<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 MARCH 31, 1998
-------------------------------------------------
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 1-12405
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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 May 1, 1998
- ----------------------------- ---------------------------------
Common stock, $2.00 par value 33,973,803
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<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
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<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 9
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 20
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEDURES 20
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS 20
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES 20
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 21
ITEM 5 - OTHER INFORMATION 21
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 21
SIGNATURES 22
EXHIBIT INDEX 23
</TABLE>
2
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PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
<TABLE>
MAGNA GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>
MARCH 31 DECEMBER 31
1998 1997
---------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 220,317 $ 247,932
Federal funds sold 95,126 48,202
Securities:
Held-to-maturity 129,305 137,690
Available-for-sale 2,109,808 1,850,932
Loans, net of unearned income 4,378,928 4,483,812
Reserve for loan losses (59,928) (59,439)
---------- ----------
Net Loans 4,319,000 4,424,373
Premises and equipment 117,253 118,587
Goodwill and other intangibles 122,188 121,817
Other assets 137,621 125,436
---------- ----------
TOTAL ASSETS $7,250,618 $7,074,969
========== ==========
LIABILITIES
Deposits:
Noninterest bearing $ 641,300 $ 711,163
Interest bearing 4,905,388 4,724,832
---------- ----------
Total Deposits 5,546,688 5,435,995
Federal funds purchased 68,725 92,200
Repurchase agreements 714,042 642,301
Other short-term borrowings 108,939 111,102
Long-term debt 115,883 92,056
Other liabilities 85,363 74,962
----------- -----------
TOTAL LIABILITIES 6,639,640 6,448,616
Commitments and contingent liabilities
STOCKHOLDERS' EQUITY
Preferred stock:
Class B, voting, $20 par value -
1,981 and 1,996 shares issued
and outstanding, respectively 40 40
Common stock, $2 par value - 34,037,452
and 33,799,995 shares issued,
respectively 68,075 67,600
Capital surplus 343,601 336,544
Retained earnings 267,982 256,611
Treasury stock - 1,473,700 and 937,900
shares respectively, at cost (60,626) (32,703)
Unearned restricted stock awards (7,596) (4,835)
Net unrealized gains(losses)
on securities (498) 3,096
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 610,978 626,353
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,250,618 $7,074,969
========== ==========
See accompanying notes.
</TABLE>
3
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<TABLE>
MAGNA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
THREE MONTHS ENDED
March 31
--------------------------
1998 1997
---- ----
<S> <C> <C>
Interest Income:
Interest and fees on loans $ 96,165 $ 79,187
Securities:
Taxable 28,395 24,528
Tax-exempt 3,770 2,192
-------- --------
32,165 26,720
Other interest income 2,173 1,155
-------- --------
TOTAL INTEREST INCOME 130,503 107,062
Interest Expense:
Deposits 55,464 43,584
Federal funds purchased 1,043 710
Repurchase agreements 8,415 6,755
Other short-term borrowings 1,763 1,265
Long-term debt 1,609 1,518
-------- --------
TOTAL INTEREST EXPENSE 68,294 53,832
-------- --------
NET INTEREST INCOME 62,209 53,230
Provision for Loan Losses 3,550 15,152
-------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 58,659 38,078
Noninterest Income:
Service charges on deposits 6,328 5,830
Trust services 3,316 2,975
Credit card services 1,928 1,251
Brokerage and investment services 1,676 1,200
Securities gains, net 596 130
Other 10,135 2,568
-------- --------
23,979 13,954
Noninterest Expense:
Employee compensation and
other benefits 23,365 19,825
Net occupancy 4,829 4,741
Equipment 2,697 2,473
FDIC insurance premiums 211 154
Intangible amortization 2,566 1,340
Other 16,362 9,884
-------- --------
50,030 38,417
-------- --------
INCOME BEFORE INCOME TAXES 32,608 13,615
Income Tax Expense 12,097 4,177
-------- --------
NET INCOME $ 20,511 $ 9,438
======== ========
Average Shares Outstanding:
Basic 32,510 29,866
Diluted 34,259 30,862
Earnings Per Share:
Basic $ .63 $ .32
===== =====
Diluted $ .61 $ .31
===== =====
Dividends Per Share $ .28 $ .25
===== =====
See accompanying notes.
</TABLE>
4
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<TABLE>
MAGNA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------------------
1998 1997
---- ----
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 29,608 $ 22,903
INVESTING ACTIVITIES
Proceeds from maturities of held-to-maturity
securities 13,572 5,174
Purchases of held-to-maturity securities - (1,397)
Proceeds from maturities of available-
for-sale securities 312,082 216,421
Proceeds from sales of available-for-
sale securities 70,978 28,916
Purchases of available-for-sale securities (652,677) (285,964)
Net decrease(increase)in loans 100,798 (39,767)
Proceeds from sales of foreclosed property 580 853
Net purchases of premises and equipment (3,471) (1,587)
Cash and cash equivalents of acquired
institutions, net of cash paid - (18,989)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (158,138) (96,340)
FINANCING ACTIVITIES
Net increase in deposits 110,702 55,091
Cash dividends (9,140) (7,077)
Net(decrease)increase in federal
funds purchased (23,475) 107,285
Net increase in repurchase agreements 71,741 49,956
Net decrease in other short-
term borrowings (402) (78,399)
Proceeds from issuance of long-term debt 25,000 -
Payments of long-term debt (93) (82)
Purchases of treasury stock (27,923) (10,983)
Other 1,429 1,564
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 147,839 117,355
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 19,309 43,918
Cash and cash equivalents at beginning of period 296,134 214,480
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 315,443 $ 258,398
========= =========
See accompanying notes.
</TABLE>
5
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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, 1997. 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--PENDING MERGER WITH UNION PLANTERS CORPORATION
On February 22, 1998, Magna and Union Planters Corporation ("Union
Planters") signed a definitive agreement for the acquisition of Magna by
Union Planters. Union Planters is a Memphis-based multi-state bank holding
company with $18.4 billion in assets as of March 31, 1998. Under the terms
of the agreement, each share of Magna's common stock will be converted into
.9686 of a share of Union Planters' common stock. The acquisition is subject
to certain regulatory approvals and to the approvals of the stockholders of
both Magna and Union Planters. The acquisition is expected to be accounted
for as a pooling-of-interests and is expected to be completed in the third
quarter of 1998.
NOTE C--ACQUISITIONS
On May 1, 1998, Magna completed the acquisition of Charter Financial,
Inc. ("Charter") for approximately 2,507,000 shares of common stock of Magna.
The acquisition will be accounted for under the purchase method. At
acquisition, Charter had approximately $408 million in assets.
NOTE D--CHANGE IN ACCOUNTING METHODS
Effective January 1, 1998, Magna adopted Financial Accounting Standards
No. 127 (FAS No. 127), "Deferral of the Effective Date of Certain Provisions
of FAS Statement No. 125." FAS 127 deferred implementation requirements of
FAS No. 125 relating to repurchase agreements, securities lending and similar
transactions until transactions entered into after December 31, 1997. The
adoption of FAS No. 127 had no material impact on Magna's financial condition
or results of operation.
Effective January 1, 1998, Magna adopted Financial Accounting Standards
No. 130 (FAS No. 130), "Reporting Comprehensive Income."
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FAS No. 130 establishes standards for the reporting and display of
comprehensive income and its components; however, the adoption of FAS No. 130
had no impact on Magna's net income or stockholders' equity. FAS No. 130
requires unrealized gains or losses on Magna's available-for-sale securities,
which prior to adoption were reported separately in stockholders' equity, to be
included in other comprehensive income.
During the first quarter of 1998 and 1997, total comprehensive income
amounted to $16.9 million and $4.8 million, respectively.
Effective January 1, 1998, Magna adopted Financial Accounting Standards
No. 131 (FAS No. 131), "Disclosures About Segments of an Enterprise and
Related Information." FAS No. 131 superseded Financial Accounting Standards
No. 14, "Financial Reporting for Segments of a Business Enterprise." FAS No.
131 changes the basis on which companies report information about operating
segments in annual financial statements and requires new disclosures
regarding operating segments in interim financial statements. FAS No. 131
also establishes standards for related disclosures about products and
services, geographic areas and major customers. Magna has determined that
all of its operations effectively operate within one reportable segment, as
defined in FAS No. 131. Accordingly, the adoption of FAS No. 131 did not
affect the historical disclosure of segment information.
NOTE E--RECLASSIFICATIONS
Certain amounts for 1997 have been reclassified to conform with 1998
financial statement presentation.
NOTE F--CAPITAL
In June 1997, Magna announced a common stock repurchase program
authorizing the repurchase of 1,700,000 shares. As of March 31, 1998, no
shares have been repurchased in connection with that program. In November
1997, Magna announced its intention to repurchase approximately 2,650,000
shares expected to be issued in connection with the acquisition of Charter.
As of March 31, 1998, Magna had repurchased 843,700 of those authorized
shares.
NOTE G--EARNINGS PER SHARE
Financial Accounting Standards No. 128 (FAS No. 128), "Earnings per
Share" was effective for Magna December 31, 1997. FAS No. 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. The following table
sets forth the computation of basic and diluted earnings per share:
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<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-------------------------------
1998 1997
---- ----
<S> <C> <C>
Numerator:
Net income $20,511 $ 9,438
Preferred stock dividends:
Class B voting preferred (1) (1)
------- -------
Numerator for basic earnings per share--
income available to common stockholders 20,510 9,437
------- -------
Effect of dilutive items:
Elimination of interest, net of related
tax effects on:
7% convertible subordinated capital notes 115 136
8-3/4% convertible subordinated debentures 284 -
------- -------
Numerator for diluted earnings per share --
income available to common stockholders
after assumed conversions $20,909 $ 9,573
======= =======
Denominator:
Weighted average common shares outstanding 32,721 29,983
Weighted average restricted common shares --
issued but not earned (211) (117)
------- -------
Denominator for basic earnings per share 32,510 29,866
------- -------
Effect of dilutive securities:
Weighted average restricted common shares --
issued but not earned 211 117
Net effect of stock options 397 199
Assumed conversion of:
7% convertible subordinated capital notes 574 680
8-3/4% convertible subordinated debentures 567 -
------- -------
Dilutive potential common shares 1,749 996
Denominator for diluted earnings per share--
adjusted weighted-average shares and assumed
conversions 34,259 30,862
======= =======
Basic earnings per share $ .63 $ .32
===== =====
Diluted earnings per share $ .61 $ .31
===== =====
</TABLE>
For the three months ended March 31, 1997, inclusion of common stock
equivalents for the 8-3/4% convertible subordinated debentures in the
computation of diluted earnings per share results in antidilution.
Therefore, those common stock equivalents are excluded from the computation.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
- -----------------------------------
INTRODUCTION
The following presentation describes Magna's results of operations
during the three month periods ended March 31, 1998 and 1997 and its
financial condition, asset quality, capital resources and liquidity as of
March 31, 1998. This discussion should be read in conjunction with Magna's
unaudited 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.
The following 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,
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. Unanticipated
events, associated with Year 2000 compliance, relating to work on
developments or modifications to computer systems and to software, including
work performed by suppliers or vendors, could affect Magna's future financial
condition and 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.
OVERVIEW
Net income for the first quarter of 1998 was $20.5 million, or $.63 and
$.61 for basic and diluted earnings per share, respectively. This compares
to $9.4 million, or $.32 and $.31 for basic and diluted earnings per share
for the first quarter of 1997.
Results for the first quarter of 1998 included $5.4 million of proceeds
in excess of the carrying value of an equity investment
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in a non-affiliated company which was acquired by a third party. The effect
of that transaction was offset by expenses of $3.5 million incurred in
connection with the pending acquisition of Magna by Union Planters.
Results for the first quarter of 1997 were adversely impacted by the
recording of an additional provision for loan losses of $12.5 million to
cover potential exposure associated with loans to a single borrower.
Excluding the additional provision, net earnings would have been $17.7
million, or $.58 per common share on a diluted basis.
Operating results of the Homeland Bankshares Corporation ("Homeland")
acquisition consummated on March 1, 1997, are included since the acquisition
date.
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
March 31 Change
-------------------------- ---------------------
1998 1997 Amount Percent
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Total interest income
(fully tax-equivalent)..................... $132,748 $108,649 $ 24,099 22.2%
Total interest expense...................... 68,294 53,832 14,462 26.9
-------- -------- --------
Net interest income................... 64,454 54,817 9,637 17.6
Provision for loan losses................... 3,550 15,152 (11,602) (76.6)
Noninterest income:
Service charges on deposits........... 6,328 5,830 498 8.5
Trust services........................ 3,316 2,975 341 11.5
Credit card services.................. 1,928 1,251 677 54.1
Brokerage and
investment services............... 1,676 1,200 476 39.7
Other................................. 10,135 2,568 7,567 294.7
-------- -------- --------
23,383 13,824 9,559 69.1
Securities gains, net................. 596 130 466 358.5
-------- -------- --------
Total............................. 23,979 13,954 10,025 71.8
-------- -------- --------
Noninterest expense:
Employee compensation and
other benefits.................... 23,365 19,825 3,540 17.9
Net occupancy......................... 4,829 4,741 88 1.9
Equipment............................. 2,697 2,473 224 9.1
FDIC insurance premiums............... 211 154 57 37.0
Intangible amortization............... 2,566 1,340 1,226 91.5
Other................................. 16,362 9,884 6,478 65.5
-------- -------- --------
Total............................. 50,030 38,417 11,613 30.2
-------- -------- --------
Income before income taxes.................. 34,853 15,202 19,651 129.3
Less: tax-equivalent adjustment............. 2,245 1,587 658 41.5
Income tax expense.......................... 12,097 4,177 7,920 189.6
-------- -------- --------
Net income.................................. $ 20,511 $ 9,438 $ 11,073 117.3
======== ======== ========
</TABLE>
10
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RESULTS OF OPERATIONS
NET INTEREST INCOME
Tax-equivalent net interest income increased 17.6% for the first quarter
of 1998 compared with 1997. The increase in tax-equivalent net interest
income was principally attributable to increased volumes of interest earning
assets and interest bearing liabilities derived from the Homeland acquisition.
The increase in tax-equivalent net interest income attributable to increased
volumes of interest earning assets and interest bearing liabilities derived
from Homeland was partially offset by a reduced net interest margin.
The net interest margin for the first quarter of 1998 was 3.86% compared
with 3.96% for the first quarter of 1997 and 3.93% for the fourth quarter of
1997. The decrease in the first quarter of 1998 compared with the fourth
quarter of 1997 was primarily attributable to a slight decline in the yield
on earning assets due in part to a decline in total loans of approximately
$105 million. The decline in the net interest margin for the first quarter
of 1998 compared with the first quarter of 1997 occurred as the cost of funds
increased at a greater rate than the yield on earning assets. The increase
in the yield on earning assets, of 11 basis points, was attributable to
increased yields earned on Magna's loan and investment portfolios. The
increased cost of funds, of 14 basis points, was primarily associated with
higher rates paid on various categories of short-term borrowings,
specifically repurchase agreements, and other short-term borrowings which is
mainly comprised of Federal Home Loan Bank advances.
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 and projected economic conditions, historical
loss trends, a review of individual loans and changes in the character and size
of the portfolio. Magna has established comprehensive credit policies and risk
rating processes that address the individual risk and return characteristics
associated with loans in the portfolio. The significantly higher provision for
loan losses in the first quarter of 1997 compared to the first quarter of 1998,
was due to the additional provision described under "OVERVIEW." Activity in
the reserve for loan losses and nonperforming loan data are presented and
discussed under "ASSET QUALITY."
NONINTEREST INCOME
Total noninterest income was $24.0 million for the first quarter of 1998
compared with $14.0 million for the first quarter of 1997.
Excluding net securities gains recognized during the quarters compared,
noninterest income increased $9.6 million for the first quarter of 1998
compared to the first quarter of 1997. Fee income generated from Homeland
contributed to the increases in all major components of noninterest income.
Service charges on deposit accounts increased $.5 million for the first
quarter of 1998
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compared to the first quarter of 1997. Income from trust services increased
$.3 million for the quarters compared. The increases in service charges on
deposit accounts and income from trust services were primarily derived from
the Homeland acquisition. Credit card services income primarily consists of
fees charged to merchants for processing credit card transactions and
interchange fees received on transactions of Magna's cardholders. The
increase of $.7 million in credit card services income during the first
quarter of 1998 partially resulted from revenues generated by the second
quarter 1997 addition of the "debit" card to Magna's product line and from
the Homeland acquisition. Brokerage and investment services income is
comprised of commissions derived from the sale of stocks, bonds, mutual
funds, annuities and other investment vehicles which are offered by Magna's
brokerage operations. During the first quarter of 1998, brokerage and
investment services income increased $.5 million compared to the first
quarter of 1997. This increase principally resulted from enhanced product
lines, expanded sales efforts, favorable market conditions and an increased
market territory attributable to the Homeland acquisition. Other noninterest
income includes such items as interchange fees on ATM transactions, income
from foreclosed properties, fees from mortgage banking operations, safe
deposit box rental fees and other miscellaneous fees. Other noninterest
income for the first quarter of 1998 increased $7.6 million compared to the
first quarter of 1997, and included a $5.4 million non-recurring item as
described under "OVERVIEW." The remaining increase to other noninterest
income was primarily the result of the Homeland acquisition.
For the first quarter of 1998, noninterest income as a percentage of
average assets, on an annualized basis, was 1.35% compared with
.95% for the first quarter of 1997.
NONINTEREST EXPENSE
Total noninterest expense was $50.0 million for the first quarter of
1998 compared with $38.4 million for the first quarter of 1997. For the
first quarter of 1998, noninterest expense as a percentage of average assets,
on an annualized basis, was 2.82% compared with 2.63% for the first quarter
of 1997.
Noninterest expenses generated from Homeland contributed to the
increases in all major components of noninterest expense. The increase in
employee compensation and other benefits for the first quarter of 1998
compared with 1997 was attributable to the Homeland acquisition coupled with
normal merit increases. The modest increases in net occupancy and equipment
expenses during the first quarter of 1998 were primarily due to direct
expenses of Homeland. FDIC insurance premiums increased during the first
quarter of 1998 due to the Homeland acquisition. Intangible amortization
increased $1.2 million during the first quarter of 1998 compared to the first
quarter of 1997. This increase was primarily associated with amortization of
goodwill attributable to the Homeland acquisition. Other noninterest
expenses increased $6.5 million for the first quarter of 1998 compared to the
first quarter of 1997. As described under "OVERVIEW," expenses of $3.5
million were incurred in connection with the pending acquisition of Magna by
Union Planters. The remaining increase to other noninterest expense was
primarily the result of the Homeland acquisition.
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Magna has conducted a comprehensive review of its computer and other
operating systems which could be affected by the Year 2000 issue and, in
accordance with stated bank regulatory requirements, has developed
implementation plans to resolve potential problems prior to the year 2000.
Management believes that all systems necessary to manage Magna's business
will be replaced, modified or upgraded at a cost of approximately $3-4
million. The estimated expenditures do not include employee compensation and
benefits associated with the internal task force that is dedicated to the
Year 2000 issue. Management expects Magna's Year 2000 plans and the related
expenses to be significantly modified following the completion of the
proposed acquisition of Magna by Union Planters in the third quarter of 1998.
The effective income tax rate was 37.1% and 30.7% for the first quarter
of 1998 and 1997, respectively. The increase in effective tax rate for the
quarters compared resulted primarily from the expenses of $3.5 million
incurred in connection with the pending acquisition of Magna by Union
Planters which were not deductible for income tax purposes. Excluding those
expenses, the effective income tax rate for the first quarter of 1998 would
have been 33.5%. The remainder of the increase resulted from generally
higher levels of taxable earnings.
FINANCIAL CONDITION
GENERAL
Certain components of Magna's consolidated balance sheet at March 31,
1998, compared with December 31, 1997 and March 31, 1997 are presented in
summary form in Table 2. The increase in total assets at March 31, 1998
compared with December 31, 1997, is primarily reflective of an increase in
investment securities.
<TABLE>
TABLE 2 -- Selected Comparative Balance Sheet Items
(In thousands)
<CAPTION>
March 31 December 31 March 31
1998 1997 1997
---------- ----------- ----------
<S> <C> <C> <C>
Total assets........................... $7,250,618 $7,074,969 $6,772,925
Loans, net of
unearned income....................... 4,378,928 4,483,812 4,357,739
Investments............................ 2,239,113 1,988,622 1,847,881
Deposits............................... 5,546,688 5,435,995 5,198,562
Federal funds purchased................ 68,725 92,200 180,260
Repurchase agreements:
Cash management...................... 614,896 581,568 435,525
Other................................ 99,146 60,733 123,379
Other short-term borrowings............ 108,939 111,102 80,268
Long-term debt......................... 115,883 92,056 82,824
</TABLE>
LOANS
Loans, net of unearned income, decreased 2.3%, or $104.9 million, from
year-end 1997 to March 31, 1998. The modest decrease was due primarily to
the level of refinancing activity
13
<PAGE> 14
in the real estate market which offset growth in other segments of the loan
portfolio.
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>
March 31 December 31 March 31
1998 1997 1997
-------------------- ---------------------- ---------------------
Commercial loans: Amount Percent Amount Percent Amount Percent
- ------------------------ ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural................. $ 790,347 18.0% $ 807,720 18.0% $ 818,302 18.8%
Commercial real estate............ 1,381,938 31.6 1,420,521 31.7 1,427,505 32.7
Real estate
construction..................... 278,205 6.4 272,151 6.1 194,447 4.5
---------- ----- ---------- ----- ---------- -----
Total commercial............ 2,450,490 56.0 2,500,392 55.8 2,440,254 56.0
---------- ----- ---------- ----- ---------- -----
Consumer loans:
- ------------------------
1-4 family residential
real estate...................... 1,204,131 27.5 1,271,432 28.3 1,285,359 29.5
Other consumer loans,
net of unearned income........... 724,307 16.5 711,988 15.9 632,126 14.5
---------- ----- ---------- ----- ---------- -----
Total consumer.............. 1,928,438 44.0 1,983,420 44.2 1,917,485 44.0
---------- ----- ---------- ----- ---------- -----
Total loans, net of
unearned income............. $4,378,928 100.0% $4,483,812 100.0% $4,357,739 100.0%
========== ===== ========== ===== ========== =====
</TABLE>
INVESTMENTS
Total investments increased $250.5 million, or 12.6%, at March 31, 1998
compared with year-end 1997. Magna's investment portfolio serves three
principal 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 liquidity needs may be satisfied. The increase in investment
securities from year-end 1997 resulted from growth in U.S. Government agency
and tax-exempt securities. The growth in these categories resulted from
reinvestment of U.S. Treasury security maturities coupled with growth in
deposits and borrowings in excess of loan demand.
Table 4 presents the composition of investments for the periods
presented.
<TABLE>
TABLE 4 -- Investment Securities
(In thousands)
<CAPTION>
March 31 December 31 March 31
1998 1997 1997
---------- ----------- ----------
<S> <C> <C> <C>
Held-to-maturity securities............ $ 129,305 $ 137,690 $ 151,183
Available-for-sale securities.......... 2,109,808 1,850,932 1,696,698
---------- ---------- ----------
Total investments................... $2,239,113 $1,988,622 $1,847,881
========== ========== ==========
</TABLE>
14
<PAGE> 15
DEPOSITS
Total deposits increased $110.7 million to $5.5 billion at March 31,
1998 from year-end 1997. Time deposits of $100,000 or more increased $192.9
million at March 31, 1998 from year-end 1997. This increase was principally
due to continued sales efforts to obtain public fund deposits as Magna
strives to expand its overall banking relationships with public entities.
This increase was partially offset by a decrease in noninterest bearing
deposits due to seasonal factors which increase demand deposits at the end of
a calendar year. All other categories of interest bearing deposits remained
relatively stable at March 31, 1998 compared to year-end 1997.
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>
March 31 December 31 March 31
1998 1997 1997
-------------------- -------------------- ----------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing............... $ 641,300 11.6% $ 711,163 13.1% $ 663,313 12.8%
Interest bearing demand
deposits.................... 633,664 11.4 623,844 11.5 630,435 12.1
Savings and market
rate deposits............... 976,905 17.6 966,727 17.8 1,031,416 19.8
Time deposits less than
$100,000.................... 2,362,678 42.6 2,395,001 44.0 2,227,489 42.9
Time deposits $100,000
or more..................... 932,141 16.8 739,260 13.6 645,909 12.4
---------- ----- ---------- ----- ---------- -----
Total deposits........... $5,546,688 100.0% $5,435,995 100.0% $5,198,562 100.0%
========== ===== ========== ===== ========== =====
</TABLE>
FEDERAL FUNDS PURCHASED AND REPURCHASE AGREEMENTS
Federal funds purchased and repurchase agreements serve as alternative
sources of funds to core deposits. Federal funds purchased decreased $23.5
million from year-end 1997. Federal funds purchased are short-term sources
of funds utilized by Magna's banking subsidiaries and are primarily obtained
from its network of correspondent banks. As such, levels of federal funds
purchased can fluctuate significantly. Repurchase agreements increased $71.7
million from year-end 1997. Approximately $33.3 million of this increase was
in the form of cash management repurchase agreements. Such accounts involve
the daily transfer of excess funds from noninterest bearing deposit accounts
into interest bearing cash management repurchase agreement accounts. The
cash management repurchase agreement accounts are viewed by management as a
stable source of funds from commercial depositors. Repurchase agreements,
other than cash management repurchase agreements, increased $48.4 million
from year-end 1997, primarily as a result of the addition of one particular
repurchase agreement associated with a commercial customer. These repurchase
agreements generally represent an alternative to short-term time certificates
offered to Magna's commercial and public fund customer base.
15
<PAGE> 16
OTHER SHORT-TERM BORROWINGS AND LONG-TERM DEBT
At March 31, 1998 and December 31, 1997, other short-term borrowings
consisted of three Federal Home Loan Bank advances having various interest
rates and maturity dates, the remaining balance of Magna's 8 3/4% Convertible
Subordinated Debentures ("Debentures") and an additional borrowing in the
form of a treasury tax and loan note option account. In November 1997, the
Debentures were reclassified from long-term debt as a result of their
November 1998 maturities. Other short-term borrowings reflected a modest
decrease of $2.2 million at March 31, 1998 compared with year-end 1997. The
majority of the decrease from year-end 1997 related to conversions of a
portion of the Debentures. As with federal funds purchased and repurchase
agreements, other short-term borrowings typically serve as an alternative
source of funds to deposit funding sources. At March 31, 1998 and December
31, 1997, long-term debt consisted of several Federal Home Loan Bank
advances, the remaining balance of Magna's 7% Convertible Subordinated
Capital Notes and a capital lease obligation. The increase in long-term debt
from year-end 1997 of $23.8 million was primarily attributable to the
procurement of a $25.0 million Federal Home Loan Bank advance which carries
an interest rate of 5.78% and matures on February 5, 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
manage credit exposure, a significant risk faced by all financial
institutions, and to support the growth of a profitable and high quality loan
portfolio. 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.
At March 31, 1998, nonperforming assets totaled $51.9 million, or .72%
of total assets, compared with nonperforming assets at year-end 1997 of $48.3
million or .68% of total assets. All categories of nonperforming loans
remained relatively stable at March 31, 1998, when compared to year-end 1997.
The level of foreclosed property was $2.2 million at March 31, 1998 compared
to $2.0 million at year-end 1997. Magna does not anticipate any significant
losses on the disposition of other real estate owned at March 31, 1998.
Net charge-offs for the first quarter of 1998 totaled $3.1 million
compared with $18.0 million for the first quarter of 1997. During the first
quarter of 1997, Magna recorded a charge-off of $14.4 million in the
commercial, financial and
16
<PAGE> 17
agricultural category on commercial loans to a single borrower. Net
charge-offs associated with all other loan categories remained relatively
stable for the quarters compared. The ratio of the reserve for losses to
total loans was 1.37% and 1.28% at March 31, 1998 and 1997, respectively.
Management believes that the consolidated reserve for loan losses is
adequate to provide for possible losses inherent in the loan portfolio.
However, no assurance can be given that subsequent changes in economic
conditions, risk elements and other factors will not require significant
changes in the level of the loan loss reserve.
Table 6 sets forth a summary of the components of Magna's loan portfolio
and nonperforming assets.
<TABLE>
TABLE 6 -- Loan Portfolio Mix and Nonperforming Assets
(In thousands)
<CAPTION>
March 31, 1998 December 31, 1997
-------------------------- -----------------------------
Loans and Non- Loans and Non-
Foreclosed performing Foreclosed performing
Property Assets Property Assets
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Commercial loans:
-----------------------
Commercial, financial and
agricultural...................... $ 790,347 $18,328 $ 807,720 $17,526
Commercial real estate............. 1,381,938 10,388 1,420,521 9,528
Real estate construction........... 278,205 3,719 272,151 2,937
---------- ------- ---------- -------
Total commercial................. 2,450,490 32,435 2,500,392 29,991
Consumer loans:
-----------------------
1-4 family residential
real estate....................... 1,204,131 14,423 1,271,432 13,178
Other consumer loans, net
of unearned income................ 724,307 2,846 711,988 3,160
---------- ------- ---------- -------
Total consumer................... 1,928,438 17,269 1,983,420 16,338
---------- ------- ---------- -------
Total loans, net of
unearned income................... 4,378,928 49,704 4,483,812 46,329
Foreclosed property.................. 2,180 2,180 1,950 1,950
---------- ------- ---------- -------
Total.............................. $4,381,108 $51,884 $4,485,762 $48,279
========== ======= ========== =======
Nonaccrual loans..................... $34,239 $29,733
Loans past due 90 days or more....... 15,241 16,366
Restructured loans................... 224 230
------- -------
Total nonperforming loans.......... 49,704 46,329
Foreclosed property.................. 2,180 1,950
------- -------
Total nonperforming assets......... $51,884 $48,279
======= =======
Nonperforming loans to
total loans........................ 1.14% 1.03%
Nonperforming assets to total
loans and foreclosed property...... 1.18 1.08
Nonperforming assets to
total assets....................... .72 .68
</TABLE>
17
<PAGE> 18
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
March 31
-------------------------------
1998 1997
------- --------
<S> <C> <C>
Balance at beginning of period............................. $59,439 $ 45,382
Reserves of acquired institution........................... - 13,146
Loans charged off:
Commercial borrowers:
Commercial, financial and agricultural.................. (1,488) (17,149)
Commercial real estate.................................. (265) (440)
Real estate construction................................ (63) (24)
------- --------
Total commercial....................................... (1,816) (17,613)
Consumer borrowers:
1-4 family residential real estate...................... (421) (140)
Other consumer loans.................................... (2,280) (1,560)
------- --------
Total consumer......................................... (2,701) (1,700)
------- --------
Total charge-offs..................................... (4,517) (19,313)
------- --------
Recoveries of loans previously charged off:
Commercial borrowers:
Commercial, financial and agricultural.................. 649 545
Commercial real estate.................................. 234 109
Real estate construction................................ 27 183
------- --------
Total commercial....................................... 910 837
Consumer borrowers:
1-4 family residential real estate...................... 57 86
Other consumer loans.................................... 489 366
------- --------
Total consumer......................................... 546 452
------- --------
Total recoveries...................................... 1,456 1,289
------- --------
Net loans charged off...................................... (3,061) (18,024)
------- --------
Provision for loan losses.................................. 3,550 15,152
------- --------
Balance at end of period................................... $59,928 $ 55,656
======= ========
Net loan charge-offs (annualized) to
average loans............................................. .28% 1.95%
Reserve for loan losses to total loans..................... 1.37 1.28
Reserve for loan losses to
nonperforming loans....................................... 120.57 124.12
</TABLE>
18
<PAGE> 19
CAPITAL RESOURCES AND LIQUIDITY
CAPITAL
Financial institutions are subject to various regulatory capital
guidelines administered by the federal banking agencies. 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 March 31, 1998, Magna's Tier 1 and Total
capital ratios were 10.85% and 12.04%, respectively. In addition to the
Risk-Based Guidelines, the federal banking agencies have established a minimum
leverage ratio guideline for financial institutions (the "Leverage Ratio
Guideline"). The Leverage Ratio Guideline provides for a minimum ratio of Tier
1 Capital to average assets of 3% for financial institutions that meet certain
specified criteria, including having the highest regulatory ratings. Other
financial institutions generally are required to maintain a leverage ratio of
at least 4% to 5%. Magna's leverage ratio at March 31, 1998 was 6.95%.
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 subsidiaries
whose ability to pay dividends and management fees is subject to limitations
under various laws and regulations, and to prudent and sound banking
principles. Magna believes that the earnings of its banking subsidiaries 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 as well as anticipated dividends for the
foreseeable future.
Magna had no commitments for any significant capital expenditures at
March 31, 1998.
CREDIT FACILITY
At March 31, 1998, Magna had lines of credit aggregating $125 million
under credit facilities with unaffiliated banks. The credit facilities
contain specific covenants which, among other things, limit dividend
payments, restrict the sale of assets by Magna under certain circumstances,
provide for possible acceleration of the repayment terms upon the sale of
Magna and require Magna to maintain certain financial ratios. At March 31,
1998, there were no amounts outstanding under the credit facilities.
19
<PAGE> 20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
- -------------------------------------------------
ABOUT MARKET RISK
- -----------------
Not applicable.
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
- --------------------------------------------------
Under Magna's Rights Agreement dated November 11, 1988, one preferred
stock purchase right (a "Magna Right") is attached to each share of Magna
common stock issued and outstanding or to be issued prior to certain
designated events. Each Magna Right becomes exercisable only under certain
circumstances and expires in 1998 unless first exercised, redeemed or
converted. The Magna Rights are designed to protect the interests of Magna
and its stockholders against coercive takeover tactics. The purpose of the
Magna Rights is to encourage potential acquirers to negotiate with Magna's
Board of Directors prior to attempting a takeover and to give the Board
leverage in negotiating on behalf of all stockholders, the terms of any
proposed takeover.
On February 22, 1998, Magna entered into a first amendment (the
"Amendment") to the Rights Agreement which provided that the execution of the
definitive agreement and certain related documents between Magna and Union
Planters for the acquisition of Magna by Union Planters, and the consummation
of the acquisition, would not cause the Magna Rights to detach from the Magna
common shares and become exercisable. The Amendment also provided that the
Rights Agreement, as amended, would expire immediately prior to the effective
time of the acquisition.
On February 22, 1998, Magna entered into an agreement with Union
Planters pursuant to which it granted an option to Union Planters to purchase
up to 6,497,180 shares of its common stock, $2.00 par value per share, at a
purchase price per option share equal to the first closing price per share of
Magna's common stock following public announcement of the execution of the
merger agreement with Union Planters. The option was granted in
consideration of Union Planters entering into an Agreement and Plan of
Reorganization with Magna. The transaction was exempt from registration
under the Securities Act of 1933, as amended, pursuant to Section 4(2) in
that it was a transaction by an issuer not involving any public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
Not applicable.
20
<PAGE> 21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not applicable.
ITEM 5. OTHER INFORMATION
- --------------------------
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits: See Exhibit Index on page 23 hereof.
(b) Reports on Form 8-K: On February 27, 1998, Magna filed a Current
Report on Form 8-K dated February 22, 1998, in which it disclosed that Magna
and Union Planters had entered into an Agreement and Plan of Reorganization,
pursuant to which Magna will be merged with and into Union Planters Holdings
Corporation, a wholly-owned subsidiary of Union Planters.
21
<PAGE> 22
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: May 12, 1998 By:/s/ G. Thomas Andes
- ------------------------ -------------------------------------
G. Thomas Andes
Chairman of the Board and
Chief Executive Officer
DATE: May 12, 1998 By:/s/ Robert S. Kahler
- ------------------------ -------------------------------------
Robert S. Kahler
Executive Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
22
<PAGE> 23
<TABLE>
EXHIBIT INDEX
-------------
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.1 Amended and Restated Directors Deferred Compensation
Plan
11.1 Computation of Earnings Per Share (shown in "Notes to
Condensed Consolidated Financial Statements, Note G -
Earnings Per Share" and incorporated herein by
reference).
27.1 Financial Data Schedule.
</TABLE>
23
<PAGE> 1
Adopted: September 1, 1996
First Amendment and Restatement: March 18, 1998
MAGNA GROUP, INC.
AMENDED AND RESTATED
DIRECTORS DEFERRED COMPENSATION PLAN
1. PURPOSE
The purposes of the Magna Group, Inc. Amended and Restated 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;
<PAGE> 2
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 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. This deferral election right will
terminate as of the close of business on March 31, 1998.
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.
2
<PAGE> 3
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 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
3
<PAGE> 4
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 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
4
<PAGE> 5
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 entitled to
receive payment of an amount from the Company that the Director
received from the Rabbi Trust.
5
<PAGE> 6
(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.
(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
6
<PAGE> 7
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, as amended and restated as
of the 18th day of March, 1998.
MAGNA GROUP, INC.
By /s/ G. Thomas Andes
---------------------------------
Title Chairman of the Board
------------------------------
7
<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 MARCH 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 220,317
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 95,126
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,109,808
<INVESTMENTS-CARRYING> 129,305
<INVESTMENTS-MARKET> 133,082
<LOANS> 4,378,928
<ALLOWANCE> 59,928
<TOTAL-ASSETS> 7,250,618
<DEPOSITS> 5,546,688
<SHORT-TERM> 891,706
<LIABILITIES-OTHER> 85,363
<LONG-TERM> 115,883
0
40
<COMMON> 68,075
<OTHER-SE> 542,863
<TOTAL-LIABILITIES-AND-EQUITY> 7,250,618
<INTEREST-LOAN> 96,165
<INTEREST-INVEST> 32,165
<INTEREST-OTHER> 2,173
<INTEREST-TOTAL> 130,503
<INTEREST-DEPOSIT> 55,464
<INTEREST-EXPENSE> 68,294
<INTEREST-INCOME-NET> 62,209
<LOAN-LOSSES> 3,550
<SECURITIES-GAINS> 596
<EXPENSE-OTHER> 50,030
<INCOME-PRETAX> 32,608
<INCOME-PRE-EXTRAORDINARY> 32,608
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,511
<EPS-PRIMARY> .63
<EPS-DILUTED> .61
<YIELD-ACTUAL> 3.86
<LOANS-NON> 34,239
<LOANS-PAST> 15,241
<LOANS-TROUBLED> 224
<LOANS-PROBLEM> 0<F1>
<ALLOWANCE-OPEN> 59,439
<CHARGE-OFFS> 4,517
<RECOVERIES> 1,456
<ALLOWANCE-CLOSE> 59,928
<ALLOWANCE-DOMESTIC> 59,928
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0<F1>
<FN>
<F1>Information not currently available; is reported
on an annual basis only.
</TABLE>
