.
12
</TABLE>
MERCHANTS CAPITAL CORPORATION
LOAN PORTFOLIO BY TYPES OF LOANS
SEPTEMBER 30,
------------------------------
1995 1994
---- ----
1. Real estate loans (includes only loans
secured primarily by real estate):
(a) Construction and land development $7,545,000 $8,514,000
(b) Secured by farmland (including farm
residential and other improvemnts) $3,261,000 3,652,000
(c) Secured by 1-4 family residential
properties $24,655,000 21,724,000
(d) Secured by multi-family (5 or more)
residential properties $2,602,000 1,168,000
(e) Secured by non-form non-residential
properties $27,695,000 15,954,000
2. Loans to financial institutions: $0 0
3. Loans for purchasing or carrying securities
(secured or unsecured): $1,838,000 936,000
4. Loans to finance agricultural production and
other loans to farmers: $2,593,000 3,137,000
5. Commercial and industrial loans (excpet those
secured by real estate): $19,246,000 18,641,000
6. Loans toindividuals for household, family,
and other personal expenditures (includes
purchase paper): $33,512,000 27,314,000
7. All other loans attributable to domestic
operations: $2,337,000 1,984,000
------------- -------------
8. Total Loans Outstanding: $125,284,000 103,024,000
9. Less: Allowance for loan losses
and unearned income: ($3,944,000) (3,008,000)
------------- -------------
10. Net Loans: $121,340,000 $100,016,000
============= =============
13
MERCHANTS CAPITAL CORPORATION
LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
September 30, 1995
Less than One year Greater than
one year to five years five years Total
Commercial, Financial and
agricultural 36,378,533 59,686,096 2,401,994 98,466,623
======================================================
Loans Due After One Year at September 30, 1995
Interest Rates
--------------
Predetermined Adjustable Total
52,270,927 9,817,163 62,088,090
------------------------------------------
14
MERCHANTS CAPITAL CORPORATION
RISK ELEMENTS
Nonperforming assets were as follows:
September 30,
1995 1994
----------------------
Nonaccrual loans 450,539 655,000
Ninety days or more past due 687,075 39,000
Information with respect to nonperforming loans is as follows:
Nine months ended
September 30,
1995 1994
---------------------
Interest income, which would have been
recorded under original terms on
nonaccrual loans 40,000 45,000
The Bank discontinues the accrual of interest income when a loan becomes 90 days
past due as to principal or interest. When a loan is placed on nonaccrual
status, previously recognized but uncollected interest is reversed to income or
charged to the allowance for loan losses. If the underlying collateral value is
sufficient to cover the principal and accrued interest, the Bank may decide to
continue the accrual of interest.
There were no loans with significant balances which would cause management
to have serious doubts as to the ability of such borrower to comply with the
present loan repayment terms, other than those disclosed above.
There are no concentrations of loans to certain types of industries exceeding
ten percent (10%) of total loans as of September 30 1995 and 1994, which are
not otherwise disclosed as a category of loans.
There are no other interest bearing assets that would require disclosure under
Non accrual, Past Due and Restructured Loans" or "Potential Problem Loans"
if such assets were loans.
15
MERCHANTS CAPITAL CORPORATION
SUMMARY OF LOAN LOSS EXPERIENCE
September 30,
1995 1994
-----------------------------
Loans outstanding at year end 125,284,000 103,024,000
=============================
Average amount of loans outstanding 109,254,763 96,496,239
=============================
Amount of loan loss reserve at beginning
of periods 1,273,160 1,232,881
Loans charged off for periods ending:
Commercial, financial, and agricultural 421,709 83,970
Installment loans to individuals 327,846 157,080
-----------------------------
749,555 241,050
Recoveries for the periods ending:
Commercial, financial, and agricultural 231,719 60,589
Installment loans to individuals 78,995 104,032
-----------------------------
310,714 164,621
Net loans charged off for periods ending 438,841 76,429
-----------------------------
Additions charged to operations during period 80,000 150,000
-----------------------------
Adjustment due to acquistion 1,101,180 0
-----------------------------
Amount of loan loss reserve at year end 2,015,499 1,306,452
=============================
Ratio of net charge-offs during periods to
average loans outstanding for the periods
ending 0.40% 0.08%
=============================
The allowance is an amount that management believes will be adequate to
absorb possible losses on existing loans that may become uncollectible,
based on evaluations of the collectibility of loans and prior loan loss
experience. The evaluations take into consideration such factors as changes
in the nature and volume of the loan portfolio, overall portfolio quality,
review of specific problem loans, and current economic conditions that
may affect the borrower's ability to pay. Credits deemed uncollectible
are charged to the allowance. Provisions for loan losses and recoveries
on loans previously charged off are added to the allowance.
16
MERCHANTS CAPITAL CORPORATION
ALLOCATION OF LOAN LOSS RESERVE
September 30,
1995 1994
Allowance % of Loans Allowance % of Loans
for Credit in Each for Credit in Each
loss Category loss Category
--------------------------------------------------
Commercial, Financial,
and Agricultural 1,389,202 68.93% 710,332 54.37%
Real Estate - Construction 37,725 1.87% 42,570 3.26%
Real Estate - Mortgage 20,000 0.99% 185,000 14.16%
Installment 568,572 28.21% 368,550 28.21%
--------------------------------------------------
2,015,499 100.00% 1,306,452 100.00%
==================================================
(1) The reserve is allocated based on a six year moving average of
net chargeoffs, a percentage is calculated to the commercial,
financial and agricultural and installment categories to determine
the required amount of the reserve. Real estate - construction and
real estate - mortgage loans, due to their historically low loss
experience are allocated an amount equal to one half (1/2) of one
percent of the year end loan balance.
17
<TABLE>
MERCHANTS CAPITAL CORPORATION
DEPOSITS & TIME CERTIFICATES IN EXCESS OF $100,000 MATURITY
<CAPTION>
Nine months ended September 30,
--------------------------------------------------
1995 1994
--------------------------------------------------
Amount Rate Amount Rate
------ ---- ------ ----
<S> <C> <C> <C> <C>
Non-interest bearing demand deposits $20,407,361 $23,181,943
Interest bearing demand deposits $69,945,096 2.96% $53,179,334 2.40%
Saving deposits $12,220,380 2.02% $13,756,165 2.05%
Time deposits $59,434,500 3.69% $65,152,938 2.89%
------------- --------------
$162,007,337 $155,270,380
MATURITIES OF THE TIME CERTIFICATED OF DEPOSIT OF $100,000 OR MORE OUTSTANDING
- ------------------------------------------------------------------------------
September 30,
DAYS TO MATURITY 1995 1994
- ---------------- --------------------------
<S> <C> <C>
O TO 90 $4,235,767 $2,254,724
91 TO 180 $3,582,580 $1,137,166
181 TO 360 $351,000 $1,580,000
Over 360 $1,913,096 $1,423,519
--------------------------
$10,082,443 $6,395,409
==========================
18
</TABLE>
MERCHANTS CAPITAL CORPORATION
RETURN ON NET EQUITY AND ASSETS
Nine months ended
September 30,
1995 1994
---- ----
Return on average asstes 0.87% 0.65%
Return on average equity 11.20% 8.33%
Dividend payout ratio 30.93% 39.05%
Equity to assets ratio 7.80% 7.83%
19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no legal proceedings that need to be disclosed as required
by Item 103 of Regulation S-B as of September 30, 1995.
Item 6. Exhibits and Reports on Form 8-K.
None.
20
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.
MERCHANTS CAPITAL CORPORATION
---------------------------
November 14, 1995 Joel H. Horton
Date ______________________ _________________________
(Signature)
Joel H. Horton
President and Chief Operating
Officer
November 14, 1995 James R. Wilkerson
Date ______________________ ____________________________
(Signature)
James R. Wilkerson
Secretary
21
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 7256564
<INT-BEARING-DEPOSITS> 756974
<FED-FUNDS-SOLD> 5300000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 30725074
<INVESTMENTS-CARRYING> 21814724
<INVESTMENTS-MARKET> 21236335
<LOANS> 121351655
<ALLOWANCE> 2015499
<TOTAL-ASSETS> 193276016
<DEPOSITS> 170759905
<SHORT-TERM> 5920045
<LIABILITIES-OTHER> 1371306
<LONG-TERM> 0
<COMMON> 3370270
0
0
<OTHER-SE> 11854490
<TOTAL-LIABILITIES-AND-EQUITY> 193276016
<INTEREST-LOAN> 8016609
<INTEREST-INVEST> 2429894
<INTEREST-OTHER> 300171
<INTEREST-TOTAL> 10746674
<INTEREST-DEPOSIT> 4514974
<INTEREST-EXPENSE> 4676942
<INTEREST-INCOME-NET> 6069732
<LOAN-LOSSES> 80000
<SECURITIES-GAINS> 8207
<EXPENSE-OTHER> 5209391
<INCOME-PRETAX> 2371195
<INCOME-PRE-EXTRAORDINARY> 1591913
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1591913
<EPS-PRIMARY> 2.36
<EPS-DILUTED> 2.36
<YIELD-ACTUAL> 8.30
<LOANS-NON> 450539
<LOANS-PAST> 687075
<LOANS-TROUBLED> 322696
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1273160
<CHARGE-OFFS> 749555
<RECOVERIES> 310714
<ALLOWANCE-CLOSE> 2015499
<ALLOWANCE-DOMESTIC> 2015499
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
