<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission file number 0-10869
FORT WAYNE NATIONAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Indiana 35-1502812
(State of Incorporation) (I.R.S Employer Identification No.)
110 West Berry Street, Fort Wayne, Indiana 46801
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (219) 426-0555
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common shares, without Par Value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained here, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
As of February 25, 1997, 11,715,855 shares of Common Stock, without Par Value
were outstanding. The aggregate market value of the voting stock held by
non-affiliates of the Registrant as of February 25, 1997 was approximately
$466,311,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the annual shareholders' meeting to be
held April 22, 1997, are incorporated by reference into Part III.
The exhibit index appears on page 78.
This report, including the cover page, contains a total of 88 pages.
<PAGE>
<PAGE>
FORT WAYNE NATIONAL CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-K
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I
ITEM 1. BUSINESS............................................... 3
Item 2. PROPERTIES............................................. 15
Item 3. LEGAL PROCEEDINGS...................................... 15
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.... 15
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.................................... 16
Item 6. SELECTED FINANCIAL DATA................................ 17
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION.................. 19
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............ 33
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.................... 72
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..... 73
Item 11. EXECUTIVE COMPENSATION................................. 76
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT......................................... 76
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......... 76
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K............................................ 77
EXHIBIT INDEX...................................................... 78
SIGNATURES......................................................... 81
</TABLE>
<PAGE>
<PAGE>
Part I
Item 1. BUSINESS
Fort Wayne National Corporation (Registrant), organized under the laws of the
State of Indiana, is the owner of all issued and outstanding stock of seven
commercial banks. The Registrant's principal banking subsidiary is Fort Wayne
National Bank ("FWNB"), located in Fort Wayne, Indiana. The Registrant also
owns all of the issued and outstanding stock of Old-First National Bank in
Bluffton, located in Bluffton, Indiana; First National Bank of Huntington,
located in Huntington, Indiana; and First National Bank of Warsaw, located in
Warsaw, Indiana. All four banks are national banking associations. In
addition, the Registrant owns all of the issued and outstanding stock of
The Auburn State Bank, located in Auburn, Indiana; Churubusco State Bank,
located in Churubusco, Indiana; and Valley American Bank and Trust Company,
located in Mishawaka, Indiana. The Registrant also owns all of the issued and
outstanding stock of Fort Wayne National Life Insurance Company, domiciled in
Phoenix, Arizona.
The Registrant is a bank holding company as defined under the BHC Act and is
not engaged in any material business activity other than as incident to its
ownership of its subsidiary banks. As of December 31, 1996, the Registrant
had a total of $3,221,297,000 in assets and a total of $2,421,891,000 in
deposits.
The Registrant's subsidiary banks engage in a wide range of commercial and
personal banking activities, including accepting demand and time deposits;
making secured and unsecured loans to corporations, individuals and others;
issuing letters of credit; and financial counseling for institutions and
individuals. The banks' lending services include making commercial,
industrial, real estate, installment, and credit card loans. Interest and
fees on commercial loans constitute the largest contribution to the banks'
operating revenues. In addition, the banks provide a wide range of trust and
trust related services, including serving as executor of estates and as
trustee under testamentary and inter vivos trusts and various pension and
other employee benefit plans. Corporate trust services include serving as
registrar and transfer agent for corporate securities and as corporate trustee
under corporate trust indentures.
Credit risk is inherent in the banks' lending activities. The allowance for
possible loan losses represents management's estimate of potential credit
losses associated with the loan portfolio, including all off-balance-sheet
lending commitments. To mitigate its exposure to credit risk, the Company
utilizes a loan grading system that helps identify, monitor and address asset
quality problems, should they arise, in an accurate and timely manner.
Credits of a significant nature are reviewed on an individual basis and
specific allocations of the allowance for possible loan losses may be made if
so warranted.
Each of the Registrant's subsidiary banks is subject, at a minimum, to annual
reviews or examinations, as applicable, by the Federal Reserve Bank System,
<PAGE>
<PAGE>
the Office of the Comptroller of the Currency, the Indiana Department of
Financial Institution, and the Federal Deposit Insurance Corporation. In
addition, the Registrant is subject to annual reviews by the Federal Reserve
Bank System.
The banks actively compete on the local and regional levels with other
commercial banks and financial institutions for all types of deposits, loans,
and trust accounts and in providing financial and other services traditionally
offered by banks. They also compete for the banking business of local and
regional offices of national companies. With respect to certain banking
services, the banks compete with insurance companies, savings and loan
associations, credit unions, brokerage firms, and other financial
institutions.
At December 31, 1996, the Registrant had approximately 1,191 full-time and 276
part-time employees. Management considers employee relations to be good.
None of the Registrant's employees is covered by a collective bargaining
agreement.
The earnings of commercial banks are affected not only by general economic
conditions, but also by the policies of various governmental regulatory
authorities. In particular, the Federal Reserve Bank (FRB) regulates money
and credit conditions and interest rates in order to influence general
economic conditions, primarily through open-market operations in U.S.
Government securities, the discount rate on bank borrowings, and setting the
reserves that banks must maintain against certain bank deposits. These
policies have a significant effect on the overall growth and distribution of
bank loans, investments and deposits. They influence interest rates charged
on loans, earned on investments and paid for time and savings deposits. FRB
monetary policies have had a significant effect on the operating results of
commercial banks in the past and are expected to exert similar influence in
the future. The general effect, if any, of such policies upon the future
business and earnings of the Company cannot be reasonably predicted.
<PAGE>
<PAGE>
STATISTICAL DISCLOSURES
AVERAGE BALANCES AND INTEREST RATES
An analysis of net interest income on a fully taxable equivalent basis is
summarized for each of the periods included in the following table.
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------- --------------------------- ---------------------------
Average Average Average
Average Rate Average Rate Average Rate
Balance Interest (%) Balance Interest (%) Balance Interest (%)
---------- -------- ------- ---------- -------- ------- ---------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Interest-bearing
deposit $ 333 $ 20 6.00% $ 205 $ 8 3.90% $ 550 $ 24 4.36%
Federal funds sold and
securities purchased
under agreement
to resell 33,984 1,597 4.70 26,097 1,322 5.07 10,543 431 4.09
Investment
securities(1)
Taxable 706,307 45,086 6.43 541,572 34,919 6.44 549,895 34,179 6.21
Nontaxable 199,686 17,546 9.10 176,262 16,122 9.48 180,749 16,003 9.19
Loans, net of
unearned income(2) 1,591,147 141,790 8.91 1,255,991 114,338 9.10 1,179,828 97,180 8.24
---------- -------- ------- ---------- -------- ------- ---------- -------- -------
Total Interest-earning
Assets 2,531,457 $206,039 8.16 2,000,127 $166,709 8.36 1,921,565 $147,817 7.72
Noninterest-earning
assets:
Cash and due from
banks 137,967 119,372 125,751
Other assets 96,466 53,210 45,559
---------- ---------- ----------
Total Assets $2,765,890 $2,172,709 $2,092,875
========== ========== ==========
Liabilities And
Shareholders' Equity
Interest-bearing
liabilities
Deposits:
Demand $ 204,620 $ 3,802 1.86% $ 203,751 $ 5,186 2.55% $ 209,788 $ 5,370 2.56%
Savings 303,685 8,191 2.70 312,888 10,409 3.33 342,583 10,584 3.09
Time deposits 1,277,846 67,660 5.29 910,175 49,819 5.47 842,887 36,211 4.30
Federal funds
purchased and
securities sold
under agreements
to repurchase 324,164 15,976 4.93 244,714 13,346 5.45 220,106 8,922 4.05
Notes payable -
U.S. Treasury and
other borrowings 22,570 1,183 5.24 23,586 1,348 5.72 18,797 709 3.77
Subordinated and
other long-term
notes 37,529 2,757 7.35 6,714 868 12.93 7,474 963 12.88
---------- ------- ------ ---------- ------- ------ ---------- -------- ------
Total Interest-bearing
Liabilities 2,170,414 $99,569 4.59 1,701,828 $80,976 4.76 1,641,635 $62,759 3.82
Noninterest-bearing
liabilities:
Demand deposits 305,111 230,842 226,394
Other liabilities 25,992 22,956 22,308
Shareholders' equity 264,373 217,083 202,538
---------- ---------- ----------
Total Liabilities And
Shareholders' Equity $2,765,890 $2,172,709 $2,092,875
========== ========== ==========
<PAGE>
<PAGE>
Interest income/earning
assets $206,039 8.16% $166,709 8.36% $147,817 7.72%
Interest expense/
earning assets 99,569 3.94 80,976 4.06 62,759 3.28
-------- ------- -------- ------- -------- -------
Net Interest Income /
Earning Assets 106,470 4.22% 85,733 4.30% 85,058 4.44%
Tax equivalent
adjustment(3) 6,674 6,377 6,243
-------- -------- --------
Net Interest Income $ 99,796 $ 79,356 $ 78,815
======== ======== ========
(1) For the purpose of these computations, unrealized gains/(losses) are
excluded from the average rate calculations.
(2) For the purpose of these computations, nonaccrual loans are included in
the daily average loan amounts outstanding.
(3) The tax equivalent adjustment is calculated using a statutory rate of 35%.
</TABLE>
<PAGE>
<PAGE>
ANALYSIS OF CHANGES IN INTEREST DIFFERENTIAL
The following table attributes changes in the Company's net interest income
(on a fully taxable equivalent basis) to changes in either average daily
balances or average rates. Changes which are attributable in part to volume
and in part to rate are allocated in direct proportion to the change in the
absolute dollar amounts of each.
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------------
1996 over 1995 1995 over 1994
----------------------- -----------------------
Volume Rate Total Volume Rate Total
------- ------- ------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in:
Interest income:
Interest-bearing deposits
with banks $ 7 $ 5 $ 12 $ (17)$ 1 $ (16)
Federal funds sold and
securities purchased under
agreements to resell 376 (101) 275 766 125 891
Investment securities:
Taxable 10,211 (44) 10,167 (507) 1,247 740
Nontaxable 2,123 (699) 1,424 (415) 534 119
Loans, net of unearned
income(1) 29,927 (2,475) 27,452 6,540 10,618 17,158
------- ------- ------- ------- ------- -------
Total Interest Income $42,644 $(3,314)$39,330 $ 6,367 $12,525 $18,892
Interest expense:
Demand deposits $ 22 $(1,406)$(1,384)$ (147)$ (37)$ (184)
Savings deposits (313) (1,905) (2,218) (874) 699 (175)
Time deposits 19,559 (1,378) 17,841 3,077 10,531 13,608
Federal funds purchased
and securities sold
under agreements to
repurchase 4,008 (1,378) 2,630 1,083 3,341 4,424
Notes payable -
U.S. Treasury
and other borrowings (60) (105) (165) 211 428 639
Subordinated and other
long-term notes 2,412 (523) 1,889 (98) 3 (95)
------- ------- ------- ------- ------- -------
Total Interest Expense $25,628 $(7,035)$18,593 $ 3,252 $14,965 $18,217
------- ------- ------- ------- ------- -------
Increase In
Interest Differential $17,016 $ 3,721 $20,737 $ 3,115 $(2,440)$ 675
======= ======= ======= ======= ======= =======
(1) Nonaccrual loans were included in the average outstanding balances.
</TABLE>
<PAGE>
<PAGE>
INVESTMENT SECURITIES
The carrying values of the Company's investment securities are summarized for
the periods indicated in the following table.
<TABLE>
<CAPTION>
December 31
------------------------------------------------------
1996 1995 1994
Amount Percent Amount Percent Amount Percent
-------- ------- -------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury $320,313 33% $191,263(1) 25% $182,802 27%
U.S. Federal agencies 335,218 34 279,309 36 252,040 36
U.S. Federal agency
mortgage backed
securities 38,437 4 34,735 5 31,196 4
States and political
subdivisions 217,823 22 198,179 26 177,420 25
Corporate debt
securities 47,195 5 50,718 7 49,933 7
Other 15,622 2 10,356 1 7,920 1
-------- ------- -------- ------- -------- -------
Total $974,608 100% $764,560 100% $701,311 100%
======== ======= ======== ======= ======== =======
(1) Includes $21,259,000 of U.S. Treasury securities held for trading
purposes.
</TABLE>
MATURITY DISTRIBUTION AND YIELDS OF INVESTMENT SECURITIES
The following table sets forth the maturities of the Company's investment
securities as of December 31, 1996 and the weighted average yields of such
securities on the basis of amortized cost and effective yields weighted for
the scheduled maturity of each security.
<TABLE>
<CAPTION>
Maturing
---------------------------------------------------------------------
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years
Amount Yield Amount Yield Amount Yield Amount Yield Total
-------- ------ -------- ------ ------- ------ ------- ------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ 76,674 6.42% $202,907 6.29% $ 40,732 6.27% $ -- --% $320,313
U.S. Federal
agencies 34,467 6.60 283,958 6.49 16,793 6.46 -- -- 335,218
U.S. Federal
agency mortgage
backed
securities 129 5.36 10,249 6.87 16,827 6.48 11,232 6.09 38,437
States and
political
subdivisions 20,273 10.08 62,202 9.71 81,428 8.93 53,920 8.77 217,823
Other -- -- 50 7.87 100 7.58 15,472 6.37 15,622
-------- ------ -------- ------ -------- ------ ------- ----- --------
Total $148,573 7.08 $586,399 6.81 $158,129 7.70 $81,507 7.95 $974,608
======== ====== ======== ====== ======== ====== ======= ===== ========
</TABLE>
<PAGE>
<PAGE>
Tax-equivalent adjustments (using a 35% rate) have been made in calculating
yields on obligations of states and political subdivisions. Equity securities
totaling $14,181,000 are included in the after ten years category.
DISTRIBUTION OF LOANS
The composition of the Company's loan portfolio is summarized for the periods
indicated in the following table.
<TABLE>
<CAPTION>
December 31
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Commercial $ 660,215 $ 453,208 $ 408,706 $ 391,836 $ 379,173
Real estate -
construction 49,693 31,312 23,686 36,022 31,494
Real estate -
mortgage 897,734 590,599 575,648 530,451 514,730
Installment 257,408 192,307 204,707 183,709 164,473
Financing leases 10,915 9,141 7,229 455 950
---------- ---------- ---------- ---------- ----------
Total $1,875,965 $1,276,567 $1,219,976 $1,142,473 $1,090,820
========== ========== ========== ========== ==========
</TABLE>
<PAGE>
<PAGE>
MATURITIES OF LOANS AND SENSITIVITIES TO CHANGES IN INTEREST RATES
The following table shows the maturity of the Company's loan portfolio
(excluding mortgages on 1-4 family residences and installment loans)
outstanding as of December 31, 1996 Also shown are the amounts due
after one year classified according to their sensitivity to changes in
interest rates.
<TABLE>
<CAPTION>
Maturing
-----------------------------------------------------------
After One
Within But Within After
One Year Five Years Five Years Total
--------- ----------------- ----------------- ----------
Fixed Variable Fixed Variable
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial $509,517 $ 71,004 $37,293 $ 42,397 $ 4 $ 660,215
Real estate -
construction 45,803 2,436 -- 1,454 -- 49,693
Real estate -
mortgage 122,443 82,727 49,936 103,298 11,563 363,967
Financing leases 521 9,263 1,131 -- -- 10,915
-------- -------- ------- -------- ------- ----------
Total $678,284 $165,430 $82,360 $147,149 $11,567 $1,084,790
======== ======== ======= ======== ======= ==========
</TABLE>
<PAGE>
<PAGE>
NONPERFORMING ASSETS
The Company's nonaccrual loans, accruing loans past due 90 days or more,
restructured loans and other real estate owned are summarized for the periods
indicated in the following
table.(1)
<TABLE>
<CAPTION>
December 31
-----------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 7,717 $18,450 $11,282 $13,691 $15,285
Accruing loans past due
90 days or more 1,804 1,467 944 1,640 1,215
Restructured loans 2,534 -- 8,750 979 245
------- ------- ------- ------- -------
Total Nonperforming Loans 12,055 19,917 20,976 16,310 16,745
Other real estate owned 1,736 319 631 754 4,227
------- ------- ------- ------- -------
Total Nonperforming Assets $13,791 $20,236 $21,607 $17,064 $20,972
======= ======= ======= ======= =======
Nonperforming loans to total
loans outstanding .64% 1.56% 1.72% 1.43% 1.54%
======= ======= ======= ======= =======
Nonperforming assets to total
assets .43% .88% 1.01% .81% 1.03%
======= ======= ======= ======= =======
</TABLE>
(1) In addition to loans classified as nonperforming at December 31, 1996,
there were loans aggregating $14,900,000 where management is closely
monitoring the borrowers' ability to comply with payment terms.
(2) Gross interest income of $698,000 would have been recorded in 1996 for
nonaccrual and restructured loans at December 31, 1996 assuming these
loans had been accruing interest throughout the year in accordance with
their original terms. The amount of interest actually included in 1996
income was $52,000.
<PAGE>
<PAGE>
SUMMARY OF LOAN LOSS EXPERIENCE
Activity in the Company's allowance for possible loan losses is summarized for
the periods indicated in the following table.
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Average amount of loans
outstanding, net of
unearned income $1,591,147 $1,255,991 $1,179,828 $1,097,483 $1,049,271
========== ========== ========== ========== ==========
Amount of loans
outstanding at the end
of the period, net of
unearned income $1,873,745 $1,273,394 $1,217,218 $1,140,813 $1,089,382
========== ========== ========== ========== ==========
Balance of allowance
for possible loan
losses at beginning
of period $ 20,047 $ 21,795 $ 21,876 $ 16,682 $ 15,376
Add: Allowance of
acquired subsidiary 11,800 -- -- -- --
Loans charged-off:
Commercial 2,896 178 2,520 794 3,025
Real estate-
construction -- 3,000 61 -- --
Real estate-
mortgage 1,339 24 244 329 681
Installment 2,409 1,754 1,163 1,336 1,967
---------- ---------- ---------- ---------- ----------
Total Loans Charged-Off 6,644 4,956 3,988 5,459 5,673
Recoveries of loans
previously
charged-off:
Commercial 430 82 572 781 165
Real estate-mortgage -- 147 74 145 71
Installment 48 534 668 667 676
---------- ---------- ---------- ---------- ----------
Total Recoveries 1,151 763 1,284 1,593 912
---------- ---------- ---------- ---------- ----------
Net loans charged-off 5,493 4,193 2,704 866 4,761
Additions to allowance
charged to expense 3,953 2,445 2,623 6,060 6,067
---------- ---------- ---------- ---------- ----------
Balance At End Of Period$ 30,307 $ 20,047 $ 21,795 $ 21,876 $ 16,682
========== ========== ========== ========== ==========
Ratio of net charge-offs
during the period to
average loans
outstanding .35% .33% .23% .08% .45%
========== ========== ========== ========== ==========
</TABLE>
<PAGE>
<PAGE>
Factors affecting management's judgment in determining additions to the
allowance charged to operating expense are outlined under the subcaption
"Allowance for Possible Loan Losses" in Note 1 to the Company's consolidated
financial statements.
ALLOCATION OF ALLOWANCE FOR POSSIBLE LOAN LOSSES
An allocation of the Company's allowance for possible loan losses is
summarized for the periods indicated in the following table. In addition to
an allocation for specific problem loans, each category includes an
unallocated portion of the allowance for possible loan losses based on loans
outstanding, credit risks and historical charge-offs. Notwithstanding the
following allocations, the entire allowance for possible loan losses is
available to absorb charge-offs in any category of loans.
<TABLE>
<CAPTION>
December 31
------------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------- -------------- -------------- -------------- --------------
Balance at end
of period Per- Per- Per- Per- Per-
applicable to Amount cent(1) Amount cent(1) Amount cent(1) Amount cent(1) Amount cent(1)
- ---------------- ------- ------ ------- ------ ------- ------ ------- ------ ------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $20,660 36% $10,149 36% $12,719 34% $13,386 34% $ 7,381 35%
Real estate -
construction 728 2 679 3 1,353 2 1,485 3 145 3
Real estate -
mortgage 5,226 48 5,731 46 3,920 47 4,167 47 5,625 47
Installment 3,693 14 3,488 15 3,803 17 2,838 16 3,531 15
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total $30,307 100% $26,047 100% $21,795 100% $21,876 100% $16,682 100%
======= ====== ======= ====== ======= ====== ======= ====== ======= ======
(1) Represents the percentage of loans outstanding in each category to total
loans outstanding.
</TABLE>
DEPOSITS
The average daily amount of the Company's deposits and the rates paid on such
deposits is summarized for the periods indicated in the following table.
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------------------
1996 1995 1994
----------------- ----------------- -----------------
Amount Rate Amount Rate Amount Rate
---------- ------ ---------- ------ ---------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing
demand deposits $ 305,111 $ 230,842 $ 226,394
Interest-bearing
demand deposits 204,620 1.86% 203,751 2.55% 209,788 2.56%
Savings deposits 303,685 2.70% 312,888 3.33% 342,583 3.09%
Time deposits 1,277,846 5.29% 910,175 5.47% 842,887 4.30%
---------- ---------- ----------
Total $2,091,262 $1,657,656 $1,621,652
========== ========== ==========
</TABLE>
<PAGE>
<PAGE>
MATURITY DISTRIBUTION OF TIME DEPOSITS OF $100,000 OR MORE
The following table shows the maturities of the Company's outstanding domestic
CDs and other time deposits in denominations of $100,000 or more at
December 31, 1996.
<TABLE>
<CAPTION>
Time Other
Certificates Time
of Deposits Deposits Total
------------ -------- --------
(In thousands)
<S> <C> <C> <C>
Time remaining to maturity:
Within three months $168,145 $3,508 $171,653
Over three through six 37,209 -- 37,209
Over six through twelve 26,451 -- 26,451
Over twelve months 36,418 -- 36,418
-------- ------ --------
Total $268,223 $3,508 $271,731
======== ====== ========
</TABLE>
SHORT-TERM BORROWINGS
The following table shows the distribution of the Company's short-term
borrowings and the weighted average interest rates thereof for the periods
indicated. Also provided are the maximum amount of borrowings and the
average amount of borrowings, as well as weighted average interest rates for
the periods indicated. (Federal funds purchased and securities sold under
agreements to repurchase are borrowings of the Company which generally mature
within 1 to 30 days. Notes payable, U.S. Treasury and other borrowings range
in maturity from 1 to 7 days.)
<TABLE>
<CAPTION>
Federal Funds Purchased Notes Payable -
and Securities Sold Under U.S. Treasury and
Agreements to Repurchase Other Borrowings
-------------------------- ----------------------
1996 1995 1994 1996 1995 1994
-------- -------- -------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31 $387,357 $241,263 $255,010 $37,628 $26,381 $21,884
Weighted average
interest rate at
year end 5.26% 4.69% 6.29% 5.07% 5.51% 5.14%
Maximum amount
outstanding at any
month's end $433,965 $292,275 $255,010 $49,256 $48,219 $38,102
Average amount
outstanding during
the year $324,164 $244,714 $220,106 $22,570 $23,586 $18,797
Weighted average
interest rate during
the year 4.93% 5.45% 4.05% 5.24% 5.72% 3.77%
</TABLE>
<PAGE>
<PAGE>
Item 2. PROPERTIES
The Registrant's principal offices and FWNB's banking headquarters are located
at 110 West Berry Street, Fort Wayne, Indiana, in a 26-story building.
Approximately 29% of the building is occupied by FWNB under the terms of a
lease agreement, which has lease terms through March 2008. See Note 7 to the
consolidated financial statements relating to premises and equipment, and
lease agreements of the Registrant.
FWNB has 19 fully utilized branch offices in Allen County, Indiana, in
addition to its main office. FWNB owns 11 of its branch offices. Five other
branch offices are part of land lease arrangements under which the buildings
are owned by FWNB. Three branch offices sites are wholly leased. Valley
American Bank and Trust Company (Valley) owns its main office facility located
in Mishawaka, Indiana. In addition Valley has 19 branch offices, of which 8
are owned by Valley, 3 are part of land lease arrangements under which the
buildings are owned by Valley, and 8 branch offices which are wholly leased.
Each of the Registrant's other banking subsidiaries owns its respective main
office in its home community. The Auburn State Bank has one branch office,
Old-First National Bank in Bluffton has three branch offices, First National
Bank of Huntington has four branch offices, and First National Bank of Warsaw
has nine branch offices.
Management of the Registrant believes that the properties used by its banking
subsidiaries are suitable and adequate for current as well as future needs.
Item 3. LEGAL PROCEEDINGS
The Registrant and its subsidiaries are defendants in various legal
proceedings. With respect to each of these suits, it is either the opinion of
legal counsel that it is without merit or the opinion of management of the
Registrant that even if the plaintiff prevails therein the disposition thereof
will not have a material affect on the financial condition of the Registrant.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders from September 30, 1996
to December 31, 1996.
<PAGE>
<PAGE>
Part II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
A market exists for Fort Wayne National Corporation common stock in the
national over-the-counter market. The following table sets forth to
the Company's best knowledge the high and low sales prices per share from
January 1, 1995 through December 31, 1996.
<TABLE>
<CAPTION>
First Second Third Fourth
1996 Quarter Quarter Quarter Quarter
- ----- -------- -------- -------- --------
<S> <C> <C> <C> <C>
High $ 32.25 $ 32.00 $ 33.00 $ 41.75
======== ======== ======== ========
Low 29.50 29.00 29.75 32.00
======== ======== ======== ========
First Second Third Fourth
1995 Quarter Quarter Quarter Quarter
- ----- -------- -------- -------- --------
High $ 27.00 $ 29.25 $ 33.50 $ 33.00
======== ======== ======== ========
Low 25.25 25.50 27.25 30.50
======== ======== ======== ========
</TABLE>
The Company's common stock is traded in the national market system of the
National Association of Securities Dealers (NASDAQ) under the symbol FWNC.
As of December 31, 1996 and 1995 there were 3,664 and 3,448 shareholders of
record, respectively.
On February 19, 1997, the closing price for the Company's common stock, as
reported by NASDAQ, was $41.50.
Market Makers: ABN-AMRO Chicago Corporation Merrill Lynch
Everen Securities, Inc. F. J. Morrissey & Co. Inc.
Herzog, Heine, Geduld, Inc. NatCity Investments, Inc.
Keefe, Bruyette & Woods, Inc. Paine Webber, Inc.
McDonald & Company
<PAGE>
<PAGE>
Item 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest and fees
on loans $ 141,257 $ 113,604 $ 96,538 $ 89,783 $ 92,724
Interest and
dividends on
investments 56,491 45,398 44,581 49,865 57,619
Other interest
income 1,617 1,330 455 1,199 1,004
--------- --------- --------- --------- ---------
Total Interest
Income 199,365 160,332 141,574 140,847 151,347
Interest expense 99,569 80,976 62,759 62,382 76,990
--------- --------- --------- --------- ---------
Net Interest Income 99,796 79,356 78,815 78,465 74,357
Provision for
possible loan
losses 3,953 2,445 2,623 6,060 6,067
--------- --------- --------- --------- ---------
Net Interest Income
After Provision
For Possible Loan
Losses 95,843 76,911 76,192 72,405 68,290
Noninterest income
Fiduciary fees 12,459 9,749 8,950 8,060 7,475
Other 12,500 9,763 10,156 10,400 8,405
Net securities gains 392 87 5 402 100
--------- --------- --------- --------- ---------
Total Noninterest
Income 25,351 19,599 19,111 18,862 15,980
Noninterest expense
Salaries and
benefits 39,724 32,237 29,798 28,878 26,733
Other 33,453 27,840 27,639 27,747 25,803
--------- --------- --------- --------- ---------
Total Noninterest
Expense 73,177 59,077 57,437 56,625 52,536
--------- --------- --------- --------- ---------
Income Before
Income Taxes 48,017 37,433 37,866 34,642 31,734
Applicable income
taxes 15,515 10,726 11,654 10,509 9,291
--------- --------- --------- --------- ---------
Net Income $ 32,502 $ 26,707 $ 26,212 $ 24,133 $ 22,443
========= ========= ========= ========= =========
<PAGE>
<PAGE>
Cash dividends
declared $ 13,250 $ 10,758 $ 9,952 $ 9,302 $ 8,656
Per common share:
Net income 2.68 2.33 2.28 2.11 1.97
Cash dividends
declared 1.02 .94 .87 .81 .76
FINANCIAL CONDITION
Total assets $3,221,297 $2,296,107 $2,135,961 $2,094,425 $2,034,049
Average daily assets 2,765,890 2,172,709 2,092,875 2,065,636 2,025,845
Average daily
deposits 2,091,262 1,657,656 1,621,652 1,612,786 1,594,816
Average daily loans 1,591,147 1,255,991 1,179,828 1,097,483 1,049,271
Average
shareholders'
equity 264,373 217,083 202,538 182,884 167,343
Subordinated and
other long-term
debt 58,341 6,400 7,160 7,920 9,305
OTHER DATA
Average common
shares outstanding 11,653,452 11,449,277 11,480,372 11,432,624 11,381,498
Number of employees
at year end (1) 1,467 1,083 1,052 1,027 1,027
Tax equivalent yield
on earning assets 8.16% 8.36% 7.72% 7.77% 8.44%
Cost of supporting
liabilities 3.94% 4.06% 3.28% 3.30% 4.14%
Net interest margin
on earning assets 4.22% 4.30% 4.44% 4.47% 4.30%
Efficiency ratio 55.68% 56.13% 55.14% 54.94% 54.77%
Return on average
assets 1.18% 1.23% 1.25% 1.17% 1.11%
Return on average
equity 12.29% 12.30% 12.94% 13.20% 13.41%
Common dividend
payout ratio 36.31% 40.28% 37.97% 38.54% 38.57%
Average equity to
average asset ratio 9.56% 9.99% 9.68% 8.85% 8.26%
Market value to book
value per common
share at year end 174.31% 154.03% 150.20% 148.58% 191.56%
Price earnings ratio 14.2 13.5 11.4 11.8 14.9
(1) Includes part-time employees.
</TABLE>
<PAGE>
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion and analysis are intended to cover significant
factors and conditions affecting the Company's overall performance for the
past three years. It should be read in conjunction with the audited
consolidated financial statements of the Company contained elsewhere herein.
On June 1, 1996 the Company acquired, through merger of Valley Financial
Services, Inc. (VFS) with and into the Company, all of the issued and
outstanding stock of VFS's only banking subsidiary, Valley American Bank and
Trust Company (Valley). This acquisition has been accounted for as a purchase
for accounting purposes, and accordingly, the results of operations of Valley
have been included in the consolidated results of operations of the Company
from the date of acquisition. As of December 31, 1996, Valley had total
assets of $923.6 million which accounts for 29% of the Company's consolidated
total assets at that date. Valley's net income of $5.1 million for the period
from June 1, 1996 to December 31, 1996 accounts for 16% of the Company's
consolidated net income for the full year ended December 31, 1996. The
acquisition of Valley has, therefore, had a material impact on the financial
position and results of operations of the Company as of and for the year ended
December 31, 1996 as compared to prior years.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1996 1995 Change
---------- ---------- -------
(Dollars in thousands,
except per share data)
<S> <C> <C> <C>
FOR THE YEAR
Total interest income $ 199,365 $ 160,332 24.3%
Total interest expense 99,569 80,976 23.0
Net interest income 99,796 79,356 25.8
Provision for possible loan
losses 3,953 2,445 61.7
Applicable income taxes 15,515 10,726 44.6
Net income 32,505 26,707 21.7
PER COMMON SHARE
Net income $ 2.68 $ 2.33 15.0%
Dividends declared 1.02 .94 8.5
Book value at year end 21.80 20.45 6.6
AVERAGES
Assets $2,765,890 $2,172,709 27.3%
Deposits 2,091,262 1,657,656 26.2
Loans (before allowance for
possible loan losses) 1,591,147 1,255,991 26.7
Investments 905,993 717,834 26.2
<PAGE>
<PAGE>
SELECTED FINANCIAL RATIOS
Return on average assets 1.18% 1.23%
Return on average equity 12.29% 12.30%
Net interest margin 4.22% 4.30%
Tier I and Tier II capital ratio 12.95% 16.27%
</TABLE>
COMPARATIVE EARNINGS ANALYSIS
<TABLE>
<CAPTION>
Increase/(Decrease)
--------------------------
1996/1995 1995/1994
------------- -----------
1996 1995 1994 Amount % Amount %
-------- ------- ------- ------- ----- ------ ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income
(fully taxable
equivalent basis) $106,470 $85,733 $85,058 $20,737 24.2% $ 675 0.8%
Taxable equivalent
adjustment 6,674 6,377 6,243 297 4.7 134 2.1
------- ------- ------- ------- ----- ------ -----
Net Interest Income 99,796 79,356 78,815 20,440 25.8 541 0.7
Provision for
possible loan losses 3,953 2,445 2,623 1,508 61.7 (178)(6.8)
Noninterest income 25,351 19,599 19,111 5,752 29.3 488 2.6
Noninterest expense 73,177 59,077 57,437 14,100 23.9 1,640 2.9
------- ------- ------- ------- ----- ------ -----
Income Before Income Taxes 48,017 37,433 37,866 10,584 28.3 (433)(1.1)
Applicable income taxes 15,515 10,726 11,654 4,789 44.6 (928)(8.0)
------- ------- ------- ------- ----- ------ -----
Net Income $ 32,502 $26,707 $26,212 $ 5,795 21.7 $ 495 1.9
======== ======= ======= ======= ===== ====== =====
</TABLE>
RESULTS OF OPERATIONS
EARNINGS. Net income in 1996 totaled $32.5 million, an increase of 22% over
the $26.7 million earned in 1995 and 24% over the $26.2 million earned in
1994. Earnings per common share for 1996 were $2.68 compared to $2.33 in 1995
and $2.28 in 1994. Fourth quarter earnings were $9.5 million or $.77 per
share, an increase of 7% over third quarter 1996 and 36% over fourth quarter
1995. Since the acquisition of Valley was accounted for as a purchase, a
significant amount of amortization relating to goodwill and other intangibles
is included in reported earnings. Cash earnings (earnings before amortization
of goodwill and other intangibles) amounted to $34.3 million or $2.83 per
common share in 1996.
The major components of the Company's operating results are summarized in the
Comparative Earnings Analysis table. Net interest income increased 26% in
1996 over 1995 after having increased less than 1% in 1995 over 1994. Without
Valley's net interest income of $18.7 million, net interest income in 1996
would have increased by $1.8 million or 2% over 1995. Net overhead, which is
the amount by which noninterest expense exceeds noninterest income, increased
<PAGE>
<PAGE>
21% in 1996 from 1995 and 3% in 1995 over 1994. Excluding Valley, net
overhead for 1996 would have been below 1995 by $1.2 million or 3%. The
provision for possible loan losses charged to earnings increased 62% in 1996
from 1995 after reflecting a 7% decrease in 1995 from 1994. Without Valley's
provision of $323,000 in 1996, the provision for loan losses would have
increased by 48%. Applicable income taxes increased by $4.8 million or 45%
following an 8% decrease in 1995 over 1994.
NET INTEREST INCOME. Net interest income, which is the difference between
interest and fees earned on assets and the interest paid on deposits and other
funding sources, is the primary source of earnings for the Company. This
component represented approximately 80% of the Company's net revenues in 1996.
A detailed analysis highlighting the changes in net interest income is
provided in the Analysis of Changes in Interest Differential table. Interest
earned on tax-exempt loans and investments is adjusted for comparative
purposes to a taxable equivalent basis using the federal tax rate of 35%,
resulting in a fully taxable equivalent (FTE) net interest income.
Net interest income on a fully taxable equivalent basis totaled $106.5 million
in 1996 compared to $85.7 million in 1995 and $85.1 million in 1994. The
significant increase in net interest income in 1996 includes an increase of
$17.0 million due to volume increases in 1996 following a $3.1 million
increase due to volume in 1995. The 1996 volume increase was fueled by the
earning assets and interest-bearing liabilities added to the Company's balance
sheet in 1996 through the acquisition of Valley. Rate movements also
increased net interest income by $3.7 million in 1996 after negatively
impacting net interest income by $2.4 million in 1995.
Average earning assets increased by $531.3 million or 27% for 1996 with
increases of $335.2 million in loans, net of unearned income, and $188.2
million in investment securities. The 1996 average earning assets include
$309.7 million of loans, net of unearned income, and $112.8 million of
investment securities of Valley. Interest-bearing liabilities increased
$468.6 million or 28% for 1996 with Valley adding $369.0 million in
interest-bearing liabilities. Absent Valley, interest-bearing liabilities
increased by $99.6 million: the net of increases of $172.9 million in time
deposits, and $10.9 million in subordinated and other long-term notes; offset
by decreases of $2.3 million in short-term borrowings, $33.5 million in
interest-bearing demand deposits and $48.4 million in savings deposits.
The increase in time deposits in 1996 continues the trend which began in 1995.
During 1995, the Company introduced its AnydayEveryday account which is
priced to yield a return above the average money market rate. This product
continues to be very successful in terms of generating time deposits for the
Company.
The Company's net interest margin measured on a fully taxable equivalent basis
decreased to 4.22% in 1996 from 4.30% in 1995 and 4.44% in 1994. Although the
Company continues to experience significant pressure on net interest margin,
the net interest margin for the fourth quarter of 1996 was 4.33% compared to
4.19% in the third quarter of 1996 and 4.21% in the fourth quarter of 1995.
<PAGE>
<PAGE>
PROVISION AND ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible
loan losses is maintained at a level believed adequate by management to absorb
estimated probable loan losses. To facilitate the periodic evaluation of the
adequacy of the allowance for possible loan losses, the Company utilizes a
loan grading system that helps identify, monitor and address asset quality
problems, should they arise, in an accurate and timely manner. Credits of a
significant nature are reviewed on an individual basis and a specific
allocation of the allowance for possible loan losses may be made if so
warranted.
The Company's charge to earnings as a provision for possible loan losses was
approximately $4.0 million in 1996, $2.4 million in 1995 and $2.6 million in
1994. Net loan charge-offs amounted to $5.5 million in 1996, $4.2 million
in 1995 and $2.7 million in 1994. Net charge-offs as a percent of average
loans outstanding were .35%, .33% and .23% for the years ended December 31,
1996, 1995 and 1994, respectively.
At December 31, 1996, the Company's allowance for possible loan losses totaled
$30.3 million or 1.62% of total loans outstanding as compared to 1.57% in 1995
and 1.79% in 1994. The ratio of the allowance for possible loan losses to
nonperforming loans of 251% for 1996 compares to 101% at the end of 1995 and
104% at December 31, 1994.
Nonperforming loans (including nonaccrual loans, accruing loans past due 90
days or more, and restructured loans) amounted to $12.1 million at year-end
1996 compared to $19.9 million at year-end 1995 and $21.0 million at year-end
1994. Nonperforming loans represented just .64% of total loans outstanding
at December 31,1996 compared to 1.56% one year ago and 1.72% at the end of
1994. Nonperforming assets (nonperforming loans plus other real estate owned)
represented .43% of total assets, the lowest level in the past five years and
significantly better than the Company's peer ratio of .59%.
Other than those loans included in the Nonperforming Assets table and related
notes thereto, there are no other loans which management is closely
monitoring, or which have been classified by bank regulators, which are being
monitored or classified because of trends or uncertainties which management
reasonably expects will materially impact future operating results, liquidity
or capital resources.
<PAGE>
<PAGE>
NONINTEREST INCOME AND EXPENSE ANALYSIS
<TABLE>
<CAPTION>
Increase/(Decrease)
-------------------------------
1996/1995 1995/1994
--------------- ---------------
1996 1995 1994 Amount % Amount %
------- ------- ------- ------- ------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Noninterest income:
Fiduciary fees $12,459 $ 9,749 $ 8,950 $ 2,710 27.8% $ 799 8.9%
Service charges on
deposit accounts 6,515 4,705 4,561 1,810 38.5 144 3.2
Other service
charges 3,197 2,880 3,943 317 11.0 (1,063) (27.0)
Net securities
gains 392 87 5 305 350.6 82 1,640.0
Other income 2,788 2,178 1,652 610 28.0 526 31.8
------- ------- ------- ------- -------- ------ --------
Total Noninterest
Income $25,351 $19,599 $19,111 $ 5,752 29.3 $ 488 2.6
======= ======= ======= ======= ======== ====== ========
Noninterest expense:
Salaries and wages $32,218 $25,231 $23,829 $ 6,987 27.7% $1,402 5.9%
Employee benefits 7,506 6,006 5,969 1,500 25.0 37 .6
Net occupancy
expense 6,360 5,032 4,952 1,328 26.4 80 1.6
Equipment expense 5,228 4,213 3,882 1,015 24.1 331 8.5
FDIC assessment (116) 1,939 3,649 (2,055) (106.0) (1,710) (46.9)
Amortization of
goodwill and
other intangibles 1,772 232 231 1,540 663.8 1 .4
Other expense 20,209 16,424 14,925 3,785 23.0 1,499 10.0
------- ------- ------- ------- -------- ------ --------
Total Noninterest
Expense $73,177 $59,077 $57,437 $14,100 23.9 $1,640 2.9
======= ======= ======= ======= ======== ====== ========
</TABLE>
NONINTEREST INCOME AND EXPENSE. A ratio often used to evaluate the
noninterest income and expense performance of banking organizations is the
efficiency ratio. This ratio is calculated by dividing total noninterest
expense by the total of net interest income (on a fully taxable equivalent
basis) and noninterest income less securities transactions. The lower the
ratio, the more efficient the organization is at generating income in
relation to the expenses incurred to obtain that income. The Company has
historically outperformed its peers with efficiency ratios of 55.7%, 56.1% and
55.1%, respectively in 1996, 1995 and 1994 compared to peer ratios of 61.0%,
61.8% and 63.4%, respectively for the same periods. Excluding the
amortization of goodwill and other intangibles, the Company's efficiency ratio
would be 54.3%, 55.9% and 54.9%, respectively in 1996, 1995 and 1994.
<PAGE>
<PAGE>
During 1996, fiduciary fees increased $2.7 million or 28% from 1995 following
the 9% increase in 1995 from 1994. Valley contributed less than $1 million to
the 1996 increase. The market value of assets under supervision by the
Company's trust and investment group continues to increase, amounting to $3.8
billion at December 31, 1996, up from $3.4 billion at December 31, 1995 and
$2.8 billion at December 31, 1994.
Service charges on deposits grew $1.8 million or 38% in 1996 after increasing
3% in 1995 over 1994. While Valley added $1.2 million to this category in
1996, the Company continues to realize an improvement in its collection of
various deposit fees.
Other service charges increased $317,000 or 11% in 1996. However, other
service charges at Valley amounted to $687,000. Therefore, this category
decreased by $370,000 or 13% net of Valley. This category also decreased by
$1.1 million in 1995 from 1994. The variance from 1995 to 1996 is attributed
primarily to a decrease in insurance premium income of $82,000, a decrease in
merchant discount fees of $59,000 and a decrease in income generated from
referrals on annuity prospects of $214,000. The 1995 decrease was also
attributed to a decrease in income generated from referrals on annuity
prospects of $340,000.
Other income reflected a $610,000 or 28% increase in 1996 from 1995 with
$292,000 contributed by Valley and $318,000 contributed by an increase in
electronic banking income. In addition, the Company recognized $189,000 in
capitalized originated mortgage servicing rights as a result of adopting
Statement 122, "Accounting for Mortgage Servicing Rights - An Amendment to
Statement 65." Other income reflected a $526,000 or 32% increase in 1995 from
1994 as the Company generated net gains on sales of loans of $101,000 in 1995
and net losses on sales of loans of $379,000 in 1994. Sales of loans netted a
gain of $5,000 in 1996.
Securities transactions amounted to a net gain of $392,000 in 1996 compared to
$87,000 in 1995 and $5,000 in 1994. Substantially all of the net securities
gain in 1996 was due to the sale of certain common stock held by the Company.
Total noninterest expense increased 24% in 1996 over 1995, yet just 3% without
Valley's $12.5 million of noninterest expense. Total noninterest expense
increased 3% in 1995 over 1994.
Salaries and wages reflected a $7.0 million or 28% increase in 1996 over 1995
($1.8 million or 7% excluding Valley) and a $1.4 million or 6% increase in
1995 over 1994. The number of full time equivalent employees increased to
1,317 at December 31, 1996 from 977 at year-end 1995 and 964 at year-end 1994.
Valley had 349 full time equivalent employees at December 31, 1996. The
increase in salaries and wages in 1996 is the result of the employees added
with the Valley acquisition, general merit increases and an increase in
incentive and other bonus compensation of $791,000 (exclusive of Valley). The
1995 increase over 1994 resulted from general merit increases and the
additional staff needed to support new products and services and increased
loan and deposit volumes.
<PAGE>
<PAGE>
Employee benefits increased by $1.5 million or 25% in 1996 from 1995,
consistent with the 28% increase in salaries and wages. Employee benefits
reflected only a minor increase in 1995 from 1994 as the result of favorable
claim experience which allowed the Company's health insurance premium rates to
remain the same in 1995 as in 1994.
Net occupancy expense increased $1.3 million or 26% in 1996 over 1995
($245,000 or 5% excluding Valley), reflecting increases in building
depreciation, utilities, insurance and rent. Net occupancy expense increased
just $80,000 or 2% in 1995 over 1994.
Equipment expense increased by $1.0 million or 24% in 1996 from 1995 ($287,000
or 7% excluding Valley) and $331,000 or 9% in 1995 over 1994. Both the 1996
and 1995 increases are due to higher depreciation on equipment as the Company
continues to roll-out its corporate-wide loan documentation / teller station /
platform technology.
The most significant decrease to noninterest expense for 1996 and 1995
occurred in the FDIC insurance expense. This category decreased by $2.1
million or 106% in 1996 and $1.7 million or 47% in 1995. The FDIC insurance
fund met its federally mandated level of 1.25% of insured deposits during the
second quarter of 1995. Therefore, the Company's FDIC insurance expense was
reduced from the prior rate of $.23 per $100 of insured deposits to $.04 per
$100 of insured deposits. Beginning in January of 1996, well capitalized
financial institutions were not assessed a premium. Beginning in January of
1997, the FDIC insurance rate has been increased to $.013 per $100 of insured
deposits and, therefore the Company expects to incur approximately $326,000 in
FDIC insurance premiums in 1997.
Amortization of goodwill and other intangibles increased by $1.5 million in
1996 over 1995, reflecting the amortization of goodwill and other intangibles
recorded in connection with the acquisition of Valley in 1996. The
acquisition of Valley created $52.8 million of goodwill and other intangibles
for which the ongoing annual amortization will be $2.6 million. Amortization
of goodwill and other intangibles relating to previous acquisitions of the
Company accounted for under the purchase method of accounting was virtually
identical in 1996, 1995 and 1994.
Other expense increased by $3.8 million or 23% in 1996 from 1995 ($691,000 or
4% excluding Valley). Professional fees including legal, accounting, and
management consulting, covering such services as acquisition planning,
strategic planning, loan work-out activities, and asset / liability management
activities increased $1.2 million. However, in 1996 certain other expenses
decreased as 1995 was impacted by conversion expenses relating to the
Company's trust software and operating expenses on loan collateral.
<PAGE>
<PAGE>
INCOME TAXES. The Company's effective tax rate was 32% in 1996, 29% in 1995
and 31% in 1994. The Company's effective tax rate for financial reporting
purposes differs from the statutory marginal federal and state tax rates.
This is attributable principally to the tax-exempt income that is earned on
various earning assets and the disallowance of a tax deduction on certain
recorded expenses. See Note 9 to the Company's consolidated financial
statements for a further discussion of income taxes.
ANALYSIS OF FINANCIAL CONDITION
The Company's total assets at December 31, 1996 increased by $925.2 million or
40% from the prior year and totaled over $3.2 billion. Loans outstanding
totaled over $1.8 billion and total deposits exceeded $2.4 billion. These
amounts include the assets, loans and deposits of Valley of $923.6 million,
$539.6 million and $622.0 million, respectively.
LOANS. All categories of lending increased during 1996 both including and
excluding loans outstanding at Valley on December 31, 1996. Excluding Valley,
loans increased by $60.7 million or 5%. Commercial lending increased by
$207.0 million or 46% of which $197.4 million was outstanding at Valley.
Installment loans totaled $257.4 million at December 31, 1996 ($200.3 million
without Valley) compared to $192.3 million at December 31, 1995. Despite
increases in each of the previously mentioned lending categories, real estate
lending, including real estate mortgage and real estate construction loans,
continues to be the major component of the Company's loan portfolio. Real
estate loans represent 51% of the Company's total loan portfolio at year-end
1996. This category of loans increased by $325.5 million or 52% from year-end
1995 with such loans at Valley amounting to $284.7 million. As the Company's
underwriting policy for 1-4 family residential loans follows that of industry
standards and meets the criteria for sale in the secondary market, the
Company's real estate loan portfolio is of high quality. The majority of the
Company's real estate lending is concentrated in the Company's market area of
north central and northeastern Indiana.
INVESTMENTS. Total investment securities increased $210.0 million or 27% from
December 31, 1995 with Valley adding $195.7 million. In 1995, investment
securities increased $63.2 million or 9% over 1994. On average during 1996,
investment securities increased $188.2 million or 26%. Excluding Valley's
average investment securities of $112.8 million, average investment securities
increased by $75.4 million or 10%. This follows a decrease of $12.8 million
or 2% in 1995 from 1994. The increase in average securities in 1996 is
attributable to average funding sources increasing at a faster rate than
average loan growth while in 1995 the opposite was true. Average short-term
investments, including federal funds sold and time deposits with other banks,
increased $8.0 million or 30% in 1996 after increasing $15.2 million or 37% in
1995 from 1994. However, $20.0 million of the 1996 increase was from
short-term investments outstanding at Valley.
During 1996 and 1995, the Company purchased approximately $49.5 million and
$25.7 million of securities designated as trading, respectively, and sold
<PAGE>
<PAGE>
trading securities with a carrying value of $69.3 million and $5.2 million,
respectively. Realized gains (losses) on sales of trading securities amounted
to $(749,000) in 1996 and $255,000 in 1995. There were no investment
securities held for trading purposes at December 31, 1996. The carrying value
of securities held for trading purposes at December 31, 1995 was $21.3 million
including a recognized unrealized gain of $715,000.
The Company's investment portfolio continues to be of high quality as
evidenced by U.S. Government and other federal agencies representing
approximately two thirds of the total outstanding in each of the past three
years. The Company's holdings of states and other political subdivisions
decreased slightly to 22% of the total portfolio compared to 26% in 1995 and
25% in 1994. Other investments, including U.S. agency mortgage backed
securities, corporate debt securities and other securities represented 13% or
less of the total portfolio at the end of 1996, 1995 and 1994.
DEPOSITS. The primary source of funds for the Company comes from demand and
time deposits generated at the affiliate banks. Total deposits as of December
31, 1996 increased by $654.4 million or 37% with $622.0 million of this
increase attributable to outstanding deposits at Valley on December 31, 1996.
In 1995, total deposits increased by $135.2 million or 8% over the levels
achieved at the end of 1994. As depicted in the Deposits table, total average
deposits increased by $433.6 million or 26% of which Valley contributed $330.8
million. However, as was realized in 1995 and 1994, the Company continues to
experience a shift in the mix of the different deposit categories. While
noninterest-bearing demand deposits as a percent of total average deposits
remained relatively stable at 15% in 1996, 14% in 1995 and 14% in 1994,
interest-bearing demand deposits as a percentage of total average deposits
decreased to 10% in 1996 from 12% in 1995 and 13% in 1994. Average savings
deposits also decreased to 15% in 1996 from 19% in 1995 and 21% in 1994.
Offsetting these decreases were increases in average time deposits to total
average deposits to 61% in 1996 from 55% in 1995 and 52% in 1994. The time
deposits category includes the Company's popular AnydayEveryday account which
averaged $327.5 million in 1996, $149.3 million in 1995 and $122.8 million in
1994.
SHORT-TERM BORROWINGS AND LONG-TERM DEBT. Federal funds purchased and
securities sold under agreements to repurchase consist primarily of repurchase
arrangements commercial customers of the Company's affiliate banks' utilize
for cash management services. In 1996, average federal funds purchased and
securities sold under agreements to repurchase increased $79.5 million or 32%
with $77.8 million of the increase coming from average federal funds purchased
and securities sold under agreements to repurchase of Valley. In 1995, this
funding category increased by $24.6 million or 11% on average from the prior
year.
The other category of short-term funding available to the Company is notes
payable to the U.S. Treasury. As indicated in the Short-Term Borrowings
table, this category can fluctuate significantly during the year. This is a
result of the timing of tax deposits made by customers and the call for these
funds made by the government. This category, however, has been a relatively
small source of funds for the Company.
<PAGE>
<PAGE>
Long-term debt increased to $58.3 million at December 31, 1996. During 1996,
the Company borrowed $15.0 million from another financial institution on a
term basis to help facilitate the payment of the cash portion of the merger
consideration paid to former shareholders of VFS. The Company also assumed
$34.8 million of Federal Home Loan Bank and other long-term debt of Valley and
$6.8 million of junior subordinated notes of VFS. Pay downs on pre-existing,
incurred and acquired debt totaled $4.9 million and $760,000 in 1996 and 1995,
respectively, as a result of scheduled principal payments. For a further
discussion of the Company's long-term debt obligations, maturities, and
related dividend and other restrictions, refer to Notes 10 and 13 in the
Company's accompanying consolidated financial statements.
CAPITAL RESOURCES. Capital adequacy is one of the main measurements used by
bank regulators to determine the strength of a financial institution. A
strong capital position will enable the Company to access capital markets
under more favorable terms. In addition, a strong capital base encourages
depositor and investor confidence in the institution.
On April 25, 1994, the Company's shareholders approved an increase from
10,000,000 to 20,000,000 in the total authorized shares of common stock,
enabling the Company to effect the three-for-two stock split that was declared
by the Board of Directors on January 18, 1994. This split was paid on May 20,
1994 to shareholders of record on April 27, 1994.
In addition, during 1994 the Board of Directors approved the repurchase of up
to 600,000 shares of the Company's common stock. During 1996 and 1995, the
Company repurchased 444,223 and 105,000 shares of its common stock at a total
cost of $14.2 million and $2.8 million, respectively.
In connection with the acquisition of VFS, on June 1, 1996 the Company issued
739,976 shares of Series 1 - 6% convertible Class B Nonvoting preferred stock
with a value of $37 million and 646,187 shares of common stock with a value of
$20 million.
Dividends declared in 1996 totaled $13.3 million, including dividends on
preferred stock of $1.3 million and dividends on common stock of $12.0
million. This compares to dividends declared on common stock of $10.8 million
in 1995 and $10.0 million in 1994. On January 21, 1997, the Company's Board
of Directors increased the annual common dividend to $1.16, up from the $1.02
declared in 1996 and the $.94 declared in 1995. The dividend payout ratio for
1996 was 36.3% compared to 40.3% for 1995 and 38.0% for 1994.
ASSET LIABILITY MANAGEMENT
As the Company's loans and deposits are designed to meet customer preferences,
maturity mismatches will occur within the balance sheet. It is the goal of
the Company's Asset/Liability Management committee to manage these maturity
mismatches in a way to provide a maximum level of net interest income within
established policy guidelines of liquidity and interest rate risk exposure.
<PAGE>
<PAGE>
INTEREST RATE SENSITIVITY. The degree by which net interest income may vary
due to changes in interest rates is measured through interest rate sensitivity
management. A static gap report, measured at a single point in time, measures
the difference between assets and liabilities that reprice in a future given
time period. The Company's gap ratio (the percentage of assets repricing
against liabilities) at December 31, 1996 was 83%. The Company has
historically operated with a liability sensitive position meaning more
liabilities reprice on a cumulative basis than assets. This indicates net
interest income should increase in declining rate scenarios and decrease in
rising rate scenarios. However, as rate movements are rarely parallel, a gap
report can only be considered a rough measurement of the direction a rate
movement could have on net interest income. The effect of a shift in the
yield curve and/or a change in the spread between certain rate indexes is
better measured through the use of simulation modeling.
The Company runs the simulation model numerous times throughout the year
comparing baseline results (earnings under a flat scenario) to earnings under
dynamic rate scenarios. The exposure to these changes are well within the
Company's guidelines. Should exposures be determined outside of tolerance
levels, the Company has tools it can use to minimize the risk to earnings.
Among these tools are specific investment decisions, pricing structures of
deposit funds, and exchange traded financial futures and options. For a
complete discussion of the Company's use of derivative contracts, refer to
Note 17 in the Company's consolidated financial statements.
RATE SENSITIVITY ANALYSIS
The following table presents an analysis of the rate sensitivity of the
Company's earning assets and interest-bearing liabilities as of December 31,
1996.
<TABLE>
<CAPTION>
Maturing or Repricing
---------------------------------------------------------------------
Non-Rate
Total Sensitive
1-90 91-180 181-365 1 Year 1-5 & Over
Days Days Days & Under Years 5 Years Total
----------- -------- --------- --------- --------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning
assets:
Net loans $ 847,707 $ 108,779 $ 161,722 $1,118,208 $ 471,681 $283,856 $1,873,745
Investment
securities(1) 70,698 47,762 94,371 212,831 579,034 182,743 974,608
Other earning
assets 56,351 100 -- 56,451 -- -- 56,451
---------- --------- --------- --------- --------- -------- ----------
Total Interest-
earning Assets 974,756 156,641 256,093 1,387,490 1,050,715 466,599 2,904,804
Other assets -- -- -- -- -- 316,493 316,493
---------- --------- --------- --------- --------- -------- ----------
Total Assets $ 974,756 $ 156,641 $ 256,093 $1,387,490 $1,050,715 $783,092 $3,221,297
========= ======== ======== ========= ========= ======== ==========
<PAGE>
<PAGE>
Interest-bearing
liabilities:
Interest-
bearing
deposits $ 956,748 $ 205,995 $ 191,163 $1,353,906 $ 447,768 $201,099 $2,002,773
Short-term
borrowings 414,275 10,260 450 424,985 -- -- 424,985
Long-term
notes 15,826 5,936 4,442 26,204 22,719 9,418 58,341
Hedged
interest-
bearing
liabilities (143,000) -- -- (143,000) -- -- (143,000)
---------- --------- --------- --------- -------- ------- ----------
Total Interest-
Bearing
Liabilities 1,243,849 222,191 196,055 1,662,095 470,487 210,517 2,343,099
Demand
deposits -- -- -- -- -- 419,118 419,118
Other
liabilities -- -- -- -- -- 22,962 22,962
Deferred gain
on sale of
premises -- -- -- -- -- 961 961
Shareholders'
equity -- -- -- -- -- 292,157 292,157
---------- --------- --------- --------- -------- ------- ----------
Total
Liabilities
and
Shareholder's
Equity $1,243,849 $ 222,191 $ 196,055 $1,662,095 $ 470,487 $945,715 $3,078,297
========= ======== ======== ========= ======== ======= ==========
Rate
sensitivity
gap $ (269,093)$ (65,550)$ 60,038 $ (274,605)
========== ========= ========= ==========
Cumulative rate
sensitivity
gap $ (269,093)$(334,643)$(274,605)
=========== ========= =========
Cumulative rate
sensitivity
gap ratio .78 .77 .83
=========== ========= =========
(1) The sensitivity of investment securities is based on the earlier of call
dates or scheduled maturities.
</TABLE>
<PAGE>
<PAGE>
LIQUIDITY. Guidelines are established through the Asset/Liability Management
committee to ensure a stable source of funding to meet both the expected and
unexpected cash demands of loan and deposit customers. The Company maintains a
stable base of core deposits provided by long-standing customer relationships.
The Company complements this source of liquidity with short-term borrowings
through correspondent bank relationships in addition to other corporate
customers. Many corporate customers utilize the Company's cash management
program sweeping excess deposit funds into repurchase agreements. Therefore,
the Company considers the majority of its repurchase agreements as another
source of stable funds.
The greatest source of liquidity for the Company is its marketable securities.
While the Company classifies all of its investments as available-for-sale, the
investment portfolio is highly liquid as approximately 71% of the portfolio
consists of marketable U.S. Treasury or federal agency securities. In
addition, the Company's investment strategy calls for laddering the maturities
of investments purchased. Therefore, there is another $37 million of other
investments scheduled to mature during 1997 that can also be used to meet
liquidity demands if necessary.
INFLATION AND CHANGING PRICES
Reported earnings are affected by inflation, indirectly through changing
interest rates and directly by increased operating expenses. However, general
price level inflation has not had a material effect on the information
presented herein.
INDUSTRY OUTLOOK AND REGULATORY CHANGES
The Company continues to be optimistic about the future of the banking
industry. Recent legislative developments which the Company sees as
encouraging include the "Depository Institutions Affiliations and Thrift
Conversion Act." This proposed legislation would eliminate the thrift charter
and permit affiliations between commercial banks, insurance companies, and
securities firms under a holding company structure. In addition, the "Deposit
Insurance Funds Act," which became law on September 30, 1996 directs the
Secretary of the Treasury to make recommendations to Congress for the
establishment of a common charter for banks and savings associations. It is
expected that the proposal from the Treasury Department to Congress would
include recommendations that commercial banks be allowed to engage in the full
range of insurance and securities activities. Both of these legislative
initiatives are aimed at modernizing the financial services industry and
eliminating some of the competitive disadvantages which banks must currently
overcome in the financial services marketplace. The Deposit Insurance Funds
Act required certain depository institutions to pay a one-time special
assessment to the FDIC in order to bring the Savings Association Insurance
Fund (SAIF) to its required reserve ratio. It also authorized the Financing
Corporation (FICO) to impose periodic assessments on both SAIF institutions
and institutions that are members of the Bank Insurance Fund (BIF), including
the Company, in order to spread the cost of interest payments on the
outstanding FICO bonds over a larger number of institutions. As a result, the
Company's FDIC insurance premiums were increased from zero to $.013 per $100
<PAGE>
<PAGE>
of insured deposits. This will result in approximately $326,000 of additional
expense to the Company in 1997. While this is not good news for the Company,
the Deposit Insurance Funds Act does call for the merger of the SAIF and BIF
into the new combined Deposit Insurance Fund on January 1, 1999. The strength
of this combined fund along with the movement towards allowing for a common
financial institutions charter are seen by the Company as positive events in
the long-term health of the financial services industry.
Turning from the national level to the local level, the Company continues to
be very excited about the overall business climate in its market area of north
central and northeastern Indiana. This market area is characterized by
increasing economic activity, low unemployment and good prospects for growth.
The Company continually looks for creative ways to attract and retain
customers. The highly successful AnydayEveryday time deposit account is an
example of this creativity. The Company also continually challenges its
operations and its delivery systems to provide higher quality services to its
customers. In the past two years the Company has made significant investments
in technology, such as the new loan documentation / teller station / platform
systems in order to give our employees the best tools to use in servicing our
customers.
The Company has been fortunate to be a very well capitalized company. This
position has allowed for the necessary investments in technology. It also
provides the Company with the ability to expand through strategic
acquisitions, such as the acquisition of Valley. And finally, a strong
capital position has and will continue to give the Company the flexibility to
buy back some of its outstanding stock and increase dividends, both actions
which should enhance shareholder value.
<PAGE>
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page
----
<S> <C>
Responsibilities for Financial Statements...................... 34
Report of Ernst & Young LLP, Independent Auditors.............. 35
Consolidated Balance Sheet as of December 31, 1996 and 1995.... 36
Consolidated Statement of Income for the years ended
December 31, 1996, 1995, and 1994............................ 38
Consolidated Statement of Cash Flows for the years ended
December 31, 1996, 1995, and 1994............................ 40
Consolidated Statement of Changes in Shareholders' Equity for
the years ended December 31, 1996, 1995, and 1994............ 42
Notes to Consolidated Financial Statements..................... 43
Quarterly Financial Information (Unaudited).................... 71
</TABLE>
<PAGE>
<PAGE>
Responsibilities for Financial Statements
The accompanying consolidated financial statements of Fort Wayne National
Corporation and subsidiaries were prepared by the management which is
responsible for their integrity and objectivity. The statements have been
prepared in conformity with generally accepted accounting principles and, as
such, include amounts based on judgments of management.
The system of internal controls of Fort Wayne National Corporation and its
subsidiaries is designed to safeguard the assets, and to assure that the books
and records reflect the transactions of the companies and that its policies
and procedures are followed. This system is augmented by a strong program of
internal audit and the careful selection and training of qualified personnel.
Ernst & Young LLP, independent auditors, are engaged to audit the consolidated
financial statements of Fort Wayne National Corporation and its subsidiaries
and issue reports thereon. Their audit is conducted in accordance with
generally accepted auditing standards which include an understanding of the
Company's accounting and financial controls. They conduct such tests and
related procedures as they deem necessary to arrive at an opinion on the
fairness of the financial statements.
The Board of Directors, through the Audit Committee of the Board, is
responsible for assuring that management fulfills its responsibilities in the
preparation of the financial statements and for engaging independent
auditors, with whom the Committee reviews the scope of the audits conducted
and the accounting principles applied in financial reporting. The Audit
Committee meets separately and jointly with the independent auditors,
representatives of management, and the internal auditors to review the
activities of each and to ensure that each is properly discharging its
responsibilities. To ensure complete independence, Ernst & Young LLP,
periodically meets with the Audit Committee, without management
representatives present, to discuss internal accounting control, auditing, and
financial reporting matters.
Fort Wayne National Corporation
<PAGE>
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
Board of Directors
Fort Wayne National Corporation
We have audited the accompanying consolidated balance sheet of Fort Wayne
National Corporation and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, cash flows, and changes in
shareholders' equity for each of the three years in the period ended
December 31, 1996. 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 Fort Wayne
National Corporation and subsidiaries at December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for impaired loans effective January 1, 1995 and its
method of accounting for certain investments in debt and equity securities
effective January 1, 1994.
/S/ Ernst & Young LLP
January 24, 1997
<PAGE>
<PAGE>
FORT WAYNE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
As of December 31
1996 1995
___________ ___________
(In thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $ 191,913 $ 177,602
Federal funds sold and securities
purchased under agreements to resell 56,075 27,150
Interest-bearing deposits with banks 376 200
Investment securities, at fair value 974,608 764,560
Loans 1,875,965 1,276,567
Less: Unearned income (2,220) (3,173)
Allowance for possible loan losses (30,307) (20,047)
__________ __________
NET LOANS 1,843,438 1,253,347
Premises and equipment 55,234 33,664
Other assets 99,653 39,584
__________ __________
TOTAL ASSETS $3,221,297 $2,296,107
========== ==========
See accompanying notes.
<PAGE>
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 419,118 $ 284,003
Interest-bearing 2,002,773 1,483,527
__________ __________
TOTAL DEPOSITS 2,421,891 1,767,530
Federal funds purchased and securities
sold under agreements to repurchase 387,357 241,263
Notes payable - U.S. Treasury and
other borrowings 37,628 26,381
Dividends payable 3,602 2,743
Accrued liabilities 19,360 16,852
Subordinated and other long-term notes 58,341 6,400
__________ __________
TOTAL LIABILITIES 2,928,179 2,061,169
Deferred gain on sale of premises 961 1,227
Shareholders' equity:
Preferred stock, without par value:
Class A Voting - 1,000,000 shares
authorized but unissued
Class B Nonvoting - 1,000,000 shares
authorized:
Series 1 6% convertible shares
outstanding: 1996 - 739,976 36,999 --
Common stock, without par value:
Authorized shares: 20,000,000
Issued and outstanding shares:
1996 - 11,706,834; 1995 - 11,428,717 19,511 19,048
Capital surplus 49,367 31,502
Retained earnings 179,052 170,990
Unrealized gain on securities
available-for-sale 7,228 12,171
__________ __________
TOTAL SHAREHOLDERS' EQUITY 292,157 233,711
__________ __________
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $3,221,297 $2,296,107
========== ==========
See accompanying notes.
</TABLE>
<PAGE>
<PAGE>
FORT WAYNE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
For The Years Ended December 31
______________________________
1996 1995 1994
________ ________ ________
(In thousands, except per share data)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans:
Taxable $140,269 $112,241 $95,346
Tax-exempt 988 1,363 1,192
Interest and dividends on
investment securities:
Taxable 45,086 34,919 34,179
Tax-exempt 11,405 10,479 10,402
Interest on federal funds sold
and securities purchased under
agreements to resell 1,597 1,322 431
Interest on deposits with banks 20 8 24
_______ _______ _______
TOTAL INTEREST INCOME 199,365 160,332 141,574
INTEREST EXPENSE
Interest on deposits 79,653 65,414 52,165
Interest on federal funds
purchased and securities sold
under agreements to repurchase 15,976 13,346 8,922
Interest on notes payable -
U.S. Treasury and other
borrowings 1,183 1,348 709
Interest on subordinated and
other long-term notes 2,757 868 963
_______ _______ _______
TOTAL INTEREST EXPENSE 99,569 80,976 62,759
_______ _______ _______
NET INTEREST INCOME
BEFORE PROVISION FOR
POSSIBLE LOAN LOSSES 99,796 79,356 78,815
Provision for possible loan losses 3,953 2,445 2,623
_______ _______ _______
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE
LOAN LOSSES 95,843 76,911 76,192
<PAGE>
<PAGE>
NONINTEREST INCOME
Fiduciary fees 12,459 9,749 8,950
Service charges on deposit
accounts 6,515 4,705 4,561
Other service charges 3,197 2,880 3,943
Net securities gains 392 87 5
Other income 2,788 2,178 1,652
_______ _______ _______
TOTAL NONINTEREST INCOME 25,351 19,599 19,111
NONINTEREST EXPENSE
Salaries and wages 32,218 25,231 23,829
Employee benefits 7,506 6,006 5,969
Net occupancy expense 6,360 5,032 4,952
Equipment expense 5,228 4,213 3,882
FDIC assessment (116) 1,939 3,649
Amortization of goodwill and
other intangibles 1,772 232 231
Other expense 20,209 16,424 14,925
_______ _______ _______
TOTAL NONINTEREST EXPENSE 73,177 59,077 57,437
_______ _______ _______
INCOME BEFORE INCOME TAXES 48,017 37,433 37,866
Applicable income taxes 15,515 10,726 11,654
_______ _______ _______
NET INCOME $32,502 $26,707 $26,212
======= ======= =======
Net income per common share $ 2.68 $ 2.33 $ 2.28
======= ======= =======
See accompanying notes.
</TABLE>
<PAGE>
<PAGE>
FORT WAYNE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31
1996 1995 1994
________ ________ ________
(In thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 32,502 $ 26,707 $ 26,212
Adjustments to reconcile net
income to net cash provided by
operating activities:
Provision for possible loan losses 3,953 2,445 2,623
Net accretion and amortization of
investment securities 241 210 411
Net accretion and amortization of loans (23) (26) (4)
Provision for depreciation and amortization
of premises and equipment 4,691 3,522 3,394
Deferred income taxes 1,726 1,433 (305)
Capitalized originated mortgage servicing rights (189) -- --
Amortization of capitalized originated mortgage
servicing rights 17 -- --
Amortization of goodwill and other intangibles 1,772 232 231
Amortization of deferred gain on sale of premises (266) (266) (266)
Gain on sale of investment securities
available-for-sale (421) (90) (132)
Loss on sale of investment securities
available-for-sale 29 3 127
Market value adjustment of investment securities
held for trading 715 (715) --
Net (gain) loss on sale of investment
securities held for trading 749 (255) --
Proceeds from sale of investment securities
held for trading 69,323 5,172 --
Purchase of investment securities held
for trading (49,528) (25,716) --
Loans originated for resale (27,997) (12,341) (13,266)
Unrealized (gain)loss on loans held for sale -- (31) 31
Proceeds from sales of loans 29,310 11,732 29,985
Net (gain) loss on sale of loans (5) (101) 379
Net loss on disposals of premises and equipment -- 21 10
(Increase)decrease in other assets 2,477 (7,566) (4,311)
Increase (decrease) in other liabilities (3,114) 305 (103)
________ ________ ________
NET CASH PROVIDED BY OPERATING ACTIVITIES 65,962 4,675 45,016
INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold and
securities purchased under agreements to resell 47,675 (25,250) (1,900)
Net decrease in interest-bearing deposits with banks 68 -- 400
Proceeds from sales of investment securities
available-for-sale 4,500 1,478 7,547
Proceeds from maturities of investment securities
available-for-sale 197,910 172,275 291,278
Purchase of investment securities available-for-sale (285,483) (180,068) (245,245)
Net increase in loans (74,876) (59,602) (96,234)
Proceeds from disposals of premises and equipment 43 32 52
Purchase of premises and equipment (8,157) (4,483) (3,737)
Purchase of net assets of Valley Financial
Services, Inc., net of cash acquired (62,637) -- --
________ ________ ________
NET CASH USED IN INVESTING ACTIVITIES (180,957) (95,618) (47,839)
<PAGE>
FINANCING ACTIVITIES
Net increase in deposits 90,729 135,188 19,482
Net increase (decrease)in short-term borrowings (4,053) (9,250) 15,105
Issuance of long-term debt 15,817 -- --
Principal payment on long-term debt (4,923) (760) (760)
Issuance of preferred stock 36,999 -- --
Issuance of common stock 20,057 -- --
Cash dividends paid on common stock (11,661) (10,544) (9,790)
Cash dividends paid on preferred stock (740) -- --
Proceeds from exercise of stock options 1,277 453 624
Repurchase of common stock (14,196) (2,826) --
________ ________ ________
NET CASH PROVIDED BY FINANCING ACTIVITIES 129,306 112,261 24,661
________ ________ ________
INCREASE IN CASH AND CASH EQUIVALENTS 14,311 21,318 21,838
Cash and cash equivalents at beginning of period 177,602 156,284 134,446
________ ________ ________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $191,913 $177,602 $156,284
======== ======== ========
Supplemental disclosures of cash flow information:
Interest paid $100,528 $ 79,878 $ 62,982
======== ======== ========
Income taxes paid $ 14,793 $ 9,764 $ 11,423
======== ======== ========
See accompanying notes.
</TABLE>
<PAGE>
<PAGE>
FORT WAYNE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For The Years Ended December 31, 1994, 1995, and 1996
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Net
Unrealized
Gain (Loss)
On Total
Securities Share-
Preferred Common Capital Retained Available- holders'
Stock Stock Surplus Earnings For-Sale Equity
_________ _______ _______ ________ __________ ________
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $ -- $19,093 $31,058 $140,929 $ -- $191,080
Net income -- -- -- 26,212 -- 26,212
Cumulative effect of
accounting change -- -- -- -- 16,175 16,175
Issuance of 37,904 shares
of common stock -- 64 560 -- -- 624
Cash dividends -
$.87 per common share -- -- -- (9,952) -- (9,952)
Net unrealized loss
on securities
available-for-sale -- -- -- -- (25,143) (25,143)
_______ _______ _______ ________ __________ ________
Balance at December 31, 1994 -- 19,157 31,618 157,189 (8,968) 198,996
Net income -- -- -- 26,707 -- 26,707
Issuance of 39,749 shares
of common stock -- 66 387 -- -- 453
Repurchase of 105,000 shares
of common stock -- (175) (503) (2,148) -- (2,826)
Cash dividends -
$.94 per common share -- -- -- (10,758) -- (10,758)
Net unrealized gain
on securities
available-for-sale -- -- -- -- 21,139 21,139
_______ _______ _______ ________ __________ ________
Balance at December 31, 1995 -- 19,048 31,502 170,990 12,171 233,711
Net income -- -- -- 32,502 -- 32,502
Issuance of 739,976 shares
of Class B Nonvoting
Series 1 6% convertible
preferred stock 36,999 -- -- -- -- 36,999
Issuance of 722,340 shares
of common stock -- 1,203 19,990 -- -- 21,193
Repurchase of 444,223 shares
of common stock -- (740) (2,266) (11,190) -- (14,196)
Cash dividends:
Common stock -
$1.02 per share -- -- -- (11,955) -- (11,955)
Preferred stock -
$1.75 per share -- -- -- (1,295) -- (1,295)
Tax benefit of nonqualified
stock options exercised -- -- 141 -- -- 141
Net unrealized loss
on securities
available-for-sale acquired -- -- -- -- (311) (311)
Net unrealized loss
on securities
available-for-sale -- -- -- -- (4,632) (4,632)
_______ _______ _______ ________ __________ ________
Balance at December 31, 1996 $36,999 $19,511 $49,367 $179,052 $ 7,228 $292,157
======= ======= ======= ======== ========== ========
See accompanying notes.
</TABLE>
<PAGE>
<PAGE>
Fort Wayne National Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
1. Significant Accounting Policies
The accounting principles followed by the Company and the methods of applying
those principles conform with generally accepted accounting principles and
with general practice within the banking industry. The principles which
materially affect the determination of financial position, results of
operations, or cash flows are summarized below.
Organization
Fort Wayne National Corporation (the Company) and its subsidiaries engage in a
wide range of commercial and personal banking and trust activities primarily
in northeast and north central Indiana.
Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, The Auburn State Bank (Auburn), Churubusco
State Bank (Churubusco), First National Bank of Huntington (Huntington), First
National Bank of Warsaw (Warsaw), Fort Wayne National Bank (FWNB), Fort Wayne
National Life Insurance Company, Inc. (FWNLIC), Old-First National Bank in
Bluffton (Old-First), and Valley American Bank and Trust Company (Valley). All
significant intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from these estimates.
Cash Flow Information
For purposes of the statement of cash flows, the Company considers cash and
due from banks as cash and cash equivalents.
Investment Securities
Effective January 1, 1994 the Company adopted Financial Accounting Standards
Board (FASB) Statement 115, "Accounting for Certain Investments in Debt and
<PAGE>
<PAGE>
Equity Securities." Application of Statement 115 resulted in an increase of
$16,175,000 to shareholders' equity on January 1, 1994. Under Statement 115,
debt securities that the Company has both the positive intent and ability to
hold to maturity are carried at amortized cost. Debt securities that the
Company does not have the positive intent and ability to hold to maturity and
all marketable equity securities are classified as available-for-sale or
trading and are carried at fair value, as determined by the closing sales
prices in an active market. Unrealized holding gains and losses on securities
classified as available-for-sale are carried as a separate component of
shareholders' equity. Unrealized holding gains and losses on securities
classified as trading are reported in earnings.
Gains or losses on the disposition of available-for-sale securities,
representing the difference between the selling price and the amortized cost
of the specific security, are recorded as realized and are disclosed
separately in the statement of income.
Loans
Interest on commercial, installment, and real estate mortgage loans is
accrued on a daily basis based on the principal outstanding. Discounts on
installment and commercial loans are amortized and included in interest
income using the interest method.
Generally, a loan (including a loan considered impaired under Statement
114,"Accounting by Creditors for Impairment of a Loan") is classified as
nonaccrual and the accrual of interest income is generally discontinued when a
loan becomes 90 days past due as to principal or interest. When interest
accruals are discontinued, unpaid interest credited to income in the current
year is reversed, and interest accrued in the prior year is charged to the
allowance for possible loan losses. Management may elect to continue the
accrual of interest when the estimated net realizable value of collateral is
sufficient to cover the principal and accrued interest, and the loan is in the
process of collection.
Allowance for Possible Loan Losses
The allowance for possible loan losses is established through a provision for
possible loan losses charged against income. Loans deemed to be uncollectible
are charged against the allowance for possible loan losses, and subsequent
recoveries, if any, are credited to the allowance.
Beginning in 1995, the Company adopted Statement 114. Under the new standard,
the allowance for possible loan losses related to loans that are identified
for evaluation in accordance with Statement 114 is based on discounted cash
flows using the loan's initial effective interest rate or the fair value of
the collateral for certain collateral dependent loans. Prior to 1995, the
allowance for possible loan losses related to these loans was based on
undiscounted cash flows or the fair value of the collateral for collateral
dependent loans. The effect of adopting this Statement was not material.
<PAGE>
<PAGE>
The allowance for possible loan losses is maintained at a level believed
adequate by management to absorb estimated probable loan losses. Management's
periodic evaluation of the adequacy of the allowance is based on the Company's
past loan loss experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay (including the
timing of future payments), the estimated value of any underlying collateral,
composition of the loan portfolio, current economic conditions, and other
relevant factors. This evaluation is inherently subjective as it requires
material estimates including amount and timing of future cash flows expected
to be received on impaired loans that may be susceptible to significant
change.
Premises and Equipment
Premises and equipment are stated at cost less allowances for depreciation
and amortization. Provisions for depreciation are computed primarily by the
straight-line method based upon the estimated useful lives of the assets.
Leasehold improvements are amortized over the shorter of the estimated useful
lives of the assets or the terms of the underlying leases.
Intangible Assets
Goodwill and other intangibles of $53,094,000 and $2,061,000 at December 31,
1996 and 1995, respectively, net of accumulated amortization of $3,305,000 and
$1,533,000, respectively, are amortized using the straight-line method over
periods ranging from 15 to 25 years. The carrying value of goodwill and other
intangibles is reviewed regularly for indicators of impairment of value.
Loan Origination Fees and Costs
Loan origination and commitment fees and certain direct loan origination
costs are deferred and amortized as a net adjustment to the related loan's
yield. The Company is generally amortizing these amounts over the
contractual life of such loans. Commitment fees based on a percentage of a
customer's unused line of credit and fees related to standby letters of
credit are recognized over the commitment period.
Interest Rate Futures and Options
The Company uses exchange traded interest rate futures and option contracts as
part of its overall interest rate risk management strategy. Gains and losses
on futures contracts used to hedge identified positions are deferred and
amortized over the remaining lives of the hedged assets or liabilities as an
adjustment to interest income or expense. Gains and losses (both realized and
unrealized) on futures and option contracts used to hedge trading activities
are included in interest and dividends on investment securities. Futures and
option contracts used to hedge trading activities are carried at market value
and included in other assets. Any deferred realized or unrealized gains or
<PAGE>
<PAGE>
losses of the interest rate futures or options are immediately recognized in
the statement of income if the specified criteria of a hedged position is not
met, the designated item matures or is liquidated, or if the anticipated
transaction is no longer likely to occur.
Stock Based Compensation
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of shares at the date of grant.
The Company accounts for stock option grants in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
(APB 25) and, accordingly, recognizes no compensation for the stock option
grants.
Reclassifications
Certain amounts in the consolidated financial statements for the years ended
December 31, 1995 and 1994 have been reclassified to conform to the 1996
presentation.
<PAGE>
<PAGE>
2. Acquisition of Valley Financial Services, Inc.
On June 1, 1996 the Company acquired, through merger of Valley Financial
Services, Inc. (VFS), with and into the Company, all of the issued and
outstanding stock of VFS's only banking subsidiary, Valley American Bank and
Trust Company. The merger was completed in accordance with an Agreement and
Plan of Merger between VFS and the Company, dated November 6, 1995. Merger
consideration consisted of $53 million in cash, $20 million in common stock
and $37 million in preferred stock. Goodwill and other intangibles of $52.8
million recorded in connection with this acquisition are being amortized over
periods up to 25 years. VFS had assets of $823,574,000 at June 1, 1996. This
acquisition has been accounted for as a purchase for accounting purposes, and
accordingly, the results of operations of VFS have been included in the
consolidated results of operations of the Company from the date of
acquisition.
The following pro forma data reflects the consolidated results of operations
of the Company as though VFS had been combined as of the beginning of each
period presented:
<TABLE>
<CAPTION>
1996 1995 1994
__________ __________ __________
(In thousands, except per share data)
<S> <C> <C> <C>
Interest income $223,725 $217,608 $188,646
Interest expense 112,563 111,375 85,114
________ ________ ________
Net interest income $111,162 $106,233 $103,532
======== ======== ========
Net income $ 29,666 $ 29,058 $ 29,532
======== ======== ========
Net income per common share $2.30 $2.22 $2.25
======== ======== ========
</TABLE>
3. Restrictions on Cash and Due From Bank Accounts
The Company's subsidiary banks are required to maintain average reserve
balances at the Federal Reserve Bank. The amount of those required reserve
balances as of December 31, 1996 was approximately $13,800,000.
<PAGE>
<PAGE>
4. Investment Securities
A summary of available-for-sale investment securities is as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ----------- ----------
(In thousands)
<S> <C> <C> <C> <C>
December 31, 1996:
U.S. Treasury $318,297 $ 2,368 $ 352 $320,313
U.S. Federal agencies 333,413 3,015 1,210 335,218
U.S. Federal agency
mortgage-backed securities 38,377 296 236 38,437
States and political
subdivisions 210,451 7,992 620 217,823
Corporate debt securities 46,315 987 107 47,195
Other 15,079 551 8 15,622
-------- ------- -------- --------
Total $961,932 $15,209 $ 2,533 $974,608
======== ======= ======== ========
December 31, 1995:
U.S. Treasury $167,319 $ 3,020 $ 335 $170,004
U.S. Federal agencies 275,011 5,088 790 279,309
U.S. Federal agency
mortgage-backed securities 34,518 339 122 34,735
States and political
subdivisions 187,772 10,613 206 198,179
Corporate securities 48,977 1,857 11 50,823
Other 9,240 1,019 8 10,251
-------- ------- -------- --------
Total $722,837 $21,936 $ 1,472 $743,301
======== ======= ======== ========
</TABLE>
<PAGE>
<PAGE>
The amortized cost and fair value of available-for-sale investment securities
at December 31, 1996, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
---------- ---------
(In thousands)
<S> <C> <C>
Due in one year or less $147,562 $148,573
Due after one year through five years 580,199 586,399
Due after five years through ten years 154,759 158,129
Due after ten years 65,777 67,326
--------- ---------
Total Debt Securities 948,297 960,427
Investments in equity securities 13,635 14,181
--------- ---------
Total $961,932 $974,608
========= =========
</TABLE>
Investment securities with a carrying value of approximately $566,304,000 and
$420,758,000 at December 31, 1996 and 1995, respectively, were pledged as
collateral for public and trust deposits, securities sold under agreements to
repurchase, and for other purposes as required by law or contract.
The fair value of U. S. Treasury obligations held for trading purposes at
December 31, 1995 was $21,259,000. No securities were held for trading
purposes at December 31, 1996. The change in net unrealized holding gains
(losses) on trading securities for the years ended December 31, 1996 and 1995
were $(715,000) and $715,000, respectively. Realized gains (losses)on trading
activities were $(749,000), $255,000 and $3,000 in 1996, 1995 and 1994,
respectively.
<PAGE>
<PAGE>
5. Loans
Loans by classification as of December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(In thousands)
<S> <C> <C>
Commercial $ 660,215 $ 453,208
Real estate - construction 49,693 31,312
Real estate - mortgage 897,734 590,599
Installment 257,408 192,307
Financing leases 10,915 9,141
---------- ----------
Gross Loans $1,875,965 $1,276,567
========== ==========
</TABLE>
At December 31, 1996 and 1995, the recorded investment in loans that are
considered to be impaired under Statement 114 was $18,559,000 and $19,749,000,
respectively, for which the related allowance for possible loan losses was
$5,047,000 and $5,450,000, respectively. The average investment in
impaired loans during the years ended December 31, 1996 and 1995 were
approximately $23,840,000 and $21,160,000, respectively. Interest income
recognized by the Company on those impaired loans was $1,051,000 in 1996 and
$1,141,000 in 1995, which included $220,000 and zero, respectively, of
interest recognized using the cash basis method of income recognition.
Certain directors and executive officers of the Company and its significant
subsidiaries, their families, and certain entities in which they have an
ownership interest were customers of the Company's subsidiary banks. Loans
with these parties were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with unrelated persons and do not involve more than normal risk
of collectibility. The aggregate dollar amounts of these loans were
$30,388,000 and $9,795,000 at December 31, 1996 and 1995, respectively.
During 1996, $21,960,000 of new loans were made, $16,225,000 of loans were
acquired with Valley, and repayments and loan reductions totaled $17,592,000.
<PAGE>
<PAGE>
6. Allowance for Possible Loan Losses
Changes in the allowance for possible loan losses for the years ended
December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Balance at beginning of year $20,047 $21,795 $21,876
Add (deduct):
Allowance of acquired subsidiary 11,800 -- --
Provisions 3,953 2,445 2,623
Recoveries 1,151 763 1,284
Loan charge-offs (6,644) (4,956) (3,988)
------- ------- -------
Balance At End Of Year $30,307 $20,047 $21,795
======= ======= =======
</TABLE>
7. Premises and Equipment and Lease Agreements
Premises and equipment at December 31 consist of the following:
<TABLE>
<CAPTION>
1996 1995
------- -------
(In thousands)
<S> <C> <C>
Land $ 6,773 $ 3,881
Buildings 37,873 21,717
Equipment 45,677 31,676
Leasehold improvements 13,241 8,688
------- -------
Total Cost 103,564 65,962
Allowances for depreciation
and amortization (48,330) (32,298)
------- -------
Net Premises And Equipment $55,234 $33,664
======= =======
</TABLE>
Total rental expense (principally buildings and equipment), net of sublease
income of $984,000 in 1996, $813,000 in 1995 and $621,000 in 1994 amounted to
$2,175,000, $1,467,000, and $1,817,000 in 1996, 1995 and 1994, respectively.
Future minimum rental commitments under noncancelable operating leases as of
December 31, 1996, net of future sublease rentals of approximately 26% of the
total in each period, are as follows (In thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 $2,393
1998 2,551
1999 2,517
2000 2,326
2001 1,459
Thereafter 8,353
</TABLE>
<PAGE>
<PAGE>
The Company's lease agreements on its main office facility have lease terms
through March 2008 with options to extend the lease term through 2069 and to
purchase the property beginning in 1997 at its then fair market value. The
lease agreements also provide for rent escalations based upon the Company's
share of any increases in the operating expenses of the building.
Details of net occupancy expense for the years ended December 31 are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Gross occupancy expense $ 7,613 $ 6,100 $5,834
Rental income (1,253) (1,068) (882)
------- ------- ------
Net Occupancy Expense $ 6,360 $ 5,032 $4,952
======= ======= ======
</TABLE>
8. Deposits
Time certificates of deposit of $100,000 or more amounted to $268,223,000 at
December 31, 1996 and $196,889,000 at December 31, 1995.
9. Income Taxes
Deferred tax assets and liabilities at December 31 are comprised of the
following:
<TABLE>
<CAPTION>
1996 1995
------- -------
(In thousands)
<S> <C> <C>
Deferred tax assets:
Allowance for possible loan losses $12,282 $ 8,124
Deferred gain on sale of premises 379 483
Accrued pension liability 234 416
Benefits restoration plan 473 347
Other 1,402 1,415
------- -------
Total Deferred Tax Assets 14,770 10,785
Deferred tax liabilities:
Net unrealized gain on securities
available-for-sale 5,051 8,293
Tax over book depreciation 1,183 1,213
Direct financing leases 1,834 1,037
Purchase accounting adjustments 1,967 233
Accreted discount on bonds 683 518
Other 687 316
------- -------
Total Deferred Tax Liabilities 11,405 11,610
------- -------
Net Deferred Tax Assets (Liabilities) $ 3,365 $ (825)
======= =======
</TABLE>
<PAGE>
<PAGE>
The components of income tax expense (credit) for the years ended December 31
are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Current:
Federal $ 9,775 $ 6,534 $ 8,751
State 4,014 2,759 3,208
------- ------- -------
Total Current Taxes 13,789 9,293 11,959
Deferred:
Federal 1,674 1,132 (241)
State 52 301 (64)
------- ------- -------
Total Deferred Taxes 1,726 1,433 (305)
------- ------- -------
Total Tax Expense $15,515 $10,726 $11,654
======= ======= =======
</TABLE>
Included in income tax expense are applicable income taxes of $159,000,
$35,000 and $2,000 relating to investment securities gains for 1996, 1995 and
1994, respectively.
A reconciliation of income taxes computed at the statutory federal income tax
rate (35%) to income tax expense is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Federal income tax $16,806 $13,101 $13,253
Add (deduct) tax effects of:
Tax-exempt income (4,327) (4,145) (4,056)
State income tax,
net of federal tax benefit 2,643 1,989 2,043
Other - net 393 (219) 414
------- ------- -------
Total $15,515 $10,726 $11,654
======= ======= =======
</TABLE>
10. Debt Arrangements
The Company has a revolving line of credit with another bank totaling
$15,000,000, of which no amounts were outstanding at December 31, 1996.
<PAGE>
<PAGE>
Subordinated and other long-term notes at December 31 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
------- -------
(In thousands)
<S> <C> <C>
12.95% Series A Notes $ 6,000 $ 6,400
Term Note, final maturity June 30, 2003 13,928 --
Federal Home Loan Bank borrowings:
5.5552% variable rate note, due January 14, 1997 4,000 --
6.403% fixed rate note, due June 5, 1997 5,000 --
6.19% fixed rate note, due July 31, 1997 1,999 --
5.5513% variable rate note, due October 21, 1997 11,000 --
5.16% fixed rate note, due September 15, 1998 4,996 --
6.64% fixed rate note, due July 16, 1999 2,997 --
5.79% fixed rate note,
final maturity July 15, 2003 3,682 --
6.88% fixed rate note, due November 15, 2016 817 --
Junior Subordinated Notes 3,922 --
------- -------
Total $58,341 $ 6,400
======= =======
</TABLE>
Principal maturities of subordinated and long-term notes are as follows (In
thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 $26,204
1998 10,522
1999 5,962
2000 2,918
2001 3,317
Thereafter 9,418
</TABLE>
The holders of the Series A Notes have the right to declare the entire
principal amount outstanding to be due and payable in the event that: l) a
person or group of affiliated persons acquires beneficial ownership of 40% or
more of the voting securities of the Company; or 2) the Company is in
noncompliance with any of its covenants. The Series A Notes are unsecured.
The Term Note, which is unsecured, requires quarterly interest and annual
principal payments. Although the Term Note accrues interest at a variable
rate, the Company has entered into an interest rate swap arrangement with the
holder of this note which effectively fixes the interest rate at 6.705%.
The Series A Note and the Term Note agreements contain a number of covenants
requiring the Company to meet stipulated capital adequacy, indebtedness,
earnings to fixed charges and return on capital ratios, and contain
restrictions with respect to nonperforming assets levels, funded debt, leases,
mergers, disposition of assets, and payment of dividends. Based upon the
restrictions in the agreements, the Company could have declared additional
common dividends of $1,399,000 to its shareholders in 1996. At December 31,
<PAGE>
<PAGE>
1996, the Company was in compliance with all debt covenants and restrictions.
The Federal Home Loan Bank borrowings each require monthly interest payments.
The 5.79% fixed rate note also requires annual principal payments. The two
variable rate notes are adjustable quarterly to LIBOR plus two basis points.
All of the Federal Home Loan Bank borrowings are covered by a blanket
collateral arrangement executed with the Federal Home Loan Bank of
Indianapolis. The carrying value of total eligible assets (primarily 1-4
family mortgage loans) available as collateral to secure current and future
advances as of December 31, 1996 is approximately $114,890,000.
The Junior Subordinated Notes (at rates ranging from 5% to 9% at December 31,
1996) are unsecured, with maturities ranging from 1997 to 2000 and are
subordinated to all other indebtedness.
11. Preferred Stock
The Class B Nonvoting Preferred Stock Series 1 (Series 1 Stock), which was
issued in connection with the acquisition of VFS, is 6% cumulative convertible
nonvoting preferred stock with a stated value of $50 per share. The holders
of the Series 1 Stock are entitled to receive cumulative preferred dividends
from the date of issuance (June 1, 1996) payable quarterly at the annual rate
of 6%. The Series 1 Stock may be redeemed by the Company at its option at any
time or from time to time on or after April 1, 2002 at $50 per share, plus
accrued and unpaid dividends. Such redemption may be subject to prior
approval by the Federal Reserve Bank. Holders of the Series 1 Stock have the
right, at their option, to convert each share of Series 1 Stock into 1.34624
shares of the Company's common stock. The sale of shares of the Series 1
Stock (or any shares of common stock received upon conversion of Series 1
Stock) is prohibited for a two year period ending May 31, 1998.
12. Per Share Data
Net income per common share data is based on weighted average number of shares
of common stock outstanding of 11,653,452; 11,449,277; and 11,480,372 in 1996,
1995, and 1994, respectively. Assumed conversion of preferred stock and
exercise of stock options would have no material effect on net income per
common share.
<PAGE>
<PAGE>
13. Regulatory Matters
Payments of dividends and extensions of credit by the Company's subsidiary
banks to the Company are subject to certain restrictions under banking laws.
The Company's subsidiary banks could have declared additional dividends of
approximately $35,552,000 to the Company in 1996 without obtaining regulatory
approval.
The Federal Reserve Act limits the extensions of credit from a subsidiary
bank to any affiliate to 10% and to all affiliates to 20% of a subsidiary
bank's capital and surplus (net assets) as defined.
The Company and its subsidiary banks are subject to various regulatory capital
requirements administered by federal and state banking agencies. Failure to
meet minimum capital requirements can initiate certain actions by regulators
that, if undertaken, could have a direct material effect on the Company's
financial statements. Under the capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company and its
subsidiary banks must meet specific capital guidelines that involve
quantitative measures of the Company's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices.
The
Company's capital amounts and classification are also subject to qualitative
judgements by the regulators about components, risk weightings of assets and
certain off-balance-sheet items and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and its subsidiary banks to maintain minimum ratios of 4%
for Tier I risk-based capital, 8% for total risk-based capital and 4% for Tier
I leverage. To be considered well capitalized under the regulatory framework
for prompt corrective action the ratios are 6%, 10% and 5%, respectively.
Management believes, as of December 31, 1996, that the Company meets all
capital adequacy requirements to which it is subject. In addition, each
subsidiary bank had regulatory capital ratios in excess of the levels
established for well capitalized institutions.
<PAGE>
<PAGE>
The following is a summary of the capital ratios of the Company and its lead
subsidiary bank, Fort Wayne National Bank, as well as a comparison of the
period-end capital balances with related amounts established by the
regulators:
<TABLE>
<CAPTION>
Capital Amounts
-------------------------------------
Well
Ratios Actual Minimum Capitalized
------- ----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
As of December 31, 1996:
Tier I risk-based capital
The Company 11.70% $231,818 $ 79,246 $118,869
Fort Wayne National Bank 10.85 109,898 40,517 60,776
Total risk-based capital
The Company 12.95 256,649 158,492 198,115
Fort Wayne National Bank 11.99 121,475 81,034 101,293
Period end Tier I leverage
The Company 7.32 231,818 126,727 158,409
Fort Wayne National Bank 7.29 109,898 60,291 75,363
As of December 31, 1995:
Tier I risk-based capital
The Company 15.02% $219,479 $ 58,440 $ 87,660
Fort Wayne National Bank 10.42 105,139 40,422 60,633
Total risk-based capital
The Company 16.27 237,742 116,880 146,100
Fort Wayne National Bank 11.67 117,769 80,843 101,054
Period end Tier I leverage
The Company 9.57 219,479 91,762 114,702
Fort Wayne National Bank 7.03 105,139 59,905 74,881
</TABLE>
As of December 31, 1996 the Company was not aware of any known trends, events
or uncertainties that would have or that are reasonably likely to have
material effect on the Company's liquidity, capital resources or operations,
nor was the Company aware of any current recommendations by regulatory
authorities which, if they were implemented, would have such an effect.
14. Stock Incentive Plans
The Company maintains two stock incentive plans under which incentive and
nonqualified stock options may be or have been granted to employees. Under
these plans, options may be granted for periods of up to ten years and are
generally exercisable one year after the date of grant. The option price is
equal to 100% of the fair value of the shares at the date of grant. In
addition, stock appreciation rights may be granted in tandem with options.
All options vest annually on the anniversary date of the grant at the rate of
25% of the number of options granted. The Company's 1994 Stock Incentive Plan
authorizes the grant of options to key employees for up to 450,000 shares of
the Company's common stock.
<PAGE>
<PAGE>
The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options because the alternative fair value
accounting provided for under Statement 123, "Accounting for Stock-Based
Compensations" requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25, because the exercise
price of the Company's stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognized.
A summary of the Company's stock option activity, and related information, for
the years ended December 31 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------ ------------------ ------------------
Weighted Weighted Weighted
-Average -Average -Average
Exercise Exercise Exercise
Options Price Options Price Options Price
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding -
beginning of
year 495,767 $25.96 448,741 $24.57 384,912 $22.76
Options granted 185,700 $32.13 103,100 $26.66 120,900 $27.58
Options
exercised (123,072) $21.61 (55,199) $15.97 (42,746) $16.37
Options
forfeited (2,800) $27.01 (875) $27.68 (14,325) $25.71
--------- --------- ---------
Outstanding -
End Of Year 555,595 $28.98 495,767 $25.96 448,741 $24.57
========= ========= =========
Exercisable At
End Of Year 237,233 $27.77 181,057 $25.10 150,470 $20.28
========= ========= =========
Weighted Average
Fair Value Of
Options Granted
During The Year $ 7.57 $ 6.72
======= ======
</TABLE>
Exercise prices for options outstanding at December 31, 1996 range from $25.88
to $32.13. The weighted-average remaining contractual life of those options
is 3.19 years. During 1996, 1995 and 1994, employees surrendered 48,839,
17,460 and 8,023 shares, respectively, for payment to the Company for stock
options exercised.
<PAGE>
<PAGE>
The fair value of options granted in 1996 and 1995 was estimated at the date
of grant using a Black-Scholes option pricing model with the following
assumptions:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Risk-free interest rate 6.32% 7.02%
Dividend yield 3.24% 3.50%
Volatility factor 24.17% 27.00%
Expected option life 5 years 5 years
</TABLE>
Because the pro forma effect of applying the fair value method to the
Company's stock options is not material, such pro forma information is not
presented.
The Company also maintains a Nonemployee Director Stock Incentive Plan
(Director Plan) which calls for a formula-based grant of stock to active
nonemployee members of the Company's Board of Directors. During 1996, 1995
and 1994, there were 1,920, 2,010 and 3,400 shares of the Company's Common
Stock issued under the Director Plan, respectively.
15. Employee Benefit Plans
The Company has a non-contributory trusteed defined benefit plan covering
substantially all of its full-time employees who are at least 21 years of age
and have completed one year of continuous service. It is the Company's
policy to fund, at a minimum, pension contributions as required by the
Employee Retirement Income Security Act. Benefits are based on years of
service and the employee's highest average of monthly earnings during any
five consecutive years of credited service.
<PAGE>
<PAGE>
The following table sets forth the funded status and amount recognized for
the Company's defined benefit pension plan in the consolidated balance sheet
at December 31 (In thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Actuarial present value of accumulated benefit
obligations, including vested benefits of
$17,613 in 1996 and $15,974 in 1995 $ 19,268 $ 17,481
======== ========
Actuarial present value of projected
benefit obligation for services rendered
to date $(25,070) $(22,818)
Plan assets at fair value, primarily investments
in bond and equity funds 29,835 26,258
-------- --------
Plan assets in excess of projected
benefit obligation 4,765 3,440
Unrecognized prior service cost 14 17
Unrecognized net gain (5,356) (4,231)
Unrecognized net asset, net of amortization -- (253)
-------- --------
Accrued Pension Liability $ (577) $ (1,027)
======== ========
</TABLE>
At December 31, 1996 and 1995, plan assets include 80,000 shares of the
Company's common stock with a fair value of $3,040,000 and $2,520,000,
respectively, investments in the FWNB Temporary Certificate of Deposit Fund of
$143,000 and $851,000, respectively, and investments in common trust funds
administered by FWNB with a fair value of $26,652,000 and $22,887,000,
respectively. During 1996 and 1995, interest and dividends earned on these
investments amounted to $115,000 and $128,000, respectively.
Net pension cost of the Company's defined benefit pension plan included the
following components:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Service cost benefits earned
during the period $ 1,612 $ 987 $ 1,076
Interest cost on projected
benefit obligation 1,621 1,455 1,345
Actual return on plan assets (3,191) (5,229) (641)
Net amortization and deferral 672 3,083 (1,305)
------- ------- -------
Net Pension Expense $ 714 $ 296 $ 475
======= ======= =======
</TABLE>
<PAGE>
<PAGE>
Assumptions used in determining the projected benefit obligations and net
periodic pension expense were:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Discount rate 7.25% 7.25% 8.50%
Rate of increase in future
compensation levels 5.50% 5.50% 5.50%
Expected long-term rate of return
on plan assets 8.00% 8.00% 8.00%
</TABLE>
The Company also sponsors an unfunded Benefits Restoration Plan, which is a
nonqualified plan that provides certain employees, as designated by the
Company's Board of Directors, defined pension benefits in excess of limits
imposed by federal tax law.
The following table sets forth the amount recognized for the Company's
unfunded Benefits Restoration Plan in the consolidated balance sheet at
December 31 (In thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Actuarial present value of accumulated benefit
obligations, including vested benefits of
$1,607 in 1996 and $1,268 in 1995 $ 1,607 $ 1,346
======= =======
Actuarial present value of projected
benefit obligation for services rendered
to date $(1,764) $(1,496)
Unrecognized prior service cost 40 79
Unrecognized net loss 421 287
Unrecognized net obligation 137 274
------- -------
Accrued Benefits Restoration Plan Liability $(1,166) $ (856)
======= =======
</TABLE>
Net cost of the Company's unfunded Benefits Restoration Plan included the
following components:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Service cost benefits earned
during the period $ 10 $ 49 $ 37
Interest cost on projected
benefit obligation 121 102 79
Net amortization and deferral 260 199 194
------ ------ ------
Net Benefits Restoration Plan Expense $ 391 $ 350 $ 310
====== ====== ======
</TABLE>
<PAGE>
<PAGE>
Assumptions used in determining the projected benefit obligations and net
periodic expense were:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Discount rate 7.25% 7.25% 8.50%
Rate of increase in future
compensation levels 6.00% 6.00% 6.00%
Expected long-term rate of return
on plan assets 8.00% 8.00% 8.00%
</TABLE>
The Company has an employees' saving and profit sharing plan for all
full-time employees who have completed one year of continuous service. The
Company's contribution to this plan has certain restrictions based on the
amount of capital accounts and earnings (as defined by the Plan) and on the
aggregate basic annual compensation of participating employees. The amount
expensed for this plan amounted to $2,361,000, $1,906,000 and $1,825,000 in
1996, 1995, and 1994, respectively.
16. Concentration of Credit Risk and Loan Commitments
In the normal course of business, the Company's subsidiary banks originate
loans to customers and enter into various commitments and contingent
liabilities to extend credit which are not reflected in the consolidated
financial statements. These customers are located primarily in northeast and
north central Indiana. This area has a broad economic base and the loan
portfolio is diversified with no industry or service sector comprising greater
than 10% of total loans outstanding. Collateral (e.g., securities,
receivables, inventory, equipment, and real estate) is obtained based on
management's credit assessment of the customer.
Loan commitments are made to accommodate the financial needs of the customers
of the Company's subsidiary banks. Standby letters of credit commit the
Company's subsidiary banks to make payments on behalf of customers when
certain specified future events occur and are primarily issued to support
commercial paper, and medium and long-term notes and debentures, including
industrial revenue obligations. Commercial letters of credit are issued to
facilitate customer trade transactions. These various arrangements have
credit risk essentially the same as that involved in extending loans to
customers and are subject to the normal credit policies of the Company's
subsidiary banks.
Loan commitments (unfunded loans and unused lines of credit) and standby
letters of credit outstanding amounted to $614,656,000 and $56,028,000,
respectively, at December 31, 1996. Commitments under commercial letters of
credit were $4,039,000 and $2,393,000 at December 31, 1996 and 1995,
respectively.
<PAGE>
<PAGE>
17. Interest Rate Futures and Options
The Company uses exchange traded financial futures and option contracts as a
part of its overall interest rate risk management. Financial futures
represent a standardized commitment to receive or pay interest calculated
based on the notional amount of the underlying contract. Call options give
the Company the right, but not the obligation, to buy a specified instrument
at a specified price. Put options give the Company the right to sell a
specified instrument at the strike or exercise price specified by the
contract.
Hedges are undertaken to adjust for differences in the maturities of specific
assets and liabilities. Maturity differences create exposure to changes in
interest rates in net interest income. The Company has employed two different
strategies using futures and option contracts to manage this exposure.
Eurodollar futures contracts are used by the Company to hedge interest rate
exposure on specific short-term liabilities. Each contract represents an
obligation to pay changes in the interest expense on a notional $1,000,000
three month Eurodollar time deposit. The Company's futures exposure increases
in the event that interest rates decrease, and at present is limited to
approximately $13,750 per contract. This maximum exposure represents the
change in interest expense on a three month $1,000,000 time deposit which
would result if interest rates dropped from current levels of 5.5% to zero.
At year end the Company had 704 Eurodollar contracts outstanding with a
maximum possible exposure of $9.7 million.
Deferred losses totaling $408,000 at December 31, 1996 resulting from
Eurodollar futures contracts, are included in interest-bearing liabilities and
will be amortized as an increase to interest expense on the Company's
short-term obligations over various periods up to two years.
A reconciliation of the gross contract amounts of Eurodollar futures contracts
and the effect on net interest income recorded for the years ended December 31
are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Contracts at beginning of year 653 458 439
New Contracts 1,679 909 780
Closed Contracts (1,628) (714) (761)
--------- --------- ----------
Contracts At End Of Year 704 653 458
========= ========= ==========
Increase (Decrease) To
Net Interest Income $ (599) $ (152) $ 281
========= ========= ==========
</TABLE>
<PAGE>
<PAGE>
During 1996 and 1995, the Company also utilized U.S. Treasury note and bond
futures and option contracts to hedge against price changes of specific U.S.
Treasury securities held in the Company's trading accounts. These futures
contracts and options have a face value of $100,000. The futures represent a
contractual obligation to buy a U.S. Treasury Security, while options
represent the right but not the obligation to buy (calls) or sell (puts) a
U.S. Treasury futures contract.
A reconciliation of the gross contract amounts of U. S. Treasury note and
bond futures and option contracts for the years ended December 31 is as
follows:
<TABLE>
<CAPTION>
Futures and
Option Contracts
------------------
1996 1995
-------- --------
<S> <C> <C>
Contracts at beginning of year 455 --
New contracts 9,413 926
Closed contracts (9,868) (471)
-------- -------
Contracts At End Of Year -- 455
======== =======
</TABLE>
Net gains (losses) from trading these financial futures and option contracts
totaled $1,165,000 and $(807,000) for the years ended December 31, 1996 and
1995, respectively. The U.S. Securities hedged by these financial futures and
options had recognized gains (losses) of $(1,464,000) and $971,000 in 1996 and
1995, respectively. The average fair value of exchange traded futures and
options used to hedge the Company's trading activities was an unrealized loss
of $450,000 and $115,000 for the years ended December 31, 1996 and 1995,
respectively. The aggregate fair value of these futures and option contracts
at December 31, 1995 was an unrealized loss $310,000.
The Company has discontinued the use of this hedging program. At December 31,
1996 all previously outstanding U.S. Treasury note and bond futures and option
contracts have been settled and all U.S. Treasury securities hedged by this
program have either been sold or transferred to the Company's
available-for-sale portfolio.
18. Impact of Recently Adopted Accounting Standards
In June 1996, the FASB issued Statement 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." The
standard provides that, following a transfer of financial assets, an entity is
to recognize the financial and servicing assets it controls and the
liabilities it has incurred, derecognize financial assets when control has
been surrendered, and derecognize liabilities when extinguished. The
statement is effective for transactions occurring after December 31, 1996.
The FASB also subsequently issued Statement 127 that delayed the effective
date of certain provisions of Statement 125 until January 1, 1998.
<PAGE>
<PAGE>
Transactions subject to the later effective date include securities lending,
repurchase agreements, dollar rolls, and similar secured financing
arrangements. Application of the new rules is not expected to have a material
impact on the Company's financial statements.
19. Fair Values of Financial Instruments
Statement 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable
to estimate that value. In cases where quoted market prices are not
available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly affected
by the assumptions used, including the discount rate and estimates of future
cash flows. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, could
not be realized in immediate settlement of the instrument. Statement 107
excludes certain financial instruments and all nonfinancial instruments from
its disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts reported in the
balance sheet for cash and short-term investments approximate those assets'
fair values.
Investment securities (including mortgage-backed securities): Fair values
for investment securities are based on quoted market prices, where available.
If quoted market prices are not available, fair values are based on quoted
market prices of comparable instruments.
Trading account assets: Fair values for the Company's trading account assets
are based on quoted market prices.
Loans receivable: For variable-rate loans that reprice frequently and with
no significant change in credit risk, fair values are based on carrying
values. The fair values for all other loans are estimated using discounted
cash flow analyses, using interest rates currently being offered for loans
with similar terms to borrowers of similar credit quality. The carrying
amount of accrued interest approximates its fair value.
<PAGE>
<PAGE>
Deposit Liabilities: The fair values disclosed for demand deposits,
including interest-bearing and noninterest-bearing accounts, savings deposits,
and certain types of money market accounts are, by definition, equal to the
amount payable on demand at the reporting date (i.e., their carrying amounts).
Fair values for fixed-rate certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently being
offered on certificates to a schedule of aggregated expected monthly
maturities on time deposits.
Short-term borrowings: The carrying amounts of federal funds purchased,
borrowings under repurchase agreements, and other short-term borrowings
approximate their fair values.
Long-term borrowings: The fair values of the Company's long-term borrowings
(other than deposits) are estimated using discounted cash flow analyses,
based on current incremental borrowing rates for similar types of borrowing
arrangements.
Off-balance-sheet instruments: Fair values of the Company's off-balance-sheet
instruments (futures, guarantees, and loan commitments), excluding instruments
in the trading portfolio which are carried at fair value, are based on quoted
market prices (futures) or fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
counterparties' credit standing (guarantees, loan commitments).
<PAGE>
<PAGE>
The carrying amount and estimated fair values of the Company's financial
instruments at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Financial Assets:
Cash and due
from banks $ 191,913 $ 191,913 $ 177,602 $ 177,602
Federal funds sold and
securities purchased under
agreements to resell 56,075 56,075 27,150 27,150
Interest-bearing deposits
with banks 376 376 200 200
Investment securities 974,608 974,608 764,560 764,560
Net loans 1,843,438 1,939,588 1,253,347 1,343,781
Financial Liabilities:
Deposits:
Noninterest-bearing 419,118 419,118 284,003 284,003
Interest-bearing 2,002,773 2,003,170 1,483,527 1,485,410
---------- ---------- ---------- ----------
Total Deposits 2,421,891 2,422,288 1,767,530 1,769,413
Federal funds purchased and
securities sold under
agreements to repurchase 387,357 387,357 241,263 241,263
Notes payable-U.S. Treasury
and other borrowings 37,628 37,628 26,381 26,381
Subordinated and other
long-term notes 58,341 58,891 6,400 8,057
Off-Balance-Sheet Instruments:
Loan commitments -- (768) -- (520)
Standby and commercial
letters of credit -- (280) -- (246)
Interest rate futures
contracts -- (172) -- 785
</TABLE>
<PAGE>
<PAGE>
20. Fort Wayne National Corporation (Parent Company Only) Financial
Information
<TABLE>
<CAPTION>
Balance Sheet
1996 1995
-------- --------
(In thousands)
<S> <C> <C>
Assets
Cash $ 3,602 $ 2,743
Short-term investments 6,384 42,046
Investment in subsidiaries 304,188 192,251
Other assets 5,856 6,209
-------- --------
Total Assets $320,030 $243,249
======== ========
Liabilities and Shareholders' Equity
Dividends payable $ 3,602 $ 2,743
Other liabilities 421 395
Subordinated and other long-term notes 23,850 6,400
Shareholders' equity:
Preferred stock 36,999 --
Common stock 19,511 19,048
Capital Surplus 49,367 31,502
Retained Earnings 179,052 170,990
Net unrealized gain on
available-for-sale securities 7,228 12,171
-------- --------
Total Shareholders' Equity 292,157 233,711
-------- --------
Total Liabilities And Shareholders' Equity $320,030 $243,249
======== ========
</TABLE>
<PAGE>
<PAGE>
Statement of Income
<TABLE>
<CAPTION>
For The Years
Ended December 31
1996 1995 1994
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Income
Dividends from subsidiaries $32,848 $18,897 $18,066
Interest and dividends on investments 1,740 2,581 1,584
Other income 372 20 60
------- ------- -------
Total Income 34,960 21,498 19,710
Expenses
Interest on subordinated and
other long-term notes 1,588 868 963
Other expenses 1,563 593 195
------- ------- -------
Total Expenses 3,151 1,461 1,158
------- ------- -------
Income Before Applicable Income
Taxes And Equity In Undistributed
Net Income Of Subsidiaries 31,809 20,037 18,552
Applicable income taxes (credit) (713) 350 43
------- ------- -------
Income Before Equity In Undistributed
Net Income Of Subsidiaries 32,522 19,687 18,509
Equity in undistributed
net income of subsidiaries (20) 7,020 7,703
------- ------- -------
Net Income $32,502 $26,707 $26,212
======= ======= =======
</TABLE>
<PAGE>
<PAGE>
Statement of Cash Flows
<TABLE>
<CAPTION>
For The Years
Ended December 31
1996 1995 1994
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Operating activities
Net income $32,502 $26,707 $26,212
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in undistributed net income of
subsidiaries 20 (7,020) (7,703)
Gain on sale of securities (362) -- (13)
(Increase) decrease in other assets (406) 343 385
Increase in other liabilities 100 52 91
------- ------- -------
Net Cash Provided By Operating Activities 31,854 20,082 18,972
Investing activities
Net (increase) decrease in short-term
investments 35,663 (5,187) (9,373)
Purchase of securities (523) (1,004) (625)
Proceeds from sales of securities 1,372 -- 1,114
Net assets of Valley Financial
Services, Inc., net of cash acquired (110,417) -- --
------- ------- -------
Net Cash Used In Investing Activities (73,905) (6,191) (8,884)
Financing activities
Issuance of long-term debt 15,000 -- --
Principal payments on long-term notes (3,826) (760) (760)
Cash dividends paid on common stock (11,661) (10,544) (9,790)
Cash dividends paid on preferred stock (740) -- --
Issuance of preferred stock 36,999 -- --
Issuance of common stock 20,057 -- --
Proceeds from exercise of stock options 1,277 453 624
Repurchase of common stock (14,196) (2,826) --
------- ------- -------
Net Cash Provided By (Used In)
Financing Activities 42,910 (13,677) (9,926)
------- ------- -------
Net Increase In Cash 859 214 162
Cash at beginning of year 2,743 2,529 2,367
------- ------- -------
Cash At End Of Year $ 3,602 $ 2,743 $ 2,529
======= ======= =======
</TABLE>
<PAGE>
<PAGE>
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
-------- -------- -------- -------- --------
(In thousands except per share data)
<S> <C> <C> <C> <C> <C>
1996
- ------------------------
Total interest income $ 39,829 $ 45,276 $ 56,623 $ 57,637 $199,365
Total interest expense 19,993 22,526 28,684 28,366 99,569
-------- -------- -------- -------- --------
Net Interest Income 19,836 22,750 27,939 29,271 99,796
Provision for possible
loan losses 880 1,005 940 1,128 3,953
-------- -------- -------- -------- --------
Net Interest Income
After Provision For
Possible Loan Losses 18,956 21,745 26,999 28,143 95,843
Noninterest income
Fiduciary fees 2,901 2,824 3,443 3,291 12,459
Other 2,487 2,831 3,578 3,604 12,500
Net securities gains 378 2 9 3 392
-------- -------- -------- -------- --------
Total Noninterest Income 5,766 5,657 7,030 6,898 25,351
Noninterest expense
Salaries and benefits 8,345 8,854 10,917 11,608 39,724
Other 6,429 7,922 9,914 9,188 33,453
-------- -------- -------- -------- --------
Total Noninterest Expense 14,774 16,776 20,831 20,796 73,177
Income Before Income
Taxes 9,948 10,626 13,198 14,245 48,017
Applicable income taxes 3,057 3,451 4,280 4,727 15,515
-------- -------- -------- -------- --------
Net income $ 6,891 $ 7,175 $ 8,918 $ 9,518 $ 32,502
======== ======== ======== ======== ========
Per common share:
Net income $ .60 $ .61 $ .70 $ .77 $ 2.68
======== ======== ======== ======== ========
Dividends declared $ .24 $ .26 $ .26 $ .26 $ 1.02
======== ======== ======== ======== ========
<PAGE>
<PAGE>
1995
- ------------------------
Total interest income $ 38,159 $ 40,039 $ 40,851 $ 41,283 $160,332
Total interest expense 18,387 20,280 21,033 21,276 80,976
-------- -------- -------- -------- --------
Net Interest Income 19,772 19,759 19,818 20,007 79,356
Provision for possible
loan losses 735 260 715 735 2,445
-------- -------- -------- -------- --------
Net Interest Income
After Provision For
Possible Loan Losses 19,037 19,499 19,103 19,272 76,911
Noninterest income
Fiduciary fees 2,372 2,447 2,381 2,549 9,749
Other 2,346 2,529 2,378 2,510 9,763
Net securities gains 11 -- 58 18 87
-------- -------- -------- -------- --------
Total Noninterest Income 4,729 4,976 4,817 5,077 19,599
Noninterest expense
Salaries and benefits 7,950 7,549 7,761 7,977 31,237
Other 7,322 7,806 6,394 6,318 27,840
-------- -------- -------- -------- --------
Total Noninterest Expense 15,272 15,355 14,155 14,295 59,077
Income Before Income
Taxes 8,494 9,120 9,765 10,054 37,433
Applicable income taxes 2,273 2,498 2,910 3,045 10,726
-------- -------- -------- -------- --------
Net income $ 6,221 $ 6,622 $ 6,855 $ 7,009 $ 26,707
======== ======== ======== ======== ========
Per common share:
Net income $ .54 $ .58 $ .60 $ .61 $ 2.33
======== ======== ======== ======== ========
Dividends declared $ .22 $ .24 $ .24 $ .24 $ .94
======== ======== ======== ======== ========
</TABLE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements with the Registrant's independent auditors
which resulted in the filing of a Form 8-K, and there has been no change in
independent auditors of the Registrant during the 24-month period prior to
December 31, 1996.
<PAGE>
<PAGE>
Part III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required under this item, with respect to directors, is
incorporated herein by reference from the March 19, 1997 Proxy Statement under
the caption "Election of Directors."
EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers
(All positions are for one year expiring at time of annual meeting)
<TABLE>
<CAPTION>
Name Age Positions Held during the past 5 years
<S> <C> <C>
M. James Johnston 55 Chairman of the Board (effective
January 1, 1997) and Chief
Executive Officer(effective June 1,
1996) of the Registrant and Fort Wayne
National Bank. Formerly President and
Chief Administrative Officer of the
Registrant and Fort Wayne National
Bank (5 years).
Stephen R. Gillig 49 President and Chief Administrative
Officer of the Registrant (effective
January 1, 1997.) Formerly Executive
Vice President, Chief Financial
Officer and Secretary of the
Registrant and Fort Wayne National
Bank (1 year). Formerly Executive
Vice President, Secretary and
Treasurer of the Registrant and
Executive Vice President of Fort Wayne
National Bank (4 years).
Thomas L. Baumgartner 59 Executive Vice President and Chief
Operations Officer of the Registrant
and Executive Vice President and Chief
Operations Officer of Fort Wayne
National Bank (5 years).
Michael J. Eikenberry 55 Executive Vice President of Loan
Administration of the Registrant and
Fort Wayne National Bank (3 years).
Formerly Senior Vice President of
Loan Administration of the Registrant
and Fort Wayne National Bank (2
years).
<PAGE>
<PAGE>
Karen M. Kasper 41 Senior Vice President, Chief Financial
Officer and Treasurer of the
Registrant and Fort Wayne National
Bank (effective January 1, 1997).
Formerly Senior Vice President and
Treasurer of the Registrant and Fort
Wayne National Bank (1 year). Formerly
Senior Vice President and Controller
of the Registrant and Fort Wayne
National Bank (4 years).
Thomas E. Elyea 51 Senior Vice President of the
Registrant (1 year) and President
and Chief Administrative Officer of
Fort Wayne National Bank (effective
January 1, 1997). Formerly Senior
Vice President Corporate /
Correspondent Banking of Fort Wayne
National Bank (8 months). Formerly
President and Chief Executive Officer
of Firstar Bank Park Forest,
Park Forest, Illinois (5 years).
John T. Kelley 39 Vice President and Controller of the
Registrant (effective January 1, 1997)
and Fort Wayne National Bank (1 year).
Formerly Assistant Vice President and
Assistant Controller of Fort Wayne
National Bank (4 years).
</TABLE>
Other Executive Officers of Affiliate Banks
(All positions are for one year expiring at time of annual meeting)
<TABLE>
<CAPTION>
Name Age Position Held during the past 5 years
<S> <C> <C>
Kim Thomas Stacey 52 Executive Vice President and Senior
Trust Officer of Fort Wayne National
Bank (3 years). Formerly Senior Vice
President and Senior Trust Officer of
Fort Wayne National Bank (3-1/2
years).
Thomas J. Brita 54 Senior Vice President, Banking Center
Administration of Fort Wayne National
Bank (4 years). Formerly Vice
President, Banking Center
Administration of Fort Wayne National
Bank (15 years).
<PAGE>
<PAGE>
Michael C. Haggarty 61 Chairman of the Board, Chief Executive
Officer, and President of The Auburn
State Bank (3 years). Formerly Chief
Executive Officer and President of The
Auburn State Bank (21 years).
Willis E. Alt, Jr. 52 President and Chief Executive Officer
of First National Bank of Warsaw (6
years).
Dennis J. Schwartz 56 President and Chief Executive Officer
of Valley American Bank and Trust
Company (effective May, 1996).
Formerly President of Valley American
Bank and Trust Company (29 years).
</TABLE>
There is no family relationship between any of the persons named above.
<PAGE>
<PAGE>
Item 11. EXECUTIVE COMPENSATION
Information required under this item, with respect to executive compensation,
is incorporated herein by reference from the March 19, 1997 Proxy Statement
under the caption "Executive Compensation."
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required under this item, with respect to security ownership
of certain beneficial owners and management, is incorporated herein by
reference from the March 19, 1997 Proxy Statement under the caption "Principal
Holders of Common Stock" and under the caption "Election of Directors."
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required under this item, with respect to certain
relationships and related transactions, is incorporated herein by reference
from the March 19, 1997 Proxy Statement under the caption "Indebtedness of
Management."
<PAGE>
<PAGE>
Part IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) The following consolidated financial statements and report of
independent auditors of Fort Wayne National Corporation and
subsidiaries are included in Part II, Item 8:
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheet as of December 31, 1996 and 1995
Consolidated Statement of Income for the years ended
December 31, 1996, 1995, and 1994
Consolidated Statement of Cash Flows for the years ended
December 31, 1996, 1995, and 1994
Consolidated Statement of Changes in Shareholders' Equity for
the years ended December 31, 1996, 1995, and 1994
Notes to Consolidated Financial Statements
(2) Financial statement schedules required by Article 9 of Regulation
S-X are not required under the related instructions or are
inapplicable, and therefore have been omitted.
(3) Listing of Exhibits
Exhibit 11 -- Statement Re Computation of Earnings Per Share
Exhibit 21 -- Subsidiaries of the Registrant
Exhibit 23 -- Consent of Ernst and Young LLP
Exhibit 27 -- Financial Data Schedule
(b) Reports on Form 8-K
No Form 8-K was filed during the fourth quarter of 1996.
(c) Exhibits
The response to this portion of Item 14 is submitted as a separate
section of this report. See the Exhibit Index on page 78.
(d) Financial Statement Schedules
None
<PAGE>
<PAGE>
FORT WAYNE NATIONAL CORPORATION
FORM 10-K
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number assigned per Sequential Numbering
Regulation S-K Item 601 Description Page Number
<S> <C> <C>
2 Agreement and Plan of Merger between Valley Financial
Services, Inc. and Fort Wayne National Corporation............ 79
3a Amended and Restated Articles of Incorporation.................. 79
3b Amended and Restated By-Laws.................................... 79
10a Fort Wayne National Bank Capital Note Purchase Agreement........ 79
10b Fort Wayne National Corporation Annual Management
Incentive Compensation Plan................................... 79
10c Supplemental Lease No. 1 (Registrant and FWNB's principal office) 79
10d Purchase Agreement Covering Fort Wayne National Corporation
12.95% Unsubordinated Note Due 2005 and 12.25% Subordinated
Note Due 1995................................................. 79
10e Fort Wayne National Corporation 1985 Stock Incentive Plan
(1989 Edition)................................................ 79
10f Fort Wayne National Corporation Benefit Restoration Plan........ 79
10g Fort Wayne National Corporation 1994 Stock Incentive Plan....... 79
10h Fort Wayne National Corporation 1994 Nonemployee Directors
Stock Incentive Plan.......................................... 79
10i Fort Wayne National Corporation - Term Loan Agreement.......... 80
10j Fort Wayne National Corporation - ISDA Master Agreement dated
as of May 24, 1996............................................ 80
11 Statement Re Computation of Earnings Per Share.................. 84
21 Subsidiaries of the Registrant.................................. 85
23 Consent of Ernst & Young LLP.................................... 86
27 Financial Data Schedule......................................... 87
</TABLE>
<PAGE>
<PAGE>
FORT WAYNE NATIONAL CORPORATION
FORM 10-K
EXHIBITS INCORPORATED BY REFERENCE
2 Agreement and Plan of Merger between Valley Financial Services, Inc.
and Fort Wayne National Corporation. Incorporated by reference to
Exhibit 2 contained in the Company's 1995 Form 10-K, File No.
0-10869.
3a Amended and Restated Articles of Incorporation of Fort Wayne National
Corporation. Incorporated by reference to Exhibit 3a contained in
the Company's June 30, 1996 Form 10-Q, File No. 0-10869.
3b Amended and Restated By-Laws. Incorporated by reference to Exhibit 3b
contained in the Company's 1991 Form 10-K, File No. 0-10869.
10a Fort Wayne National Bank - Capital Note Purchase Agreement.
Incorporated by reference to Exhibit 10.1 contained in Amendment
No. 2 to the Company's Registrant Statement on Form S-14, File
No. 2-75725.
10b Fort Wayne National Corporation Annual Management Incentive
Compensation Plan. Incorporated by reference to Exhibit 10b to the
Company's 1987 Form 10-K, File 0-10869.
10c Fort Wayne National Bank - Supplemental Lease No. 1. Incorporated by
reference to Exhibit 10c contained in the Company's 1983 Form 10-K,
File 0-10869.
10d Purchase Agreement Covering Fort Wayne National Corporation 12.95%
Unsubordinated Note due 2005 and 12.25% Subordinated Note due 1995.
Incorporated by reference to Exhibit 4 contained in the Company's
June 30, 1985, Form 10-Q, File No. 0-10869.
10e Fort Wayne National Corporation 1985 Stock Incentive Plan (1993
Edition). Incorporated by reference to Amendment No. 1 to the
Company's Registration on Form S-8, Registration No. 33-33123.
10f Fort Wayne National Corporation Benefit Restoration Plan. Incorporated
by reference to Exhibit 10f contained in the Company's 1992 Form
10-K, File 0-10869.
10g Fort Wayne National Corporation 1994 Stock Incentive Plan. Incorporated
by reference to Exhibit A contained in the Company's Proxy Statement
dated March 22, 1994.
10h Fort Wayne National Corporation 1994 Nonemployee Directors Stock
Incentive Plan. Incorporated by reference to Exhibit B contained in
the Company's Proxy Statement dated March 22, 1994.
<PAGE>
<PAGE>
FORT WAYNE NATIONAL CORPORATION
FORM 10-K
EXHIBITS INCORPORATED BY REFERENCE - Continued
10i Fort Wayne National Corporation - Term Loan Agreement. Incorporated by
reference to Exhibit 10i contained in the Company's June 30, 1996
Form 10-Q, File No. 0-10869.
10j Fort Wayne National Corporation - ISDA Master Agreement dated
as of May 24, 1996. Incorporated by reference to Exhibit 10j
contained in the Company's June 30, 1996 Form 10-Q, File
No. 0-10869.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be a signed on its
behalf by the undersigned, thereunto duly authorized.
FORT WAYNE NATIONAL CORPORATION (Registrant)
By /S/ M. James Johnston March 18, 1997
M. James Johnston, Chairman of the Board (Date)
and Chief Executive Officer
Principal Executive Officers
/S/ M. James Johnston March 18, 1997
M. James Johnston, Chairman of the Board (Date)
and Chief Executive Officer
/S/ Stephen R. Gillig March 18, 1997
Stephen R, Gillig, President (Date)
and Chief Administrative Officer
Principal Financial and Accounting Officer
/S/ Karen M. Kasper March 18, 1997
Karen M. Kasper, Senior Vice President, (Date)
Chief Financial Officer and Treasurer
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant,
Fort Wayne National Corporation, and in the capacities indicated thereunto
duly authorized on the dates indicated.
By /S/ Walter S. Ainsworth March 18, 1997
Walter S. Ainsworth, Director (Date)
By /S/ Willis E. Alt, Jr. March 18, 1997
Willis E. Alt, Jr., Director (Date)
By /S/ Robert A. Anker March 18, 1997
Robert A. Anker, Director (Date)
By /S/ Stanley C. Craft March 18, 1997
Stanley C. Craft, Director (Date)
By /S/ Richard B. Doner March 18, 1997
Richard B. Doner, Director (Date)
By /S/ Jon F. Fuller March 18, 1997
Jon F. Fuller, Director (Date)
By March 18, 1997
Thomas C. Griffith, Director (Date)
By /S/ Michael C. Haggarty March 18, 1997
Michael C. Haggarty, Director (Date)
By /S/ M. James Johnston March 18, 1997
M. James Johnston, Director (Date)
By /S/ Joanne B. Lantz March 18, 1997
Joanne B. Lantz, Director (Date)
By March 18, 1997
Jackson R. Lehman, Director (Date)
<PAGE>
<PAGE>
By /S/ Michael J. McClelland March 18, 1997
Michael J. McClelland, Director (Date)
By /S/ Patrick G. Michaels March 18, 1997
Patrick G. Michaels, Director (Date)
By /S/ Patricia R. Miller March 18, 1997
Patricia R. Miller, Director (Date)
By /S/ Dennis J. Schwartz March 18, 1997
Dennis J. Schwartz, Director (Date)
By /S/ Paul E. Shaffer March 18, 1997
Paul E. Shaffer, Director (Date)
By /S/ Thomas M. Shoaff March 18, 1997
Thomas M. Shoaff, Director (Date)
By /S/ Jeff H. Towles, M.D. March 18, 1997
Jeff H. Towles, M.D., Director (Date)
By /S/ Julie I. Walda March 18, 1997
Julie I. Walda, Director (Date)
By /S/ Don A. Wolf March 18, 1997
Don A. Wolf, Director (Date)
<PAGE>
<PAGE>
FORT WAYNE NATIONAL CORPORATION
EXHIBIT 11
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Year Ended December 31
1996 1995 1994
-------- -------- --------
(Amounts in thousands, except
per share data)
<S> <C> <C> <C>
PRIMARY
Average shares outstanding................. 11,653 11,449 11,480
Net effect of dilutive stock options --
based on the treasury stock method
using average market price............... 64 55 42
------- ------- -------
TOTAL 11,717 11,504 11,522
======= ======= =======
Net Income................................. $32,502 $26,707 $26,212
Preferred stock dividends.................. 1,295 -- --
------- ------- -------
Net income applicable to common stock...... $31,207 $26,707 $26,212
======= ======= =======
Earnings per common and common share
equivalents.............................. $2.66 $2.32 $2.27
======= ======= =======
FULLY DILUTED
Average shares outstanding.................. 11,653 11,449 11,480
Net effect of conversion of preferred stock. 582 -- --
Net effect of dilutive stock options --
based on the treasury stock method
using the higher of the end of the
period market price or average
market price.............................. 132 87 42
------- ------- -------
TOTAL 12,367 11,536 11,522
======= ======= =======
Net income applicable to common stock...... $32,502 $26,707 $26,212
======= ======= =======
Earnings per common and common share
equivalents.............................. $2.63 $2.32 $2.27
======= ======= =======
</TABLE>
NOTE -- Average shares outstanding were used for the earnings per share
calculation included in the Company's financial statements since
the dilutive effect of the assumed conversion of preferred stock
and stock options granted were less than 3%.
<PAGE>
<PAGE>
FORT WAYNE NATIONAL CORPORATION
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following are wholly owned subsidiaries of the Registrant:
The Auburn State Bank, Auburn, Indiana, chartered by the State of Indiana.
Churubusco State Bank, Churubusco, Indiana, chartered by the State of Indiana.
First National Bank of Huntington, Huntington, Indiana, a national banking
association formed under the laws of the United States.
First National Bank of Warsaw, Warsaw, Indiana, a national banking association
formed under the laws of the United States.
Fort Wayne National Bank, Fort Wayne, Indiana, a national banking
association formed under the laws of the United State.
Fort Wayne National Life Insurance Company, Phoenix, Arizona, chartered by
the State of Arizona.
Old-First National Bank in Bluffton, Bluffton, Indiana, a national banking
association formed under the laws of the United States.
Valley American Bank and Trust Company, Mishawaka, Indiana, chartered by the
State of Indiana.
<PAGE>
<PAGE>
FORT WAYNE NATIONAL CORPORATION
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-33123) pertaining to the Fort Wayne National Corporation 1994
Stock Incentive Plan of Fort Wayne National Corporation and in the related
Prospectus of our report dated January 24, 1997, with respect to the
consolidated financial statements of Fort Wayne National Corporation included
in the Annual Report (Form 10-K) for the year ended December 31, 1996.
/S/ Ernst & Young LLP
Fort Wayne, Indiana
March 17, 1997
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORT WAYNE NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL
STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 191,913
<INT-BEARING-DEPOSITS> 376
<FED-FUNDS-SOLD> 56,075
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 961,932
<INVESTMENTS-MARKET> 974,608
<LOANS> 1,875,965
<ALLOWANCE> 30,307
<TOTAL-ASSETS> 3,221,297
<DEPOSITS> 2,421,891
<SHORT-TERM> 424,985
<LIABILITIES-OTHER> 23,923
<LONG-TERM> 58,341
36,999
0
<COMMON> 19,511
<OTHER-SE> 235,647
<TOTAL-LIABILITIES-AND-EQUITY> 3,221,297
<INTEREST-LOAN> 141,257
<INTEREST-INVEST> 56,491
<INTEREST-OTHER> 1,617
<INTEREST-TOTAL> 199,365
<INTEREST-DEPOSIT> 79,653
<INTEREST-EXPENSE> 99,569
<INTEREST-INCOME-NET> 99,796
<LOAN-LOSSES> 3,953
<SECURITIES-GAINS> 392
<EXPENSE-OTHER> 73,177
<INCOME-PRETAX> 48,017
<INCOME-PRE-EXTRAORDINARY> 32,502
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,502
<EPS-PRIMARY> 2.66
<EPS-DILUTED> 2.63
<YIELD-ACTUAL> 4.22
<LOANS-NON> 7,717
<LOANS-PAST> 1,804
<LOANS-TROUBLED> 2,534
<LOANS-PROBLEM> 14,900
<ALLOWANCE-OPEN> 20,047
<CHARGE-OFFS> 6,644
<RECOVERIES> 1,151
<ALLOWANCE-CLOSE> 30,307
<ALLOWANCE-DOMESTIC> 30,307
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
