<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 SEPTEMBER 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
----------------------------------------------------
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
----- -----
<TABLE>
<CAPTION>
Title of class of Number of shares
common stock outstanding as of November 8, 1995
- ----------------------------- ------------------------------------
<S> <C>
Common stock, $2.00 par value 27,902,152
</TABLE>
<PAGE> 2
<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>
SEPTEMBER 30 DECEMBER 31
1995 1994
------------ -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 149,088 $ 264,434
Federal funds sold 10,037 17,496
Securities:
Held-to-maturity 266,851 267,829
Available-for-sale 1,094,480 949,345
Loans 3,174,412 2,976,187
Unearned income (3,469) (7,986)
Reserve for loan losses (41,630) (43,991)
---------- ----------
Net Loans 3,129,313 2,924,210
Premises and equipment 81,669 72,986
Other assets 127,629 142,202
---------- ----------
TOTAL ASSETS $4,859,067 $4,638,502
========== ==========
LIABILITIES
Deposits:
Noninterest bearing $ 501,470 $ 595,224
Interest bearing 3,278,466 3,077,531
---------- ----------
Total Deposits 3,779,936 3,672,755
Federal funds purchased 134,345 129,870
Repurchase agreements 365,725 291,645
Other short-term borrowings - 15,000
Long-term debt 93,747 104,453
Other liabilities 56,485 53,467
---------- ----------
TOTAL LIABILITIES 4,430,238 4,267,190
Commitments and contingent liabilities
STOCKHOLDERS' EQUITY
Preferred stock:
Class B, voting, $20 par value - 2,039
and 2,074 shares issued and
outstanding, respectively 41 41
Common stock, $2 par value - 27,881,344
and 27,512,462 shares issued and
outstanding, respectively 55,762 55,025
Capital surplus 209,464 203,693
Retained earnings 168,965 148,417
Net unrealized losses on securities (5,403) (35,864)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 428,829 371,312
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,859,067 $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 NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------ ------------------
1995 1994 1995 1994
------------------ ------------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $67,698 $56,747 $196,503 $158,337
Securities:
Taxable 18,609 16,014 52,497 45,110
Tax-exempt 1,850 1,811 5,430 5,565
------- ------- -------- --------
20,459 17,825 57,927 50,675
Other interest income 323 206 1,339 399
------- ------- -------- --------
TOTAL INTEREST INCOME 88,480 74,778 255,769 209,411
Interest Expense:
Deposits 36,415 25,961 100,857 72,748
Short-term borrowings 5,306 2,409 14,277 5,603
Long-term debt 1,421 1,837 4,321 5,015
------- ------- -------- --------
TOTAL INTEREST EXPENSE 43,142 30,207 119,455 83,366
------- ------- -------- --------
NET INTEREST INCOME 45,338 44,571 136,314 126,045
Provision for Loan Losses 3,562 900 7,491 3,000
------- ------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 41,776 43,671 128,823 123,045
Noninterest Income:
Service charges on deposits 5,731 5,593 16,845 16,367
Trust 2,104 2,300 6,667 6,817
Securities gains (losses), net (128) 39 235 351
Other 4,391 3,644 11,555 12,130
------- ------- -------- --------
12,098 11,576 35,302 35,665
Noninterest Expense:
Employee compensation and
other benefits 18,040 18,328 54,701 54,758
Net occupancy 4,292 3,934 13,197 11,769
Equipment 2,284 2,212 6,646 6,702
FDIC insurance premiums (172) 2,021 3,945 6,028
Other 10,231 10,870 31,621 33,285
------- ------- -------- --------
34,675 37,365 110,110 112,542
------- ------- -------- --------
INCOME BEFORE INCOME TAXES 19,199 17,882 54,015 46,168
Income Tax Expense 6,064 5,464 16,846 13,994
------- ------- -------- --------
NET INCOME $13,135 $12,418 $ 37,169 $ 32,174
======= ======= ======== ========
Average Shares Outstanding 27,958 27,055 27,823 26,328
Per Share Data:
Net income $.47 $.46 $1.34 $1.22
==== ==== ===== =====
Dividends declared $.20 $.19 $.60 $.57
==== ==== ==== ====
See accompanying notes.
</TABLE>
4
<PAGE> 5
<TABLE>
MAGNA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-------------------
1995 1994
---- ----
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 46,271 $ 31,474
INVESTING ACTIVITIES
Proceeds from maturities of held-to-maturity
securities 14,364 17,450
Proceeds from sales of held-to-maturity securities 3,863 -
Purchases of held-to-maturity securities (13,396) (12,276)
Proceeds from maturities of available-
for-sale securities 125,990 195,531
Proceeds from sales of available-for-
sale securities 71,933 114,687
Purchases of available-for-sale securities (296,194) (313,497)
Net increase in loans (215,173) (224,891)
Proceeds from sales of foreclosed property 6,283 8,395
Purchases of premises and equipment (16,036) (7,778)
Proceeds from sales of premises and equipment 246 808
Cash and cash equivalents of acquired institutions - 12,523
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (318,120) (209,048)
FINANCING ACTIVITIES
Net increase in deposits 107,417 5,115
Cash dividends (16,620) (14,899)
Increase in federal funds purchased
and repurchase agreements 43,555 96,298
Proceeds from long-term debt 25,000 73,500
Net decrease in other short-term borrowings (15,000) (11,737)
Other 4,692 781
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 149,044 149,058
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (122,805) (28,516)
Cash and cash equivalents at beginning of period 281,930 204,960
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $159,125 $176,444
======== ========
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--ACQUISITION
On October 11, 1995, Magna entered into a definitive agreement
which provides for the acquisition of River Bend Bancshares, Inc.,
East Alton, Illinois, ("River Bend"). River Bend, with three banking
locations, reported at December 31, 1994, assets of approximately $158
million and stockholders' equity of approximately $12 million. The
agreement provides for the issuance of approximately 550,240 shares of
Magna common stock and approximately $12.3 million in cash in exchange
for the outstanding shares of River Bend common and preferred stock.
The acquisition, which is subject to, among other things, regulatory
approval and the approval of River Bend's stockholders, will be
accounted for as a purchase and is expected to be completed in the
first quarter of 1996.
NOTE C--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 third quarter of 1995 was $13.1 million,
or 47 cents per common share, compared with $12.4 million, or 46
cents per share, for the third quarter of 1994. For the first
nine months of 1995, net income was $37.2 million, or $1.34 per
common share, compared with $32.2 million, or $1.22 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
September 30 Change
------------------- -----------------
1995 1994 Amount Percent
------ ------- -------- --------
<S> <C> <C> <C> <C>
Total interest income
(fully tax-equivalent) . . . . . . . . $89,790 $76,031 $13,759 18.1%
Total interest expense. . . . . . . . . 43,142 30,207 12,935 42.8
------- ------- -------
Net interest income. . . . . . . . . 46,648 45,824 824 1.8
Provision for loan losses . . . . . . . 3,562 900 2,662 295.8
Noninterest income:
Service charges on deposits. . . . . 5,731 5,593 138 2.5
Trust. . . . . . . . . . . . . . . . 2,104 2,300 (196) (8.5)
Other. . . . . . . . . . . . . . . . 4,391 3,644 747 20.5
------- ------- -------
12,226 11,537 689 6.0
Securities gains (losses), net. . . (128) 39 (167) <FNM>
------- ------- -------
Total . . . . . . . . . . . . . . 12,098 11,576 522 4.5
------- ------- -------
Noninterest expense:
Employee compensation and
other benefits . . . . . . . . . 18,040 18,328 (288) (1.6)
Net occupancy. . . . . . . . . . . . 4,292 3,934 358 9.1
Equipment. . . . . . . . . . . . . . 2,284 2,212 72 3.3
FDIC insurance premiums. . . . . . . (172) 2,021 (2,193) (108.5)
Other. . . . . . . . . . . . . . . . 10,231 10,870 (639) (5.9)
------- ------- -------
Total . . . . . . . . . . . . . . 34,675 37,365 (2,690) (7.2)
------- ------- -------
Income before income taxes. . . . . . . 20,509 19,135 1,374 7.2
Less: tax-equivalent adjustment . . . . 1,310 1,253 57 4.5
Income tax expense . . . . . . . . . . 6,064 5,464 600 11.0
------- ------- -------
Net income. . . . . . . . . . . . . . . $13,135 $12,418 $ 717 5.8
======= ======= =======
<FN>
- ----------------------
<FNM> - not meaningful
7
<PAGE> 8
<CAPTION>
Nine Months Ended
September 30 Change
------------------- -----------------
1995 1994 Amount Percent
------ ------- -------- --------
<S> <C> <C> <C> <C>
Total interest income
(fully tax-equivalent) . . . . . . . . $259,559 $213,192 $46,367 21.7%
Total interest expense. . . . . . . . . 119,455 83,366 36,089 43.3
-------- -------- -------
Net interest income. . . . . . . . . 140,104 129,826 10,278 7.9
Provision for loan losses . . . . . . . 7,491 3,000 4,491 149.7
Noninterest income:
Service charges on deposits. . . . . 16,845 16,367 478 2.9
Trust. . . . . . . . . . . . . . . . 6,667 6,817 (150) (2.2)
Other. . . . . . . . . . . . . . . . 11,555 12,130 (575) (4.7)
-------- -------- -------
35,067 35,314 (247) (.7)
Securities gains, net . . . . . . . 235 351 (116) (33.0)
-------- -------- -------
Total . . . . . . . . . . . . . . 35,302 35,665 (363) (1.0)
-------- -------- -------
Noninterest expense:
Employee compensation and
other benefits . . . . . . . . . 54,701 54,758 (57) (.1)
Net occupancy. . . . . . . . . . . . 13,197 11,769 1,428 12.1
Equipment. . . . . . . . . . . . . . 6,646 6,702 (56) (.8)
FDIC insurance premiums. . . . . . . 3,945 6,028 (2,083) (34.6)
Other. . . . . . . . . . . . . . . . 31,621 33,285 (1,664) (5.0)
-------- -------- -------
Total . . . . . . . . . . . . . . 110,110 112,542 (2,432) (2.2)
-------- -------- -------
Income before income taxes. . . . . . . 57,805 49,949 7,856 15.7
Less: tax-equivalent adjustment . . . . 3,790 3,781 9 .2
Income tax expense . . . . . . . . . . 16,846 13,994 2,852 20.4
-------- -------- -------
Net income. . . . . . . . . . . . . . . $ 37,169 $ 32,174 $ 4,995 15.5
======== ======== =======
</TABLE>
The following paragraphs discuss more fully significant changes
and trends as they relate to Magna's results of operations during
the nine month and three month periods ended September 30, 1995 and
its financial condition, asset quality, capital resources and
liquidity as of September 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 1.8% for the
third quarter of 1995 compared with 1994 and increased 7.9% for the
first nine 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 third quarter of 1995 was 4.17%
compared with 4.36% for the second quarter of 1995, 4.54% for the first
quarter of 1995 and 4.52% for the third quarter of 1994. The net
interest margin for the first nine months of 1995 was 4.35% compared
with 4.45% for the first nine months of 1994. The continued decline
in the third quarter of 1995 compared with the first two quarters 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
8
<PAGE> 9
current interest rate environment, management anticipates continued
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 third quarter
of 1995 compared with $11.6 million for the third quarter of 1994.
Noninterest income for the first nine months of 1995 was $35.3
million compared with $35.7 million for the same period of 1994.
During the first nine months of 1995 compared with the same period
in 1994, the effect of a higher level of credit card income was
offset by reduced brokerage commissions and insurance-related income
and a lower level of other real estate income.
For the third quarter of 1995, noninterest income as a percentage
of average assets, on an annualized basis, was 1.01% compared with
1.06% for the third quarter of 1994.
NONINTEREST EXPENSE
Total noninterest expense was $34.7 million for the third quarter
of 1995 compared with $37.4 million for the third quarter of 1994.
For the first nine months of 1995, total noninterest expense was
$110.1 million compared with $112.5 million for the same period of
1994.
The effect of staff reductions and other cost savings associated
with consolidation of certain back-office operations was partially
offset by normal merit increases and increases in other employee
benefits for the third quarter and first nine months of 1995
compared with the same periods in 1994. Net occupancy expense
increased during the third quarter and the first nine months of 1995
compared with the same periods in 1994, primarily due to relocation
and other costs associated with Magna's operations center which was
placed in service during the second quarter of 1995. A reduction in
the Federal Deposit Insurance Corporation deposit assessment rate
announced in the third quarter of 1995, retroactive to June 1, 1995
resulted in a negative expense of $.2 million for the three months
ended September 30, 1995 compared with expense of $2.0 million for
the third quarter of 1994. For the first nine months of 1995 and
1994, FDIC insurance premiums were $3.9 million and $6.0 million,
respectively.
For the third quarter of 1995, noninterest expense as a
percentage of average assets, on an annualized basis, was 2.89%
compared with 3.41% for the third quarter of 1994.
The effective income tax rate was 31.6% and 30.6% for the third
quarter of 1995 and 1994, respectively. The effective income tax
rate was 31.2% and 30.3% for the first nine months of 1995 and 1994,
respectively. Income tax expense for the first nine months of 1995
9
<PAGE> 10
included a $.9 million nonrecurring benefit. The benefit resulted
from the elimination of a valuation allowance on certain federal and
state net operating loss carryforwards 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. Excluding
the effect of the nonrecurring benefit, the increase in the
effective tax rates for the periods compared primarily resulted from
reduced levels of tax-exempt interest as a percentage of total
interest income.
FINANCIAL CONDITION
GENERAL
Certain components of Magna's consolidated balance sheet at
September 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
September 30 December 31 -------------------
1995 1994 Amount Percent
------------ ----------- -------- --------
<S> <C> <C> <C> <C>
Total assets . . . . . . . . . $4,859,067 $4,638,502 $220,565 4.8%
Loans, net of unearned income . 3,170,943 2,968,201 202,742 6.8
Investments . . . . . . . . . . 1,361,331 1,217,174 144,157 11.8
Deposits . . . . . . . . . . . 3,779,936 3,672,755 107,181 2.9
Federal funds purchased . . . . 134,345 129,870 4,475 3.4
Repurchase agreements:
Cash management . . . . . . . 291,751 162,272 129,479 79.8
Other . . . . . . . . . . . . 73,974 129,373 (55,399) (42.8)
Other short-term borrowings . . - 15,000 (15,000) (100.0)
Long-term debt . . . . . . . . 93,747 104,453 (10,706) (10.2)
</TABLE>
LOANS
Loans, net of unearned income, increased 6.8%, or $202.7
million, from year-end 1994 to September 30, 1995 due to Magna's
competitive pricing structure and strong loan demand primarily in
the commercial, financial and agricultural sector during the
first nine months of 1995.
Table 3 presents the composition of the loan portfolio by type
of borrower and major loan category and the percentage of each to
the total portfolio for the periods presented.
10
<PAGE> 11
<TABLE>
TABLE 3 -- Loan Portfolio Composition
(In thousands)
<CAPTION>
September 30 December 31 September 30
1995 1994 1994
---------------- --------------- ---------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Commercial borrowers:
- --------------------
Commercial, financial
and agricultural . . . . . . . . . . .$ 581,944 18.4% $ 492,538 16.6% $ 490,239 17.0%
Commercial real estate. . . . . . . . . 973,905 30.7 932,553 31.4 906,252 31.3
Real estate
construction . . . . . . . . . . . . . 156,217 4.9 130,734 4.4 115,210 4.0
---------- ----- ---------- ----- ---------- -----
Total commercial . . . . . . . . . . 1,712,066 54.0 1,555,825 52.4 1,511,701 52.3
---------- ----- ---------- ----- ---------- -----
Consumer borrowers:
- -------------------
1-4 family residential
real estate. . . . . . . . . . . . . . 934,098 29.5 903,082 30.4 884,327 30.6
Other consumer loans,
net of unearned income . . . . . . . . 524,779 16.5 509,294 17.2 492,975 17.1
---------- ----- ---------- ----- ---------- -----
Total consumer . . . . . . . . . . . 1,458,877 46.0 1,412,376 47.6 1,377,302 47.7
---------- ----- ---------- ----- ---------- -----
Total loans, net of
unearned income. . . . . . . . . . .$3,170,943 100.0% $2,968,201 100.0% $2,889,003 100.0%
========== ===== ========== ===== ========== =====
</TABLE>
INVESTMENTS
Total investments increased 11.8%, or $144.2 million, at
September 30, 1995 compared with year-end 1994. Management's
decision to invest in available-for-sale securities was a part of
its overall asset/liability management strategy. Activity in the
securities portfolio is managed to control interest rate risk and
maintain adequate liquidity based on Magna's financial position.
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
September 30 December 31 ----------------
1995 1994 Amount Percent
----------- ----------- -------- -------
<S> <C> <C> <C> <C>
Held-to-maturity securities . . $ 266,851 $ 267,829 $ (978) (.4)%
Available-for-sale securities. . 1,094,480 949,345 145,135 15.3
---------- ---------- -------- ----
Total investments . . . . . . $1,361,331 $1,217,174 $144,157 11.8
========== ========== ======== ====
</TABLE>
DEPOSITS
Total deposits increased $107.2 million to $3.8 billion at
September 30, 1995 from year-end 1994. The upward shift in the
interest rate environment and availability of alternative
investment products offered by Magna and its competitors led to a
decline in noninterest bearing deposits at September 30, 1995
compared with year-end 1994. Also contributing to the decline
were seasonal factors which tend to increase demand deposits at
the end of a calendar year. The increase in time deposits during
the first nine months of 1995 was primarily due to higher rates
paid on such deposits as a result of the shift in the interest
rate environment and Magna's decision to price competitively such
deposits. Management believes that these factors also led to
movement from more liquid savings and market rate deposits to
time deposits during the first nine months of 1995.
11
<PAGE> 12
Table 5 sets forth the composition of deposits and the changes
in each category for the periods presented.
<TABLE>
TABLE 5 -- Deposit Liability Composition
(In thousands)
<CAPTION>
September 30 December 31
1995 1994 Change
----------------- ----------------- ---------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing . . . . . . . . .$ 501,470 13.3% $ 595,224 16.2% $(93,754) (15.8)%
NOW and other
transaction accounts . . . . . . . 507,238 13.4 551,246 15.0 (44,008) (8.0)
Savings and market
rate deposits . . . . . . . . . . 802,676 21.2 920,611 25.1 (117,935) (12.8)
Time deposits less than
$100,000 . . . . . . . . . . . . . 1,651,974 43.7 1,396,027 38.0 255,947 18.3
Time deposits $100,000
or more. . . . . . . . . . . . . . 316,578 8.4 209,647 5.7 106,931 51.0
---------- ----- ---------- ----- --------
Total deposits . . . . . . . . .$3,779,936 100.0% $3,672,755 100.0% $107,181 2.9
========== ===== ========== ===== ========
</TABLE>
CASH MANAGEMENT REPURCHASE AGREEMENTS
Cash management repurchase agreement accounts increased
79.8%, or $129.5 million, from year-end 1994 to September 30,
1995. Such accounts involve the daily transfer of excess funds
from a noninterest bearing deposit account into the interest
bearing cash management repurchase agreement account. The cash
management repurchase agreement accounts are viewed by management
as a source of funds from commercial depositors and serve as an
alternative investment vehicle for such depositors.
OTHER SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Other short-term borrowings reflected a decrease of $15.0
million at September 30, 1995 compared with year-end 1994 as debt
of a banking subsidiary matured. Long-term debt decreased 10.2%,
or $10.7 million, primarily as a result of reclassification of a
$35 million repurchase agreement of a banking subsidiary from
long-term debt to repurchase agreements and a new $25 million
borrowing of a banking subsidiary which replaced the matured debt.
ASSET QUALITY
Nonperforming assets increased 5.7%, or $2.5 million, from
year-end 1994 to September 30, 1995. Five credits totaling
approximately $6 million, of which approximately $4.7 million had
been identified as concerned loans, were placed on nonaccrual
during the third quarter of 1995. These credits represent the
primary reason for the increase in nonperforming assets during
1995. However, nonperforming assets as a percentage of total
loans and foreclosed property remained stable when comparing
September 30, 1995 to year-end 1994. Charge-offs in the third
quarter 1995 included three commercial credits totaling
approximately $1.3 million, a $.7 million consumer credit related
to a commercial borrower and a $.3 million 1-4 family real estate
credit. As a result of the increase in nonaccrual credits and
12
<PAGE> 13
the level of net charge-offs, the reserve to nonperforming loan
ratio declined to 104.24% at September 30, 1995 compared with
119.21% at year-end 1994. Management continues to monitor the
asset quality of the portfolio, promptly following up on problem
credits and implementing workout strategies to manage the level of
nonperforming assets. Magna does not anticipate any significant
losses on the disposition of other real estate owned at September
30, 1995.
Management believes that the consolidated reserve for loan
losses is adequate to provide for possible losses inherent in the
loan portfolio. However, no assurance can be given that subsequent
changes in economic conditions, risk elements and other factors
will not require significant changes in the level of the loan loss
reserve.
Table 6 sets forth a summary of Magna's loan portfolio mix and
nonperforming assets.
<TABLE>
Table 6 - Loan Portfolio Mix and Nonperforming Assets
(In thousands)
<CAPTION>
September 30, 1995 December 31, 1994
---------------------- -----------------------
Loans and Non- Loans and Non-
Foreclosed performing Foreclosed performing
Property Assets Property Assets
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Commercial borrowers:
---------------------
Commercial, financial and
agricultural. . . . . . . . . . .$ 581,944 $ 8,911 $ 492,538 $ 9,713
Commercial real estate . . . . . . 973,905 14,030 932,553 13,365
Real estate construction . . . . . 156,217 2,698 130,734 1,135
---------- ------- ---------- -------
Total commercial . . . . . . . . 1,712,066 25,639 1,555,825 24,213
Consumer borrowers:
-------------------
1-4 family residential
real estate . . . . . . . . . . . 934,098 11,565 903,082 9,534
Other consumer loans, net
of unearned income. . . . . . . . 524,779 2,732 509,294 3,155
---------- ------- ---------- -------
Total consumer . . . . . . . . . 1,458,877 14,297 1,412,376 12,689
---------- ------- ---------- -------
Total loans, net of
unearned income . . . . . . . . . 3,170,943 39,936 2,968,201 36,902
Foreclosed property. . . . . . . . . 6,677 6,677 7,206 7,206
---------- ------- ---------- -------
Total. . . . . . . . . . . . . . .$3,177,620 $46,613 $2,975,407 $44,108
========== ======= ========== =======
Nonaccrual loans . . . . . . . . . . $31,237 $27,184
Loans past due 90 days or more . . . 7,097 8,060
Restructured loans . . . . . . . . . 1,602 1,658
------- -------
Total nonperforming loans. . . . . 39,936 36,902
Foreclosed property. . . . . . . . . 6,677 7,206
------- -------
Total nonperforming assets . . . . $46,613 $44,108
======= =======
Nonperforming loans to
total loans . . . . . . . . . . . 1.26% 1.24%
Nonperforming assets to total
loans and foreclosed property . . 1.47 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 Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Balance at beginning of period . . . . . . $43,270 $41,858 $43,991 $40,065
Reserves of acquired institutions . . . . . - 1,079 - 2,741
Loans charged off:
Commercial borrowers:
Commercial, financial and agricultural . (3,289) (445) (5,382) (2,957)
Commercial real estate . . . . . . . . . (777) (562) (2,866) (2,143)
Real estate construction . . . . . . . . (93) - (140) (104)
------- ------- ------- -------
Total commercial . . . . . . . . . . . (4,159) (1,007) (8,388) (5,204)
Consumer borrowers:
1-4 family residential real estate . . . (833) (194) (1,734) (1,338)
Other consumer loans . . . . . . . . . . (1,031) (780) (3,056) (2,389)
------- ------- ------- -------
Total consumer . . . . . . . . . . . . (1,864) (974) (4,790) (3,727)
------- ------- ------- -------
Total charge-offs . . . . . . . . . (6,023) (1,981) (13,178) (8,931)
------- ------- ------- -------
Recoveries of loans previously charged off:
Commercial borrowers:
Commercial, financial and agricultural . 234 389 1,297 3,878
Commercial real estate . . . . . . . . . 193 210 891 809
Real estate construction . . . . . . . . 2 114 52 233
------- ------- ------- -------
Total commercial . . . . . . . . . . . 429 713 2,240 4,920
Consumer borrowers:
1-4 family residential real estate . . . 114 23 269 178
Other consumer loans . . . . . . . . . . 278 315 817 934
------- ------- ------- -------
Total consumer . . . . . . . . . . . . 392 338 1,086 1,112
------- ------- ------- -------
Total recoveries . . . . . . . . . . 821 1,051 3,326 6,032
------- ------- ------- -------
Net loans charged off . . . . . . . . . . . (5,202) (930) (9,852) (2,899)
------- ------- ------- -------
Provision for loan losses charged
to operations . . . . . . . . . . . . . . 3,562 900 7,491 3,000
------- ------- ------- -------
Balance at end of period . . . . . . . . . $41,630 $42,907 $41,630 $42,907
======= ======= ======= =======
Net loan charge-offs (annualized) to
average loans . . . . . . . . . . . . . . .66% .13% .43% .15%
Reserve for loan losses to total loans . . 1.31 1.49 1.31 1.49
Reserve for loan losses to
nonperforming loans . . . . . . . . . . . 104.24 98.26 104.24 98.26
</TABLE>
14
<PAGE> 15
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 September 30, 1995,
Magna's Tier 1 and Total Capital ratios were 12.84% and 14.00%,
respectively. Magna's leverage ratio at September 30, 1995 was
8.56%.
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 $168 million at September 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 third 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: November 10, 1995 By: /s/ G. Thomas Andes
- ----------------------------- ------------------------------
G. Thomas Andes
Chairman of the Board and
Chief Executive Officer
DATE: November 10, 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 Nine Months Ended
September 30 September 30
1995 1994 1995 1994
------- -------- -------- ------
<S> <C> <C> <C> <C>
Primary
-------
Average common shares outstanding 27,794 26,892 27,687 26,182
Assumed exercise of employee stock options 164 163 136 146
------- ------- ------- -------
Total 27,958 27,055 27,823 26,328
======= ======= ======= =======
Net income $13,135 $12,418 $37,169 $32,174
Less preferred stock dividends:
Class B voting preferred -- (1) (2) (2)
------- ------- ------- -------
Net income $13,135 $12,417 $37,167 $32,172
======= ======= ======= =======
Per common share:
Net income $0.47 $0.46 $1.34 $1.22
======= ======= ======= =======
Fully Diluted <FA>
--------------------------
Average common shares outstanding 27,794 26,892 27,687 26,182
Assumed exercise of employee stock options 193 166 214 171
Assumed conversion of:
7% convertible subordinated capital notes 881 956 908 981
8-3/4% convertible subordinated debentures -- -- -- --
------- ------- ------- -------
Average common shares and common share
equivalents 28,868 28,014 28,809 27,334
======= ======= ======= =======
Net income $13,135 $12,418 $37,169 $32,174
Less preferred stock dividends:
Class B voting preferred -- (1) (2) (2)
Elimination of interest net of related tax
effects on:
7% convertible subordinated capital notes 179 211 578 633
8-3/4% convertible subordinated debentures -- -- -- --
------- ------- ------- -------
Fully diluted net income $13,314 $12,628 $37,745 $32,805
======= ======= ======= =======
Per common share:
Net income $0.46 $0.45 $1.31 $1.20
======= ======= ======= =======
<FN>
<FA> Inclusion of common share equivalents for the 8 3/4% convertible subordinated debentures for the three month and nine
month periods ended September 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 SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 149,088
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 10,037
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,094,480
<INVESTMENTS-CARRYING> 266,851
<INVESTMENTS-MARKET> 273,407
<LOANS> 3,170,943
<ALLOWANCE> 41,630
<TOTAL-ASSETS> 4,859,067
<DEPOSITS> 3,779,936
<SHORT-TERM> 500,070
<LIABILITIES-OTHER> 56,485
<LONG-TERM> 93,747
0
41
<COMMON> 55,762
<OTHER-SE> 373,026
<TOTAL-LIABILITIES-AND-EQUITY> 4,859,067
<INTEREST-LOAN> 196,503
<INTEREST-INVEST> 57,927
<INTEREST-OTHER> 1,339
<INTEREST-TOTAL> 255,769
<INTEREST-DEPOSIT> 100,857
<INTEREST-EXPENSE> 119,455
<INTEREST-INCOME-NET> 136,314
<LOAN-LOSSES> 7,491
<SECURITIES-GAINS> 235
<EXPENSE-OTHER> 110,110
<INCOME-PRETAX> 54,015
<INCOME-PRE-EXTRAORDINARY> 54,015
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,169
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.31
<YIELD-ACTUAL> 4.35
<LOANS-NON> 31,237
<LOANS-PAST> 7,097
<LOANS-TROUBLED> 1,602
<LOANS-PROBLEM> 0<F1>
<ALLOWANCE-OPEN> 43,991
<CHARGE-OFFS> 13,178
<RECOVERIES> 3,326
<ALLOWANCE-CLOSE> 41,630
<ALLOWANCE-DOMESTIC> 41,630
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0<F1>
<FN>
<F1>Information not currently available; is reported on an annual basis only.
</TABLE>
