<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, 1996
------------------------------------
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 November 8, 1996
- - ----------------------------- --------------------------------------
Common stock, $2.00 par value 28,110,713
<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
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II - OTHER INFORMATION
ITEM 5 - OTHER INFORMATION 20
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 26
SIGNATURE PAGE 27
EXHIBIT INDEX 28
</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
1996 1995
------------ -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 157,076 $ 175,167
Federal funds sold 83,543 47,046
Securities:
Held-to-maturity 141,848 126,248
Available-for-sale 1,454,618 1,238,616
Loans 3,368,705 3,205,374
Unearned income (1,044) (2,608)
Reserve for loan losses (45,093) (42,623)
---------- ----------
Net Loans 3,322,568 3,160,143
Premises and equipment 81,718 81,691
Other assets 143,110 118,588
---------- ----------
TOTAL ASSETS $5,384,481 $4,947,499
========== ==========
LIABILITIES
Deposits:
Noninterest bearing $ 532,436 $ 570,262
Interest bearing 3,632,424 3,318,004
---------- ----------
Total Deposits 4,164,860 3,888,266
Federal funds purchased 20,195 41,790
Repurchase agreements 501,287 368,861
Other short-term borrowings 98,628 50,000
Long-term debt 79,117 93,071
Other liabilities 60,492 59,467
---------- ----------
TOTAL LIABILITIES 4,924,579 4,501,455
Commitments and contingent liabilities
STOCKHOLDERS' EQUITY
Preferred stock:
Class B, voting, $20 par value -
1,996 and 2,039 shares issued, respectively 40 41
Common stock, $2 par value - 28,797,642
and 27,997,889 shares issued,
respectively 57,595 55,996
Capital surplus 226,943 211,588
Retained earnings 205,019 177,438
Treasury stock 745,000 shares, at cost (17,605) -
Net unrealized gains (losses)
on securities (12,090) 981
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 459,902 446,044
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,384,481 $4,947,499
========== ==========
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
------------------ -----------------
1996 1995 1996 1995
------------------ -----------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $72,111 $67,698 $212,503 $196,503
Securities:
Taxable 24,221 18,609 69,226 52,497
Tax-exempt 1,769 1,850 5,229 5,430
------- ------- -------- --------
25,990 20,459 74,455 57,927
Other interest income 461 323 1,316 1,339
------- ------- -------- --------
TOTAL INTEREST INCOME 98,562 88,480 288,274 255,769
Interest Expense:
Deposits 40,399 36,415 116,785 100,857
Federal funds purchased 542 956 2,518 2,176
Repurchase agreements 6,010 4,246 15,589 11,649
Other short-term borrowings 1,158 104 3,028 452
Long-term debt 1,727 1,421 5,221 4,321
------- ------- -------- --------
TOTAL INTEREST EXPENSE 49,836 43,142 143,141 119,455
------- ------- -------- --------
NET INTEREST INCOME 48,726 45,338 145,133 136,314
Provision for Loan Losses 2,499 3,562 7,781 7,491
------- ------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 46,227 41,776 137,352 128,823
Noninterest Income:
Service charges on deposits 5,919 5,731 17,458 16,845
Trust 2,356 2,104 7,102 6,667
Securities gains(losses), net 89 (128) 779 235
Other 4,158 4,391 11,977 11,555
------- ------- -------- --------
12,522 12,098 37,316 35,302
Noninterest Expense:
Employee compensation and
other benefits 17,048 18,040 51,937 54,701
Net occupancy 4,551 4,292 13,536 13,197
Equipment 2,154 2,284 6,627 6,646
FDIC insurance premiums 442 (172) 525 3,945
Other 10,320 10,231 31,544 31,621
------- ------- -------- --------
34,515 34,675 104,169 110,110
------- ------- -------- --------
INCOME BEFORE INCOME TAXES 24,234 19,199 70,499 54,015
Income Tax Expense 8,208 6,064 24,271 16,846
------- ------- -------- --------
NET INCOME $16,026 $13,135 $ 46,228 $ 37,169
======= ======= ======== ========
Average Shares Outstanding:
Primary 28,233 27,958 28,409 27,823
Fully Diluted 29,792 28,868 29,999 28,809
Per Share Data:
Net income:
Primary $ .57 $ .47 $ 1.63 $ 1.34
======= ======= ======== ========
Fully Diluted $ .56 $ .46 $ 1.59 $ 1.31
======= ======= ======== ========
Dividends declared $ .22 $ .20 $ .66 $ .60
======= ======= ======== ========
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
---------------------
1996 1995
---- ----
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 58,483 $ 46,271
INVESTING ACTIVITIES
Proceeds from maturities of held-to-maturity
securities 7,119 14,364
Proceeds from sales of held-to-maturity securities 89 3,863
Purchases of held-to-maturity securities (12,346) (13,396)
Proceeds from maturities of available-
for-sale securities 268,048 125,990
Proceeds from sales of available-for-
sale securities 117,639 71,933
Purchases of available-for-sale securities (544,029) (296,194)
Net increase in loans (128,290) (215,173)
Proceeds from sales of foreclosed property 5,718 6,283
Purchases of premises and equipment (5,538) (16,036)
Proceeds from sales of premises and equipment 971 246
Purchase of financial organization,
net of cash received (2,233) -
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (292,852) (318,120)
FINANCING ACTIVITIES
Net increase in deposits 140,776 107,417
Cash dividends (18,646) (16,620)
Increase (decrease) in federal funds purchased (21,595) 4,475
Increase in repurchase agreements 131,611 39,080
Net increase (decrease) in other
short-term borrowings 9,204 (15,000)
Proceeds from long-term debt 25,000 25,000
Payments of long-term debt (6) -
Purchase of treasury stock (17,605) -
Other 4,036 4,692
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 252,775 149,044
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 18,406 (122,805)
Cash and cash equivalents at beginning of period 222,213 281,930
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 240,619 $ 159,125
========= =========
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, 1995. 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--ACQUISITIONS
On February 29, 1996, Magna acquired River Bend Bancshares, Inc. for
approximately 550,000 shares of common stock and approximately $12.3 million
in cash. The acquisition contributed approximately $160 million to total
assets and approximately $12 million to stockholders' equity at the date of
acquisition. The acquisition was accounted for under the purchase method and
was immaterial to the financial condition and results of operations of Magna.
On August 30, 1996, Magna entered into a definitive agreement which
provides for the acquisition of Homeland Bankshares Corporation, Waterloo,
Iowa ("Homeland"). Homeland owns and operates four commercial banks and one
savings bank and provides financial services through a network of 33
locations in the state of Iowa. At December 31, 1995, Homeland reported
assets of approximately $1.2 billion and stockholders' equity of
approximately $129.5 million. The agreement provides for the issuance of up
to 5,038,934 shares of Magna common stock and approximately $92 million in
cash in exchange for the outstanding shares of Homeland common stock. The
acquisition, which is subject to, among other things, regulatory approval and
the approval of Homeland's stockholders, will be accounted for as a purchase
and is expected to be completed in the first quarter of 1997.
NOTE C--CHANGE IN ACCOUNTING METHODS
On January 1, 1996, Magna adopted Financial Accounting Standards No. 122
(FAS No. 122), "Accounting for Mortgage Servicing Rights." FAS No. 122
requires capitalization of purchased mortgage servicing rights, as well as
internally originated mortgage servicing rights. These mortgage servicing
rights are amortized over the estimated servicing period of the related
loans. The adoption of the standard had no material impact on Magna's
financial condition or results of operations.
6
<PAGE> 7
NOTE D--RECLASSIFICATIONS
Certain amounts in the 1995 financial statements have been reclassified
to conform with the 1996 presentation. Such reclassifications had no effect
on net income.
NOTE E--CAPITAL
In January, 1995, Magna announced a common stock repurchase program
authorizing the repurchase of up to 5% of its outstanding shares of common
stock or 1.4 million shares. During the nine months ended September 30, 1996,
Magna repurchased 745,000 shares.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
- - -----------------------------------
OVERVIEW
Net income for the third quarter of 1996 was $16.0 million, or 57 cents
per common share, compared with $13.1 million, or 47 cents per share, for the
third quarter of 1995. For the first nine months of 1996, net income was
$46.2 million, or $1.63 per common share, compared with $37.2 million, or
$1.34 per share, in 1995.
Operating results of the acquisition consummated on February 29, 1996,
are included since the acquisition date and are not material to Magna's
financial condition and results of operations for the periods presented.
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
------------------------- ------------------------------
1996 1995 Amount Percent
---- ---- ------ -------
<S> <C> <C> <C> <C>
Total interest income
(fully tax-equivalent) . . . . . . . $99,846 $89,790 $10,056 11.2%
Total interest expense. . . . . . . . 49,836 43,142 6,694 15.5
------- ------- -------
Net interest income . . . . . . . . 50,010 46,648 3,362 7.2
Provision for loan losses . . . . . . 2,499 3,562 (1,063) (29.8)
Noninterest income:
Service charges on deposits . . . . 5,919 5,731 188 3.3
Trust . . . . . . . . . . . . . . . 2,356 2,104 252 12.0
Other . . . . . . . . . . . . . . . 4,158 4,391 (233) (5.3)
------- ------- -------
12,433 12,226 207 1.7
Securities gains(losses), net . . . 89 (128) 217 169.5
------- ------- -------
Total . . . . . . . . . . . . . . 12,522 12,098 424 3.5
------- ------- -------
Noninterest expense:
Employee compensation and
other benefits . . . . . . . . . . 17,048 18,040 (992) (5.5)
Net occupancy . . . . . . . . . . . 4,551 4,292 259 6.0
Equipment . . . . . . . . . . . . . 2,154 2,284 (130) (5.7)
FDIC insurance premiums . . . . . . 442 (172) 614 357.0
Other . . . . . . . . . . . . . . . 10,320 10,231 89 .9
------- ------- -------
Total . . . . . . . . . . . . . . 34,515 34,675 (160) (.5)
------- ------- -------
Income before income taxes. . . . . . 25,518 20,509 5,009 24.4
Less: tax-equivalent adjustment . . . 1,284 1,310 (26) (2.0)
Income tax expense. . . . . . . . . . 8,208 6,064 2,144 35.4
------- ------- -------
Net income. . . . . . . . . . . . . . $16,026 $13,135 $ 2,891 22.0
======= ======= =======
8
<PAGE> 9
<CAPTION>
Nine Months Ended
September 30 Change
------------------------- ------------------------------
1996 1995 Amount Percent
---- ---- ------ -------
<S> <C> <C> <C> <C>
Total interest income
(fully tax-equivalent) . . . . . . . $292,056 $259,559 $32,497 12.5%
Total interest expense. . . . . . . . 143,141 119,455 23,686 19.8
-------- -------- -------
Net interest income . . . . . . . . 148,915 140,104 8,811 6.3
Provision for loan losses . . . . . . 7,781 7,491 290 3.9
Noninterest income:
Service charges on deposits . . . . 17,458 16,845 613 3.6
Trust . . . . . . . . . . . . . . . 7,102 6,667 435 6.5
Other . . . . . . . . . . . . . . . 11,977 11,555 422 3.7
-------- -------- -------
36,537 35,067 1,470 4.2
Securities gains, net . . . . . . . . 779 235 544 231.5
-------- -------- -------
Total . . . . . . . . . . . . . . . 37,316 35,302 2,014 5.7
-------- -------- -------
Noninterest expense:
Employee compensation and
other benefits . . . . . . . . . . . 51,937 54,701 (2,764) (5.1)
Net occupancy . . . . . . . . . . . . 13,536 13,197 339 2.6
Equipment . . . . . . . . . . . . . . 6,627 6,646 (19) (.3)
FDIC insurance premiums . . . . . . . 525 3,945 (3,420) (86.7)
Other . . . . . . . . . . . . . . . . 31,544 31,621 (77) (.2)
-------- -------- -------
Total . . . . . . . . . . . . . . . 104,169 110,110 (5,941) (5.4)
-------- -------- -------
Income before income taxes. . . . . . . 74,281 57,805 16,476 28.5
Less: tax-equivalent adjustment . . . . 3,782 3,790 (8) (.2)
Income tax expense. . . . . . . . . . . 24,271 16,846 7,425 44.1
-------- -------- -------
Net income. . . . . . . . . . . . . . . $ 46,228 $ 37,169 $ 9,059 24.4
======== ======== =======
</TABLE>
The following paragraphs discuss more fully significant changes and
trends as they relate to Magna's results of operations during the three month
and nine month periods ended September 30, 1996 and its financial condition,
asset quality, capital resources and liquidity as of September 30, 1996.
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
Tax-equivalent net interest income increased 7.2% for the third quarter of
1996 compared with 1995 and increased 6.3% for the first nine months of 1996
compared with the same period in 1995. The increases primarily resulted from
an increase in the volume of earning assets offset by a reduced net interest
margin. Tax-equivalent net interest income also was positively impacted in
1996 by the effect of the acquisition consummated during the first quarter.
9
<PAGE> 10
The net interest margin was 3.94% for the third quarter of 1996, which
represented a decline from the 4.09% and the 4.17% net interest margins
reported in the second quarter of 1996 and the third quarter of 1995,
respectively. The net interest margin for the first nine months of 1996 was
4.04% compared with 4.35% for the first nine months of 1995. The decline
during the 1996 periods compared to the 1995 periods occurred as the yield on
earning assets declined while the cost of funds increased. The decline in
the yield on earning assets, for the 1996 periods compared to the 1995
periods, was partially associated with a change in the mix of earning
assets. The percentage of earning assets attributable to the investment
portfolio increased during the 1996 periods, while the percentage of earning
assets attributable to the higher yielding loan portfolio decreased. This
change, along with an overall decline in rates earned on the investment
portfolio, contributed to the decline in the yield on earning assets. The
increased cost of funds primarily resulted from Magna's decision, during the
middle part of 1995, to price certain deposit categories, primarily time
deposits, more competitively. In addition, during the first nine months of
1996, when compared to the first nine months of 1995, Magna experienced a
shift in the deposit mix as customers favored the higher yielding time
deposits.
PROVISION FOR LOAN LOSSES
Factors which influence management's determination of the provision for
loan losses include, among other things, evaluation of the anticipated impact
on the loan portfolio of current economic conditions, changes in the
character and size of the portfolio and past loan loss experience. The
decrease in the provision for loan losses for the quarters compared was
primarily the result of a lower level of net charge-offs experienced in the
third quarter of 1996, compared to those experienced in the third quarter of
1995. Activity in the reserve for loan losses and nonperforming loan data
are presented and discussed under "ASSET QUALITY."
NONINTEREST INCOME
Total noninterest income was $12.5 million for the third quarter of 1996
compared with $12.1 million for the third quarter of 1995. Noninterest
income for the first nine months of 1996 was $37.3 million compared with
$35.3 million for the same period of 1995. Increased levels of trust income
and brokerage and insurance-related income were recorded during the 1996
periods compared with 1995. In addition, increased levels of fee income from
insufficient fund items and fees associated with Magna's corporate cash
management product contributed to the increases in service charges on deposit
accounts for the periods compared.
For the third quarter of 1996, noninterest income as a percentage of
average assets, on an annualized basis, was .93% compared with 1.01% for the
third quarter of 1995.
NONINTEREST EXPENSE
Total noninterest expense was $34.5 million for the third quarter of 1996
compared with $34.7 million for the third quarter of 1995. For the first
nine months of 1996, total noninterest expense was
10
<PAGE> 11
$104.2 million compared with $110.1 million for the same period of 1995.
The decrease in employee compensation and other benefits for the 1996
periods compared with 1995 was attributable to staff reductions that occurred
in January 1996. These reductions occurred as Magna continues to achieve
efficiencies in back-office operations and as a result of the merger of
Magna's banking subsidiaries in the fourth quarter of 1995. The reduction in
employee compensation and other benefits resulting from these staff
reductions was partially offset by normal merit increases, severance costs
and compensation and benefits attributable to the consummated acquisition.
FDIC deposit insurance premiums include assessments levied in connection with
the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund
(SAIF). During the third quarter of 1996, FDIC deposit insurance premiums
included a special assessment which was mandated by federal legislation enacted
on September 30, 1996. This legislation called for financial institutions to
pay a one-time special assessment on SAIF insured deposit levels as of March
31, 1995. This one-time special assessment, recorded by Magna during the
third quarter of 1996, amounted to $.4 million. A reduction in the BIF
deposit insurance assessment rate announced in the third quarter of 1995
resulted in a negative expense of $.2 million for the three months ended
September 30, 1995 and contributed to the reduction of $3.4 million for the
first nine months of 1996 compared to the first nine months of 1995. The 1996
legislation which mandated the assessment for SAIF insured deposits also reduced
ongoing SAIF deposit insurance assessment rates from $.230 to $.064 per $100 of
insured deposits and increased ongoing BIF deposit insurance assessment rates
from zero to $.013 per $100 of insured deposits beginning January 1, 1997.
Assuming the FDIC levies no additional special assessments and does not further
modify the deposit insurance assessment structure, Magna's FDIC deposit
insurance premiums should approximate $.6 million in 1997, based upon current
deposit levels, the mix of those deposits and excluding the effects of the
pending acquisition of Homeland.
For the third quarter of 1996, noninterest expense as a percentage of
average assets, on an annualized basis, was 2.56% compared with 2.89% for the
third quarter of 1995.
Magna recorded income tax expense of $8.2 million for the third quarter of
1996 compared with $6.1 million for the third quarter of 1995. For the first
nine months of 1996, income tax expense was $24.3 million compared with $16.8
million for the same period of 1995. Income tax expense for the first nine
months of 1995 included a $.9 million nonrecurring benefit. This benefit
resulted from the elimination of valuation allowances on certain federal and
state net operating loss carryforwards which management believed to be, more
likely than not, realizable.
The effective income tax rate was 33.9% and 31.6% for the third quarter of
1996 and 1995, respectively. The effective income tax rate was 34.4% and
31.2% for the first nine months of 1996 and 1995, respectively. Excluding
the effects of the non-recurring tax benefit, the increase in the effective
tax rate for the periods compared resulted primarily from generally higher
levels of earnings coupled with reduced levels of tax-exempt interest as a
percentage of total interest income.
11
<PAGE> 12
FINANCIAL CONDITION
GENERAL
Certain components of Magna's consolidated balance sheet at September 30,
1996 compared with December 31, 1995 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 ------------------
1996 1995 Amount Percent
------------ ----------- ------ -------
<S> <C> <C> <C> <C>
Total assets . . . . . . . . $5,384,481 $4,947,499 $436,982 8.8%
Loans, net of unearned income 3,367,661 3,202,766 164,895 5.1
Investments . . . . . . . . . 1,596,466 1,364,864 231,602 17.0
Deposits . . . . . . . . . . 4,164,860 3,888,266 276,594 7.1
Federal funds purchased . . . 20,195 41,790 (21,595) (51.7)
Repurchase agreements:
Cash management . . . . . . 421,879 294,328 127,551 43.3
Other . . . . . . . . . . . 79,408 74,533 4,875 6.5
Other short-term borrowings . 98,628 50,000 48,628 97.3
Long-term debt . . . . . . . 79,117 93,071 (13,954) (15.0)
</TABLE>
LOANS
Loans, net of unearned income, increased 5.1%, or $164.9 million, from
year-end 1995 to September 30, 1996. A portion of this increase was derived
from the consummated acquisition. In addition to acquired loans, Magna also
has experienced steady growth in its commercial, financial and agricultural,
commercial real estate and real estate construction categories.
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>
September 30 December 31 September 30
1996 1995 1995
----------------- ----------------- -----------------
Commercial borrowers: Amount Percent Amount Percent Amount Percent
- - --------------------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural . . . . . . . . . . . . . $ 630,705 18.7% $ 593,664 18.5% $ 581,944 18.4%
Commercial real estate. . . . . . . . . . . 1,099,213 32.7 996,464 31.1 973,905 30.7
Real estate
construction . . . . . . . . . . . . . . . 162,238 4.8 156,978 4.9 156,217 4.9
---------- ----- ---------- ----- ---------- -----
Total commercial . . . . . . . . . . . . 1,892,156 56.2 1,747,106 54.5 1,712,066 54.0
---------- ----- ---------- ----- ---------- -----
Consumer borrowers:
- - -------------------
1-4 family residential
real estate. . . . . . . . . . . . . . . . 934,861 27.8 934,826 29.2 934,098 29.5
Other consumer loans,
net of unearned income . . . . . . . . . . 540,644 16.0 520,834 16.3 524,779 16.5
---------- ----- ---------- ----- ---------- -----
Total consumer . . . . . . . . . . . . . 1,475,505 43.8 1,455,660 45.5 1,458,877 46.0
---------- ----- ---------- ----- ---------- -----
Total loans, net of
unearned income. . . . . . . . . . . . . $3,367,661 100.0% $3,202,766 100.0% $3,170,943 100.0%
========== ===== ========== ===== ========== =====
</TABLE>
12
<PAGE> 13
INVESTMENTS
Total investments increased 17.0%, or $231.6 million, at September 30,
1996 compared with year-end 1995. Magna's investment portfolio serves three
important functions. First, it is a vehicle for managing balance sheet rate
sensitivity. Second, it is a means for investment of excess funds. Third,
the available-for-sale portion of the portfolio provides a resource from
which immediate liquidity needs may be satisfied. The increase in investment
securities from year-end 1995 resulted primarily from the consummated
acquisition coupled with growth from cash management repurchase agreements,
which are collateralized with investment securities.
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 ------------------
1996 1995 Amount Percent
----------- ----------- ------ -------
<S> <C> <C> <C> <C>
Held-to-maturity securities . . $ 141,848 $ 126,248 $ 15,600 12.4%
Available-for-sale securities. . 1,454,618 1,238,616 216,002 17.4
---------- ---------- --------
Total investments . . . . . . $1,596,466 $1,364,864 $231,602 17.0
========== ========== ========
</TABLE>
DEPOSITS
Total deposits increased $276.6 million to $4.2 billion at September 30,
1996 from year-end 1995. A significant portion of this increase was derived
from the acquisition consummated during the first quarter of 1996. Excluding
the effects of the acquisition, interest bearing deposits, particularly time
deposits, increased from year-end 1995. This increase was partially offset
by a decrease in noninterest bearing deposits. The decrease in noninterest
bearing deposits was due to seasonal factors, which generally increase
deposits at the end of a calendar year, coupled with a shift towards higher
yielding time deposits. More aggressive sales efforts also contributed to
the increase in interest bearing deposits, primarily time deposits.
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
1996 1995 Change
---------------- ---------------- ---------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing . . . . . . . $ 532,436 12.8% $ 570,262 14.7% $(37,826) (6.6)%
NOW and other
transaction accounts . . . . . 522,485 12.5 496,590 12.8 25,895 5.2
Savings and market
rate deposits. . . . . . . . . 818,365 19.7 794,423 20.4 23,942 3.0
Time deposits less than
$100,000 . . . . . . . . . . . 1,794,637 43.1 1,674,305 43.0 120,332 7.2
Time deposits $100,000
or more. . . . . . . . . . . . 496,937 11.9 352,686 9.1 144,251 40.9
---------- ----- ---------- ----- --------
Total deposits . . . . . . . $4,164,860 100.0% $3,888,266 100.0% $276,594 7.1
========== ===== ========== ===== ========
</TABLE>
13
<PAGE> 14
FEDERAL FUNDS PURCHASED AND REPURCHASE AGREEMENTS
Federal funds purchased and repurchase agreements increased $110.8
million from year-end 1995. Federal funds purchased are short-term sources
of funds utilized by Magna's banking subsidiary and are primarily obtained
from its network of correspondent banks. As such, levels of federal funds
purchased can fluctuate significantly. The increase in repurchase agreements
was primarily in the form of cash management repurchase agreements. 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 stable source of funds from commercial depositors.
OTHER SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Other short-term borrowings reflected an increase of $48.6 million at
September 30, 1996 compared with year-end 1995. The increase consisted of
three advances from the Federal Home Loan Bank, two totaling $23.5 million
due in February 1997 and one $15.0 million advance due in August 1997, which
were reclassified from long-term debt and an additional $10.1 million
borrowing in the form of a treasury tax and loan note option account, which
was opened in January 1996. The amounts maturing in February 1997 which were
reclassified from long-term debt to other short-term borrowings were
replaced, in the long-term debt category, with two additional advances
totaling $25.0 million from the Federal Home Loan Bank. One issue in the
amount of $10.0 million bears an interest rate of 5.91% and matures on March
7, 2001, while the remaining $15.0 million issue bears an interest rate of
6.20% and matures on March 7, 2003.
ASSET QUALITY
Magna's asset quality management program includes the establishment of
investment and credit policies, the continued evaluation of the quality and
trends of material assets and the prompt implementation of appropriate
actions in view of the results of such evaluation. The objective of Magna's
asset quality management program, particularly with regard to loans, is to
reduce the risk of non-collection, which is a significant risk faced by a
financial institution.
Management continues to monitor the asset quality of the loan portfolio,
promptly following up on problem credits and implementing workout strategies
to manage the level of nonperforming assets. These workout strategies, which
include intensified collection efforts on potential 90-day past due credits,
negotiated settlements and third-party refinancings, resulted in a decline in
nonperforming loans of 14.5%, or $4.5 million, from year-end 1995 to
September 30, 1996. Charge-offs associated with certain nonperforming loans
also impacted the nonperforming loan reduction. At September 30, 1996,
14
<PAGE> 15
nonperforming assets totaled $30.6 million, or .57% of total assets, compared
with nonperforming assets at year-end 1995 of $35.8 million, or .72% of total
assets. The level of foreclosed property decreased $.8 million from December
1995. Magna does not anticipate any significant losses on the disposition of
other real estate owned at September 30, 1996.
Net charge-offs in the third quarter of 1996 were $1.9 million, a
decrease of $3.3 million from the third quarter of 1995. Net charge-offs for
the first nine months of 1996 totaled $6.2 million compared to $9.9 million
for the first nine months of 1995. Charge-offs in the third quarter of 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.
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.
15
<PAGE> 16
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, 1996 December 31, 1995
--------------------------- ---------------------------
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 . . . . . . . . . . . $ 630,705 $ 6,329 $ 593,664 $ 7,197
Commercial real estate. . . . . . . 1,099,213 7,393 996,464 8,294
Real estate construction. . . . . . 162,238 1,342 156,978 1,979
---------- ------- ---------- -------
Total commercial. . . . . . . . . 1,892,156 15,064 1,747,106 17,470
Consumer borrowers:
- - -------------------
1-4 family residential
real estate. . . . . . . . . . . . 934,861 8,983 934,826 10,914
Other consumer loans, net
of unearned income . . . . . . . . 540,644 2,304 520,834 2,436
---------- ------- ---------- -------
Total consumer. . . . . . . . . . 1,475,505 11,287 1,455,660 13,350
---------- ------- ---------- -------
Total loans, net of
unearned income. . . . . . . . . . 3,367,661 26,351 3,202,766 30,820
Foreclosed property . . . . . . . . . . 4,215 4,215 5,009 5,009
---------- ------- ---------- -------
Total . . . . . . . . . . . . . . . $3,371,876 $30,566 $3,207,775 $35,829
========== ======= ========== =======
Nonaccrual loans. . . . . . . . . . . . $16,680 $24,564
Loans past due 90 days or more. . . . . 9,627 6,198
Restructured loans. . . . . . . . . . . 44 58
------- -------
Total nonperforming loans . . . . . 26,351 30,820
Foreclosed property . . . . . . . . . . 4,215 5,009
------- -------
Total nonperforming assets. . . . . $30,566 $35,829
======= =======
Nonperforming loans to
total loans. . . . . . . . . . . . . . .78% .96%
Nonperforming assets to total
loans and foreclosed property. . . . . .91 1.12
</TABLE>
16
<PAGE> 17
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
------------------ -----------------
1996 1995 1996 1995
------- -------- ------- -------
<S> <C> <C> <C> <C>
Balance at beginning of period . . . . . . $44,464 $43,270 $42,623 $43,991
Reserves of acquired institutions . . . . . - - 890 -
Loans charged off:
Commercial borrowers:
Commercial, financial and agricultural . (925) (3,289) (3,478) (5,382)
Commercial real estate . . . . . . . . . (748) (777) (1,587) (2,866)
Real estate construction . . . . . . . . (45) (93) (317) (140)
------- ------- ------- -------
Total commercial . . . . . . . . . . . (1,718) (4,159) (5,382) (8,388)
Consumer borrowers:
1-4 family residential real estate . . . (455) (833) (1,147) (1,734)
Other consumer loans . . . . . . . . . . (1,004) (1,031) (3,524) (3,056)
------- ------- ------- -------
Total consumer . . . . . . . . . . . . (1,459) (1,864) (4,671) (4,790)
------- ------- ------- -------
Total charge-offs . . . . . . . . . (3,177) (6,023) (10,053) (13,178)
------- ------- ------- -------
Recoveries of loans previously charged off:
Commercial borrowers:
Commercial, financial and agricultural . 770 234 2,175 1,297
Commercial real estate . . . . . . . . . 123 193 411 891
Real estate construction . . . . . . . . 3 2 20 52
------- ------- ------- -------
Total commercial . . . . . . . . . . . 896 429 2,606 2,240
Consumer borrowers:
1-4 family residential real estate . . . 140 114 372 269
Other consumer loans . . . . . . . . . . 271 278 874 817
------- ------- ------- -------
Total consumer . . . . . . . . . . . . 411 392 1,246 1,086
------- ------- ------- -------
Total recoveries . . . . . . . . . . 1,307 821 3,852 3,326
------- ------- ------- -------
Net loans charged off . . . . . . . . . . . (1,870) (5,202) (6,201) (9,852)
------- ------- ------- -------
Provision for loan losses charged
to operations . . . . . . . . . . . . . . 2,499 3,562 7,781 7,491
------- ------- ------- -------
Balance at end of period . . . . . . . . . $45,093 $41,630 $45,093 $41,630
======= ======= ======= =======
Net loan charge-offs (annualized) to
average loans . . . . . . . . . . . . . . .22% .66% .25% .43%
Reserve for loan losses to total loans . . 1.34 1.31 1.34 1.31
Reserve for loan losses to
nonperforming loans . . . . . . . . . . . 171.12 104.24 171.12 104.24
</TABLE>
17
<PAGE> 18
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 "Federal Reserve Board"). 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, 1996,
Magna's Tier 1 and Total Capital ratios were 13.22% and 14.49%, respectively.
In addition, the Federal Reserve Board has established a minimum leverage
capital ratio of 3% which represents the minimum standard of Tier 1 Capital
to tangible assets for bank holding companies. This minimum leverage capital
ratio is considered satisfactory only with respect to top-rated banking
organizations that do not contemplate expansion. Magna's leverage ratio at
September 30, 1996 was 8.24%.
The pending acquisition of Homeland will impact Magna's capital ratios.
At September 30, 1996, on a pro forma basis which includes the effects of the
acquisition of Homeland, the Tier 1 Capital, Total Capital and leverage
ratios were 10.39%, 11.61% and 6.91%, respectively.
In January 1995, Magna announced a common stock repurchase program
authorizing the repurchase of up to 5% of its outstanding shares of common
stock or 1.4 million shares. During the nine months ended September 30,
1996, Magna repurchased 745,000 shares.
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 subsidiary. In
general, the ability of Magna's banking subsidiary 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 subsidiary without prior regulatory approval amounted to
approximately $32 million at September 30, 1996.
Magna believes that its banking subsidiary's 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.
18
<PAGE> 19
The preceding discussion contains certain forward looking statements
with respect to the financial condition, results of operations and business
of Magna. These forward looking statements involve certain risks and
uncertainties. For example, by accepting deposits at fixed rates at different
times and for different terms and lending funds at fixed rates for fixed
periods, a bank accepts the risk that the cost of funds may rise and the use
of the funds may be at a fixed rate. Similarly, the cost of funds may fall,
but a bank may have committed by virtue of the term of a deposit to pay what
becomes an above market rate. Investments may decline in value in a rising
interest rate environment. Loans, and the reserve for loan losses, have
the risk that the borrower will not repay all funds in a timely manner as well
as the risk of total loss. Collateral may or may not have the value attributed
to it. The loan loss reserve, while believed adequate, may prove inadequate if
one or more large borrowers, or numerous mid-range borrowers, or a combination
of both, experience financial difficulty for individual or national or
international reasons. Because the business of banking is highly regulated,
decisions of governmental authorities, such as the rate of deposit insurance,
can have a major effect on operating results. All of these uncertainties, as
well as others, are present in a banking operation and stockholders are
cautioned that management's view of the future on which it prices its products,
evaluates collateral, sets loan reserves and estimates costs of operation
and regulation may prove to be other than as anticipated.
19
<PAGE> 20
PART II - OTHER INFORMATION
- - ---------------------------
ITEM 5. OTHER INFORMATION
- - -------------------------
(a) As previously noted, on August 30, 1996, Magna entered into a
definitive agreement which provides for the acquisition of Homeland.
The following unaudited pro forma combined consolidated balance sheet
gives effect to the acquisition of Homeland as if it had been consummated on
September 30, 1996.
The following unaudited pro forma combined consolidated income statements
for the nine months ended September 30, 1996 and for the year ended December
31, 1995 set forth the results of operations of Magna combined with the
results of operations of Homeland as if the acquisition had occurred as of
the first day of the period presented.
The unaudited pro forma combined consolidated financial statements should
be read in conjunction with the accompanying Notes to Pro Forma Combined
Consolidated Financial Statements and with the historical financial
statements of Magna and Homeland. The historical interim financial
information for the nine months ended September 30, 1996, used as a basis for
the pro forma combined consolidated financial statements, include all
necessary adjustments, which, in management's opinion, are necessary to
present data fairly. These unaudited pro forma combined consolidated
financial statements may not be indicative of the results of operations that
actually would have occurred if the acquisition had been consummated on the
date assumed above or the results of operations that may be achieved in the
future.
The unaudited pro forma combined consolidated financial statements
reflect a repurchase of approximately 600,000 shares of Magna common stock.
While Magna has previously announced its intention to effect such a
repurchase, Magna has not firmly committed to do so and there is no certainty
as to whether any such repurchase will occur or as to the price per share at
which a repurchase would occur if one were effected.
20
<PAGE> 21
<TABLE>
MAGNA GROUP, INC.
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
REFLECTING THE ACQUISITION OF HOMELAND BANKSHARES CORPORATION
SEPTEMBER 30, 1996
(UNAUDITED; IN THOUSANDS)
<CAPTION>
MAGNA/
HOMELAND
MAGNA HOMELAND PRO FORMA ADJUSTMENTS PRO FORMA
HISTORICAL HISTORICAL DEBIT CREDIT COMBINED
---------- ---------- --------- ----------- --------
ASSETS
- - ------
<S> <C> <C> <C> <C> <C>
Cash and due from banks $ 157,076 $ 55,547 $ 212,623
Federal funds sold 83,543 17,400 100,943
Held-to-maturity securities 141,848 - 141,848
Available-for-sale securities 1,454,618 190,759 109,667<F1> 1,535,710
Loans 3,368,705 895,165 4,263,870
Unearned income (1,044) - (1,044)
Reserve for loan losses (45,093) (9,278) (54,371)
---------- ---------- ----------
Net Loans 3,322,568 885,887 4,208,455
Premises and equipment 81,718 24,506 3,980<F2> 812<F3> 109,392
Other assets 143,110 32,844 101,838<F4> 12,439<F5>
386<F6> 4,663<F7> 261,076
---------- ---------- ----------
TOTAL ASSETS $5,384,481 $1,206,943 $6,570,047
========== ========== ==========
LIABILITIES
- - -----------
Deposits:
Noninterest bearing $ 532,436 $ 121,109 $ 653,545
Interest bearing 3,632,424 816,877 4,449,301
---------- ---------- ----------
Total Deposits 4,164,860 937,986 5,102,846
Federal funds purchased 20,195 26,575 46,770
Repurchase agreements 501,287 - 501,287
Other short-term borrowings 98,628 53,744 152,372
Long-term debt 79,117 46,962 126,079
Other liabilities 60,492 10,604 4,270<F8> 75,366
---------- ---------- ----------
TOTAL LIABILITIES 4,924,579 1,075,871 6,004,720
STOCKHOLDERS' EQUITY
- - --------------------
Preferred stock 40 - 40
Common stock 57,595 71,292 71,292<F9> 10,078<F10> 67,673
Surplus 226,943 - 109,597<F11> 336,540
Retained earnings 205,019 59,863 59,863<F12> 205,019
Treasury stock (17,605) - 14,250<F13> (31,855)
Net unrealized loss on
securities (12,090) (83) 83<F14> (12,090)
---------- ---------- ----------
TOTAL STOCKHOLDERS'
EQUITY 459,902 131,072 565,327
---------- ---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $5,384,481 $1,206,943 $6,570,047
========== ========== ==========
See Notes to Pro Forma Combined Consolidated Balance Sheet.
</TABLE>
21
<PAGE> 22
[FN]
MAGNA GROUP, INC.
NOTES TO PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1996
<F1> Reflects the sale of securities to provide cash for payment to Homeland
shareholders, payment of cash for legal and professional fees
connected with the Homeland acquisition and payment of cash to
repurchase approximately 600,000 shares of Magna common stock.
<F2> Write-up of certain Homeland fixed assets to fair value.
<F3> Write-off of certain Homeland fixed assets not compatible with Magna
systems.
<F4> Reflects goodwill resulting from the acquisition of Homeland by Magna.
This goodwill will be amortized over a period of 15 years.
<F5> Write-off of unamortized goodwill previously recorded on the books of
subsidiary banks of Homeland.
<F6> Reflects net deferred taxes related to: write-up of fixed assets to fair
value; write-off of fixed assets not compatible with Magna systems;
accrual for vacation pay liability; accrual for possible payments
required in connection with change of control agreements held by
certain Homeland executives; and accrual for present value of future
benefits connected with Homeland's Supplemental Retirement Income
Plan.
<F7> Write-off of unamortized deposit base intangibles previously recorded
on the books of subsidiary banks of Homeland.
<F8> Establish vacation pay accrual for employees of Homeland in conformity
with Magna policy; establish accrual for possible payments required
in connection with change of control agreements held by certain
Homeland executives; and establish accrual for the present value of
future benefits connected with Homeland's Supplemental Retirement
Income Plan.
<F9> Elimination of 5,703,378 shares of Homeland common stock.
<F10> Issuance of 5,038,934 shares of Magna common stock.
<F11> Adjustment to Magna capital to reflect acquisition of Homeland.
<F12> Elimination of Homeland retained earnings.
<F13> Reflects the repurchase of 600,000 shares of Magna common stock issued
in connection with the acquisition of Homeland.
<F14> Elimination of Homeland net unrealized loss on available-for-sale
securities.
22
<PAGE> 23
<TABLE>
MAGNA GROUP, INC.
PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
MAGNA/
HOMELAND
MAGNA HOMELAND PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $212,503 $57,956 $270,459
Securities:
Taxable 69,226 7,954 $(5,141)<F1> 72,039
Tax-exempt 5,229 1,287 6,516
-------- ------- ------- --------
74,455 9,241 (5,141) 78,555
Other interest income 1,316 1,526 2,842
-------- ------- ------- --------
TOTAL INTEREST INCOME 288,274 68,723 (5,141) 351,856
Interest Expense:
Deposits 116,785 26,115 142,900
Federal funds purchased 2,518 2,373 4,891
Repurchase agreements 15,589 - 15,589
Other short-term borrowings 3,028 771 3,799
Long-term debt 5,221 2,071 7,292
-------- ------- --------
TOTAL INTEREST EXPENSE 143,141 31,330 174,471
-------- ------- ------- --------
NET INTEREST INCOME 145,133 37,393 (5,141) 177,385
Provision for Loan Losses 7,781 1,705 9,486
-------- ------- ------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 137,352 35,688 (5,141) 167,899
Noninterest Income:
Service charges on deposits 17,458 2,594 20,052
Trust 7,102 1,859 8,961
Securities gains, net 779 17 796
Other 11,977 4,739 16,716
-------- ------- --------
37,316 9,209 46,525
Noninterest Expense:
Employee compensation and
other benefits 51,937 14,837 66,774
Net occupancy 13,536 2,317 99<F2> 15,952
Equipment 6,627 1,874 8,501
FDIC insurance premiums 525 2,128 2,653
Other 31,544 7,465 3,473<F3> 42,482
-------- ------- ------- --------
104,169 28,621 3,572 136,362
-------- ------- ------- --------
INCOME BEFORE INCOME TAXES 70,499 16,276 (8,713) 78,062
Income Tax Expense 24,271 6,301 (1,834)<F4> 28,738
-------- ------- ------- --------
NET INCOME $ 46,228 $ 9,975 $(6,879) $ 49,324
======== ======= ======= ========
Primary net income per share $ 1.63 $ 1.74 $ 1.50
======== ======= ========
Fully diluted net income
per share $ 1.59 $ 1.74 $ 1.48
======== ======= ========
See Notes to Pro Forma Combined Consolidated Statements of Income.
</TABLE>
23
<PAGE> 24
<TABLE>
MAGNA GROUP, INC.
PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME
TWELVE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
MAGNA/
HOMELAND
MAGNA HOMELAND PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $266,146 $74,098 $340,244
Securities:
Taxable 71,853 14,520 $ (6,854)<F1> 79,519
Tax-exempt 7,266 2,015 9,281
-------- ------- -------- --------
79,119 16,535 (6,854) 88,800
Other interest income 1,903 1,847 3,750
-------- ------- -------- --------
TOTAL INTEREST INCOME 347,168 92,480 (6,854) 432,794
Interest Expense:
Deposits 138,025 36,239 174,264
Federal funds purchased 3,463 3,586 7,049
Repurchase agreements 16,147 - 16,147
Other short-term borrowings 623 3,474 4,097
Long-term debt 6,059 1,505 7,564
-------- ------- --------
TOTAL INTEREST EXPENSE 164,317 44,804 209,121
-------- ------- -------- --------
NET INTEREST INCOME 182,851 47,676 (6,854) 223,673
Provision for Loan Losses 9,992 941 10,933
-------- ------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 172,859 46,735 (6,854) 212,740
Noninterest Income:
Service charges on deposits 22,487 3,094 25,581
Trust 8,638 2,450 11,088
Securities gains, net 356 31 387
Other 16,382 6,090 22,472
-------- ------- --------
47,863 11,665 59,528
Noninterest Expense:
Employee compensation and
other benefits 72,993 18,998 91,991
Net occupancy 17,677 2,712 133<F2> 20,522
Equipment 8,967 2,367 11,334
FDIC insurance premiums 4,342 1,381 5,723
Other 42,238 10,892 4,764<F3> 57,894
-------- ------- -------- --------
146,217 36,350 4,897 187,464
-------- ------- -------- --------
INCOME BEFORE INCOME TAXES 74,505 22,050 (11,751) 84,804
Income Tax Expense 23,283 8,429 (2,446)<F4> 29,266
-------- ------- -------- --------
NET INCOME $ 51,222 $13,621 $ (9,305) $ 55,538
======== ======= ======== ========
Primary net income per share $ 1.84 $ 2.37 $ 1.72
======== ======= ========
Fully diluted net income
per share $ 1.80 $ 2.37 $ 1.69
======== ======= ========
See Notes to Pro Forma Combined Consolidated Statements of Income.
</TABLE>
24
<PAGE> 25
[FN]
MAGNA GROUP, INC.
NOTES TO PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1996
AND TWELVE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED)
<F1> Reflects foregone interest income on discretionary sale of securities
used to provide cash for payment to Homeland shareholders, payment of
cash for legal and professional fees connected with the Homeland
acquisition and payment of cash to repurchase approximately 600,000
shares of Magna common stock.
<F2> Reflects amortization of purchase accounting adjustment associated with
the write-up of certain Homeland fixed assets to fair value.
<F3> Reflects amortization of incremental intangibles.
<F4> Income tax expense on pro forma adjustments is reflected using a tax
rate of 35%.
25
<PAGE> 26
(b) On November 1, 1996, Magna filed an application to list its common
stock on the New York Stock Exchange, Inc. It is expected that the common
stock will begin trading on such exchange by the end of November 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - -----------------------------------------
(a) Exhibits: See Exhibit Index on page 28 hereof.
(b) Reports on Form 8-K: On September 9, 1996, Magna filed a Current
Report on Form 8-K dated August 30, 1996, and reported the following
information under "Item 5 - Other Events":
On August 30, 1996, Magna and Homeland entered into a definitive
Agreement and Plan of Reorganization (the "Merger Agreement") which provides,
among other things, for the merger ("Merger") of Homeland with and into a
wholly owned subsidiary of Magna.
Under the terms of the Merger Agreement, each share of Homeland common
stock, par value $12.50 per share ("Homeland Common Stock"), outstanding
immediately prior to the effective time of the Merger may be exchanged for
1.55 shares of Magna common stock, par value $2.00 per share ("Magna Common
Stock"), for 57% of the aggregate consideration or for $37.50 in cash for 43%
of the aggregate consideration, subject to adjustment as of closing to
equalize the value of the cash and stock consideration. Homeland
shareholders may elect to receive either all Magna Common Stock, all cash or
a mixture of Magna Common Stock and cash for their shares of Homeland Common
Stock, subject to certain limitations.
Immediately after executing the Merger Agreement, Magna and Homeland
entered into a Stock Option Agreement, dated August 30, 1996 (the "Stock
Option Agreement"), pursuant to which Homeland granted to Magna an option to
purchase, under certain circumstances, up to 1,134,972 shares of Homeland
Common Stock at a price, subject to certain adjustments, of $34.00 per share
(the "Magna Option"). The Magna Option if exercised, would equal, before
giving effect to the exercise of the Magna Option, 19.9% of the total number
of shares of Homeland Common Stock outstanding as of August 30, 1996.
The acquisition, which is subject to, among other things, regulatory
approval and the approval of Homeland's stockholders, will be accounted for
as a purchase and is expected to be completed in the first quarter of 1997.
26
<PAGE> 27
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 8, 1996 By:/s/ G. Thomas Andes
- - ------------------------------ -------------------------------
G. Thomas Andes
Chairman of the Board and
Chief Executive Officer
DATE: November 8, 1996 By:/s/ Ronald A. Buerges
- - ------------------------------ -------------------------------
Ronald A. Buerges
Executive Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
27
<PAGE> 28
<TABLE>
EXHIBIT INDEX
-------------
<CAPTION>
EXHIBIT NO. DESCRIPTION
- - ----------- ------------
<C> <S>
10.1 Magna Directors Deferred Plan, filed herewith.
10.2 Magna Directors Deferred Compensation
Plan, filed herewith.
10.3 First Amendment to Magna Board of
Directors Retirement Plan, filed herewith.
10.4 Restricted Stock Agreement dated
April 17, 1996, between Magna and
G. Thomas Andes, filed herewith.
11.1 Computation of Net Income Per Common
Share, filed herewith.
27.1 Financial Data Schedule, filed herewith.
</TABLE>
28
<PAGE> 1
MAGNA GROUP, INC.
DIRECTORS DEFERRED PLAN
1. PURPOSE
The purpose of the Magna Group, Inc. Directors Deferred Plan
(the "Plan") is to provide certain members of the Board of
Directors of Magna Group, Inc. (the "Company") who are not
employees of the Company and any of its Affiliates ("Non-
Employee Directors") an equity interest in the Company in
order to enhance the identity of interests between Non-
Employee Directors and the stockholders of the Company. The
Plan provides for the crediting of certain accrued benefits
under the Magna Group, Inc. Board of Directors Retirement
Plan ("Directors Retirement Plan") to the Non-Employee
Director's account under this Plan. A Non-Employee
Director's interest under the Plan shall be expressed in
Stock Units equivalent to shares of the Company's Common
Stock ("Shares").
2. TERM
The Plan shall be effective as of September 1, 1996, and
shall remain in effect until terminated by the Board of
Directors ("Board") of the Company; provided, however, that
the issuance of Shares under the Plan shall be conditioned
upon the effectiveness of a registration statement covering
the Shares.
3. PARTICIPATION
Each Non-Employee Director whose Accrued Benefit (as defined
under such Directors Retirement Plan) under the Directors
Retirement Plan is transferred to this Plan shall
participate in the Plan.
4. CREDITING OF ACCRUED BENEFITS
(a) DETERMINATION OF STOCK UNITS: As of September 30,
1996, the Company shall credit to the Stock Unit
Account of each Non-Employee Director the number of
Stock Units equal to the amount of the Accrued Benefit
transferred to the Plan from the Directors Retirement
Plan divided by the Fair Market Value (as defined in
Section 10 hereof) of a Share on September 30, 1996.
Such calculation shall be carried to three decimal
places.
(b) DISTRIBUTION ELECTIONS: The Non-Employee Director
shall elect the time and form of distribution with
respect to the amount credited pursuant to Section
4(a). Such election must be made on or before December
31, 1996. An election as to the time and form of
distribution may not be changed or revoked after
December 31, 1996.
(c) STOCK UNIT ACCOUNTS: The Stock Units determined
pursuant to Section 4(a) above shall be credited to a
bookkeeping reserve account maintained by the Company.
<PAGE> 2
(d) The Stock Units credited to the Non-Employee Director's
Stock Unit Account from time to time shall constitute
the Non-Employee Director's entire benefit under this
Plan.
5. ADDITIONS TO DEFERRED ACCOUNTS
As of each dividend payment date with respect to Shares,
there shall be credited to each Non-Employee Director's
Stock Unit Account an additional number of Stock Units equal
to (i) the per-share dividend payable with respect to a
Share on such date multiplied by (ii) the number of Stock
Units held in the Stock Unit Account as of the close of
business on the first business day prior to such dividend
payment date and, if the dividend is payable in cash or
property other than Shares, divided by (iii) the Fair Market
Value of a Share on such business day. For purposes of this
Section 5, "dividend" shall include all dividends, whether
normal or special, and whether payable in cash, Shares or
other property. The calculation of additional Stock Units
shall be carried to three decimal places.
6. VESTING OF ACCOUNTS
All Stock Units credited to a Non-Employee Director's Stock
Unit Account pursuant to this Plan shall be at all times
fully vested and nonforfeitable.
7. PAYMENT OF ACCOUNTS
(a) TIME OF PAYMENT: Payment of the Stock Units to a Non-
Employee Director shall commence in January of the year
of payment specified by the Non-Employee Director in
the distribution election form; provided that (i) if
the Non-Employee Director ceases to be a Non-Employee
Director solely because of the Non-Employee Director's
disability, or (ii) if the Non-Employee Director
applies for a hardship withdrawal and the Committee in
its sole discretion determines that a hardship exists,
an immediate lump sum distribution of Shares shall be
made to the Non-Employee Director. A distribution on
account of hardship may be in an amount equal to all or
any portion of the Non-Employee Director's Stock Unit
Account, as the Committee shall determine. In the
event of the death of the Non-Employee Director before
the Director's Stock Unit Account has been fully
distributed, the Non-Employee Director's Stock Unit
Account shall be paid in one lump sum to the Non-
Employee Director's Beneficiary as soon as practicable
following the date of death of the Non-Employee
Director.
(b) FORM OF PAYMENT: If a benefit is paid in the form of a
single sum, such benefit shall be paid in whole Shares
and cash representing any fractional Share. If a
benefit is being paid in installment payments, the
number of Shares to be paid shall be determined
initially by dividing the number of Stock Units
credited to the Non-Employee's Stock Unit Account by
the number of installment payments and rounding to the
nearest number of whole Stock Units; each subsequent
payment shall be determined by dividing the number of
Stock Units remaining in the Stock Unit Account by the
number of installments remaining to be paid and rounding
2
<PAGE> 3
to the nearest number of whole Stock Units. Each installment payment
shall consist of whole number of Shares with the last installment
payment consisting of whole number of Shares and cash representing
any fractional Share. The Company shall issue and deliver
to the Non-Employee Director a stock certificate for
payment of Stock Units as soon as practicable following
the date on which the Stock Units, or any portion
thereof, become payable.
(c) FORM OF DISTRIBUTION: Distributions shall be made from
the Stock Unit Account of a Non-Employee Director in
whichever of the following methods the Non-Employee
Director elects:
(i) A single sum.
(ii) Annual installments over a period not to exceed 10
years.
If all or any portion of the Stock Unit Account is
being distributed in installments, the portion of the
account being held for future distribution shall
continue to be credited with additional Stock Units for
dividends as provided in Section 5.
8. SHARES SUBJECT TO THE PLAN
The aggregate number of Shares that may be subject to
issuance under the Plan shall not exceed 25,000, subject to
adjustment as provided in Section 9 of the Plan.
9. ADJUSTMENTS AND REORGANIZATION
In the event of any stock dividend, stock split, combination
or exchange of Shares, merger, consolidation, spin-off,
recapitalization or other distribution (other than normal
cash dividends) of Company assets to stockholders, or any
other change affecting Shares or the price of Shares, such
proportionate adjustments, if any, as the Board in its sole
discretion may deem appropriate to reflect such change shall
be made with respect to the aggregate number of Shares that
may be issued under the Plan, and each Stock Unit held in
the Stock Unit Accounts. Any adjustments described in the
preceding sentence shall be carried to three decimal places.
10. FAIR MARKET VALUE
Fair Market Value of a share of Stock for all purposes under
the Plan shall mean, for any particular date, (i) for any
period during which the Stock shall not be listed for
trading on a national securities exchange, but when the
Stock is authorized as a Nasdaq National Market security,
the last transaction price per share quoted by The Nasdaq
Stock Market (the "Nasdaq"), (ii) for any period during
which the Stock shall not be listed for trading on a
national securities exchange or authorized as a Nasdaq
National Market security, but when the Stock is authorized
as a Nasdaq SmallCap Market security, the closing bid price
as reported by the Nasdaq, (iii) for any period during which
the Stock shall be listed for trading on a national
securities exchange, the closing
3
<PAGE> 4
price per share of Stock on such exchange as of the close of such trading
day or (iv) the market price per share of Stock as determined by a
nationally recognized investment banking firm selected by
the Board of Directors in the event neither (i), (ii) nor
(iii) above shall be applicable. If Fair Market Value is to
be determined as of a day when the securities markets are
not open, the Fair Market Value on that day shall be the
Fair Market Value on the preceding day when the markets were
open.
11. TERMINATION OR AMENDMENT OF PLAN
(a) IN GENERAL: The Board may at any time by resolution
terminate, suspend or amend this Plan. If the Plan is
terminated by the Board, no deferrals may be credited
after the effective date of such termination, but
previously credited Stock Units and additional credits
which may be made to reflect earnings on such units
shall remain outstanding in accordance with the terms
and conditions of the Plan.
(b) WRITTEN CONSENTS: No amendment may adversely affect
the right of any Non-Employee Director to have dividend
equivalents credited to a Stock Unit Account or to
receive any Shares pursuant to the payout of such
accounts, unless such Non-Employee Director consents in
writing to such amendment.
12. GOVERNMENT REGULATIONS
(a) The obligations of the Company to issue any Shares
under this Plan shall be subject to all applicable
laws, rules and regulations and the obtaining of all
such approvals by governmental agencies as may be
deemed necessary or appropriate by the Board.
(b) Subject to the provisions of Section 11, the Board may
make such changes in the design and administration of
this Plan as may be necessary or appropriate to comply
with the rules and regulations of any governmental
authority.
13. MISCELLANEOUS
(a) UNFUNDED PLAN: Nothing contained in this Plan and no
action taken pursuant to the provisions hereof shall
create or be construed to create a trust of any kind,
or a fiduciary relationship between the Company and a
Non-Employee Director, the Non-Employee Director's
designate or any other person. The Plan shall be
unfunded with respect to the Company's obligation to
pay any amounts due, and a Non-Employee Director's
rights to receive any payment with respect to any Stock
Unit Account shall be not greater than the rights of an
unsecured general creditor of the Company.
The Company shall establish a Rabbi Trust to accumulate
Shares to fund the obligations of the Company pursuant
to this Plan. Payment from the Rabbi Trust of amounts
due under the terms of this Plan shall satisfy the
obligation of the Company to make such payment. In no
event shall any Non-Employee be
4
<PAGE> 5
entitled to receive payment of an amount from the Company that the
Director received from the Rabbi Trust.
(b) ASSIGNMENT; ENCUMBRANCES: The right to have amounts
credited to a Stock Unit Account and the right to
receive payment with respect to such Stock Unit Account
under this Plan are not assignable or transferable and
shall not be subject to any encumbrances, liens,
pledges or charges of the Non-Employee Director or to
the claims of the Non-Employee Director's creditors.
Any attempt to assign, transfer, hypothecate or attach
any rights with respect to or derived from any Stock
Unit shall be null and void and of no force and effect
whatsoever.
(c) DESIGNATION OF BENEFICIARIES: A Non-Employee Director
may designate in writing a beneficiary or beneficiaries
to receive any distribution under the Plan which is
made after the Non-Employee Director's death; provided,
however, that if at the time any such distribution is
due, there is no designation of a beneficiary in force
or if any person (other than a trustee or trustees) as
to whom a beneficiary designation was in force at the
time of such Director's death shall have died before
the payment became due and the Non-Employee Director
has failed to provide in such beneficiary designation
for any person or persons to take in lieu of such
deceased person, the person or persons entitled to
receive such distribution (or part thereof, as the case
may be) shall be the Non-Employee Director's executor
or administrator.
(d) RELATIONSHIP OF NON-EMPLOYEE DIRECTOR: A Non-Employee
Director's relationship with the Company is not in fact
and is not intended to be an employee-employer
relationship, and nothing in this Plan shall be
construed to create such a relationship.
(e) ADMINISTRATION: The Compensation Committee of the
Board of Directors of Magna Group, Inc. shall
administer the Plan, including the adoption of rules or
the preparation of forms to be used in its operation,
and to interpret and apply the provisions hereof as
well as any rules which it may adopt. In addition, the
Board may appoint other individuals, firms or
organizations to act as agent of the Company in
carrying out administrative duties under the Plan.
Except as may be provided in a Rabbi Trust, the
decisions of the Committee, including, but not limited
to, interpretations and determinations of amounts due
under this Plan, shall be final and binding on all
parties.
(f) GOVERNING LAW: The validity, construction and effect
of the Plan and any actions taken or relating to the
Plan, shall be determined in accordance with the laws
of the State of Missouri without regard to its conflict
of law rules, and applicable federal law.
(g) RIGHTS AS A STOCKHOLDER: A Non-Employee Director shall
have no rights as a stockholder with respect to a Stock
Unit until the Non-Employee Director actually becomes a
holder of record of Shares distributed with respect
thereto.
5
<PAGE> 6
(h) NOTICES: All notices or other communications made or
given pursuant to this Plan shall be in writing and
shall be sufficiently made or given if hand delivered,
or if mailed by certified mail, addressed to the Non-
Employee Director at the address contained in the
records of the Company or to the Company at its
principal office, as applicable.
IN WITNESS WHEREOF, Magna Group, Inc. has adopted the
foregoing instrument this 1st day of September, 1996.
MAGNA GROUP, INC.
By /s/ G. Thomas Andes
------------------------------------------
Title President and CEO
---------------------------------------
6
<PAGE> 1
MAGNA GROUP, INC.
DIRECTORS DEFERRED COMPENSATION PLAN
1. PURPOSE
The purposes of the Magna Group, Inc. Directors Deferred
Compensation Plan (the "Plan") are to provide members of the
Board of Directors of Magna Group, Inc. (the "Company") and
certain affiliates or subsidiaries of the Company
("Affiliate") who are not employees of the Company and any
of its Affiliates ("Non-Employee Directors" as defined
below) the opportunity to acquire an equity interest in the
Company in order to attract and retain well-qualified
individuals to serve as Non-Employee Directors and to
enhance the identity of interests between Non-Employee
Directors and the stockholders of the Company. The Plan
permits each Non-Employee Director to elect to defer the
receipt of all or any portion of any retainer, committee
chair, and/or meeting fees. A Non-Employee Director's
interest under the Plan shall be expressed in Stock Units
equivalent to shares of the Company's Common Stock
("Shares"). The Plan may be adopted by any Affiliate with
the consent of the Company.
2. TERM
The Plan shall be effective as of September 1, 1996, and
shall remain in effect until terminated by the Board of
Directors ("Board") of the Company; provided, however, that
the issuance of Shares under the Plan shall be conditioned
upon the effectiveness of a registration statement covering
the Shares.
3. ELIGIBILITY FOR PARTICIPATION
A Non-Employee Director is an individual who is a member of
the Board of Directors of the Company or of the Board of
Directors of an Affiliate which has adopted the Plan
("Participating Affiliate") and who is not an employee of
the Company and any Affiliate. A Non-Employee Director
shall be eligible to participate in the Plan and elect, in
accordance with Section 4(a) of the Plan, to defer the
receipt of all or any portion of a retainer, committee
chair, and/or meeting fees ("Fees") payable by the
applicable Company or Participating Affiliate for services
on the Board of Directors of the Company or such
Participating Affiliate.
4. DEFERRAL OF FEES
(a) DEFERRAL ELECTIONS: Commencing on the effective date of
the Plan, each Non-Employee Director may elect to defer
the receipt of all or any portion of Fees payable to
such Non-Employee Director; provided that no deferral
election may be made in an amount less than $200.00 per
month. Each deferral election is irrevocable and must
be made on or before December 31 of the calendar year
immediately preceding the calendar year during which
the Fees will be earned; provided however, a Non-
Employee Director who first becomes eligible to
participate in the Plan on or after July 1 of a
calendar year must make a deferral
<PAGE> 2
election within 30 days of becoming eligible to participate in the
Plan with respect to Fees earned during the remainder of
that calendar year and for Fees earned during the
following calendar year. A deferral election for Fees
earned during the period September 1, 1996 through
December 31, 1997 may be made on or before September
18, 1996. Anything contained herein to the contrary
notwithstanding, a Non-Employee Director may not
revoke, change or make a deferral election if such
director has made an opposite-way election under any
plan of the Company within the previous six months. A
deferral election will continue in effect for
subsequent calendar years unless changed or revoked by
the Non-Employee Director on or before December 31 of
the calendar year immediately preceding the calendar
year for which such change or revocation is effective.
The Non-Employee Director shall elect the time and form
of distribution with respect to the Fees being deferred
pursuant to each deferral election. An election as to
the time and the form of distribution with respect to
Fees being deferred for a year may not be changed after
the beginning of the year to which such election
relates.
(b) CREDITING DEFERRAL AMOUNTS TO ACCOUNTS: Amounts
deferred pursuant to Section 4(a) shall be credited to
a bookkeeping reserve account maintained by the Company
("Stock Unit Account") as of the last day of the month
in which such amounts would have been paid in cash. The
number of Stock Units credited to the Stock Unit
Account of a Non-Employee Director of the Company shall
equal one hundred twenty-five percent (125%) of the
amount deferred divided by the Fair Market Value (as
defined in Section 10 hereof) of a Share on the last
day of the month (or such other date as determined by
the Committee but not earlier than the date such Non-
Employee Director would have otherwise been paid such
deferred amounts) in which such deferral amount would
have been paid but for the deferral election pursuant
to Section 4(a). The number of Stock Units credited to
the Stock Unit Account of a Non-Employee Director of a
Participating Affiliate shall equal one hundred (100%)
of the amount deferred divided by the Fair Market Value
(as defined in Section 10 hereof) of a Share on the
last day of the month (or such other date as determined
by the Committee but not earlier than the date such
Non-Employee Director would have otherwise been paid
such deferred amounts) in which such deferral amount
would have been paid but for the deferral election
pursuant to Section 4(a). Such calculation of Stock
Units shall be carried to three decimal places.
(c) The Stock Units credited to the Non-Employee Director's
Stock Unit Account from time to time shall constitute
the Non-Employee Director's entire benefit under this
Plan.
5. ADDITIONS TO DEFERRED ACCOUNTS
As of each dividend payment date with respect to Shares,
there shall be credited to each Non-Employee Director's
Stock Unit Account an additional number of Stock Units equal
2
<PAGE> 3
to (i) the per-share dividend payable with respect to a
Share on such date multiplied by (ii) the number of Stock
Units held in the Stock Unit Account as of the close of
business on the first business day prior to such dividend
payment date and, if the dividend is payable in cash or
property other than Shares, divided by (iii) the Fair Market
Value of a Share on such business day. For purposes of this
Section 5, "dividend" shall include all dividends, whether
normal or special, and whether payable in cash, Shares or
other property. The calculation of additional Stock Units
shall be carried to three decimal places.
6. VESTING OF ACCOUNTS
All Stock Units credited to a Non-Employee Director's Stock
Unit Account pursuant to this Plan shall be at all times
fully vested and nonforfeitable.
7. PAYMENT OF ACCOUNTS
(a) TIME OF PAYMENT: Payment of the Stock Units to a Non-
Employee Director shall commence in January of the year
of payment specified by the Non-Employee Director in
the deferral election; provided that (i) if the Non-
Employee Director ceases to be a Non-Employee Director
solely because of the Non-Employee Director's
disability, or (ii) if the Non-Employee Director
applies for a hardship withdrawal and the Committee in
its sole discretion determines that a hardship exists,
an immediate lump sum distribution of Shares shall be
made to the Non-Employee Director. A distribution on
account of hardship may be in an amount equal to all or
any portion of the Non-Employee Director's Stock Unit
Account, as the Committee shall determine. In the
event of the death of the Non-Employee Director before
the Director's Stock Unit Account has been fully
distributed, the Non-Employee Director's Stock Unit
Account shall be paid in one lump sum to the Non-
Employee Director's Beneficiary as soon as practicable
following the date of death of the Non-Employee
Director.
(b) FORM OF PAYMENT: If a benefit is paid in the form of a
single sum, such benefit shall be paid in whole Shares
and cash representing any fractional Share. If a
benefit is being paid in installment payments, the
number of Shares to be paid shall be determined
initially by dividing the number of Stock Units
credited to the Non-Employee's Stock Unit Account by
the number of installment payments and rounding to the
nearest number of whole Stock Units; each subsequent
payment shall be determined by dividing the number of
Stock Units remaining in the Stock Unit Account by the
number of installments remaining to be paid and
rounding to the nearest number of whole Stock Units.
Each installment payment shall consist of whole number
of Shares with the last installment payment consisting
of whole number of Shares and cash representing any
fractional Share. The Company shall issue and deliver
to the Non-Employee Director a stock certificate for
payment of Stock Units as soon as practicable following
the date on which the Stock Units, or any portion
thereof, become payable.
3
<PAGE> 4
(c) FORM OF DISTRIBUTION: Distributions shall be made from
the Stock Unit Account of a Non-Employee Director in
whichever of the following methods the Non-Employee
Director elects at the time of the deferral election:
(i) A single sum.
(ii) Annual installments over a period not to exceed 10
years.
If all or any portion of the Stock Unit Account is
being distributed in installments, the portion of the
account being held for future distribution shall
continue to be credited with additional Stock Units for
dividends as provided in Section 5.
8. SHARES SUBJECT TO THE PLAN
The aggregate number of Shares that may be subject to
issuance under the Plan shall not exceed 25,000, subject to
adjustment as provided in Section 9 of the Plan.
9. ADJUSTMENTS AND REORGANIZATION
In the event of any stock dividend, stock split, combination
or exchange of Shares, merger, consolidation, spin-off,
recapitalization or other distribution (other than normal
cash dividends) of Company assets to stockholders, or any
other change affecting Shares or the price of Shares, such
proportionate adjustments, if any, as the Board in its sole
discretion may deem appropriate to reflect such change shall
be made with respect to the aggregate number of Shares that
may be issued under the Plan, and each Stock Unit held in
the Stock Unit Accounts. Any adjustments described in the
preceding sentence shall be carried to three decimal places.
10. FAIR MARKET VALUE
Fair Market Value of a share of Stock for all purposes under
the Plan shall mean, for any particular date, (i) for any
period during which the Stock shall not be listed for
trading on a national securities exchange, but when the
Stock is authorized as a Nasdaq National Market security,
the last transaction price per share quoted by The Nasdaq
Stock Market (the "Nasdaq"), (ii) for any period during
which the Stock shall not be listed for trading on a
national securities exchange or authorized as a Nasdaq
National Market security, but when the Stock is authorized
as a Nasdaq SmallCap Market security, the closing bid price
as reported by the Nasdaq, (iii) for any period during which
the Stock shall be listed for trading on a national
securities exchange, the closing price per share of Stock on
such exchange as of the close of such trading day or (iv)
the market price per share of Stock as determined by a
nationally recognized investment banking firm selected by
the Board of Directors in the event neither (i), (ii) nor
(iii) above shall be applicable. If Fair Market Value is to
be determined as of a day when the securities markets are
not open, the Fair Market Value on that day shall be the
Fair Market Value on the preceding day when the markets were
open.
4
<PAGE> 5
11. TERMINATION OR AMENDMENT OF PLAN
(a) IN GENERAL: The Board may at any time by resolution
terminate, suspend or amend this Plan. If the Plan is
terminated by the Board, no deferrals may be credited
after the effective date of such termination, but
previously credited Stock Units and additional credits
which may be made to reflect earnings on such units
shall remain outstanding in accordance with the terms
and conditions of the Plan.
(b) WRITTEN CONSENTS: No amendment may adversely affect
the right of any Non-Employee Director to have dividend
equivalents credited to a Stock Unit Account or to
receive any Shares pursuant to the payout of such
accounts, unless such Non-Employee Director consents in
writing to such amendment.
12. GOVERNMENT REGULATIONS
(a) The obligations of the Company to issue any Shares
under this Plan shall be subject to all applicable
laws, rules and regulations and the obtaining of all
such approvals by governmental agencies as may be
deemed necessary or appropriate by the Board.
(b) Subject to the provisions of Section 11, the Board may
make such changes in the design and administration of
this Plan as may be necessary or appropriate to comply
with the rules and regulations of any governmental
authority.
13. MISCELLANEOUS
(a) UNFUNDED PLAN: Nothing contained in this Plan and no
action taken pursuant to the provisions hereof shall
create or be construed to create a trust of any kind,
or a fiduciary relationship between the Company and a
Non-Employee Director, the Non-Employee Director's
designate or any other person. The Plan shall be
unfunded with respect to the Company's obligation to
pay any amounts due, and a Non-Employee Director's
rights to receive any payment with respect to any Stock
Unit Account shall be not greater than the rights of an
unsecured general creditor of the Company.
The Company shall establish a Rabbi Trust to accumulate
Shares to fund the obligations of the Company pursuant
to this Plan. Payment from the Rabbi Trust of amounts
due under the terms of this Plan shall satisfy the
obligation of the Company to make such payment. In no
event shall any Non-Employee be entitled to receive
payment of an amount from the Company that the Director
received from the Rabbi Trust.
(b) ASSIGNMENT; ENCUMBRANCES: The right to have amounts
credited to a Stock Unit Account and the right to
receive payment with respect to such Stock Unit Account
under this Plan are not assignable or transferable and
shall not be subject to any encumbrances, liens,
pledges or charges of the Non-Employee Director or to the
5
<PAGE> 6
claims of the Non-Employee Director's creditors.
Any attempt to assign, transfer, hypothecate or attach
any rights with respect to or derived from any Stock
Unit shall be null and void and of no force and effect
whatsoever.
(c) DESIGNATION OF BENEFICIARIES: A Non-Employee Director
may designate in writing a beneficiary or beneficiaries
to receive any distribution under the Plan which is
made after the Non-Employee Director's death; provided,
however, that if at the time any such distribution is
due, there is no designation of a beneficiary in force
or if any person (other than a trustee or trustees) as
to whom a beneficiary designation was in force at the
time of such Director's death shall have died before
the payment became due and the Non-Employee Director
has failed to provide in such beneficiary designation
for any person or persons to take in lieu of such
deceased person, the person or persons entitled to
receive such distribution (or part thereof, as the case
may be) shall be the Non-Employee Director's executor
or administrator.
(d) RELATIONSHIP OF NON-EMPLOYEE DIRECTOR: A Non-Employee
Director's relationship with the Company is not in fact
and is not intended to be an employee-employer
relationship, and nothing in this Plan shall be
construed to create such a relationship.
(e) ADMINISTRATION: The Board shall appoint a Committee
consisting of three (3) or more persons to
administer the Plan, including the adoption of rules or
the preparation of forms to be used in its operation,
and to interpret and apply the provisions hereof as
well as any rules which it may adopt. In addition, the
Board may appoint other individuals, firms or
organizations to act as agent of the Company in
carrying out administrative duties under the Plan.
Except as may be provided in a Rabbi Trust, the
decisions of the Committee, including, but not limited
to, interpretations and determinations of amounts due
under this Plan, shall be final and binding on all
parties.
(f) GOVERNING LAW: The validity, construction and effect
of the Plan and any actions taken or relating to the
Plan, shall be determined in accordance with the laws
of the State of Missouri without regard to its conflict
of law rules, and applicable federal law.
(g) RIGHTS AS A STOCKHOLDER: A Non-Employee Director shall
have no rights as a stockholder with respect to a Stock
Unit until the Non-Employee Director actually becomes a
holder of record of Shares distributed with respect
thereto.
(h) NOTICES: All notices or other communications made or
given pursuant to this Plan shall be in writing and
shall be sufficiently made or given if hand delivered,
or if mailed by certified mail, addressed to the Non-
Employee Director at the address contained in the
records of the Company or to the Company at its
principal office, as applicable.
6
<PAGE> 7
IN WITNESS WHEREOF, Magna Group, Inc. has adopted the
foregoing instrument this 1st day of September, 1996.
--- ---------
MAGNA GROUP, INC.
By /s/ G. Thomas Andes
-------------------------------------
Title President and CEO
----------------------------------
7
<PAGE> 1
FIRST AMENDMENT
TO
MAGNA GROUP, INC.
BOARD OF DIRECTORS RETIREMENT PLAN
WHEREAS, Magna Group, Inc. (the "Company") established the
Magna Group, Inc. Board of Directors Retirement Plan (the "Plan")
effective as of January 1, 1994; and
WHEREAS, The Company desires to amend the Plan effective as of
September 1, 1996.
NOW, THEREFORE, the Plan is hereby amended, effective as of
September 1, 1996, in the following respects:
I.
Section 1.18 is hereby added to the Plan which shall read as
follows:
"1.18 ACCRUED BENEFIT means the present value
of the benefit which the Participant
would be entitled to receive commencing
within sixty (60) days following his
Retirement Date with such benefit being
calculated assuming that such Participant
retires from the Board upon attaining age
seventy (70) and using the number of
Years of Service such Participant has
completed as of December 31, 1996.
Present value shall be determined using
such assumptions as the Committee shall
determine in its sole discretion."
II.
Section 2.01 of the Plan is hereby deleted in its entirety and
the following is substituted in lieu thereof:
"2.01 Each Director shall become a Participant
in the Plan as of the first day following
his completion of five (5) Years of
Service. Anything contained herein to
the contrary notwithstanding, (i) no
Director shall become a Participant in
the Plan after September 30, 1996; (ii) a
Participant who has attained age seventy
(70) on or before September 30, 1996
shall continue to participate in the
Plan; (iii) each Participant other than a
Participant described in (ii) above shall
cease being a Participant in the Plan as
of September 30, 1996; and (iv) the
Accrued Benefit of each Participant
described in (iii) above shall be
transferred to the Magna Group, Inc.
Directors Deferred Plan ("Directors
Plan") and paid to the Participant in
accordance with the terms of the
Directors Plan."
<PAGE> 2
III.
Section 6.01 of the Plan is hereby deleted in its entirety and
the following is substituted in lieu thereof:
"6.01 Subject to Section 6.02, the Company
reserves the right at any time, by
resolution of the Board, to amend or
terminate the Plan for any reason and
without the consent of any Participant.
Effective on the date as of which no
further benefit obligations are due in
accordance with the terms of the Plan,
the Plan shall automatically terminate
and be of no further force and effect."
IN WITNESS WHEREOF, the Company hereby adopts this First
Amendment this 1st day of September, 1996.
MAGNA GROUP, INC.
By: /s/ G. Thomas Andes
------------------------
<PAGE> 1
MAGNA GROUP, INC.
1996 LONG TERM PERFORMANCE PLAN
RESTRICTED STOCK AGREEMENT
This Restricted Stock Agreement (hereinafter "Agreement"),
is entered into this 17th day of April, 1996, in the County of
St. Louis, Missouri, by and between Magna Group, Inc., a Delaware
corporation (hereinafter "Company") and G. Thomas Andes,
(hereinafter "Executive") pursuant to the Magna Group, Inc. 1996
Long Term Performance Plan (the "Plan").
1. DEFINITIONS. Terms used in this Agreement have the
meanings prescribed in the Plan, except that the following terms
shall have the following meanings:
(a) AWARD DATE means the first business day following
a Valuation Period. There may be as many as four
Award Dates as designated below, if the Average
Magna Price equals or exceeds the Specified Price
during a Valuation Period:
25% Award Date - Specified Price = $29.00
50% Award Date - Specified Price = $32.00
75% Award Date - Specified Price = $35.00
100% Award Date - Specified Price = $39.00
(b) RESTRICTION PERIOD means, with respect to a share
of Stock granted on an Award Date, the period from
such Award Date through and including the day
before the earliest of (i) the date on which
Executive's employment with the Company ends by
reason of Retirement, Disability or death, (ii)
the date on which occurs a Change of Control, or
(iii) the fifth anniversary of such Award Date.
(c) AVERAGE MAGNA PRICE means the average of the Fair
Market Value of a share of Stock during a period
of twenty (20) consecutive trading days during
which shares of Stock shall be traded.
(d) TERMINATION DATE means March 10, 2000 unless such
date shall occur during a Valuation Period in
which a price set forth in paragraph 1(a) above
shall be met on one or more occasions in which
event the date shall be extended and mean a date
including and ending nineteen (19) consecutive
trading days thereafter.
(e) VALUATION PERIOD means a period of twenty (20)
consecutive trading days ending on or before the
Termination Date.
<PAGE> 2
2. CONDITIONAL AWARD OF STOCK. The Company will grant to
Executive up to an aggregate of 50,000 shares of Stock as of the
specified Award Dates if such dates occur before the Termination
Date:
On the 25% Award Date -- 12,500 Shares
On the 50% Award Date -- 25,000 Shares
On the 75% Award Date -- 37,500 Shares
On the 100% Award Date -- 50,000 Shares
Any shares of Stock which have not been awarded before the
earliest of (i) the date Executive's employment with the Company
ends, (ii) the date on which occurs a Change of Control, or (iii)
the first business day after the Termination Date, shall not be
awarded under this Agreement and may be used for other purposes
as allowed by the Plan.
3. ISSUANCE OF STOCK. Certificates for shares of Stock will
be issued to Executive as soon as practicable following an Award
Date. Such certificates will contain a legend reflecting or
incorporating the restrictions on transferability described in
this Agreement. Executive shall have no rights as a Stockholder
with respect to a share of Stock granted pursuant to this
Agreement prior to the issuance of a certificate therefor.
4. INCORPORATION OF LONG TERM PERFORMANCE PLAN. This
Agreement is entered into pursuant to the Plan, which Plan is by
this reference incorporated herein and made a part hereof.
5. NON-TRANSFERABILITY OF STOCK. Shares of Stock issued to
Executive pursuant to this Agreement may not be transferred by
Executive during the Restriction Period. This limitation shall
not preclude a transfer by Executive during the Restriction
Period to a trust of which Executive is the grantor, initial
trustee and primary income beneficiary. All restrictions shall
terminate as of the end of the Restriction Period, and upon the
surrender of certificates for shares issued pursuant to this
Agreement the Company shall issue certificates, without any
legend or other indication of restrictions imposed hereunder, for
a corresponding number of shares.
6. FORFEITURE OF STOCK. If Executive's employment with the
Company ends for any reason before the end of the Restriction
Period with respect to a share of Stock, such share shall be
forfeited, and the certificate representing such share shall be
returned to the Company as soon as practicable following such
forfeiture.
7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC. In the
event of the payment of a stock dividend, a split-up or
consolidation of shares, or any like capital
- 2 -
<PAGE> 3
adjustment of the Company before the Termination Date, then to the extent the
shares of Stock, which may be awarded hereunder have not yet been awarded,
there shall be a corresponding adjustment as to the number of shares covered
under this Agreement, to the end that Executive shall retain the Executive's
proportionate interest in the Company with respect to shares issued as of a date
following such capital change as he would have received if such change had not
taken place.
8. AWARD CONDITIONED ON ACCEPTANCE. This Agreement shall be
void and of no effect unless a copy of this Agreement is executed
by Executive and returned to the Human Resources Department of
the Company not later than 30 days after the day this Agreement
is mailed or delivered to Executive.
9. EFFECTIVE DATE. This Agreement is made under the Magna Group,
Inc. 1996 Long Term Performance Plan. It shall not be effective unless
and until the Stockholders of the Company have approved the Plan.
IN WITNESS WHEREOF, MAGNA GROUP, INC. has caused this
Agreement to be executed and Executive has signed the same, in
duplicate originals as of the day and year first above written.
MAGNA GROUP, INC.
By /s/ Carolyn B. Ryseff
-------------------------------------
Carolyn B. Ryseff
Senior Vice President
By /s/ G. Thomas Andes
-------------------------------------
G. Thomas Andes
Executive
- 3 -
<PAGE> 1
Exhibit 11.1
------------
<TABLE>
MAGNA GROUP, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
(In thousands, except per share data)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Primary
- - -------
Average common shares outstanding 28,101 27,794 28,287 27,687
Assumed exercise of employee stock options 132 164 122 136
------- ------- ------- -------
Total 28,233 27,958 28,409 27,823
======= ======= ======= =======
Net income $16,026 $13,135 $46,228 $37,169
Less preferred stock dividends:
Class B voting preferred -- -- (2) (2)
------- ------- ------- -------
Net income $16,026 $13,135 $46,226 $37,167
======= ======= ======= =======
Per common share:
Net income $0.57 $0.47 $1.63 $1.34
======= ======= ======= =======
Fully Diluted<FA>
- - -----------------
Average common shares outstanding 28,101 27,794 28,287 27,687
Assumed exercise of employee stock options 214 193 218 214
Assumed conversion of:
7% convertible subordinated capital notes 784 881 801 908
8-3/4% convertible subordinated debentures 693 -- 693 --
------- ------- ------- -------
Average common shares and common share
equivalents 29,792 28,868 29,999 28,809
======= ======= ======= =======
Net income $16,026 $13,135 $46,228 $37,169
Less preferred stock dividends:
Class B voting preferred -- -- (2) (2)
Elimination of interest net of
related tax effects on:
7% convertible subordinated capital notes 168 179 505 578
8-3/4% convertible subordinated debentures 361 -- 1,074 --
------- ------- ------- -------
Fully diluted net income $16,555 $13,314 $47,805 $37,745
======= ======= ======= =======
Per common share:
Net income $0.56 $0.46<FA> $1.59 $1.31<FA>
======= ======= ======= =======
<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 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, 1996, 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-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 157,076
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 83,543
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,454,618
<INVESTMENTS-CARRYING> 141,848
<INVESTMENTS-MARKET> 142,110
<LOANS> 3,367,661
<ALLOWANCE> 45,093
<TOTAL-ASSETS> 5,384,481
<DEPOSITS> 4,164,860
<SHORT-TERM> 620,110
<LIABILITIES-OTHER> 60,492
<LONG-TERM> 79,117
0
40
<COMMON> 57,595
<OTHER-SE> 402,267
<TOTAL-LIABILITIES-AND-EQUITY> 5,384,481
<INTEREST-LOAN> 212,503
<INTEREST-INVEST> 74,455
<INTEREST-OTHER> 1,316
<INTEREST-TOTAL> 288,274
<INTEREST-DEPOSIT> 116,785
<INTEREST-EXPENSE> 143,141
<INTEREST-INCOME-NET> 145,133
<LOAN-LOSSES> 7,781
<SECURITIES-GAINS> 779
<EXPENSE-OTHER> 104,169
<INCOME-PRETAX> 70,499
<INCOME-PRE-EXTRAORDINARY> 70,499
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,228
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 1.59
<YIELD-ACTUAL> 4.04
<LOANS-NON> 16,680
<LOANS-PAST> 9,627
<LOANS-TROUBLED> 44
<LOANS-PROBLEM> 0<F1>
<ALLOWANCE-OPEN> 42,623
<CHARGE-OFFS> 10,053
<RECOVERIES> 3,852
<ALLOWANCE-CLOSE> 45,093
<ALLOWANCE-DOMESTIC> 45,093
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0<F1>
<FN>
<F1>Information not currently available; is reported
on an annual basis only.
</TABLE>
