<PAGE> 1
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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):
July 14, 1995
---------------------
BancorpSouth, Inc.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Mississippi 0-10826 64-0659571
--------------- ---------------- ----------------
(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification
Incorporation) Number)
One Mississippi Plaza
Tupelo, Mississippi 38801
--------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(601) 680-2000
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
------------------------------------------------------------
(Former name or former address, if changed since last report)
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<PAGE> 2
ITEM 5. OTHER EVENTS.
As of June 16, 1995, the Registrant and Wes-Tenn Bancorp, Inc., a
Tennessee corporation ("Wes-Tenn"), entered into an Agreement and Plan of
Merger providing for the merger of Wes-Tenn with and into the Registrant, with
the Registrant being the surviving corporation (the "Wes-Tenn Merger").
Simultaneously with the Wes-Tenn Merger, Tennessee Community Bank, a Tennessee
banking corporation and wholly-owned subsidiary of Wes-Tenn, will be merged with
and into Volunteer Bank, a Tennessee banking corporation and wholly-owned
subsidiary of the Registrant ("Volunteer"), with Volunteer being the surviving
bank. Each holder of Wes-Tenn common stock will be entitled to receive 0.6296
of a share of the Registrant's common stock (subject to appropriate adjustment
in the event of certain occurrences) in exchange for each outstanding share of
Wes-Tenn common stock. The closing of the Wes-Tenn Merger is subject to certain
conditions, including the approval of the shareholders of Wes-Tenn and the
receipt of applicable regulatory approvals or consents, including those of the
Federal Deposit Insurance Corporation and the Tennessee Department of Financial
Institutions. The parties anticipate closing the Wes-Tenn Merger on or about
October 31, 1995.
As of May 9, 1995, the Registrant entered into a purchase and
assumption agreement with Shelby Bank, a Tennessee banking corporation,
whereby Volunteer is to acquire substantially all of the assets, and assume
certain liabilities, of Shelby Bank in exchange for an aggregate of up to
78,516 shares of the Registrant's common stock (the "Shelby Purchase").
Shelby Bank operates a general commercial banking business at a single office
located in Bartlett, Shelby County, Tennessee and at April 13, 1995 had assets
of approximately $24 million. The closing of the Shelby Purchase is subject
to certain conditions, including the approval of shareholders of Shelby Bank
and the receipt of applicable approvals and consents, including those of the
Federal Deposit Insurance Corporation and the Tennessee Department of
Financial Institutions.
Historical and pro forma financial information
- ----------------------------------------------
Filed herewith under Item 7 is certain historical and pro forma
financial information required by Regulation S-X for probable acquisitions by
the Registrant.
Comparative per share data
- --------------------------
The following table presents selected comparative unaudited per share
data (i) of each of the Registrant and Fist Federal Bank for Savings ("First
Federal"), a federally-chartered savings bank with which the Registrant has
entered into an agreement and plan of merger (the "First Federal Merger
Agreement") providing for the merger of First Federal with and into on a
historical basis, (ii) for the Registrant and First Federal on a pro forma
basis, (iii) the Registrant, First Federal and other pending acquisitions on a
pro forma basis, (iv) First Federal on a pro forma equivalent basis, and (v)
First Federal and other pending acquisitions on a pro forma equivalent basis.
The other pending acquisitions are the Wes-Tenn Merger and the Shelby Purchase.
<TABLE>
<CAPTION>
Book Value Per Share:
December 31, 1994 March 31, 1995
----------------- --------------
<S> <C> <C>
The Registrant historical(1) $25.71 $26.33
First Federal historical 17.70 17.92
The Registrant and First Federal pro forma (2) 25.71 26.01
The Registrant, First Federal and other pending
acquisitions pro forma(3) 25.00 25.49
First Federal pro forma equivalent(4) 17.95 18.15
First Federal and other pending acquisitions
pro forma equivalent(5) 17.45 17.79
<CAPTION>
Three Months Ended
Net Income Per Share: Year Ended December 31 March 31
---------------------------------- ------------------
1992 1993 1994 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
The Registrant historical(1)(7) $2.40 $3.34 $3.11 $0.80
First Federal historical(6) N/A N/A 1.43 0.22
The Registrant and First Federal pro forma(2)(6) N/A N/A 3.10 0.79
The Registrant, First Federal and other pending
acquisitions pro form(3)(6) N/A N/A 2.97 0.75
First Federal pro forma equivalent(4)(6) N/A N/A 2.16 0.55
First Federal and other pending acquisitions
pro forma equivalent(5)(6) N/A N/A 2.07 0.52
<CAPTION>
Three Months Ended
Cash Dividends Per Share: Year Ended December 31 March 31
---------------------------------- ------------------
1992 1993 1994 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
The Registrant historical(1)(7) $1.02 $1.03 $1.11 $0.30
First Federal historical(6) N/A N/A 0.25 -
The Registrant and First Federal pro forma(2)(6) N/A 1.03 1.11 0.30
The Registrant, First Federal and other pending
acquisitions pro form(3)(6) N/A N/A 1.11 0.30
First Federal pro forma equivalent(4)(6) N/A N/A 0.77 0.21
First Federal and other pending acquisitions
pro forma equivalent(5)(6) N/A N/A 0.77 0.21
</TABLE>
- ---------------------------
(1) Presented as if the merger between the Registrant and LF Bancorp, Inc.;
which was effective March 31, 1995, had been effective throughout the
periods presents.
(2) Presented as if the mergers between the Registrant and First Federal had
been efffective throughout the periods presented.
(3) Presented as if the mergers between the Registrant, First Federal and other
pending acquisitions had been effective throughout the periods presents.
(4) Calculated by multiplying the Registrant value by the quotient calculated
by dividing the number of shares of the Registrant's common stock
issuable under the Merger Agreement by the number of shares of First
Federal common stock outstanding as of the end of the period.
(5) Calculated by multiplying the Registrant and other pending acquisitions pro
forma value by the quotient calculated by diving the number of shares of
the Registrant's common stock issuable under the First Federal Merger
Agreement by the number of shares of First Federal common stock
outstanding as of the end of the period.
(6) Not applicable for periods prior to First Federal's conversion from mutual
to stock ownership on October 31, 1993.
(7) Does not include the effect of LF Bancorp's net income per share prior to
its conversion from mutual to stock ownership on December 30, 1992.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The following historical financial statements of Wes-Tenn are included
herewith:
- Wes-Tenn Bancorp, Inc. Consolidated Balance Sheets at March 31,
1995 and Decenber 31, 1994 (unaudited)
- Wes-Tenn Bancorp, Inc. Consolidated Statements of Income for the
three months ended March 31, 1995 and 1994 (unaudited)
- Wes-Tenn Bancorp, Inc. Consolidated Statements of Cash Flows for the
three months ended March 31, 1995 and 1994 (unaudited)
- Wes-Tenn Bancorp, Inc. Notes to Consolidated Financial Statements
- Independent Auditors' Report
- Wes-Tenn Bancorp, Inc. Consolidated Balance Sheets at December
31, 1994 and 1993
- Wes-Tenn Bancorp, Inc. Consolidated Statements of Income for the
years ended December 31, 1994, 1993 and 1992.
- Wes-Tenn Bancorp, Inc. Consolidated Statements of Changes in
Stockholders' Equity for the years ended December 31, 1994,
1993 and 1992
- Wes-Tenn Bancorp, Inc. Consolidated Statements of Cash Flows
for the years ended December 31, 1994, 1993 and 1992
2
<PAGE> 3
- Wes-Tenn Bancorp, Inc. Notes to Consolidated Financial Statements
(b) Pro forma financial information
The following pro forma financial statements are included herewith in
connection with the Wes-Tenn Merger and the Shelby Purchase:
- Pro Forma Condensed Consolidated Balance Sheet at March 31,
1995 (unaudited)
- Pro Forma Condensed Consolidated Statements of Income for the
three months ended March 31, 1995 and 1994 (unaudited)
- Pro Forma Condensed Consolidated Statements of Income for the
years ended December 31, 1994, 1993 and 1992 (unaudited)
(c) Exhibits
23.1 Consent of KPMG Peat Marwick LLP
3
<PAGE> 4
WES-TENN BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE> 5
WES-TENN BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
(unaudited) MARCH 31, DECEMBER 31,
1995 1994
---------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 7,261 $ 7,965
Interest bearing deposits
with banks 3,981 4,318
Federal funds sold 0 3,275
Securities, available for
sale 41,266 41,861
Securities, held to
maturity 49,190 46,189
Stock in Federal Home
Loan Bank 1,621 1,595
-------- --------
Total securities 92,077 89,645
-------- --------
Loans, net of unearned
interest 186,813 176,926
Less: Allowance for
losses (2,616) (2,588)
-------- --------
Loans, net 184,197 174,338
-------- --------
Bank premises and equipment,
net 4,196 4,108
Other real estate 171 321
Accrued interest receivable 2,905 2,434
Other assets 1,273 1,264
-------- --------
Total assets $296,061 $287,668
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits $ 60,360 $ 73,804
Savings deposits 32,105 33,610
Time deposits 150,049 130,692
-------- --------
Total deposits 242,514 238,106
-------- --------
Federal funds purchased 3,225 0
Federal Home Loan Bank
advances 19,095 19,388
Other borrowed money 1,808 2,327
Accrued interest payable 1,397 1,225
Other liabilities 1,673 1,490
-------- --------
Total liabilities 269,712 262,536
-------- --------
Stockholders' equity:
Capital stock, $1 par
value. Authorized 1,000,000
shares; issued and outstanding
601,108 and 591,673 shares in
1995 and 1994, respectively 601 592
Additional paid in capital 11,748 11,532
Retained earnings 16,326 15,727
Net unrealized gains (losses)
on available-for-sale
securities (419) (825)
Treasury stock, at cost (45,994
and 45,758 for 1995 and 1994,
respectively) (1,907) (1,894)
-------- --------
Total stockholders' equity 26,349 25,132
-------- --------
Total liabilities and
stockholders' equity $296,061 $287,668
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE> 6
WES-TENN BANCORP, INC.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME 3 MONTHS 3 MONTHS
(in thousands, except for per share amounts) ENDED ENDED
(unaudited) 03/31/95 03/31/94
--------------------------
<S> <C> <C>
INTEREST INCOME:
Loans, including fees $4,221 $3,855
Deposits with banks 53 64
Federal funds sold 14 26
Interest on investments:
Taxable 1,079 846
Exempt from federal taxes 340 345
------ ------
TOTAL INTEREST INCOME 5,707 5,136
------ ------
INTEREST EXPENSE:
Deposits:
Demand 343 261
Time, $100,000 and over 316 225
Other time and savings 1,884 1,474
Federal funds purchased 8 0
Federal Home Loan Bank advances 291 147
Other borrowed funds 41 28
------ ------
TOTAL INTEREST EXPENSE 2,883 2,135
------ ------
NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES 2,824 3,001
Provision for credit losses 118 48
------ ------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 2,706 2,953
------ ------
NON-INTEREST INCOME:
Service charges on deposits 301 144
Other charges, commissions, and fees 124 115
Security gains (losses), net 0 0
Other operating income 172 133
------ ------
TOTAL NON-INTEREST INCOME 597 392
------ ------
NON-INTEREST EXPENSES:
Salaries and benefits 1,137 1,069
Occupancy expense, including furniture and fixtures 306 252
Other non-interest expense 732 664
------ ------
TOTAL NON-INTEREST EXPENSE 2,175 1,985
------ ------
INCOME BEFORE INCOME TAXES $1,128 $1,360
Applicable income taxes 322 374
------ ------
NET INCOME $ 806 $ 986
====== ======
Earnings per share: $ 1.45 $ 1.80
====== ======
PRO-FORMA INCOME STATEMENT AMOUNTS: (SEE FOOTNOTES)
Total interest income $6,429 5,839
====== ======
Total interest expense $3,286 2,443
====== ======
Net interest income $3,143 3,396
====== ======
Net income $ 892 1,158
====== ======
Earnings per share $ 1.41 1.84
====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
6
<PAGE> 7
WES-TENN BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
1995 1994
------------------------
<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 806 $ 986
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Amortization of intangible assets 5 5
Depreciation and amortization of premises and equipment 127 86
Net amortization (accretion) of securities (30) (32)
Accretion of loan fees and discounts (30) (14)
Provision for possible credit losses 118 48
(Gains) losses from disposal of other real estate, including provisions (13) 0
Stock dividends from Federal Home Loan Bank (26) (9)
(Increase) decrease in interest receivable (471) (51)
Increase (decrease) in interest payable 172 (42)
(Gains) losses on sale of securities 0 0
Other, net (87) (6)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 571 971
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in interest bearing deposits with banks 337 1,084
Net (increase) decrease in federal funds sold 3,275 5,100
Purchase of securities (3,641) (9,061)
Maturities and calls of securities 1,373 4,228
Proceeds from sales of securities 0 0
Principal payments on mortgage backed securities 554 2,403
Purchases of Federal Home Loan Bank stock 0 (191)
Net (increase) decrease in loans (9,947) 467
Capital expenditures for premises and equipment (215) (280)
Proceeds from sales of other real estate 163 20
------- -------
NET CASH USED IN INVESTING ACTIVITIES (8,101) 3,770
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 4,408 (4,567)
Proceeds from other borrowed money 0 1,000
Increase in federal funds purchased 3,225 0
Principal payments on FHLB advances and other borrowed money (812) (832)
Cash dividends paid (207) (164)
Exercise of stock warrants 231 0
Purchase of outstanding stock warrants (6) 0
Purchase of treasury stock (13) 0
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,826 (4,563)
------- -------
NET INCREASE IN CASH AND DUE FROM BANKS (704) 178
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 7,965 10,056
------- -------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 7,261 $10,234
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
7
<PAGE> 8
WES-TENN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements have been
prepared in conformity with generally accepted accounting principles and
prevailing practices within the banking industry. Wes-Tenn Bancorp, Inc.
(the "Company") is a one bank holding company for Tennessee Community Bank
(the "Bank"), and is engaged in the business of banking and bank related
activities. The Bank has two wholly-owned subsidiaries; TC Finance, a
consumer finance company, and West Tennessee Life Insurance Company, a
credit life insurance company. The Bank is subject to the regulations of
certain federal and state agencies and undergoes periodic examinations by
those regulatory agencies. The accompanying financial statements for all
periods presented include the accounts and transactions of the Company, the
Bank, and the Bank's wholly owned subsidiaries. All significant
inter-company transactions have been eliminated. In the opinion of
management, all adjustments necessary for a fair presentation of the
consolidated financial statements have been included. The results of
operations for the three month period ended March 31, 1995, are not
necessarily indicative of the results to be expected for the full year.
2. The computation of net income per share is based upon the weighted
average number of shares outstanding of 554,035 for the three months ended
March 31, 1995, and 547,778 for the three months ended March 31, 1994.
3. On January 1, 1995, the Company adopted Statements of Financial Accounting
Standards statements 114, "Accounting by Creditors for Impairment of a
Loan" and 118, " Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosure". These statements required that impaired loans
that are within the scope of the statement be measured on the present value
of expected future cash flows, discounted at the loan's effective interest
rate or at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. The adoption of these
statements did not have a material impact on the financial condition or
results of operations of the Company.
4. Effective April 3, 1995, the Company acquired 100% of the outstanding stock
of West Tennessee Financial Corporation ("WTFC"), a bank holding company
owning 100% of Community Bank of West Tennessee ("Community Bank"), and
WTFC and Community Bank were simultaneously merged into the Company and the
Bank, respectively. The actual purchase price was approximately $4.4
million in a combination of cash and stock and the acquisition is being
accounted for as a purchase for financial reporting purposes. WTFC had
total assets of approximately $38 million, stockholders' equity of
approximately $3 million and net income for the three months ended March
31, 1995 of approximately $86 thousand, on a historical cost basis. WTFC
income amounts have been included in the pro-forma information presented on
the consolidated statements of income.
5. The following table summarizes the loan loss experience for the periods
indicated:
<TABLE>
<CAPTION>
Three months ended
March 31, 1995
--------------
(dollars in thousands)
<S> <C>
Allowance for credit losses,
beginning of period .............. 2,588
Provision for credit losses ........ 188
Charge-offs ........................ (155)
Recoveries ......................... 65
-----
2,616
=====
</TABLE>
6. Certain prior period amounts have been reclassified to conform to current
period presentation.
8
<PAGE> 9
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Wes-Tenn Bancorp, Inc.:
We have audited the accompanying consolidated balance sheets of Wes-Tenn
Bancorp, Inc. and subsidiary as of December 31, 1994 and 1993, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1994.
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 Wes-Tenn Bancorp,
Inc. and subsidiary at December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
As discussed in note 1 to the financial statements, the Company changed its
methods of accounting for income taxes and investments in debt and equity
securities in 1993 to adopt the provisions of Financial Accounting Standards
Board's Statements of Financial Accounting Standards No. 115, Accounting for
Certain Investments in Debt and Equity Securities.
KPMG Peat Marwick LLP
Memphis, Tennessee
February 15, 1995
9
<PAGE> 10
WES-TENN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
ASSETS 1994 1993
---- ----
(in thousands)
<S> <C> <C>
Cash and demand balances with banks (note 3) $ 7,965 10,056
Interest bearing deposits with banks 4,318 6,829
Securities available-for-sale, at fair values (amortized cost
of $43,188 in 1994 and $60,845 in 1993) (notes 4 and 9) 41,861 62,530
Securities held-to-maturity (fair value of $44,643 in 1994
and $20,634 in 1993) (notes 4 and 9) 46,189 20,395
Federal funds sold 3,275 6,400
Stock in Federal Home Loan Bank, at cost (note 8) 1,595 778
Loans (notes 5, 8 and 9) 180,971 172,375
Less:
Unearned income 4,045 4,158
Allowance for credit losses (note 6) 2,588 2,730
---------- -------
NET LOANS 174,338 165,487
---------- -------
Premises and equipment, net (note 7) 4,108 3,364
Other real estate 321 157
Accrued interest receivable 2,434 2,473
Other assets (note 12) 1,264 762
---------- -------
TOTAL ASSETS $ 287,668 279,231
========== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS (NOTE 9):
Demand:
Non-interest bearing $ 22,463 22,355
Interest bearing 51,341 36,297
Savings:
Other savings 33,610 33,736
Time, $100,000 and over 20,945 21,902
Other time 109,747 125,537
---------- -------
TOTAL DEPOSITS 238,106 239,827
---------- -------
Federal Home Loan Bank advances (note 8) 19,388 9,370
Other borrowed money (note 8) 2,327 2,204
Accrued interest payable 1,225 979
Other liabilities (note 12) 1,490 2,175
---------- -------
TOTAL LIABILITIES 262,536 254,555
---------- -------
STOCKHOLDERS' EQUITY (NOTE 13):
Capital stock, $1 par value. Authorized 1,000,000 shares; issued and
outstanding 591,673 and 542,416 shares in 1994 and 1993, respectively 592 542
Surplus 11,532 10,859
Undivided profits 15,727 13,279
Net unrealized (loss) gain on available for sale securities (825) 1,046
--------- -------
27,026 25,726
Treasury stock - at cost, 45,758 and 30,413 shares, respectively 1,894 1,050
---------- -------
TOTAL STOCKHOLDERS' EQUITY 25,132 24,676
Commitments and contingencies (note 14) ---------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 287,668 279,231
========== =======
</TABLE>
See accompanying notes to consolidated financial statements.
10
<PAGE> 11
WES-TENN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(in thousands, except per share amounts)
<S> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $15,883 17,205 17,005
Deposits with banks 209 419 727
Federal funds sold 113 166 173
Interest on investments:
Taxable 3,364 3,183 2,815
Exempt from federal taxes 1,355 1,383 1,195
------- ------ ------
TOTAL INTEREST INCOME 20,924 22,356 21,915
INTEREST EXPENSE:
Deposits:
Demand 1,586 1,411 1,446
Time, $100,000 and over 944 1,017 1,169
Other time and savings 5,747 6,789 8,159
Other borrowed funds 143 126 165
Federal Home Loan Bank advances 734 447 148
------- ------ ------
TOTAL INTEREST EXPENSE 9,154 9,790 11,087
------- ------ ------
NET INTEREST INCOME BEFORE
PROVISION FOR CREDIT LOSSES 11,770 12,566 10,828
Provision for credit losses (note 6) 285 1,063 1,008
------- ------ ------
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES 11,485 11,503 9,820
NON-INTEREST INCOME:
Service charges on deposit accounts 727 711 647
Other service charges, commissions and fees 504 504 664
Securities (losses) gains, net (note 4) (163) 144 176
Other 563 582 503
------- ------ ------
TOTAL NON-INTEREST INCOME 1,631 1,941 1,990
NON-INTEREST EXPENSE:
Salaries 3,429 3,173 2,758
Employee benefits (note 11) 877 691 634
Occupancy expense, net of rental income (note 7) 545 539 482
Furniture and equipment expense 659 610 573
Federal insurance premiums 597 571 542
Other 2,433 2,715 2,221
------- ------ ------
TOTAL NON-INTEREST EXPENSE 8,540 8,299 7,210
------- ------ ------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 4,576 5,145 4,600
Income taxes (note 12) 1,354 1,683 2,027
------- ------ ------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 3,222 3,462 2,573
Cumulative effect, at January 1, 1993 of
change in accounting for income taxes (note 12) - 50 -
------- ------ ------
NET INCOME $ 3,222 3,512 2,573
======= ====== ======
Earnings per share (note 13) $ 5.77 6.53 5.18
======= ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
11
<PAGE> 12
WES-TENN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
COMMON PAID-IN UNDIVIDED UNREALIZED TREASURY
STOCK SURPLUS PROFITS GAIN (LOSS) STOCK TOTAL
----- ------- ------- ----------- ----- -----
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1992 480 9,890 8,280 - (1,792) 16,858
Cash dividends declared
($1.04 per share) - - (499) - - (499)
Stock issuance (note 2) 35 359 - - 1,792 2,186
Conversion of warrants (note 13) 3 59 - - - 62
Net change in unrealized losses
on marketable equity securities - - 53 - - 53
Purchase of treasury stock - - - - (43) (43)
Net income - - 2,573 - - 2,573
---- ------ ------ ------- ------ ------
Balances, December 31, 1992 518 10,308 10,407 - (43) 21,190
Cash dividends declared
($1.26 per share) - - (640) - - (640)
Conversion of warrants (note 13) 24 576 - - - 600
Purchase of treasury stock - - - - (1,007) (1,007)
Purchase of stock warrants - (25) - - - (25)
Impact at December 31, 1993,
of change in accounting for
securities, net of taxes
of $640 (notes 1 and 4) - - - 1,046 - 1,046
Net income - - 3,512 - - 3,512
---- ------ ------ ------- ------ ------
Balances, December 31, 1993 542 10,859 13,279 1,046 (1,050) 24,676
Cash dividends declared
($1.48 per share) - - (774) - - (774)
Conversion of warrants (note 13) 50 1,157 - - - 1,207
Purchase of treasury stock - - - - (844) (844)
Purchase of stock warrants - (484) - - - (484)
Change in market valuation of
securities available-for-sale
net of taxes of $(1,141)
(note 4) - - - (1,871) - (1,871)
Net income - - 3,222 - - 3,222
---- ------ ------ ------- ------ ------
Balances, December 31, 1994 $592 11,532 15,727 (825) (1,894) 25,132
==== ====== ====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE> 13
WES-TENN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(in thousands)
<S> <C> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,222 3,512 2,573
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Amortization of intangible assets 20 25 33
Depreciation and amortization of premises and equipment 445 408 314
Net (accretion) amortization of investment securities and
mortgage-backed securities (30) 120 (402)
Accretion of loan fees and discounts (122) (163) (142)
Provision for possible credit losses 285 1,063 1,008
Provision for possible real estate losses 36 - 3
Decrease (increase) in trading securities, net - 2,019 (2,019)
Stock dividends from Federal Home Loan Bank (62) (35) (20)
Decrease in interest receivable 39 161 167
Increase (decrease) in interest payable 246 (51) (383)
Losses (gain) on sale of investment securities 163 (43) (88)
Other, net (104) 325 798
--------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,138 7,341 1,842
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of real estate owned 190 677 798
Net decrease in federal funds sold 3,125 3,475 325
Purchase of securities held-to-maturity (28,265) (50,286) (37,577)
Purchases of securities available-for-sale (5,936) - -
Maturities of securities held-to-maturity 2,268 22,765 8,121
Maturities of securities available-for-sale 5,533 - -
Proceeds from sales of securities available-for-sale 13,072 - -
Proceeds from sales of securities - 8,461 12,123
Principal payments on mortgage-backed securities,
held-to-maturity 432 5,225 1,265
Principal payments of mortgage-backed securities,
available-for-sale 4,625 - -
Net increase in loans (9,365) (4,598) (9,101)
Capital expenditures for premises and equipment (1,189) (280) (183)
Purchase of stock in FHLB (755) - -
Proceeds from sale of premises and equipment - - 11
--------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES $ (16,265) (14,561) (24,218)
--------- -------- --------
</TABLE>
(Continued)
13
<PAGE> 14
WES-TENN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits $ (1,721) (1,367) 17,363
Proceeds from other borrowed money 1,325 1,525 580
Principal payments on other borrowed money (1,202) (1,609) (1,503)
Cash dividends paid (774) (640) (499)
Purchase of treasury stock (844) (1,007) (43)
Purchase of stock warrants (484) (25) -
Proceeds from FHLB advances 16,000 6,500 1,500
Principal repayment on FHLB advances (5,982) (244) (218)
Net proceeds from warrant conversion 1,207 600 2,248
--------- ------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,525 3,733 19,428
--------- ------- -------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (4,602) (3,487) (2,948)
Cash and due from banks at the beginning of the period 16,885 20,372 23,320
--------- ------- -------
Cash and due from banks at the end of the period $ 12,283 16,885 20,372
========= ======= =======
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 8,908 9,841 11,470
Income taxes paid 1,251 1,776 1,459
Increase in other real estate due to foreclosures of loans 351 200 417
Net change in unrealized losses on marketable equity securities - - 53
Net change in market valuation of securities available-for-sale,
net of deferred taxes of $(1,141) and $640 in 1994
and 1993, respectively (1,871) 1,046 -
========= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE> 15
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of Wes-Tenn Bancorp, Inc. and
subsidiary (the Company) are prepared in conformity with generally
accepted accounting principles and prevailing practices within the
banking industry. Management of the Company 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 periods reported. The Company, a one-bank holding
company, is engaged in the business of banking and bank-related
activities. The bank subsidiaries are subject to the regulations of
certain federal and state agencies and undergo periodic examinations
by those regulatory agencies. The following is a summary of the
significant accounting and reporting policies used in preparing the
consolidated financial statements. (See note 2.)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Wes-Tenn
Bancorp, Inc. and its wholly-owned subsidiary: Tennessee Community
Bank (the Bank) and its wholly-owned subsidiaries, Wes-Tenn Mortgage
Finance, Inc., TC Finance, Inc. and West Tennessee Life Insurance
Company. All significant intercompany accounts and transactions are
eliminated in consolidation.
SECURITIES
At December 31, 1993, the Company adopted SFAS 115, which addresses
the accounting and reporting for investments in equity securities with
a readily determinable market value and for all investments in debt
securities. Under SFAS 115, the Company must classify these
securities as either (1) securities held-to-maturity, (2) trading
securities or (3) securities available for sale. If management has
the positive intent and the Company has ability to hold securities to
maturity, they are classified as held-to-maturity and are recorded
(Continued)
15
<PAGE> 16
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
at cost adjusted for amortization of premiums and accretion of
discounts. Securities bought and held principally for the purpose of
selling them in the near term are classified as trading securities and
are reported at fair value, with unrealized gains and losses included
in earnings. Securities not classified as either held-to-maturity or
trading securities are classified as securities available-for-sale and
are recorded at fair value, with unrealized gains and losses excluded
from earnings and reported net of tax as a separate component of
stockholders' equity until realized. Amortization of premiums and
accretion of discounts are recorded using the interest method. Gains
or losses from the sale of securities are recorded in non-interest
income using the specific identification method.
Prior to the adoption of Statement 115, the Company classified its
marketable equity securities at the lower of cost or market, with a
valuation allowance for unrealized losses established as a charge
against stockholders' equity. Securities purchased with the intention
of recognizing short-term profits were placed in a trading account and
carried at market value. All other securities were carried at
historical cost, adjusted for the
(Continued)
16
<PAGE> 17
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
amortization of premiums and accretion of discounts. When the
Company's intent was to sell a security prior to maturity, it was
deemed held for sale and carried at the lower of cost or market.
There were no such securities identified at December 31, 1992.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation. Provisions for depreciation are computed using the
straight-line method for buildings and accelerated methods for
furniture and equipment over the estimated useful life of the assets.
Costs of major additions and improvements are capitalized;
expenditures for maintenance and repairs are charged to expense as
incurred.
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses is maintained at a level considered
adequate by management to absorb potential losses in the loan
portfolio. The provision for credit losses is based on management's
evaluation of the loan portfolio. Factors considered in management's
evaluation are current and anticipated future economic conditions,
previous loan loss experience, industry concentrations, and the
overall quality of the loan portfolio. While management uses
available information to recognize losses, 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 allowances for losses.
Such agencies may require the Company to recognize additions to the
allowances based on their judgments about information available to
them at the time of their examination.
INCOME RECOGNITION ON LOANS
Loans are reported at the principal amount outstanding, net of
unearned income and the allowance for credit losses. Unearned income
on installment loans is amortized using methods which approximate the
interest method. Management does not accrue interest on loans when it
is determined that the borrower is unable
17
<PAGE> 18
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
to meet his contractual obligation or where interest or principal is
90 days or more past due, unless the loan is adequately secured and in
process of collection. A loan may be designated as partially accruing
when the rate of interest has been reduced because the borrower has
experienced financial difficulties. Interest income on such loans is
recognized at the reduced interest rate.
Loan origination and commitment fees and certain direct loan
origination costs are deferred and amortized as a yield adjustment to
the related loans, generally over the contractual life of the loans.
RETIREMENT PLANS
The Company has a discretionary profit-sharing plan covering
substantially all employees with more than one year of service.
(Continued)
18
<PAGE> 19
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCOME TAXES
In February 1992, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. Statement 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 Statement 109, deferred tax assets and
liabilities are recognized for the estimated 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 in effect for the year in which those temporary differences
are expected to be recovered or settled. Under Statement 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.
Effective January 1, 1993, the Company adopted Statement 109 and the
cumulative effect of that change in the method of accounting for
income taxes in the 1993 consolidated statement of income was a
benefit of $50,000.
Pursuant to the deferred method under APB Opinion 11, which was
applied in 1992 and prior years, deferred income taxes were recognized
for income and expense items that were 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.
OTHER REAL ESTATE
Other real estate is carried at the lower of the recorded investment
in the property or its fair value less estimated selling costs. Any
loss at foreclosure is charged to the allowance for credit losses.
Provisions for operating expenses of such properties and gains and
losses on their disposition are included in non-interest expense.
(Continued)
19
<PAGE> 20
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EARNINGS PER SHARE
The computations of earnings per share in each year is based on the
weighted average number of shares outstanding during the year adjusted
for dilutive stock warrants. (See note 13.)
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company 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 and to reduce its own exposure to fluctuation in
interest rates. These financial instruments include commitments to
extend credit and standby letters of credit. (See note 14.)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and demand balances with banks
and interest bearing deposits with banks.
(Continued)
20
<PAGE> 21
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RECENT PRONOUNCEMENTS
In May 1993, FASB also issued SFAS 114, Accounting by Creditors for
Impairment of a Loan, as amended by SFAS 118, Accounting by Creditors
for Impairment of a Loan-Income Recognition and Disclosures. This
statement amends SFAS 5, Accounting for Contingencies, and SFAS 15,
Accounting by Debtors and Creditors for Troubled Debt Restructurings,
and prescribes the recognition criterion for loan impairment and the
measurement methods for certain impaired loans and loans whose terms
are modified in troubled-debt restructurings (a "restructured loan").
This statement is effective for financial statements issued for fiscal
years beginning after December 15, 1994. The Company's adoption of
this statement is not expected to have a material impact on its
financial position or results of operation.
During 1994, the Company adopted SFAS No. 119, Disclosure about
Derivative Financial Instruments and Fair Value of Financial
Instruments. This statement amends SFAS statements No. 105,
Disclosure of Information about Financial Instruments with Off-Balance
Sheet Risk and Financial Instruments with Concentrations of Credit
Risk, and No. 107, Disclosure about Fair Value of Financial
Instruments. This statement requires specific disclosures on
derivatives for financial instruments.
RECLASSIFICATIONS
Certain 1993 and 1992 amounts have been reclassified to conform to
1994 financial statement presentation.
(2) BUSINESS COMBINATION - CONVERSION AND MERGER
On September 27, 1991, the Company and Tri-County Federal Savings Bank
(Tri-County) reached a definitive Restated Agreement and Plan of
Reorganization providing for the Company's acquisition of Tri-County
simultaneously with Tri-County's conversion from a federal mutual
savings bank to a federal stock savings bank. Tri-County received
regulatory approval and the merger-conversion was accomplished in
February 1992 by the offering of 104,868 shares of the Company's
common stock and common stock purchase warrants in exchange for 100%
of Tri-County's newly-converted stock. The net proceeds from the
issuance and sale of the Company's common stock and common stock
purchase warrants, which approximated $2,200,000, was infused as
additional capital of Tri-County. The transaction was accounted for
as a pooling of interests. Conversion costs of approximately $100,000
were capitalized by Tri-County and will be amortized over a five-year
period. All other costs of the
(Continued)
21
<PAGE> 22
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
offering in the amount of $388,140 were deducted from the proceeds
of the shares sold in the conversion.
At the time of the conversion, in accordance with regulatory
requirements, Tri-County established a liquidation account for the
benefit of eligible depositors who continued to maintain their
accounts at Tri-County after the conversion in the amount of
$3,928,273. The liquidation account will be reduced annually to the
extent that eligible depositors have reduced their qualifying
deposits. Subsequent increases will not restore an eligible account
holder's interest in the liquidation account. In the event of a
complete liquidation, each eligible depositor will be entitled to
receive a distribution from the liquidation account in an amount
proportionate to the current adjusted qualifying balances for each
account then held. The liquidation account balance is not available
for payment of dividends. At December 31, 1994, the liquidation
balance had been reduced to a balance of $224,992.
Prior to the merger, Tri-County's fiscal year end was September 30.
Accordingly, its results are included as of that date for fiscal year
1992. In conjunction with Tri-County's merger with Tennessee
Community Bank in 1993, the results of operations for the former
Tri-County for the period October 1, 1992 to December 31, 1992 are
included with the result of operations for the period ended December
31, 1993.
(Continued)
22
<PAGE> 23
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) REQUIRED CASH BALANCES
Aggregate average daily reserves of $2,078,000 were maintained at
December 31, 1994 to satisfy federal regulatory requirements.
(4) SECURITIES
The amortized cost, gross unrealized holding gains, gross unrealized
holding losses and fair value for available-for-sale and
held-to-maturity securities by major security type at December 31 were
as follows:
<TABLE>
<CAPTION>
1994
--------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
(in thousands)
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Treasury securities and
obligations of U.S.
government corporations
and agencies $17,058 8 1,245 15,821
Obligations of state and
political subdivisions 14,833 264 22 15,075
Other securities 362 14 - 376
Mortgage-backed securities 10,935 7 353 10,589
------- ----- ----- ------
Totals $43,188 293 1,620 41,861
======= ===== ===== ======
Held-to-maturity:
U.S. Treasury securities and
obligations of U.S.
government corporations
and agencies 29,854 117 927 29,044
Obligations of state and
political subdivisions 10,431 7 361 10,077
Mortgage-backed securities 5,904 - 382 5,522
------- ----- ----- ------
Totals $46,189 124 1,670 44,643
======= ===== ===== ======
</TABLE>
(Continued)
23
<PAGE> 24
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1993
--------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
(in thousands)
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Treasury securities and
obligations of U.S.
government corporations
and agencies $25,669 402 73 25,998
Obligations of state and
political subdivisions 16,971 1,109 - 18,080
Other securities 264 46 2 308
Mortgage-backed securities 17,941 217 14 18,144
------- ----- -- ------
Totals $60,845 1,774 89 62,530
======= ===== == ======
Held-to-maturity:
U.S. Treasury securities and
obligations of U.S.
government corporations
and agencies 9,764 59 24 9,799
Obligations of state and
political subdivisions 7,251 163 22 7,392
Mortgage-backed securities 3,380 83 20 3,443
------- ----- -- ------
Totals $20,395 305 66 20,634
======= ===== == ======
</TABLE>
(Continued)
24
<PAGE> 25
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Maturities of securities classified as available-for-sale and
held-to-maturity were as follows at December 31, 1994 (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):
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR
COST VALUE
---- -----
(in thousands)
<S> <C> <C>
Available-for-sale:
Due in one year or less $ 9,422 9,156
Due after one year through five years 19,613 18,909
Due after five years through ten years 2,884 2,867
Due after ten years 334 340
------- ------
32,253 31,272
Mortgage-backed securities 10,935 10,589
------- ------
$43,188 41,861
======= ======
Held-to-maturity:
Due in one year or less 6,468 6,371
Due after one year through five years 13,829 13,078
Due after five years through ten years 19,988 19,672
------- ------
40,285 39,121
Mortgage-backed securities 5,904 5,522
------- ------
$46,189 44,643
======= ======
</TABLE>
Proceeds from sales of securities available-for-sale during 1994 were
approximately $13,072,000. Gross gains of approximately $51,000 and
gross losses of approximately $214,000 were realized on those sales.
Proceeds from sales of securities during 1993 and 1992 were
approximately $8,461,000 and $12,123,000, respectively. Gross gains
of approximately $125,000 and $176,000 and gross losses of
approximately $82,000 and $88,000 were recognized on those sales
during 1993 and 1992, respectively.
(Continued)
25
<PAGE> 26
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Gross gains of $101,000 and $88,000 were realized during 1993 and
1992, respectively, from sales of trading securities.
Securities, including mortgage-backed securities, with a book value of
approximately $8,810,000 and $15,582,000 at December 31, 1994 and
1993, respectively, were pledged to secure public deposits and pledged
for other purposes as required by law.
Investments in general obligations of the State of Tennessee as of
December 31, 1994, had a book value of approximately $14,674,000 and a
market value of approximately $14,890,000.
(Continued)
26
<PAGE> 27
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) LOANS
Loans outstanding at December 31 by major lending classification were
as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
(in thousands)
<S> <C> <C>
Commercial and industrial loans $ 6,089 8,139
Real estate:
Construction and land development 4,791 3,274
Secured by farmland and improvements 6,108 5,465
Secured by residential properties 100,199 91,674
Other real estate loans 16,962 13,078
Loans to individuals for household, family
and other personal expenditures 37,677 40,838
Agricultural loans 4,683 5,514
All other loans 417 235
-------- -------
TOTAL LOANS, NET OF UNEARNED INCOME 176,926 168,217
Allowance for credit losses (2,588) (2,730)
-------- -------
NET LOANS $174,338 165,487
======== =======
</TABLE>
The above table reflects loans net of unearned income. The amount of
unearned discount remaining is approximately $4,045,000 and $4,158,000
at December 31, 1994 and 1993, respectively.
Nonaccrual and restructured loans totaled approximately $220,000 and
$375,000 at December 31, 1994 and 1993, respectively. The effect on
income before income taxes had interest been earned at the contractual
rates on these loans as compared to the actual amount earned was
immaterial for 1994 and 1993. There were no commitments to lend
additional funds to borrowers whose loans are classified as nonaccrual
or restructured.
(6) ALLOWANCE FOR CREDIT LOSSES
A summary of changes in the allowance for credit losses for the years
ended December 31 is as follows:
(Continued)
27
<PAGE> 28
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Balance at beginning of year $2,730 2,362 1,892
Provision charged to operating expenses 285 1,063 1,008
Deductions:
Loans charged-off (697) (877) (858)
Recoveries 270 182 320
------ ----- -----
Net charge-offs (427) (695) (538)
------ ----- -----
Balance at end of year $2,588 2,730 2,362
====== ===== =====
</TABLE>
(Continued)
28
<PAGE> 29
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) PREMISES AND EQUIPMENT
Premises and equipment and accumulated depreciation thereon at
December 31 are as follows:
<TABLE>
<CAPTION>
ESTIMATED USEFUL
LIVES - YEARS 1994 1993
------------- ---- ----
(in thousands)
<S> <C> <C>
Land $ 456 381
Buildings 10-40 3,732 3,732
Furniture and equipment 3-7 2,683 1,814
------ -----
TOTAL 6,871 5,927
Accumulated depreciation
2,763 2,563
------ -----
PREMISES AND EQUIPMENT, NET $4,108 3,364
====== =====
</TABLE>
Depreciation expense on premises and equipment for the years ended
December 31, 1994, 1993 and 1992 was approximately $445,000, $408,000
and $314,000, respectively.
(8) FEDERAL HOME LOAN BANK ADVANCES
AND OTHER BORROWED MONEY
<TABLE>
<CAPTION>
Borrowings consisted of the following at December 31:
1994 1993
---- ----
(in thousands)
<S> <C> <C>
Advances from Federal Home Loan Bank of
Cincinnati with stated rates from 5.65% to
8.95% maturing from February 1, 2006 to
November 1, 2013 $19,388 9,370
======= =====
Open line of credit with a commercial bank, with an
interest rate of 8.5%. Total available credit of
$2,800,000. Interest due quarterly, principal
annual through April 2003 1,330 830
Series 1 collateralized mortgage obligation bonds
of Wes-Tenn Mortgage Finance, Inc.; secured by
mortgage-backed securities with carrying values of
$1,030,000 and $1,363,000 at December 31, 1994
and 1993, respectively. Interest is payable quarterly
at a variable rate with a maximum rate of 12%.
The average rate paid was 5.7% and 4.2% for
1994 and 1993, respectively. The bonds mature
July 25, 2017 889 1,201
Other 108 173
------- -----
TOTAL OTHER BORROWED MONEY $2,327 2,204
======= =====
</TABLE>
FHLB advances are secured by the stock of the FHLB and certain real
estate loans of the Company totaling approximately $29,082,000 at
December 31, 1994.
(Continued)
29
<PAGE> 30
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures About
Fair Value of Financial Instruments (SFAS No. 107) requires that the
Company disclose estimated fair values for its financial instruments.
See note 14 for a discussion of the Company's off-balance sheet
financial instruments whose fair values are estimated to be equal to
their carrying value.
The fair value of most investments and mortgage-backed securities is
estimated based on market prices or dealer quotes. See "Note 4:
Securities" for market values.
The following table presents fair value information for financial
instruments shown in the Company's balance sheet for which no market
exists. The fair values for these financial instruments were
calculated by discounting expected cash flows using the information
presented. Because no market exists for these financial instruments
and because management does not intend to sell these financial
instruments, the Company does not know whether the fair values shown
below represent values at which the respective financial instruments
could be sold.
<TABLE>
<CAPTION>
1994
-----------------------------------------------------------------
ESTIMATED CALCULATED
CARRYING AVERAGE AVERAGE FAIR VALUE FAIR VALUE
AMOUNT YIELD MATURITY RATE (*) AMOUNT
------ ----- -------- -------- ------
(in thousands)
<S> <C> <C> <C> <C> <C>
Commercial and
industrial loans $ 6,089 10.03% 27 months 9.50% $ 6,099
Real estate:
Construction and
land development 4,791 8.42 3 months 9.50 4,740
Secured by farmland
and improvements 6,108 9.09 8 months 9.50 6,076
Secured by residential
properties 100,199 8.33 110 months 9.50 98,858
Other real estate loans 16,962 8.78 7 months 9.50 16,792
Loans to individuals for
household, family and
other personal
expenditures 37,677 10.55 29 months 9.88 40,232
Agricultural loans 4,683 9.47 11 months 9.50 4,680
All other loans 417 8.20 20 months 9.50 306
Time deposits 130,692 4.95 8 months 5.52 130,275
Federal Home Loan
Bank Advances 19,388 6.19 36 months 6.60 18,185
Other borrowed money 2,327 7.30 59 months 7.30 2,327
</TABLE>
(Continued)
30
<PAGE> 31
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1993
-----------------------------------------------------------------
ESTIMATED CALCULATED
CARRYING AVERAGE AVERAGE FAIR VALUE FAIR VALUE
AMOUNT YIELD MATURITY RATE (*) AMOUNT
------ ----- -------- -------- ------
(in thousands)
<S> <C> <C> <C> <C> <C>
Commercial and
industrial loans $ 8,139 8.97% 7 months 8.21% $ 8,175
Real estate:
Construction and
land development 3,274 8.92 3 months 8.00 3,283
Secured by farmland
and improvements 5,465 8.82 8 months 8.08 5,482
Secured by residential
properties 91,674 8.35 32 months 7.44 92,598
Other real estate loans 13,078 8.36 4 months 8.00 13,140
Loans to individuals for
household, family and
other personal
expenditures 40,838 11.40 20 months 10.40 41,654
Agricultural loans 5,514 8.88 8 months 8.14 5,527
All other loans 235 8.00 20 months 7.50 238
Time deposits 147,439 4.23 4 months 3.65 147,691
Federal Home Loan
Bank Advances 9,370 6.30 59 months 5.45 10,832
Other borrowed money 2,204 6.00 68 months 6.00 2,204
</TABLE>
*Management has made estimates of fair value discount rates that it
believes to be reasonable. However, because there is no market
for these financial instruments, management has no basis to
determine whether the rates shown would be indicated in an actual
sale. The reader is encouraged to use different discount rates to
calculate fair values for the Company's financial instruments if
such rates are believed to be more appropriate.
(Continued)
31
<PAGE> 32
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SFAS No. 107 specifies that fair values should be calculated based on
the value of one unit, without regard to any premium or discount that
may result from concentrations of ownership of a financial instrument.
In addition, SFAS No. 107 does not permit the Company to disclose an
estimated fair value for its demand and savings deposits. Such
deposits amount to a total of approximately $107,414,000 and
$92,388,000 at December 31, 1994 and 1993, respectively, and annually
provide funding to the Company at a cost significantly below the cost
of borrowing funds in the market. Management believes that the
Company's demand and savings deposits as continuing sources of less
costly funding provide a significant additional value to the Company
that is not reflected above.
(Continued)
32
<PAGE> 33
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Because no market exists for a significant portion of the Company's
financial instruments and because of the inherent imprecision of
estimating fair value discount rates for financial instruments for
which no market exists and because of the disclosure restrictions
imposed by SFAS No. 107, management does not believe that the above
information reflects the amounts that would be received if the
Company's assets and liabilities were sold.
(10) RELATED PARTY TRANSACTIONS
From time to time, the Company provides credit to directors and
executive officers of the Company and their affiliates. In
management's opinion, such transactions are made on substantially the
same terms as those prevailing at the time for comparable transactions
with other persons and do not involve more than the normal risk of
collectibility or present other unfavorable features.
Such loans were approximately $628,000 and $569,000 at December 31,
1994 and 1993, respectively. During 1994, new loans of approximately
$104,000 were made, and repayments of approximately $45,000 were
received.
(11) EMPLOYEE BENEFIT PLANS
The Company maintains a non-contributory discretionary profit-sharing
plan (the Plan) covering substantially all full-time employees who
have completed at least one year of service and have attained the age
of 21.
Contributions to the Plan which are made at the discretion of the
board of directors totaled approximately $210,000 and $195,000 for
the years ended December 31, 1994 and 1993, respectively.
(12) INCOME TAXES
Income tax expense for the years ended December 31 consists of:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Current:
Federal $1,140 1,523 1,232
State 290 345 320
------ ----- -----
Total current 1,430 1,868 1,552
Deferred federal and state (76) (185) 475
----- ---- -----
Total income tax expense $1,354 1,683 2,027
====== ===== =====
</TABLE>
(Continued)
33
<PAGE> 34
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income tax expense for the years ended December 31, 1994, 1993 and
1992 differed from the amounts computed by applying the U.S. federal
income tax rate of 34 percent as a result of the following:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Computed "expected" tax expense $1,556 1,749 1,564
Increase (reduction) in income taxes
resulting from:
Tax exempt income (403) (397) (348)
State income taxes, net of
federal income tax benefit 183 206 260
Statutory bad debt recapture - - 504
Other, net 18 125 47
------ ----- -----
$1,354 1,683 2,027
====== ===== =====
</TABLE>
For the year ended December 31, 1992, deferred income tax expense
resulted from timing differences in the recognition of income and
expense for income tax and financial reporting purposes. The sources
and tax effects of those timing differences consisted of $504,000 of
statutory bad debt recapture and $(29,000) of various other
differences.
(Continued)
34
<PAGE> 35
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31,
1994 and 1993, are presented below (in thousands):
<TABLE>
<CAPTION>
1994 1993
---- ----
(in thousands)
<S> <C> <C>
Deferred tax assets:
Loans, principally due to allowance for possible
loan losses and interest income recognition $ 88 43
Deferred compensation, principally due to
accrual for financial reporting purposes 138 149
Unrealized loss on available for sale securities 501 -
Other 81 54
---- ----
Total gross deferred tax assets 808 246
Valuation allowance ( -) ( -)
---- ----
Net deferred tax assets 808 246
---- ----
Deferred tax liabilities:
Investments, principally due to dividends
deferred for tax purposes (51) (28)
Premises and equipment, principally due to
differences in depreciation (131) (140)
Unrealized gains on available for sale securities - (640)
Other (53) (82)
---- ----
Total deferred tax liabilities (235) (890)
---- ----
Net deferred tax asset (liability) $573 (644)
==== ====
</TABLE>
(13) STOCKHOLDERS' EQUITY AND PER SHARE DATA
Dividends paid by the Company are provided primarily from dividends
received from the subsidiary. Banking regulations limit the amount of
dividends that may be paid without prior approval of the agencies
which regulate the Bank.
The computation of earnings per share in each year was based on the
weighted average number of common shares outstanding. Stock warrants
which were dilutive, were included as share equivalents using the
treasury stock methods. The number of shares used in
(Continued)
35
<PAGE> 36
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
computing earnings per share was 558,144 and 537,754 and 497,017 in
1994, 1993 and 1992, respectively. Fully diluted earnings per share
was not materially different from primary earnings per share for any
years presented.
The Company had outstanding at December 31, 1994, warrants to purchase
approximately 9,600 shares of its common stock. The warrants were
issued in 1992 in connection with the Tri-County merger (note 2).
Each warrant is exercisable at $24.50 per share, and may be exercised
during the periods of May 1 through July 31 of 1992 and 1993 and May
1, 1994 through February 3, 1995. In 1994 and 1993, respectively,
49,257 and 24,508 warrants were exercised and converted to shares of
common stock. All outstanding warrants at December 31,1994 were
exercised before February 3, 1994.
(Continued)
36
<PAGE> 37
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In January 1993, the Company filed a tender offering to purchase from
existing shareholders up to 60,000 shares of its outstanding common
stock for $34.00 per share, and up to 30,000 outstanding warrants for
$8.00 per warrant. The offer expired on February 15, 1993 and
resulted in the Company repurchasing 21,193 shares of common stock and
3,090 warrants at a total cost of approximately $745,000. The Company
purchased an additional 7,440 shares in September 1993.
During the fourth quarter of 1994, the Company purchased 15,345 shares
of stock at $55 per share and those shares are reflected as treasury
shares at December 31, 1994. During the fourth quarter of 1994, the
Company also repurchased 15,873 warrants at $30.50 per warrant.
(14) COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company has various outstanding
commitments to extend credit and standby letters of credit which are
not disclosed in the accompanying consolidated financial statements.
At December 31, 1994 and 1993, the Company had outstanding
approximately $259,700 and $266,700, respectively, in standby letters
of credit and commitments to extend approximately $9,986,000 and
$6,711,000, respectively, under outstanding lines of credit. In the
opinion of management, no significant credit losses will result from
these commitments.
(15) SUBSEQUENT EVENT - PENDING ACQUISITION
On August 30, 1994, a definitive merger agreement was executed between
the Company and West Tennessee Financial Corporation (WTFC), a bank
holding company. WTFC owns all of the outstanding shares of capital
stock of Community Bank of West Tennessee (Community Bank), formerly
First Federal Savings and Loan Association, a state chartered
commercial bank with its principal office located in Selmer, Tennessee
and two additional branches in Hardin County. Pursuant to the merger
agreement, WTFC is to be merged with and into the Company, with the
Company being the surviving corporation. The shareholders of WTFC
common stock, $.01
(Continued)
37
<PAGE> 38
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
par value per share, are to receive $51 in cash or .9273 shares of the
Company's common stock in exchange for each share of WTFC common
stock. As soon as reasonably practical after the merger of WTFC into
the Company, Community Bank will be merged into the Bank, with the
Bank continuing as the surviving bank. The Company intends to account
for the mergers under the purchase method of accounting. At December
31, 1994, WTFC had total assets of $36.2 million. The mergers are
subject to the approval of WTFC's shareholders. Management expects
this transaction to be consummated on April 3, 1995.
(Continued)
38
<PAGE> 39
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(16) CONDENSED PARENT COMPANY FINANCIAL INFORMATION
Condensed financial information of Wes-Tenn Bancorp, Inc. (parent
only) is as follows:
CONDENSED BALANCE SHEETS
DECEMBER 31
<TABLE>
<CAPTION>
1994 1993
------- ------
(in thousands)
<S> <C> <C>
Assets:
Cash and demand balances with banks $ 370 32
Investment in subsidiary 26,141 25,519
Other - 3
------- ------
TOTAL ASSETS $26,511 25,554
======= ======
Liabilities:
Other borrowed money 1,330 830
Other liabilities 49 48
------- ------
TOTAL LIABILITIES 1,379 878
------- ------
Stockholders' equity 25,132 24,676
------- ------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $26,511 25,554
======= ======
</TABLE>
(Continued)
39
<PAGE> 40
WES-TENN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Income:
Dividends received from subsidiary $ 860 929 699
Other income - - 180
------ ----- -----
860 929 879
Expenses 96 156 139
------ ----- -----
INCOME BEFORE EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARY 764 773 740
Equity in undistributed earnings of subsidiary 2,458 2,739 1,833
------ ----- -----
NET INCOME $3,222 3,512 2,573
====== ===== =====
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Net cash flows from operating activities:
Net income $ 3,222 3,512 2,573
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Earnings from subsidiary (3,318) (3,668) (2,532)
Dividends received from subsidiary 860 929 699
Other, net (31) 5 229
------- ------- ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 733 778 969
------- ------- ------
Cash flows from financing activities:
Principal payments on other borrowed money (825) (1,220) (1,060)
Proceeds from other borrowed money 1,325 1,525 580
Cash dividends paid (774) (640) (499)
Conversion of stock warrants 1,207 600 62
Purchase of treasury stock (844) (1,007) (43)
Purchase of stock warrants (484) (25) -
------- ------ ------
NET CASH USED IN FINANCING ACTIVITIES (395) (767) (960)
------- ------ ------
NET INCREASE IN CASH AND DEMAND
BALANCES WITH BANKS 338 11 9
Cash and demand balances with banks at the
beginning of the year 32 21 12
------- ------- ------
Cash and demand balances with banks at the
end of the year $ 370 32 21
======= ======= ======
</TABLE>
40
<PAGE> 41
Pro Forma Condensed Consolidated Financial Information
The following tables contain unaudited consolidated pro forma condensed
financial information showing a balance sheet at March 31, 1995, and statements
of income for the three months ended March 31, 1995 and 1994 and for the years
ended December 31, 1994, 1993 and 1992 for (i) the Registrant (adjusted to
include the financial results of LF Bancorp, Inc., which was merged with and
into the Registrant on March 31, 1995 and accounted for as a pooling of
interests); (ii) the Registrant and First Federal, and (iii) the Registrant,
First Federal and other pending acquisitions. The other pending acquisitions
are (i) the proposed purchase of substantially all of the assets and assumption
of certain liabilities of Shelby Bank; and (ii) the proposed merger with
Wes-Tenn. The unaudited pro forma financial information reflects each
acquisition using either the pooling of interests or purchase method of
accounting in accordance with the accounting requirements applicable to each
respective transaction. The unaudited pro forma financial information should
be read in conjunction with the historical consolidated financial statements
and notes thereto of the Registrant, First Federal and Wes-Tenn. Pro forma
results are not necessarily indicative of future operating results.
41
<PAGE> 42
Pro Forma Condensed Consolidated Balance Sheet
March 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Historical
-------------------------------------------
Other Pending
BancorpSouth First Federal Acquisitions(6) Adjustments Pro Forma
------------ ------------- ------------- ----------- ---------
ASSETS (In thousands)
<S> <C> <C> <C> <C> <C>
Cash and due from banks $ 130,745 $ 1,356 $ 15,122 $ 147,223
Held-to maturity securities 499,473 9,288 50,811 559,572
Loans and leases, net 1,834,268 13,880 196,344 2,044,492
Available-for-sale securities 137,738 - 46,353 184,091
Mortgages held for sale 11,180 - - 11,180
Premises and equipment, net 69,524 226 5,371 250 (2) 75,371
Other assets 108,604 287 4,745 1,434 (3) 115,070
---------- ------- -------- ------ ----------
Total assets $2,791,532 $25,037 $318,746 $1,684 $3,136,999
========== ======= ======== ====== ==========
LIABILITIES
Deposits
Non-interest bearing $ 319,785 - 64,739 $ 384,524
Interest bearing 2,126,065 22,012 199,159 2,347,236
---------- ------- -------- ----------
Total deposits 2,445,850 22,012 263,898 2,731,760
Short-term borrowings 31,864 - 3,225 35,089
Long-term debt 47,037 - 19,095 66,132
Other liabilities 36,016 203 4,927 41,146
---------- ------- -------- ----------
Total liabilites 2,560,767 22,215 291,145 2,874,127
---------- ------- -------- ----------
STOCKHOLDERS' EQUITY
Common stock 22,045 157 3,474 118 (1)
(2,677)(4)
3,184 (5) 26,301
Capital surplus 73,782 1,239 14,566 (118)(1)
(78)(4)
(3,184)(5) 86,207
Unrealized gain (loss) on
available-for-sale securities 125 - (605) 186 (4) (294)
Retained earnings 135,847 1,426 12,073 4,253 (4) 153,599
Less cost of treasury stock (1,034) - (1,907) (2,941)
---------- ------- -------- ------ ----------
Total stockholders' equity 230,765 2,822 27,601 1,684 262,872
---------- ------- -------- ------ ----------
Total liabilities and stockholders' equity $2,791,532 $25,037 $318,746 $1,684 $3,136,999
========== ======= ======== ====== ==========
</TABLE>
- ----------------------------
(1) Reclassification of capital accounts to reflect the exchange of First
Federal Common Stock for BancorpSouth Common Stock.
(2) Estimated write-up of premises and equipment acquired from The Shelby
Bank.
(3) Cost in excess of fair value of net assets acquired from The Shelby Bank.
(4) Adjustments to capital accounts to reflect the transaction with The Shelby
Bank.
(5) Reclassification of capital accounts to reflect the exchange of Wes-Tenn
Bancorp Common Stock for BancorpSouth Common Stock.
(6) Does not include West Tennessee Financial Corporation ("WTFC"), a bank
holding company with total assets of approximately $38 million. WTFC
was merged into Wes-Tenn Bancorp effective April 3, 1995 and the
transaction was accounted for as a purchase for financial reporting
purposes.
42
<PAGE> 43
Pro Forma Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended March 31,
--------------------------------------------------------------------------------------------
1994 1995
--------------------------------------------- ---------------------------------------------
BancorpSouth, BancorpSouth,
First Federal First Federal
BancorpSouth & Other Pending BancorpSouth & Other Pending
Historical & First Federal Acquisitions Historical & First Federal Acquisitions
BancorpSouth Pro Forma Pro Forma (1) BancorpSouth Pro Forma Pro Forma (1)
------------ --------------- --------------- ------------ --------------- --------------
(In thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Interest revenue $42,490 $42,874 $48,331 $52,510 $52,932 $59,041
Interest expense 17,046 17,229 19,491 22,513 22,725 25,810
------- ------- ------- ------- ------- -------
Net interest revenue 25,444 25,645 28,840 29,997 30,207 33,231
Provision for credit losses 1,064 1,067 1,120 1,176 1,180 1,299
------- ------- ------- ------- ------- -------
Net interest revenue, after
provision for credit losses 24,380 24,578 27,720 28,821 29,027 31,932
Other revenue 4,884 4,943 5,399 7,062 7,094 7,740
Other expense 21,860 22,023 24,334 25,457 25,648 28,138
------- ------- ------- ------- ------- -------
Income before income tax
and accounting change 7,404 7,498 8,785 10,426 10,473 11,534
Applicable income taxes 2,015 2,051 2,422 3,385 3,397 3,716
------- ------- ------- ------- ------- -------
Net income $ 5,389 $ 5,447 $ 6,363 $ 7,041 $ 7,076 $ 7,818
======= ======= ======= ======= ======= =======
Earnings per share
Primary $ 0.62 $ 0.62 $ 0.62 $ 0.80 $ 0.79 $ 0.75
======= ======= ======= ======= ======= =======
Fully diluted $ 0.62 $ 0.62 $ 0.62 $ 0.80 $ 0.79 $ 0.75
======= ======= ======= ======= ======= =======
Average shares
Primary 8,733 8,843 10,297 8,801 8,911 10,427
Fully diluted 8,733 8,843 10,297 8,803 8,914 10,430
</TABLE>
- ----------------------------
(1) Does not include West Tennessee Financial Corporation ("WTFC"), a bank
holding company with total assets of approximately $38 million. WTFC was
merged into Wes-Tenn Bancorp effective April 3, 1995 and the transaction
was accounted for as a purchase for financial reporting purposes.
43
<PAGE> 44
Pro Forma Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
For the years ended December 31,
-------------------------------------------------------------------------------------------------
1992 1993
--------------------------------------------- -----------------------------------------------
BancorpSouth, BancorpSouth,
First Federal First Federal
BancorpSouth & Other Pending BancorpSouth & Other Pending
Historical & First Federal Acquisitions Historical & First Federal Acquisitions
BancorpSouth Pro Forma Pro Forma (2) BancorpSouth Pro Forma Pro Forma (2)
------------ --------------- --------------- ------------ --------------- ---------------
(In thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Interest revenue $180,285 $182,079 $205,189 $171,035 $172,606 $196,162
Interest expense 79,996 81,056 92,913 68,112 68,925 79,318
-------- -------- -------- -------- -------- --------
Net interest revenue 100,289 101,023 112,276 102,923 103,681 116,844
Provision for credit losses 11,818 11,836 12,924 7,886 7,969 9,047
-------- -------- -------- -------- -------- --------
Net interest revenue, after
provision for credit losses 88,471 89,187 99,352 95,037 95,712 107,797
Other revenue 21,105 21,321 23,593 24,027 24,321 26,514
Other expense 82,394 82,949 91,322 84,837 85,457 94,858
-------- -------- -------- -------- -------- --------
Income before income tax
and accounting change 27,182 27,559 31,623 34,227 34,576 39,453
Applicable income taxes 6,954 7,101 9,126 8,402 8,533 10,213
-------- -------- -------- -------- -------- --------
Income before accounting
change 20,228 20,458 22,497 25,825 26,043 29,240
Accounting change, net of tax - - - 3,380 3,380 3,380
Extraordinary item (284) (284) (284) - - -
-------- -------- -------- -------- -------- --------
Net income $ 19,944 $ 20,174 $ 22,213 $ 29,205 $ 29,423 $ 32,620
======== ======== ======== ======== ======== ========
Earnings per share(1)
Primary:
Income before
accounting change $ 2.43 N/A N/A $ 2.99 N/A N/A
Accounting change,
net of taxes - - 0.39 - -
Extraordinary item (0.03) - - - - -
-------- -------- -------- -------- -------- --------
Net income $ 2.40 N/A N/A $ 3.38 N/A N/A
======== ======== ======== ======== ======== ========
Fully diluted:
Income before
accounting change $ 2.32 N/A N/A $ 2.95 N/A N/A
Accounting change,
net of taxes - - 0.39 - -
Extraordinary item (0.03) - - - - -
-------- -------- -------- -------- -------- --------
Net income $ 2.29 N/A N/A $ 3.34 N/A N/A
======== ======== ======== ======== ======== ========
Average shares(1)
Primary 8,335 N/A N/A 8,651 N/A N/A
Fully diluted 8,731 N/A N/A 8,747 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
1994
-----------------------------------------------
BancorpSouth,
First Federal
BancorpSouth & Other Pending
Historical & First Federal Acquisitions
BancorpSouth Pro Forma Pro Forma (2)
------------ --------------- ---------------
<S> <C> <C> <C>
Interest revenue $185,256 $186,868 $209,178
Interest expense 75,102 75,875 85,610
-------- -------- --------
Net interest revenue 110,154 110,993 123,568
Provision for credit losses 5,652 5,662 6,004
-------- -------- --------
Net interest revenue, after
provision for credit losses 104,502 105,331 117,564
Other revenue 24,347 24,562 26,387
Other expense 91,671 92,366 101,878
-------- -------- --------
Income before income tax
and accounting change 37,178 37,527 42,073
Applicable income taxes 10,876 10,984 12,335
-------- -------- --------
Income before accounting
change 26,302 26,543 29,738
Accounting change, net of tax 962 962 962
Extraordinary item - - -
-------- -------- --------
Net income $ 27,264 $ 27,505 $ 30,700
======== ======== ========
Earnings per share
Primary:
Income before
accounting change (1) $ 3.01 $ 3.00 $ 2.88
Accounting change,
net of taxes 0.11 0.11 0.09
Extraordinary item - - -
-------- -------- --------
Net income $3.12 $3.11 $2.97
======== ======== ========
Fully diluted:
Income before
accounting change (1) $ 3.00 $ 2.99 $ 2.88
Accounting change,
net of taxes 0.11 0.11 0.09
Extraordinary item - - -
-------- -------- --------
Net income $ 3.11 $ 3.10 $ 2.97
======== ======== ========
Average shares
Primary 8,750 8,859 10,313
Fully diluted 8,757 8,867 10,321
</TABLE>
(1) N/A - Not applicable for periods prior to First Federal's conversion from
mutual to stock ownership on October 1, 1993.
(2) Does not include West Tennessee Financial Corporation ("WTFC"), a bank
holding company with total assets of approximately $38 million. WTFC was
merged into Wes-Tenn Bancorp effective April 3, 1995 and the transaction
was accounted for as a purchase for financial reporting purposes.
44
<PAGE> 45
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BANCORPSOUTH, INC.
By: /s/ Cathy M. Robertson
--------------------------------
Cathy M. Robertson
First Vice President and
Corporate Secretary
Date: July 13, 1995
45
<PAGE> 46
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBITS NUMBER
- ------ ----------------------- ------
<S> <C>
23.1 Consent of KPMG Peat Marwick LLP
</TABLE>
46
<PAGE> 1
EXHIBIT 23.1
[LOGO] KPMG Peat Marwick LLP
Consent of Independent Public Accountants
We consent to the use of our report included herein.
KPMG Peat Marwick LLP
Memphis, Tennessee
July 11, 1995
