UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A No. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 4, 1994
Union Bancshares, Inc.
(Exact name of registrant as specified in its charter)
Kansas 0-11114 48-0936090
(State of incorporation) (Commission (I.R.S. Employer
File Number) Identification No.)
200 Union Center Building
150 North Main
Wichita, Kansas 67202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (316) 261-4700
Not Applicable
(Former name or former address, if changed since last report)
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Union Bancshares, Inc. and Subsidiaries
Item 2. Acquisition or Disposition of Assets
The information required for this item was previously
filed on Form 8-K dated April 11, 1994.
Item 7. Financial Statements and Exhibits
(a) Financial statements of First Community Federal Savings
and Loan Association (First Community)
Independent Auditors' Report
Consolidated Balance Sheets as of September 30, 1993 and
1992
Consolidated Statements of Operations, years ended
September 30, 1993, 1992 and 1991
Consolidated Statements of Stockholders' Equity, years
ended September 30, 1993, 1992 and 1991
Consolidated Statements of Cash Flows, years ended
September 30, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
(b) Pro forma financial information of Union Bancshares, Inc.
Pro Forma Condensed Combined Balance Sheet
Union Bancshares, Inc. as of March 31, 1994
First Community as of March 31, 1994
Pro Forma Condensed Combined Statement of Income for the
year ended:
Union Bancshares, Inc. as of December 31, 1993
First Community as of September 30, 1993
Pro Forma Condensed Combined Statement of Income for the
three months ended:
Union Bancshares, Inc. as of March 31, 1994
First Community as of December 31, 1993
(c) Exhibits
The Merger Agreement by and among Union Bancshares, Inc.,
Union National Bank of Wichita, and First Community dated
April 3, 1994 was previously submitted on Form 8-K dated
April 11, 1994.
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Union Bancshares, Inc. and Subsidiaries
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Union Bancshares, Inc. has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
UNION BANCSHARES, INC.
/S/ WILLIAM G. WATSON /S/ STEVEN C. WORRELL
By: William G. Watson By: Steven C. Worrell
President & Chief Vice President,
Executive Officer Treasurer & Chief
Financial Officer
(Principal Executive Officer) (Principal Accounting Officer)
Date Date
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Union Bancshares, Inc. and Subsidiaries
The fiscal year end for Union Bancshares, Inc. (UBI) falls on
December 31 and First Community's occurred on September 30.
Because First Community's fiscal year end falls within 93 days of
UBI's no adjustments were made to First Community's statements of
income to conform them to UBI's fiscal year end statements. Based
upon this information, the following pro forma condensed combined
balance sheet as of March 31, 1994, and the pro forma condensed
consolidated statements of income for the year ended December 31,
1993 for UBI and September 30, 1993 for First Community and the
three months ended March 31, 1994 for UBI and December 31, 1993 for
First Community, give effect to the acquisition of First Community
by UBI.
The pro forma statements have been prepared by UBI's
management based upon the financial statements of First Community
included elsewhere herein. These pro forma statements may not be
indicative of the results that actually would have occurred if the
combination had been in effect on the dates indicated or which may
be obtained in the future. The pro forma financial statements
should be read in conjunction with the audited financial statements
and notes of UBI and First Community.
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Union Bancshares, Inc. and Subsidiaries
First Community Federal Savings and Loan Association
September 30, 1993 and 1992
Report of Independent Certified Public Accountants and
Consolidated Financial Statements
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Baird,
Kurtz &
Dobson
Independent Accountants' Report
Board of Directors
First Community Federal Savings and Loan Association
Winfield, Kansas
We have audited the accompanying consolidated statements of
income, stockholders' equity and cash flows of FIRST COMMUNITY
FEDERAL SAVINGS AND LOAN ASSOCIATION for the year ended September
30, 1991. These financial statements are the responsibility of the
Association's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
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 audit
provides a reasonable basis for our opinion.
In our opinion, the 1991 consolidated financial statements
referred to above present fairly, in all material respects, the
results of operations and cash flows of FIRST COMMUNITY FEDERAL
SAVINGS AND LOAN ASSOCIATION for the year ended September 30, 1991
in conformity with generally accepted accounting principles.
/S/ BAIRD, KURTZ & DOBSON
November 15, 1991
Springfield, Missouri
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INDEPENDENT AUDITORS' REPORT
The Board of Directors
First Community Federal Savings and
Loan Association:
We have audited the accompanying consolidated balance sheets of
First Community Federal Savings and Loan Association and subsidiary
as of September 30, 1993 and 1992, and the related consolidated
statements of operations, stockholders' equity and cash flows for
the years then ended. These consolidated financial statements are
the responsibility of the Association's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits. The consolidated
financial statements of First Community Federal Savings and Loan
Association and subsidiary as of September 30, 1991 were audited by
other auditors whose report thereon dated November 15, 1991,
expressed an unqualified opinion on those statements.
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 1993 and 1992 consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of First Community Federal Savings and Loan
Association and subsidiary as of September 30, 1993 and 1992, and
the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting
principles.
As discussed in notes 1 and 10 to the consolidated financial
statements, the Association adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," in 1993.
/S/ KPMG PEAT MARWICK
Wichita, Kansas
November 12, 1993
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FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Consolidated Balance Sheets
September 30, 1993 and 1992
<TABLE>
<CAPTION>
Assets 1993 1992
<S> <C> <C>
Cash $ 346,486 134,273
Interest-bearing deposits in other financial
institutions 1,515,335 3,359,835
Cash and cash equivalents 1,861,821 3,494,108
Investment securities (market value of
$7,933,881 and $7,499,413 at September
30, 1993 and 1992) (notes 2 and 8) 7,906,009 7,454,220
Mortgage-backed securities (market value of
$68,219,084 and $80,015,208 at September
30, 1993 and 1992) (notes 3, 7 and 8) 67,226,219 78,167,819
Mortgage loans held for sale, less net deferred
loan origination fees of $2,699 and $6,834
at September 30, 1993 and 1992, respectively 575,097 1,081,698
Loans receivable (notes 4 and 8) 75,280,889 72,567,040
Accrued interest receivable:
Loans 668,742 588,151
Mortgage-backed securities 482,191 661,181
Investments 24,150 29,581
Premises and equipment (note 6) 2,008,934 2,112,643
Real estate owned and in judgment (note 5) 260,286 718,642
Prepaid expenses and other assets (notes 10
and 11) 464,080 373,262
Cash value of life insurance (note 13) 1,806,122 1,711,159
Other receivables 3,206,544 2,569,085
$161,771,084 171,528,589
Liabilities and Stockholders' Equity
Savings deposits (note 7) $106,957,809 121,371,395
Federal Home Loan Bank advances (note 8) 42,220,000 38,420,000
Advance payments by borrowers for taxes and
insurance 869,835 969,420
Accounts payable and accrued expenses (notes
10 and 13) 1,403,850 1,310,312
151,451,494 162,071,127
Stockholders' equity (notes 12, 14, 15 and 16):
Common stock, par value $1 per share;
authorized 5,000,000 shares; 329,812
shares issued and outstanding at
September 30, 1993 and 1992 329,812 329,812
Additional paid-in capital 2,083,106 2,083,106
Retained earnings - substantially restricted 7,906,672 7,044,544
10,319,590 9,457,462
Commitments and contingencies (notes 17 and 19)
$161,771,084 171,528,589
</TABLE>
See accompanying notes to consolidated financial statements.
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FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Consolidated Statements of Operations
Years Ended September 30, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Interest income:
Loans $6,771,596 8,463,489 10,254,359
Mortgage-backed securities 4,916,227 5,381,262 5,443,820
Investment securities 474,937 686,170 806,255
Other 50,059 73,803 227,975
Total interest income 12,212,819 14,604,724 16,732,409
Interest expense:
Deposits (note 7) 4,774,900 6,676,391 8,712,182
FHLB advances 3,097,687 3,382,852 3,505,519
Other 62,981 65,676 520,091
Total interest expense 7,935,568 10,124,919 12,737,792
Net interest income 4,277,251 4,479,805 3,994,617
Provision for loan losses (note 4) 83,275 133,721 533,604
Net interest income after provision
for loan losses 4,193,976 4,346,084 3,461,013
Other income:
Gain on sale of loans 208,702 286,861 103,726
Gain on sale of investment securities - 121,973 -
Gain on sale of mortgage-backed
securities - 580 1,349
Fees and service charges 526,522 523,027 468,061
Gain on proceeds of life
insurance (note 13) - - 923,294
Other income 268,376 227,425 266,674
Total other income 1,003,600 1,159,866 1,763,104
Other expenses:
Compensation and related expenses 1,685,098 1,547,218 1,573,079
Deferred compensation expense
(note 13) 45,264 43,923 875,964
Occupancy 193,946 223,837 211,772
Data processing 213,894 224,602 227,657
Equipment 161,766 175,983 196,230
Federal insurance premiums 235,506 269,448 262,841
Loss on real estate operations
(note 5) 58,559 111,565 11,124
Other expenses 926,230 900,316 764,311
Total other expenses 3,520,263 3,496,892 4,122,978
Income before income taxes 1,677,313 2,009,058 1,101,139
Income tax expense (note 10) 610,373 545,793 184,500
Income before cumulative effect of
accounting change 1,066,940 1,463,265 916,639
Cumulative effect of change in accounting
for income taxes (note 10) 125,000 - -
Net income $1,191,940 1,463,265 916,639
</TABLE>
See accompanying notes to consolidated financial statements.
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FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Consolidated Statements of Operations, Continued
Years Ended September 30, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Income per share:
Income before cumulative effect
of accounting change $ 3.20 4.38 2.81
Cumulative effect of change
in accounting for income taxes .37 - -
Net income $ 3.57 4.38 2.81
</TABLE>
See accompanying notes to consolidated financial statements.
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FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Consolidated Statements of Stockholders' Equity
Years Ended September 30, 1993, 1992 and 1991
<TABLE>
<CAPTION>
Net Unrealized
Loss on
Additional Marketable
Common Paid-In Retained Equity
Stock Capital Earnings Securities Total
<S> <C> <C> <C> <C> <C>
Balance at
September 30, 1990 $322,312 2,030,606 4,664,640 (138,333) 6,879,225
Stock issued under
employee stock option
plan (note 14) 7,500 52,500 - - 60,000
Net change in unrealized
loss on marketable
equity securities - - - 94,066 94,066
Net income - - 916,639 - 916,639
Balance at
September 30, 1991 329,812 2,083,106 5,581,279 (44,267) 7,949,930
Net change in unrealized
loss on marketable
equity securities - - - 44,267 44,267
Net income - - 1,463,265 - 1,463,265
Balance at
September 30, 1992 329,812 2,083,106 7,044,544 - 9,457,462
Cash dividends
($1 per share) - - (329,812) - (329,812)
Net income - - 1,191,940 - 1,191,940
Balance at
September 30, 1993 $329,812 2,083,106 7,906,672 - 10,319,590
See accompanying notes to consolidated financial statements.
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FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Consolidated Statements of Cash Flows
Years Ended September 30, 1993, 1992 and 1991
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $1,191,940 1,463,265 916,639
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation 139,487 177,918 185,041
Provision for loan losses 83,275 133,721 533,604
Provision for loss and write-downs on
real estate owned and in judgment 51,371 97,950 -
Gain on sale of investment securities - (121,973) -
Net gain on sale of mortgage-backed
securities - (580) (1,349)
Gain on sale of loans (208,702) (286,861) (103,726)
Federal Home Loan Bank stock
dividend - (221,100) (294,500)
(Gain) loss on sale of premises
and equipment 235 209 (207)
Gain on life insurance proceeds - - (923,294)
Gain on sale of real estate owned (20,975) (46,590) (15,723)
Deferred compensation,
net of payments made (1,906) (551) 843,709
Amortization of premiums and
discounts on investment securities (1,237) (4,742) (152,929)
Amortization of premiums and
discounts on mortgage-backed
securities 274,649 56,925 (287,043)
Net loan fees deferred (5,760) (150,007) 117,303
Originations of loans held for sale,
net of repayments (17,736,528) (29,291,368) (7,218,936)
Proceeds from sale of loans
held for sale 18,451,831 28,496,531 7,322,662
Decrease in accrued interest
receivable 103,830 278,590 209,717
Decrease in interest payable
on deposits (62,288) (61,190) (10,761)
Decrease (increase) in prepaid
expenses and other assets (57,972) (136,675) 12,890
Increase in income taxes payable 90,726 58,639 91,237
Deferred income taxes (61,166) 86,629 (73,509)
Increase (decrease) in accounts
payable and accrued expenses 33,038 (938,216) 728,792
Net (increase) decrease in other
receivables (637,459) (1,616,981) 627,800
Net cash provided by (used in)
operating activities 1,626,389 (2,026,457) 2,507,417
</TABLE>
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FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Consolidated Statements of Cash Flows, Continued
Years Ended September 30, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Cash flows from investing activities:
Principal collections on loans, net $5,318,758 24,654,848 3,177,028
Purchase of loans (8,103,888) (1,206,466) (1,059,994)
Purchase of mortgage-backed securities (16,724,487) (37,199,954) (17,757,527)
Proceeds from sale of mortgage-backed
securities - 224,273 7,004,748
Principal collected on mortgage-backed
securities 27,391,438 20,794,623 10,569,839
Purchase of investment securities (749,166) (1,147,450) (8,087,816)
Proceeds from sale of investment
securities - 2,107,500 995,313
Proceeds from maturities of
investment securities 100,000 150,000 9,092,659
Principal payments received on
investment securities 198,614 18,629 -
Purchase of FHLB stock - - (657,400)
Purchase of premises and equipment (36,013) (68,680) (141,905)
Proceeds from sale of premises
and equipment - - 3,351
Capitalized costs on real estate owned - - 51,181
Proceeds from sale of real estate owned 421,726 1,068,131 443,341
Purchase of cash value in insurance
policies - (440,100) (367,000)
Proceeds from life insurance policies - - 1,933,295
Increase in cash value of life
insurance (94,963) (67,222) (128,639)
Net cash provided by investing
activities 7,722,019 8,888,132 5,070,474
Cash flows from financing activities:
Net increase (decrease) in deposits (14,351,298) 449,006 1,273,992
Proceeds from FHLB advances 9,200,000 4,500,000 106,600,000
Repayment of FHLB advances (9,800,000) (14,407,500) (92,825,000)
Net increase (decrease) in short-term
borrowings 4,400,000 - (18,514,913)
Net (increase) decrease in advances
from borrowers for taxes and
insurance (99,585) (399,664) 90,420
Proceeds from issuance of common stock - - 60,000
Payment of dividends (329,812) - -
Net cash used in financing
activities (10,980,695) (9,858,158) (3,315,501)
Net (decrease) increase in cash
and cash equivalents (1,632,287) (2,996,483) 4,262,390
Cash and cash equivalents at
beginning of year 3,494,108 6,490,591 2,228,201
Cash and cash equivalents at
end of year $1,861,821 3,494,108 6,490,591
</TABLE>
See accompanying notes to consolidated financial statements.
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FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
September 30, 1993, 1992 and 1991
(1) Summary of Significant Accounting Policies
(a) Principles of Consolidation
First Community Federal Savings and Loan Association (the
Association) is a federally-chartered stock savings and
loan association. The consolidated financial statements
include the accounts of the Association and First Financial
Services, Inc. (a wholly owned subsidiary). All
significant intercompany transactions and balances have
been eliminated in consolidation.
(b) Investment Securities and Mortgage-Backed Securities
Investments in investment securities and mortgage-backed
securities intended to be held to maturity are carried at
amortized cost. Premiums and discounts on investment
securities and mortgage-backed securities are amortized to
income over the term of the security using a method that
approximates the interest method.
In determining whether securities can be held until
maturity, management considers whether there are
conditions, such as liquidity or regulatory requirements
which would impair its ability to hold such securities
until maturity. Based on the Association's current
financial condition, management intends to and believes
that it has the ability to hold the investments and
mortgage-backed securities until maturity.
(c) Marketable Equity Securities
Marketable equity securities are carried at the lower of
aggregate cost or market. In the event carrying amount is
reduced below cost, a valuation account is established by
a charge to equity representing the net unrealized loss.
(d) Mortgage Loans Held for Sale
Mortgage loans held for sale are valued at the lower of
cost or market as determined by outstanding commitments
from investors or current investor yield requirements
calculated on a loan-by-loan basis.
(e) Loan Origination and Commitment Fees
The Association follows Statement of Financial Accounting
Standards No. 91 ("SFAS 91") whereby loan origination fees
and certain direct loan origination costs are deferred and
recognized over the lives of the related loans as an
adjustment of the loans' yield using the interest method on
a loan-by-loan basis. The net deferred fees or costs
relating to loans held for sale are recognized as a
component of the gain (loss) on sale of loans when the
loans are sold.
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FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies, Continued
(e) Loan Origination and Commitment Fees, Continued
Under SFAS 91, commitment fees received in connection with
the purchase of loans are deferred and recognized over the
lives of the resulting loans as an adjustment of yield, or
if the commitment expires unexercised, recognized in income
upon expiration of the commitment.
(f) Real Estate Owned and in Judgment
Real estate owned and in judgment includes real estate
acquired by foreclosure or by deed in lieu of foreclosure,
properties in the process of foreclosure subject to the
statutory redemption period (in judgment) and properties
classified as in substance foreclosures. Real estate owned
is recorded at the lower of cost or estimated fair value at
the date the property is classified as real estate owned.
Provisions for loss are recorded if, subsequent to the date
of acquisition, the estimated fair value less selling costs
(estimated net realizable value in 1992 and 1991) of the
property is less than its recorded value. The effect on
the consolidated financial statements of changing in 1993
from utilizing net realizable value to fair value less
selling costs for determining provision for loss on real
estate owned was not material.
(g) Depreciation
Depreciation on premises and equipment is provided using
the straight-line method over the estimated useful lives of
the related assets.
(h) Income Taxes
In February 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 109,
Accounting For Income Taxes (SFAS 109). SFAS 109 requires
a change from the deferred method of accounting for income
taxes of APB Opinion 11 to the asset and liability method
of accounting for income taxes. Under the asset and
liability method of SFAS 109, deferred tax assets and
liabilities are recognized for the future income 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 SFAS 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
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FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies, Continued
(h) Income Taxes, Continued
Effective October 1, 1992, the Association adopted SFAS 109
and has reported the cumulative effect of that change in
the method of accounting for income taxes in the 1993
consolidated statement of operations.
Pursuant to the deferred method under APB 11, which was
applied in 1992 and prior years, deferred income taxes are
recognized for income and expense items that are reported
in different years for financial reporting purposes and
income tax purposes using the tax rate applicable for the
year of the calculation. Under the deferred method,
deferred taxes are not adjusted for subsequent changes in
tax rates.
(i) Deferred Premium on Sales of Loans and Loan Servicing Fees
The Association sells loans with servicing retained. At
the time of the sale, an evaluation is made of the
contractual servicing fee which is represented by the
differential between the contractual interest rate of the
loan and the interest rate payable to the investor. The
present value of the amount by which the contractual
servicing fee exceeds or is less than a normal servicing
fee, after evaluation of estimated prepayments on such
loans, is considered to be an adjustment of the sales
proceeds which in turn increases or reduces the gain or
loss recognized at the time of sale. The resultant amount
of deferred premiums is recorded in the consolidated
balance sheet as other assets and is amortized using the
interest method over the estimated remaining lives of such
loans. The contractual servicing fee is recognized as
income over the lives of the related loans, net of the
estimated normal amortization of the deferred premium on
sales of loans which was the projected amortization
inherent in the original present value calculation. Loan
servicing costs are charged to expense as incurred. When
actual loan repayment experience exceeds original
estimates, supplemental amortization is charged to
operations so that the original rate of return will be
provided over the estimated lives of the remaining loans as
revised.
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FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies, Continued
(j) Allowance for Delinquent Interest
The Association provides an allowance for accrued interest
receivable when the collection of such interest is not
reasonably assured. The allowance is netted against
accrued interest receivable for financial statement
purposes.
(k) Provision for Loan Losses
Provisions for estimated losses are charged to operations
to maintain an allowance for losses which is available to
absorb future loan losses. The allowance is charged and
loans are reduced by a corresponding amount at the time the
Association determines that a portion of a loan will be
uncollectible. Losses arising from writing down property
acquired from foreclosures or in substance foreclosures to
estimated fair value are also charged to the allowance for
losses.
In determining the adequacy of the allowance for losses on
loans management considers, among other things, the
Association's historical loss experience, delinquency
levels and its assessment of the risk in the loan portfolio
based upon its internal loan review procedures.
While management uses available information to recognize
losses on loans, future additions to the allowance may be
necessary based on changes in economic conditions. The
Association is subject to the regulations of certain
Federal agencies and undergoes periodic examinations by
those regulatory authorities. As an integral part of those
examinations, the various regulatory agencies periodically
review the Association's allowances for losses on loans.
Such agencies may require the Association to recognize
additions to the allowance based on their judgments about
information available to them at the time of their
examination.
(l) Gain on Sale of Loans
Gains or losses on sales of mortgage loans are recognized
at the time of settlement.
(m) Financial Options and Hedging Activities
In 1991 and certain prior years, the Association was
involved in the hedging of certain of its investment
securities, mortgage loans and mortgage-backed securities
for the purpose of reducing its exposure to the risk of
changes in interest rates.
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FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies, Continued
(m) Financial Options and Hedging Activities, Continued
Gains and losses from financial futures transactions that
qualified as effective hedges were deferred and capitalized
as a component of the hedged asset or liability. These
gains and losses are amortized over the remaining
contractual life of the hedged asset or liability using a
method that approximates the interest method as an
adjustment to the related interest income or expense.
Deferred gains totaled $7,718 and $19,221 at September 30,
1993 and 1992, respectively. Deferred losses totaled
$100,729 and $131,179 at September 30, 1993 and 1992,
respectively.
(n) Income Per Share
Income per share has been computed by dividing the net
income for the year by the weighted average number of
shares of common stock and, except where anti-dilutive,
common stock equivalents outstanding during the year. The
weighted average number of common stock and common stock
equivalents were 333,872; 333,872 and 326,619 for the years
ended September 30, 1993, 1992 and 1991, respectively.
Outstanding employee stock options are common stock
equivalents.
(o) Statements of Cash Flows
For purposes of the statements of cash flows, cash
equivalents include cash on hand, withdrawable cash on
deposit in other institutions and interest-bearing deposits
in other financial institutions with an original maturity
of less than ninety days.
During 1993, 1992 and 1991, the Association paid cash for
interest expense of $7,997,855; $10,186,109 and
$13,030,476, respectively. During 1993, 1992 and 1991, the
Association made income tax payments of $455,813; $402,376
and $237,979, respectively.
Noncash investing activities included the following for the
years ended September 30, 1993, 1992 and 1991:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Sales of real estate owned
financed by the Association $304,000 469,000 55,894
Transfer of loans to real estate
owned 297,766 478,281 1,950,466
</TABLE>
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(2) Investment Securities
The amortized cost and estimated market value of investments
in securities are as follows at September 30, 1993 and 1992:
<TABLE>
<CAPTION>
September 30, 1993
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government Agency
Security $700,000 5,250 - 705,250
Small Business
Administration security 782,268 489 - 782,757
1,482,268 5,739 - 1,488,007
Marketable equity securities -
Federal Home Loan Bank
stock (note 8) 3,427,400 - - 3,427,400
Asset Management Fund
Intermediate - Term
Liquidity Portfolio 2,996,341 22,133 - 3,018,474
6,423,741 22,133 - 6,445,874
$7,906,009 27,872 - 7,933,881
</TABLE>
The amortized cost and estimated market value of investment
securities at September 30, 1993, by contractual maturity, are
shown below:
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
<S> <C> <C>
After one through five years $700,000 705,250
After ten years 782,268 782,757
Marketable equity securities (no maturity) 6,423,741 6,445,874
$7,906,009 7,933,881
</TABLE>
Proceeds from sales of debt securities were $2,107,500 for
1992. Gross realized gains on sales of investment securities
for the year ended September 30, 1992 were $121,973. No gross
gains or losses were realized for 1993 or 1991.
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(2) Investment Securities, Continued
<TABLE>
<CAPTION>
September 30, 1992
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury obligations $49,721 - - 49,721
Small Business
Administration security 980,758 - 1,840 978,918
1,030,479 - 1,840 1,028,639
Marketable equity securities -
Federal Home Loan Bank
stock 3,427,400 - - 3,427,400
Asset Management Fund
Intermediate - Term
Liquidity Portfolio 2,996,341 47,033 - 3,043,374
6,423,741 47,033 - 6,470,774
$7,454,220 47,033 1,840 7,499,413
</TABLE>
A requirement of the Association's membership in the Federal
Home Loan Bank of Topeka (FHLB) is that the Association must
own a certain amount of stock in the FHLB. At September 30,
1993, the Association was required to own stock in the FHLB
aggregating $2,052,500. No ready market exists for such
stock, and it has no quoted market value. For disclosure
purposes, such stock is assumed to have a market value which
is equal to its redemption value.
(3) Mortgage-Backed Securities
Mortgage-backed securities consist of the following:
<TABLE>
<CAPTION>
September 30, 1993
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Government National
Mortgage Association
Pass-Through
Certificates $10,761,732 486,707 2,660 11,245,779
Federal National
Mortgage Association
Pass-Through
Certificates 28,682,248 236,845 113,731 28,805,362
Federal Home Loan
Mortgage Corporation
Participation
Certificates 22,934,413 486,881 80,298 23,340,996
Other collateralized
mortgage obligations 292,471 - 1,093 291,378
Real estate mortgage
investment conduits 4,555,355 - 19,786 4,535,569
$67,226,219 1,210,433 217,568 68,219,084
</TABLE>
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(3) Mortgage-Backed Securities, Continued
<TABLE>
<CAPTION>
September 30, 1992
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Government National
Mortgage Association
Pass-Through
Certificates $14,471,181 653,242 3,223 15,121,200
Federal National
Mortgage Association
Pass-Through
Certificates 26,159,262 423,939 21,223 26,561,978
Federal Home Loan
Mortgage Corporation
Participation
Certificates 29,261,276 820,856 23,615 30,058,517
Other collateralized
mortgage obligations 425,100 2,647 - 427,747
Real estate mortgage
investment conduits 7,851,000 14,591 19,825 7,845,766
$78,167,819 1,915,275 67,886 80,015,208
</TABLE>
Proceeds from sales of mortgage-backed securities were $-0-,
$224,273 and $7,004,748 for 1993, 1992 and 1991, respectively.
Resultant gross gains of $-0-, $580 and $78,618 were realized
for 1993, 1992 and 1991, respectively. Gross losses of
$77,269 were recognized in 1991.
Certain of the certificates are pledged as collateral for
deposits as set forth in note 7 and for borrowings as set
forth in note 8.
(4) Loans Receivable
Loans receivable consist of the following:
<TABLE>
<CAPTION>
September 30,
1993 1992
<S> <C> <C>
Conventional $44,045,910 49,189,381
Real estate construction 3,069,725 2,437,550
Partially guaranteed by VA 2,234,927 2,571,842
Insured by FHA 3,543,234 4,220,981
Real estate installment 6,264,872 4,837,552
Consumer and share loans 4,676,536 4,768,773
FHA Title I loans 10,752,999 4,276,104
Commercial loans 2,598,860 2,407,453
77,187,063 74,709,636
Undisbursed portion of loans-in-process (1,578,383) (1,579,917)
Premiums on loans purchased 249,010 10,238
Deferred loan fees, net (246,418) (252,178)
Allowance for loan losses (330,383) (320,739)
$75,280,889 72,567,040
</TABLE>
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(4) Loans Receivable, Continued
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Years Ended September 30,
1993 1992 1991
<S> <C> <C> <C>
Balance, beginning of year $320,739 477,864 555,649
Provision for loan losses 83,275 133,721 533,604
Charge-offs (129,226) (312,889)(645,009)
Recoveries 55,595 22,043 33,620
Balance, end of year $330,383 320,739 477,864
</TABLE>
Loans being serviced by the Association for the benefit of
others amounted to $50,628,478; $45,920,216 and $26,701,565 at
September 30, 1993, 1992 and 1991, respectively.
The Association has issued mortgaged-backed securities
guaranteed by GNMA under the provisions of the National
Housing Act. At September 30, 1993 and 1992, the principal
amount of these securities outstanding was approximately
$4,908,000 and $5,217,000, respectively, which also represents
the approximate principal amount of the related mortgages that
serve as collateral for the securities that are being serviced
under this program.
Loans to directors, executive officers and principal holders
of equity securities totaled $729,527 and $709,987 at
September 30, 1993 and 1992, respectively. Management
believes that such loans are made in the ordinary course of
business with normal credit terms including interest rate and
collateral and do not represent more than a normal risk of
collection. An analysis of loans to officers, directors and
principal stockholders is as follows:
<TABLE>
<S> <C>
September 30, 1992 $709,987
Loans originated 185,499
Loan repayments (165,959)
September 30, 1993 $729,527
</TABLE>
At September 30, 1993 and 1992, the allowance for delinquent
interest on loans amounted to $23,364 and $44,010,
respectively.
Restructured troubled loans and loans on which the accrual of
interest has been discontinued amounted to $621,829, $457,648
and $1,118,346 at September 30, 1993, 1992 and 1991,
respectively. Gross interest income of approximately $60,000,
$56,000 and $140,000 would have been recorded for the years
ended September 30, 1993, 1992 and 1991, respectively, on such
loans if the loans had been current in accordance with their
original terms and had been outstanding throughout the period.
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(4) Loans Receivable, Continued
Interest income on such loans included in net income during
these periods amounted to approximately $40,000, $31,000 and
$96,000, respectively.
Certain of the Association's real estate loans are pledged as
collateral for borrowings as set forth in note 8.
(5) Real Estate Owned and in Judgment
Real estate owned and in judgment consist of the following:
<TABLE>
<CAPTION>
September 30,
1993 1992
<S> <C> <C>
Real estate owned $13,099 302,961
Real estate in judgment 96,991 149,804
In substance foreclosures 130,765 208,964
Other assets acquired by foreclosure 22,145 104,863
Allowance for losses (2,714) (47,950)
$260,286 718,642
</TABLE>
A summary of activity in the allowance for losses on real
estate owned and in judgment is as follows for the years ended
September 30, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Balance, beginning of year $47,950 -
Provision for loss charged to expense 51,371 97,950
Property charged-off (96,607) (50,000)
Balance, end of year $ 2,714 47,950
</TABLE>
Loss on real estate operations is summarized as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Provisions for loss on property held
in real estate owned inventory $51,371 97,950 -
Gain on sale of real estate owned,
net (20,975) (46,590)(15,723)
Other expense, net of rental income 28,163 60,205 26,847
$58,559 111,565 11,124
</TABLE>
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(6) Premises and Equipment
Premises and equipment consist of the following at cost:
<TABLE>
<CAPTION>
September 30,
1993 1992
<S> <C> <C>
Land $373,266 378,501
Buildings 2,037,108 2,039,946
Furniture, fixtures and equipment 1,161,914 1,133,023
3,572,288 3,551,470
Less accumulated depreciation and
amortization (1,563,354) (1,438,827)
$2,008,934 2,112,643
</TABLE>
(7) Deposits
Deposit balances are summarized as follows:
<TABLE>
<CAPTION>
September 30,
1993 1992
<S> <C> <C>
Passbooks with a weighted average rate
of 2.92% and 3.01%, respectively $10,623,912 9,814,980
Certificates with a weighted average rate
of 4.34% and 5.27%, respectively 75,300,022 91,375,817
NOW accounts and money market demand
accounts with a weighted average
rate of 2.42% and 2.85%, respectively 20,973,681 20,058,117
Accrued interest 60,194 122,481
Total $106,957,809 121,371,395
</TABLE>
Contractual maturities of certificate accounts at September
30, 1993 are as follows:
<TABLE>
<CAPTION>
One to Two After
Less Than Two to Three Three
Interest Rate Total One Year Years Years Years
<S> <C> <C> <C> <C> <C>
Less than 3% $112,167 112,167 - - -
3% - 3.99% 40,677,064 35,996,214 4,680,850 - -
4% - 4.99% 12,960,655 3,191,089 7,147,712 2,483,051 138,803
5% - 5.99% 10,836,198 1,650,817 1,233,238 384,142 7,568,001
6% - 6.99% 5,378,470 3,649,950 539,944 561,477 627,099
7% - 7.99% 2,872,458 1,583,024 221,783 1,053,651 14,000
8% - 8.99% 2,463,010 1,912,893 512,451 5,100 32,566
$75,300,022 48,096,154 14,335,978 4,487,421 8,380,469
</TABLE>
Interest expense on deposits consisted of the following:
<TABLE>
<CAPTION>
September 30,
1993 1992 1991
<S> <C> <C> <C>
Passbooks $311,882 383,058 451,397
Certificates 3,947,740 5,681,215 7,609,554
NOW accounts and money market
demand accounts 534,647 636,120 674,598
Early withdrawal penalties (19,369) (24,002) (23,367)
$4,774,900 6,676,391 8,712,182
</TABLE>
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(7) Deposits, Continued
Certain deposits aggregating $2,601,738 are secured by
mortgage-backed securities with an amortized cost of
$10,556,714.
Deposits of $100,000 or more at September 30, 1993 and 1992
were $11,276,198 and $15,766,158, respectively.
(8) Advances From Federal Home Loan Bank
Federal Home Loan Bank advances consist of the following:
<TABLE>
<CAPTION>
Interest Rates at September 30,
Maturity September 30, 1993 1993 1992
<S> <C> <C> <C>
Within one year 7.40% - 8.80% $6,120,000 9,800,000
1 - 2 years 6.25% - 8.95% 8,200,000 6,120,000
2 - 3 years 8.00% - 9.05% 10,625,000 8,200,000
3 - 4 years 6.25% - 9.05% 6,875,000 10,625,000
4 - 5 years 6.40% - 6.55% 6,000,000 3,675,000
37,820,000 38,420,000
Line of credit 4,400,000 -
$42,220,000 38,420,000
Weighted average cost of advances 7.13% 8.12%
</TABLE>
The FHLB advances are secured by the Association's stock in
the FHLB (note 2) and the Association must maintain
unencumbered eligible collateral consisting primarily of first
mortgage loans and mortgage-backed securities with a
collateral value of at least the amount of the advances.
The Association has a line of credit with the FHLB in the
amount of $15,500,000 which expires in September 1994. The
amount borrowed under this line of credit at September 30,
1993 was $4,400,000 which bears interest at the FHLB daily
rate (3.48% at September 30, 1993).
(9) Short-Term Borrowings
The Association periodically enters into sales of securities
under agreements to repurchase (reverse repurchase
agreements). Fixed-coupon reverse repurchase agreements are
treated as financings, and the obligations to repurchase
securities sold are reflected as a liability in the
consolidated balance sheet. The dollar amount of securities
underlying the agreements remains in the asset accounts.
There were no such borrowings outstanding at or during the
years ended September 30, 1993 or 1992.
Securities sold under agreements to repurchase averaged
$5,499,310 for the year ended September 30, 1991. The maximum
amounts outstanding at any month-end was $17,901,598 during
the year ended September 30, 1991.
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(10) Income Taxes
As discussed in note 1(h), the Association adopted SFAS 109 as
of October 1, 1992. The cumulative effect of this change in
accounting for income taxes of $125,000 is determined as of
October 1, 1992 and is reported separately in the consolidated
statement of operations for the year ended September 30, 1993.
Prior years' financial statements have not been restated to
apply the provisions of SFAS 109.
The consolidated provision for income taxes includes the
following components:
<TABLE>
<CAPTION>
September 30,
1993 1992 1991
<S> <C> <C> <C>
Current expense:
Federal $450,526 366,674 255,102
State 96,013 92,490 2,907
Total current expense 546,539 459,164 258,009
Deferred expense (benefit) 63,834 86,629 (73,509)
$610,373 545,793 184,500
</TABLE>
A reconciliation of the Association's provision for income
taxes to the expected amount based upon the Federal statutory
corporate rate of 34% for the years ended September 30, 1993,
1992 and 1991 is as follows:
<TABLE>
<CAPTION>
September 30,
1993 1992 1991
<S> <C> <C> <C>
Federal income tax at expected rate $570,286 683,080 374,387
State income taxes, net of Federal
income tax benefit 69,780 74,013 4,694
Difference in bad debt deduction
allowable for income tax purposes
versus amount recognized for
financial reporting purposes - (44,624) (91,130)
Nontaxable life insurance proceeds - - (357,658)
Alternative minimum tax - (182,494) 182,494
Other - net (29,693) 15,818 71,713
$610,373 545,793 184,500
</TABLE>
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(10) Income Taxes, Continued
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and
liabilities at September 30, 1993 are presented below:
<TABLE>
<S> <C>
Deferred tax assets:
Allowance for loan losses $128,109
Deferred loan fees and discounts 95,559
Compensated absences 7,500
Deferred compensation 337,391
Other 39,217
Total gross deferred tax asset 607,776
Deferred tax liabilities:
Allowance for loan losses (55,136)
Premises and equipment (14,552)
Pension benefits (20,157)
FHLB stock (392,437)
Other (39,957)
Total gross deferred liabilities (522,239)
Net deferred tax asset $85,537
</TABLE>
For the years ended September 30, 1992 and 1991, deferred
income tax expense (benefit) results from timing differences
in the recognition of revenue and expense for income tax and
financial reporting purposes. The sources of these
differences and the tax effect of each are as follows:
<TABLE>
<CAPTION>
September 30,
1992 1991
<S> <C> <C>
Income and expenses recognized for
financial reporting purposes on
the accrual basis but on a cash
basis for income tax purposes $52,689 (21,000)
FHLB stock dividend 84,018 46,500
Securities losses - 32,500
Deferred compensation 209 (133,500)
Alternative minimum tax for income
tax purposes versus that recog-
nized for financial reporting
purposes (57,000) 57,000
Other 6,713 (55,009)
$86,629 (73,509)
</TABLE>
Prepaid expenses and other assets include $85,537 and $24,371
of future income tax benefits at September 30, 1993 and 1992,
respectively, and $28,320 of refundable income taxes at
September 30, 1992. Accounts payable and accrued expenses
includes $62,406 of income taxes payable at September 30,
1993.
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(11) Pension Plan
The Association has a defined benefit pension plan covering
substantially all of its employees. The benefits are based on
years of service and the employee's highest average
compensation received for five consecutive years. The
Association's funding policy is to contribute annually the
maximum amount that can be deducted for federal income tax
purposes.
The following table sets forth the plan's funded status as of
the measurement date of September 30, 1993 and 1992, and the
amounts recognized in the Association's consolidated balance
sheets:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Actuarial present value of benefit
obligations:
Accumulated benefit obligation:
Vested $256,952 174,572
Nonvested 12,107 8,416
$269,059 182,988
Plan assets at fair value - comprised of
certificates of deposit, United States
Treasury obligations and other short-
term money market instruments $388,794 326,645
Projected benefit obligation for service
rendered to date (463,805) (345,162)
Projected benefit obligation in excess of
Plan assets (75,011) (18,517)
Unrecognized net gain from past experience
different from that assumed and effects
of changes in assumptions 109,585 27,743
Unrecognized net assets at October 1, 1989,
being amortized over average years of
future service 17,836 18,814
Prepaid pension costs included in prepaid
expenses and other assets $52,410 28,040
</TABLE>
Net pension cost included the following components:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Service cost - benefit earned during
the period $44,608 36,137 32,550
Interest cost on projected benefit
obligation 27,613 17,799 27,166
Actual return on plan assets (923) (22,737) (26,355)
Net amortization and deferral (24,630) 325 978
Net periodic pension cost $46,668 31,524 34,339
</TABLE>
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(11) Pension Plan, Continued
The weighted-average discount rates used in determining the
actuarial present value of the projected benefit obligation
were 7.5% and 8.0%, respectively, in 1993 and 1992. The rate
of increase in future compensation levels was 5.0% in 1993 and
1992. The expected long-term rate of return on assets in 1993
and 1992 was 8%.
(12) Employee Stock Ownership Trust
In 1989, the Association established an Employee Stock
Ownership Plan (ESOP) covering substantially all employees.
It is anticipated that a major portion of the plan assets will
be invested in common stock of the Association. The ESOP is
to be funded by contributions made by the Association in cash
or common stock which will be determined annually by the Board
of Directors. The ESOP may also borrow funds from a third
party to finance the purchase of stock of the Association.
Shares purchased with such proceeds will be held in a suspense
account for allocation among members as the loan is paid.
Contributions to the ESOP and shares released from the
suspense account will be allocated among participants on the
basis of compensation in the year of allocation. Benefits
become 100% vested after five years of credited service.
Forfeitures will be reallocated among remaining participating
employees. Benefits are payable upon retirement, early
retirement, disability or separation from service.
Distributions may be paid in shares of common stock or in
cash.
The ESOP Trustee must vote all allocated shares held in the
ESOP in accordance with the instructions of the participating
employees. Unallocated shares and shares held in the suspense
account will be voted pro rata based on the shares voted by
the participating employees.
The Association contributed $14,600 to the ESOP in fiscal year
1993 of which $7,845 was distributed to retiring and
terminating employees. No contributions were made during
fiscal 1992 or 1991. During fiscal 1992, the Association had
to fund $5,943 to the ESOP to cover the deficit in cash
incurred upon payment of distributions to retiring and
terminating employees. As of September 30, 1993, the ESOP had
not incurred any indebtedness. As of September 30, 1993, 1992
and 1991, the ESOP owned 5,650, 5,400 and 3,400 shares,
respectively, of the Association's common stock.
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(13) Deferred Compensation Payable
During fiscal years 1991 and 1989, the Association entered
into deferred compensation agreements for the benefit of
senior executive officers and directors. One additional
deferred compensation agreement was entered into during 1992.
Additional cash value in insurance policies were purchased
totaling $-0-, $440,100 and $367,000 during the years ended
September 30, 1993, 1992 and 1991, respectively. Benefits are
partially vested for executives at early retirement age and
fully vested for executives and directors at normal retirement
age. Compensation expense in an amount necessary to accrue
the present value of the deferred compensation liability,
calculated on the interest method, began in fiscal 1991 (see
note 19). The deferred compensation expense accrued was
$45,264, $43,923 and $20,091 for the years ended September 30,
1993, 1992 and 1991, respectively.
During the year ended September 30, 1991, Chairman of the
Board, Kenneth Brown, passed away. Mr. Brown was covered by
deferred compensation agreements. The present value of the
death benefit, which is recorded in accounts payable and
accrued expenses in the accompanying consolidated balance
sheet, was $855,873 (balance of $767,974 at September 30,
1993) and is payable in 180 monthly installments at an 8%
discount rate beginning February 15, 1991, to his named
beneficiary. The Association had purchased life insurance to
fund this death benefit. Life insurance proceeds of
$1,662,315 were received by the Association. Of this amount
$757,376 was policy cash surrender value resulting in a net
gain from policy proceeds of $904,939. During the year ended
September 30, 1991, two other policies were cashed by the
Association resulting in an additional gain of $18,355.
(14) Stock Option Plan
In connection with the conversion of the Association from
mutual to stock form, the Board of Directors adopted a Stock
Option and Incentive Plan. Options granted under the plan
expire five years from the date of grant for any employee who
owns stock representing more than 10% of the common stock
outstanding at the time the option is granted. For all other
options, the expiration date is ten years from the date of the
grant.
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(14) Stock Option Plan, Continued
Options for 64,201 shares have been approved by the Board of
Directors, of which 50,000 shares have been granted and 14,201
shares remain available at September 30, 1993. Of the options
to acquire 42,500 shares outstanding at September 30, 1993,
20,300 of the options are at a price per share of $8 and
22,200 of the options are at a price per share of $10. Option
prices were set by the Board of Directors at estimated fair
market value as of the date of grant. Changes in stock
options are shown below:
<TABLE>
<CAPTION>
Number of Option
Shares Prices
<S> <C> <C>
Outstanding at September 30, 1990 37,500 $8 - 10
Granted 19,500 $10
Exercised (7,500) $8
Forfeited (500) $8
Outstanding at September 30, 1991 49,000 $8 - 10
Forfeited (6,000) $10
Outstanding at September 30, 1992 43,000 $8 - 10
Forfeited (500) $10
Outstanding at September 30, 1993 42,500 $8 - 10
</TABLE>
At September 30, 1993, all of the above options were
exercisable (see note 19).
(15) Stockholders' Equity
As a result of the Association meeting certain definitional
tests under the Internal Revenue Code, at September 30, 1993,
the Association had accumulated income of approximately
$3,100,000 for which no provision for Federal income tax has
been made. Such amount represents an allocation of income to
bad debt deduction for tax purposes only. Reduction of the
amount so allocated for purposes other than bad debt losses,
including a dividend distribution or a distribution in
liquidation, will create income for tax purposes which will be
subject to the then current corporate income tax rate.
In 1983, the Association completed the sale of 322,012 shares
of common stock pursuant to a Plan of Conversion to convert
the Association to a federally-chartered capital stock
association. In the event of a complete liquidation (and only
in such an event) depositors who continued to maintain their
deposits since the conversion will be entitled to receive a
liquidation distribution before such distribution may be made
to the stockholders.
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(16) Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA) and Financial Institutions Reform, Recovery and
Enforcement Act of 1989 (FIRREA)
FDICIA was signed into law on December 19, 1991. Regulations
implementing the prompt corrective action provisions of FDICIA
became effective on December 19, 1992. 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." Institutions categorized as
"undercapitalized" or worse are subject to certain
restrictions, including the requirement to file a capital plan
with their primary federal regulator, prohibitions on the
payment of dividends and management fees, restrictions on
executive compensation, and increased supervisory monitoring,
among other things. Other restrictions may be imposed on the
institution either by its primary federal regulator or by the
Federal Deposit Insurance Corporation (FDIC), including
requirements to raise additional capital, sell assets, or sell
the entire institution. Once an institution becomes
"critically undercapitalized" it must generally be placed in
receivership or conservatorship within 90 days.
FIRREA was signed into law on August 9, 1989; regulations for
savings institutions' minimum capital requirements went into
effect on December 7, 1989. In addition to its capital
requirements, FIRREA includes provisions for changes in the
Federal regulatory structure for institutions including a new
deposit insurance system, increased deposit insurance premiums
and restricted investment activities with respect to
noninvestment grade corporate debt and certain other
investments. FIRREA also increases the required ratio of
housing related assets in order to qualify as a savings
institution.
The regulations require institutions to have a minimum
regulatory tangible capital equal to 1.5% of adjusted total
assets, a minimum 4% core/leverage capital ratio, a minimum 4%
tier 1 risk-based ratio and a minimum 8% total risk-based
capital ratio to be considered "adequately capitalized."
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(16) Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA) and Financial Institutions Reform, Recovery and
Enforcement Act of 1989 (FIRREA), Continued
An institution is deemed to be "critically undercapitalized"
if it has a tangible equity ratio of 2% or less.
At September 30, 1993, the Association's tangible capital
ratio was 6.4%, tangible equity ratio was 6.4%, core/leverage
ratio was 6.4%, tier 1 risk-based ratio was 17.0% and total
risk-based ratio was 17.5%, based on tangible capital of
$10.27 million, core/leverage capital of $10.27 million, tier
1 risk-based capital of $10.27 million, and total risk-based
capital of $10.60 million, as defined and adjusted total
assets of $161.73 million and risk-weighted assets of $60.56
million, as defined. At September 30, 1993, the Association
is in the "well capitalized" category.
The following sets forth a reconciliation of equity capital to
regulatory capital for the Association along with a comparison
of the Association's regulatory capital ratios to the minimum
requirements.
<TABLE>
<CAPTION>
Core/ Tier 1 Total
TangibleTangibleLeverageRisk-basedRisk-based
Capital Equity Capital Capital Capital
(Thousands of dollars)
<S> <C> <C> <C> <C> <C>
Equity capital per
accompanying financial
statements and amended
quarterly report sub-
mitted to the OTS $10,320 10,320 10,320 10,320 10,320
Nonallowable assets -
investment in subsidiary 47 47 47 47 47
General valuation
allowance - - - - 325
Regulatory capital -
computed $10,273 10,273 10,273 10,273 10,598
Adjusted total assets $161,730 161,730 161,730
Risk-weighted assets 60,556 60,556
Capital ratio 6.4% 6.4% 6.4% 17.0% 17.5%
Regulatory capital category:
Well capitalized if equal
to or greater than 5.0% 6.0% 10.0%
Adequately capitalized
if equal to or
greater than 1.5%
Undercapitalized if less
than 4.0% 4.0% 8.0%
Not critically under-
capitalized if equal
to or greater than 2.0%
</TABLE>
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(17) Financial Instruments With Off-Balance-Sheet Risk
The Association 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, standby
letters of credit and lines of credit. These instruments
involve, to varying degrees, elements of credit risk in excess
of the amount recognized in the balance sheet.
The Association had outstanding commitments to originate
mortgage loans aggregating approximately $1,969,000 at
September 30, 1993. All of these commitments were for fixed
rate mortgages with interest rates ranging from 6.125% to
7.625%. 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.
Since some of the commitments may expire without being drawn
upon, the total commitment amounts do not necessarily
represent future cash requirements.
At September 30, 1993, the Association had two outstanding
letters of credit amounting to $10,000. Letters of credit are
conditional commitments issued by the Association 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.
At September 30, 1993, the Association had granted unused
lines of credit to borrowers aggregating approximately
$282,000 for commercial lines and $443,000 for open-end
consumer lines. Lines of credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the contract. Lines of credit generally have
fixed expiration dates. Since a portion of the line may
expire without being drawn upon, the total unused lines do not
necessarily represent future cash requirements. The
Association evaluates each customer's credit worthiness on a
case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Association upon extension of credit,
is based on management's credit evaluation of the counter
party. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment,
commercial real estate and residential real estate. The
Association uses the same credit policies in granting lines of
credit as it does for on-balance sheet instruments.
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(17) Financial Instruments With Off-Balance-Sheet Risk, Continued
The Association had outstanding commitments to sell fixed rate
mortgages aggregating approximately $2,183,000 at September
30, 1993. These commitments relate to mortgage loans held for
sale or mortgage loans to be originated and sold and have been
considered in determining the carrying value of mortgage loans
held for sale as discussed in note 1(d).
(18) Business and Credit Concentrations
The Association grants commercial, real estate and consumer
loans to customers in south central Kansas. A significant
portion of the Association's loan portfolio is secured by
single and multi-family residential real estate. Credit risk
with respect to these loans is therefore largely dependent
upon economic conditions in south central Kansas, however,
loans granted within the Association's trade area have been
granted to a wide variety of borrowers. At September 30,
1993, the Association had approximately $10.8 million of FHA
Title 1 Loans of which approximately $3,200,000 is secured by
collateral in California. Management does not believe that
any significant concentrations of credit risk exist with
respect to individual borrowers or groups of borrowers which
are engaged in similar activities that would be similarly
affected by changes in economic or other conditions.
(19) Sale of Association
In October 1993, the Association entered into an agreement
with Union Bancshares, Inc. and its subsidiary Union National
Bank of Wichita (UNB) under which UNB would acquire all the
outstanding common stock of the Association. In
consideration, the Association's stockholders would receive
$35 in cash for each outstanding share of the Association's
common stock and the excess of $35 over the exercise price for
each common stock option outstanding. Consummation of the
agreement is subject to certain conditions including obtaining
regulatory approval and approval of the Association's
stockholders. The agreement specifies that the merger must be
consummated within 30 days of receipt of final regulatory
approval, but not later than July 31, 1994.
The deferred compensation agreements with the former chairman
of the board and with two senior executive officers (see note
13) contain "change in control" clauses. Under these clauses
upon a change in control (such as the above described sale),
the covered individuals will receive lump sum payments equal
to the total payment called for under such agreements adjusted
for present value using the current Federal Reserve discount
rate (approximately 3% at September 30, 1993) which is a
different discount rate than the rate used by the Association
for the normal periodic accrual of compensation under these
agreements.
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(19) Sale of Association, Continued
Such amounts are payable only upon consummation of the
qualifying transaction and, accordingly, such amounts are not
recorded in the accompanying consolidated financial statements
at September 30, 1993. If a qualifying transaction were
consummated as of September 30, 1993, additional liabilities
pertaining to the deferred compensation agreements of
approximately $625,000 (before consideration of applicable
income tax benefit) over the amounts reflected in the
accompanying consolidated balance sheet at September 30, 1993
would be incurred.
(20) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107,
Disclosures About Fair Value of Financial Instruments,
requires that the Association disclose estimated fair values
for its financial instruments. The Association has made fair
value estimates for financial instruments, which includes
financial assets and liabilities and commitments to extend
credit. Fair value estimates have been made as of September
30, 1993 based on current economic conditions, risk
characteristics of the various financial instruments and other
subjective factors. Fair value estimates have not been
changed to reflect events or circumstances occurring
subsequent to September 30, 1993.
Fair value estimates are based on existing financial
instruments and do not represent an aggregate net fair value
of the Association. For example, the fair value estimates do
not include the value of depositor relationships. In
addition, the tax ramifications related to the realization of
the gains and losses can have a significant effect on fair
value estimates and have not been considered in these
estimates.
The following methods and assumptions were used to estimate
the fair value of each class of financial instrument for which
it is practicable to estimate that value:
Cash and Cash Equivalents
The balance sheet carrying amount is a reasonable estimate
of fair value.
Loans Receivable and Mortgage Loans Held for Sale
The Association's loan portfolio has been segregated into
categories of loans with reasonably similar characteristics
in order to estimate the fair value. Mortgage loans were
divided into fixed rate and adjustable rate (treasury based
and non-treasury based), with further segmentation into
residential, residential construction and commercial loans.
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(20) Fair Value of Financial Instruments, Continued
Loans Receivable and Mortgage Loans Held for Sale, Continued
The fair value estimate of loans was calculated by the
discounted cash flow method. Monthly interest and principal
cash flows adjusted for estimates of prepayments were
discounted by a rate which approximates loan rates offered
by the Association on new loans of the same type, credit
quality and maturity or in combination with secondary
mortgage market rates for similar types of loans. The
effect of non-performing loans on the fair value estimate
was determined to be insignificant.
Adjustable rate loans were evaluated based on adjustment
characteristics of repricing period, margin, period caps and
lifetime caps. The fair value of adjustable rate loans in
excess of carrying value is due to the lag in repricing.
Fixed rate mortgage and consumer loans were evaluated based
on the factors of weighted average maturity, weighted
average balloon date, weighted average rate, government
guarantee or insurance.
Mortgage-Backed Securities
Fair value of mortgage-backed securities is based on quoted
market prices.
Investment Securities
Fair value of investment securities is based on quoted
market price. For stock in FHLB, the balance sheet carrying
amount is a reasonable estimate of the fair value based on
book value per share being equal to current redemption
price.
Accrued Interest Receivable
The balance sheet carrying amount is a reasonable estimate
of the fair value.
Deposits
The estimated fair value of non-interest-bearing deposits,
NOW accounts, passbook deposits and money market accounts is
the amount payable on demand as of September 30, 1993. The
estimated fair value of monthly variable rate certificates
of deposit is the balance sheet carrying amount. The
estimated fair values of fixed-rate certificates of deposit
are based on the discounted value of contractual cash flows
with the discount rate approximating the September 30, 1993
rate offered for deposits of similar remaining maturities.
<PAGE>
<PAGE>
FIRST COMMUNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Notes to Consolidated Financial Statements
(20) Fair Value of Financial Instruments, Continued
Advances from FHLB
The estimated fair value of variable rate FHLB advances is
the balance sheet carrying amount. The estimated fair value
of fixed rate advances has been determined using rates
currently available to the Association for debt with similar
terms and remaining maturities.
Accrued Interest Payable
The estimated fair value of accrued interest payable is the
balance sheet carrying amount.
Deferred Compensation
The estimated fair value of deferred compensation was
calculated by the discounted cash flow method using a
discount rate that approximates current interest rates on
obligations with similar maturities.
Commitments to Extend Credit
The estimated fair value of commitments to extend credit,
letters of credit and lines of credit were based on fees
currently charged to enter into similar agreements, taking
into account the remaining terms of the agreement and the
counterparties' credit standings. The carrying value and
related fair value of such agreements is nominal.
The carrying value and estimated fair value of the
Association's financial instruments are as follows:
<TABLE>
<CAPTION>
September 30, 1993
Carrying Fair
Value Value
<S> <C> <C>
Financial assets:
Cash and cash equivalents $1,861,821 1,861,821
Loans receivable 75,280,889 77,585,000
Mortgage loans held for sale 575,097 583,000
Mortgage-backed securities 67,226,219 68,219,084
Investment securities 7,906,009 7,933,881
Accrued interest receivable 1,175,083 1,175,083
Financial liabilities:
Deposits 106,897,615 107,297,000
Advances from FHLB 42,220,000 44,472,000
Accrued interest payable 60,194 60,194
Deferred compensation 877,252 901,252
<CAPTION>
Contract
Amount
<S> <C>
Unrecognized financial instruments:
Commitments to extend credit $1,968,605
Letters of credit 10,000
Lines of credit 725,000
</TABLE>
<PAGE>
<PAGE>
Union Bancshares, Inc. and Subsidiaries
Pro Forma Financial Information of Union Bancshares, Inc.
<PAGE>
<PAGE>
Union Bancshares, Inc. and Subsidiaries
Pro Forma Condensed Combined Balance Sheet
(Unaudited)
March 31, 1994
(In thousands)
<TABLE>
<CAPTION>
Historical
Union First Pro Pro
BancsharesCommunity Forma Forma
Inc. Fed. S&L Adjustments Combined
<S> <C> <C> <C> <C> <C>
Assets
Cash and due from banks $32,708 $ 452 $(12,794) (1)
7,000 (2) 27,366
Federal funds sold and
securities purchased under
resale agreements -- -- --
Total cash
and cash equivalents 32,708 452 (5,794) 27,366
Investment securities
held to maturity 133,755 64,251 (269) (3) 197,737
Investment securities
available for sale 35,465 -- 35,465
Total investment securities 169,220 64,251 (269) 233,202
Trading account securities 100 -- 100
Loans 299,011 76,114 1,112 (4) 376,237
Less: Allowance for loan losses (4,541) (346) (4,887)
Net loans 294,470 75,768 1,112 371,350
Premises and equipment 12,528 1,900 (924) (5) 13,504
Other assets 9,665 5,619 772 (6)
5,031 (6) 21,087
Total assets $518,691 $147,990 $ (72) $666,609
Liabilities and Stockholders' Equity
Deposits $422,716 $98,443 $ 937 (7) 522,096
Federal funds purchased and
securities sold under
agreements to repurchase 17,993 -- 17,993
Other short-term borrowings 3,275 -- 3,275
FHLB advances 19,900 37,350 685 (8) 57,935
Long-term borrowings 7,500 -- 7,000 (2) 14,500
Other liabilities 5,151 1,606 697 (9)
1,200 (9) 8,654
Total liabilities 476,535 137,399 10,519 624,453
Common stock,
Class A, par value $10 per share;
1,000,000 shares authorized,
350,690 shares outstanding 3,507 330 (330) (10) 3,507
Capital surplus 3,527 2,083 (2,083) (10) 3,527
Retained earnings 35,069 8,178 (8,178) (10) 35,069
Unrealized gain on securities
available for sale, net 53 -- 53
Total stockholders' equity 42,156 10,591 (10,591) 42,156
Total liabilities and
stockholders' equity $518,691 $147,990 $ (72) $666,609
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements
<PAGE>
<PAGE>
Union Bancshares, Inc. and Subsidiaries
Pro Forma Condensed Combined Statement of Income
(Unaudited)
(In thousands except per share data)
<TABLE>
<CAPTION>
Historical Year Ended
Union First
Bancshares Community Pro Pro
Inc. Fed. S&L Forma Forma
12/31/93 9/30/93 Adjustments Combined
<S> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $27,181 $ 6,772 $ (75) (11) 33,878
Interest and dividends on
investment securities 11,341 5,441 70 (12) 16,852
Interest on trading account
securities -- -- --
Interest on Federal funds sold
and securities purchased 113 -- 113
under resale agreements -- -- --
Total interest income 38,635 12,213 (5) 50,843
Interest expense:
Interest on deposits 12,808 4,775 (304) (13) 17,279
Interest on Federal funds
purchased and securities sold
under agreements to repurchase 581 -- 581
Interest on other short-term
borrowings 80 63 143
Interest on FHLB advances 477 3,098 (411) (14) 3,164
Interest on long-term borrowings 776 -- 420 (15) 1,196
Total interest expense 14,722 7,936 (295) 22,363
Net interest income 23,913 4,277 290 28,480
Provision for loan losses 2,412 83 2,495
Net interest income after
provision for loan losses 21,501 4,194 290 25,985
Other income 7,904 1,003 8,907
Other expense 22,163 3,520 297 (16) 25,980
Income before
income tax expenses 7,242 1,677 (7) 8,912
Income tax expense 2,050 485 (3) (17) 2,532
Net income $5,192 $ 1,192 $ (4) $6,380
Earnings per share data:
Net income $14.81 $18.19
Dividends $1.70 $1.70
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements
<PAGE>
<PAGE>
Union Bancshares, Inc. and Subsidiaries
Pro Forma Condensed Combined Statement of Income
(Unaudited)
(In thousands except per share data)
<TABLE>
<CAPTION>
Historical Three Months Ended Three
Union First Months
Bancshares Community Pro Pro
Inc. Fed. S&L Forma Forma
3/31/94 12/31/93 Adjustments Combined
<S> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $6,659 $ 1,714 $ (19) (11) 8,354
Interest and dividends on
investment securities 2,444 1,056 35 (12) 3,535
Interest on trading account
securities -- -- --
Interest on Federal funds sold
and securities purchased
under resale agreements 2 -- 2
Total interest income 9,105 2,770 16 11,891
Interest expense:
Interest on deposits 2,755 997 (76) (13) 3,676
Interest on Federal funds
purchased and securities sold
under agreements to repurchase 209 -- 209
Interest on other short-term
borrowings 22 15 37
Interest on FHLB advances 148 727 (103) (14) 772
Interest on long-term borrowings 166 -- 105 (15) 271
Total interest expense 3,300 1,739 (74) 4,965
Net interest income 5,805 1,031 90 6,926
Provision for loan losses 605 36 641
Net interest income after
provision for loan losses 5,200 995 90 6,285
Other income 2,422 248 2,670
Other expense 5,631 819 75 (16) 6,525
Income before
income tax expenses 1,991 424 15 2,430
Income tax expense 599 152 6 (17) 757
Net income $1,392 $ 272 $ 9 $1,673
Earnings per share data:
Net income $3.97 $4.77
Dividends $.30 $.30
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements
<PAGE>
<PAGE>
Union Bancshares, Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Description of Transaction
On April 4, 1994, First Community Federal Savings and Loan
Association (First Community) of Winfield, Kansas, was merged into
Union National Bank of Wichita (UNB) in accordance with the merger
agreement between Union Bancshares, Inc. (UBI), UNB and First
Community dated October 13, 1993. Under the merger agreement, each
outstanding share of First Community common stock was converted
into $35.00 in cash. Stock options of First Community were
converted into $35.00 in cash less the strike price of the options.
The total cost of the transaction was $12,646,520. The
purchase price was determined by assessing the worth in dollars of
the ongoing income stream generation from First Community, taking
into consideration market value of assets and liabilities. The
transaction, which will be accounted for as a purchase, was
financed with a $7,000,000 loan from Harris Bank and Trust in
Chicago and the remaining $5,646,520 from internal funds. The
merger passed all regulatory approvals and the approval of First
Community shareholders.
First Community was a savings and loan institution with total
assets as of April 4, 1994 of $148,000,000, and offered full
service banking from three branches. These facilities are located
one each in Winfield, Arkansas City and Derby, Kansas. All three
of these offices were part of the merger and will be ran as
branches of UNB.
Pro Forma Adjustments
(1) To record cash consideration paid to seller ($12,646,520) and
the expenses associated with the acquisition of First
Community ($147,000).
(2) To record the $7,000,000 borrowed by UBI to partially finance
the merger.
(3) To record difference between the fair value and the book value
of the investment security portfolio of First Community at
merger date.
(4) To record difference between the fair value and the book value
of the loan portfolio of First Community at merger date.
(5) To record the difference between the fair value and the book
value of premises and equipment of First Community at merger
date.
(6) To record the excess of cost over the fair value of net assets
acquired ($5,031,000) and the difference between the fair
value and the book value of miscellaneous other assets of
First Community at merger date and estimated tax impact of
fair value adjustments (at a 38% combined state and federal
tax rate).
<PAGE>
<PAGE>
Union Bancshares, Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Pro Forma Adjustments (Continued)
(7) To record difference between the fair value and book value of
deposit accounts of First Community at merger date.
(8) To record difference between the fair value and book value of
Federal Home Loan Bank (FHLB) advances at merger date.
(9) To record the difference between the fair value and the book
value of miscellaneous other liabilities of First Community at
merger date ($697,000) and establish a tax liability for the
recapture of First Community's tax loan loss reserve
($1,200,000).
(10) To eliminate stockholders' equity of First Community.
(11) To record the amortization of the purchase accounting
adjustments arising from the increase in fair value of First
Community's loan portfolio.
(12) To record the amortization of the purchase accounting
adjustments arising from the decrease in fair value of First
Community's investment security portfolio.
(13) To record the amortization of the purchase accounting
adjustments arising from the increase in fair value of First
Community's deposit accounts.
(14) To record the amortization of the purchase accounting
adjustments arising from the increase in fair value of First
Community's FHLB advances.
(15) To record the interest expense on the indebtedness incurred to
finance the merger.
(16) To record the amortization of the purchase accounting
adjustments arising from:
<TABLE>
<CAPTION>
12/31/93 3/31/94
<S> <C> <C>
The excess of cost over
net assets acquired $335,000 $ 84,000
The decrease in fair value of
First Community's premises and equipment (38,000) (9,000)
</TABLE>
(17) To record the applicable income tax effect of the above
adjustments.
<PAGE>
<PAGE>
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<PAGE>
