<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1995
-----------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------------- --------------------------
Commission file number 0-8234
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MAGNA GROUP, INC.
-------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 37-0996453
--------------------------------- --------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
One Magna Place
1401 South Brentwood Boulevard
St. Louis, Missouri 63144-1401
-------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(314) 963-2500
-------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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
----- ------
Title of class of Number of shares
common stock outstanding as of August 8, 1995
--------------------------------- --------------------------------------
Common stock, $2.00 par value 27,767,765
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<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION 7
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 16
SIGNATURE PAGE 17
EXHIBIT INDEX 18
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
----------------------------
<TABLE>
MAGNA GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>
JUNE 30 DECEMBER 31
1995 1994
---------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 205,390 $ 264,434
Federal funds sold 54,767 17,496
Securities:
Held-to-maturity 269,922 267,829
Available-for-sale 933,308 949,345
Loans 3,097,027 2,976,187
Unearned income (4,623) (7,986)
Reserve for loan losses (43,270) (43,991)
---------- ----------
Net Loans 3,049,134 2,924,210
Premises and equipment 81,195 72,986
Other assets 127,366 142,202
---------- ----------
TOTAL ASSETS $4,721,082 $4,638,502
========== ==========
LIABILITIES
Deposits:
Noninterest bearing $ 537,693 $ 595,224
Interest bearing 3,315,067 3,077,531
---------- ----------
Total Deposits 3,852,760 3,672,755
Federal funds purchased and
repurchase agreements 314,317 421,515
Other short-term borrowings 15,000 15,000
Long-term debt 68,928 104,453
Other liabilities 55,310 53,467
---------- ----------
TOTAL LIABILITIES 4,306,315 4,267,190
Commitments and contingent liabilities
STOCKHOLDERS' EQUITY
Preferred stock:
Class B, voting, $20 par value -
2,074 shares issued and outstanding 41 41
Common stock, $2 par value - 27,736,198
and 27,512,462 shares issued and
outstanding, respectively 55,472 55,025
Capital surplus 207,037 203,693
Retained earnings 161,389 148,417
Net unrealized losses on securities (9,172) (35,864)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 414,767 371,312
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,721,082 $4,638,502
========== ==========
See accompanying notes.
</TABLE>
3
<PAGE> 4
<TABLE>
MAGNA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ------------------
1995 1994 1995 1994
------------------ ------------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $65,705 $51,936 $128,805 $101,590
Securities:
Taxable 16,748 15,169 33,888 29,096
Tax-exempt 1,770 1,727 3,580 3,754
------- ------- -------- --------
18,518 16,896 37,468 32,850
Other interest income 803 147 1,016 193
------- ------- -------- --------
TOTAL INTEREST INCOME 85,026 68,979 167,289 134,633
Interest Expense:
Deposits 34,384 23,205 64,442 46,787
Short-term borrowings 3,972 1,851 8,971 3,194
Long-term debt 1,380 1,797 2,900 3,178
------- ------- -------- --------
TOTAL INTEREST EXPENSE 39,736 26,853 76,313 53,159
------- ------- -------- --------
NET INTEREST INCOME 45,290 42,126 90,976 81,474
Provision for Loan Losses 2,262 1,000 3,929 2,100
------- ------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 43,028 41,126 87,047 79,374
Noninterest Income:
Service charges on deposits 5,653 5,737 11,114 10,774
Trust 2,244 2,270 4,563 4,517
Securities gains, net 297 346 363 312
Other 3,929 4,426 7,164 8,486
------- ------- -------- --------
12,123 12,779 23,204 24,089
Noninterest Expense:
Employee compensation and
other benefits 18,078 18,503 36,661 36,430
Net occupancy 4,933 3,989 8,905 7,835
Equipment 2,160 2,304 4,362 4,490
FDIC insurance premiums 2,059 2,014 4,117 4,007
Other 10,916 11,410 21,390 22,415
------- ------- -------- --------
38,146 38,220 75,435 75,177
------- ------- -------- --------
INCOME BEFORE INCOME TAXES 17,005 15,685 34,816 28,286
Income Tax Expense 4,606 5,143 10,782 8,530
------- ------- -------- --------
NET INCOME $12,399 $10,542 $ 24,034 $ 19,756
======= ======= ======== ========
Average Shares Outstanding 27,821 26,037 27,757 25,958
Per Share Data:
Net income $.45 $.40 $.87 $.76
==== ==== ==== ====
Dividends declared $.20 $.19 $.40 $.38
==== ==== ==== ====
See accompanying notes.
</TABLE>
4
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<TABLE>
MAGNA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<CAPTION>
SIX MONTHS ENDED
JUNE 30
---------------------
1995 1994
---- ----
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 32,425 $ 28,462
INVESTING ACTIVITIES
Proceeds from maturities of held-to-maturity
securities 10,274 12,784
Proceeds from sales of held-to-maturity securities 738 -
Purchases of held-to-maturity securities (10,485) (11,336)
Proceeds from maturities of available-
for-sale securities 74,890 156,655
Proceeds from sales of available-for-
sale securities 70,352 104,687
Purchases of available-for-sale securities (86,179) (276,966)
Net increase in loans (133,281) (101,021)
Proceeds from sales of foreclosed property 2,796 4,776
Purchases of premises and equipment (13,025) (4,579)
Proceeds from sales of premises and equipment 103 770
Cash and cash equivalents of acquired institutions - 10,660
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (83,817) (103,570)
FINANCING ACTIVITIES
Net increase (decrease) in deposits 180,178 (31,253)
Cash dividends (11,062) (9,786)
Increase (decrease) in federal funds
purchased and repurchase agreements (142,198) 85,470
Proceeds from long-term debt - 73,500
Net decrease in other short-term borrowings - (26,864)
Other 2,701 298
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 29,619 91,365
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (21,773) 16,257
Cash and cash equivalents at beginning of period 281,930 204,960
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $260,157 $221,217
======== ========
See accompanying notes.
</TABLE>
5
<PAGE> 6
MAGNA GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A--BASIS OF PRESENTATION
The unaudited interim condensed consolidated financial statements
of Magna Group, Inc. and its affiliates ("Magna") have been prepared
in accordance with generally accepted accounting principles for the
banking industry and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. Reference is hereby
made to the notes to consolidated financial statements contained in
Magna's Annual Report on Form 10-K for the year ended December 31,
1994. In the opinion of management, all adjustments considered
necessary for a fair presentation of the unaudited interim condensed
consolidated financial statements have been included therein and are
of a normal recurring nature. The results of operations for the
interim periods presented herein are not necessarily indicative of the
results to be expected for the full year.
NOTE B--RECLASSIFICATIONS
Certain amounts in the 1994 financial statements have been
reclassified to conform with the 1995 presentation. Such
reclassifications had no effect on net income.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
-----------------------------------------------------------
OPERATIONS AND FINANCIAL CONDITION
----------------------------------
OVERVIEW
Net income for the second quarter of 1995 was $12.4 million,
or 45 cents per common share, compared with $10.5 million, or 40
cents per share, for the second quarter of 1994. For the first
six months of 1995, net income was $24.0 million, or 87 cents per
common share, compared with $19.8 million, or 76 cents per share,
in 1994.
The effect of acquisitions consummated in the second and
third quarters of 1994 are reflected in Magna's results of
operations from the respective acquisition dates forward.
Table 1 summarizes Magna's statement of income and the
change in each category for the periods presented.
<TABLE>
TABLE 1 - - Comparative Statements of Income
(In thousands)
<CAPTION>
Three Months Ended
June 30 Change
---------------------- ---------------------
1995 1994 Amount Percent
-------- -------- --------- -------
<S> <C> <C> <C> <C>
Total interest income
(fully tax-equivalent) . . . . . . $86,277 $70,164 $16,113 23.0%
Total interest expense. . . . . . . 39,736 26,853 12,883 48.0
------- ------- -------
Net interest income. . . . . . . 46,541 43,311 3,230 7.5
Provision for loan losses . . . . . 2,262 1,000 1,262 126.2
Noninterest income:
Service charges on deposits. . . 5,653 5,737 (84) (1.5)
Trust. . . . . . . . . . . . . . 2,244 2,270 (26) (1.1)
Other. . . . . . . . . . . . . . 3,929 4,426 (497) (11.2)
------- ------- -------
11,826 12,433 (607) (4.9)
Securities gains, net . . . . . 297 346 (49) (14.2)
------- ------- -------
Total. . . . . . . . . . . . 12,123 12,779 (656) (5.1)
------- ------- -------
Noninterest expense:
Employee compensation and
other benefits . . . . . . . 18,078 18,503 (425) (2.3)
Net occupancy. . . . . . . . . . 4,933 3,989 944 23.7
Equipment. . . . . . . . . . . . 2,160 2,304 (144) (6.3)
FDIC insurance premiums. . . . . 2,059 2,014 45 2.2
Other. . . . . . . . . . . . . . 10,916 11,410 (494) (4.3)
------- ------- -------
Total. . . . . . . . . . . . 38,146 38,220 (74) (.2)
------- ------- -------
Income before income taxes. . . . . 18,256 16,870 1,386 8.2
Less: tax-equivalent adjustment . . 1,251 1,185 66 5.6
Income tax expense . . . . . . . . 4,606 5,143 (537) (10.4)
------- ------- -------
Net income. . . . . . . . . . . . . $12,399 $10,542 $ 1,857 17.6
======= ======= =======
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
Six Months Ended
June 30 Change
---------------------- ---------------------
1995 1994 Amount Percent
-------- -------- --------- -------
<S> <C> <C> <C> <C>
Total interest income
(fully tax-equivalent) . . . . . . $169,769 $137,161 $32,608 23.8%
Total interest expense. . . . . . . 76,313 53,159 23,154 43.6
-------- -------- -------
Net interest income. . . . . . . 93,456 84,002 9,454 11.3
Provision for loan losses . . . . . 3,929 2,100 1,829 87.1
Noninterest income:
Service charges on deposits. . . 11,114 10,774 340 3.2
Trust. . . . . . . . . . . . . . 4,563 4,517 46 1.0
Other. . . . . . . . . . . . . . 7,164 8,486 (1,322) (15.6)
-------- -------- -------
22,841 23,777 (936) (3.9)
Securities gains, net . . . . . 363 312 51 16.3
-------- -------- -------
Total. . . . . . . . . . . . 23,204 24,089 (885) (3.7)
-------- -------- -------
Noninterest expense:
Employee compensation and
other benefits . . . . . . . 36,661 36,430 231 .6
Net occupancy. . . . . . . . . . 8,905 7,835 1,070 13.7
Equipment. . . . . . . . . . . . 4,362 4,490 (128) (2.9)
FDIC insurance premiums. . . . . 4,117 4,007 110 2.7
Other. . . . . . . . . . . . . . 21,390 22,415 (1,025) (4.6)
-------- -------- -------
Total. . . . . . . . . . . . 75,435 75,177 258 .3
-------- -------- -------
Income before income taxes. . . . . 37,296 30,814 6,482 21.0
Less: tax-equivalent adjustment . . 2,480 2,528 (48) (1.9)
Income tax expense . . . . . . . . 10,782 8,530 2,252 26.4
-------- -------- -------
Net income. . . . . . . . . . . . . $ 24,034 $ 19,756 $ 4,278 21.7
======== ======== =======
</TABLE>
The following paragraphs discuss more fully significant changes
and trends as they relate to Magna's results of operations during
the six month and three month periods ended June 30, 1995 and its
financial condition, asset quality, capital resources and liquidity
as of June 30, 1995. This discussion should be read in conjunction
with Magna's condensed consolidated financial statements and notes
thereto. The results of operations for the interim periods
presented herein are not necessarily indicative of the results to be
expected for the full year.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Fully tax-equivalent net interest income increased 7.5% for the
second quarter of 1995 compared with 1994 and increased 11.3% for
the first six months of 1995 compared with the same period in 1994.
Fully tax-equivalent net interest income was positively impacted in
1995 by the effect of acquisitions consummated in 1994 and increased
volume of earning assets during 1995.
The net interest margin for the second quarter of 1995 was 4.36%
compared with 4.54% for the first quarter of 1995, 4.59% for the
fourth quarter of 1994 and 4.50% for the second quarter of 1994.
The net interest margin for the first six months of 1995 was 4.45%
compared with 4.42% for the first six months of 1994. The decline
in the second quarter of 1995 compared with the first quarter of
1995 occurred as Magna's overall yield on earning assets did not
keep pace with the increase in its cost of funds. Based on the
current interest rate environment, management anticipates continued
8
<PAGE> 9
pressure on the margin, consistent with what is expected throughout
much of the financial services industry.
PROVISION FOR LOAN LOSSES
The increase in the provision for loan losses in 1995 was
primarily due to a higher level of net charge-offs and internal loan
growth. Activity in the reserve for loan losses and nonperforming
loan data are presented and discussed under "ASSET QUALITY."
NONINTEREST INCOME
Total noninterest income was $12.1 million for the second quarter
of 1995 compared with $12.8 million for the second quarter of 1994.
Noninterest income for the first six months of 1995 was $23.2
million compared with $24.1 million for the same period of 1994.
A reduced level of brokerage commissions and insurance-related
income was recorded in the first six months of 1995 compared with
1994. Contributing to this decline was the higher interest rate
environment in 1995 which was conducive to the sale of traditional
bank products. Other sources of noninterest income for the first
six months of 1995 were positively impacted by the effect of the
1994 acquisitions.
For the second quarter of 1995, noninterest income as a
percentage of average assets, on an annualized basis, was 1.05%
compared with 1.23% for the second quarter of 1994.
NONINTEREST EXPENSE
Total noninterest expense was $38.1 million for the second
quarter of 1995 compared with $38.2 million for the second quarter
of 1994. For the first six months of 1995, total noninterest
expense was $75.4 million compared with $75.2 million for the same
period of 1994.
Noninterest expense increased during the first six months of 1995
as a result of acquisitions consummated in 1994, normal merit
increases and increases in other employee benefits. Staff
reductions and other cost savings associated with consolidation of
certain back-office operations reduced the impact of the additional
expenses during the three month and six month periods ended June 30,
1995. During the second quarter of 1995, certain departments within
Magna were relocated to a new operations center. Net occupancy
expense increased during 1995, primarily due to costs recorded in
the second quarter associated with this relocation.
For the second quarter of 1995, noninterest expense as a
percentage of average assets, on an annualized basis, was 3.31%
compared with 3.68% for the second quarter of 1994.
The effective income tax rate was 27.1% and 32.8% for the second
quarter of 1995 and 1994, respectively. The effective income tax
rate was 31.0% and 30.2% for the first six months of 1995 and 1994,
respectively. The decrease in the effective income tax rate for the
second quarter of 1995 compared with the second quarter of 1994
resulted from a $.9 million nonrecurring tax benefit in the second
quarter of 1995. A valuation allowance relating to certain federal
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<PAGE> 10
and state net operating loss carryforwards was eliminated in the
second quarter of 1995 based on management's belief that realization
of this deferred tax asset became more likely than not as a result
of mergers of certain Magna subsidiaries.
FINANCIAL CONDITION
GENERAL
Certain components of Magna's consolidated balance sheet at June
30, 1995 compared with December 31, 1994 are presented in summary
form in Table 2 below.
<TABLE>
TABLE 2 -- Selected Comparative Balance Sheet Items
(In thousands)
<CAPTION>
Change
June 30 December 31 -------------------
1995 1994 Amount Percent
---------- ----------- -------- -------
<S> <C> <C> <C> <C>
Total assets . . . . . . . . . $4,721,082 $4,638,502 $ 82,580 1.8%
Loans, net of unearned income . 3,092,404 2,968,201 124,203 4.2
Investments . . . . . . . . . . 1,203,230 1,217,174 (13,944) (1.1)
Deposits . . . . . . . . . . . 3,852,760 3,672,755 180,005 4.9
Borrowings. . . . . . . . . . . 398,245 540,968 (142,723) (26.4)
</TABLE>
LOANS
Loans, net of unearned income, increased 4.2%, or $124.2
million, from year-end 1994 to June 30, 1995 due to Magna's
competitive pricing structure, strong loan demand primarily in
the commercial, financial and agricultural sector during the
first six months of 1995 and a seasonal increase in real estate
construction loans.
Table 3 presents the composition of the loan portfolio by type
of borrower and major loan category and the percentage of each to
the total portfolio for the periods presented.
<TABLE>
TABLE 3 -- Loan Portfolio Composition
(In thousands)
<CAPTION>
June 30 December 31 June 30
1995 1994 1994
--------------- --------------- ---------------
Commercial borrowers: Amount Percent Amount Percent Amount Percent
--------------------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural. . . . . . $ 558,721 18.1% $ 492,538 16.6% $ 479,441 17.6%
Commercial real estate . . . 947,396 30.6 932,553 31.4 872,612 31.9
Real estate
construction. . . . . . . . 148,969 4.8 130,734 4.4 109,939 4.0
---------- ---- ---------- ---- ---------- ----
Total commercial. . . . . 1,655,086 53.5 1,555,825 52.4 1,461,992 53.5
---------- ---- ---------- ---- ---------- ----
Consumer borrowers:
-------------------
1-4 family residential
real estate . . . . . . . . 917,258 29.7 903,082 30.4 829,176 30.3
Other consumer loans,
net of unearned income. . . 520,060 16.8 509,294 17.2 443,284 16.2
---------- ---- ---------- ---- ---------- ----
Total consumer. . . . . . 1,437,318 46.5 1,412,376 47.6 1,272,460 46.5
---------- ---- ---------- ---- ---------- ----
Total loans, net of
unearned income . . . . . $3,092,404 100.0% $2,968,201 100.0% $2,734,452 100.0%
========== ===== ========== ===== ========== =====
</TABLE>
10
<PAGE> 11
INVESTMENTS
Total investments decreased 1.1%, or $13.9 million, at June
30, 1995 compared with year-end 1994. This decrease was
primarily the result of proceeds from principal paydowns and
maturities of securities being used to fund loan growth and
reduce short-term borrowings, partially offset by an improvement
in the market value of the available-for-sale portfolio at June
30, 1995 compared with year-end 1994.
Table 4 presents the composition of investments and the change
in each category for the periods presented.
<TABLE>
TABLE 4 -- Investment Securities Portfolio Composition
(In thousands)
<CAPTION>
Change
June 30 December 31 -----------------
1995 1994 Amount Percent
---------- ----------- -------- -------
<S> <C> <C> <C> <C>
Held-to-maturity securities . . $ 269,922 $ 267,829 $ 2,093 .8%
Available-for-sale securities. . 933,308 949,345 (16,037) (1.7)
---------- ---------- --------
Total investments . . . . . . $1,203,230 $1,217,174 $(13,944) (1.1)
========== ========== ========
</TABLE>
DEPOSITS
Total deposits increased $180.0 million to $3.9 billion at
June 30, 1995 from year-end 1994. The decline in noninterest
bearing deposits during the first six months of 1995 was due to
seasonal factors which increase demand deposits at the end of a
calendar year. The increase in time deposits during the first
six months of 1995 was primarily due to higher rates paid on such
deposits as a result of the overall upward shift in the interest
rate environment and Magna's decision to price competitively such
deposits. Management believes that these factors also led to
movement from more liquid savings and market rate deposits to
time deposits during the first six months of 1995.
Table 5 sets forth the composition of deposits and the changes
in each category for the periods presented.
<TABLE>
TABLE 5 -- Deposit Liability Composition
(In thousands)
<CAPTION>
June 30 December 31
1995 1994 Change
---------------- ----------------- ---------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing. . . . . . . . $ 537,693 13.9% $ 595,224 16.2% $(57,531) (9.7)%
NOW and other
transaction accounts. . . . . . 535,301 13.9 551,246 15.0 (15,945) (2.9)
Savings and market
rate deposits . . . . . . . . . 842,168 21.9 920,611 25.1 (78,443) (8.5)
Time deposits less than
$100,000. . . . . . . . . . . . 1,653,883 42.9 1,396,027 38.0 257,856 18.5
Time deposits $100,000
or more . . . . . . . . . . . . 283,715 7.4 209,647 5.7 74,068 35.3
---------- ----- ---------- ----- --------
Total deposits. . . . . . . . $3,852,760 100.0% $3,672,755 100.0% $180,005 4.9
========== ===== ========== ===== ========
</TABLE>
11
<PAGE> 12
BORROWINGS
Total borrowings decreased 26.4%, or $142.7 million, from
year-end 1994 to June 30, 1995, primarily due to decreases in
federal funds purchased and repurchase agreements. Contributing
to the decrease in short-term borrowings for the periods compared
was the higher level of deposits and utilization of securities
proceeds to reduce borrowings during the first six months of
1995. Long-term debt decreased 34.0%, or $35.5 million,
primarily due to the reclassification of a $35 million repurchase
agreement of a banking subsidiary which had a remaining maturity
of less than one year as of June 30, 1995.
ASSET QUALITY
Nonperforming assets increased $2.7 million, or 6.2%, from
year-end 1994 to June 30, 1995. Net loan charge-offs which
exceeded the provision for loan losses and an increase in
nonperforming loans during the first six months of 1995 resulted
in a decline in the reserve to nonperforming loan ratio at June
30, 1995 to 111.95% compared with 119.21% at year-end 1994.
Management continues to monitor the asset quality of the
portfolio, promptly following up on problem credits and
implementing workout strategies to manage the level of
nonperforming assets.
Foreclosed property increased $1.0 million during the first
six months of 1995, primarily as the result of the addition of a
$1.6 million retail office building. Magna does not anticipate
any significant losses on the disposition of other real estate
owned at June 30, 1995.
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Table 6 sets forth a summary of Magna's loan portfolio mix and
nonperforming assets.
<TABLE>
Table 6 - Loan Portfolio Mix and Nonperforming Assets
(In thousands)
<CAPTION>
June 30, 1995 December 31, 1994
----------------------- --------------------------
Loans and Non- Loans and Non-
Foreclosed performing Foreclosed performing
Property Assets Property Assets
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Commercial borrowers:
---------------------
Commercial, financial and
agricultural . . . . . . . . . . . $ 558,721 $ 8,715 $ 492,538 $ 9,713
Commercial real estate. . . . . . . 947,396 13,377 932,553 13,365
Real estate construction. . . . . . 148,969 2,891 130,734 1,135
---------- ------- ---------- -------
Total commercial. . . . . . . . . 1,655,086 24,983 1,555,825 24,213
Consumer borrowers:
-------------------
1-4 family residential
real estate. . . . . . . . . . . . 917,258 10,942 903,082 9,534
Other consumer loans, net
of unearned income . . . . . . . . 520,060 2,725 509,294 3,155
---------- ------- ---------- -------
Total consumer. . . . . . . . . . 1,437,318 13,667 1,412,376 12,689
---------- ------- ---------- -------
Total loans, net of
unearned income . . . . . . . . . 3,092,404 38,650 2,968,201 36,902
Foreclosed property . . . . . . . . . 8,207 8,207 7,206 7,206
---------- ------- ---------- -------
Total . . . . . . . . . . . . . . . $3,100,611 $46,857 $2,975,407 $44,108
========== ======= ========== =======
Nonaccrual loans. . . . . . . . . . . $27,330 $27,184
Loans past due 90 days or more. . . . 9,701 8,060
Restructured loans. . . . . . . . . . 1,619 1,658
------- -------
Total nonperforming loans . . . . . 38,650 36,902
Foreclosed property . . . . . . . . . 8,207 7,206
------- -------
Total nonperforming assets. . . . . $46,857 $44,108
======= =======
Nonperforming loans to
total loans. . . . . . . . . . . . 1.25% 1.24%
Nonperforming assets to total
loans and foreclosed property. . . 1.51 1.48
</TABLE>
13
<PAGE> 14
Table 7 presents information pertaining to the activity in and
an analysis of Magna's reserve for loan losses for the periods
presented.
<TABLE>
Table 7 - Reserve For Loan Losses
(In thousands)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ -----------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Balance at beginning of period . . . . . . $43,748 $39,808 $43,991 $40,065
Reserves of acquired institutions . . . . . - 1,662 - 1,662
Loans charged off:
Commercial borrowers:
Commercial, financial and agricultural . (1,190) (1,561) (2,093) (2,512)
Commercial real estate . . . . . . . . . (759) (686) (2,089) (1,581)
Real estate construction . . . . . . . . (47) - (47) (104)
------- ------- ------- -------
Total commercial . . . . . . . . . . . (1,996) (2,247) (4,229) (4,197)
Consumer borrowers:
1-4 family residential real estate . . . (690) (658) (901) (1,144)
Other consumer loans . . . . . . . . . . (1,198) (811) (2,025) (1,609)
------- ------- ------- -------
Total consumer . . . . . . . . . . . . (1,888) (1,469) (2,926) (2,753)
------- ------- ------- -------
Total charge-offs . . . . . . . . . (3,884) (3,716) (7,155) (6,950)
------- ------- ------- -------
Recoveries of loans previously charged off:
Commercial borrowers:
Commercial, financial and agricultural . 600 2,282 1,063 3,489
Commercial real estate . . . . . . . . . 245 260 698 599
Real estate construction . . . . . . . . 2 118 50 119
------- ------- ------- -------
Total commercial . . . . . . . . . . . 847 2,660 1,811 4,207
Consumer borrowers:
1-4 family residential real estate . . . 22 126 155 155
Other consumer loans . . . . . . . . . . 275 318 539 619
------- ------- ------- -------
Total consumer . . . . . . . . . . . . 297 444 694 774
------- ------- ------- -------
Total recoveries . . . . . . . . . . 1,144 3,104 2,505 4,981
------- ------- ------- -------
Net loans charged off . . . . . . . . . . . (2,740) (612) (4,650) (1,969)
------- ------- ------- -------
Provision for loan losses charged
to operations . . . . . . . . . . . . . . 2,262 1,000 3,929 2,100
------- ------- ------- -------
Balance at end of period . . . . . . . . . $43,270 $41,858 $43,270 $41,858
======= ======= ======= =======
Net loan charge-offs (annualized) to
average loans . . . . . . . . . . . . . . .36% .09% .31% .15%
Reserve for loan losses to total loans . . 1.40 1.53 1.40 1.53
Reserve for loan losses to
nonperforming loans . . . . . . . . . . . 111.95 103.10 111.95 103.10
</TABLE>
14
<PAGE> 15
Management believes that the consolidated reserve for loan
losses is adequate to provide for possible losses inherent in the
loan portfolio. However, no assurance can be given that
subsequent changes in economic conditions, risk elements and
other factors will not require significant changes in the level
of the loan loss reserve.
CAPITAL RESOURCES AND LIQUIDITY
CAPITAL
Financial institutions are required to maintain ratios of
capital to assets in accordance with guidelines adopted in 1989
by the Board of Governors of the Federal Reserve System. The
guidelines are commonly known as "Risk-Based Guidelines" as they
define the capital level requirements of a financial institution
based upon the level of credit risk associated with holding
various categories of assets. The Risk-Based Guidelines require
minimum ratios of Tier 1 and Total Capital to risk-weighted
assets of 4% and 8%, respectively. At June 30, 1995, Magna's
Tier 1 and Total Capital ratios were 12.89% and 14.13%,
respectively. Magna's leverage ratio at June 30, 1995 was 8.57%.
DIVIDENDS AND RESOURCE COMMITMENTS
The primary source of funds to Magna on a parent company only
basis consists of dividends and management fees paid by its
banking affiliates. In general, the ability of Magna's banking
affiliates to pay dividends and management fees is subject to
limitations under various laws and regulations, and to prudent
and sound banking principles. Dividends available to Magna from
its banking affiliates without prior regulatory approval amounted
to approximately $163 million at June 30, 1995.
Magna believes that its banking subsidiaries' earnings will be
sufficient to provide capital to fund asset growth and to permit
the distribution of cash dividends to Magna sufficient to meet
Magna's operating and debt service requirements for the
foreseeable future.
15
<PAGE> 16
PART II - OTHER INFORMATION
---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
(a) Exhibits: See Exhibit Index on page 18 hereof.
(b) Reports on Form 8-K: No reports on Form 8-K were filed by
Magna during the second quarter of 1995.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MAGNA GROUP, INC.
----------------------------------------
(Registrant)
DATE: August 9, 1995 By: /s/ G. Thomas Andes
----------------------------- -------------------------------------
G. Thomas Andes
Chairman of the Board and
Chief Executive Officer
DATE: August 9, 1995 By: /s/ Luckett G. Maynard
----------------------------- --------------------------------------
Luckett G. Maynard
Executive Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
17
<PAGE> 18
<TABLE>
EXHIBIT INDEX
-------------
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
11.1 Computation of Earnings Per Common
Share, filed herewith.
27.1 Financial Data Schedule, filed herewith.
</TABLE>
18
<PAGE> 1
<TABLE>
MAGNA GROUP, INC. Exhibit 11.1
COMPUTATION OF EARNINGS PER COMMON SHARE
(In thousands, except per share data)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary
-------
Average common shares outstanding 27,683 25,904 27,633 25,822
Assumed exercise of employee stock options 138 133 124 136
-------- -------- -------- --------
Total 27,821 26,037 27,757 25,958
======== ======== ======== ========
Net income $12,399 $10,542 $24,034 $19,756
Less preferred stock dividends:
Class B voting preferred (1) (1) (2) (2)
-------- -------- -------- --------
Net income $12,398 $10,541 $24,032 $19,754
======== ======== ======== ========
Per common share:
Net income $0.45 $0.40 $0.87 $0.76
======== ======== ======== ========
Fully Diluted <FA>
------------------
Average common shares outstanding 27,683 25,904 27,633 25,822
Assumed exercise of employee stock options 156 144 168 146
Assumed conversion of:
7% convertible subordinated capital notes 911 991 921 993
8-3/4% convertible subordinated debentures -- -- -- --
-------- -------- -------- --------
Average common shares and common
share equivalents 28,750 27,039 28,722 26,961
======== ======== ======== ========
Net income $12,399 $10,542 $24,034 $19,756
Less preferred stock dividends:
Class B voting preferred (1) (1) (2) (2)
Elimination of interest net of
related tax effects on:
7% convertible subordinated capital notes 200 210 400 422
8-3/4% convertible subordinated debentures -- -- -- --
-------- -------- -------- --------
Fully diluted net income $12,598 $10,751 $24,432 $20,176
======== ======== ======== ========
Per common share:
Net income $0.44 <FA> $0.40 <FA> $0.85 <FA> $0.75 <FA>
======== ======== ======== ========
<FN>
<FA>Inclusion of common share equivalents for the 8 3/4% convertible subordinated debentures for the three month and six month
periods ended June 30, 1995 and 1994 in the calculation of fully diluted net income per common share results in antidilution,
and therefore, these are excluded from the computation.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MAGNA GROUP, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 205,390
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 54,767
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 933,308
<INVESTMENTS-CARRYING> 269,922
<INVESTMENTS-MARKET> 275,609
<LOANS> 3,092,404
<ALLOWANCE> 43,270
<TOTAL-ASSETS> 4,721,082
<DEPOSITS> 3,852,760
<SHORT-TERM> 329,317
<LIABILITIES-OTHER> 55,310
<LONG-TERM> 68,928
0
41
<COMMON> 55,472
<OTHER-SE> 359,254
<TOTAL-LIABILITIES-AND-EQUITY> 4,721,082
<INTEREST-LOAN> 128,805
<INTEREST-INVEST> 37,468
<INTEREST-OTHER> 1,016
<INTEREST-TOTAL> 167,289
<INTEREST-DEPOSIT> 64,442
<INTEREST-EXPENSE> 76,313
<INTEREST-INCOME-NET> 90,976
<LOAN-LOSSES> 3,929
<SECURITIES-GAINS> 363
<EXPENSE-OTHER> 75,435
<INCOME-PRETAX> 34,816
<INCOME-PRE-EXTRAORDINARY> 34,816
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,034
<EPS-PRIMARY> .87
<EPS-DILUTED> .85
<YIELD-ACTUAL> 4.45
<LOANS-NON> 27,330
<LOANS-PAST> 9,701
<LOANS-TROUBLED> 1,619
<LOANS-PROBLEM> 0<F1>
<ALLOWANCE-OPEN> 43,991
<CHARGE-OFFS> (7,155)
<RECOVERIES> 2,505
<ALLOWANCE-CLOSE> 43,270
<ALLOWANCE-DOMESTIC> 43,270
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> (0)<F1>
<FN>
<F1>Information not currently available; is reported on an annual basis only.
</TABLE>
