SECURITIES AND EXCHANGE COMMISSIOn
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 11, 1994
(July 1, 1994)
Hibernia Corporation
(Exact name of issuer as specified in its charter)
Louisiana 1-10294 72-0724532
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
organization)
313 Carondelet Street, New Orleans, Louisiana 70130
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (504) 533-5332
Item 5. Other Events
As has been disclosed by the Registrant in prior filings,
effective July 1, 1994, First Commercial Bancshares, Inc. was
merged with and into the Registrant, in a stock-for-stock exchange
that was accounted by the Registrant for as a pooling of interest.
On that same day, Bastrop National Bank was merged into Hibernia
National Bank, a subsidiary of the Registrant, in a stock-for-stock
exchange with the Registrant accounted for by the Registrant as a
pooling of interests. In addition, effective August 1, 1994, First
Bancorp of Louisiana, Inc. and First Continental Bancshares, Inc.
were each merged with and into the Registrant, in separate stock-
for-stock exchanges that were accounted by the Registrant for as
pooling of interests. For the remainder of the 1994 fiscal year,
if the Registrant desires to file a registration statement under
the Securities Act of 1933, as amended (the "Act"), the Registrant
will be required to prepare restated financial statements
reflecting the above-described transactions.
The Registrant has prepared restated supplemental consolidated
financial statements reflecting the above-described transactions
and is filing them as Exhibit 99.1 to this Current Report on Form
8-K so that the Registrant may incorporate such financial
statements into any future registration statements by reference to
this Report.
Also filed as exhibits hereto are the audited financial
statements of Bastrop National Bank and the audited consolidated
financial statements of First Commercial Bancshares, Inc., First
Bancorp of Louisiana, Inc. and First Continental Bancshares, Inc..
Item 7. Financial Statements and Exhibits.
(c) Exhibits
23 Consent of Ernst & Young LLP
99.1 Supplemental Consolidated Financial Statements
of Hibernia Corporation (as restated to
reflect the acquisitions of Commercial
Bancshares, Inc., and Bastrop National Bank on
July 1, 1994 and the acquisitions of First
Bancorp of Louisiana, Inc. and First
Continental Bancshares, Inc. on August 1,
1994)
99.2 Audited Consolidated Financial Statements of
Commercial Bancshares, Inc. for the fiscal
year ended December 31, 1993
99.3 Audited financial statements of Bastrop
National Bank for the fiscal year ended
December 31, 1993
99.4 Audited consolidated financial statements of
First Bancorp of Louisiana, Inc. for the
fiscal year ended December 31, 1993
99.5 Audited consolidated financial statements of
First Continental Bancshares, Inc. for the
fiscal year ended December 31, 1993
EXHIBIT INDEX
Exhibit Page
Number Description Number
23 Consent of Ernst & Young LLP
99.1 Supplemental Consolidated Financial Statements
of Hibernia Corporation (as restated to
reflect the acquisitions of Commercial
Bancshares, Inc., and Bastrop National Bank on
July 1, 1994 and the acquisitions of First
Bancorp of Louisiana, Inc. and First
Continental Bancshares, Inc. on August 1,
1994
99.2 Audited Consolidated Financial Statements of
Commercial Bancshares, Inc. for the fiscal
year ended December 31, 1993
99.3 Audited financial statements of Bastrop
National Bank for the fiscal year ended
December 31, 1993
99.4 Audited consolidated financial statements of
First Bancorp of Louisiana, Inc. for the
fiscal year ended December 31, 1993
99.5 Audited consolidated financial statements of
First Continental Bancshares, Inc. for the
fiscal year ended December 31, 1993
SIGNATURE
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 hereunto duly authorized.
HIBERNIA CORPORATIOn
(Registrant)
Date: October 11, 1994 By: /s/ RONALD E. SAMFORD, JR.
Ronald E. Samford, Jr.
Chief Accounting Officer
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the following
Hibernia Corporation Registration Statements
Form S-3 No. 33-26553 (dated February 21, 1989)
Form S-8 No. 2-81353 (dated February 23, 1989)
Form S-8 No. 33-26871 (dated February 23, 1989)
Form S-3 No. 33-37701 (dated January 31, 1991)
Form S-8 No. 2-96194 (dated April 8, 1991)
Form S-3 No. 33-53108 (dated December 28, 1992)
Form S-3 No. 33-55844 (dated December 28, 1992)
Form S-4 No. 33-52971 (dated May 13, 1994)
Form S-4 No. 33-51901 (dated May 13, 1994)
Form S-4 No. 33-53011 (dated June 16, 1994)
Form S-4 No. 33-52249 (dated July 8, 1994)
of our report dated January 11, 1994, except for the pooling of
interests with the Other Pooled Companies described in Note 16, for
which the date is August 1, 1994, with respect to the supplemental
consolidated financial statements of Hibernia Corporation included
in this Report on Form 8-K dated October 7, 1994.
/S/ ERNST & YOUNG LLP
Ernst & Young LLP
New Orleans, Louisiana
October 7, 1994
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Hibernia Corporation
We have audited the supplemental consolidated balance sheets of
Hibernia Corporation and Subsidiary (formed as a result of the
consolidation of Hibernia Corporation and the Other Pooled
Companies as described in Note 16) as of December 31, 1993 and 1992
and the related supplemental consolidated statements of income,
changes in shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1993. The
supplemental consolidated financial statements give retroactive
effect to the mergers of Hibernia Corporation and the Other Pooled
Companies during 1994, which have been accounted for using the
pooling of interests method as described in Note 16 to the
supplemental consolidated financial statements. These supplemental
financial statements are the responsibility of the management of
Hibernia Corporation. Our responsibility is to express an opinion
on these supplemental financial statements based on our audits. We
did not audit the financial statements of the Other Pooled
Companies which statements reflect total assets constituting
approximately 16% for 1993 and approximately 15% for 1992 of the
related supplemental consolidated financial statement totals, and
which reflect net interest income constituting approximately 14% of
the related supplemental consolidated financial statement totals
for the three-year period ended December 31, 1993. Those
statements were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it relates to data
included for the Other Pooled Companies, is based solely on the
reports of the other auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and
the reports of other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the reports of other
auditors, the supplemental financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Hibernia Corporation and Subsidiary at
December 31, 1993 and 1992, and the consolidated results of their
operations and their cash flows for each of the three years in the
period ended December 31, 1993, after giving retroactive effect to
the mergers of Hibernia Corporation and the Other Pooled Companies,
as described in Note 16 to the supplemental consolidated financial
statements, in conformity with generally accepted accounting
principles.
As discussed in Notes 3 and 13, in 1993 the Company changed its
method of accounting for debt securities and income taxes. As
discussed in Note 14, in 1991 the Company changed its method of
accounting for lease expense.
/S/ERNST & YOUNG
Ernst & Young
January 11, 1994, except for the
pooling of interests with the Other
Pooled Companies described in Note 16,
as to which the date is
August 1, 1994
New Orleans, Louisiana
<TABLE>
<CAPTION>
Supplemental Consolidated Balance Sheets
Hibernia Corporation and Subsidiary
December 31 ($ in thousands) 1993 1992
<S> <C> <C>
ASSETS
Cash and due from banks $254,856 $295,430
Short-term investments 272,234 617,822
Securities available for sale 526,636 604,265
Securities held to maturity
(estimated fair values 1993 and
1992: $1,815,109 and $1,199,031) 1,784,561 1,177,418
Loans, net of unearned income 2,745,385 2,764,117
Reserve for possible loan losses (168,856) (194,859)
Loans, net 2,576,529 2,569,258
Bank premises and equipment 93,564 99,719
Customers' acceptance liability 11,800 2,088
Other assets 199,833 226,710
TOTAL ASSETS $5,720,013 $5,592,710
LIABILITIES
Deposits:
Demand, noninterest-bearing $946,326 $890,372
Interest-bearing 3,948,528 3,910,446
Total Deposits 4,894,854 4,800,818
Federal funds purchased and securities sold under
agreements to repurchase 153,241 127,752
Liability on acceptances 11,800 2,088
Payables arising from securities transactions not
yet settled 50,875 151,344
Other liabilities 110,971 80,584
Debt 23,981 25,710
TOTAL LIABILITIES 5,245,722 5,188,296
SHAREHOLDERS' EQUITY
Preferred stock, no par value:
Authorized - 100,000,000 shares; issued
and outstanding - none - -
Class A common stock, no par value:
Authorized - 100,000,000 shares;
issued and outstanding
96,633,258 and 95,418,503 at
December 31, 1993 and 1992 185,537 183,204
Class B common stock, no par value:
Authorized - 100,000,000 shares; issued
and outstanding - none - -
Surplus 389,691 388,452
Retained earnings (deficit) (111,812) (166,648)
Unrealized gain on securities available for sale 11,275 -
ESOP commitment (400) (594)
TOTAL SHAREHOLDERS' EQUITY 474,291 404,414
TOTAL LIABILITES AND SHAREHOLDERS' EQUITY $5,720,013 $5,592,710
<FN>
See notes to supplemental consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
Supplemental Consolidated Income Statements
Hibernia Corporation and Subsidiary
Year Ended December 31 ($ in thousands, except
per share data) 1993 1992 1991
<S> <C> <C> <C>
Interest Income
Interest and fees on loans $224,146 $293,980 $495,697
Interest on securities:
U.S. government securities and obligations
of U.S. government agencies 126,820 111,482 135,929
Obligations of states and political
subdivisions 1,222 1,202 6,274
Trading account interest 33 99 70
Interest on time deposits in domestic banks 295 361 522
Interest on federal funds sold and securities
purchased under agreements to resell 9,219 15,198 11,417
Total Interest Income 361,735 422,322 649,909
Interest Expense
Interest on deposits 121,000 167,648 355,371
Interest on federal funds purchased and
securities sold under agreements to
repurchase 4,002 6,910 16,794
Interest on debt and other 2,669 13,366 14,396
Total Interest Expense 127,671 187,924 386,561
Net Interest Income 234,064 234,398 263,348
Provision for possible loan losses (5,607) 68,327 180,589
Net Interest Income After Provision for
Possible Loan Losses 239,671 166,071 82,759
Noninterest Income
Trust fees 13,310 12,849 14,844
Service charges on deposits 34,937 36,451 39,209
Other service, collection and exchange
charges 17,367 15,745 21,775
Gain on settlement of acquired loans 1,308 4,151 9,043
Loss on sale of Texas Bank - (2,934) -
Other operating income 7,326 9,760 13,247
Securities gains, net 165 17,336 17,707
Total Noninterest Income 74,413 93,358 116,136
Noninterest Expense
Salaries and employee benefits 98,517 99,480 128,063
Occupancy expense, net 22,757 25,393 30,823
Equipment expense 12,577 15,019 15,579
Data processing expense 16,753 17,726 12,783
Foreclosed property expense 7,135 22,702 28,781
Provision for data processing enhancements 11,991 - -
Other operating expense 83,604 77,691 122,011
Total Noninterest Expense 253,334 258,011 338,040
Income Before Income Taxes, Extraordinary Items and
Cumulative Effect of Accounting Changes 60,750 1,418 (139,456)
Income tax expense 5,359 3,170 1,911
Income Before Extraordinary Items and
Cumulative Effect of Accounting Changes 55,391 (1,752) (141,367)
Extraordinary net loss on debt restructuring - (44,493) -
Utilization of net operating loss carryforwards - 6,181 200
Cumulative effect of accounting changes 3,043 - (21,643)
Net Income (Loss) $58,434 ($40,064) ($162,810)
Income (Loss) Per Share
Income (loss) before extraordinary items and cumulative effect of
accounting changes $0.58 ($0.04) ($3.44)
Extraordinary loss on debt restructuring - (1.04) -
Utilization of net operating loss carryforward - 0.14 0.01
Cumulative effect of accounting chages 0.03 - (0.53)
Net Income (Loss) Per Share $0.61 ($0.94) ($3.96)
<FN>
See notes to supplemental consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Hibernia Corporation and Subsidiary
Shares Shares Unrealized
of of
Preferred Common Retained Gains(Losses)
($ in thousands, except per Stock Stock Preferred Common ESOP Earnings on Securities
share data) (000) (000) Stock Stock Surplus Commitment (Deficit) Available for Sale Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1990 - 40,869 $ - $78,469 $256,531 ($826) $44,656 $0 $378,830
Net loss for 1991 - - - - - - (162,810) - (162,810)
Issuance of Common Stock:
Divdend Reinvestment Plan - 174 - 335 827 - - - 1,162
Employee Benefit Plan - 243 - 467 764 - - - 1,231
Cash dividends declared:
Common ($.15 per share) - - - - - - (4,181) - (4,181)
By pooled companies
prior to merger - - - - - - (839) - (839)
Reduction of ESOP Commitment 106 - - 106
Other - - - - 318 - - - 318
Balances at December 31,
1991 - 41,286 - 79,271 258,440 (720) (123,174) - 213,817
Net loss for 1992 - - - - - - (40,064) - (40,064)
Issuance of Preferred Stock
in debt restructuring 21,818 - 60,000 - 50,472 - - - 110,472
Conversion of Preferred
Stock to Common Stock (21,818) 22,091 (60,000) 42,416 17,584 - - - -
Issuance of Common Stock:
Divdend Reinvestment Plan - 14 - 26 38 - - - 64
Employee Benefit Plan - 12 - 24 37 - - - 61
Purchase Warrants in debt
restructuring - - - - 4,304 - - - 4,304
Rights offering - 21,677 - 41,619 37,588 - - - 79,207
Debt conversion - 10,338 - 19,848 20,079 - - - 39,927
Cash dividends declared:
By pooled companies prior
to merger - - - - - - (3,410) - (3,410)
Reduction of ESOP Commitment - - - - - 126 - - 126
Other - - - - (90) (90)
Balances at December 31,
1992 - 95,418 - 183,204 388,452 (594) (166,648) - 404,414
Net income for 1993 - - - - - - 58,434 - 58,434
Issuance of Common Stock:
Divdend Reinvestment Plan - 32 - 62 167 - - - 229
Stock Option Plan - 32 - 61 95 - - - 156
Exercise of Purchase
Warrants - 1,151 - 2,210 955 - - - 3,165
Cumulative effect of change
in accounting for securities
available for sale - - - - - - - 11,275 11,275
Cash dividends declared:
Common ($.03 per share) - - - - - - (2,508) - (2,508)
By pooled companies
prior to merger - - - - - - (1,090) - (1,090)
Reduction of ESOP Commitment - - - - - 194 - - 194
Other - - - - 22 - - - 22
Balances at December 31,
1993 0 96,633 0 $185,537 $389,691 ($400) (111,812) $11,275 $474,291
<FN>
See notes to supplemental consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
Hibernia Corporation and Subsidiary
Year Ended December 31 ($ in thousands) 1993 1992 1991
<S> <C> <C> <C>
Operating Activities
Net income (loss) $58,434 ($40,064) ($162,810)
Adjustments to reconcile net income
(loss) to net
cash provided by operating
activities:
Extraordinary loss on debt
restructuring 0 44,493 0
Provision for possible loan
losses (5,607) 68,327 180,589
Rent accrued, not currently
payable 0 0 21,643
Amortization of intangibles and
deferred charges 8,747 10,496 9,899
Depreciation and amortization 12,579 16,242 15,656
Valuation of Texas Bank 0 0 13,000
Premium amortization, net of discount
accretion 19,213 9,517 (6,271)
Realized investment securities
gains (165) (17,336) (17,707)
Provision for data processing
enhancements 11,991 0 0
Gain on sale of assets (4,415) (1,767) (1,980)
Provision for losses on
foreclosed and other assets 13,187 23,731 30,700
Decrease (increase) in interest
receivable and other assets (4,862) 46,073 35,981
Increase (decrease) in interest
payable and other liabilities 19,608 7,916 (10,511)
Net Cash Provided By Operating
Activities 128,710 167,628 108,189
Investing Activities
Purchases of securities (1,244,827) (1,105,255) (754,963)
Proceeds from sales of securities 6,739 472,315 569,153
Maturities of securities 633,965 353,225 237,008
Net decrease (increase) in loans (67,957) 642,944 247,467
Proceeds from sales of loans 66,074 98,767 935,137
Proceeds from sale of Texas Bank, net
of $146,237 cash sold 0 (88,237) 0
Net cash paid to acquire bank (2,815) 0 0
Purchases of premises, equipment
and other assets (9,808) (11,047) (16,883)
Proceeds from sales of foreclosed
assets 38,510 47,502 30,292
Proceeds from sales of premises,
equipment and other assets 57 23,803 7,777
Net Cash (Used) Provided By
Investing Activities (580,062) 434,017 1,254,988
Financing Activities
Net increase (decrease) in domestic
deposits 40,139 (437,657) (1,032,926)
Net increase (decrease) in time deposits
- foreign office 1,722 (311) (120,923)
Net increase (decrease) in short-term
borrowings 25,355 (14,198) (166,898)
Proceeds from issuance of debt 12,506 6,250 2,048
Payments on debt (14,481) (9,522) (14,456)
Issuance of common stock 3,572 77,705 2,330
Dividends paid (3,598) (3,410) (5,020)
Net Cash Provided (Used) By
Financing Activities 65,215 (318,143) (1,335,845)
Increase (Decrease) in Cash and
Cash Equivalents (386,137) 220,502 27,332
Cash and Cash Equivalents at Beginning
of Year 913,227 692,725 665,393
Cash and Cash Equivalents at End
of Year $527,090 $913,227 $692,725
Supplemental Disclosures
Cash paid (received) during the
year for:
Interest expense $127,229 $195,655 $397,069
Income taxes $12,260 ($13,728) $121
Non-cash investing and financing
activities:
Loans transferred to foreclosed assets $5,857 $33,797 $111,251
</TABLE>
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
Hibernia Corporation and Subsidiary
Note 1 Summary of Significant Accounting Policies
Hibernia Corporation, through its wholly owned subsidiary, Hibernia
National Bank (the Louisiana Bank), provides a full array of
financial products and services, including retail, commercial,
small-business, international, mortgage and private banking; cash
management; and trust throughout Louisiana. The Louisiana Bank,
through its wholly owned subsidiaries, also provides retail
brokerage and alternative investments, including mutual funds and
annuities.
The accounting principles followed by Hibernia Corporation and
Subsidiary (the Company or Hibernia) and the methods of applying
those principles conform with generally accepted accounting
principles and those generally practiced within the banking
industry. The principles which significantly affect the
determination of financial position and results of operations are
summarized below:
Consolidation
The supplemental consolidated financial statements include the
accounts of Hibernia Corporation (the Parent Company) and its
wholly owned subsidiary, Hibernia National Bank, for all periods
presented and the accounts of Hibernia National Bank in Texas (the
Texas Bank) from August 24, 1989, the date of acquisition, to June
30, 1992. The consolidated financial statements include the Parent
Company's equity investment in the Texas Bank from June 30, 1992,
to the date of its sale, December 31, 1992.
These supplemental consolidated financial statements give
retroactive effect to the mergers of Hibernia Corporation with
Commercial Bancshares, Inc. (on July 1, 1994), Bastrop National
Bank (on July 1, 1994), First Bancorp of Louisiana, Inc. (on August
1, 1994) and First Continental Bancshares, Inc. (on August 1, 1994)
which have been accounted for using the pooling of interests
method. These supplemental consolidated financial statements will
become the primary historical financial statements upon issuance of
financial statements that include the date of consummation.
All significant intercompany transactions and balances have been
eliminated.
Securities
At December 31, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." SFAS No. 115 requires
the classification of securities into one of three categories:
Trading, Available for Sale, or Held to Maturity.
Management determines the appropriate classification of debt
securities at the time of purchase and re-evaluates this
classification periodically. Trading account securities are held
for resale in anticipation of short-term market movements. Debt
securities are classified as held to maturity when the Company has
the positive intent and ability to hold the securities to maturity.
Securities not classified as held to maturity or trading are
classified as available for sale.
Trading account securities are carried at market value and are
included in short-term investments. Gains and losses, both
realized and unrealized, are reflected in earnings. Held to
maturity securities are stated at amortized cost. Available for
sale securities are stated at fair value, with unrealized gains and
losses, net of tax, reported in a separate component of
shareholders' equity.
The amortized cost of debt securities classified as held to
maturity or available for sale is adjusted for amortization of
premiums and accretion of discounts to maturity or, in the case of
mortgage-backed securities, over the estimated life of the
security. Amortization, accretion and accruing interest are
included in interest income on securities. Realized gains and
losses, and declines in value judged to be other than temporary,
are included in net securities gains. The cost of securities sold
is determined based on the specific identification method.
Loans
Loans are stated at the principal amounts outstanding, less
unearned income and the reserve for possible loan losses. Interest
on loans and accretion of unearned income are computed by methods
which approximate a level rate of return on recorded principal.
Non-refundable loan origination and commitment fees and certain
direct loan origination costs are deferred, and the net amount is
amortized as an adjustment of the related loan's yield over the
life of the loan.
Loans are placed in nonaccrual status when, in management's
opinion, there is a question concerning full collectibility of both
principal and interest.
Reserve for Possible Loan Losses
The reserve for possible loan losses is maintained to cover
possible losses inherent in the loan portfolio. The reserve is
based on management's estimate of future losses, and actual losses
may vary from the current estimate. The estimate is reviewed
periodically, taking into consideration the risk characteristics of
the loan portfolio, past loss experience, general economic
conditions and other factors which deserve current recognition. As
adjustments to the estimate of future losses become necessary, they
are reflected as a provision for possible loan losses in
current-period earnings. Actual loan losses are deducted from and
subsequent recoveries are added to the reserve.
Foreclosed Assets
Foreclosed assets include real estate and other collateral acquired
upon the default of loans and in-substance foreclosures.
In-substance foreclosure occurs when the market value of the
collateral is less than the legal obligation of the borrower,
repayment of the loan is dependent upon the sale or operation of
the collateral and the borrower's ability to rebuild equity in the
property is doubtful.
Foreclosed assets are recorded at fair value of the assets acquired
less the estimated cost to sell. Losses arising from the initial
reduction of the outstanding loan amount to fair value are deducted
from the reserve for possible loan losses. A valuation reserve for
foreclosed assets is maintained for subsequent valuation
adjustments on a specific-property basis.
Bank Premises and Equipment
Bank premises and equipment are stated at cost less allowances for
depreciation and amortization. Depreciation and amortization are
computed primarily using the straight-line method over the
estimated useful lives of the assets, which generally are 10 to 40
years for buildings and 3 to 15 years for equipment, and over the
shorter of the lease terms or the estimated lives of the leasehold
improvements.
Excess of Cost Over Fair Value of Net Assets Acquired
The excess of cost over the fair value of net assets acquired
(goodwill) is being amortized using the straight-line method over
the estimated periods benefited, generally 15 years.
Income Taxes
Effective January 1, 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, the liability
method is used in accounting for income taxes. This method
determines deferred tax assets and liabilities based on differences
between financial reporting and tax bases of assets and
liabilities. The tax effect of these differences is measured using
enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Prior to the adoption of SFAS
No. 109, income tax expense was determined using the deferred
method. Deferred tax expense was based on items of income and
expense that were reported in different years in the financial
statements and tax returns and was measured at the tax rate in
effect in the year the difference originated.
The Company files a consolidated federal income tax return. The
Louisiana Bank is subject to a Louisiana shareholder tax which is
based partly on income. The income portion is reported as state
income tax. In addition, certain subsidiaries of the Louisiana
Bank are subject to Louisiana state income tax.
Cash Flows
The Company considers as cash and cash equivalents all items
included in cash and due from banks, interest-bearing time deposits
in domestic banks and federal funds sold and securities purchased
under agreements to resell.
Reclassification
Certain items included in the consolidated financial statements for
1992 and 1991 have been reclassified to conform with the 1993
presentation.
Note 2 Short-Term Investments
<TABLE>
<CAPTION>
December 31
($ in thousands) 1993 1992
<S> <C> <C>
Interest-bearing time deposits in
domestic banks $1,084 $9,322
Federal funds sold and securities purchased
under agreements to resell 271,150 608,475
Trading account securities 0 25
Total short-term investments $272,234 $617,822
</TABLE>
Note 3 Securities
As discussed in Note 1, the Company adopted SFAS No. 115 effective
December 31, 1993. Prior to December 31, 1993, the Company
classified securities as held for sale securities (available for
sale) and investment securities (held to maturity) based on
criteria which did not differ significantly from that required by
SFAS No. 115. Held for sale securities were recorded at the lower
of cost or fair value. A summary of securities classified as
available for sale and held to maturity is presented below.
($ in thousands) December 31, 1993
Estimated Gross Gross
Amortized Fair Unrealized Unrealized
Type Cost Value Gains Losses
Available for sale:
Mortgage-backed securities $489,790 $500,851 $11,095 $34
Other 25,571 25,785 282 68
Total available for sale $515,361 $526,636 $11,377 $102
Held to maturity:
U.S. treasuries $576,674 $590,251 $13,829 $252
Mortgage-backed securities 1,104,523 1,118,960 18,574 4,137
Other 103,364 105,898 2,693 159
Total held to maturity $1,784,561 $1,815,109 $35,096 $4,548
($ in thousands) December 31, 1992
Estimated Gross Gross
Amortized Fair Unrealized Unrealized
Type Cost Value Gains Losses
Available for sale:
Mortgage-backed securities $579,435 $590,954 $11,543 $24
Other 24,830 25,129 371 72
Total available for sale $604,265 $616,083 $11,914 $96
Held to maturity:
U.S. treasuries $592,298 $601,576 $9,680 $402
Mortgage-backed securities 503,755 514,136 10,952 571
Other 81,365 83,319 2,054 100
Total held to maturity $1,177,418 $1,199,031 $22,686 $1,073
Realized gains and losses from the sale of securities are
summarized below:
<TABLE>
<CAPTION>
Year Ended December 31
($ in thousands) 1993 1992 1991
<S> <C> <C> <C>
Realized gains $173 $17,555 $23,060
Realized losses (8) (219) (5,353)
Net realized gains $165 $17,336 $17,707
</TABLE>
Securities with carrying values of $1,336,499,000 and
$1,221,128,000 at December 31, 1993, and 1992, respectively, were
either pledged to secure public and trust deposits or sold under
repurchase agreements.
The carrying amount and estimated fair value by maturity of
securities held to maturity are shown below:
<TABLE>
<CAPTION>
December 31, 1993
Amortized Fair
($ in millions) Cost Value
<S> <C> <C>
Due in 1 year or less $162.1 $163.4
Due after 1 year through 5 years 515.4 529.7
Due after 5 years through 10 years 32.3 34.2
Due after 10 years 1,074.8 1,087.8
Total held to maturity $1,784.6 $1,815.1
</TABLE>
Mortgage-backed securities are classified according to their
contractual maturity without consideration of contractual
repayments or projected prepayments. Securities available for sale
at December 31, 1993, include $6,087,000 due after 1 year through
5 years, $94,213,000 due after 5 years through 10 years and
$426,336,000 due after 10 years.
Note 4 Loans
The following is a summary of loans classified by repayment source:
<TABLE>
<CAPTION>
December 31
($ in thousands) 1993 1992
<S> <C> <C>
Energy-related $66,099 $48,186
Transportation, communications
and utilities 112,898 157,281
Commercial real estate 448,976 477,167
Health care 214,571 255,205
Services 239,590 241,459
Commercial and industrial 467,384 497,684
Other commercial 138,827 161,722
Total commercial 1,688,345 1,838,704
Residential mortgage 458,788 415,640
Indirect 238,219 139,329
Student 74,526 72,551
Revolving credit 52,815 54,988
Other 232,692 242,905
Total consumer 1,057,040 925,413
Total portfolio $2,745,385 $2,764,117
</TABLE>
The following is a summary of nonperforming loans and foreclosed
assets:
<TABLE>
<CAPTION>
December 31
($ in thousands) 1993 1992
<S> <C> <C>
Nonaccrual loans $59,655 $140,918
Restructured loan 1,841 352
Nonperforming loans $61,496 $141,270
Foreclosed assets $36,365 $74,622
</TABLE>
Interest income in the amount of $8,910,000 for 1993, $18,112,000
for 1992 and $30,649,000 for 1991 would have been recorded on
nonperforming loans if they had been classified as performing. The
Company recorded $2,527,000, $1,451,000 and $490,000 of interest
income on nonperforming loans during 1993, 1992 and 1991,
respectively.
In May 1993, the Financial Accounting Standards Board (FASB) issued
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan,"
which becomes effective January 1, 1995. SFAS No. 114 requires
that an impaired loan be measured based on discounted future cash
flows, observable market price or fair value of the collateral.
The effect of adopting SFAS No. 114 is not expected to have a
material impact.
The following is a summary of activity in the reserve for possible
loan losses:
<TABLE>
<CAPTION>
Year Ended December 31
($ in thousands) 1993 1992 1991
<S> <C> <C> <C>
Balance at beginning of year $194,859 $218,543 $165,242
Loans charged off (37,591) (92,628) (137,198)
Recoveries 17,195 16,123 9,910
Net loans charged off (20,396) (76,505) (127,288)
Provision for possible loan losses (5,607) 68,327 180,589
Reduction due to sale of Texas Bank 0 (15,506) 0
Balance at end of year $168,856 $194,859 $218,543
</TABLE>
A valuation reserve on foreclosed assets is reported as a reduction
of foreclosed assets. The table below summarizes the changes in
this reserve:
<TABLE>
<CAPTION>
Year Ended December 31
($ in thousands) 1993 1992 1991
<S> <C> <C> <C>
Balance at beginning of year $10,696 $6,514 $7,861
Addition to reserve charged to expense 9,131 20,942 25,446
Write-downs of foreclosed property (6,731) (16,760) (26,793)
Balance at end of year $13,096 $10,696 $6,514
</TABLE>
Note 5 Related-Party Transactions
Certain directors and officers of the Company, members of their
immediate families and entities in which they or members of their
immediate families have principal ownership interests are customers
of and have other transactions with the Company in the ordinary
course of business. Loans to these parties are made on
substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
third-party transactions and do not involve more than normal risks
of collectibility or present other unfavorable features.
Loans to related parties were $30,874,000 and $37,487,000 at
December 31, 1993, and 1992, respectively. The change during 1993
reflects $64,994,000 in new loans and $71,607,000 of repayments.
These amounts do not include loans made in the ordinary course of
business to other entities with which the Company has no
relationship, other than a director of the Company being a director
of the other entity, unless the director had the ability to
significantly influence the other entity.
Securities sold to related parties under repurchase agreements
amounted to $9,968,000 and $13,115,000 at December 31, 1993, and
1992, respectively. During 1993, the Company sold $22,700,000 of
mortgage loan pools to a related party at carrying value, which
approximated fair value.
First National Bank of Jefferson (FNJ), a subsidiary of First
Continental Bancshares, Inc. (see Note 1) had a number of banking
relationships with other banks which had certain directors,
officers and shareholders in common. The most significant of these
relationships related to loan participations sold to and purchased
from the other banks. Total loan participations sold to affiliated
banks was approximately $2,149,000 and $551,000 at December 31,
1993 and 1992, respectively. The total of loan participations
purchased from these banks amounted to approximately $3,054,000 and
$2,009,000 at December 31, 1993 and 1992, respectively. These loan
participations sold and purchased were made without recourse, on
comparable terms with the original loan, and at market rates of
interest which provide for reimbursement of loan origination and
servicing costs.
Note 6 Bank Premises and Equipment
<TABLE>
<CAPTION>
December 31
($ in thousands) 1993 1992
<S> <C> <C>
Land $20,373 $20,787
Bank premises 63,499 63,834
Leasehold improvements 28,403 27,547
Furniture and equipment 83,562 78,813
195,837 190,981
Less allowance for depreciation
and amortization (102,273) (91,262)
Total $93,564 $99,719
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31
($ in thousands) 1993 1992 1991
<S> <C> <C> <C>
Provisions for depreciatioN
and amortization included in:
Occupancy expense $5,629 $4,490 $6,015
Equipment expense 6,777 8,697 7,956
Total $12,406 $13,187 $13,971
</TABLE>
Note 7 Time Deposits
Domestic certificates of deposit of $100,000 or more amounted to
$721,873,000 and $722,891,000 at December 31, 1993, and 1992,
respectively. Interest on these certificates amounted to
$26,184,000, $34,682,000 and $89,195,000 in 1993, 1992 and 1991,
respectively.
Foreign deposits, which are deposit liabilities of the Cayman
Island office of the Louisiana Bank, were $3,417,000 and $1,695,000
at December 31, 1993, and 1992, respectively. Interest expense on
foreign deposits amounted to $149,000, $71,000 and $3,854,000 for
1993, 1992 and 1991, respectively.
Note 8 Debt
<TABLE>
<CAPTION>
December 31
($ in thousands) 1993 1992
<S> <C> <C>
Hibernia Corporation:
Hibernia Corporation notes,
bearing interest at 13%,
due August 1995 $ - $2,020
Note payable to a bank,
bearing interest at prime plus 1%,
maturing in December 1998 3,345 3,545
Note payable to a bank,
bearing interest at prime plus 1%,
maturing in 1997, with required
quarterly principal payments of
$90,000 - 1,008
Note payable to a bank,
bearing interest at prime plus 1%,
maturing in 2003, with required
quarterly principal payments of
$110,000 3,690 -
Convertible subordinated debentures,
bearing interest at 10%,
due 2002 800 850
Employee Stock Ownership Plan,
bearing interest at prime,
maturing in 1997, with required
quarterly principal payments
of $31,200 400 594
Senior Secured Notes Payable,
bearing interest at 10.75%,
due in 1997 5,884 5,444
Mandatory Convertible
Subordinated Debentures,
bearing interest at 12%,
maturing in 1996 6,000 6,000
Hibernia National Bank:
Subordinated capital notes,
bearing interest at 8%,
maturing in December 1997,
with required annual principal
payments of $360,000 - 6,040
Federal Home Loan Bank advances 3,862 -
Other - 209
Total $23,981 $25,710
</TABLE>
During 1993, the Company retired Hibernia Corporation notes,
Hibernia National Bank subordinated capital notes and other debt.
All other debt, which was acquired through mergers, was retired at or
immediately following the legal mergers, except for the Federal Home Loan Bank
advances. The acquired debt was secured by the common stock of various
subsidiaries of merger companies.
The Federal Home Loan Bank advances were obtained to fund certain
loans made by First Bancorp of Louisiana, Inc. The balance of the
loans which secure the advances amounted to $3,899,000 at December
31, 1993. The advances accrue interest at contractual rates of
5.7% to 6.3% and are due in monthly installments of approximately
$39,000, including interest. The advances are scheduled to
amortize through various dates between 2002 and 2008. However,
should the loans for which the advances were obtained repay at a
faster rate than anticipated, then the advances are to be repaid at
a correspondingly faster rate.
Note 9 Other Assets and Other Liabilitie
<TABLE>
<CAPTION>
December 31
($ in thousands) 1993 1992
<S> <C> <C>
Other assets:
Accrued interest receivable $49,398 $44,144
Goodwill 42,042 46,897
Foreclosed assets 36,365 74,622
Deferred income taxes 23,967 12,478
Purchased mortgage servicing
rights 4,270 7,416
Excess servicing receivable
arising from asset
securitization 3,384 7,270
Other 39,991 33,883
Total other assets $199,417 $226,710
Other liabilities:
Accrued interest payable $21,690 $20,512
Reserve for future rental
payments under sale/leaseback 21,155 21,317
Trade accounts payable and
accrued liabilities 48,247 23,269
Other 19,879 15,486
Total other liabilities $110,971 $80,584
</TABLE>
Amortization relating to goodwill totaled $4,970,000, $5,776,000
and $6,270,000 for the years ended December 31, 1993, 1992, and
1991, respectively. Accumulated amortization at December 31, 1993,
and 1992 totaled $37,776,000 and $32,806,000, respectively.
Note 10 Per-Share Data
Income (loss) per common share data are based on the weighted
average number of shares outstanding of 96,196,623; 42,629,773; and
41,138,432 in 1993, 1992 and 1991, respectively. Primary and fully
diluted per-share data are not applicable to the Company because
the computations are not dilutive. The common stock issued in the
mergers is considered to be outstanding as of January 1, 1991.
Note 11 Employee Benefit Plans
The Company maintains a defined-contribution benefit plan under
Section 401(k) of the Internal Revenue Code, the Retirement
Security Plan (RSP). Substantially all employees who have
completed one year of service are eligible to participate in the
RSP. Under the RSP, employees contribute a portion of their
regular compensation, with the Company matching employee
contributions based upon tenure. Matching contributions are
charged to employee benefits expense. At December 31, 1993, the
RSP owned 771,100 shares of Class A Common Stock. The Company's
contributions to the RSP totaled $705,000 in 1993, $681,000 in 1992
and $2,216,000 in 1991.
In 1993 and 1992, the Company maintained incentive bonus programs
for key employees. Costs of the incentive bonus programs were
$1,800,000 and $1,750,000 for the years ended December 31, 1993,
and 1992, respectively. No bonuses were accrued or paid during
1991.
During 1993, the Company established a plan for grant of
performance share awards under its Long-Term Incentive Plan for
certain members of management. Under this plan, if the Company
achieves certain predetermined performance goals during the
two-year period from January 1, 1993, through December 31, 1994,
the Company will award common stock to certain members of
management who contribute to the Company's achievement of
predetermined goals. A maximum of 381,000 shares may be awarded
under this plan in 1995. During the year ended December 31, 1993,
$1,619,000 of compensation expense was recorded relating to the
performance share awards.
The Company sponsors a defined-benefit plan which provides certain
health care and life insurance benefits for employees who retired
on or before December 31, 1992. The plan is unfunded. Effective
January 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." The
effect of prospectively adopting SFAS No. 106 increased net
periodic postretirement cost and decreased net income by $292,000.
In November 1992, the FASB issued SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." SFAS No. 112 requires
accrual-based accounting for benefits cost relating to former or
inactive employees after employment but before retirement and
becomes effective January 1, 1994. The effect of adopting SFAS No.
112 is not expected to have a material impact.
The accumulated postretirement benefit obligation at January 1,
1993, was $4,591,000. The components of net periodic
postretirement benefit cost for 1993 include $397,000 of transition
obligation amortization and $367,000 of interest cost.
The discount rate used in determining the accumulated
postretirement benefit obligation was 8%. The annual assumed rate
of increase in the cost of covered benefits (the health care trend
rate) is 11% and is assumed to decrease gradually to 8% in 1996 and
to remain constant thereafter. Increasing the health care trend
rate by one percentage point in each year would increase the
accumulated postretirement benefit obligation as of January 1,
1993, by $279,000 and the aggregate of the amortization and
interest cost components of net periodic postretirement benefits by
$22,000.
First Bancorp of Louisiana, Inc., (FBL) which was merged into the
Company on August 1, 1994, maintained an Employee Stock Ownership
Plan (ESOP). This ESOP will remain in existence subsequent to the
merger. The ESOP covers substantially all FBL employees who
qualified as to age and length of service. A participant's
interest in his or her account becomes totally vested after
completion of five years of service. Contributions to the ESOP are
at the discretion of the Board of Directors; however,
contributions, including dividends received from Hibernia, must be
sufficient to pay any current obligations of the ESOP. Expense
relating to this ESOP of $466,000, $135,000, and $154,000 is
included in the supplemental consolidated statements of income for
the years ended December 31, 1993, 1992 and 1991, respectively.
At December 31, 1993 and 1992, the ESOP had outstanding a note
payable to an unaffiliated bank in the amount of $400,000 and
$594,000, respectively, which is guaranteed by the Company. At
December 31, 1993, the borrowing was secured by 305,541 shares of
Hibernia's common stock. At December 31, 1993 and 1992, the ESOP
owned 1,202,316 and 1,230,182 shares, respectively, of Hibernia
common stock.
Certain of the merged companies adopted retention agreements in
1993 to encourage certain officers of the merged companies to
continue their employment through the consummation of the merger.
These agreements were executed primarily to maintain stability
within the organization and reduce the risk of loss of key members
of management before consummation of any potential merger or
acquisition of the respective Companies. These agreements provided
that if the designated officers remain with the Company through the
consummation of the merger, and certain other conditions are
satisfied, they would receive additional compensation aggregating
approximately $1.3 million. At December 31, 1993, this liability
had not been recorded as shareholder and regulatory approval for
the mergers had not yet been obtained. This liability was recorded
during the three month period ended June 30, 1994.
Note 12 Stock Options
The Company's stock option plans provide incentive and
non-qualified options to various key employees and non-employee
directors to purchase shares of Class A Common Stock at no less
than the fair market value of the stock at the date of grant. All
options issued prior to 1992 became exercisable six months from the
date of grant. The remaining options granted under the 1987 Stock
Option Plan, the Long-Term Incentive Plan and the 1993 Directors'
Stock Option Plan become exercisable in the following increments:
50% after the expiration of two years from the date of grant, an
additional 25% three years from the date of grant and the remaining
25% four years from the date of grant.
Options issued to employees and directors, other than the chief
executive officer, become immediately exercisable if the holder of
the option dies while the option is outstanding. Options granted
under the 1987 Stock Option Plan generally expire 10 years from the
date granted. Options granted under the Long-Term Incentive Plan
and the 1993 Directors' Stock Option Plan do not expire unless the
holder dies, retires, becomes permanently disabled or leaves the
employ of the Company, at which time the options expire at various
times ranging from 30 to 180 days.
At December 31, 1993, shares available for grant under the 1987
Stock Option Plan, the Long-Term Incentive Plan and the 1993
Directors' Stock Option Plan amounted to 173,945; 1,918,970; and
925,000, respectively. The 1983 Stock Option Plan was terminated in
November 1993, and there are no options outstanding under this
plan.
The table below summarizes the activity in the plans during 1993:
<TABLE>
<CAPTION>
Non- Price Range
Incentive qualified Per Share
<S> <C> <C> <C>
1987 Stock Option Plan:
Outstanding,
December 31, 1992 176,828 752,379 $4.19 to $18.80
Granted 13,913 642,152 $7.19
Canceled - (4,196) $4.94
Exercised - (31,639) $4.94
Outstanding
December 31, 1993 190,741 1,358,696 $4.19 to $18.80
Exercisable,
December 31, 1993 15,188 401,583 $4.94 to $18.80
Long-Term Incentive Plan:
Outstanding,
December 31, 1992 - -
Granted - 963,000 $5.94 to $7.75
Canceled - (58,000) $7.13 to $7.63
Outstanding,
December 31, 1993 - 905,000 $5.94 to $7.75
Exercisable,
December 31, 1993 - -
1993 Directors' Stock Option Plan:
Outstanding,
December 31, 1992 - -
Granted - 75,000 $7.31
Outstanding,
December 31, 1993 - 75,000 $7.31
Exercisable,
December 31, 1993 - -
</TABLE>
Note 13 Income Taxes
As discussed in Note 1, the Company adopted SFAS No. 109 effective
January 1, 1993. As permitted by SFAS No. 109, prior-year
financial statements were not restated. The cumulative effect of
the adoption of this Statement was to increase net income by
$3,043,000.
Income tax expense includes amounts currently payable and amounts
deferred to or from other years as a result of differences in the
timing of recognition of income and expense for financial reporting
and federal tax purposes. The components of income tax expense are
as follows:
<TABLE>
<CAPTION>
Year Ended December 31
($ in thousands) 1993 1992 1991
<S> <C> <C> <C>
Current tax expense:
Federal income tax $13,762 $3,401 $1,046
State income tax 1,696 848 183
Total current tax expense 15,458 4,249 1,229
Deferred tax expense (benefit):
Federal income tax 3,408 (1,079) 682
Change in deferred tax
valuation reserve (13,507) - -
Total deferred tax expense (benefit) (10,099) (1,079) 682
Shareholder's Equity:
Cumulative effect of change
in accounting for securities
available for sale 3,946 - -
Change in deferred tax
valuation reserve (3,946) - -
Total shareholder's equity - - -
Income tax expense $5,359 $3,170 $1,911
</TABLE>
The reconciliation of the federal statutory income tax rate to the
Company's effective rate can be found in the table below.
<TABLE>
<CAPTION
Year Ended December 31
($ in thousands) 1993 1992 1991
Amount Rate Amount Rate Amount Rate
<S> <C> <C> <C> <C> <C> <C>
Tax expense (benefit)
based on federal
statutory rate $21,263 35.0 % $484 34.0 % ($47,415) (34.0)%
Tax-exempt interest (2,999) (4.9) (4,168)(293.7) (7,623) (5.5)
Goodwill 1,685 2.8 1,327 93.5 (2,661) (1.9)
Sale of Texas Bank - - 2,182 153.8 4,420 3.2
State income tax, net
of federal benefit 1,103 1.8 559 39.4 120 0.1
Limitation on
recognition of
tax benefit - - 2,527 178.1 54,407 39.0
Change in deferred
tax valuation reserve (13,507)(22.2) - - - -
Change in tax rate on
existing temporary
differences (2,109) (3.5) - - - -
Other 49 - 259 18.3 663 0.5
Income tax expense $5,485 9.0 % $3,170 223.4 % $1,911 1.4%
</TABLE>
During 1993, deferred income taxes were based on differences
between the basis of assets and liabilities for financial statement
purposes and tax reporting purposes and available tax credit
carryforwards. During 1992 and 1991, deferred income taxes were
provided on those items that were taxable or deductible in
different periods for financial statement and federal income tax
purposes. The tax effects of the cumulative temporary differences
and tax credit carryforwards which create deferred tax assets and
liabilities at December 31, 1993, are detailed below:
<TABLE>
<CAPTION>
($ in thousands) December 31, 1993
<S> <C>
Deferred tax assets:
Reserve for possible loan losses $56,922
Sale / leaseback 6,258
Foreclosed assets 7,183
Loan fees 2,462
Other 12,230
Alternative minimum tax
credit carryforward 17,450
Regular net operating losses 2,096
Total deferred tax assets 104,601
Deferred tax liabilities:
Discounts on securities 426
Unrealized gain on securities
available for sale 3,946
Depreciation 2,640
Purchase accounting adjustments, net 2,619
Other 4,227
Total deferred tax liabilities 13,858
Deferred tax assets net of
deferred tax liabilities 90,743
Deferred tax valuation reserve (66,776)
Total net deferred tax asset $23,967
</TABLE>
Management currently estimates realizability of the net deferred
tax asset based on the Company's ability to, first, recover taxes
previously paid and, second, generate taxable income over the next
12 months. A deferred tax valuation reserve is established to
limit the net deferred tax asset to its realizable value.
The tax effects of significant items giving rise to deferred tax
expense (benefit) in 1992 and 1991 are detailed below:
<TABLE>
<CAPTION>
Year Ended December 31
($ in thousands) 1992 1991
<S> <C> <C>
Provision for possible loan losses $2,712 ($18,146)
Discounts on securities (135) (300)
Foreclosed assets 813 (3,028)
Loan fees 550 334
Depreciation (787) (523)
Sale of auto loans (3,638) 562
Alternative minimum tax credits (692) -
Other 98 (4,234)
Limitation on recognition of tax benefits - 26,017
Deferred tax expense (benefit) ($1,079) $682
</TABLE>
For federal income tax purposes, the Company has $17,450,000 in
alternative minimum tax credit carryforwards at December 31, 1993,
which do not expire.
The 1992 debt restructuring between the Company and bank group
discussed in Note 17 gave rise to "testing dates" under Section 382
of the Internal Revenue Code to determine if a change in ownership
of the Company had occurred. Generally, a change in ownership
occurs when the percentage of stock owned by one or more
five-percent shareholders, as defined, has increased by more than
50 percentage points over a three-year period. When a change of
this type occurs, a limitation is imposed on pre-change "built-in"
losses, as defined, and tax credit carryforwards. Due to the
assumed issuance of stock in connection with proposed mergers and
dependent upon resolution of proposed tax regulations related to
stock issuances, for purposes of Section 382, a change in ownership
of the Company will occur in 1994. Based on current estimates, the
Company has no pre-change "built-in" losses, and its ability to
utilize tax credit carryforwards will not be significantly
affected.
Note 14 Leases
The Company leases its headquarters, operations center and certain
other bank premises and equipment under non-cancelable operating
leases which expire at various dates through 2013. Certain of the
leases have escalation clauses and renewal options ranging from one
to 30 years.
Total rental expense (none of which represents contingent rentals)
included in occupancy and equipment expense was $10,740,000;
$12,490,000 and $15,151,000 in 1993, 1992 and 1991,
respectively.
The future minimum rental commitments at December 31, 1993, for all
long-term operating leases are as follows: 1994 - $9,254,000; 1995
- - $8,838,000; 1996 - $8,077,000; 1997 - $7,733,000; 1998 -
$7,520,000; and thereafter - $64,812,000.
On January 1, 1991, the Company changed its method of accounting
for lease expense related to the 1983 sale/leaseback of the
Company's headquarters and operations buildings. Under the
alternative method adopted in 1991, the Company recognizes lease
expense on the straight-line basis over the terms of the 25-year
leases, rather than in accordance with the contractual lease
payments. The cumulative effect adjustment resulting from the
change in method included in the results of operations for 1991
amounted to $21.6 million. The change had no material effect on
the results of operations (before the cumulative effect adjustment)
for 1991. There was no income tax benefit recognized related to
the cumulative effect adjustment.
Note 15 Other Operating Expense
<TABLE>
<CAPTION>
Year ended December 31
($ in thousands) 1993 1992 1991
<S> <C> <C> <C>
Deposit insurance and
examination fees $14,187 $13,302 $15,900
Postage 3,936 4,481 6,846
Stationery and supplies 4,065 4,041 4,825
Professional 9,203 13,427 15,339
Amortization of intangibles 8,276 10,174 10,247
State taxes on equity 2,356 1,872 4,614
Loan collection expense 4,753 7,237 9,418
Advertising and promotional expenses 5,623 2,882 3,203
Valuation allowance on Texas Bank - - 13,000
Other 31,205 20,275 38,619
Total other operating expense $83,604 $77,691 $122,011
</TABLE>
Note 16 Proposed Mergers
The Company merged with four Louisiana financial institutions in
1994. These supplemental consolidated financial statements give
retroactive effect to these mergers
On July 1, 1994, Commercial Bancshares, Inc. (Commercial) merged
into Hibernia. Hibernia issued 2,367,481 shares of common stock to
the shareholders of Commercial common stock. Commercial
shareholders received 8.4 shares of Hibernia common stock for each
share of Commercial common stock.
On July 1, 1994, Bastrop National Bank (Bastrop) merged into
Hibernia. Hibernia issued 2,444,043 shares of common stock to the
shareholders of Bastrop common stock. Bastrop shareholders
received 8.147 shares of Hibernia common stock for each share of
Bastrop common stock.
On August 1, 1994, First Bancorp of Louisiana, Inc. (FBL) merged
into Hibernia. Hibernia issued 4,311,315 shares of common stock to
the shareholders of FBL common stock. FBL shareholders received
18.14 shares of Hibernia common stock for each share of FBL common
stock.
On August 1, 1994, First Continental Bancshares, Inc. (FCBI) merged
into Hibernia. Hibernia issued 3,898,655 shares of common stock to
the shareholders of FCBI common stock and other securities. FCBI
shareholders received 1.41 shares of Hibernia common stock for each
share of FCBI common stock.
Hibernia's mergers with Commercial, Bastrop, FBL and FCBI
(collectively, the Other Pooled Companies) were accounted for as a
poolings-of-interests. The following table shows the key components
of the results of operations of the previously separate entities
for the years ended December 31, 1993, 1992 and 1991.
<TABLE>
<CAPTION>
Hibernia Commercial Bastrop FBL FCBI Total
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Net interest income $195,705 $6,459 $4,939 $8,248 $18,713 $234,064
Cumulative effect of
accounting change - $421 - - $2,622 $3,043
Net income $47,950 $2,088 $2,050 $2,706 $3,640 $58,434
Year ended December 31, 1992
Net interest income $197,278 $6,538 $5,179 $7,067 $18,336 $234,398
Extraordinary gain (loss)
on debt restructuring ($56,122) $284 - - $11,345 ($44,493)
Utilization of net operating
loss carryforward - $185 - - $5,996 $6,181
Net income (loss) ($64,037) $2,058 $2,179 $1,945 $17,791 ($40,064)
Year ended December 31, 1991
Net interest income $234,599 $5,590 $4,175 $4,899 $14,085 $263,348
Utilization of net operating
loss carryforward - $200 - - - $200
Cumulative effect of
accounting change ($21,643) - - - - ($21,643)
Net income (loss) ($165,640) $1,070 $1,561 $1,038 ($839) ($162,810)
</TABLE>
Hibernia is a party to merger agreements with three additional
Louisiana financial institutions which are pending regulatory and
shareholder approval. All of these transactions are expected to be
consummated during 1994 or early 1995 and will be accounted for as
poolings of interests. The summary below contains information
regarding institutions with which Hibernia has entered into
definitive merger agreements.
($ in thousands) June 30, 1994 Estimated Consideration
Number Hibernia Value of
of Total Shares Shares
Institution Offices Assets Issued* Issued*
Pioneer Bancshares, Inc. 11 $361,986 8,371,000 $71,149
First State Bank &
Trust Company 7 149,686 3,350,000 28,745
American Bank of Norco 5 93,541 2,250,000 19,125
Total 23 $605,213 13,971,000 $119,019
*Estimated per share market value of $8.50
Note 17 Recapitalization
During 1992, the Company increased shareholders' equity by $177.8
million through the restructuring of $99.1 million in debt and a
shareholder rights offering.
Debt Restructuring
On September 28, 1992, the Company completed the restructuring of
its $99.1 million debt to a group of seven banks. As reflected in
the table below, the existing debt was extinguished through the
issuance of securities and resulted in a non-cash extraordinary
loss for the fair value of the securities issued in excess of the
carrying value of the debt restructured.
The Company recorded the preferred stock at its $60 million
liquidation preference and recorded as surplus the value of the
preferred stock in excess of the liquidation preference, together
with the value of the warrants issued, net of costs of issuance of
$1.3 million. Subsequent to the completion of the rights offering
and pursuant to antidilution provisions of the preferred stock, the
bank group converted an aggregate of 21,818,182 shares of preferred
stock to 22,091,443 shares of common stock.
Under antidilution provisions of the senior and subordinated debt
agreements, each bank was issued rights to purchase additional
shares of common stock, the number to be determined by the number
of shares issued in a rights offering to shareholders. The
agreements provided that, if all shares available in the rights
offering were purchased, the banks would have the right to purchase
an aggregate of approximately 16.5 million shares. The rights
offering was fully subscribed, and the banks elected to purchase an
aggregate of 10.3 million shares through the conversion of debt and
related accrued interest, and certain of the banks purchased for
cash an additional 1.9 million shares.
During 1993, certain warrants issued in the restructuring were
exercised, resulting in the issuance of approximately 1,151,000
shares of common stock. The number of shares subject to warrants
outstanding and exercisable at December 31, 1993, was approximately
661,000. The warrants expire in September 1999.
During 1992, FCBI restructured its debt with a bank. As a result
of this restructuring, a gain on extinguishment of debt of
$11,345,000, net of tax, was recorded. During 1992, a portion of
Commercial's notes payable were discounted by the lending bank. As
a result, an extraordinary gain of $284,000, net of tax, was
recorded.
<TABLE>
<CAPTION>
COMPUTATION OF EXTRAORDINARY LOSS
($ in thousands)
<S> <C>
Securities issued
21,818,182 shares of non-cumulative
convertible preferred stock valued at
$5.125 per share, which was the quoted
market price of Hibernia Corporation
common stock on September 28,1992 $111,818
1,812,000 common stock purchase warrants
valued at $2.375 per share, which is the
spread between the $5.125 quoted market
price of Hibernia Corporation common
stock on September 28, 1992, and the
$2.75 contractual exercise price 4,304
Senior debt, secured by all assets of
the Company 26,625
Subordinated debt 12,500
Total fair value of securities issued (155,247)
Less: debt restructured 99,125
Extraordinary loss (non-cash) on debt
restructuring - Hibernia (56,122)
Extraordinary gain (non-cash) on deby
restructuring - Commercial 284
Extraordinary gain (non-cash) on debt
restructuring - FCBI 11,345
Extraordinary loss on debt restructuring, net ($44,493)
</TABLE>
Rights Offering
On November 12, 1992, the Company commenced an offering to
shareholders of record on that date to purchase 19.8 million shares
of common stock at a subscription price of $4.00 per share. The
closing market price of the Company's common stock on November 11,
1992, was $5.00 per share. The offering was fully subscribed, and
the Company issued 19.8 million shares of common stock. As
previously described, certain debtholders elected to participate in
the rights offering and purchased an additional 1.9 million shares
of common stock at $4.00 per share. The Company received net
proceeds from the rights offering of $79.2 million.
Note 18 Sale of the Texas Bank
On December 31, 1992, the Company sold the stock of the Texas Bank
to Comerica Incorporated. The Company received net proceeds of
$56.2 million, which is the purchase price of $58.0 million reduced
by the dividend paid by the Texas Bank to the Parent Company in the
third quarter of 1992. The Company recorded a loss of $2.9 million
in the third quarter of 1992 in order to reduce the Parent
Company's investment in the Texas Bank to its net realizable value.
At June 30, 1992, the carrying values of the assets and liabilities
of the Texas Bank were $910.2 million and $848.2 million,
respectively. The revenues and expenses of the Texas Bank (before
eliminations) shown in the table below are included in the
Consolidated Statements of Income on a fully consolidated basis for
1991 and the first six months of 1992.
<TABLE>
Condensed Income Statements
Hibernia National Bank in Texas
<CAPTION>
Six Months Year Ended
Ended June December 31
<S> <C> <C>
($ in thousands) 1992 1991
Interest Income $36,132 $94,676
Interest Expense 15,974 55,377
Net interest income 20,158 39,299
Provision for possible loan losses 3,125 7,280
Net interest income after provision 17,033 32,019
Noninterest income 5,316 17,730
Noninterest expense 19,939 46,647
Income before income taxes 2,410 3,102
Income tax expense 1,009 864
Net income $1,401 $2,238
</TABLE>
Note 19 Hibernia Corporation (Parent Company only)
<TABLE>
<CAPTION>
BALANCE SHEETS
December 31
($ in thousands) 1993 1992
<S> <C> <C>
Investment in bank subsidiary $461,069 $377,318
Other assets 63,564 70,742
Total assets $524,633 $448,060
Current liabilities $30,639 $24,185
Debt 20,119 19,461
Shareholders' equity 473,875 404,414
Total liabilities and
shareholders' equity $524,633 $448,060
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
Year Ended December 31
($ in thousands) 1993 1992 1991
<S> <C> <C> <C>
Equity in undistributed income
(loss) of subsidiary $65,211 $12,969 ($143,637)
Dividends from subsidiary 7,340 6,588 10,100
Other income 1,924 (3,780) 227
Total income 74,475 15,777 (133,310)
Interest expense 2,277 12,819 13,801
Other expense 13,178 5,985 16,258
Total expense 15,455 18,804 30,059
Income (loss) before taxes,
extraordinary item and
accounting changes 59,020 (3,027) (163,369)
Income tax expense (benefit) (299) (1,196) (559)
Income (loss) before
extraordinary items and
cumulative effect of
accounting changes 59,319 (1,831) (162,810)
Extraordinary gain (loss) on
debt restructuring 0 (44,493) 0
Utilization of NOL Carryforward 0 6,260 0
Cumulative effect of accounting
changes (885) 0 0
Net income (loss) $58,434 ($40,064) ($162,810)
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Year Ended December 31
($ in thousands) 1993 1992 1991
<S> <C> <C> <C>
Operating Activities
Net income (loss) $58,434 ($40,064) ($162,810)
Non-cash adjustment for equity
in subsidiary's undistributed
net (income) loss (65,211) (12,969) 142,462
Extraordinary loss on
debt restructuring 0 44,493 0
Other adjustments 7,849 13,654 30,585
Net cash provided (used) by
operating activities 1,072 5,114 10,237
Investing Activities
Investment in subsidiary (9,181) (75,000) (6,217)
Proceeds from sales of
investments, net 283 (1,103) 1,218
Sale of Texas Bank 0 56,225 0
Net cash used by
investing activities (8,898) (19,878) (4,999)
Financing Activities
Issuance of debt 8,500 6,250 2,900
Payments on debt (8,088) (9,109) (13,771)
Dividends paid (2,999) (105) (4,258)
Issuance of Common Stock 3,572 79,051 2,330
Net cash provided (used)
by financing activities 985 76,087 (12,799)
Increase (decrease) in cash (6,841) 61,323 (7,561)
Cash at beginning of year 63,918 2,595 10,156
Cash at end of year $57,077 $63,918 $2,595
</TABLE>
Note 20 Other Financial Instruments
The Company issues financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs
of its customers and to reduce exposure to fluctuations in interest
rates. These financial instruments include commitments to extend
credit, letters of credit and standby letters of credit and
involve, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the balance sheet.
Commitments to extend credit are legally binding, conditional
agreements generally having fixed expiration or termination dates
and specified interest rates and purposes. These commitments
generally require customers to maintain certain credit standards.
Collateral requirements and loan-to-value ratios are the same as
those for funded transactions and are established based on
management's credit assessment of the customer. Commitments may
expire without being drawn upon. Therefore, the total commitment
amount does not necessarily represent future requirements.
The Company issues letters of credit and financial guarantees
whereby it agrees to honor certain financial commitments in the
event its customers are unable to perform. The majority of the
standby letters of credit consist of performance guarantees.
Management conducts regular reviews of all outstanding standby
letters of credit, and the results of these reviews are considered
in assessing the adequacy of the Company's reserve for possible
loan losses.
<TABLE>
<CAPTION>
December 31
($ in thousands) 1993 199
<S> <C> <C>
Commitments to
extend credit $564,381 $456,636
Letters of credit
and financial guarantees $104,024 $131,884
</TABLE>
Management does not anticipate any material losses as a result of
these instruments.
As of December 31, 1993, and 1992, the Company was a guarantor of
an interest rate swap agreement, which matures in 1995, with a
notional amount of $74 million. The agreement was executed by one
of the Company's customers, and the Company is exposed to loss
should its customer default. The Company's exposure to loss is
limited to the difference between the interest payments the
customer is obligated to pay and those it is entitled to receive.
The Company attempts to minimize this risk by performing normal
credit reviews on its customer.
Significant loan concentrations are disclosed in Note 4.
Note 21 Fair Value of Financial Instruments
SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments," requires disclosure of fair value information about
financial instruments for which it is practicable to estimate fair
value, whether or not the financial instruments are recognized in
the financial statements. When quoted market prices are not
available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate and
estimates of future cash flows. The derived fair value estimates
cannot be substantiated through comparison to independent markets
and, in many cases, could not be realized in immediate settlement
of the instrument. SFAS No. 107 excludes certain financial
instruments and all non-financial instruments from its disclosure
requirements. Further, the disclosures do not include estimated
fair values for items which are not financial instruments but which
represent significant value to the Company - among them, core
deposit intangibles, loan servicing rights, trust operations and
other fee-generating businesses. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of
the Company.
The carrying amount of cash and short-term investments, demand
deposits and short-term borrowings approximates the estimated fair
value of these financial instruments. The estimated fair value of
securities, interest rate swaps and other off-balance-sheet
instruments is based on quoted market prices, dealer quotes and
prices obtained from independent pricing services. The estimated
fair value of loans and interest-bearing deposits is based on
present values using applicable risk-adjusted spreads to the LIBOR
yield curve to approximate current interest rates applicable to
each category of these financial instruments.
Interest rates were not adjusted for changes in credit of
performing commercial loans for which there are no known credit
concerns. Management segregates loans in appropriate risk
categories and believes the risk factor embedded in the interest
rates results in a fair valuation of these loans on an entry-value
basis.
Variances between the carrying amount and the estimated fair value
of loans reflect both credit risk and interest rate risk. Changes
in credit risk gave rise to carrying amounts in excess of fair
values which is more than offset by the reserve for possible loan
losses of $168.9 million. However, the current low interest rate
environment gave rise to fair values in excess of carrying amounts.
The fair value estimates presented are based on information
available to management as of December 31, 1993. Although
management is not aware of any factors that would significantly
affect the estimated fair value amounts, these amounts have not
been revalued for purposes of these financial statements since that
date, and, therefore, current estimates of fair value may differ
significantly from the amounts presented.
<TABLE>
<CAPTION>
December 31, 1993
Estimated
Carrying Fair
($ in thousands) Amount Value
<S> <C> <C>
Assets
Cash and short-term investments $527,090 $527,090
Securities available for sale 526,636 526,636
Securities held to maturity 1,784,561 1,815,109
Commercial loans 1,688,345 1,700,326
Consumer loans 1,057,040 1,064,562
Liabilities
Demand deposits 946,326 946,326
Interest-bearing deposits 3,948,528 3,934,767
Federal funds purchased and
securities sold under
agreements to repurchase 153,241 153,241
Off-balance-sheet financial instruments
Interest rate swaps 0 1,408
Commitments and letters of credit 0 (6,117)
</TABLE>
Note 22 Regulatory Matters and Dividend Restrictions
In July 1991, the Louisiana Bank entered into a consent order with
the Office of the Comptroller of the Currency (OCC). Under the
consent order, the Louisiana Bank agreed to develop three-year
capital, strategic, profit and liquidity plans; to review and
revise certain policies; and to correct specific matters deemed by
the OCC to be violations of law. In June 1993, this consent order
was terminated by the OCC.
In December 1991, the Parent Company entered into an agreement with
the Federal Reserve Bank of Atlanta (FRB), pursuant to which the
Parent Company agreed, among other things, to develop capital,
strategic and liquidity plans and to obtain approval from the FRB
prior to declaring or paying any dividends on its capital stock,
increasing its indebtedness or selling certain assets. These
regulatory controls were terminated by the FRB in November 1993.
Under current FRB regulations, the Louisiana Bank may lend the
Parent Company up to 10% of the Louisiana Bank's capital and
surplus. Based on this limitation, approximately $26,086,000 was
available for loans to the Parent Company at December 31, 1993.
The payment of dividends by the Louisiana Bank to the Parent
Company is restricted by various regulatory and statutory
limitations. In 1994, the Louisiana Bank will have available to
pay dividends to the Parent Company, without approval of the OCC,
approximately $84,878,000, plus net retained profits earned in 1994
prior to the dividend declaration date.
Banks are required to maintain noninterest-bearing balances with
the FRB to meet reserve requirements. Average reserve balances were
$42,382,000 in 1993 and $48,560,000 in 1992.
Note 23 Contingencies
The Company is a party to certain pending legal proceedings arising
from matters incidental to its business.
In addition, the Company is a named defendant in a shareholder
class-action suit which alleges that, during the period March 19,
1990, to July 30, 1991, the market value of the Company's common
stock was artificially inflated due to false and misleading news
releases and public statements and the failure to disclose material
facts. This suit is in the discovery stage. The Company intends
to contest the suit vigorously.
The Company has established reserves for potential litigation
losses of approximately $11,500,000 at December 31, 1993. In the
opinion of management and counsel, the aggregated unreserved
liability or loss, if any, of legal proceedings will not have a
significant effect on the consolidated financial condition of the
Company.
<PAGE>
COMMERCIAL CONSOLIDATED FINANCIAL INFORMATION
REPORT
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
DECEMBER 31, 1992
REPORT
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
DECEMBER 31, 1992
TABLE OF CONTENTS
Exhibit Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1992 AND 1991:
Consolidated Statements of Condition A 2
Consolidated Statements of Income B 3
Consolidated Statements of Changes in
Shareholders' Equity C 4
Consolidated Statements of Cash Flows D 5 - 6
Notes to Consolidated Financial Statements E 7 - 19
INDEPENDENT AUDITORS' REPORT ON ADDITIONAL 20
INFORMATION
ADDITIONAL INFORMATION FOR THE YEAR ENDED
DECEMBER 31, 1992:
Consolidating Statement of Condition F 21
Information
Consolidating Statement of Income G 22
Information
Consolidating and Eliminating Entries H 23
INDEPENDENT AUDITORS' REPORT
Board of Directors
Commercial Bancshares, Inc. and Subsidiary
Abbeville, Louisiana
We have audited the accompanying consolidated statements of condition of
Commercial Bancshares, Inc. and Subsidiary as of December 31, 1992 and 1991,
and the related consolidated statements of income, changes in shareholders'
equity and cash flows for the years then ended. These financial statements
are the responsibility of the Holding Corporation and Subsidiary's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Commercial Bancshares, Inc. and Subsidiary as of December 31, 1992 and 1991,
and the results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
January 29, 1993
<PAGE>
Exhibit A
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION DECEMBER 31, 1992 AND 1991
ASSETS
1992 1991
Cash and Due from Banks $ 6,835,587 $ 5,380,059
Interest Bearing Deposits 46,799 150,212
Federal Funds Sold 11,350,000 6,800,000
Total Cash and
Cash Equivalents 18,232,386 12,330,271
Investment Securities 89,428,562 84,900,784
Loans (net of allowance for
loan losses
of $1,195,030 and
$1,306,102 in 1992
and 1991, respectively) 63,123,572 67,513,972
Premises and Equipment, Net 3,235,296 3,482,689
Real Estate and Other Property
Acquired by Foreclosure,
Net 2,265,898 2,601,318
Accrued Interest Receivable 1,774,692 1,975,148
Other Assets 2,180,103 1,588,222
TOTAL ASSETS $180,240,509 $174,394,404
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Non-interest Bearing
Deposits $ 26,142,498 $ 20,397,683
Interest Bearing Deposits 136,329,821 134,679,298
Total Deposits 162,472,319 155,076,981
Accrued Interest Payable 555,358 996,041
Other Liabilities 1,513,436 1,121,228
Notes Payable 3,545,000 7,287,652
TOTAL LIABILITIES 168,086,113 164,481,902
SHAREHOLDERS' EQUITY:
Common Stock, $2 par value,
500,000 sharesauthorized,
314,723 shares issued,
282,343shares
outstanding 629,446 629,446
Capital Surplus 515,305 515,305
Unrealized Loss on
Marketable Equity
Securities -0- (186,196)
Treasury Stock,
32,380 Shares at Cost (1,152,744) (1,152,744)
Undivided Profits 12,162,389 10,104,691
TOTAL SHAREHOLDERS' EQUITY 12,154,396 9,910,502
TOTAL LIABILITIES AND $180,240,509 $174,392,404
SHAREHOLDERS' EQUITY
The accompanying Notes to Consolidated Financial Statements are an integral
part
of these statements.
<PAGE>
Exhibit B
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
FOR THE YEARS ENDED
CONSOLIDATED STATEMENTS OF INCOME DECEMBER 31, 1992 AND 1991
1992 1991
INTEREST INCOME:
Loans, Including Fees $ 6,489,210 $ 7,856,716
Investment Securities:
Taxable 5,622,683 6,063,002
Non-taxable 69,866 228,859
Federal Funds Sold 230,384 292,117
TOTAL INTEREST INCOME 12,412,143 14,440,694
INTEREST EXPENSE:
Deposits 5,496,924 8,215,523
Notes Payable 377,686 634,718
TOTAL INTEREST EXPENSE 5,874,610 8,850,241
NET INTEREST INCOME 6,537,533 5,590,453
PROVISION FOR LOAN LOSSES 150,000 10,000
NET INTEREST INCOME AFTER
PROVISION FOR LOAN
LOSSES 6,387,533 5,580,453
OTHER INCOME:
Customer Service Fees 861,278 917,499
Loss on Sale of Marketable
Equity Securities
(201,944) (213,142)
Gain on Sale of Other
Investment Securities
246,045 235,331
Loss on Sale of Other Real
Estate and
Other Property Acquired (29,589) (21,738)
Income From Real Estate
Acquired by Foreclosure
221,340 104,102
Other Income 58,647 83,173
TOTAL OTHER INCOME 1,155,777 1,105,225
OTHER EXPENSES:
Salaries and Employee
Benefits
2,565,331 2,509,687
Occupancy Expense 793,808 863,914
Amortization of Intangible
Assets
155,480 176,299
Expenses Related to Real
Estate Acquired
by Foreclosure 256,870 623,313
Other Operating Expenses 1,545,024 1,479,264
TOTAL OTHER EXPENSES 5,316,513 5,652,477
INCOME BEFORE INCOME TAX
EXPENSE AND
EXTRAORDINARY ITEMS 2,226,797 1,033,201
INCOME TAX EXPENSE 638,350 163,445
INCOME BEFORE EXTRAORDINARY
ITEMS 1,588,447 869,756
EXTRAORDINARY ITEMS:
Benefit of Utilization
of Net Operating
Loss Carryforward 185,000 200,000
Gain on Debt Extinguishment,
Net of Income
Taxes 284,251 -0-
NET INCOME $ 2,057,698 $ 1,069,756
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
Exhibit C
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FOR THE YEARS ENDED
CHANGES IN SHAREHOLDERS' EQUITY DECEMBER 31, 1992 AND 1991
Unrealized
Loss
on
Marketable
Common Capital Equity Undivided Treasury
Stock Surplus Securities Profits Stock
BALANCE,
12-31-90
1990 $ 629,446 $ 515,305 $ (473,511) $ 9,034,935 $(1,152,744)
Change in
Unrealized
Loss on
Marketable
Equity
Securities 287,315
Net Income 1,069,756
BALANCE,
12-31-91 629,446 515,305 (186,196) 10,104,691 (1,152,744)
Change in
Unrealized
Loss on
Marketable
Equity
Securities 186,196
Net Income 2,057,698
BALANCE,
12-31-92 $ 629,446 $ 515,305 $ -0- $12,162,389 $(1,152,744)
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
Exhibit D
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
FOR THE YEARS ENDED
CONSOLIDATED STATEMENTS OF CASH FLOWS DECEMBER 31, 1992 AND 1991
1992 1991
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income $ 2,057,698 $ 1,069,756
Adjustments to Reconcile
Net Income to
Net Cash Provided
by Operating Activities:
Loss on Sale of
Marketable Equity
Securities 201,944 213,142
Gain on Sale on
Investment
Securities (246,045) (235,331)
Gain on Debt
Extinguishment (430,682) -0-
Net Accretion of
Discount -0- (314,625)
Net Amortization
of Premium 637,520 -0-
Provision for
Loan Losses 150,000 10,000
Provision for
Deferred Income
Taxes (1,325) -0-
Losses on Sales
and Writedowns of
Real Estate and
Other Property
Acquired by
Foreclosure 96,134 348,970
Depreciation and
Amortization 481,935 562,837
(Increase) Decrease
in Accrued Interest
Receivable and
Other Assets (530,904) 794,714
Decrease in Accrued
Interest Payable (440,683) (357,763)
Increase (Decrease)
in Other
Liabilities 393,533 (71,994)
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,369,125 2,019,706
<PAGE>
Exhibit D
(Continued)
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
FOR THE YEARS ENDED
CONSOLIDATED STATEMENTS OF CASH FLOWS DECEMBER 31, 1992 AND 1991
1992 1991
CASH FLOWS FROM
INVESTING ACTIVITIES:
Principal Payments
Received and Proceeds
from Sales and
Maturities of
Investment
Securities 45,924,300 16,282,584
Purchase of
Investment
Securities (50,859,301) (24,767,670)
Net Decrease in
Certificate of
Deposit -0- 1,000,000
Net Decrease in
Loans 4,088,802 3,382,864
Proceeds from Sales
of Real Estate
and Other Property
Acquired By
Foreclosure 904,700 1,656,041
Purchase of Additional
Interest in
Real Estate
Acquired (513,816) -0-
Purchase of Premises
and Equipment (95,063) (129,898)
NET CASH USED IN
INVESTING ACTIVITIES (550,378) (2,576,079)
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
Exhibit D
Continued
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
FOR THE YEARS ENDED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) DECEMBER 31, 1992 AND 1991
1992 1991
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net Increase in
Deposits $ 7,395,338 $ 138,436
Repayments of Notes
Payable (3,311,970) (862,778)
NET CASH PROVIDED BY
(USED IN) FINANCING
ACTIVITIES 4,083,368 (724,342)
NET DECREASE IN CASH
AND CASH EQUIVALENTS 5,902,115 (1,280,715)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 12,330,271 13,610,986
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 18,232,386 $ 12,330,271
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
Cash Paid During the
Year for Interest $ 6,315,292 $ 9,208,004
Cash Paid During the
Year for Income
Taxes $ 545,538 $ 175,000
Income Tax Refunds
Received During
the Year $ -0- $ 867,277
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
Exhibit E
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1992
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES:
The accounting and reporting policies of Commercial Bancshares, Inc. (Holding
Corporation) and Subsidiary conform to generally accepted accounting
principles and the prevailing practices within the banking industry. A
summary of significant accounting policies is as follows:
Principles of Consolidation
The consolidated financial statements include the accounts of Commercial
Bancshares, Inc. and its wholly-owned subsidiary, First Commercial Bank. All
material intercompany transactions and balances have been eliminated.
Fair Value of Financial Instruments
Statement No. 107 (SFAS No. 107), "Disclosures about Fair Value of Financial
Instruments," issued by the Financial Accounting Standards Board in December
1991, requires disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for which it is
practicable to estimate that value. The techniques are significantly
affected by the assumptions used, including the discount rate and estimates
of future cash flows. In that regard, the derived fair value estimates
cannot be substantiated by comparison to independent markets and, in many
cases, could not be realized in immediate settlement of the instrument.
Statement 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the aggregate
fair value amounts presented do not represent the underlying value of the
Holding Corporation and Subsidiary.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
Cash and Cash Equivalents
For those short-term instruments, the carrying amount is a reasonable
estimate of fair value.
Investment Securities
Fair value equals quoted market price, if available. If a quoted market
price is not available, fair value is estimated using quoted market prices
for similar securities.
Loans
The fair value is estimated by discounting the future cash flows using the
current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
<PAGE>
Exhibit E
Continued
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1992
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
(Continued):
Deposits
The fair value of demand deposits, NOW accounts, savings accounts, and
money market deposits is the amount payable on demand at the reporting
date. The fair value of fixed-maturity certificates of deposit is
estimated using the rates currently offered for deposits of similar
remaining maturities.
Notes Payable
Rates currently available to the Holding Corporation and Subsidiary for
debt with similar terms and remaining maturities are used to estimate fair
value of existing debt.
Commitments to Extend Credit and Standby Letters of Credit
The fair value of commitments is estimated using the fees currently charged
to enter into similar agreements, taking into account the remaining terms of
the agreements and the present creditworthiness of the counterparties. For
fixed-rate loan commitments, fair value also considers the difference between
current levels of interest rates and the committed rates. The fair value of
letters of credit is based on fees currently charged for similar agreements
or on the estimated cost to terminate them or otherwise settle the
obligations with the counterparties at the reporting date.
Investment Securities
Investment securities, other than marketable equity securities, are carried
at cost, adjusted for amortization of premiums and accretion of discounts
which are recognized as adjustments to interest income. Gains or losses on
disposition are recorded in other income on the trade date based on the net
proceeds and the adjusted carrying amount of the securities sold using the
specific identification method. It is the Holding Corporation and
Subsidiary's intent, and it has the ability to hold these securities to
maturity.
Marketable equity securities are stated at the lower of aggregate
cost or market and are adjusted by a charge to a valuation account
within shareholders' equity called "Unrealized Loss on Marketable
Equity Securities." Realized gains or losses on the sale of
marketable equity securities are shown separately in other income.
Loans
Loans are stated at the principal amount outstanding, net of
unearned discount and allowance for loan losses. Unearned discount
relates principally to consumer installment loans. The related
interest income is recognized principally by the simple interest
method which records interest based on the principle amount
outstanding. Loan fees which represent an adjustment to the
interest yield are deferred and amortized over the estimated life
of the loan.
When the payment of principal or interest on a loan is delinquent
for 90 days, or earlier in some cases, the loan is placed on non-
accrual status, unless the loan is in the process of collection and
the underlying collateral fully supports the carrying value of the
loan. If the decision is made to continue accruing interest on the
loan, periodic reviews are made to confirm the accruing status of
the loan. When a loan is placed on non-accrual status, interest
accrued during the current year prior to the judgement of
uncollectibility is charged to operations. Interest accrued during
prior periods is charged to the allowance for loan losses.
Generally, any payments received on non-accrual loans are applied
first to outstanding loan amounts and next to the recovery of
charged-off loan amounts. Any excess is treated as recovery of
lost interest.
Allowance For Loan Losses
The allowance for loan losses is a valuation allowance available
for losses incurred on loans. All losses are charged to the
allowance for loan losses when the loss actually occurs or when a
determination is made that a loss is likely to occur. Recoveries
are credited to the allowance at the time of recovery.
Management's judgment as to the level of future losses on existing
loans involves the consideration of current and anticipated
economic conditions and their potential effects on specific
borrowers; an evaluation of the existing relationships among loans,
potential loan losses, and the present level of the allowance;
results of examinations of the loan portfolio by regulatory
agencies; and management's internal review of the loan portfolio.
It should be understood that estimates of future loan losses
involve an exercise of judgment. While it is possible that in
particular periods the Bank may sustain losses which are
substantial relative to the allowance for loan losses, it is the
judgment of management that the allowance for loan losses reflected
in the consolidated statements of condition is adequate to absorb
possible losses in the existing loan portfolio.
Premises and Equipment
Premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation expense is computed
primarily using the straight-line method over the estimated useful
lives of the assets which range from 3 to 40 years. Leasehold
improvements are amortized on a straight-line basis over the
periods of the leases or the estimated useful lives, whichever is
shorter.
Real Estate Acquired by Foreclosure
Real estate acquired by foreclosure is recorded at the balance of
the loan or at estimated fair value, whichever is less, at the date
acquired, plus capital improvements made thereafter to facilitate
sale. Adjustments are made to reflect declines, if any, in net
realizable values below the recorded amounts. Costs of holding
real estate acquired in settlement of loans are reflected in income
currently. Gains on sales of such real estate are taken into
income based on the buyer's initial and continuing investment in
the property.
Intangible Assets
Unamortized costs of the purchased subsidiary in excess of the fair
market value of the acquired net tangible assets are included in
Other Assets in the consolidated statements of condition.
Identifiable intangible assets, principally related to depositor
and borrower relationships, are being amortized using an
accelerated method over the estimated periods benefitted (6 to 12
years). The unamortized balance at December 31, 1992 and 1991 was
$239,845 and $320,912, respectively. Amortization expense on
identifiable intangible assets was $81,067 and $106,662 for 1992
and 1991, respectively. The remaining costs (goodwill) are being
amortized on the straight-line basis over 12 years. The
unamortized balance at December 31, 1992 and 1991 was $199,346 and
$238,562, respectively. Amortization expense was $39,216 for 1992
and 1991.
Income Taxes
Deferred income taxes are provided for timing differences between
items of income or expense reported in the consolidated financial
statements and those reported for income tax purposes. These
differences relate primarily to the provision for loan losses,
writedowns of Other Real Estate Owned, deferred compensation,
depreciation on premises and equipment and capital loss carryovers.
In December 1987, the Financial Accounting Standards Board issued
Statement No. 96 (SFAS No. 96), "Accounting for Income Taxes". In
early 1992, the Financial Accounting Standards Board issued
Statement No. 109 (SFAS No. 109) which supersedes SFAS No. 96 for
the accounting for income taxes. Implementation is for all fiscal
years beginning after December 15, 1992. SFAS No. 109 requires
companies to change from the deferred income method to the modified
liability method. Under the modified liability method, deferred
tax balances are calculated at balance sheet dates and represent
amounts of income taxes refundable or payable in future years
resulting from temporary differences and operating loss and tax
credit carryforwards. The change in deferred tax balances is
recorded as an element of income tax expense in the financial
statements. Under current interpretations of SFAS No. 109, the
company's preliminary evaluation indicates that upon adoption in
1993, a favorable effect of approximately $500,000 will be realized
for financial reporting purposes.
The tax sharing agreement between the Holding Corporation and the
Bank states that the Bank is responsible only to the extent of that
portion of the consolidated tax liability less applicable credits
calculated as if it were filing a separate return.
Consolidated Statements of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks and federal funds
sold. Generally, federal funds are purchased and sold for one day
periods.
Reclassifications
Certain reclassifications have been made to the 1991 consolidated
financial statements in order to conform to the classifications
adopted for reporting in 1992.
NOTE 2 - CASH AND DUE FROM BANKS:
The Bank is required to maintain average reserve balances with the
Federal Reserve Bank. "Cash and Due from Banks" in the
consolidated statements of condition included amounts so restricted
of $500,000 at December 31, 1992 and 1991.
NOTE 3 - INVESTMENT SECURITIES:
The carrying value and related market value of investment
securities are presented below:
December 31, 1992
Carrying Unrealized Unrealized Market
Value Gains Losses Value
U.S. Treasuries $21,715,571 $ 234,471 $ (42,136) $21,907,906
U.S. Agencies 64,648,853 887,673 (253,523) 65,283,003
State and Political
Subdivisions 1,450,624 42,449 -0- 1,493,073
Other Securities 1,613,514 30,795 -0- 1,644,309
Totals $89,428,562 $ 1,195,388 $ (295,659) $90,328,291
December 31, 1991
Carrying Unrealized Unrealized Market
Value Gains Losses Value
U.S. Treasuries $18,883,364 $ 317,146 $ -0- $19,200,510
U.S. Agencies 62,492,958 1,752,274 (62,009) 64,183,223
State and Political
Subdivisions 994,485 64,738 (604) 1,058,619
Marketable Equity
Securities 1,527,007 -0- -0- 1,527,007
Other Securities 1,002,970 17,655 -0- 1,020,625
Totals $84,900,784 $ 2,151,813 $ (62,613) $86,989,984
The carrying value and related market value of investment securities at December
31, 1992, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
Carrying Market
Value Value
Due in One Year or Less $38,478,930 $38,834,059
Due After One Year through
Five Years 49,467,264 49,962,952
Due After Five Years through
Ten Years 1,026,210 1,059,079
Due After Ten Years 456,158 472,201
Totals $89,428,562 $90,328,291
At December 31, 1991, marketable equity securities consisted of investments in
the following mutual funds: Transamerica U.S. Government Income Trust,
Transamerica Government Securities Trust, and Colonial Government Securities.
Proceeds from sales of investments in debt securities during 1992 were
$8,359,703. Gross gains of $246,045 and gross losses of $-0- were realized on
those sales.
Proceeds from sales of investments in debt securities during 1991 were
$15,339,746. Gross gains of $236,266 and gross losses of $935 were realized on
those sales.
Investment securities with a carrying amount of approximately $30,320,343 and
$32,841,969 and an estimated market value of $30,885,909 and $34,469,037 at
December 31, 1992 and 1991, respectively, were pledged to secure public deposits
and for other purposes required or permitted by law.
<PAGE>
NOTE 4 - LOANS:
The loan portfolio consists of various types of loans classified by major type
as follows:
1992 1991
Real Estate $38,143,741 $38,726,389
Commercial and
Industrial 17,806,935 19,395,194
Consumer 7,698,373 9,638,286
Agriculture 640,488 887,314
Other 29,065 172,891
64,318,602 68,820,074
Less Allowance
for Loan Losses 1,195,030 1,306,102
Totals $63,123,572 $67,513,972
Loans had an estimated fair value of $64,228,923 at December 31, 1992.
As of December 31, 1992 and 1991, loans outstanding to directors, officers, and
their affiliates were approximately $4,634,484 and $4,578,799, respectively.
In the opinion of management, all transactions entered into between the Bank and
such related parties have been and are, in the ordinary course of business, made
on the same terms and conditions as similar transactions with unaffiliated
persons. During 1992, $5,083,957 of new and renewal loans were made and
repayments of $5,028,272 were received. Letters of Credit and unadvanced lines
of credit to directors, officers, and their affiliates totaled $1,304,616 and
$772,099 at December 31, 1992 and 1991.
At December 31, 1992, fixed rate loans totaled $45,605,390 and variable rate
loans totaled $18,713,212.
At December 31, 1992 and 1991 loans on which the accrual of interest had been
discontinued or reduced amounted to $848,073 and $1,547,356, respectively.
Interest income foregone on these non-accrual loans was $82,131 and $43,757 for
the years ended December 31, 1992 and 1991, respectively.
The Bank had five trouble debt restructurings during the year involving
commercial loans. The aggregate recorded investment at December 31, 1992 was
$352,320. The amount of interest income included in net income from these loans
was $21,727. If the loans would have been continued under the original terms
gross interest income would have been $30,695.
<PAGE>
An analysis of activity in the allowance for loan losses is as follows:
1992 1991
Balance at Beginning
of Year $ 1,306,102 $ 2,064,339
Provision Charged
to Operations 150,000 10,000
Loans Charged Off (406,368) (965,938)
Loan Recoveries 145,296 197,701
Balance at End
of Year $ 1,195,030 $ 1,306,102
NOTE 5 - PREMISES AND EQUIPMENT:
Premises and equipment are summarized below:
1992 1991
Land $ 455,970 $ 455,970
Buildings 3,511,047 3,508,297
Leasehold Improvements 296,251 290,788
Furniture, Fixtures,
and Equipment 3,038,734 2,973,768
7,302,002 7,228,823
Less Accumulated
Depreciation and
Amortization (4,066,706) (3,746,134)
Premises and Equipment,
Net $ 3,235,296 $ 3,482,689
Depreciation expense included in the Consolidated Statements of Operations was
$342,456 and $402,538 for the years ended December 31, 1992 and 1991.
NOTE 6 - DEPOSITS:
Deposits are summarized below:
1992 1991
Demand $ 26,142,498 $ 20,397,683
NOW Accounts 28,641,197 24,062,385
Savings 14,774,682 11,668,123
Money Market Accounts 28,707,285 24,593,358
Time Certificates
of Deposits 64,206,657 74,355,432
Totals $162,472,319 $155,076,981
Deposits had an estimated fair value of $ 162,735,630 at December 31, 1992.
Included in the interest bearing deposits are certificates of deposit in amounts
of $100,000 or more totaling $13,960,372 and $17,591,861 at December 31, 1992
and 1991, respectively.
NOTE 7 - CONCENTRATION OF DEPOSITS:
The Bank has deposits with four customers in the amount of $10,982,755 at
December 31, 1992. This amount represents 6.76% of total customer deposits.
The deposits consist of public, corporate and personal funds.
NOTE 8 - NOTES PAYABLE:
Notes payable consist of the following notes secured by 100% of the stock of the
subsidiary bank. The current note is subject to the terms of a loan agreement
which specifies minimum net worth and capital requirements, common stock
dividend restrictions, loan loss reserve requirements, limitations on non-
performing assets and other customary covenants.
1992 1991
Note payable to a bank,
bearing interest payable
quarterly at a rate 1/4
of 1% in excess of the
prime rate of the lending
bank, 7.75% as of
December 31, 1991 $ -0- $6,835,000
Note payable to a bank,
bearing interest payable
quarterly at a rate 1/2
of 1% in excess of the
prime rate of the lending
bank, 8.00% as of
December 31, 1991 -0- 452,652
<PAGE>
1992 1991
Note payable to a bank,
bearing interest payable
quarterly at the rate of
1% in excess of the prime
rate of the lending bank,
7.00% at December 31, 1992. 3,545,000 -0-
Totals $ 3,545,000 $7,287,652
Notes payable had a estimated fair value of $3,545,000 at December 31, 1992.
Maturities of notes payables for each of the five years succeeding December 31,
1992, are as follows:
Year Amount
December 31, 1993 $ 200,000
December 31, 1994 390,000
December 31, 1995 655,000
December 31, 1996 705,000
December 31, 1997 780,000
After December 31, 1997 815,000
Total $ 3,545,000
A portion of the notes payable at December 31, 1991 were discounted by the
lending bank and the balance paid in full in September 1992. The extraordinary
item reported at December 31, 1992, is the $430,682 discount allowed by the
lending bank, net of $146,431 in related income taxes.
NOTE 9 - INCOME TAXES:
The components of the provision for federal income taxes are as follows:
1992 1991
Current Income
Tax Provision $601,106 $121,000
Income Taxes Related
to Gain on Debt
Extinguishment (146,431) -0-
Benefit of Prior
Net Operating Losses 185,000 200,000
Refund Related to 1991
in Excess of Benefit
Recorded in Prior Year -0- (98,000)
Provision for Deferred
Taxes (1,325) (59,555)
Total $ 638,350 $ 163,445
The provision for federal income taxes differs from the amount computed by
applying the federal income tax statutory rate on operations as follows:
1992 1991
Amount % Amount %
Taxes Calculated
at Statutory Rate $757,000 34.0 $351,000 34.0
Decrease resulting
from Tax-Exempt
Interest Component (38,000) (1.7) (116,000) (11.2)
Amortization of Costs
Incurred and Excess
Purchase Price of
Acquired Company 55,000 2.5 77,000 7.5
Utilization of Available
Tax Credits (164,000) (7.4)
Refund Related to 1991
in Excess of
Benefit Recorded -0- -0- (98,000) (9.5)
Deferred Tax from
Prior Year -0- -0- (59,555) (5.8)
Other, Net 28,350 1.3 9,000 .8
Totals $638,350 28.7 $163,445 15.8
NOTE 9 - INCOME TAXES (Continued):
Deferred taxes, according to the timing differences which caused them, are as
follows:
1992 1991
Depreciation $ (19,000) $ (16,000)
Provision for
Loan Losses (5,000) 215,000
Deferred Compensation 14,000 (13,000)
Capital Loss not
Utilized Due to
Limitation (46,000) (85,000)
Other Real
Estate Owned 63,000 2,000
Limitation on
Recording of
Deferred Tax Debits -0- (102,000)
Other (8,325) (1,000)
Totals $ (1,325 $ -0-
NOTE 10 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK:
The Bank is a party to various financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit and involve, to varying degrees, elements of credit risk in
excess of the amounts recognized in the consolidated statements of condition.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit is represented by the contractual amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments. The
Bank does not anticipate any material loss as a result of these transactions.
1992 1991
Commitments to
Extend Credit $ 7,017,503 $ 7,534,537
Standby Letters
of Credit $ 638,550 $ 541,510
The fair values of commitments to extend credit and standby letters of credit
were $7,017,503 and $638,550 at December 31, 1992.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts disclosed above do not
necessarily represent future cash requirements. The Bank evaluates each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained, if considered necessary by the Bank upon extension of credit, is based
on management's credit evaluation of the counterparty.
NOTE 10 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (Continued):
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers.
NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES:
The Holding Corporation and Subsidiary are also subject to claims and lawsuits
which arise primarily in the ordinary course of business. Based on information
presently available and advice received from legal counsel representing the
Holding Corporation and Subsidiary in connection with such claims and lawsuits,
it is the opinion of management that the disposition or ultimate determination
of such claims and lawsuits will not have a material adverse effect on the
consolidated financial position of the Holding Corporation and Subsidiary.
The Bank is a party to three operating lease agreements for the rental of branch
bank and drive-in facilities. Monthly payments total $3,346 through lease
periods that begin to expire in 1993.
Required payments for each of the next five years are as follows:
Amount
1993 $ 38,502
1994 19,552
1995 9,552
1996 1,592
1997 -0-
Total $ 69,198
Lease payments included in Occupancy Expense totaled $40,152 and $39,880 for
the years ending December 31, 1992 and 1991, respectively.
NOTE 12 - DIVIDEND RESTRICTIONS:
The Bank is restricted under applicable laws in the payment of dividends to an
amount equal to current year earnings plus undistributed earnings for the
immediately preceding year, unless prior permission is received from the
Commissioner of Financial Institutions. Payment of dividends by the Holding
Corporation are subject to restrictive covenants of the debt agreement.
NOTE 13 - EMPLOYEE BENEFIT PLANS:
The Bank has an Employee Stock Ownership Plan (ESOP) covering employees who meet
certain eligibility requirements. The cost of the Plan is borne by the Bank
through contributions determined by the Board of Directors. Contributions to
the ESOP were $30,000 for the year ended December 31, 1992.
The Bank also has a salary deferral plan covering substantially all employees
who meet eligibility requirements. The plan provides for payments upon
retirement, death or disability. The Bank makes a matching contribution for a
portion of the employee salary deferrals. The Bank's contributions to the plan
were $37,976 and $35,128 for the years ended December 31, 1992 and 1991,
respectively.
NOTE 14 - STOCK OPTION PLAN:
During 1992, the Board of Directors of the Holding Corporation and the President
of the Bank signed a stock option agreement. Under the agreement, the Holding
Corporation has offered an option to the President to purchase 4,000 shares of
common stock at the market price of the stock on the agreement date of September
1, 1992 ($25 per share). The option was not exercised in 1992 and expires
September 1, 1993.
NOTE 15 - RELATED PARTY TRANSACTIONS:
The majority of the insurance coverages for the Bank were written through an
insurance agency owned by a member of the Board of Directors. The policies
provide coverage for bank facilities and equipment, blanket bond and liability
coverage, and other miscellaneous insurance needs. Payments to the agency
totalled $184,196 during the year ended December 31, 1992.
<PAGE>
INDEPENDENT AUDITORS' REPORT ON ADDITIONAL INFORMATION
Board of Directors
Commercial Bancshares, Inc. and Subsidiary
Abbeville, LA
Our report on our audit of the basic consolidated financial statements of
Commercial Bancshares, Inc. and Subsidiary for 1992 appears on page 1. That
audit was made for the purpose of forming an opinion on the basic consolidated
financial statements taken as a whole. The consolidating information on pages
19 through 21 is presented for the purpose of additional analysis and is not a
required part of the basic financial statements. This consolidating
information is the responsibility of the Company's management. Such information
has been subjected to the auditing procedures applied in our audit of the basic
consolidated financial statements and, in our opinion, is fairly stated in all
material respects when considered in relation to the basic consolidated
financial statements taken as a whole.
January 29, 1993
<PAGE>
Exhibit F
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATING STATEMENT OF CONDITION INFORMATION DECEMBER 31, 1992
First
Commercial Commercial
ASSETS Bancshares Bank
Cash and Due from Banks $ 315,869 $ 6,835,587
Interest Bearing Deposits 46,799
Federal Funds Sold 11,350,000
Total Cash and Cash Equivalents 315,869 18,232,386
Investments Securities 89,428,562
Loans, Net 63,100,382
Premises and Equipment, Net 2,905,131
Real Estate Acquired by
Forclosure, Net 2,265,898
Accrued Interest Receivable 1,774,692
Other Assets 15,897,873 1,589,654
TOTAL ASSETS $15,897,873 $179,296,705
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits: $ -0- $ 26,458,367
Non-interest Bearing 136,329,821
Interest Bearing
Total Deposits -0- 162,788,188
Accrued Interest Payable 67,550 487,808
Other Liabilities 130,927 1,617,177
Notes Payable 3,545,000
Total Liabilities 3,743,477 164,893,173
SHAREHOLDERS' EQUITY
Common Stock 629,446 600,000
Capital Surplus 515,305 5,400,000
Treasury Shares, At Cost (1,152,744)
Undivided Profits 12,162,389 8,403,532
Total Shareholders' Equity 12,154,396 14,403,532
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $15,897,873 $179,296,705
<PAGE>
Exhibit F
(Continued)
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATING STATEMENT OF CONDITION INFORMATION DECEMBER 31, 1992
Consolidating Commercial
and Bancshares,
Eliminating Inc. and
ASSETS Entries Subsidiary
Cash and Due from Banks $ (315,869) $ 6,835,587
Interest Bearing Deposits 46,799
Federal Funds Sold 11,350,000
Total Cash and Cash Equivalents (315,869) 18,232,386
Investments Securities 89,428,562
Loans, Net 23,190 63,123,572
Premises and Equipment, Net 330,165 3,235,296
Real Estate Acquired by
Forclosure, Net 2,265,898
Accrued Interest Receivable 1,774,692
Other Assets (14,991,555) 2,180,103
TOTAL ASSETS $(14,954,069) $ 180,240,509
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Non-interest Bearing $ (315,869) $ 26,142,498
Interest Bearing 136,329,821
Total Deposits (315,869) 162,472,319
Accrued Interest Payable 555,358
Other Liabilities (234,668) 1,513,436
Notes Payable 3,545,000
Total Liabilities (550,537) 168,086,113
SHAREHOLDERS' EQUITY
Common Stock (600,000) 629,446
Capital Surplus (5,400,000) 515,305
Treasury Shares, At Cost (1,152,744)
Undivided Profits (8,403,532) 12,162,389
Total Shareholders' Equity (14,403,532) 12,154,396
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $(14,954,069) $180,240,509
<PAGE>
Exhibit G
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATING STATEMENT OF INCOME INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1992
First
Commercial Commercial
Bancshares Bank
INTEREST INCOME:
Loans, Including Feests $ -0- $ 6,489,210
Investment Securities:
Taxable 15,241 5,607,442
Non-Taxable 69,866
Federal Funds Sold 230,384
15,241 12,396,902
INTEREST EXPENSE:
Deposits 5,496,924
Notes Payable 377,686
377,686 5,496,924
NET INTEREST INCOME (LOSS) (362,445) 6,899,978
PROVISION FOR LOAN LOSSES 150,000
NET INTEREST INCOME (LOSS) AFTER PROVISION
FOR LOAN LOSSES (362,445) 6,749,978
OTHER INCOME:
Customer Service Fees 861,278
Loss on Sale of Marketable Equity
Securities (201,944)
Gain on Sale of Other Investment
Securities 874 245,171
Loss on Sale of Other Real Estate
and Other Property Acquired (29,589)
Income From Real Estate Acquired
by Foreclosure 221,340
Other Income 1,950,451 38,098
1,951,325 1,134,354
OTHER EXPENSES:
Salaries and Employee Benefits 2,565,331
Occupancy Expense 793,808
Amortization of Intangible Assets 155,480
Expenses Related to Real Estate
Acquired by Foreclosure
and Repossessed Property 256,870
Other Operating Expenses 95,667 1,449,357
251,147 5,065,366
<PAGE>
Exhibit G
(Continued)
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATING STATEMENT OF INCOME INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1992
First
Commercial Commercial
Bancshares Bank
INCOME BEFORE INCOME TAX EXPENSE
(BENEFIT) AND EXTRAORDINARY
ITEMS 1,337,733 2,818,966
INCOME TAX EXPENSE (BENEFIT) (250,715) 889,065
INCOME BEFORE EXTRAORDINARY ITEMS 1,588,448 1,929,901
EXTRAORDINARY ITEMS 469,251
NET INCOME $ 2,057,699 $ 1,929,901
<PAGE>
Exhibit G
(Continued)
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATING STATEMENT OF INCOME INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1992
Consolidating Commercial
and Bancshares,
Eliminating Inc. and
Entries Subsidiary
INTEREST INCOME:
Loans, Including Fees $ -0- $ 6,489,210
Investment Securities:
Taxable 5,622,683
Non-Taxable 69,866
Federal Funds Sold 230,384
12,412,143
INTEREST EXPENSE:
Deposits 5,496,924
Notes Payable 377,686
5,874,610
NET INTEREST INCOME (LOSS) 6,537,533
PROVISION FOR LOAN LOSSES 150,000
NET INTEREST INCOME (LOSS) AFTER PROVISION
FOR LOAN LOSSES 6,387,533
OTHER INCOME:
Customer Service Fees 861,278
Loss on Sale of Marketable Equity
Securities (201,944)
Gain on Sale of Other Investment
Securities 246,045
Loss on Sale of Other Real Estate
and Other Property Acquired (29,589)
Income From Real Estate Acquired
by Foreclosure 221,340
Other Income (1,929,902) 58,647
(1,929,902) 1,155,777
<PAGE>
Exhibit G
(Continued)
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATING STATEMENT OF INCOME INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1992
Consolidating Commercial
and Bancshares,
Eliminating Inc. and
Entries Subsidiary
OTHER EXPENSES:
Salaries and Employee Benefits 2,565,331
Occupancy Expense 793,808
Amortization of Intangible Assets 155,480
Expenses Related to Real Estate
Acquired by Foreclosure
and Repossessed Property 256,870
Other Operating Expenses 1,545,024
5,316,513
INCOME BEFORE INCOME TAX EXPENSE
(BENEFIT) AND EXTRAORDINARY
ITEMS (1,929,902) 2,226,797
INCOME TAX EXPENSE (BENEFIT) 638,350
INCOME BEFORE EXTRAORDINARY ITEMS (1,929,902) 1,588,447
EXTRAORDINARY ITEMS 469,251
NET INCOME $(1,929,902) $ 2,057,698
<PAGE>
Exhibit H
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATING AND ELIMINATING ENTRIES
(1)
Premises and Equipment, Net $ 330,165
Loans 23,190
Other Liabilities 234,668
Other Assets $588,023
To reclassify intangibles
resulting from excess
price paid over book
value from other assets
to appropriate accounts.
(2)
Noninterest-bearing Deposits 315,870
Cash and Due from Banks 315,870
To eliminate parent company's
demand deposit accounts at
the subsidiary bank.
(3)
Common Stock 600,000
Capital Surplus 5,400,000
Undivided Profits 6,473,630
Other Income 1,929,902
Other Assets 14,403,532
To eliminate equity in
subsidiary and investment
in consolidated subsidiary
on parent company's books.
<PAGE>
REPORT
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
DECEMBER 31, 1991 AND 1990
<PAGE>
REPORT
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
DECEMBER 31, 1991 AND 1990
TABLE OF CONTENTS
Exhibit Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1991 AND 1990:
Consolidated Statements of Condition A 2
Consolidated Statements of Operations B 3
Consolidated Statements of Changes in
Shareholders' Equity C 4
Consolidated Statements of Cash Flows D 5 - 6
Notes to Consolidated Financial Statements E 7 - 16
INDEPENDENT AUDITORS' REPORT ON
ADDITIONAL INFORMATION 17
ADDITIONAL INFORMATION FOR THE YEAR ENDED
DECEMBER 31, 1991:
Consolidating Statement of Condition
Information F 18
Consolidating Statement of Operations
Information G 19
Consolidating and Eliminating Entries H 20
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Commercial Bancshares, Inc. and Subsidiary
Abbeville, Louisiana
We have audited the accompanying consolidated statement of condition of
Commercial Bancshares, Inc. and Subsidiary as of December 31, 1991, and the
related consolidated statement of operations, changes in shareholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Holding Corporation and Subsidiary's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Commercial Bancshares, Inc. and
Subsidiary as of December 31, 1990, were audited by other auditors whose report
dated January 31, 1991, on those statements included an explanatory paragraph
that described the uncertainty detailed in the final paragraph below.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Commercial
Bancshares, Inc. and Subsidiary as of December 31, 1991, and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
At December 31, 1990, the Holding Corporation's notes payable to a Bank had
matured. The loan agreements relating to these notes anticipates an annual
renewal of the notes for the next five years. However, as a result of the
Holding Corporation's failure to meet certain technical covenants in the loan
agreement, the lender originally expressed its intention not to renew the notes
and demanded payment in full. The Holding Corporation has been negotiating with
the lender since 1990 to restructure the debt. The notes are secured by 100% of
the stock of the subsidiary bank. Payments continue to be made according to the
agreement and management believes that the negotiations will be successful. The
consolidated financial statements do not contain any adjustments which might be
required should the negotiations not succeed.
January 31, 1992
<PAGE>
Exhibit A
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION DECEMBER 31, 1991 AND 1990
ASSETS
1991 1990
Cash and Due from Banks (Note 2) $ 5,380,059 $ 6,361,847
Interest Bearing Deposits 150,212 1,324,139
Total Cash and Cash Equivalents 5,530,271 7,685,986
Certificate of Deposit -0- 1,000,000
Federal Funds Sold 6,800,000 5,925,000
Investment Securities (Note 3) 84,900,784 75,791,569
Loans (net of allowance for loan
losses of $1,306,102 and
$2,065,000 in 1991 and 1990,
respectively) (Note 4) 67,513,972 71,474,031
Premises and Equipment, Net (Note 5) 3,482,689 3,755,329
Real Estate and Other Property
Acquired by Foreclosure, Net 2,601,318 4,039,134
Accrued Interest Receivable 1,975,148 1,869,794
Other Assets 1,588,222 2,648,589
TOTAL ASSETS $174,392,404 $174,189,432
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Non-interest Bearing Deposits $ 20,397,683 $ 21,510,149
Interest Bearing Deposits 134,679,298 133,428,396
Total Deposits (Note 6 and 7) 155,076,981 154,938,545
Accrued Interest Payable 996,041 1,353,804
Other Liabilities 1,121,228 1,193,222
Notes Payable (Note 8) 7,287,652 8,150,430
TOTAL LIABILITIES 164,481,902 165,636,001
COMMITMENTS AND CONTINGENCIES (Notes 11 and 12) -0- -0-
SHAREHOLDERS' EQUITY:
Common Stock, $2 par value,
500,000 shares authorized,
314,723 shares issued,
282,343 shares outstanding 629,446 629,446
Capital Surplus 515,305 515,305
Unrealized Loss on Marketable
Equity Securities (186,196) (473,511)
Treasury Stock, at Cost (32,380 shares
in 1991 and 1990) (1,152,744) (1,152,744)
Undivided Profits 10,104,691 9,034,935
<PAGE>
Exhibit A
(Continued)
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION DECEMBER 31, 1991 AND 1990
ASSETS
1991 1990
TOTAL SHAREHOLDERS' EQUITY 9,910,502 8,553,431
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $174,392,404 $174,189,432
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
<PAGE>
Exhibit B
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
FOR THE YEARS ENDED
CONSOLIDATED STATEMENTS OF OPERATIONS DECEMBER 31, 1991 AND 1990
1991 1990
INTEREST INCOME:
Loans, Including Fees $ 7,856,716 $ 8,238,210
Investment Securities:
Taxable 6,063,002 5,694,562
Non-taxable 228,859 401,536
Federal Funds Sold 292,117 514,385
TOTAL INTEREST INCOME 14,440,694 14,848,693
INTEREST EXPENSE:
Deposits 8,215,523 9,089,076
Notes Payable 634,718 842,621
TOTAL INTEREST EXPENSE 8,850,241 9,931,697
NET INTEREST INCOME 5,590,453 4,916,996
PROVISION FOR LOAN LOSSES 10,000 1,310,491
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 5,580,453 3,606,505
OTHER INCOME:
Customer Service Fees 917,499 814,251
Loss on Sale of Marketable
Equity Securities (213,142) (57,488)
Gain on Sale of Other
Investment Securities 235,331 928
Loss on Sale of Other
Real Estate and
Other Property Acquired (21,738) (34,094)
Other Income 187,275 332,227
TOTAL OTHER INCOME 1,105,225 1,055,824
OTHER EXPENSES:
Salaries and Employee Benefits 2,509,687 2,739,422
Occupancy Expense 863,914 959,732
Amortization of Intangible Assets 176,299 193,834
Expenses related to Real
Estate Acquired by Foreclosure 623,313 890,915
Other Operating Expenses 1,479,264 1,432,631
TOTAL OTHER EXPENSES 5,652,477 6,216,534
<PAGE>
Exhibit B
(Continued)
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
FOR THE YEARS ENDED
CONSOLIDATED STATEMENTS OF OPERATIONS DECEMBER 31, 1991 AND 1990
1991 1990
INCOME (LOSS) BEFORE INCOME TAX
EXPENSE (BENEFIT) AND EXTRAORDINARY
ITEM 1,033,201 (1,554,205)
INCOME TAX EXPENSE (BENEFIT) (Note 9) 163,445 (687,000)
INCOME BEFORE EXTRAORDINARY ITEM 869,756 (867,205)
EXTRAORDINARY ITEM - BENEFIT OF
UTILIZATION OF NET OPERATING
LOSS CARRYFORWARD (200,000) -0-
NET INCOME (LOSS) $ 1,069,756 $ (867,205)
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
<PAGE>
Exhibit C
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FOR THE YEARS ENDED
CHANGES IN SHAREHOLDERS' EQUITY DECEMBER 31, 1991 AND 1990
Unrealized
Loss
on Marketable
Common Capital Equity
Stock Surplus Securities
BALANCE, DECEMBER 31, 1989 $ 629,446 $ 515,305 $ (471,608)
Purchase of Treasury Stock
Change in Unrealized Loss
on Marketable Equity
Securities (1,903)
Net Loss
BALANCE, DECEMBER 31, 1990 629,446 515,305 (473,511)
Change in Unrealized Loss
on Marketable Equity
Securities 287,315
Net Income
BALANCE, DECEMBER 31, 1991 $ 629,446 $ 515,305 $(186,196)
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
<PAGE>
Exhibit C
(Continued)
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FOR THE YEARS ENDED
CHANGES IN SHAREHOLDERS' EQUITY DECEMBER 31, 1991 AND 1990
Undivided Treasury
Profits Stock
BALANCE, DECEMBER 31, 1989 $9,902,140 $(1,151,744)
Purchase of Treasury Stock (1,000)
Change in Unrealized Loss
on Marketable Equity
Securities
Net Loss 867,205)
BALANCE, DECEMBER 31, 1990 9,034,935 (1,152,744)
Change in Unrealized Loss
on Marketable Equity
Securities
Net Income 1,069,756
BALANCE, DECEMBER 31, 1991 $10,104,691 $(1,152,744)
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
<PAGE>
Exhibit D
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
FOR THE YEARS ENDED
CONSOLIDATED STATEMENTS OF CASH FLOWS DECEMBER 31, 1991 AND 1990
1991 1990
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 1,069,756 $ (867,205)
Adjustments to Reconcile Net
Income (Loss) to Net Cash
Provided by Operating Activities:
Loss on Sale of Marketable Equity
Securities 213,142 57,488
Gain on Sale of Investment Securities (235,331) (928)
Net Accretion of Discount (314,625) (951,645)
Provision for Loan Losses 10,000 1,310,491
Losses on Sales and Writedowns of
Real Estate and Other
Property Acquired
by Foreclosure 348,970 414,035
Depreciation and Amortization 562,837 667,235
Decrease (Increase) in Accrued
Interest Receivable and Other
Assets 794,714 (785,815)
Decrease in Accrued Interest Payable (357,763) (83,595)
Increase in Other Liabilities 222,004 245,652
Decrease in Deferred Income Taxes (293,998) -0-
NET CASH PROVIDED BY OPERATING
ACTIVITIES 2,019,706 5,713
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (Increase) Decrease in
Federal Funds Sold (875,000) 2,375,000
Proceeds from Sales and Maturities
of Investment Securities 16,282,584 24,142,995
Purchase of Investment Securities (24,767,670) (30,554,019)
Net (Increase) Decrease in
Certificate of Deposit 1,000,000 (1,000,000)
Net (Increase) in Loans 3,382,864 1,253,084
Proceeds from Sales of Real Estate
and Other Property Acquired
By Foreclosure 1,656,041 1,620,876
Purchase of Premises and Equipment (129,898) (52,921)
NET CASH USED IN INVESTING ACTIVITIES (3,451,079) (2,214,985)
<PAGE>
Exhibit D
(Continued)
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
FOR THE YEARS ENDED
CONSOLIDATED STATEMENTS OF CASH FLOWS DECEMBER 31, 1991 AND 1990
1991 1990
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase in Deposits $ 138,436 $ 2,156,698
Repayments of Notes Payable (862,778) (862,778)
Purchase of Treasury Stock -0- (1,000)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (724,342) 1,292,920
NET DECREASE IN CASH AND
CASH EQUIVALENTS (2,155,715) (916,352)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 7,685,986 8,602,338
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 5,530,271 $ 7,685,986
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid During the Year
for Interest $ 9,208,004 $ 10,015,292
Cash Paid During the Year
for Income Taxes $ 175,000 $ 53,102
Income Tax Refunds Received
During the Year $ 867,277 $ -0-
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
<PAGE>
Exhibit E
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1991
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES:
The accounting and reporting policies of Commercial Bancshares, Inc.
(Holding Corporation) and subsidiary conform to generally accepted
accounting principles and the prevailing practices within the banking
industry. A summary of significant accounting policies is as follows:
Principles of Consolidation
The consolidated financial statements include the accounts of Commercial
Bancshares, Inc. and its wholly-owned subsidiary, First Commercial Bank.
All material intercompany transactions have been eliminated.
Investment Securities
Investment securities, other than marketable equity securities, are
carried at cost, adjusted for amortization of premiums and accretion of
discounts which are recognized as adjustments to interest income. Gains
or losses on disposition are recorded in other income on the trade date
based on the net proceeds and the adjusted carrying amount of the
securities sold using the specific identification method. It is the
Holding Corporation and Subsidiary's intent, and it has the ability to
hold these securities to maturity. Marketable equity securities are
stated at the lower of aggregate cost or market and are adjusted by a
charge to a valuation account within shareholders' equity called
"Unrealized Loss on Marketable Equity Securities." Realized gains or
losses on the sale of marketable equity securities are shown separately
in other income.
Loans
Loans are stated at the principal amount outstanding, net of unearned
discount and allowance for loan losses. Unearned discount relates
principally to consumer installment loans. The related interest income
is recognized principally by the simple interest method which records
interest based on the principle amount outstanding. Loan fees which
represent an adjustment to the interest yield are deferred and amortized
over the estimated life of the loan.
When the payment of principal or interest on a loan is delinquent for 90
days, or earlier in some cases, the loan is placed on non-accrual status,
unless the loan is in the process of collection and the underlying
collateral fully supports the carrying value of the loan. If the
decision is made to continue accruing interest on the loan, periodic
reviews are made to confirm the accruing status of the loan. When a loan
is placed on non-accrual status, interest accrued during the current year
prior to the judgement of uncollectibility is charged to operations.
Interest accrued during prior periods is charged to the allowance for
loan losses. Generally, any payments received on non-accrual loans are
applied first to outstanding loan amounts and next to the recovery of
charged-off loan amounts. Any excess is treated as recovery of lost
interest.
<PAGE>
Exhibit E
Continued
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1991
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (Continued):
Allowance For Loan Losses
The allowance for loan losses is a valuation allowance available for losses
incurred on loans. All losses are charged to the allowance for loan losses
when the loss actually occurs or when a determination is made that a loss
is likely to occur. Recoveries are credited to the allowance at the time
of recovery.
Management's judgment as to the level of future losses on existing loans
involves the consideration of current and anticipated economic conditions
and their potential effects on specific borrowers; an evaluation of the
existing relationships among loans, potential loan losses, and the present
level of the allowance; results of examinations of the loan portfolio by
regulatory agencies; and management's internal review of the loan
portfolio. In determining the collectibility of certain loans, management
also considers the fair value of any underlying collateral.
It should be understood that estimates of future loan losses involve an
exercise of judgment. While it is possible that in particular periods the
Bank may sustain losses which are substantial relative to the allowance for
loan losses, it is the judgment of management that the allowance for loan
losses reflected in the consolidated statements of condition is adequate to
absorb possible losses in the existing loan portfolio.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation expense is computed primarily using the
straight-line method over the estimated useful lives of the assets which
range from 3 to 40 years. Leasehold improvements are amortized on a
straight-line basis over the periods of the leases or the estimated useful
lives, whichever is shorter.
Real Estate Acquired by Foreclosure
Real estate acquired by foreclosure is recorded at the balance of the loan
or at estimated fair value, whichever is less, at the date acquired, plus
capital improvements made thereafter to facilitate sale. Adjustments are
made to reflect declines, if any, in net realizable values below the
recorded amounts. Costs of holding real estate acquired in settlement of
loans are reflected in income currently. Gains on sales of such real
estate are taken into income based on the buyer's initial and continuing
investment in the property.
<PAGE>
Exhibit E
Continued
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1991
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (Continued):
Intangible Assets
Unamortized costs of the purchased subsidiary in excess of the fair market
value of the acquired net tangible assets are included in Other Assets in
the consolidated statements of condition. Identifiable intangible assets,
principally related to depositor and borrower relationships, are being
amortized using an accelerated method over the estimated periods benefitted
(6 to 12 years). The unamortized balance at December 31, 1991 and 1990 was
$320,912 and $907,000, respectively. Amortization expense on identifiable
intangible assets was $106,662 and $139,000 for 1991 and 1990,
respectively. The remaining costs (goodwill) are being amortized on the
straight-line basis over 12 years. The unamortized balance at December 31,
1991 and 1990 was $238,562 and $278,000, respectively. Amortization
expense was $39,216 for 1991 and 1990.
Income Taxes
Deferred income taxes are provided for timing differences between items of
income or expense reported in the consolidated financial statements and
those reported for income tax purposes. These differences relate primarily
to the provision for loan losses, writedowns of Other Real Estate Owned,
deferred compensation, depreciation on premises and equipment and capital
loss carryovers.
In December 1987, the Financial Accounting Standards Board issued Statement
No. 96 (SFAS No. 96), "Accounting for Income Taxes". In early 1992, the
Financial Accounting Standards Board issued Statement No. 109 (SFAS No.
109) which supersedes SFAS No. 96 for the accounting for income taxes.
Implementation is for all fiscal years beginning after December 15, 1992.
SFAS No. 109 requires companies to change from the deferred method of
accounting for income taxes to the liability method. Under the liability
method, deferred tax balances are calculated at balance sheet dates and
represent amounts of income taxes refundable or payable in future years
resulting from temporary differences. The change in deferred tax balances
is recorded as an element of income tax expense in the financial
statements. Under current interpretations of SFAS No. 109, the company's
evaluation indicates no material impact on its financial statements.
Consolidated Statements of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and federal funds sold. Generally,
federal funds are purchased and sold for one day periods.
Reclassifications
Certain reclassifications have been made to the 1990 consolidated financial
statements in order to conform to the classifications adopted for reporting
in 1991.
2. CASH AND DUE FROM BANKS:
The Bank is required to maintain average reserve balances with the Federal
Reserve Bank. "Cash and due from banks" in the consolidated statements of
condition included amounts so restricted of $500,000 at December 31, 1991
and $1,018,000 at December 31, 1990.
3. INVESTMENT SECURITIES:
The carrying value and related market value of investment securities are
presented below:
December 31, 1991
Carrying Unrealized Unrealized Market
Value Gains Losses Value
U.S. Treasuries $18,883,364 $ 317,146 $ -0- $19,200,510
U.S. Agencies 62,492,958 1,752,274 (62,009) 64,183,223
State and Political
Subdivisions 994,485 64,738 (604) 1,058,619
Marketable Equity
Securities 1,527,007 -0- -0- 1,527,007
Other Securities 1,002,970 17,655 -0- 1,020,625
Totals $84,900,784 $ 2,151,813 $ (62,613) $86,989,984
December 31, 1990
Carrying Unrealized Unrealized Market
Value Gains Losses Value
U.S. Treasuries $12,964,000 $ 207,000 $ (34,000) $13,137,000
U.S. Agencies 54,085,000 188,000 (309,000) 53,964,000
State and Political
Subdivisions 3,781,000 216,000 -0- 3,997,000
Marketable Equity
Securities 2,432,000 -0- -0- 2,432,000
Other Securities 2,530,000 7,000 (6,000) 2,531,000
Totals $75,792,000 $ 618,000 $ (349,000) $76,061,000
The carrying value and related market value of investment securities at December
31, 1991, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
Carrying Market
Value Value
Due in One Year or Less $28,670,273 $28,991,142
Due After One Year
through Five Years 24,801,730 25,532,255
Due After Five Years
through Ten Years 4,324,835 4,492,466
Due After Ten Years 25,576,939 26,447,114
Subtotal 83,373,777 85,462,977
Marketable Equity Securities 1,527,007 1,527,007
Totals $84,900,784 $86,989,984
3. INVESTMENT SECURITIES (Continued):
Marketable equity securities consist of investments in the following mutual
funds: Transamerica U.S. Government Income Trust, Transamerica Government
Securities Trust, and Colonial Government Securities.
Proceeds from sales of investments in debt securities during 1991 were
$15,339,746. Gross gains of $236,266 and gross losses of $935 were
realized on those sales.
Proceeds from sales of investments in debt securities during 1990 were
$17,564,488. Gross gains of $8,000 and gross losses of $7,512 were
realized on those sales.
Investment securities with a carrying amount of approximately $32,841,969
and $36,394,000 and an estimated market value of $34,469,037 and
$36,706,000 at December 31, 1991 and 1990, respectively, were pledged to
secure public deposits and for other purposes required or permitted by law.
4. LOANS:
The loan portfolio consists of various types of loans classified by major
type as follows:
1991 1990
Real Estate $38,726,389 $37,509,000
Commercial and Industrial 19,395,194 24,422,000
Consumer 9,638,286 10,335,000
Agriculture 887,314 1,157,000
Other 172,891 116,000
68,820,074 73,539,000
Less: Allowance for Loan Losses 1,306,102 2,065,000
Totals $67,513,972 $71,474,000
As of December 31, 1991 and 1990, loans outstanding to directors, officers,
and their affiliates were approximately $4,578,799 and $4,938,000,
respectively. In the opinion of management, all transactions entered into
between the Bank and such related parties have been and are, in the
ordinary course of business, made on the same terms and conditions as
similar transactions with unaffiliated persons. During 1991, $140,419 of
new loans were made and repayments of $499,620 were received. Letters of
Credit and unadvanced lines of credit to directors, officers, and their
affiliates totaled $772,099 at December 31, 1991.
At December 31, 1991, fixed rate loans totaled $53,086,309 and variable
rate loans totaled $15,705,879.
At December 31, 1991 and 1990 loans on which the accrual of interest had
been discontinued or reduced amounted to $1,547,365 and $2,005,000,
respectively. The following table presents interest income actually earned
and additional interest income that would have been earned under these
original terms of the loans:
1991 1990
Income Earned $ 100,870 $ 78,000
Foregone Income 43,757 205,000
The Bank had six trouble debt restructurings during the year involving
commercial loans. The aggregate recorded investment at December 31, 1991
was $816,873. The amount of interest income included in net income from
these six loans was $10,204. If the loans would have been continued under
the original terms gross interest income would have been $148,272.
An analysis of activity in the allowance for loan losses is as follows:
1991 1990
Balance at Beginning of Year $ 2,064,339 $ 3,711,000
Provision Charged to Operations 10,000 1,310,000
Loans Charged Off (965,938) (3,085,000)
Loan Recoveries 197,701 129,000
Balance at End of Year $ 1,306,102 $ 2,065,000
5. PREMISES AND EQUIPMENT:
Premises and equipment are summarized below:
1991 1990
Land $ 455,970 $ 456,000
Buildings 3,508,297 3,248,000
Leasehold Improvements 290,788 316,000
Furniture, Fixtures, and Equipment 2,973,768 2,695,000
7,228,823 6,715,000
Less Accumulated Depreciation
and Amortization (3,746,134) (2,960,000)
Premises and Equipment, Net $ 3,482,689 $ 3,755,000
Depreciation expense included in the Consolidated Statements of Operations
was $402,538 and $492,225 for the years ended December 31, 1991 and 1990.
6. DEPOSITS:
Deposits are summarized below:
1991 1990
Demand $ 20,397,683 $ 21,510,000
NOW Accounts 24,062,385 19,892,000
Savings 11,668,123 10,475,000
Money Market Accounts 24,593,358 21,702,000
Time Certificates of Deposits 74,355,432 81,360,000
Totals $155,076,981 $154,939,000
Maturities of certificates of deposit are presented in the following
schedules:
Amount
Maturing
1992 $67,923,442
1993 5,161,631
1994 1,059,667
1995 154,508
1996 40,184
After 1996 16,000
Total $74,355,432
Included in the interest bearing deposits are certificates of deposit in
amounts of $100,000 or more totaling $17,591,861 and $20,574,000 at
December 31, 1991 and 1990, respectively.
7. CONCENTRATION OF DEPOSITS:
The Bank has deposits with 3 customers in the amount of $17,236,655 at
December 31, 1991. This amount represents 11.11% of total customer
deposits. The deposits consist of public and personal funds.
8. NOTES PAYABLE:
Notes payable consist of the following notes secured by 100% of the stock
of the subsidiary bank. Both notes are subject to the terms of the same
loan agreement which specify a minimum net worth requirement, common stock
dividend restrictions and other customary covenants.
1991 1990
Note payable to a bank, bearing interest
payable quarterly at a rate 1/4 of 1% in
excess of the prime rate of the lending
bank, 7.75% as of December 31, 1991 $ 6,835,000 $ 7,620,000
Note payable to a bank, bearing interest
payable quarterly at a rate 1/2 of 1% in
excess of the prime rate of the lending
bank, 8.00% as of December 31, 1991 452,652 530,000
Totals $ 7,287,652 $ 8,150,000
At December 31, 1990, the Holding Corporation was in technical default of
certain covenants of the loan agreements relating to notes payable to bank.
Although the Holding Corporation has been current as to principal and
interest, the lender has declined to waive the violations, has declared the
notes in default and demanded payment in full. The Holding Corporation has
been negotiating with the lender since 1990 to restructure the debt.
Management believes that the negotiations will be successful.
9. INCOME TAXES:
The components of the provision for federal income taxes are as follows:
1991 1990
Currently (Receivable) Payable $ 121,000 $ (687,000)
Provision in Lieu of Income Taxes 200,000 -0-
Refund Related to 1990 in Excess of
Benefit Recorded in Prior Year (98,000) -0-
Deferred Taxes (59,555) -0-
Total $ 163,445 $ (687,000)
The provision for federal income taxes differs from the amount computed by
applying the federal income tax statutory rate on operations as follows:
1991 1990
Amount % Amount %
Taxes Calculated at
Statutory Rate $351,000 34.0 $(528,000) (34.0)
Decrease resulting from
Tax-Exempt Interest
Component (116,000) (11.2) (211,000) (13.5)
Amortization of Costs
Incurred and Excess
Purchase Price of
Acquired Company 77,000 7.5 66,000 4.2
Refund Related to 1990
in Excess of
Benefit Recorded (98,000) (9.5) -0- --
Deferred Tax from Prior Year (59,555) (5.8) -0- --
Other, Net 9,000 .8 (14,000) ( .9)
Totals $163,445 15.8 $(687,000) (44.2)
For income tax purposes, the Holding Corporation and Subsidiary has net
operating loss carryforwards at December 31, 1991 of approximately $517,000
which expire in years through 2001 and investment tax credit carryforwards
of $74,000. For financial statement purposes, the Holding Corporation and
Subsidiary has a net operating loss carryforward of approximately
$1,900,000.
Deferred taxes, according to the timing differences which caused them, are
as follows:
1991 1990
Depreciation $ (16,000) $ (11,000)
Provision for Loan Losses 215,000 534,000
Deferred Compensation (13,000) (21,000)
Capital Loss not Utilized
Due to Limitation (85,000) -0-
Other Real Estate Owned 2,000 (97,000)
Limitation on Recording of
Deferred Tax Debits (102,000) (375,000)
Other (1,000) (30,000)
Totals $ -0- $ -0-
At December 31, 1991, the Bank has a liability to the Holding Corporation
$327,200 for income tax benefits provided by the Holding Corporation.
10. EMPLOYEE BENEFIT PLANS:
The Bank has an Employee Stock Ownership (ESOP) covering eligible
employees.
The Bank also has a salary deferral plan covering substantially all
employees which provides for payments upon retirement, death or disability.
11. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK:
The Bank is a party to various financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit and standby letters of credit and involve, to varying degrees,
elements of credit risk in excess of the amounts recognized in the
consolidated statements of condition. As of December 31, 1991 and 1990,
the Bank's commitments to extend credit totaled $7,534,537 and $6,599,000,
respectively, and standby letters of credit totaled $541,510 and $714,000,
respectively. Bank management does not anticipate any material loss as a
result of these transactions.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments
are expected to expire without being drawn upon, the total commitment
amounts disclosed above do not necessarily represent future cash
requirements. The Bank evaluated each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if considered
necessary by the Bank upon extension of credit, is based on management's
credit evaluation of the counterparty.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that
involved in extending standard lending arrangements.
12. COMMITMENTS AND CONTINGENT LIABILITIES:
The Holding Corporation and Subsidiary are also subject to claims and
lawsuits which arise primarily in the ordinary course of business. Based
on information presently available and advice received from legal counsel
representing the Holding Corporation and Subsidiary in connection with such
claims and lawsuits, it is the opinion of management that the disposition
or ultimate determination of such claims and lawsuits will not have a
material adverse effect on the consolidated financial position of the
Holding Corporation and Subsidiary.
13. DIVIDEND RESTRICTIONS
Dividends from the subsidiary Bank are payable only out of current earnings
or undistributed earnings of the preceding year. In addition, dividends in
excess of fifty percent of current earnings, or of an amount that would
bring adjusted primary capital of the Bank under eight percent are
currently subject to regulatory approval. Payment of dividends by the
Holding Corporation are subject to restrictive covenants of the debt
agreement.
<PAGE>
INDEPENDENT AUDITORS' REPORT ON ADDITIONAL INFORMATION
Our audit was conducted for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The consolidating
information on pages 18 through 20 is presented for the purpose of additional
analysis and is not a required part of the basic financial statements. This
consolidating information is the responsibility of the Company's management.
Such information has been subjected to the auditing procedures applied in our
audit of the basic consolidated financial statements and, in our opinion, is
fairly stated in all material respects when considered in relation to the basic
consolidated financial statements taken as a whole. Reference is made to the
fourth paragraph of our independent auditors' report on page 1.
January 31, 1992
<PAGE>
Exhibit F
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATING STATEMENT OF CONDITION INFORMATION DECEMBER 31, 1991
First
Commercial Commercial
ASSETS Bancshares Bank
Cash and Due from Banks $ 1,059,556 $ 5,380,059
Interest Bearing Deposits 62,445 87,767
Total Cash and
Cash Equivalents 1,122,001 5,467,826
Federal Funds Sold 6,800,000
Investment Securities 84,900,784
Loans, Net 67,486,086
Premises and Equipment, Net 3,136,524
Real Estate Acquired by
Foreclosure, Net 2,601,318
Accrued Interest Receivables 1,975,148
Other Assets 16,365,640 845,935
$17,487,641 $173,213,621
LIABILITIES AND SHAREHOLDERS'
EQUITY
LIABILITIES:
Deposits:
Non-interest Bearing $ $ 21,457,239
Interest Bearing 134,679,298
Total Deposits 156,136,537
Accrued Interest Payable 147,363 848,678
Other Liabilities 142,124 1,540,972
Notes Payable 7,287,652 -0-
Total Liabilities 7,577,139 158,526,187
COMMITMENTS AND CONTINGENCIES -0- -0-
SHAREHOLDERS' EQUITY:
Common Stock 629,446 600,000
Capital Surplus 515,305 5,400,000
Unrealized Loss on
Marketable Equity
Securities (186,196)
Treasury Shares, At Cost (1,152,744) -0-
Undivided Profits 9,918,495 8,873,630
Total Shareholders' Equity 9,910,502 14,687,434
$17,487,641 $173,213,621
<PAGE>
Exhibit F
(Continued)
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATING STATEMENT OF CONDITION INFORMATION DECEMBER 31, 1991
Consolidating Commercial
and Bancshares,
Eliminating Inc. and
ASSETS Entries Subsidiary
Cash and Due from Banks $ (1,059,556) $ 5,380,059
Interest Bearing Deposits 150,212
Total Cash and
Cash Equivalents (1,059,556) 5,530,271
Federal Funds Sold 6,800,000
Investment Securities 84,900,784
Loans, Net 27,886 67,513,972
Premises and Equipment, Net 346,165 3,482,689
Real Estate Acquired by
Foreclosure, Net 2,601,318
Accrued Interest Receivables 1,975,148
Other Assets (15,623,353) 1,588,222
$(16,308,858) $174,392,404
LIABILITIES AND SHAREHOLDERS'
EQUITY
LIABILITIES:
Deposits:
Non-interest Bearing $ (1,059,556) $ 20,397,683
Interest Bearing 134,679,298
Total Deposits (1,059,556) 155,076,981
Accrued Interest Payable 996,041
Other Liabilities (561,868) 1,121,228
Notes Payable 7,287,652
Total Liabilities (1,621,424) 164,481,902
COMMITMENTS AND CONTINGENCIES -0- -0-
SHAREHOLDERS' EQUITY:
Common Stock (600,000) 629,446
Capital Surplus (5,400,000) 515,305
Unrealized Loss on
Marketable Equity
Securities (186,196)
Treasury Shares, At Cost (1,152,744)
Undivided Profits (8,687,434) 10,104,691
Total Shareholders' Equity (14,687,434) 9,910,502
$(16,308,858) $174,392,404
<PAGE>
Exhibit G
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATING STATEMENT OF CONDITION INFORMATION DECEMBER 31, 1991
First
Commercial Commercial
ASSETS Bancshares Bank
INTEREST INCOME:
Loans, Including Fees $ $ 7,856,716
Investment Securities:
Taxable 81,626 5,981,376
Non-taxable 228,859
Federal Funds Sold 292,117
81,626 14,359,068
INTEREST EXPENSE:
Deposits 8,215,523
Notes Payable 634,718
634,718 8,215,523
NET INTEREST INCOME (LOSS) (553,092) 6,143,545
PROVISION FOR LOAN LOSSES 10,000
NET INTEREST INCOME (LOSS)
AFTER PROVISIONS FOR
LOAN LOSSES (553,092) 6,133,545
OTHER INCOME:
Customer Service Fees 917,499
Loss on Sale of Marketable
Equity Securities (213,142)
Gain (Loss) on Sale of
Other Investment
Securities 235,331
Loss on Sale of Other
Real Estate Owned (21,738)
Other Income 1,443,959 184,398
1,443,959 1,102,348
OTHER EXPENSES:
Salaries and Employee
Benefits 2,509,687
Occupancy Expense 863,914
Amortization of
Intangible Assets 176,299
Expenses Related to Real
Estate Acquired by
Foreclosure and
Repossessed Property 623,313
Other 78,767 1,400,497
255,066 5,397,411
INCOME (LOSS) BEFORE INCOME
TAX EXPENSE AND
EXTRAORDINARY ITEM
(BENEFIT) 635,801 1,838,482
INCOME TAX EXPENSE (BENEFIT) (433,955) 597,400
INCOME BEFORE EXTRAORDINARY
ITEM 1,069,756 1,241,082
EXTRAORDINARY ITEM (200,000)
NET INCOME (LOSS) $ 1,069,756 $ 1,441,082
<PAGE>
Exhibit G
(Continued)
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATING STATEMENT OF CONDITION INFORMATION DECEMBER 31, 1991
Consolidating Commercial
and Bancshares,
Eliminating Inc. and
ASSETS Entries Subsidiary
INTEREST INCOME:
Loans, Including Fees $ $ 7,856,716
Investment Securities:
Taxable 6,063,002
Non-taxable 228,859
Federal Funds Sold 292,117
14,440,694
INTEREST EXPENSE:
Deposits 8,215,523
Notes Payable 634,718
8,850,241
NET INTEREST INCOME (LOSS) 5,590,453
PROVISION FOR LOAN LOSSES 10,000
NET INTEREST INCOME (LOSS)
AFTER PROVISIONS FOR
LOAN LOSSES 5,580,453
OTHER INCOME:
Customer Service Fees 917,499
Loss on Sale of Marketable
Equity Securities (213,142)
Gain (Loss) on Sale of
Other Investment
Securities 235,331
Loss on Sale of Other
Real Estate Owned (21,738)
Other Income (1,441,082) 187,275
(1,441,082) 1,105,225
OTHER EXPENSES:
Salaries and Employee
Benefits 2,509,687
Occupancy Expense 863,914
Amortization of
Intangible Assets 176,299
Expenses Related to Real
Estate Acquired by
Foreclosure and
Repossessed Property 623,313
Other 1,479,264
5,652,477
INCOME (LOSS) BEFORE INCOME
TAX EXPENSE AND
EXTRAORDINARY ITEM
(BENEFIT) (1,441,082) 1,033,201
INCOME TAX EXPENSE (BENEFIT) (163,445)
INCOME BEFORE EXTRAORDINARY
ITEM (1,441,082) 869,756
EXTRAORDINARY ITEM (200,000)
NET INCOME (LOSS) $ (1,441,082) $ 1,069,756
<PAGE>
Exhibit H
COMMERCIAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATING AND ELIMINATING ENTRIES
(1)
Premises and Equipment, Net $ 346,165
Loans 27,886
Other Liabilities 234,668
Other Assets $ 608,719
To reclassify intangibles resulting from excess price paid over book value
from other assets to appropriate accounts.
(2)
Noninterest-bearing Deposits 1,059,556
Cash and Due from Banks 1,059,556
To eliminate parent company's demand deposit accounts at the subsidiary
bank.
(3)
Other Liabilities 327,200
Other Assets 327,200
To eliminate receivable on parent company's books and payable on
subsidiary's books.
(4)
Common Stock 600,000
Capital Surplus 5,400,000
Undivided Profits 7,246,352
Other Income 1,441,082
Other Assets 14,687,434
To eliminate equity in subsidiary and investment in consolidated subsidiary
on parent company's books.
<PAGE>
BASTROP FINANCIAL INFORMATION
BASTROP NATIONAL BANK
BASTROP, LOUISIANA
_________________
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
DECEMBER 31, 1993
________________
BASTROP NATIONAL BANK
BASTROP, LOUISIANA
DECEMBER 31, 1993
CONTENTS
PAGE
Independent Auditor's Report.............................. 1
Balance Sheets............................................ 2
Statements of Income...................................... 3
Statements of Changes in Stockholders' Equity............. 4
Statements of Cash Flows.................................. 5-6
Notes to Financial Statements............................. 7-13
ROGER C. PARKER
CERTIFIED PUBLIC ACCOUNTANT
2905-A Cameron
MONROE, LOUISIANA 71201
318-387-3170/FAX 318-361-5153
January 20, 1994
Independent Auditors' Report
To the Board of Directors
and Stockholders of
Bastrop National Bank
Bastrop, Louisiana
I have audited the accompanying balance sheets of Bastrop National
Bank as of December 31, 1993 and 1992, and the related statements
of income, retained earnings, and cash flows for each of the three
years in the period ended December 31, 1993. These financial
statements are the responsibility of the Bank's management. My
responsibility is to express an opinion on these financial
statements based on my audits.
I conducted my audits in accordance with generally accepted
auditing standards. Those standards require that I plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statements presentation. I believe that my audit
provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Bastrop
National Bank as of December 31, 1993 and 1992, and the results of
its operations and cash flows for the years in the period ended
December 31, 1993 in conformity with generally accepted accounting
principles.
/S/ ROGER C. PARKER
Roger C. Parker
Certified Public Accountant
BASTROP NATIONAL BANK
BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
1993 1992
ASSETS
Cash and Due from Banks 5,494,362 5,594,884
Investment Securities (Approximate
Market Value $77,799,000 and
$76,707,000 respectively) 76,709,820 75,318,479
Federal Funds Sold 10,525,000 9,100,000
Loans, Less allowance for Loan
Losses of $384,155 and $357,825,
respectively 35,097,784 34,821,674
Bank Premises, Equipment and
Furniture 1,284,430 1,346,229
Other Real Estate 93,473 75,000
Accrued Interest Receivable 1,251,659 1,531,089
Other Assets 65,367 69,561
TOTAL ASSETS 130,521,895 127,856,916
LIABILITIES AND STOCKHOLDERS EQUITY
LIABILITIES
DEPOSITS
Demand 16,482,783 17,563,007
NOW Accounts 23,597,169 20,234,050
Savings 10,896,022 11,599,684
Time, $100,000 and Over 24,226,655 24,166,867
Other Time 39,838,325 40,351,618
TOTAL DEPOSITS 115,040,954 113,915,226
Accrued Interest Payable 467,949 462,294
Other Liabilities 252,247 168,918
TOTAL LIABILITIES 115,761,150 114,546,438
STOCKHOLDERS' EQUITY
Common Stock, Par Value $1
300,000 Shares Authorized and Issued 300,000 300,000
Surplus 1,000,000 1,000,000
Retained Earnings 13,460,745 12,010,478
TOTAL STOCKHOLDERS' EQUITY 14,760,745 13,310,478
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 130,521,895 127,856,916
The accompanying notes are an integral part of these financial
statements.
YEAR ENDED DECEMBER 31,
1993 1992 1991
INTEREST INCOME
Interest and Fees
on Loans 3,182,851 3,410,283 3,647,521
Interest on
Investment Securities
U. S. Treasury
Securities 693,203 860,960 997,035
U. S. Government
Agencies and
Corporations 3,617,036 3,898,852 3,665,610
States and Political
Subdivisions 630,161 572,024 494,647
Other Securities 2,352 14,847 31,659
Interest on Federal
Funds Sold 199,826 178,219 470,424
Interest on Deposits
in Banks - 1,997 37,191
TOTAL INTEREST INCOME 8,325,429 8,937,182 9,344,087
INTEREST EXPENSE
Interest on Deposits 3,386,741 3,757,895 5,169,113
NET INTEREST INCOME 4,938,688 5,179,287 4,174,974
Provision for
Loan Losses 28,000 39,688 16,528
NET INTEREST
INCOME AFTER
PROVISION FOR
LOAN LOSSES 4,910,688 5,139,599 4,158,446
OTHER INCOME
Service Charges 544,620 507,224 466,321
Credit Life Insurance 76,389 115,148 105,929
Other Income 78,107 68,671 67,785
Securities Gains 50,811 21,938
- -
TOTAL OTHER INCOME 749,927 712,981 640,035
OTHER EXPENSES
Salaries 1,162,254 1,058,085 990,862
Profit Sharing and
Other Employee
Benefits 289,499 278,495 239,804
Occupancy Expenses 357,625 351,039 350,224
Other Operating
Expenses 1,021,747 1,131,369 900,610
Securities Losses - - 277,633
TOTAL OTHER EXPENSES 2,831,125 2,818,988 2,759,133
INCOME BEFORE TAXES 2,829,490 3,033,592 2,039,348
Applicable Income Taxes 779,223 854,279 478,000
NET INCOME 2,050,267 2,179,313 1,561,348
The accompanying notes are an integral part of these financial
statements.
BASTROP NATIONAL BANK
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
TOTAL
COMMON RETAINED STOCKHOLDERS'
STOCK SURPLUS EARNINGS EQUITY
BALANCE,
DECEMBER 31, 1990
300,000 1,000,000 12,319,817 13,619,817
Net Income -0- -0- 1,561,348 1,561,348
Cash Dividends
Declared -0- -0- ( 750,000) ( 750,000)
BALANCE,
DECEMBER 31, 1991 300,000 1,000,000 13,131,165 14,431,165
Net Income -0- -0- 2,179,313 2,179,313
Cash Dividends
Declared -0- -0- ( 3,300,000) (3,300,000)
BALANCE,
DECEMBER 31, 1992 300,000 1,000,000 12,010,478 13,310,478
Net Income -0- -0- 2,050,267 2,050,267
Cash Dividends
Declared -0- -0- ( 600,000) ( 600,000)
BALANCE,
DECEMBER 31,
1993 300,000 1,000,000 13,460,745 14,760,745
The accompanying notes are an integral part of these financial
statements.
BASTROP NATIONAL BANK
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
1993 1992 1991
CASH FLOWS FROM
OPERATING ACTIVITIES:
Interest Received From:
Loans 3,360,206 3,488,614 3,545,922
Investment Securities 5,349,147 5,646,648 5,162,992
Federal Funds Sold 199,826 178,219 470,424
Service Charges 544,620 507,224 466,321
Credit Life Insurance 76,389 115,148 105,929
Other Income 78,107 68,671 67,785
Interest Paid to
Depositors ( 3,381,086) ( 3,952,084) ( 5,442,653)
Cash Paid to
Suppliers &
Employees ( 2,589,767) ( 2,586,665) ( 2,148,116)
Income Taxes Paid ( 748,000) ( 868,118) ( 557,761)
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,889,442 2,597,657 1,670,843
CASH FLOWS FROM
INVESTING ACTIVITIES:
Proceeds From Sales of
Inventory Securities 6,155,828 8,356,196 979,750
Proceeds From
Maturities of Investment
Securities 26,600,097 22,018,538 23,203,308
Purchase of Investment
Securities (34,400,775) (38,988,494) (34,468,071)
Federal Funds Sold,
Net ( 1,425,000) ( 1,775,000) 1,700,000
Net (Increase) Decrease
in Loans ( 322,583) ( 1,758,580) 682,951
Capital Expenditures ( 123,259) ( 90,692) ( 25,215)
NET CASH USED IN
INVESTING ACTIVITIES ( 3,515,692) ( 8,688,032) ( 7,927,277)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net Increase in Demand
Deposits, NOW Accounts,
and Savings Accounts 1,579,233 7,726,064 7,002,751
Net Decrease in
Time Deposits ( 453,505) ( 157,512) ( 71,416)
Dividends Paid ( 600,000) ( 3,300,000) ( 750,000)
NET CASH PROVIDED BY
FINANCING ACTIVITIES ( 525,728) ( 4,268,552) ( 6,181,335)
NET DECREASE IN CASH
& CASH EQUIVALENTS ( 100,000) ( 1,821,823) ( 75,099)
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF YEAR 5,594,884 7,416,707 7,491,806
CASH AND CASH
EQUIVALENTS AT
END OF YEAR 5,494,362 5,594,884 7,416,707
RECONCILIATION OF
NET INCOME TO NET
CASH PROVIDED BY
OPERATING ACTIVITIES:
Net Income 2,050,267 2,179,313 1,561,348
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation 185,058 191,508 199,609
Provision for
Loan Losses 28,000 39,688 16,528
(Gain) Loss on
Sale of
Investments ( 50,811) ( 21,938) 277,633
(Increase) Decrease
in Interest
Receivable 279,430 11,074 ( 191,298)
Amortization of
Bond Premium 304,320 365,225 26,549
Decrease in
Prepaid Expenses 4,194 6,471 50,580
(Reduction) Increase
in Interest Payable 5,655 ( 194,189) ( 273,540)
Increase in Other
Liabilities 83,329 20,505 3,434
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,889,442 2,597,657 1,670,843
The accompanying notes are an integral part of these financial
statements.
BASTROP NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment Securities. Investment securities are stated at
cost adjusted for amortization of premiums and accretion of
discounts, which are recognized as adjustments to interest
income. Gains or losses on disposition are based on the net
proceeds and the adjusted carrying amount of the securities
sold, using the specific identification method.
Loans and Allowance for Loan Losses. Loans are stated at the
amount of unpaid principal, reduced by unearned discount and
an allowance for loan losses. Unearned discount on consumer
loans is recognized as income over the terms of the loans
using the rule of seventy-eights method. Interest on
commercial loans is calculated by using the simple interest
method on daily balances of the principal amount outstanding.
The allowance for loan losses is established through a
provision for loan losses charged to expenses. Loans are
charged against the allowance for loan losses when management
believes that the collectibility of the principal is unlikely.
The allowance is an amount that management believes will be
adequate to absorb possible losses on existing loans that may
become uncollectible, based on evaluations of the
collectibility of loans and prior loan loss experience. The
evaluations take into consideration such factors as changes in
the nature and volume of the loan portfolio, overall portfolio
quality, review of specific problem loans, and current
economic conditions that may affect the borrowers' ability to
pay. Accrual of interest is discontinued on a loan when
management believes, after considering economic and business
conditions and collection efforts, that the borrowers'
financial condition is such that collection of interest is
doubtful.
Bank Premises and Equipment - Bank premises and equipment are
recorded at cost. Depreciation is provided by using both
straight-line and accelerated methods over the estimated
useful lives of the properties.
Cash Equivalents - For purposes of the statement of cash
flows, cash and cash equivalents include cash on hand and
amounts due from banks.
2. INVESTMENT SECURITIES
Carrying amounts and approximate market values of investment
securities are summarized as follows.
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1993 COST GAINS LOSSES VALUE
U. S. Treasury
Securities 13,896,776 173,602 4,329 14,066,046
Obligations of Other
U. S. Government
Agencies and
Corporations 21,178,155 489,885 15,570 21,652,470
Obligations of
States and
Political
Subdivisions 11,473,026 226,221 38,907 11,660,340
Mortgage Backed
Securities 30,122,866 452,125 193,823 30,381,168
Federal Reserve
Bank Stock 39,000 - - 39,000
TOTAL 76,709,820 1,341,833 252,629 77,799,024
The amortized cost and estimated market value of debt securities at
December 31, 1993 by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
ESTIMATED
AMORTIZED MARKET
COST VALUE
Due in One Year or Less 9,249,820 9,346,691
Due After One Year Through Five Years 30,315,776 30,938,755
Due After Five Years Through Ten Years 6,982,358 7,093,410
Mortgage Backed Securities 30,122,866 30,381,168
Federal Reserve Bank Stock 39,000 39,000
TOTAL 76,709,820 77,799,024
2. INVESTMENT SECURITIES (Continued)
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1992 COST GAINS LOSSES VALUE
U. S. Treasury
Securities 12,170,939 174,298 - 12,345,234
Obligations of Other
U. S. Government
Agencies and
Corporations 31,323,804 599,998 32,870 31,890,932
Obligations of
States and
Political
Subdivisions 8,264,051 243,004 16,853 8,490,202
Mortgage Backed
Securities 23,520,688 475,437 54,257 23,941,868
Other Securities 39,000 - - 39,000
TOTAL 75,318,479 1,492,737 103,980 76,707,236
The amortized cost and estimated market value of debt securities at
December 31, 1992, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
ESTIMATED
AMORTIZED MARKET
COST VALUE
Due in One Year or Less 6,574,138 6,663,693
Due After One Year Through Five Years 39,165,754 39,903,710
Due After Five Years Through Ten Years 6,018,899 6,158,965
Due After Ten Years - -
Mortgage Backed Securities 23,520,688 23,941,868
Federal Reserve Bank Stock 39,000 39,000
TOTAL 75,318,479 76,707,236
Gross gains of $59,470, $39,387 and $204,750 and gross losses of
$8,659, $17,499 and $482,383 were realized on sales of investment
securities in 1993, 1992, and 1991, respectively.
Investment securities with an amortized cost of $19,847,872 and
estimated market value of $20,361,512 were pledged as collateral on
public deposits and for other purposes as required by law at
December 31, 1993. Securities so pledged at December 31, 1992 had
an amortized cost $16,567,862 and estimated market value of
$17,100,540.
There were no securities on non-accrual status at December 31, 1993
and December 31, 1992.<PAGE>
3. LOANS
Major classification of loans are as follows:
December 31,
1993 1992
Installment 3,984,930 4,292,014
Installment - Real Estate 12,010,777 11,363,652
Commercial 13,614,323 12,596,842
Commercial - Real Estate 6,307,167 7,550,372
35,917,197 35,802,880
Unearned Discount 435,258 623,381
35,481,939 35,179,499
Allowance for Loan Losses 384,155 357,825
Loans, Net 35,097,784 34,821,674
Loans on which the accrual of interest has been discontinued or
reduced amounted to $265,445 and $393,614 at December 31, 1993 and
1992 respectively. If interest on those loans had been accrued,
such income would have approximated $26,708 and $33,457 in 1993 and
1992, respectively.
Changes in the allowance for loan losses were as follows:
YEAR ENDED DECEMBER 31,
1993 1992
Balance, Beginning of Year 357,825 345,000
Provision Charged to Operations 28,000 39,688
Loans Charged Off ( 15,691) ( 39,905)
Recoveries 14,021 13,042
Balance, end of year 384,155 357,825
4. BANK PREMISES, EQUIPMENT AND FURNITURE
Major classifications of these assets are as follows:
December 31,
1993 1992
Land 202,095 202,095
Buildings 2,352,716 2,352,716
Equipment and Furniture 1,087,250 984,817
3,642,061 3,539,628
Accumulated Depreciation 2,357,631 2,193,399
1,284,430 1,346,229
Depreciation expense amounted to $185,058 in 1993, $191,508 in 1992
and $199,609 in 1991.<PAGE>
5. FEDERAL INCOME TAXES
The Company's effective income tax rates in the accompanying
statements of income are less than statutory tax rates for the
following reasons:
1993 1992 1991
Statutory Federal Income Tax Rate 34% 34% 34%
Less: Non-taxable Bond
Interest Income ( 7) ( 6) ( 9)
Effective Tax Rate 27% 28% 25%
The primary differences between taxable income for financial
reporting purposes and tax reporting purposes are due to permanent
rather than timing differences. Therefore, there is no provision
for deferred income taxes.
6. PROFIT SHARING PLAN
The Bank maintains a voluntary profit sharing plan covering
substantially all of its employees. The contributions for the
years ended December 31, 1993, 1992 and 1991 were $100,000 and
$75,000, respectively.
7. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the bank makes various
commitments and incurs certain contingent liabilities that are
not presented in the accompanying financial statements. The
commitments and contingent liabilities include various
guarantees, commitments to extend credit, and standby letters
of credit. At December 31, 1993 and 1992, outstanding
commitments to extend credit totaled $6,392,897 and
$3,129,226, respectively. At December 31, 1993 and 1992,
commitments under standby letters of credit and guarantees
aggregated $338,700 and $638,700, respectively. The bank does
not anticipate any material losses as a result of the
commitments and contingent liabilities.
8. TRANSACTIONS WITH DIRECTORS AND OFFICERS
The Bank has had, and may be expected to have in the future,
banking transactions in the ordinary course of business with
directors, principal officers, their immediate families, and
affiliated companies in which they are principal stockholders
(commonly referred to as related parties) on the same terms,
including interest rates and collateral, as those prevailing
at the time for comparable transactions with others. The
activity in these loans is summarized below:
BALANCE AT
BEGINNING BALANCE AT
OF YEAR NEW LOANS PAYMENTS END OF YEAR
1993 1,680,314 1,754,500 2,193,938 1,240,876
1992 1,064,998 2,536,345 1,921,029 1,680,314
9. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is a party to financial instruments with off-balance-
sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments
include commitments to extend credit and standby letters of
credit. Those instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the
amount recognized in the statement of financial position. The
contract amounts of those instruments reflect the extent of
involvement the Bank has in particular classes of financial
instruments.
The Bank's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument
for commitments to extend credit and standby letters of credit
written is represented by the contractual notional amount of
those instruments. The Bank uses the same credit policies in
making commitments and conditional obligations as it does for
on-balance-sheet instruments.
Unless noted otherwise, the Bank does not require collateral
or other security to support financial instruments with credit
risk.
DECEMBER 31,
1993 1992
Financial Instruments Whose Contract
Amounts Represents Credit Risk:
Commitments to Extend Credit 6,392,897 3,929,225
Standby Letters of Credit 338,700 638,700
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require
payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements.
The Bank evaluates each customer's creditworthiness on a case-
by-case basis. The amount of collateral obtained if deemed
necessary by the Bank upon extension of credit is based on
management's credit evaluation of the counterparty.
Collateral held varies, but may include accounts receivable,
inventory, property, plant, equipment, and income-producing
commercial properties.
Standby letters of credit written are conditional commitments
issued by the Bank to guarantee the performance of a customer
to a third party. The credit risk involved in issuing letters
of credit is essentially the same as that involved in
extending loan commitments to customers.
10. SIGNIFICANT CONCENTRATIONS OF CREDIT RISK
Most of the Bank's business activity is with customers located
within its primary market area, an area that generally
includes Morehouse Parish. The economy of the Bank's primary
market area depends heavily on agriculture and the paper
manufacturing industry. As of December 31, 1993 and 1992
approximately $5,257,000 and $4,224,000 of the Bank's loan
portfolio was either secured by farmland or loans to farmers.
11. DIVIDENDS AND REGULATORY RESTRICTIONS
Regulations limit the availability of the Bank's retained
earnings for the payment of dividends without prior approval
of bank regulatory authorities. In this regard, the Bank can
declare dividends in 1994 of $329,580 plus an additional
amount for 1994 year-to-date income as of the date of the
dividend.
The Bank is required by the Federal Reserve to maintain
certain minimum balances of noninterest bearing deposits in
either vault cash or Federal Reserve deposits. At December
31, 1993, this required balance was approximately $986,100.
12. MERGER
On November 3, 1993, the Board of Directors of the Bank voted
to merge with Hibernia National Bank. Pending regulatory
approval, the merger is expected to be completed in March or
April of 1994.
<PAGE>
FIRST BANCORP OF LOUISIANA, INC.
AND SUBSIDIARY
Consolidated Financial Statements
December 31, 1992 and 1991
(With Independent Auditors' Report
Thereon)
<PAGE>
Independent Auditors' Report
The Board of Directors
First Bancorp of Louisiana, Inc.:
We have audited the accompanying consolidated balance sheets of
First Bancorp of Louisiana, Inc. and Subsidiary as of December 31,
1992 and 1991, and the related consolidated statements of income,
stockholders' equity, and cash flows for the years then ended.
These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of First Bancorp of Louisiana, Inc. and Subsidiary at
December 31, 1992 and 1991, and the results of their operations and
their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
February 12, 1993
<PAGE>
FIRST BANCORP OF LOUISIANA, INC. AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1992 and 1991
Assets 1992 1991
Cash and due from banks $ 11,815,310 15,211,415
Federal funds sold and other temporary
investments 825,000 5,015,000
Interest-bearing deposits with financial
institutions 1,077,474 2,138,000
Investment securities 69,215,516 65,048,163
Loans, net 69,563,468 59,908,098
Premises and equipment, net 1,640,299 1,092,136
Accrued interest receivable 1,518,937 1,610,990
Other assets 899,659 567,974
____________ ___________
$156,555,663 150,591,776
============ ===========
Liabilities and Stockholders' Equity
Deposits:
Demand, noninterest-bearing $ 26,975,743 27,538,669
Money market and NOW accounts 33,391,507 26,258,099
Savings 11,772,828 9,379,603
Time 68,654,612 72,574,272
___________ ___________
Total deposits 140,794,690 135,750,643
Notes payable 2,452,487 3,087,607
Accrued interest payable 350,295 906,087
Securities sold under agreements to repurchase 1,700,513 1,218,948
Other liabilities 309,752 364,896
___________ ___________
Total liabilities 145,607,737 141,328,181
___________ ___________
Stockholders' equity:
Common stock, par value $5 per share.
1,000,000 shares authorized; 272,700 shares
issued 1,363,500 1,363,500
Capital surplus 6,743,622 6,743,622
Retained earnings 5,020,586 3,185,882
Treasury stock, 63,552 and 52,267 shares
in 1992 and 1991, respectively, at cost (1,585,463) (1,309,970)
Employee Stock Ownership Plan commitment (594,319) (719,439)
___________ ___________
Total stockholders' equity 10,947,926 9,263,595
Commitments and contingent liabilities
____________ ___________
$156,555,663 150,591,776
============ ===========
See accompanying notes to consolidated financial statements.
<PAGE>
FIRST BANCORP OF LOUISIANA, INC. AND SUBSIDIARY
Consolidated Statements of Income
Years ended December 31, 1992 and 1991
1992 1991
Interest income:
Loans $ 6,286,019 5,845,228
Investment securities:
U.S. government and agency obligations 2,472,422 2,523,581
Mortgage-backed 1,668,749 1,587,823
Obligations of states and political
subdivisions 555,133 573,989
Other 798,813 631,160
Deposits with financial institutions 131,584 323,943
Federal funds sold and other 146,539 385,977
__________ __________
Total interest income 12,059,259 11,871,701
__________ __________
Interest expense:
Deposits:
Time 3,400,329 4,985,181
Money market and NOW accounts 975,395 1,163,020
Savings 361,915 431,118
Notes payable 185,786 318,789
Other 69,056 74,244
_________ _________
Total interest expense 4,992,481 6,972,352
_________ _________
Net interest income 7,066,778 4,899,349
Provision for loan losses 710,000 432,000
_________ _________
Net interest income after provision
for loan losses 6,356,778 4,467,349
_________ _________
Other operating income:
Customer service charges 660,966 604,577
Investment securities gains (losses), net 59,527 (17,972)
Other real estate gains, net 63,226 26,475
Other charges and commissions 536,824 581,067
_________ _________
Total other operating income 1,320,540 1,194,147
_________ _________
Other operating expenses:
Salaries and employee benefits 2,403,749 2,194,554
Occupancy and equipment 941,884 588,902
Other operating expenses 1,788,475 1,535,132
_________ _________
Total other operating expenses 5,134,108 4,318,588
_________ _________
Income before income tax expense 2,543,210 1,342,908
Income tax expense 597,789 304,888
_________ _________
Net income $ 1,945,421 1,038,020
========= =========
Net income per share:
Average common shares outstanding $ 9.11 4.67
========= =========
Average common shares outstanding assuming
full dilution $ 8.15 4.18
========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
FIRST BANCORP OF LOUISIANA, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1992 and 1991
Employee
Stock Total
Ownership Stock-
Common Capital Retained Treasury Plan holders'
Stock Surplus Earnings Stock Commitment Equity
Balances at
December 31,
1990 1,363,500 6,743,622 2,237,445 (1,228,654) (825,254) 8,290,659
Purchase of
3,878 shares of
common stock
as treasury
stock _ _ _ (93,718) _ (93,718)
Cash dividends
declared _ _ (89,583) 12,402 _ (77,181)
Reduction of
commitment to
ESOP _ _ _ _ 105,815 105,815
Net income _ _ 1,038,020 _ _ 1,038,020
_________ _________ _________ ___________ _________ _________
Balances at
December 31,
1991 1,363,500 6,743,622 3,185,882 (1,309,970) (719,439) 9,263,595
Purchase of
11,285 shares
of common
stock as
treasury
stock _ _ _ (281,400) _ (281,400)
Cash dividends
declared _ _ (110,717) 5,907 _ (104,810)
Reduction of
commitment to
ESOP _ _ _ _ 125,120 125,120
Net income _ _ 1,945,421 _ _ 1,945,421
__________ _________ _________ __________ _________ __________
Balances at
December 31,
1992 $1,363,500 6,743,622 5,020,586 (1,585,463) (594,319) 10,947,926
========== ========= ========= =========== ========= ==========
See accompanying notes to consolidated financial statements.
<PAGE>
FIRST BANCORP OF LOUISIANA, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended December 31, 1992 and 1991
1992 1991
Operating activities:
Net income $ 1,945,421 1,038,020
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 710,000 432,000
Provision for depreciation and amortization 453,101 273,117
Net amortization of investment securities 44,834 1,617
Deferred income tax benefit (376,239) (40,403)
Loss (gain) on sales of investment securities (59,527) 17,972
Gains on sales of premises and equipment
and other assets (64,403) (31,281)
Decrease in accrued interest receivable 92,053 58,756
Increase in other assets (10,632) (44,401)
Decrease in accrued interest payable (555,792) (10,889)
Increase (decrease) in other liabilities (55,144) 202,116
___________ __________
Net cash provided by operating
activities 2,123,672 1,896,624
___________ __________
Investing activities:
Net decrease in interest-bearing deposits with
financial institutions 1,060,526 2,272,000
Proceeds from sales of investment securities 2,193,324 482,028
Proceeds from maturities and principal
paydowns of investment securities 14,611,400 9,783,826
Purchases of investment securities (20,957,384) (17,601,250)
Purchases of loans _ (4,273,050)
Net increase in loans (10,526,270) (7,203,051)
Proceeds from sales of premises and equipment
and other assets 290,489 180,479
Purchases of premises and equipment (1,011,264) (99,068)
___________ ___________
Net cash used by investing
activities (14,339,179) (16,458,086)
___________ ___________
Financing activities:
Net increase in deposits 5,044,047 21,584,755
Net (decrease) increase in obligations under
repurchase agreements 481,565 (186,600)
Cash dividends paid (104,810) (77,181)
Payments to acquire treasury stock (281,400) (93,718)
Proceeds from refinancing of notes payable 850,000 2,048,168
Payments on notes payable (1,360,000) (2,908,168)
__________ __________
Net cash provided by financing
activities 4,629,402 20,367,256
__________ __________
Increase (decrease) in cash and cash equivalents (7,586,105) 5,805,794
Cash and cash equivalents at beginning of year 20,226,415 14,420,621
__________ __________
Cash and cash equivalents at end of year $12,640,310 20,226,415
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
FIRST BANCORP OF LOUISIANA, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1992 and 1991
(1) Business and Summary of Significant Accounting Policies
Business _ First Bancorp of Louisiana, Inc. ("First Bancorp")
was incorporated under the laws of the State of Louisiana as
a one-bank holding company for the purpose of acquiring 100%
of the outstanding stock of First National Bank of West
Monroe (the "Bank"). The Bank is the principal asset and
primary source of revenue for First Bancorp.
First Bancorp, through the Bank, provides a full range of
banking services to individual and corporate customers in
northeast Louisiana. First Bancorp and the Bank are subject
to regulations of certain federal agencies and undergo
periodic examinations by those regulatory authorities.
Principles of Consolidation and Basis of Presentation _ The
consolidated financial statements include the results of
operations of First Bancorp and the Bank and its subsidiary,
First National Computer Center, Inc. All significant
intercompany balances and transactions have been eliminated
in consolidation.
The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles. In
preparing the consolidated financial statements, management
is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of
the balance sheet and income and expenses for the period.
Material estimates that are particularly susceptible to
significant change relate to the determination of the
allowance for loan losses and the valuation of other real
estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination
of the allowances for loan losses and the valuation of other
real estate, management obtains independent appraisals for
significant properties.
Cash and Cash Equivalents _ For purposes of reporting cash
flows, cash and cash equivalents include cash on hand,
amounts due from banks, repurchase agreements, and federal
funds sold. Generally, repurchase agreements and federal
funds are sold for one-day periods.
Investment Securities _ Investment securities are carried at
cost adjusted for accretion of discount and amortization of
premium on a constant yield basis to maturity. Gains or
losses on the sale of investment securities are based upon
the adjusted cost of the specific security sold.
All investments in debt securities held by the Bank are
classified in the accompanying financial statements as
investment securities based on management's ability and
intention to hold such securities for the foreseeable future.
The amortization of premiums and discounts on mortgage-backed
securities and collateralized mortgage obligations are
periodically adjusted to reflect the actual prepayment
experience on the underlying mortgage loans.
Loans _ Loans are stated at the principal amount outstanding
with appropriate reduction for unearned discount and the
allowance for loan losses.
Interest on commercial, real estate, and most installment
loans is accrued as earned. Interest on other installment
loans is deferred and recognized under the sum-of-the-digits
method, which generally results in level rates of return on
principal balances outstanding. Accrual of interest is
discontinued on a loan when management believes, after
considering economic and business conditions and collection
efforts, that the borrower's financial condition is such that
the collection of interest is uncertain. Normally, loans are
reviewed for placement in a noninterest-accruing status when
the principal or interest has been billed and uncollected for
a period of ninety days. Generally, when a loan is placed on
nonaccrual status, any interest previously accrued but not
collected is reversed unless the collateral for the loan is
sufficient to cover the accrued interest or a guarantor
assures payment of interest.
Allowance for Loan Losses _ The allowance for loan losses is
maintained at a level believed adequate by management to
absorb potential loan losses. Management's determination of
the adequacy of the allowance is based on an evaluation of
the relative risks inherent in the loan portfolio, taking
into consideration the nature, volume, and quality of the
portfolio, specific problem loans, past credit loss
experience, current and future economic conditions, results
of internal review procedures, and other relevant factors.
The provision for loan losses is charged to expense and loans
charged off, net of recoveries, are charged directly to the
allowance.
While management uses available information to recognize
losses on loans, future additions to the allowance may be
necessary based on changes in economic conditions. In
addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Bank's
allowance for losses on loans. Such agencies may require the
Bank to recognize additions to the allowances based on their
judgments about information available to them at the time of
their examination.
Premises and Equipment _ Bank premises and equipment are
stated at acquisition cost less accumulated depreciation and
amortization. Depreciation is computed on the straight-line
method over the estimated useful lives of the assets.
Leasehold improvements are amortized on a straight-line basis
over the life of the respective lease or the estimated useful
lives of the improvements, whichever is shorter. Maintenance
and repairs are charged to operating expense and renewals and
betterments are capitalized. Gains or losses on dispositions
are reflected currently in the statement of income.
Income Taxes _ First Bancorp and the Bank file a consolidated
federal tax return. Income taxes and benefits are allocated
based on each company's contribution to the total federal tax
liability.
Deferred income taxes are provided on items of income or
expense recognized in different time periods for financial
accounting and income tax purposes.
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," was issued by the Financial
Accounting Standards Board in February 1992. Statement 109
requires a change from the deferred method under APB Opinion
11 to the asset and liability method of accounting for income
taxes. Under the asset and liability method of Statement
109, deferred income taxes are recognized for the future tax
consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. Under Statement 109, the effect on deferred taxes
of a change in tax rates is recognized in income in the
period that includes the enactment date.
Statement 109 must be adopted in 1993. Upon adoption, First
Bancorp plans to apply the provisions of Statement 109
without restating prior year's financial statements. It is
not anticipated that the adoption of Statement 109 will have
a material effect on First Bancorp's consolidated financial
position or results of operations. The amount will be
reported separately as the cumulative effect of the change in
the method of accounting for income taxes in the consolidated
statement of income for the year ending December 31, 1993.
Other Real Estate _ Other real estate and repossessed assets
of $144,000 and $225,000 are included in other assets in the
consolidated financial statements at December 31, 1992 and
1991, respectively, and consist of properties acquired in
satisfaction of uncollectible loans. These properties are
carried at the lower of acquisition cost or fair value based
on their appraised value at the date acquired less selling
costs. Any write-down required from the loan receivable to
acquisition cost or fair value at the date of foreclosure is
charged to the allowance for loan losses. Subsequent gains
or losses on the sale of these properties are credited or
charged to earnings while losses resulting from periodic
valuation of these properties are charged to earnings.
Net Income Per Share _ Net income per average share
outstanding is calculated based on the weighted average
number of shares outstanding during the year. The average
number of shares outstanding during 1992 and 1991 was 213,587
and 222,248, respectively. Net income per average share
outstanding assuming full dilution also considers the impact
of conversion of First Bancorp's subordinated debentures into
common shares as of the beginning of each year. The average
number of shares outstanding during 1992 and 1991 assuming
full dilution was 245,530 and 264,353, respectively.
Reclassifications _ Certain 1991 amounts have been
reclassified to conform to the 1992 presentation.
(2) Cash and Due From Banks
The Bank is a member of the Federal Reserve System and is
required to maintain reserve balances in accordance with
Federal Reserve Bank requirements. Included in cash and due
from banks are reserve requirements of $877,000 and $710,000 at
December 31, 1992 and 1991, respectively.
(3) Investment Securities
The amortized cost and estimated market values of investments in
debt securities at December 31, 1992 and 1991, are as follows:
December 31, 1992
________________________________________________
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
U.S. Treasury securities
and obligations of
U.S. government
corporations and
agencies $31,065,082 1,057,409 _ 32,122,491
Obligations of states
and political
subdivisions 6,099,710 424,065 _ 6,523,775
Corporate securities 9,055,433 289,355 _ 9,344,788
Mortgage-backed
securities 21,769,377 592,928 (56,328) 22,305,977
Other securitie 1,225,914 4,637 _ 1,230,551
___________ _________ _______ __________
$69,215,516 2,368,394 (56,328) 71,527,582
=========== ========= ======= ==========
<PAGE>
December 31, 1991
_________________________________________________
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
U.S. Treasury securities
and obligations of
U.S. government
corporations and
agencies $29,568,253 1,530,382 _ 31,098,635
Obligations of states
and political
subdivisions 6,400,964 533,884 (62,000) 6,872,848
Corporate securities 8,546,915 345,149 _ 8,892,064
Mortgage-backed
securities 19,511,254 859,725 (17,471) 20,353,508
Other securitie 1,020,777 8,436 (5,744) 1,023,469
___________ _________ ________ __________
$65,048,163 3,277,576 (85,215) 68,240,524
=========== ========= ======== ==========
The amortized cost and estimated market value of debt securities at
December 31, 1992, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
Estimated
Amortized Cost Market Value
Due in one year or less $14,679,943 15,014,634
Due after one year through five years 24,265,262 25,164,344
Due after five years through ten years 5,515,292 5,933,616
Due after ten years 2,985,642 3,109,011
___________ __________
47,446,139 49,221,605
Mortgage-backed securities 21,769,377 22,305,977
___________ __________
$69,215,516 71,527,582
=========== ==========
Proceeds from sales of investments in debt securities during 1992
were $2,193,000. Gross gains of $60,000 were realized on those
sales. Proceeds from sales of investments in debt securities
during 1991 were $482,000, which resulted in gross losses of
$18,000.
Investments in debt securities having an amortized cost of
$21,164,000 and $19,093,000 at December 31, 1992 and 1991,
respectively, were pledged to secure public funds on deposit and
for other purposes as required or permitted by law.
(4) Loans and Allowance for Loan Losses
The composition of the Bank's loan portfolio at December 31,
1992 and 1991, is as follows:
1992 1991
Commercial, industrial, and agricultural $ 54,259,323 46,954,545
Installment 17,455,395 14,725,823
___________ __________
Total 71,714,718 61,680,368
Less:
Allowance for loan losses (1,983,588) (1,415,131)
Unearned discount (167,662) (357,139)
___________ ___________
Loans, net $ 69,563,468 59,908,098
========== ==========
At December 31, 1992 and 1991, the Bank had discontinued the
accrual of interest on loans aggregating approximately
$1,513,000 and $2,158,000, respectively. Net interest
income for 1992 and 1991 would have been higher by
approximately $167,000 and $206,000, respectively, had
interest been accrued at contractual rates on these
nonperforming loans.
On July 19, 1991, the Bank purchased a pool of loans from the
Resolution Trust Corporation acting as conservator for the
People's Homestead Savings Bank, F.S.B., for $4,273,000.
The gross amount owed by the borrowers on these loans was
$4,649,000. The discount associated with the purchased
loans is being amortized on a constant yield basis over each
individual loan's contractual term.
Changes in the allowance for loan losses for the years ended
December 31, 1992 and 1991, are summarized as follows:
1992 1991
Balance, January 1 $ 1,415,131 1,299,786
Provision charged to operating expense 710,000 432,000
Loans charged off (217,336) (406,327)
Recoveries on loans 75,793 89,672
___________ _________
Balance, December 31 $ 1,983,588 1,415,131
=========== =========
During 1992 and 1991, the Bank reduced loans through the
repossession of other real estate and assets in the amount
of approximately $134,000 and $62,000, respectively. Also
during 1990, $927,000 of First Bancorp common stock
representing 35,437 shares was received by the Bank in lieu
of repayment on a loan. First Bancorp purchased 11,812
shares of this stock from the Bank for $302,000 in each year
in the two-year period ended December 31, 1992. First
Bancorp anticipates repurchasing the remaining stock from
the Bank over the next few years. This stock is reflected
as treasury stock in the accompanying First Bancorp balance
sheet.
(5) Premises and Equipment
Premises and equipment at December 31, 1992 and 1991, are summarized as
follows:
Estimated
Useful Life 1992 1991
Land _ $ 424,417 198,417
Buildings and leasehold
improvements 5-40 years 1,593,545 1,127,445
Furniture, fixtures, and
equipment 3-10 years 1,651,808 1,575,634
Automobiles 2-3 years 133,154 126,005
__________ _________
3,802,924 3,027,501
Less accumulated depreciation
and amortization (2,162,625) (1,935,365)
__________ __________
Premises and equipment, net $1,640,299 1,092,136
========== =========
(6) Time Deposits
Included in time deposits at December 31, 1992 and 1991, are $10,750,000
and $11,421,000, respectively, of certificates of deposits in
denominations of $100,000 or more. Interest on certificates of $100,000
or more amounted to $465,000 and $768,000 in 1992 and 1991,
respectively.
(7) Notes Payable
Notes payable at December 31, 1992 and 1991, consists of the following:
1992 1991
Note payable to an unaffiliated bank in quarterly
principal installments of $90,000 plus interest
at a New York bank's prime rate plus 1% (7.0% at
December 31, 1992) through 1997 $1,008,168 1,368,168
Convertible subordinated debentures payable; interest
due semiannually at 10% through 2002 _ 1,000,000
Convertible subordinated debentures payable; interest
due semiannually at 10% through 2002 850,000 _
Employee Stock Ownership Plan commitment consisting of
a note payable to an unaffiliated bank in quarterly
principal installments of $31,280 through 1997 plus
interest at 97% ofa New York bank's prime rate (5.8%
at December 31, 1992) 594,319 719,439
_________ _________
$2,452,487 3,087,607
========= =========
The note payable to an unaffiliated bank is collateralized by
the common stock of the Bank. The loan agreement places
certain restrictions on First Bancorp with respect to
dividends, other distributions to stockholders, future
borrowings, issuance of bank common stock, and other
matters.
During 1992, First Bancorp repurchased the subordinated
debentures which were outstanding at December 31, 1991. In
a separate transaction, First Bancorp issued $850,000 in
convertible, subordinated debentures to certain directors
and officers of the Bank and others. The terms of the new
debentures are the same as the original debentures with the
exception of a change in the conversion price.
The holders of subordinated debentures may elect, upon
maturity, to convert the debentures into shares of First
Bancorp common stock at the conversion price of $26.61 per
share or receive cash equal to the principal amount of the
debentures plus accrued interest. Also, at the option of
the holder, the debentures are convertible into common stock
at the conversion price at any time prior to maturity. At
the option of First Bancorp, the debentures may be redeemed
for cash equal to the principal amount of the debentures
plus accrued interest at any time prior to maturity.
(8) Income Taxes
Federal income tax expense (benefit) applicable to net income
for the years ended December 31, 1992 and 1991, was as follows:
1992 1991
Current $ 974,028 345,291
Deferred (376,239) (40,403)
_________ ________
$ 597,789 304,888
A reconciliation of the expected federal income tax expense,
computed by applying the federal corporate tax rate of 34%,
to income before income tax expense, to actual income tax
expense follows:
1992 1991
Expected federal income tax expense $ 864,692 456,589
Tax-exempt income (142,184) (146,050)
Utilization of alternative minimum tax credit
carryforward (116,768) _
Other (7,951) (5,651)
_________ _______
Actual income tax expense $ 597,789 304,888
========= =======
Effective tax rate 23.5% 22.7
========= =======
The income tax effects of timing differences between financial
and taxable income were as follows:
1992 1991
Depreciation and amortization $ (66,013) 196
Net accretion of discount on investment
securities 1,947 19,162
Provision for loan losses (193,275) (39,217)
Effect of alternative minimum tax (116,768) _
Other (2,130) (20,544)
__________ _______
Deferred income tax benefit $(376,239) (40,403)
========== ========
Current income taxes payable of $74,000 and $160,000 are
included in other liabilities at December 31, 1992 and 1991,
respectively. Included in other assets are deferred income
tax charges of $382,000 and $47,000 at December 31, 1992 and
1991, respectively. The amount of alternative minimum tax
credit carryforward for financial reporting purposes was
$17,000 at December 31, 1992.
(9) Employee Benefit Plan
First Bancorp maintains an Employee Stock Ownership Plan
(ESOP). The Plan covers substantially all employees who
qualify as to age and length of service. Contributions to
the ESOP are at the discretion of the Board of Directors of
First Bancorp; however, contributions, including dividends
received from First Bancorp, must be sufficient to pay any
current obligations of the ESOP. Contributions to the ESOP
of $135,000 and $154,000 are included in salaries and
employee benefits in the consolidated statements of income
for the years ended December 31, 1992 and 1991, respectively.
Depending on the source, the net increase or decrease in Plan
assets for the year is allocated to the account of each plan
participant either based on the ratio of each participant's
account balance at the beginning of the year to the total of
all participant account balances at the beginning of the
year or in the same proportion that each participant's
compensation for the year bears to the total compensation of
all participants for the year. A participant's interest in
his or her account becomes totally vested after completion
of five years of service.
At December 31, 1992 and 1991, the ESOP had outstanding a note
payable to an unaffiliated bank in the amount of
approximately $594,000 and $719,000, respectively, which is
guaranteed by First Bancorp. Interest on this debt amounted
to $41,000 and $69,000 during the years ended December 31,
1992 and 1991, respectively. All interest payments were
made by the ESOP. The borrowing is secured by 25,024 shares
of First Bancorp's common stock and is payable in quarterly
installments of $31,280 through 1997, plus interest at 97%
of a New York bank's prime rate (5.8% at December 31, 1992).
At December 31, 1992 and 1991, the ESOP owned 67,810 and
75,534 shares, respectively, of First Bancorp common stock.
(10) Regulatory Matters
Applicable federal regulations impose restrictions on the
amounts of dividends that may be declared by First Bancorp
and the Bank. In addition to the formal statutes and
regulations, regulatory authorities also consider the
adequacy of the Bank's total capital in relation to its
assets, deposits, and other such items. Capital adequacy
considerations could further limit the availability of
dividends from the Bank.
National banks are required to obtain approval of the
Comptroller of the Currency if dividends declared in any
year exceed the profits of that year combined with the net
retained profits of the preceding two years. During 1992
and 1991, the Bank paid dividends to First Bancorp totaling
$850,000 and $1,200,000, respectively. Prior approval of
the regulatory authorities will be required during 1993, if
the amount to be paid as dividends exceeds profits for the
same period plus $1,190,000 available for payment at
December 31, 1992.
The Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") was signed into law on December 19, 1991.
The prompt corrective actions of FDICIA place restrictions
on any insured depository institution that does not meet
certain requirements, including minimum capital ratios. The
restrictions are based on an institution's FDICIA defined
capital category and become increasingly more severe as an
institution's capital category declines. In addition to the
prompt corrective action requirements, FDICIA includes
significant changes to the legal and regulatory environment
for insured depository institutions, including reductions in
insurance coverage for certain kinds of deposits, increased
supervision by the federal regulatory agencies, increased
reporting requirements for insured institutions, and new
regulations concerning internal controls, accounting, and
operations.
The prompt corrective action regulations define specific
capital categories based on an institution's capital ratios.
The capital categories, in declining order, are "well
capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," and "critically
undercapitalized." To be considered "well capitalized," an
institution is required to have at least a 5% leverage
ratio, a 6% Tier I risk-based capital ratio, and a 10% total
risk-based capital ratio. However, the regulatory agencies
may impose higher minimum standards on individual
institutions or may downgrade an institution from one
category because of safety and soundness concerns.
At December 31, 1992, the Bank's leverage ratio was 8.2%, Tier
I risk-based ratio was 14.3%, total risk-based ratio was
15.6%, and tangible equity ratio was 8.2%.
(11) Related Parties
The Bank enters into various loans and other transactions in
the ordinary course of business with its directors,
executive officers, and some of their related business
interests. The loans and other transactions are made on
substantially the same terms as those prevailing at the time
for comparable loans and similar transactions with other
persons. Certain officers and directors and entities in
which these individuals were principals were indebted to the
Bank in the aggregate amount (net of participation loans
sold) of $1,874,000 and $1,841,000 at December 31, 1992 and
1991, respectively.
(12) Supplemental Cash Flow Information
During 1992 and 1991, First Bancorp paid to depositors and
other banks interest payments of $5,548,000 and $6,983,000,
respectively. Also during 1992 and 1991, First Bancorp paid
to the Internal Revenue Service $1,019,000 and $255,000 in
tax payments, respectively.
(13) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments"
requires that First Bancorp disclose estimated fair values
for its financial instruments. Fair value estimates,
methods, and assumptions are set forth below for First
Bancorp's financial instruments.
Cash and Cash Equivalents and Other Short-Term Investments _
For those short-term investments, the carrying amount is a
reasonable estimate of fair value.
Investment Securities _ The fair value, which approximates the
estimated market values, of longer-term investments and
mortgage-backed securities, except certain state and
municipal securities, is estimated based on bid prices
published in financial newspapers or bid quotations received
from securities dealers. The fair value, which approximates
the estimated market values, of certain state and municipal
securities is not readily available through market sources
other than dealer quotations, so fair value estimates are
based on quoted market prices of similar instruments,
adjusted for differences between the quoted instruments and
the instruments being valued.
Loan Receivables _ Fair values are estimated for portfolios of
loans with similar financial characteristics. Loans are
segregated by type such as commercial, commercial real
estate, residential mortgage, and consumer. The carrying
amount of performing loans that were funded or will mature
within three months of the balance sheet date approximate
the fair value of those loans. Additionally, the carrying
amount of adjustable rate loans that reprice within ninety
days also approximate the fair value of those loans. The
fair value of the remaining performing and nonperforming
loans is calculated by discounting scheduled cash flows
through the estimated maturity using estimated market
discount rates that reflect the credit and interest rate
risk inherent in the loan. The estimate of maturity is
based on First Bancorp's historical experience with
repayments for each loan classification, modified, as
required, by an estimate of the effect of current economic
and lending conditions.
Deposit Liabilities and Repurchase Agreements _ The fair value
of deposits with no stated maturity, such as noninterest-
bearing demand deposits, savings, NOW accounts, money market
accounts, and repurchase agreements is equal to the amount
payable as of December 31, 1992. The fair value of
certificates of deposit is based on the discounted value of
contractual cash flows. The discount rate is estimated
using the rates currently offered for deposits of similar
remaining maturities.
Notes Payable _ The carrying amount of First Bancorp's notes
payable approximate fair value as the note payable to a bank
and the Employee Stock Ownership Plan commitment adjust for
changes in current interest rates. Additionally, the
carrying amount of First Bancorp's subordinated debentures
also approximate fair value as First Bancorp has determined
that the original terms in which the subordinated debentures
were issued would not be significantly different from the
terms of new debentures if such were to be issued at year
end.
Interest Accruals _ The fair value of First Bancorp's accrued
interest receivable and accrued interest payable amounts
approximate their carrying value due to the short maturity
of these financial instruments.
The estimated fair values of First Bancorp's financial
instruments at December 31, 1992 are as follows:
Carrying Estimated
Amount Fair Value
Financial assets:
Cash and due from banks $ 11,815,310 11,815,310
Federal funds sold and other
temporary investments 825,000 825,000
Interest-bearing deposits with
financial institutions 1,077,474 1,077,474
Investment securities 69,215,516 71,527,582
Loans, net 69,563,468 70,090,806
Accrued interest receivable 1,518,937 1,518,937
Financial liabilities:
Deposits:
Demand, noninterest-bearing 26,975,743 26,975,743
Money market and NOW accounts 33,391,507 33,391,507
Savings 11,772,828 11,772,828
Time 68,654,612 68,983,458
Notes payable 2,452,487 2,452,487
Accrued interest payable 350,295 350,295
Securities sold under agreements to
repurchase 1,700,513 1,700,513
Fair value estimates are made at a specific point in time,
based on relevant market information and information about
the financial instrument. These estimates do not reflect
any premium or discount that could result from offering for
sale at one time First Bancorp's entire holdings of a
particular financial instrument. Because no market exists
for a significant portion of First Bancorp's financial
instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic
conditions, risk characteristics of various financial
instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and matters
of significant judgment and therefore cannot be determined
with precision. Changes in assumptions could significantly
affect the estimates.
Fair value estimates are based on existing on- and off-balance
sheet financial instruments without attempting to estimate
the value of anticipated future business and the value of
assets and liabilities that are not considered financial
instruments.
(14) Financial Instruments With Off-Balance Sheet Risk
The Bank is a party to financial instruments with off-balance
sheet risk in the normal course of business to meet the
financing needs of its customers. These financial
instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying
degrees, elements of credit risk in excess of the amount
recognized in the balance sheet. The contractual or
notional amounts of those instruments reflect the extent of
involvement the Bank has in particular classes of financial
instruments.
The Bank's exposure to credit loss in the event of
nonperformance by the other party to the financial
instrument for commitments to extend credit and standby
letters of credit is represented by the contractual or
notional amount of those instruments. The Bank uses the
same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments.
Contractual or
Notional Amount
at December 31, 1992
Financial instruments whose contract amounts
represent credit risk:
Aggregate commitments to extend credit $ 10,730,000
Less amounts previously funded 6,022,000
____________
Net commitments unfunded $ 4,708,000
============
Standby letters of credit $ 998,000
============
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the contract. Commitments generally have
fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of
collateral obtained if deemed necessary by the Bank upon
extension of credit is based on management's credit
evaluation of the counterparty. Collateral held varies but
may include accounts receivable; inventory; property, plant,
and equipment; real estate; and income-producing commercial
properties.
Standby letters of credit are conditional commitments issued
by the Bank to guarantee the performance of a customer to a
third party. Those guarantees are primarily issued to
support public and private short-term borrowing
arrangements. The credit risk involved in issuing letters
of credit is essentially the same as that involved in
extending loan facilities to customers. The Bank holds
collateral supporting those commitments for which collateral
is deemed necessary.
(15) Concentration of Credit Risk
The Bank grants real estate, commercial, industrial, and
agricultural loans to customers primarily in northeast
Louisiana. Although the Bank has a diversified loan
portfolio, a substantial portion (approximately 58%) of its
loans, although not always funded for such purpose, are
secured by real estate and its ability to fully collect its
loans is dependent upon the real estate market in this
region. The Bank typically requires collateral sufficient
in value to cover the principal amount of the loan. Such
collateral is evidenced by mortgages on property held and
readily accessible to the Bank.
<PAGE>
FIRST BANCORP OF LOUISIANA, INC. AND SUBSIDIARY
Consolidated Balance Sheets
Unaudited ($ in thousands)
September 30 September 30
Assets 1993 1992
Cash and due from banks $9,785 $7,907
Federal funds sold and securities purchased
under agreements to resell 6,700 300
Total Cash and Cash Equivalents $16,485 $8,207
Interest-bearing deposits with financial institutions 1,077 1,262
Investment securities 103,636 68,032
Loans, (net of allowance for loan losses of
$1,511 and 1,865 at September 30, 1993 and 1992
respectively) 97,719 66,744
Premises and equipment, net 2,008 1,531
Accrued interest receivable 2,818 1,903
Real Estate Owned 116 151
Other assets 2,089 1,674
Total Assets $224,871 $148,242
Liabilities and Stockholders' Equity
Deposits
Demand, noninterest bearing $28,435 $20,516
Money Market and NOW accounts 45,819 30,093
Savings 19,074 10,853
Time $101,966 $69,692
Total Deposits $195,294 $131,154
Notes payable 5,800 2,574
FHLB Advances Payable 3,920
Federal Funds purchased and securities sold under
agreements to repurchase 5,270 2,856
Accrued interest payable 829 593
Other Liabilities 951 619
Total Liabilities $212,065 $137,796
Stockholders' equity:
Common stock, par value $5 per share. 1,000,000
shares authorized; 272,700 shares issued 1,363 1,363
Capital surplus 6,744 6,744
Retained earnings 6,839 4,545
Treasury stock, 65,088 and 63,081 shares in 1993
and 1992, respectively, at cost (1,639) (1,580)
Employee Stock Ownership Plan commitment (500) (626)
Total Stockholders' Equity $12,807 $10,446
Total Liabilities and Stockholders' Equity $224,871 $148,242
See accompanying notes to consolidated financial statements.
<PAGE>
FIRST BANCORP OF LOUISIANA, INC. AND SUBSIDIARY
Consolidated Statements of Income
Unaudited ($ in thousands, except per share data)
3 months ended 9 months ended
September 30 September 30
1993 1992 1993 1992
Interest Income $1,917 $1,575 $5,192 $4,676
Loans, including fees
Investment securities:
US goverment and agency obligations 558 613 1,533 1,889
Mortgage-backed 409 433 1,184 1,298
Obligations of states and political
subdivisions 123 137 360 422
Other 180 204 544 606
Deposits with finanacial institutions 25 31 75 104
Federal funds sold and other 72 7 136 125
Total interest income 3,284 3,000 9,024 9,120
Interest expense
Deposits:
Time 743 773 2,023 2,703
Money Market and NOW accounts 265 237 699 752
Savings 95 91 254 279
Notes payable 50 45 114 145
Other 73 27 156 56
Total interest expense 1,226 1,173 3,246 3,935
Net interest income 2,058 1,827 5,778 5,185
Provision for loan losses (145) 250 (145) 590
Net interest income after provision
for loan losses 2,203 1,577 5,923 5,775
Other operating expenses:
Customer service charges 197 164 558 484
Other charges and commissions 157 105 536 485
Investment securities gains
(losses), net 52 24 52 24
Total other operating income 406 293 1,146 993
Other operating expenses:
Salaries and employee benefits 770 648 2,056 1,757
Occupancy and equipment 239 253 708 633
Other operating rexpenses 558 465 1,557 1,301
Total other operating expenses 1,567 1,366 4,321 3,691
Income before income tax expense 1,042 504 2,748 1,897
Income tax expense 301 136 825 538
Net income $741 $367 $1,923 $1,359
Net income per share
Average common shares outstanding $3.57 $1.75 $9.22 $6.33
Average common shares outstanding
assuming full dilution $3.12 $1.50 $8.03 $5.33
See accompanying notes to consolidated financial statements.
<PAGE>
FIRST BANCORP OF LOUISIANA, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Unaudited ($ in thousands)
For the 9 months ended
September 30, 1993 and 1992
Employee Stock
Common Capital Retained Treasury Ownership Plan Stockholders'
Stock Surplus Earnings Stock Commitment Equity
Balance,
December 31,
1992 $1,363 $6,744 $5,020 ($1,585) ($594) $10,948
Purchase of
1,536 shares of
common stock as
treasury stock (54) (54)
Cash dividends
declared (104) (104)
Reduction of
commitment to
ESOP 94 94
Net income 1,923 1,923
Balances at
September 30,
1993 $1,363 $6,744 $6,839 ($1,639) ($500) $12,807
Balances at
December 31,
1991 $1,363 $6,744 $3,186 ($1,310) ($720) $ 9,263
Purchase of
10,814 shares
of common
stock as
treasury stock (270) (270)
Reduction of commitment to ESOP 94 94
Net Income 1,359 1,359
Balances at
September 30,
1992 $1,363 $6,744 $4,545 ($1,580) ($626) $10,446
<PAGE>
FIRST BANCORP OF LOUISIANA, INC AND SUBSIDIARY
Consolidated Statements of Cash Flows
Unaudited ($ in thousands)
9 months ended
September 30
1993 1992
Operating Activities
Net Income $1,923 $1,359
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses (145) 590
Provision for depreciation and amortization 248 360
Net amortization of investment securities 84 20
Loss (gain) on sales of investment securities (52) (24)
Gains on sales of premises and equipment and
other asset (115) (63)
Decrease (increase) in accrued interest receivable (342) (292)
Decrease (increase) in other assets (86) (51)
Increase (decrease) in accrued interest payable 239 (313)
Increase (decrease) in other liabilities (48) 255
Net Cash Provided by Operating Activities 1,706 1,841
Investing Activities
Net decrease in interest-bearing deposits with
financial institutions 0 876
Proceeds from sales of investment securities 2,068 1,219
Proceeds from maturities and principal paydowns of
investment securities 14,005 13,515
Purchases of investment securities (16,863) (17,713)
Net increase in loans (7,063) (7,587)
Proceeds from sales of premises and equipment and
other assets 214 279
Purchases of premises and equipment (170) (799)
Cash paid to purchase subsidiary bank,
net of cash received (2,813) 0
Net cash used by investing actvities (10,622) (10,210)
Financing activities:
Net increase (decrease) in deposits 2,322 (4,597)
Net increase in Federal Funds Purchased
and obligations under repurchase agreements 3,235 1,637
Cash dividends paid (104) 0
Payments to acquire treasury stock (54) (270)
Proceeds from notes payable 8,500 850
Payments on notes payable (5,058) (1,270)
Net increases in FHLB advances 3,920 0
Net cash provided by financing activities 12,761 (3,650)
Increase (decrease) in cash and cash equivalents 3,845 (12,019)
Cash and cash equivlants at beginning of year 12,640 20,226
Cash and cash equivalents at end of year $16,485 $ 8,207
See accommpanying notes to consolidated financial statements.
<PAGE>
FIRST BANCORP OF LOUISIANA, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Unaudited ($ in thousands)
NOTE 1 - Income Taxes
Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." As permitted by SFAS No 109, the Company elected
not to restate the financial statements of any prior years. The
effect of the change on pre-tax income from continuing operations
for the none months ended September 30, 1993 was not material,
however the cumulative effect of the change increased net income by
$49.
Components of Deferred Tax Assets and Liabilities
At January 1, 1993
(in thousands)
Deferred Tax Assets
Reserve for loan losses 449
Depreciation 68
Foreclosed assets 14
Total deferred tax assets 531
Deferred tax liabilities
Discount Accretion - Investments 73
Total deferred tax liabilities 73
Total net deferred tax asset $458
NOTE 2 - Per Share Data and Market Value of Stock
Net income per average share outstanding is calculated based on the
weighted average number of shares outstanding during the year. The
average number of shares outstanding for the nine months ended
September 30, 1993 and 1992 was 208,465 and 214,458, respectively.
Net income per average share outstanding assuming full dilution
also considers the impact of conversion of First Bancorp's
subordinated debentures into common shares as of the beginning of
each year. The average number of shares outstanding during the
nine months ended September 30, 1993 and 1992 was 240,408 and
254,305 respectively.
There is not an established public trading market for the Company's
common stock. However, an annual valuation of the stock is
prepared for the Employee Stock Ownership Plan. As of December 31,
1992 the value of the Company's common stock was estimated to be
$34.66.
NOTE 3 - Non-Performing Loans
September 30 December 31
1993 1992 1992 1991
Nonaccrual loans $ 832 $1,787 $1,513 $2,158
Restructured loans 631 954 908 802
______ ______ ______ ______
Total nonperforming loans $1,463 $2,741 $2,421 $2,960
====== ====== ====== ======
Accruing loans past due
ninety days or more $ 335 $ 319 $ 324 $ 61
====== ====== ====== ======
When the payment of principal or interest on a loan is delinquent
for 120 days, or earlier in some cases, the loan is placed on
nonaccrual status, unless the loan is in the process of collection
and the underlying collateral fully supports the carrying value of
the loan. If the decision is made to continue accruing interest on
the loan, periodic reviews are made to confirm the accruing status
of the loan. When a loan is placed on nonaccrual status, interest
accrued during the current year prior to the judgement of
uncollectibility is charged to operations. Interest accrued during
prior periods is charged to the allowance for loan losses.
Generally, any payments received on nonaccrual loans are applied
first to outstanding loan amounts and next to the recovery of
charged-off loan amounts. Any excess is treated as recovery of
lost interest.
Interest income in the amount of $148 would have been recorded on
nonaccrual loans during the nine months ended September 30, 1993 if
they had been performing in accordance with their contractual
terms. During the nine months ended September 30, 1993, the
company recorded no interest income on nonaccrual loans.
In addition to the nonperforming loans disclosed above, management
has identified loans totalling $292 thousand for which payments are
current, but which, in management's opinion, are subject to
potential future classification as non-performing or past due.
NOTE 4 - Acquisition
On August 31, 1993, First Bancorp acquired Southern National Bank
at Tallulah for $9,156. Assets purchased included $2,366 of cash
and due from banks, $33,662 of investment securities, $21,034 of
loans, $446 of bank premises, furniture and fixtures, and $1,112 of
other assets. Liabilities assumed included $52,177 of deposits,
$334 of Federal Funds sold and securities sold under agreements to
repurchase and $928 of accrued interest payable and other
liabilities. The purchase method of accounting was used to record
the acquisition. Operations of Southern National Bank prior to the
acquisition are not included in these consolidated financial
statements.
<PAGE>
FIRST BANCORP OF LOUISIANA, INC. AND SUBSIDIARY
Quarterly Income Results
Unaudited ($ in thousands, except per share amounts)
1993
I II III IV
Interest income 2,863 2,877 3,284
Net interest income 1,863 1,857 2,058
Net income 578 604 741
Net income per share
Average common shares outstanding $2.76 $2.89 $3.57
Average common shares outstanding assuming
full dilution $2.40 $2.51 $3.12
1992
I II III IV
Interest income $3,054 $3,065 3,000 2,940
Net interest income 1,596 1,762 1,827 1,882
Net income 569 423 367 588
Net income per share
Average common shares outstanding $2.60 $1.97 $1.75 $2.80
Average common shares outstanding assuming
full dilution $2.18 $1.65 $1.50 $2.43
1991
I II III IV
Interest income $2,786 $2,821 $3,063 $3,202
Net interest income 995 1,079 1,304 1,521
Net income 178 248 284 328
Net income per share
Average common shares outstanding $0.79 $1.11 $1.28 $1.49
Average common shares outstanding assuming
full dilution $0.67 $0.93 $1.10 $1.30
ARTHUR ANDERSEN & CO.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
First Continental Bancshares, Inc.:
We have audited the accompanying consolidated statements of
condition of First Continental Bancshares, Inc. (a Louisiana
corporation) (the Company) and subsidiary as of December 31, 1993
and 1992, and the related consolidated statements of income
(loss), cash flows and shareholders' equity for each of the three
years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
As discussed in Note 2, the Company does not currently meet
minimum regulatory capital standards. During 1993, the Company
was required to submit a capital plan to the Federal Reserve
Board (FRB). The plan was submitted in March, 1993, but it was
not accepted by the FRB due to capital ratios (as reflected in
the plan) remaining below the minimum regulatory guidelines until
1996. As a result, the Company considered other strategic
alternatives which ultimately led to an agreement to merge with
Hibernia Corporation, as further discussed in Note 1. The
merger, which has been approved by the Company's Board of
Directors, is subject to, among other things, regulatory and
shareholder approval, and if approved, is expected to be
completed in 1994. Also, as discussed in Note 2, during 1991 the
Company's subsidiary, First National Bank of Jefferson (the
Bank), entered into a Formal Agreement with the Office of the
Comptroller of the Currency (the OCC) which requires, among other
things, that the Bank not declare or pay dividends without prior
approval in writing by the OCC and that the Bank maintain certain
minimum capital ratios which it met at December 31, 1993 and
1992.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of First Continental Bancshares, Inc. and
subsidiary as of December 31, 1993 and 1992, and the results of
their operations and cash flows for each of the three years in
the period ended December 31, 1993, in conformity with generally
accepted accounting principles.
As discussed in Notes 3, 7, and 16 to the financial statements,
effective January 1, 1993, the Company changed its methods of
accounting for investment securities, income taxes, and post-
retirement benefits other than pensions.
s/ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
New Orleans, Louisiana
February 14, 1994
First Continental Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CONDITION
December 31, 1993 and 1992
(In Thousands) 1993 1992
ASSETS
Cash and Due from Banks $ 13,141 $ 16,964
Investment Securities:
U.S. Treasury Securities
and Obligations of U.S.
Government Agencies 34,223 26,675
Mortgage-Backed Securities
(guaranteed by government
agencies and corporations) 91,883 70,698
State and Political Subdivisions 289 -
Federal Reserve Bank Stock and
Other Securities 1,312 705
Total Investments (fair
value of approximately
$128,549 in 1993
and $100,418 in 1992) 127,707 98,078
Federal Funds Sold 22,000 17,200
Loans 223,093 232,958
Reserve for Possible Loan Losses (6,590) (6,261)
Net Loans 216,503 226,697
Bank Premises and Equipment, Net 6,051 6,193
Accrued Interest Receivable 1,933 1,970
Other Real Estate and Foreclosed
Property, Net 7,630 22,395
Other Assets 2,075 824
Goodwill 2,872 3,697
TOTAL ASSETS $399,912 $394,018
LIABILITIES
Deposits:
Interest-Free $ 60,999 $ 59,946
Money Market 52,268 54,053
Savings & NOW 85,431 86,844
Time 146,317 145,183
Interest-Bearing Deposits from
Affiliated Banks 335 1,169
Total Deposits 345,350 347,195
Short-Term Borrowings 13,234 14,149
Notes Payable 5,884 5,444
Mandatory Convertible Debentures 6,000 6,000
Accrued Interest Payable 7,379 5,711
Other Liabilities 4,668 2,569
TOTAL LIABILITIES 382,515 381,068
SHAREHOLDERS' EQUITY
Preferred Stock - 500,000 shares
authorized; 140,000 shares
designated as Class A Cumulative
Convertible Preferred Stock
- par value $1 per share; 135,974
shares issued and outstanding 11,422 11,422
Common Stock - par value $1 per share,
5,000,000 shares authorized;
2,145,151 shares issued, of which
17,055 are held as treasury stock
at December 31, 1993 and 1992 2,145 2,145
Surplus 2,741 2,741
Unrealized Gain on Available-For-Sale
Securities 807 -
Accumulated Earnings (Losses) 400 (3,240)
Treasury Stock (118) (118)
TOTAL SHAREHOLDERS' EQUITY 17,397 12,950
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $399,912 $394,018
The accompanying notes are an integral part of these statements.
First Continental Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
For The Years Ended December 31, 1993, 1992 and 1991
(In Thousands Except for Per
Share Data) 1993 1992 1991
INTEREST INCOME:
Interest and Fees on Loans $ 22,636 $ 24,612 $ 26,672
Interest on Investments:
U. S. Government & Agencies 1,846 1,612 967
Mortgage-Backed Securities 5,044 5,405 4,894
State and Political
Subdivisions 13 2 6
Interest on Federal Funds
Sold & Other 446 549 984
Total Interest Income 29,985 32,180 33,523
INTEREST EXPENSE:
Interest on Deposits:
Money Market 1,171 1,794 2,677
Savings and NOW 1,423 2,359 3,606
Time 6,636 8,016 11,362
Interest on Short-Term
Borrowings 289 322 543
Interest on Note Payable
and Debentures 1,753 1,353 1,250
Total Interest Expense 11,272 13,844 19,438
NET INTEREST INCOME 18,713 18,336 14,085
PROVISION FOR POSSIBLE
LOAN LOSSES 725 1,152 1,800
NET INTEREST INCOME AFTER
PROVISION FOR
POSSIBLE LOAN LOSSES 17,988 17,184 12,285
OTHER INCOME:
Service Charges on
Deposit Accounts 2,755 2,726 2,629
Other Charges,
Commissions and Fees 1,580 1,557 1,439
Other Operating Income 424 592 463
Security Gains 24 20 179
Total Other Income 4,783 4,895 4,710
OTHER EXPENSES:
Salaries and Employee Benefits 8,087 7,034 6,954
Net Occupancy Expense 1,472 1,470 1,750
Litigation Loss (Recovery), Net 92 255 (176)
Other Real Estate Expenses 5,213 6,554 3,685
Other Operating Expenses 5,837 6,084 5,310
Total Other Expenses 20,701 21,397 17,523
INCOME (LOSS) BEFORE
MINORITY INTERESTS 2,070 682 (528)
Less: Minority Interest -0- -0- 311
INCOME (LOSS) BEFORE INCOME TAXES,
EXTRAORDINARY ITEMS AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 2,070 682 (839)
Provision for Income Taxes 1,052 232 -0-
Income (Loss) Before
Extraordinary Items and
Cumulative Effect of Change
in Accounting Principle 1,018 450 (839)
Extraordinary Items:
Gain on Extinguishment of
Debt, Net of Tax -0- 11,345 -0-
Utilization of Net Operating
Loss Carryforward -0- 5,996 -0-
Net Income (Loss) Before
Cumulative Effect of Change
in Accounting Principle 1,018 17,791 (839)
Cumulative Effect of Change
in Accounting Principle -
(Adoption of SFAS 109) 2,622 -0- -0-
Net Income (Loss) 3,640 17,791 (839)
PREFERRED STOCK DIVIDENDS
AND ACCRUED INTEREST (2,053) (1,994) (2,033)
NET INCOME (LOSS)
APPLICABLE TO
COMMON STOCK $ 1,587 $ 15,797 $ (2,872)
The accompanying notes are an integral part of these statements.
First Continental Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME (LOSS) - (Continued)
For The Years Ended December 31, 1993, 1992 and 1991
(In Thousands Except for Per Share Data) 1993 1992 1991
PRIMARY EARNINGS (LOSS) PER SHARE:
Earnings (Loss) Per Common Share
Assuming No Dilution:
Income (Loss) Before Extraordinary
Items and Cumulative Effect of
Change in Accounting Principle $ .48 $ .21 $ (.39)
Extraordinary Items -0- 8.15 -0-
Change in Accounting Principle 1.23 -0- -0-
Preferred Stock Dividends and
Accrued Interest (.96) (.94) (.96)
Net Income (Loss) Applicable
to Common Stock $ .75 $7.42 $(1.35)
FULLY-DILUTED EARNINGS PER SHARE:
Earnings Per Common Share Assuming Full Dilution:
Income Before Extraordinary Items and
Cumulative Effect of Change in
Accounting Principle $ N/A $ .33 $ N/A
Extraordinary Items N/A 4.71 N/A
Change in Accounting Principle N/A -0- N/A
Net Income Applicable to
Adjusted Common Stock
Outstanding $ N/A $5.04 $ N/A
The accompanying notes are an integral part of these statements.
First Continental Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 1993, 1992 and 1991
(In Thousands) 1993 1992 1991
OPERATING ACTIVITIES:
Net Income (Loss) $ 3,640 $ 17,791 $ (839)
Minority Interest - - 311
Adjustments to Reconcile
Net Income (Loss) to
Net Cash Provided by
Operating Activities:
Gain on Extinguishment of
Debt, Pretax - (17,190) -
Cumulative Effect of Change
in Accounting Principle (2,622) - -
Provision for Possible Loan
Losses 725 1,152 1,800
Provision for Other Real
Estate Losses and Write-Down
to Market Value 4,235 5,253 2,736
Depreciation 371 460 720
Provision for (Recovery
of) Litigation Loss 92 255 (176)
Amortization of Purchase
Adjustments 825 826 843
Amortization (Accretion)
of Security
Premium and Discount 364 452 191
Accretion of Senior
Debentures and Note
Payable 440 392 350
(Gain) Loss on Sale/Valuation
of Investments (24) 57 (179)
(Gain) Loss on Sale of Other
Real Estate (350) (205) 314
Decrease (Increase) in Accrued
Interest Receivable 37 209 580
Increase (Decrease) in Accrued
Interest Payable 1,668 540 (516)
Increase (Decrease) in
Other Liabilities 2,007 (498) (1,140)
Decrease (Increase) in
Other Assets 955 (38) 162
Net Cash Provided by Operating
Activities 12,363 9,456 5,157
INVESTING ACTIVITIES:
Proceeds From Sales of
Investment Securities 15 520 19,669
Proceeds From Maturities and
Calls of Investment Securities 52,436 36,449 7,144
Purchases of Investment
Securities (81,197) (44,677) (49,106)
Net Change in Loan Portfolio 5,458 (5,016) 16,107
Net Change in Federal
Funds Sold (4,800) (7,200) (5,000)
Proceeds From Sale of Other
Real Estate Owned 14,891 11,275 2,354
Net Purchases of Premises
and Equipment (229) (139) (48)
Net Cash Provided by (Used in)
Investing Activities (13,426) (8,788) (8,880)
FINANCING ACTIVITIES:
Net Increase (Decrease)
in Interest-Free,
Money Market, Savings
and NOW Deposits (2,979) 4,653 13,960
Net Increase (Decrease) in
Certificates of Deposit 1,134 (18,171) (7,732)
Net Increase (Decrease) in
Short-Term Borrowings (915) 7,289 (3,828)
Proceeds From Issuance of
Long-Term Debt - 5,400 -
Repayment of Long-Term Debt - (4,200) -
Net Cash Provided by (Used in)
Financing Activities (2,760) (5,029) 2,400
NET INCREASE (DECREASE)
IN CASH AND
CASH EQUIVALENTS (3,823) (4,361) (1,323)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 16,964 21,325 22,648
CASH AND CASH EQUIVALENTS AT
END OF YEAR $13,141 $16,964 $21,325
Cash Paid During the Year
for (in thousands):
Interest $ 9,164 $12,914 $19,954
Income Taxes 119 81 -
The accompanying notes are an integral part of these statements.
<TABLE>
<CAPTION>
First Continental Bancshares, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY (DEFICIT)
For The Years Ended December 31, 1993, 1992 and 1991
(In Thousands)
Unrealized Gain
on Available-For-
Preferred Stock Common Stock Surplus Sale Securities Treasury Stock Accumulated
Earnings
Shares Amount Shares Amount Amount Amount Shares Amount (Losses)
BALANCE,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/90 136 $11,422 2,145 $2,145 $2,741 $ - (17) $(118) $(20,192)
Net Loss-
1991 (839)
BALANCE,
12/31/91
136 11,422 2,145 2,145 2,741 - (17) (118) (21,031)
Net Income-
1992 17,791
BALANCE,
12/31/92 136 11,422 2,145 2,145 2,741 - (17) (118) (3,240)
Net Income-
1993 3,640
Unrealized
Gains 807
BALANCE,
12/31/93 136 $11,422 2,145 $2,145 $2,741 $ 807 (17) $(118) $ 400
The accompanying notes are an integral part of these statements.
</TABLE>
First Continental Bancshares, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended December 31, 1993, 1992 and 1991
NOTE 1. MERGER PLAN.
On December 4, 1993, First Continental Bancshares, Inc.
(the "Company") and Hibernia Corporation ("Hibernia") entered
into an Agreement and Plan of Merger (the "Agreement") pursuant
to which the Company would merge within and into Hibernia and
each outstanding share of the Company's Class A Cumulative
Convertible Preferred Stock (see Note 11) would be converted into
and become exchangeable for a combination of cash and Hibernia
Class A Common Stock ("Hibernia Common Stock") with an aggregate
value of approximately $118 per share (as of March 31, 1994) and
each outstanding share of the Company's Common Stock would be
converted into and become exchangeable for 1.4 to 2 shares of
Hibernia Common Stock, depending on the price of Hibernia Common
Stock prior to closing, valued at $12 per share. All outstanding
Class A and Class B Senior Secured Notes due 1997 (see Note 10)
and 12% Mandatory Convertible Subordinated Debentures due
November 15, 1996 (see Note 10) of the Company will be redeemed
at par plus accrued and unpaid interest, and premiums, if any.
The merger is subject, among other things, to receipt of
regulatory and shareholder approvals, and is currently expected
to be completed during the second or third quarter of 1994.
NOTE 2. REGULATORY MATTERS, CAPITAL AND DIVIDEND RESTRICTIONS.
The Company and its wholly-owned subsidiary, the First
National Bank of Jefferson Parish (the "Bank" or "FNJ") are
subject to regulatory risk-based capital guidelines. In the
risk-based capital computation, all assets are weighted based
upon assigned risk factors, and certain off-balance sheet items
are included, such as loan commitments and standby letters of
credit. Capital is separated into two categories, Tier 1 and
Tier 2, which combine for Total Capital. Tier 1 consists of
common stockholders' equity and a portion of the Company's
perpetual Preferred Stock. Tier 2 capital consists of portions
of the allowance for loan losses and subordinated debt, subject
to certain limitations. The regulators have also issued capital
leverage guidelines. The leverage ratio consists of Tier 1
capital as a percent of average total assets. Unrealized gain
attributable to implementation of Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," (see Note 3 and Note
7), although included in shareholders' equity, is not included
for regulatory capital ratio computation purposes. Additionally,
as required, portions of the Company's deferred tax assets have
been excluded from the capital ratios reflected below.
The Company's capital ratios are not in compliance with
regulatory requirements, and were as follows at December 31, 1993
and 1992, respectively:
Regulatory
Requirement
12/31/93 12/31/93 12/31/92
Tier 1 Capital 4.00% 1.18% (0.63%)
Total Capital 8.00% 2.36% (0.63%)
Leverage Ratio 4.00% .72% (0.42%)
Formal Agreement with the OCC
The Bank and the OCC entered into a Formal Agreement on May
23, 1991, under which the Bank agreed, among other things, that
it would not declare or pay any dividends unless the dividend
payment is in compliance with applicable laws, has been approved
in writing by the OCC and is consistent with the minimum capital
levels contained in the Bank's capital plan established pursuant
to the Formal Agreement. The Formal Agreement was amended on
January 9, 1992 to require the Bank to achieve by March 1, 1992
either Tier 1 capital equal to 5.5% of risk-weighted assets
("Tier 1 Capital Ratio") and 5% of average adjusted total assets
("Leverage Ratio") or alternate capital ratios specified in a
capital plan approved by the OCC, and, within 60 days, to develop
and submit to the OCC a three-year capital plan.
The Bank submitted its three-year capital plan in March 1992
and a revised capital plan in early 1993 which reflected capital
ratios at December 31, 1992 exceeding those required in the
Formal Agreement. The Plan was approved by the OCC in July 1993.
The Bank's capital ratios required by the Formal Agreement
and at December 31, 1993 and 1992, respectively, were:
Required
by Formal
Agreement 12/31/93 12/31/92
Tier 1 Capital 5.5% 12.35% 8.74%
Total Capital N/A 13.62% 10.00%
Leverage Ratio 5.0% 7.59% 5.72%
The Bank is in substantial compliance with the requirements of
the Formal Agreement, as amended.
<PAGE>
Examination by the Federal Reserve Board (FRB); Certain
Regulatory Impositions on Company
In November 1992, the FRB conducted an examination of the Company
and a copy of the examination report was provided to the
Company's Board of Directors in February 1993. In this report,
the FRB noted that the consolidated capital levels remain below
regulatory minimums and that management should act immediately to
rectify this problem. The FRB requested the Company to submit a
capital plan by March 31, 1993, that would bring the Company's
capital to a satisfactory level. The Company submitted a revised
capital plan to the FRB in March 1993. Upon review, the FRB
determined that the Plan was unacceptable because the capital
ratios remained below the minimum regulatory guidelines until
1996. The Company subsequently retained a consultant to assist
in addressing this issue and to review the Company's strategic
alternatives. This process ultimately led to the definitive
agreement to merge with Hibernia discussed in Note 1.
Because of the Company's financial condition, the FRB requested
the Board of Directors to adopt a Board resolution that
acknowledged the continuation of the no debt/no dividend letter
issued on June 11, 1986 by the FRB and contains, among other
things, the following: (i) no additional debt incurrence without
FRB approval; (ii) no payment of dividends to shareholders
without prior written approval from the FRB, (iii) no Treasury
Stock repurchases, (iv) quarterly Company reporting to the FRB,
(v) subsidiary reporting to the FRB, (vi) quarterly written
progress reports to the FRB, and (vii) the appointment of a
Compliance Committee to ensure all provisions of the request and
holding company laws and regulations are complied with in the
future. Management believes the Company is in compliance with
these requirements.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
The accounting and reporting policies of the Company reflect
industry practices and are in accordance with generally accepted
accounting principles. The principles and policies which
materially affect the determination of results of operations,
financial position, and cash flows are summarized below.
Reclassifications
Certain prior year amounts have been reclassified to conform with
current year presentation.
Consolidation
The consolidated financial statements include the accounts of the
Company and the Bank. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Fair Value of Financial Instruments
FASB Statement No. 107, "Disclosures About Fair Value of
Financial Instruments," requires disclosure of fair value
information about financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not
available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that
regard, the derived fair value estimates may not be substantiated
by comparison to independent markets and, in many cases, could
not be realized in immediate settlement of the instrument.
Statement 107 excludes certain financial instruments and all non-
financial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
Investment Securities
At December 31, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." SFAS No. 115
requires the classification of securities into one of three
categories: Trading, Available-for-Sale, or Held-to-Maturity.
Management determines the appropriate classification of debt
securities at the time of purchase and re-evaluates this
classification periodically. Trading account securities are held
for resale in anticipation of short-term market movements. Debt
securities are classified as held-to-maturity when the Company
has the positive intent and ability to hold the securities to
maturity. Securities not classified as held-to-maturity or
trading are classified as available-for-sale.
Effective December 31, 1993, there were no trading account
securities. Had there been, those securities would have been
carried at market value and included in short-term investments.
Gains and losses, both realized and unrealized, would have been
reflected in earnings. Held-to-maturity securities are stated at
amortized cost. Available-for-sale securities are presented at
fair value, with unrealized gains and losses, net of tax,
reported as a separate component of shareholders' equity. Net
unrealized gains of approximately $807,000 were included in
shareholders' equity as of December 31, 1993.
The amortized cost of debt securities classified as held-to-
maturity or available-for-sale is adjusted for amortization of
premiums and accretion of discounts to maturity, or in the case
of mortgage-backed securities, over the estimated life of the
security. Amortization, accretion and accrued interest are
included in interest income on securities. Realized gains and
losses, and declines in value judged to be other than temporary,
are included in net securities gains. The cost of securities
sold is determined based on the specific identification method.
Loans
Loans are stated at the principal amount outstanding less
applicable unearned discount. The fair value of loans as
disclosed in Note 5 is estimated by discounting the future cash
flows using the current rates at which similar loans would be
made to borrowers with similar credit ratings and for the same
remaining maturity. Interest on commercial and real estate loans
is accrued based on the principal balance outstanding. Unearned
discount on consumer installment loans is recognized into income
using the sum-of-the-months digits method, which does not differ
materially from the interest method. The accrual of interest is
discontinued when it appears that collection may be doubtful.
Non-Performing Assets
Non-performing assets include loans 90 days or more past due but
still accruing interest, certain renegotiated loans, non-accrual
loans and other real estate and collateral acquired as the result
of foreclosures. Non-accrual loans are loans on which the
accrual of interest income has been discontinued because the
borrower's financial condition has deteriorated to the extent
that the collection of interest is doubtful. Until the loan is
returned to performing status, generally as the result of the
full payment of all past due principal and interest, interest
income is recorded on the cash basis.
Assets acquired through foreclosure, other than marketable equity
securities which are included in investment securities, are
recorded at the lower of cost or estimated fair value less
selling costs. Estimated fair value is the anticipated sales
price of the property, based upon independent appraisals or other
relevant factors. The excess of the loan balance over the fair
value of the asset at the time of foreclosure is charged to the
reserve for possible loan losses. Subsequent declines in market
value of the assets below their carrying values are charged
against the Other Real Estate Reserve. Such reserve is
specifically allocated by property, provisions are added monthly
based on historical indices and management review. Gains and
losses, those greater than the specific reserve for that
particular property, on disposition are reflected in income in
the year in which they occur. The amount of provision included
in other real estate expenses for the years ended December 31,
1993, 1992 and 1991, respectively, was $4,235,000, $5,253,000 and
$2,736,000.
Reserve for Possible Loan Losses
The determination of the balance in the reserve for possible loan
losses is based on an analysis of the relative risks inherent in
the loan portfolio and reflects an amount which, in management's
judgment, is adequate to provide for potential loan losses. A
provision for possible loan losses is charged to operating
expenses for the amount required to adjust the reserve to the
appropriate balance as determined by management. Ultimate losses
may vary from the current estimates. These estimates are
reviewed periodically and, as adjustments become necessary, they
are reported in earnings in the periods in which they become
known.
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization for
book purposes is computed on a straight-line basis over the
estimated useful lives of the depreciable property as described
in Note 8. Maintenance and repairs are charged to operating
expense, and gains or losses on dispositions are reflected
currently in the statements of income (loss).
Deposits
The fair value of demand deposits, savings and interest-bearing
demand deposits is the amount payable on demand at December 31,
1993. The fair value of fixed maturity certificates of deposit
and other time deposits are estimated using the rates currently
offered for deposits of similar remaining maturities.
Income Taxes
Effective January 1, 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, the liability
method is used in accounting for income taxes. This method
determines deferred tax assets and liabilities based on
differences between financial reporting and tax bases of assets
and liabilities. The tax effect of these differences is measured
using enacted tax rates and laws that will be in effect when the
differences are expected to reverse. As permitted by SFAS No.
109, the prior years' financial statements have not been
restated, and the impact of adopting SFAS No. 109 as of January
1, 1993 in the amount of $2,622,000 is shown as the cumulative
effect of a change in accounting principle in the accompanying
consolidated statement of income. Prior to the adoption of SFAS
No. 109, income tax expense was determined using the deferred
method. Deferred tax expense was based on items of income and
expense that were reported in different years in the financial
statements and tax returns and was measured at the tax rate in
effect in the year the difference originated. Those differences
related principally to depreciation expense, provision for
possible loan losses and write-downs of other real estate. The
Company files a consolidated federal income tax return. In
addition, the Company is subject to Louisiana state income tax.
Purchase Accounting Adjustments
The acquisition of the Bank was recorded in 1982 using the
purchase method of accounting. Under purchase accounting, the
assets and liabilities of FNJ at the date of acquisition were
recorded at their fair market values and the excess of the
purchase price over the net fair value of FNJ's assets and
liabilities was recognized as goodwill of $12,046,000, which is
being amortized over 15 years using the straight-line method.
The remaining goodwill at December 31, 1993 is $2,872,000. In
connection with the acquisition of the Bank, warrants were issued
to individuals who had the option to purchase up to 354,574
shares of the Company's Common Stock at an exercise price of
$3.50 per share, which were to expire June 30, 1987. These
warrants were purchased by the Company (see Note 13) during 1986
for $2,393,000. At the Bank's acquisition date, no entries were
recorded to reflect the issuance of the warrants due to
uncertainty in establishing a value for them. During 1986, the
Company's purchase of these warrants established a value and,
accordingly, the purchase price was recorded as additional
goodwill and is being amortized over the remaining original life
of the goodwill. Included in other operating expenses for 1993,
1992 and 1991 is goodwill amortization of approximately $826,000,
$826,000 and $843,000 for each year, respectively.
Statements of Cash Flows
Cash and cash equivalents include cash and due from banks,
deposits in affiliated banks and interest-bearing deposits in
banks.
NOTE 4. CASH AND DUE FROM FINANCIAL INSTITUTIONS.
During 1993 and 1992, FNJ was required by regulation to maintain
balances on deposit with the Federal Reserve Bank which averaged
approximately $1,284,000 and $1,854,000, for those years,
respectively.
NOTE 5. LOANS AND NON-PERFORMING ASSETS.
Loans
The primary assets of the Company which are subject to asset
quality risk are the loan portfolio and other real estate and
foreclosed property. The risk elements of a loan portfolio
include non-accrual, renegotiated and past due loans and loan
concentrations.
The composition of the loan portfolio at the end of 1993 and 1992
was as follows (in thousands):
-------December 31-------
1993 1992
Energy........................... $ - $ 1,676
Marine........................... 1,069 3,682
Other Commercial................. 18,187 23,994
Land and Construction............ 2,631 1,365
Residential Real Estate.......... 52,815 51,698
Commercial Real Estate........... 67,847 67,977
Installment 88,966 92,462
Subtotal $231,515 $242,854
Less: Unearned Discount (8,422) (9,896)
Total $223,093 $232,958
Loans had an estimated fair value of approximately
$225,705,000 and $236,743,000 at December 31, 1993 and 1992,
respectively. (See Note 3 regarding the Company's method for
estimating the fair value of the loan portfolio.)
In May 1993, the Financial Accounting Standards Board issued
Statement No. 114, "Accounting by Creditors for Impairment of a
Loan", which requires that impaired loans that are within the
scope of this statement be measured based on the present value of
expected future cash flows discounted at the loan's effective
interest rate or at the loan's market price or the fair value of
the collateral if the loan is collateral dependent. Adoption of
the new standard is required for fiscal years beginning after
December 15, 1994. The standard is to be adopted prospectively
with the effect of initially applying the standard to be
reflected as an adjustment to the Bank's provision for loan
losses in the year of adoption. The effect, if any, the new
standard may have on the Bank's financial position and results of
operations is not expected to be significant based on the current
loan portfolio.
Non-Performing Assets
Non-accrual loans, loans past due 90 days or more, along
with real estate acquired through foreclosure and repossessed
personal property, represent non-performing assets. Detail of
these elements is as follows:
-------December 31-------
(In Thousands)
1993 1992
Loans:
90 days or more past due,
but still accruing interest $ 729 $ 2,027
Non-accrual 4,647 7,965
Total Non-Performing Loans $ 5,376 $ 9,992
Other Real Estate and Foreclosed Property:
Real Estate:
Residential $ 1,587 $ 7,107
Commercial Buildings 4,679 11,877
Raw Land 5,540 6,271
Other Foreclosed Property 28 708
$11,834 $25,963
Reserve for Possible Other Real Estate Losses:
Balance, beginning of year $ 3,568 $ 1,326
Provision for possible losses 4,235 5,253
Losses charged to the reserve (3,620) (3,018)
Recoveries of other real
estate previously charged
off 21 7
Balance, end of year $ 4,204 $ 3,568
Total Non-Performing Assets $13,006 $32,387
Non-Performing Loans/Total Loans 2.4% 4.3%
Non-Performing Assets/Total Assets 3.3% 8.2%
Activity in the Reserve for Possible Other Real Estate Losses
during 1991 included a beginning balance of $975,000, provision for
possible losses of $2,736,000, losses charged to the reserve of
$2,506,000 and recoveries of $121,000, resulting in an ending
balance of $1,326,000.
At December 31, 1993, eight properties represent 70% of total
other real estate owned; at December 31, 1992, approximately 47% of
the Bank's other real estate owned was concentrated in ten
properties. There were no loans which had been restructured at
December 31, 1993, or December 31, 1992.
As permitted under current accounting practices, during 1993,
the Company revised its policy with respect to accounting for
insubstance foreclosures. Currently, the Company considers
insubstance foreclosure assets to be loans for which the Company
has taken possession of the underlying collateral. There are no
loans which meet this criteria as of December 31, 1993 and the
total of loans which met this criteria as of December 31, 1992 was
$4,187,000. Amounts reported as insubstance foreclosures in 1992
prior to the Company's change in accounting policy were
approximately $6,556,000. Therefore, for comparative purposes,
approximately $2,369,000 of assets previously reported as
insubstance foreclosures have been reclassified from other real
estate to loans in the accompanying 1992 financial statements.
The average balance of loans on a non-accrual basis for 1993
and 1992 was approximately $5,551,000 and $9,483,000, respectively.
Interest income on non-accrual loans, which is recorded only when
received, was $422,602, $687,730 and $479,675 in 1993, 1992 and
1991, respectively. Interest income that would have been earned on
non-accrual loans had those loans been on accrual status totalled
approximately $560,000, $1,005,000 and $924,000 in 1993, 1992 and
1991, respectively.
Monitoring and resolution of problem loans continue to receive
significant Management attention. However, the uncertainty of the
energy industry and its related effect on the overall economy could
have an adverse effect on the financial condition of the Company's
loan customers. In the future it is possible that additional loans
to customers could be classified as non-performing or that
additional charge-offs and write-downs, as well as higher loan loss
provisions, could be incurred.
NOTE 6. RESERVE FOR POSSIBLE LOAN LOSSES.
The provision for possible loan losses charged to expense is
determined in accordance with the policy described in Note 3.
Transactions in the reserve for possible loan losses during 1993,
1992 and 1991 were as follows (in thousands):
1993 1992 1991
Balance, Beginning of Year $ 6,261 $ 7,147 $ 9,023
Provision for Possible Loan Losses 725 1,152 1,800
Losses Charged to the Reserve (2,298) (3,358) (4,825)
Recoveries of Loans Previously
Charged-Off 1,902 1,320 1,149
Balance, End of Year $ 6,590 $ 6,261 $ 7,147
Loans are charged off when the probability of loss is
established. In management's opinion, all known losses have been
charged to the reserve as of December 31, 1993.
NOTE 7. INVESTMENT SECURITIES.
As discussed in Note 3, the Company adopted SFAS No. 115
effective December 31, 1993. Prior to December 31, 1993, the
Company classified all securities as held-to-maturity. A summary
of securities classified as available-for-sale and held-to-maturity
is presented below (in thousands):
--------------December 31, 1993-------------
Gross Gross
Amortized Estimated Unrealized Unrealized
Cost Fair Value Gains Losses
AVAILABLE-FOR-SALE
U. S. Treasury
Securities and
Obligations of
U. S.Government
Agencies $ 25,039 $ 25,563 $ 544 $ (20)
Mortgage-Backed
Securities 68,413 68,650 497 (260)
Other 381 843 462 -
Total Available-
For-Sale $ 93,833 $ 95,056 $ 1,503 $ (280)
HELD-TO-MATURITY
U. S. Treasury
Securities and
Obligations of
U. S. Government
Agencies $ 8,660 $ 8,677 $ 17 $ -
Mortgage-Backed
Securities 23,233 24,046 939 (126)
Other 758 770 12 -
Total Held-To-
Maturity $ 32,651 $ 33,493 $ 968 $ (126)
--------------December 31, 1992-------------
Gross Gross
Amortized Estimated Unrealized Unrealized
Cost Fair Value Gains Losses
HELD-TO-MATURITY
U. S. Treasury
Securities and
Obligations of
U. S. Government
Agencies $ 26,675 $ 27,267 $ 609 $ (17)
Mortgage-Backed
Securities 70,698 72,446 1,890 (142)
Other 705 705 - -
Total Held-To-
Maturity $ 98,078 $100,418 $ 2,499 $ (159)
The amortized cost and estimated fair value of debt
securities at December 31, 1993, by contractual maturity, are shown
below (in thousands). Expected maturities will differ from
contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
AVAILABLE-FOR-SALE
Amortized Estimated
Cost Fair Value
Due in One Year $ 4,017 $ 4,040
Due After One Year Through Five Years 20,314 20,757
Due After Five Years Through Ten Years 14,136 14,262
Due After Ten Years 55,365 55,997
Total Available-For-Sale $ 93,832 $ 95,056
HELD-TO-MATURITY
Amortized Estimated
Cost Fair Value
Due in One Year $ 8,806 $ 8,824
Due After One Year Through Five Years 2,711 2,824
Due After Five Years Through Ten Years 2,765 2,815
Due after ten years 18,369 19,030
Total Held-To-Maturity $ 32,651 $ 33,493
Mortgage-backed securities are classified according to their
contractual maturity without consideration of contractual prepayments or
projected prepayments. Securities available for sale at December
31, 1993, include mortgage-backed securities of $1,308,000 due after
one year through five years, $12,186,000 due after five years through
ten years, and $55,155,000 due after ten years. Held-to-maturity
securities at December 31, 1993, include mortgage-backed securities of
$2,711,000 due after one year through five years, $2,645,000 due after five
years through ten years, and $17,878,000 due after ten years. Contractual
maturities on mortgage-backed securities ranged from 2.63 years to
approximately 32 years at December 31, 1993. Estimated average
life on the portfolio of mortgage-backed securities was 3.31 years at
December 31, 1993.
Proceeds from the sale and call of investment securities
during 1993 and 1992 were $515,600 and $520,772, respectively. Gross
gains of $23,864 and $20,272 were realized on these transactions in 1993 and
1992 respectively. No losses were realized on sales during the periods.
Investment securities with a par value of approximately
$28,873,000 and $28,523,000 at December 31, 1993 and 1992, respectively, were
pledged to secure public deposits, repurchase agreements and other
transactions.
NOTE 8. PREMISES AND EQUIPMENT.
Consolidated Company and Bank premises and equipment consists
of the following (in thousands):
----------December 31----------
1993 1992
Land $ 2,499 $ 2,499
Buildings and Leasehold
Improvements 9,034 9,000
Equipment 8,284 8,105
Total 19,817 19,604
Accumulated Depreciation
and Amortization (13,766) (13,411)
Net $ 6,051 $ 6,193
Depreciation and amortization is provided utilizing the
straight-line method and estimated useful lives as follows:
Range of
Useful Lives
Buildings and Leasehold Improvements 5 - 50 years
Equipment 1 - 5 years
NOTE 9. INTEREST-BEARING DEPOSITS.
A summary of interest-bearing deposits is as follows (in
thousands):
-------December 31-------
1993 1992
Demand and Savings Deposits $ 85,431 $ 86,844
Money Market Accounts 52,603 55,222
Certificates of Deposit 146,317 145,183
$284,351 $287,249
Certificates of deposit had an estimated fair value of
approximately $147,894,000 and $146,637,000 at December 31, 1993,
and 1992 respectively. (See Note 3 regarding the Company's method for
estimating the fair value of the deposit portfolio.) The carrying
value of demand, savings and money market deposits is deemed a reasonable
estimate of fair value for those financial instruments.
NOTE 10. LONG-TERM DEBT.
Senior Secured Notes
On November 9, 1992, the Company issued an aggregate principal
amount of $5.4 million of its 10.75% Class A and Class B Senior
Secured Notes due 1997 ("Notes"). The Company used the proceeds to
repurchase certain interests in the Company held by Collecting Bank, N.A. in
a debt restructuring transaction and retained sufficient funds to pay the
first two years of interest on the Notes. Interest on the Notes is
payable quarterly on each January 1, April 1, July 1 and October 1. In
addition, under the terms of the Indenture with respect to the
Notes, the Class A noteholders earn the right to receive from the Company
an additional cash payment (the "Cash Premium") payable not later than
the second anniversary of the earlier of maturity or redemption of the
Class A Notes (the "Note Payment Date"). The amount of the Cash Premium
earned by each Class A noteholder is calculated by multiplying (i)
10% of the principal amount of the Class A Notes held by such Class A
noteholder on the Note Payment Date by (ii) the number of years
from the date of issuance (including the year the Note Payment Date occurs)
during which the Class A Notes have been outstanding (up to a
maximum of five years). Cash Premium on the Class A Notes is being recognized
(amortized) on a straight-line basis over the five-year life of the
Notes.
Pursuant to the Indenture, each holder of Class A Notes has
the option (the "Share Option") to exchange the right to receive the
Cash Premium with respect to any or all of their Class A Notes for
shares of the Company's Common Stock if holders of a minimum of 25% of the
aggregate principal amount of the Notes elect to exercise their
Share Option and if certain other conditions provided for in the
Indenture (the "Option Conditions") are satisfied. If holders of all of the
Class A Notes elect to receive the Share Option and the Option Conditions
are satisfied, such Class A noteholders would receive an aggregate of
16.32% of the outstanding shares of Common Stock of the Company after such
issuance.
The Notes are redeemable at the option of the Company, in
whole or in part, after November 9, 1994 at the principal amount plus
accrued interest and are mandatorily redeemable by the Company in the event
of a merger or consolidation of either the Company or the Bank with or
into another person or the sale of all or substantially all of the
Company's or the Bank's assets to another person (an "Extraordinary
Transaction").
The Agreement with Hibernia discussed in Note 1 constitutes an
Extraordinary Transaction with respect to the Notes, and all the
Notes will be redeemed pursuant to the Indenture if the merger is
consummated. Additionally, each holder of the Class A Notes will be entitled
to receive the Cash Premium upon redemption of his Notes on the
effective date of the merger. If the Share Option is exercised and the
Option Conditions are satisfied, each holder of Class A Notes will be
entitled to receive, in lieu of the Cash Premium attributable to his Class
A Notes, approximately 94 shares of Common Stock for each $1,000
principal amount of Class A Note. Each such share of Common Stock will then
be converted into shares of Hibernia Common Stock as described in Note
1.
Currently the best indicator of fair value on the Notes is
derived from the terms of the Agreement with Hibernia. Based on those
terms, at December 31, 1993, the consideration received by the noteholders
could vary depending upon whether the Cash Premium on the Class A Notes
was paid in cash or shares were issued pursuant to the Share Option.
The total value would be approximately $6,427,000 if the Class A
noteholders receive the Cash Premium and $10,517,000 if the noteholders
exercise their Share Option and the Option Conditions are satisfied.
Mandatory Convertible Subordinated Debentures
In 1986, the Company issued $6 million of 12% Mandatory
Convertible Subordinated Debentures due November 15, 1996 (the "Debentures"),
in connection with its retirement of $2 million in existing
subordinated Debentures and repurchase of outstanding Common Stock warrants
(see Note 13). At maturity, the principal amount of the Debentures will be
converted into shares of Company Common Stock at the conversion
rate of 78 shares of Common Stock for each $1,000 principal amount of
outstanding Debentures. Holders of the Debentures are permitted to
convert the Debentures into Common Stock at any time after November
15, 1990 at the same conversion rate. At December 31, 1993, none of
the Debentures had been converted. The Debentures are redeemable at
the option of the Company, in whole or in part, after November 15,
1993, for the redemption price (expressed as a percentage of principal) of
105%, 103% and 100% for each of the twelve-month periods ending November
15, 1994, 1995 and 1996, respectively, plus accrued interest. However,
any such redemption may only be effected with the proceeds realized
from the Company's sale of Common Stock or perpetual preferred stock.
The Company has not paid interest on the Debentures since May
15, 1988 and, based upon the financial condition of the Company, it is
not anticipated that the payment of interest on the Debentures will
resume in the foreseeable future. Under the terms of the Debenture
Agreement, non-payment of interest is not an event of default. Accrued
interest as of December 31, 1993 was $4,142,000. The Debentures are
subordinate to all Senior Indebtedness of the Company (as defined in the
Debenture Agreement) and holders of the Debentures are permitted to declare
an event of default and accelerate payment of the principal of the
Debentures and accrued interest thereon only in the event of the
bankruptcy, insolvency or reorganization of the Company. If the
Company were liquidated, Debenture holders would have priority over the
holders of the Company's Preferred Stock and Common Stock to the remaining
assets of the Company; however, the debenture holders would be in
a subordinate position to the holders of Notes.
The fair value of the Debentures, based on the terms of the
Agreement with Hibernia discussed in Note 1, is approximately $10.4
million at December 31, 1993.
NOTE 11. CUMULATIVE CONVERTIBLE PREFERRED STOCK.
The Company has 135,974 shares of Class A Cumulative
Convertible Preferred Stock ("Preferred Stock") outstanding with a book value
of $11,422,000, upon which the Company has not paid dividends since
the last quarter of 1986. The Preferred Stock has an annual dividend
rate of $10.92 per share and is redeemable after June 30, 1994 at the
option of the Company at $84.00 per share plus accumulated and unpaid
dividends and interest thereon. At the option of the holder, the Preferred
Stock is convertible into Common Stock at a rate of 1.63 shares of Common
Stock for each share of Preferred Stock with all accumulated and
unpaid dividends and interest thereon becoming a debt of the Company
payable to the Preferred stockholders. Accumulated and unpaid dividends were
$10,395,000 at December 31, 1993. Interest on the accumulated and
unpaid dividends began to accrue as of January 1, 1989 at The Chase
Manhattan Bank, N.A., prime rate, adjusted quarterly. Accrued
interest on the dividends was $2,551,000 at December 31, 1993.
As reflected in the Agreement with Hibernia discussed in Note
1, if the merger is consummated, each outstanding share of Preferred
Stock would receive total consideration valued at approximately $118 (as
of March 31, 1994) in the form of cash and Hibernia Common Stock.
NOTE 12. DEBT SETTLEMENT.
As reported in the Company's previous Annual Report filings,
the Company was the subject of a claimed default of its loan in the
principal amount of $16,100,000 from First City National Bank of
Houston ("First City") that was payable on the earlier of demand or
December 31, 1988.
In 1990 the Company and the Bank entered into a Settlement
Agreement and Supplemental Settlement Agreement with First City and
Collecting Bank, N.A. ("Collecting Bank"), a special purpose bank
that had been created by First City and to which the loan had been
assigned. Pursuant to the terms of these agreements (i) the parties exchanged
releases of all claims and litigation related to the Company's
debt; (ii) Collecting Bank delivered to the Company the $16.1 million
promissory note, duly cancelled, and all of the FNJ stock which had
been pledged to secure the note; (iii) the Company delivered to
Collecting Bank 62,685 shares of FNJ Common Stock; (iv) FNJ issued a warrant
to Collecting Bank representing an additional 52% of the outstanding
FNJ Common Stock, with FNJ having the right to defer the exercise of
the warrant by the Collecting Bank by making annual payments ("Exercise
Deferral Payments") in the annual amount of 4.25% of $11.6 million
(the "Repurchase Price") for the period from March 31, 1990 to March 31,
1995 (with the first payment due March 1, 1992 for the period from March
31, 1990 to December 31, 1991) and 10% thereafter, and with FNJ having
the right to repurchase the warrant at any time prior to March 31, 1998
for the Repurchase Price plus accrued and unpaid Exercise Deferral
Payments; and (v) the Company issued to Collecting Bank a Senior Debenture in
the principal amount of $2 million, bearing interest at the rate of 7%
per annum until March 31, 1995, and at the rate of 10% thereafter. The
Senior Debenture had no maturity date and was redeemable at the
option of the Company within five years for $1 million.
The accounting for the delivery of the warrant in satisfaction
of the indebtedness owed to, Collecting Bank, was treated as a
debt-for-debt exchange. A loss on the transaction of $2.8 million was
recorded as a result of this transaction; this loss resulted from the
following (in thousands):
Investment in Bank at Restructure $ 25,099
Percentage Given to First City 19.9%
4,994
Fair Value of Stock Given Up
(315,000 shares @ $35/share x 19.9%) (2,194)
Resulting Loss on Transfer $ 2,800
As a result, minority interest of $3,560,000 was recorded and
a writedown of goodwill was realized of $1,434,000. The Note Payable
and the Senior Debenture were recorded as follows (in thousands):
Original Note Payable $16,100
Interest Payable 2,212
Subtotal 18,312
Less: Stock Given Up (2,194)
Remaining Debt 16,118
Allocation to Senior Debenture (500)
Recorded Value of Note Payable $15,618
The Note Payable and the Senior Debenture were being accreted,
using the effective interest method, to $17,545,000 (the total of
the Exercise Deferral Payments plus the Repurchase Price) and
$2,000,000, respectively.
At the direction of the Bank's primary regulator in early
1992, the Company began negotiations with the Collecting Bank to rescind the
warrant in exchange for a lump sum cash payment. As a result of
these negotiations, on November 9, 1992, First Continental Bancshares,
Inc. repurchased from the Federal Deposit Insurance Corporation
("FDIC"), in its capacity as receiver for Collecting Bank, (i) 62,685 shares
of Common Stock, $10.00 par value per share, of the Bank, (ii) a
warrant to acquire an additional 52% of the outstanding shares of FNJ Common
Stock, (iii) a warrant entitling Collecting Bank to maintain its 19.9%
ownership interest in FNJ in the event of certain circumstances and
(iv) a senior debenture in the principal amount of $2,000,000
(collectively, the "Collecting Bank Interests"). The repurchase was effected in
connection with the settlement of all pending litigation between
the Company and FNJ, and Collecting Bank and First City, Texas-Houston,
N.A., ("Debt Settlement").
The Company made a cash payment of $4.2 million to the FDIC to
repurchase the Collecting Bank Interests. A gain on extinguishment
of debt of $17,190,000, pre-tax, resulted from this transaction. The
Company funded the repurchase by issuing an aggregate principal
amount of $5.4 million of 10.75% Class A and Class B Senior Secured Notes
due 1997 on November 9, 1992. (See Note 10.) The remainder of the
proceeds from the issuance of the Notes are held in escrow to be used by the
Company to provide for the first two years of debt service on the
Notes and to pay certain expenses of the offering.
As a result of the repurchase of the Collecting Bank Interests
and the settlement of the litigation in 1992, all of the Collecting
Bank Interests were cancelled, the Company now owns 100% of the
outstanding shares of FNJ Common Stock (50% plus one share of which has been
pledged by the Company to the trustee for the noteholders to secure the
Company's obligations under the Notes), and the Company has no
further obligation to Collecting Bank.
NOTE 13. RELATED PARTY TRANSACTIONS.
In the ordinary course of business, FNJ makes loans to its
directors, principal officers and shareholders. These loans are
made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other unaffiliated persons. Transactions in loans made to directors,
principal officers and shareholders, including their family members
and companies in which they have a significant ownership interest, were
as follows during 1993 and 1992 (in thousands):
1993 1992
Balance, Beginning of Year $ 379 $ 229
Additions 1 192
Repayments and Other (264) (42)
Balance, End of Year $ 116 $ 379
In addition, FNJ has a number of banking relationships with
other banks which have certain directors, officers and shareholders
in common. The most significant of these relationships relates to
loan participations sold to and purchased from the other banks.
Total loan participations sold to affiliated banks was
approximately $2,149,413 and $551,133 at December 31, 1993 and
1992, respectively. The total of loan participations purchased
from these banks amounted to approximately $3,054,456 and
$2,009,123 at December 31, 1993 and 1992, respectively. These loan
participations sold and purchased are made without recourse, on
comparable terms with the original loan, at market rates of
interest which provide for reimbursement of loan origination and
servicing costs.
In addition, FNJ has other banking relationships with the
aforementioned banks as follows:
These banks maintain time deposits and demand deposits at FNJ,
which totalled approximately $710,815 and $1,355,000 at December
31, 1993 and 1992, respectively, while FNJ maintained no time
deposits nor demand deposits at these related banks at those dates.
In the normal course of business the Company performs services
for and receives services from certain related banks. Fees
received for services performed totalling $83,000, $149,000 and
$222,000 for 1993, 1992 and 1991, respectively, and were included
in either other operating income or as a reduction of salaries and
employee benefits for the respective years. Fees paid for services
received totalling $90,000 for the year ending December 31, 1992,
and $164,000 for 1991 were included in other operating expenses for
the respective years. No fees were paid in 1993.
In 1993, the Company and the Bank sold various affiliate bank
stocks, which were held as other assets and which represented a
book value of $34,200 prior to the bids being requested, to various
individuals including directors and principal officers of the
Company. The sales were made through a public notification and
sealed bid procedure with the highest bidder being awarded the
shares. A gain on the sales of $91,498 (net of tax) is reflected
in Unrealized Gain on Available-For-Sale Securities in the
Company's financial statements as the sales were settled in January
1994.
During 1986 the Company issued $6,000,000 in mandatory
convertible subordinated Debentures to related banks (see Note 10).
Portions of the proceeds were used to retire $2,000,000 in existing
subordinated Debentures and to purchase 354,574 outstanding Common
Stock warrants for $2,393,000 at a price of $6.75 per warrant (net
of the warrants' $3.50 conversion price). The price was based upon
an appraisal of the Company's stock at $10.25 per share performed
by an independent investment banking firm. Of the 354,574 warrants
purchased, 212,742 were purchased from individuals who were either
principal shareholders or officers and directors of the Company.
This transaction was approved by a majority of the shareholders of
the Company.
NOTE 14. INCOME TAXES.
Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109 "Accounting for
Income Taxes." Under this new accounting standard, the tax
consequences of all temporary differences between the tax bases of
the assets or liabilities and their reported amounts in the
financial statements represent either tax liabilities to be settled
in the future or tax assets that will be realized as a reduction of
future taxes. Among other provisions, SFAS No. 109 requires the
use of currently enacted tax rates to measure these deferred tax
assets and liabilities. The change in the net deferred tax
position between periods represents the deferred tax expense or
benefit to be recognized in the financial statements.
The components of income tax expense for the years ended
December 31, 1993, 1992 and 1991 were as follows (in thousands):
1993 1992 1991
Current $ 125 $ 232 $ -
Deferred 927 - -
$1,052 $ 232 $ -
Total income tax expense differed from the amount computed by
applying the statutory federal income tax rates to pretax income
for the years ended December 31, 1993, 1992 and 1991 as follows (in
thousands):
1993 1992 1991
Federal Income Tax Expense $ 704 $ 232 $ (285)
Increase (Decrease) Resulting From:
Non-Taxable Interest Income (78) (82) (138)
Non-Taxable Income and Expense Related to
Consolidation Adjustments - (220) (313)
Amortization of Goodwill 281 281 287
Unused Portion of Book Operating Loss to
Be Carried Forward - - 432
Other 145 21 17
Actual Income Tax Expense $1,052 $ 232 $ -
The components of the Company's deferred tax assets and
liabilities as of January 1, 1993 and December 31, 1993 and the
changes in the respective balances between those periods were as
follows (in thousands):
January 1, Net December 31,
1993 Change 1993
Deferred Tax Assets:
Other Real Estate $ 3,107 $ 806 $ 2,301
Reserve for Loan Losses 437 (246) 683
Net Operating Loss
Carryforwards 2,639 543 2,096
Other 400 (250) 650
Total Deferred
Tax Assets $ 6,583 $ 853 $ 5,730
Deferred Tax Liabilities:
Basis Difference in
Stock of Subsidiary $(3,044) $ - $(3,044)
Depreciation (917) 73 (990)
Basis Difference in
Investment Securities - 416 (416)
Total Deferred
Liabilities (3,961) 489 (4,450)
Valuation Allowance - - -
Net Deferred
Tax Asset $ 2,622 $ 1,342 $ 1,280
As of December 31, 1993, for tax purposes, the Company had net
operating loss carryforwards (NOL's) of approximately $6,200,000
available to offset future taxable income which will expire in
varying amounts through the year 2006. SFAS No. 109 requires,
among other things, recognition of future tax benefits, subject to
a valuation allowance based on the likelihood of realizing such
benefits. In evaluating the realization of net tax benefits, the
Company must determine whether it is "more likely than not" that
the Company will realize such benefits and that all negative and
positive evidence be considered (with more weight given to evidence
that is "objective and verifiable") in making the determination.
Upon adopting SFAS No. 109, the Company applied the evaluation
criteria set forth in the Statement and determined that based on
the available evidence at the time of adoption, no valuation
reserve for the net deferred tax asset was required. At each
reporting period, the Company re-evaluates all available evidence
in determining whether realization of deferred tax assets is more
likely than not, and, if appropriate, records adjustments to the
valuation allowance. Matters considered by the Company in
determining the appropriate levels of valuation allowance include
(but are not necessarily limited to) historical operating results,
current and expected market conditions, future business plans and
available tax strategies, as well as current banking laws and
regulations.
As of December 31, 1993, the Company determined that based on
available evidence, no valuation reserve for the net deferred tax
asset was required.
NOTE 15. EARNINGS PER SHARE.
Earnings per share was computed by dividing net income (loss)
less Preferred Stock dividends by the weighted average number of
outstanding shares of Common Stock. The Preferred Stock and the
Debentures are not considered Common Stock equivalents. The
weighted average number of outstanding common and common equivalent
shares used in computing primary earnings (loss) per share was
2,128,096 during the past three years. For purposes of computing
fully diluted earnings (loss) per share, the Common Stock
conversion attributes of the Preferred Stock, the Debentures, and
the premium associated with the Class A Senior Notes were computed
and added to Common Stock outstanding as of the beginning of each
year. At December 31, 1993 and 1991, the computed Common Stock
conversion amounts associated with the Preferred Stock, the
Debentures, and the premium associated with the Class A Senior
Notes in 1993 were determined to be anti-dilutive in computing
fully-diluted earnings per share. At December 31, 1992, the
computed Common Stock conversion amounts associated with the
Preferred Stock, the Debentures, and the premium associated with
the Class A Senior Notes were 221,638, 734,136 and 601,540 shares,
respectively. The total weighted average number of shares
outstanding used for computing fully diluted earnings per share at
December 31, 1992 was 3,685,410.
NOTE 16. COMMITMENTS AND CONTINGENCIES.
The Bank is committed under various non-cancellable operating
leases for its facilities and for certain equipment leased on a
short-term basis. Total rent expense included in the accompanying
statements of income (loss) was $266,000, $271,000 and $294,000 in
1993, 1992 and 1991, respectively. The future minimum rental
commitments as of December 31, 1993 are as follows (in thousands):
1994 $ 356,520
1995 145,350
1996 70,704
1997 15,809
1998 & After 43,067
$ 631,450
The Company and its subsidiary are defendants in and are
threatened with various other legal proceedings arising from their
regular business activities, primarily the business of making and
collecting loans. To address such exposure, the Company
periodically records loss accruals when, in the opinion of
management, losses from such litigation become known and probable.
Management believes that the amounts accrued for litigation losses
as of December 31, 1993 is adequate and in the opinion of
management, based upon the advice of legal counsel, the outcome of
such litigation will not have a material adverse effect on the
Company's financial position or results of operations.
Off-Balance Sheet Instruments
In the normal course of business, the Bank is a party to
financial instruments which are not recorded in the financial
statements. These financial instruments include commitments to
extend credit and letters of credit.
Loan commitments and lines of credit represent commitments to
lend funds at specific rates, with fixed expiration or review dates
and for specific purposes. These commitments are agreements to
fund loans if the conditions in the agreements are met. Since many
commitments are never actually drawn on, the unfunded amounts do
not necessarily represent future funding requirements. The Bank
evaluates each customer's credit worthiness on an individual basis.
The amount of collateral obtained, if any, upon extension of credit
is based on the credit worthiness of the customer.
Standby letters of credit obligate the Bank to pay third
parties if customers fail to perform under the agreements with
those third parties. Letters of credit are subject to credit
reviews, collateral requirements and debt covenants similar to
those in loan agreements. The credit risk involved in issuing
letters of credit is essentially the same as that which is involved
in extending loans to customers.
In the opinion of management, there are no financial
instruments which present an unusual risk to the Bank and no
material losses are anticipated as a result of these transactions.
A summary of obligations under financial instruments which are
not reflected in the financial statements follows (in thousands):
December 31, December 31,
1993 1992
Commitments to Extend Credit
for Loans and Leases 13,183 11,215
Standby Letters of Credit 722 1,127
The fair value of off-balance sheet commitments was immaterial
at December 31, 1993 and 1992.
Employee Benefit Plans
The Company sponsors a welfare benefit plan for retired
employees of the Company. To be eligible to participate in this
plan, an employee at retirement must accumulate a minimum of 75
points based on age at retirement and years of service with the
Company after age 39. Benefits available to eligible retirees
include $5,000 of term life insurance and retiree medical coverage.
Effective January 1, 1993, the Company adopted SFAS No. 106,
"Employers' Accounting for Post-Retirement Benefits Other Than
Pensions." It is the intent of the Company to amortize its
accumulated and post-retirement benefit obligation over a 20-year
period as permitted by the Statement.
The SFAS 106 accumulated post-retirement benefit obligation at
January 1, 1993 was $489,072. In fiscal year 1993, the Company
recognized a net periodic post-retirement expense of $87,937,
$40,114 of which related to interest cost, $23,369 related to
service cost attributable to 1993, and $24,454 related to
amortization of the initial transition obligation which is being
recognized over 20 years.
The SFAS 106 accumulated post-retirement benefit obligation at
December 31, 1993 was $574,327. This will result in the Company
recognizing a net periodic post-retirement expense of $74,327 in
1994.
The discount rate used in calculating the accumulated post-
retirement benefit obligation as of December 31, 1993 was 7%. The
annual assumed rate of increase in the cost of covered health care
benefits through 1995 (the health care trend rate) is 12% for
charges covered by Medicare and 14% for charges not covered by
Medicare. The annual assumed rate of increase is predicted to
decrease gradually in 1% increments every other year until it
levels off at 6.5% in 2006.
Increasing the health care trend rate by one percentage point
above the rate disclosed above would result in a change to the
accumulated post-retirement benefit of less than one percent.
In November 1992, the FASB issued SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." SFAS No. 112 requires
accrual-based accounting for benefits cost relating to former or
inactive employees after employment but before retirement and
becomes effective January 1, 1994. The effect of adopting SFAS No.
112 is not expected to have a material impact.
Retention agreements were adopted in 1993 to encourage certain
Officers and Executive Officers of the Bank to continue their
employment with the Bank in the context of ongoing merger
discussions between the Company and certain non-affiliated
financial institutions. These agreements were executed primarily
to maintain stability within the organization and reduce the risk
of loss of key members of management before consummation of any
potential merger or acquisition of the Company. These agreements
provide that if the Officers and Executive Officers remain with the
Bank through the consummation of a merger, and certain other
conditions are satisfied, they would receive additional
compensation aggregating approximately $1.3 million.
NOTE 17. PARENT COMPANY FINANCIAL INFORMATION.
The following is a condensed summary of financial statements
as of December 31, 1993 and 1992, and for each of the three years
in the period ended December 31, 1993 (in thousands):
STATEMENTS OF CONDITION
1993 1992
Cash and Due From Banks $ 394 $ 19
Investments in Securities 948 1,131
Investment in Subsidiary Bank 33,627 26,763
Other Assets - 83
$34,969 $27,996
Accrued Liabilities $ 5,688 $ 3,602
Notes Payable 5,884 5,444
Mandatory Convertible Debenture 6,000 6,000
Shareholders' Equity 17,397 12,950
$34,969 $27,996
STATEMENTS OF INCOME (LOSS)
1993 1992 1991
Dividends from Subsidiary Bank $ - $ - $ -
Equity in Undistributed Earnings
of Subsidiary Bank 6,954 3,028 1,255
Amortization of Purchase
Adjustments (831) (832) (848)
Other Income and Expense (Net) (452) (280) 4
Interest Expense on Long-Term Debt (1,753) (1,353) (1,250)
Net Income (Loss) Before Income Taxes,
Extraordinary Items and Cumulative Effect
of Change in Accounting
Principle 3,918 563 (839)
Provision (Benefit) for Income Taxes (626) 192 -
Net Income (Loss) Before Extraordinary Items
and Cumulative Effect of Change in Accounting
Principle 4,544 371 (839)
Extraordinary Items:
Gain on Extinguishment of
Debt, Net of Tax - 11,345 -
Utilization of Net Operating
Loss Carryforward - 6,075 -
Net Income (Loss) Before Cumulative Effect of
Change in Accounting Principle 4,544 17,791 (839)
Cumulative Effect of Change in Accounting
Principle - (Adoption of SFAS 109) (904) - -
Net Income (Loss) $ 3,640 $17,791 $ (839)
Under the terms of resolutions approved by the Board of
Directors of the Bank, prior approval of the OCC is required before any
dividends can be paid to First Continental Bancshares, Inc. for
purposes of debt service, preferred dividends, or other corporate
purposes.
STATEMENTS OF CASH FLOWS
1993 1992 1991
OPERATING ACTIVITIES:
Net Income (Loss) $ 3,640 $17,791 $ (839)
Adjustments to Reconcile Net Income (Loss) to Net
Cash Used in Operating Activities:
Gain on Extinguishment of
Debt, Pre-Tax - (17,190)
-
Cumulative Effect of Change
in Accounting Principle 904 - -
Equity in Undistributed (Earnings)
Loss of Subsidiary (6,954) (3,028) (1,255)
Amortization of Organization Costs 83 16 16
Amortization of Purchase Adjustments 831 832 848
Accretion of Senior Debentures
and Note Payable 440 392 350
Adjustment to Market Value of
Equity Securities - 40 -
Increase in Accrued Interest Payable 793 961 900
Increase in Accounts Payable 355 66 23
Net cash Provided By (Used In)
Operating Activities 92 (120) 43
INVESTING ACTIVITIES:
Purchase of Securities (540) (1,104) -
Sales and Maturities of
Investment Securities 823 - -
Net Cash Provided By (Used In)
Investing Activities 283 (1,104) -
FINANCING ACTIVITIES:
Proceeds From Issuance of
Long-Term Debt - 5,400 -
Repayment of Long-Term Debt - (4,200) -
Net Cash Provided by
Financing Activities - 1,200 -
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 375 (24) 43
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 19 43 -
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 394 $ 19 $ 43
NOTE 18. BANK ONLY FINANCIAL INFORMATION.
The statements of condition of First National Bank of
Jefferson Parish as of December 31, 1993 and December 31, 1992, and
the related statements of income and changes in shareholders'
equity for each of the three years in the period ended December 31,
1993, follow (in thousands):
STATEMENTS OF CONDITION
1993 1992
ASSETS
Cash and Due from Banks $ 13,141 $ 16,960
Investment Securities:
United States Government and Agencies 33,557 25,578
Mortgage-Backed Securities 91,883 70,698
State and Political Subdivisions 289 -
Federal Reserve Bank Stock and
Other Securities 1,030 670
Total Investments (fair value
of approximately $127,598 in 1993
and $99,282 in 1992) 126,759 96,946
Federal Funds Sold 22,000 17,200
Loans 223,093 232,958
Reserve for Possible Loan Losses (6,590) (6,261)
Net Loans 216,503 226,697
Bank Premises and Equipment, Net 5,803 5,939
Accrued Interest Receivable 1,933 1,970
Other Real Estate and Foreclosed
Property, Net 7,630 22,395
Other Assets 3,435 742
TOTAL ASSETS $397,204 $388,849
LIABILITIES
Deposits:
Interest-Free $ 61,087 $ 59,951
Money Market 52,574 54,063
Savings & NOW 85,431 86,844
Time 146,317 145,183
Interest-Bearing Deposits
From Affiliated Banks 335 1,169
Total Deposits 345,744 347,210
Short-Term Borrowings 13,234 14,149
Accrued Interest Payable 3,092 2,216
Other Liabilities 4,627 2,461
TOTAL LIABILITIES 366,697 366,036
SHAREHOLDERS' EQUITY
Common Stock 3,150 3,150
Surplus 7,600 7,600
Unrealized Gain on Available-For-
Sale Securities 740 -
Undivided Profits 19,017 12,063
TOTAL SHAREHOLDERS' EQUITY 30,507 22,813
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $397,204 $388,849
STATEMENTS OF INCOME
1993 1992 1991
INTEREST INCOME:
Interest and Fees on Loans $ 22,636 $ 24,612 $ 26,672
Interest and Dividends on
Investment Securities:
United States Government
& Agencies 1,809 1,612 691
Mortgage-Backed Securities 5,044 5,405 5,170
State and Political
Subdivisions 13 2 6
Federal Reserve Bank Stock
and Other Securities 19 19 20
Interest on Federal Funds Sold
and Securities
Purchased Under Agreements
to Resell 426 530 956
Interest on Deposits in Banks - - 8
Total Interest Income 29,947 32,180 33,523
INTEREST EXPENSE:
Interest on Deposits:
Money Market 1,174 1,807 2,677
Savings and NOW 1,423 2,359 3,606
Time 6,636 8,016 11,362
Interest on Short-Term
Borrowings 289 322 543
Total Interest Expense 9,522 12,504 18,188
NET INTEREST INCOME 20,425 19,676 15,335
PROVISION FOR POSSIBLE LOAN
LOSSES 725 1,152 1,800
NET INTEREST INCOME AFTER
PROVISION FOR
POSSIBLE LOAN LOSSES 19,700 18,524 13,535
OTHER INCOME:
Service Charges on
Deposit Accounts 2,755 2,726 2,629
Other Charges, Commissions
and Fees 1,580 1,555 1,439
Other Operating Income 464 592 442
Security Gains 8 20 179
Total Other Income 4,807 4,893 4,689
OTHER EXPENSES:
Salaries and Employee Benefits 8,087 7,034 6,954
Net Occupancy Expense 1,466 1,464 1,746
Litigation Loss (Recovery) 92 255 (176)
Other Real Estate Expenses, Net 5,213 6,554 3,685
Other Operating Expense 4,543 4,962 4,448
Total Other Expenses 19,401 20,269 16,657
INCOME BEFORE INCOME TAXES,
EXTRAORDINARY ITEMS AND
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 5,106 3,148 1,567
Provision for Income Taxes 1,678 1,070 -
Income Before Extraordinary
Items and Cumulative
Effect of Change in
Accounting Principle 3,428 2,078 1,567
Extraordinary Item:
Utilization of Net Operating
Loss Carryforward - 950 -
Net Income Before Cumulative
Effect of Change
in Accounting Principle 3,428 3,028 1,567
Cumulative Effect of Change
in Accounting Principle -
(Adoption of SFAS 109) 3,526 - -
NET INCOME $ 6,954 $ 3,028 $ 1,567
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Unrealized
Gain on
Alternative Undivided Available-For-Sale
---Common Stock--- --Warrant-- ---Surplus--- --Profits-- --Sale Securities--
Shares Amount Amount Amount Amount Amount
BALANCE,
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1990 3,150 $3,150 $5,458 $7,600 $ 2,010 $ -
Net Income 1,567
Accretion on
Alternative Warrant 1,174 (1,174)
BALANCE,
DECEMBER 31, 1991 3,150 3,150 6,632 7,600 2,403 -
Net Income 3,028
Reversal of Accretion
on Alternative
Warrant and
Alternative Warrant (6,632) 6,632
BALANCE,
DECEMBER 31, 1992 3,150 3,150 - 7,600 12,063 -
Net Income 6,954
Unrealized Gain 740
BALANCE,
DECEMBER 31, 1993 3,150 $3,150 $ - $7,600 $19,017 $740
</TABLE>
NOTE 19. OTHER OPERATING INCOME AND EXPENSES.
Other Charges, Commissions and Fees included the following
amounts of Trust Income: $611,000 in 1993; $577,000 in 1992; and
$490,000 in 1991.
Other operating expenses consisted of the following for the
years ended December 31, 1993, 1992 and 1991 (in thousands):
1993 1992 1991
Amortization of Purchase
Adjustments $ 831 $ 832 $ 848
Legal and Professional 1,313 1,342 968
Data Processing 755 756 675
FDIC Assessment 984 816 726
Note Offering Expenses - 237 -
Other 1,954 2,101 2,093
$5,837 $6,084 $5,310
NOTE 20. SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES.
As discussed in Note 12, the Company restructured its note
payable to First City during 1990. The following noncash
transactions were recorded (in thousands):
Discount on Note Payable $ 482
Forgiveness of Accrued Interest Payable 2,212
Transfer of 19.9% of Investment in
Subsidiary Bank (3,560)
Issuance of Senior Debenture (500)
Write-Off of Goodwill, Net (1,434)
Loss on Transfer of Assets $(2,800)
As is also discussed in Note 12, in 1992, the Company again
restructured its debt with the then current holder of the note, the
FDIC. Pursuant to this restructure, there were certain non-cash
transactions recorded. Those transactions were as follows (in
thousands):
Forgiveness of Debt Associated With Note Payable
Including Accrued Interest $12,532
Release of Senior Debenture and
Related Accretion 720
Release of Minority Interest Position 3,938
Gain on Extinguishment of Debt $17,190
