<PAGE>
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
August 21, 1995 (August 4, 1995)
--------------------------------------------------------------------------------
Date of Report (Date of earliest event reported)
CNB BANCSHARES, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
INDIANA
--------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
0-11510 35-1568731
--------------------------------------------------------------------------------
(Commission File Number) (IRS Employer Identification No.)
20 N.W. THIRD STREET, EVANSVILLE, INDIANA 47739-0001
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (812) 464-3400
Not Applicable
--------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
Exhibit Index on Page 7
<PAGE>
Item 2. Acquisition or Disposition of Assets.
------ ------------------------------------
On August 4, 1995, CNB Bancshares, Inc., an Indiana corporation
("CNB"), acquired UF Bancorp, Inc., a Delaware corporation ("UFB"), pursuant to
an Agreement and Plan of Merger ("Merger Agreement"), dated December 12, 1994,
as amended June 9, 1995. Under terms of the Merger Agreement, UFB was merged
(the "Merger") with and into a wholly-owned subsidiary of CNB, and each of the
1,652,770 shares of UFB common stock outstanding at August 4, 1995, was
converted into 1.366 shares of common stock of CNB. The Merger was accounted
for as a "pooling of interests" for accounting and financial reporting purposes.
UFB was a savings and loan holding company headquartered in
Evansville, Indiana. At June 30, 1995, UFB had consolidated assets of $563
million and shareholders' equity of $43 million. Through its wholly-owned
subsidiary, Union Federal Savings Bank ("Union Federal"), UFB operated 16
offices in eight counties in southern Indiana, western Kentucky and the Mt.
Carmel area in southern Illinois. Contemporaneous with the Merger, Union
Federal merged with and into CNB's lead bank, The Citizens National Bank of
Evansville, and certain of Union Federal's branches located outside of the
Evansville, Indiana area were transferred, via branch purchase and assumption
transactions, to other CNB subsidiaries currently operating in those markets.
Prior to the Merger, there were no material relationships between UFB
and its shareholders, and CNB, or any of the affiliates, directors or officers
of CNB or any associates of any such directors or officers.
2
<PAGE>
Item 5. Other Events
------ ------------
On August 4, 1995, CNB merged with The Bank of Orleans, Orleans,
Indiana, which had total assets of $59 million and shareholders' equity of $6
million. The merger was accounted for as a "pooling of interests" for
accounting and financial reporting purposes.
Also on August 4, 1995, CNB acquired the Indiana branches of
Household, f.s.b., with total deposits of approximately $79 million, located in
Terre Haute, Brazil and Sullivan, Indiana.
3
<PAGE>
Item 7. Financial Statements and Exhibits
------ ---------------------------------
(a) Financial Statements of Business Acquired
-----------------------------------------
Financial Statements of UFB
---------------------------
The consolidated financial statements as of and for the year ended June 30,
1995 are unaudited. The consolidated financial statements as of June 30,
1994 and for each of the two years in the period ended June 30, 1994 are
audited.
1. Consolidated Statement of Financial Condition as of June 30, 1995 and
1994
2. Consolidated Statements of Operations for the Years Ended June 30, 1995,
1994 and 1993
3. Consolidated Statements of Changes in Stockholders' Equity for the Years
Ended June 30, 1995, 1994 and 1993
4. Consolidated Statements of Cash Flows for the Years Ended June 30, 1995,
1994 and 1993
5. Notes to Consolidated Financial Statements and Independent Auditor's
Report
(b) Unaudited Pro Forma Financial Information
-----------------------------------------
1. Pro Forma Combined Condensed Balance Sheet as of June 30, 1995 and
December 31, 1994
2. Pro Forma Combined Condensed Statements of Income for the Years Ended
December 31, 1994, 1993 and 1992
3. Pro Forma Combined Condensed Statement of Income for the Six Months
Ended June 30, 1995
4. Notes to Pro Forma Combined Condensed Financial Statements
(c) Exhibits
--------
The following exhibits are incorporated herein by reference:
Exhibit 2(a) Agreement and Plan of Merger, dated December 12, 1994, by and
among CNB, UF Bancorp, Inc. and Citizens Bancshares, Inc., is
incorporated herein by reference from the UF Bancorp, Inc.
Current Report on Form 8-K, dated December 14, 1994.
Exhibit 2(b) Amendment to Agreement and Plan of Merger, dated June 9,
1995, by and among CNB, UF Bancorp, Inc. and Citizens
Bancshares, Inc. is Incorporated by reference from CNB's
Registration Statement on Form S-4 (No. 33-60357)
4
<PAGE>
Item 7. Financial Statements and Exhibits (continued)
------ ---------------------------------------------
The following exhibits are submitted herewith:
Exhibit 99(a) Press Release, dated August 4, 1995
Exhibit 99(b) Financial Statements of UF Bancorp, Inc. and Report of
Independent Auditor
Exhibit 99(c) Pro Forma Financial Statements
5
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 21, 1995
CNB BANCSHARES, INC.
By: /s/ James J. Giancola
-------------------------------------
James J. Giancola
President and Chief Operating Officer
6
<PAGE>
EXHIBIT INDEX
-------------
Exhibit 99(a) Press Release, dated August 4, 1995
Exhibit 99(b) Financial Statements of UF Bancorp, Inc. and Report of
Independent Auditor
Exhibit 99(c) Pro Forma Financial Statements
7
<PAGE>
[LOGO] CNB Bancshares, Inc. 20 NW Third Street
Evansville, Indiana 47739-0001
812-464-3400
------------------------------------------------------------
PRESS RELEASE
------------------------------------------------------------
DATE: August 4, 1995
FOR RELEASE: Immediately
RELEASED BY: H. Lee Cooper, Chairman and Chief Executive 812-464-3224
Officer, CNB Bancshares, Inc.
CONTACT: James J. Giancola, President and Chief Operating 812-464-3265
Officer, CNB Bancshares, Inc.
CNB BANCSHARES, INC. ANNOUNCES
THE COMPLETION OF THREE ACQUISITIONS
H. Lee Cooper, Chairman and Chief Executive Officer of CNB Bancshares, Inc.
(NASDAQ-NMS: CNBE) announced today the completion of three separate
acquisitions. The three acquisitions involve UF Bancorp, Inc. (NASDAQ-NMS:
UFBI), The Bank of Orleans and the Indiana branches of Household Bank, f.s.b.
UF Bancorp, Inc. is the parent company of Union Federal Savings Bank,
Evansville, Indiana. UF Bancorp had total assets of $563 million at June 30,
1995, and shareholders' equity of $43 million. Union Federal operates offices
in and around Evansville, Columbus, Shelbyville, and Jasper in Indiana; Mt.
Carmel in Illinois; and Henderson in Kentucky. Effective with the completion of
the acquisition, Union Federal will be merged into The Citizens National Bank of
Evansville, lead bank for CNB, and the Henderson, Mt. Carmel, and Jasper offices
of Union Federal will be merged with CNB's affiliate banks in those markets.
The Bank of Orleans, Orleans, Indiana had total assets of $59 million and
shareholders' equity of $6 million at June 30, 1995. The Bank of Orleans
expands CNB's Southern Indiana franchise into Orange County.
The Indiana branches of Household Bank, f.s.b., with total deposits of
approximately $79 million, are located in Terre Haute, Brazil and Sullivan,
Indiana. These offices will become part of Citizens Bank of Western Indiana,
CNB's affiliate bank headquartered in Terre Haute.
H. Lee Cooper stated, "The completion of these acquisitions bring CNB
approximately 50,000 new customers. We are very committed to providing
outstanding service to these new customers and look forward to working with the
staffs of Union Federal, Orleans and Household to deliver on this commitment."
He also said, "These acquisitions increase CNB's assets by $701 million or 24
percent, bringing us to over $3.7 billion. While The Bank of Orleans, the Union
Federal Columbus and Shelbyville offices, and the Sullivan office of Household
represent new markets for CNB, the vast majority of the asset increase, over 80
percent, occurs in markets already served by CNB. We believe the opportunity to
increase our market share is very attractive.
<PAGE>
Page 2
Press Release
August 4, 1995
In order to maximize this opportunity, we have already converted all three
acquisitions to our data processing systems and are in position to offer CNB's
comprehensive product offerings to these new customers immediately.
Additionally, we combined half of the acquired offices with our existing offices
in order to further improve the efficiency of our retail delivery system. The
efforts put forth to date by our associates and the associates of the acquired
banks have been tremendous."
Donald A. Rausch, Chairman, President and Chief Executive Officer of UF Bancorp,
Inc. said, "We are very pleased to be merging with CNB. Our shareholders have
received an attractive return on their investments in the form of CNB stock.
Our staff has worked very closely with CNB over the past few months in order to
combine our two organizations. We believe our customers will continue to
receive excellent service as part of Citizens Bank."
CNB Bancshares currently operates 92 banking offices in addition to some 26
consumer finance offices in Kentucky and Tennessee under the name Peoples
Security Finance Company, Inc., and a property and casualty insurance agency
operating as Citizens Insurance located in Evansville, Indiana. CNB has offices
in and around Evansville, Terre Haute, Lafayette, Greenwood, Bloomington,
Columbus, Shelbyville, Brazil, Sullivan, Orleans and Jasper in Indiana;
Effingham, Harrisburg, Mt. Vernon, Mt. Carmel, Marion, Carmi and Vandalia in
Illinois; and Madisonville, Morganfield, Henderson and Jefferson County
(Louisville) in Kentucky.
<PAGE>
<TABLE>
<CAPTION>
UF BANCORP, INC and SUBSIDIARY CORPORATIONS
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(Dollars in thousands)
JUNE 30, JUNE 30,
1995 1994
-------------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Cash $12,566 $13,021
Federal funds sold 1,500 3,300
Short-term interest bearing deposits 453 11,681
-------- --------
Cash and cash equivalents 14,519 28,002
Investments:
Securities held to maturity 26,544
(market value $26,384)
Securities available for sale 36,265
Mortgage-backed securities :
Mortgage-backed securities held to maturity 243,563
(market value $240,710)
Mortgage-backed securities available for sale 257,975
Loans receivable, net 201,781 167,917
Mortgage loans held for sale 24,380 9,623
Real estate acquired in settlement of loans, net 706 1,472
Premises and equipment 8,853 9,166
Federal Home Loan Bank stock, at cost 7,852 6,101
Interest receivable 4,306 2,955
Prepaid expenses and other assets 6,558 8,540
-------- --------
Total assets $563,195 $503,883
======== ========
LIABILITIES
Deposits $359,572 $382,916
Advances from Federal Home Loan Bank 151,926 68,800
Interest payable 2,298 1,424
Other liabilities 5,959 4,358
-------- --------
Total liabilities 519,755 457,498
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value:
Authorized and unissued--1,000,000 shares
Common Stock, $.01 par value:
Authorized - 4,000,000 shares
Issued 1,891,909 and 1,858,463 shares 19 19
Additional paid-in capital 18,146 17,334
Retained earnings--substantially restricted 31,402 34,852
-------- --------
49,567 52,205
Less:
Treasury stock-at cost-264,770 shares (5,308) (5,308)
Reduction for ESOP loan guarantee 0 (272)
Unearned compensation (120) (240)
Unrealized loss on securities available for sale (699)
-------- --------
Total stockholders' equity 43,440 46,385
-------- --------
Total liabilities and stockholders' equity $563,195 $503,883
======== ========
</TABLE>
See notes to consolidated financial statements
1
<PAGE>
<TABLE>
<CAPTION>
UF BANCORP, INC. and SUBSIDIARY CORPORATIONS
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except share data)
YEAR ENDED
JUNE 30,
-------------------------------------------
1995 1994 1993
------------ -------------- ------------
(Unaudited)
<S> <C> <C> <C>
Interest Income
Loans $15,455 $14,742 $17,049
Mortgage-backed securities 17,841 13,978 14,164
Other interest and dividends 3,164 1,232 1,308
Loans held for resale 1,016 1,900 3,270
------------ -------------- ------------
37,476 31,852 35,791
------------ -------------- ------------
Interest Expense
Deposits 15,179 15,081 17,329
FHLB of Indianapolis advances 8,626 3,439 3,398
------------ -------------- ------------
23,805 18,520 20,727
------------ -------------- ------------
Net Interest Income 13,671 13,332 15,064
Provision for loan losses 1,100 914 285
------------ -------------- ------------
Net Interest Income After Provision
for Loan Losses 12,571 12,418 14,779
------------ -------------- ------------
Other Income
Gain (loss) on:
Sale of subsidiary 0 962 747
Sale of investment securities (533) 0 0
Mortgage-backed securities available for sale (768) 0 0
Service charges on deposit accounts 856 819 755
Mortgage loan origination fees 1,970 3,724 4,457
Mortgage loan servicing fees 1,684 1,977 1,583
Insurance commissions 303 255 635
Other operating income 192 394 256
------------ -------------- ------------
3,704 8,131 8,433
------------ -------------- ------------
Other Expenses
Salaries and employee benefits 5,958 6,639 8,066
Premises and equipment expense 1,335 1,446 1,572
Deposit insurance 858 872 664
Data processing 452 474 535
Communication, supplies, etc. 759 833 964
Advertising 449 469 437
Warranty losses on sold loans 2,514 1,482 456
Professional fees 766 44 49
Loan sub-servicing fees 357 416 423
Other operating expenses 2,611 2,123 2,002
------------ -------------- ------------
16,059 14,798 15,168
------------ -------------- ------------
Income (Loss) Before Income Taxes and Cumulative
Effect of Change in Accounting Method 216 5,751 8,044
Income Taxes 2,742 2,072 3,094
Net Income (Loss) Before Cumulative Effect of ------------ -------------- ------------
Change in Accounting Method (2,526) 3,679 4,950
Cumulative Effect of Change in Accounting Method 0 300 0
------------ -------------- ------------
Net Income (Loss) ($2,526) $3,979 $4,950
============ ============== ============
Per Share:
Net Income (loss) before cumulative effect of
change in accounting method ($1.47) $2.14 $2.74
Net income (loss) ($1.47) $2.31 $2.74
Dividends $0.575 $0.485 $0.430
Average common and common equivalent
shares outstanding 1,715,725 1,718,909 1,806,567
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
<TABLE>
<CAPTION>
UF BANCORP, INC. and SUBSIDIARY CORPORATIONS
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands)
(Unaudited with Respect to 1995)
Unrealized
Additional Loss on Total
Common Paid-in Retained Treasury ESOP Looan Unearned Available for Stockholders'
Shares Amount Capital Earnings Stock Guarantee Compensation Sale Securities Equity
------ ------ ------- -------- ----- --------- ------------ --------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, July 1, 1992 1,759,382 $19 $17,072 $27,459 ($1,109) ($1,158) ($480) $41,803
Net income for 1993 4,950 4,950
Cash dividends ($.43) per share) (748) (748)
Tax benefits of ESOP, stock
options and RRP 104 104
Exercise of stock options 6,482 65 65
Purchase of treasury stock (88,293) (1,961) (1,961)
Amortization of unearned
compensation 120 120
Principal repayments on
ESOP loan 186 186
--------- --- ------- ------- ------- ------- ----- ------- -------
Balances, June 30, 1993 1,677,571 19 17,241 31,661 (3,070) (972) (360) 44,519
Net income for 1994 3,979 3,979
Cash dividends ($.48 per share) (788) (788)
Tax benefits of ESOP, stock
options and RRP 93 93
Purchase of treasury stock (83,878) (2,238) (2,238)
Amortization of unearned
compensation 120 120
Principal repayments on
ESOP loan 700 700
--------- --- ------- ------- ------- ------- ----- ------- -------
Balances, June 30, 1994 1,593,693 19 17,334 34,852 (5,308) (272) (240) 46,385
Adoption of FAS 115 ($1,844) (1,844)
Net income for 1995 (2,526) (2,526)
Cash dividends ($.575 per share) (924) (924)
Issuance of common stock 14,000 476 476
Tax benefits of ESOP, stock
options and RRP 141 141
Amortization of unearned
compensation 120 120
Principal repayments on
ESOP loan 272 272
Exercise of stock options 19,446 195 195
Change in unrealized loss on
available for sale securities 1,145 1,145
--------- --- ------- ------- ------- ------- ----- ------- -------
Balances, June 30, 1995 1,627,139 $19 $18,146 $31,402 ($5,308) $0 ($120) ($699) $43,440
========= === ======= ======= ======= ======= ===== ======= =======
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
UF BANCORP, INC and SUBSIDIARY CORPORATIONS
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Year ended June 30,
---------------------------------------
1995 1994 1993
------------- ------------- -----------
(Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($2,526) $3,979 $4,950
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Provision for loan losses 1,100 914 285
Provision for warranty losses on sold loans 2,514 1,482 456
Depreciation and amortization 686 759 787
Decrease (Increase) in mortgage loans held for sale (14,757) 443 37,982
Other adjustments, net 1,265 (2,468) (7,056)
------------- ------------- -----------
Net cash provided (used) by operating activities (11,718) 5,109 37,404
------------- ------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of mortgage backed securities held to maturity (36,637) (69,893) (115,232)
Proceeds from held to maturity mortgage-backed securities
maturities and principal repayments 6,988 71,894 47,373
Purchase of available for sale mortgage-backed securities (29,004)
Proceeds from available for sale mortgage-backed securities
maturities and principal repayments 38,144
Purchase of held to maturity investment securities (4,000) (28,461) (5,497)
Proceeds from held to maturity investment securities
maturities and principal repayments 8,825 2,219
Proceeds from sale of held to maturity investment securities 14,205
Purchases of available-for-sale investment securities (21,557)
Proceeds from available for sale investment securities
maturities and principal repayments 6,857
Net change in loans 1,037 19,249 25,291
Purchase of loans (36,103) (9,358) (11,480)
Proceeds from sale of real estate owned 740 431 474
Purchases of premises and equipment (373) (486) (2,253)
Proceeds from sale of fixed assets 714 376
Purchase of FHLB of Indianapolis stock (1,751) (1,101) (1,013)
------------- ------------- -----------
Net cash used by investing activities (61,454) (8,186) (59,742)
------------- ------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in non-interest bearing
deposits , NOW accounts and savings accounts (20,023) 10,844 17,691
Net increase (decrease) in certificates of deposit (3,321) (9,640) (26,730)
Repayment of FHLB of Indianapolis advances (72,007) (100,000) (115,000)
Proceeds obtained from FHLB of Indianapolis advances 155,133 110,800 142,000
Net increase (decrease) in advances
by borrowers for taxes and insurance 19 (19) (81)
Proceeds from sale of common stock and exercise of options 671 65
Tax benefits of ESOP, stock options and RRP 141 93 104
Purchase of treasury stock (2,238) (1,961)
Cash dividends (924) (788) (748)
------------- ------------- -----------
Net cash provided by financing activities 59,689 9,052 15,340
------------- ------------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (13,483) 5,975 (6,998)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 28,002 22,027 29,025
------------- ------------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $14,519 $28,002 $22,027
============= ============= ===========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $22,833 $18,581 $21,130
Income taxes paid 1,746 1,940 3,438
Reclassification of available-for-sale mortgage-backed securities and investments 289,556
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of UF Bancorp, Inc. (the "Company") and
its wholly-owned subsidiary, Union Federal Savings Bank (the "Bank"), and its
wholly-owned subsidiaries, Unifin, Inc., Community Insurance Associates, Inc.,
Union Security Mortgage, Inc. (USM), which was sold effective May 31, 1993, and
Union Financial Corp. (UFC), conform to generally accepted accounting principles
and reporting practices followed by the thrift industry. The more significant
of the policies are described below.
The financial statements for 1995 are unaudited, all adjustments, consisting of
normal accruals which in the opinion of management are necessary for a fair
presentation of the financial results, have been included in the consolidated
financial statements as of and for the year ended June 30, 1995.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries after elimination of all material intercompany transactions and
accounts.
DESCRIPTION OF BUSINESS
The Bank generates real estate, mortgage, consumer and commercial loans and
receives deposits from customers located primarily in southern Indiana, western
Kentucky and southern Illinois. The Bank's loans are generally secured by
specific items of collateral including real property, consumer assets and
business assets. USM, which was sold on May 31, 1993, was in the mortgage
banking business, which included the origination, funding, selling, brokering
and servicing of mortgage loans in southern California. UFC, which was formed
in January 1993, is in the same line of business as USM and serves the middle
Atlantic coast states.
INVESTMENTS AND MORTGAGE-BACKED SECURITIES
Gains or losses on the sale of investment and mortgage-backed certificates are
determined on a specific-identification basis. Premiums and discounts on
investment and mortgage-backed securities are amortized into income over the
life of the security using the level-yield method. Mortgage-backed securities
represent primarily participating interests in pools of long-term first mortgage
loans originated and serviced by the issuers of the securities.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115 (SFAS No. 115), Accounting for Certain
Investments in Debt and Equity Securities. This statement requires that
securities be classified in three categories and provides specific accounting
treatment for each. "Trading" securities are bought and held primarily for sale
in the near term and are carried at fair value, with unrealized holding gains
and losses included in earnings; "held-to-maturity" securities, for which the
intent is to hold to maturity, are carried at amortized cost; and "available-
for-sale" securities are all others and are carried at fair value with
unrealized holding gains and losses excluded from earnings and reported as a
separate component of stockholders' equity. The Company adopted SFAS No. 115 on
July 1, 1994. At that date, investment securities with an approximate carrying
value of $6,718,000 and mortgage-backed securities with an approximate carrying
value of $177,800,000 were reclassified as available for sale. These
reclassifications resulted in a
5
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
INVESTMENTS AND MORTGAGE-BACKED SECURITIES (CONTINUED)
decrease in total stockholders' equity, net of taxes, of $1,844,000. All other
investment and mortgage-backed securities were classified as "held to maturity".
At June 30, 1995, mortgage-backed securities with a fair value of $257,975,000
and investment securities of $36,265,000 were classified as available for sale.
At June 30, 1995, the net unrealized loss on these "available for sale"
securities of $699,000 was recorded as a reduction of stockholders' equity.
LOANS
Loans are carried at the principal amount outstanding. Interest income is
accrued on the principal balances of loans. Loans are placed in a nonaccrual
status when the loans become delinquent ninety days or more. Interest income
previously accrued but not deemed collectible is reversed and charged against
current income. Interest on these loans is then recognized as income when
collected. Certain loan fees and direct costs are being deferred and amortized
as an adjustment of yield on the loans.
MORTGAGE BANKING ACTIVITIES
Mortgage loans held for sale are carried at the lower of cost or market
determined on an individual loan basis. The weighted average interest rate of
such loans at June 30, 1995 and 1994 was 8.0% and 7.5%. All mortgage loans held
for sale at June 30, 1995 and 1994 had commitments for sale to permanent
investors.
Mortgage loan origination fees incorporate all income associated with the
generation and selling of mortgage loans and includes loan origination,
processing, placement and commitment fees, gains and losses on sales of loans
and loan servicing rights and forward loan commitments. Loan origination and
processing fees, net of related direct costs, are recognized when the related
loans are sold to permanent investors. Loan placement fees are recognized when
all significant services have been performed. Loan commitment fees paid
relating to commitments with permanent investors are recognized when the related
loans are sold to permanent investors or recognized as an expense when it
becomes evident the commitment will not be used. Gains on sales of loans and/or
loan servicing rights are recognized when title and all risks and rewards
irrevocably pass to the buyer. Gains and losses on mandatory forward
commitments are recognized when the related loans are sold or management
determines that the commitment will not be utilized.
REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS
Real estate properties acquired in settlement of loans are initially recorded at
the lower of the related loan balance or fair value, less estimated selling
costs, at the date of acquisition. When a reduction from the loan balance to
the fair value is required at the time of foreclosure, the difference is charged
to the allowance for loan losses. Further reduction from recorded value to net
realizable value are made through increases in the allowance for losses on real
estate owned. Costs relating to the development and improvement of the property
are capitalized, whereas costs relating to holding the property are charged to
expense.
ALLOWANCES FOR LOAN AND REAL ESTATE LOSSES
Allowances for losses on loans and real estate owned are maintained to absorb
potential losses based on management's continuing review and evaluation of the
portfolios and its judgment as to the impact of economic conditions on the
portfolios. The evaluation by management includes consideration of past loss
experience, changes in the composition of the portfolios and the current
condition and amounts of loans outstanding and real estate owned.
6
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost net of accumulated depreciation.
Depreciation is computed on the straight-line method over their estimated useful
lives: buildings and land improvements, 20 to 50 years and furniture fixtures
and equipment, 3 to 7 years. Maintenance and repairs are expensed as incurred
while major additions and improvements are capitalized. Gains and losses on
dispositions are included in current operations.
FEDERAL HOME LOAN BANK STOCK
Federal Home Loan Bank (FHLB) stock is a required investment for institutions
that are members of the FHLB system. The required investment in common stock is
based on a predetermined formula.
PENSION PLAN COSTS
Pension plan costs are based on actuarial computations and charged to current
operations. The funding policy is to pay at least the minimum amounts required
by the Employee Retirement Income Security Act of 1974.
INCOME TAXES
Income taxes provided in the consolidated statement of operations includes
deferred income tax provisions or benefits for all significant temporary
differences in recognizing income and expenses for financial reporting and
income tax purposes. The Company has adopted the provisions of Statement of
Financial Accounting Standards No. 109 (SFAS No. 109), Accounting for Income
Taxes, for the year ended June 30, 1994. The Company and its subsidiaries file
consolidated income tax returns.
NET INCOME PER SHARE
Income per share computations are based on the weighted average number of common
shares and common share equivalents outstanding during the year. Common stock
options are considered common stock equivalents. Net loss per share for the
year ended June 30, 1995, based upon 1,715,725 average common and common
equivalent shares outstanding, was $1.47.
Earnings per share for the year ended June 30, 1994 was $2.31, based upon
1,718,909 average common and common equivalent shares outstanding and included a
$.17 per share increase resulting from the Company's adoption of SFAS No. 109.
Net income per share for the year ended June 30, 1993 based upon 1,806,567
average common and common equivalent shares outstanding was $2.74.
. MERGER AGREEMENT
On December 13, 1994, CNB Bancshares, Inc. (CNB) and the Company jointly
announced the execution of a definitive merger agreement whereby CNB would
acquire the Company. Under the terms of the agreement, shareholders of UF
Bancorp will receive 1.366 shares of CNB common stock for each of the
outstanding common shares of UF Bancorp, assuming CNB's market price just prior
to the closing is not less than $26.66 per share or more than $36.06 per share.
In addition, CNB will reserve shares for future issuance pursuant to the
outstanding UF Bancorp options. The merger is subject to approval by the UF
Bancorp shareholders, the receipt of appropriate regulatory approvals and
certain other conditions. Under certain circumstances, should UF Bancorp not
complete this transaction, it may become obligated to pay CNB a termination fee
of $2 million.
7
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
. SALE OF UNION FINANCIAL CORP.
On May 31, 1995, the Bank entered into agreements to sell all of the mortgage
servicing rights and premises and equipment of its wholly-owned, Virginia based
mortgage bank subsidiary, UFC. The sales price consisted of cash payments for
the assets sold and reimbursement for certain operating expenses from May 31,
1995 to the closing date. The sale of servicing was completed June 30, 1995
resulting in a pretax gain of $112,000. UFC will continue to operate to fulfill
its remaining mortgage bank obligations which consist primarily of the
completion of pending loans and delivery of loans to investors.
Summarized operating results of UFC are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30 1995 1994 1993
-------- ------ -------
<S> <C> <C> <C>
Net interest income $ 371 $ 66 $ (8)
Operating income 2,047 3,689 350
------- ------ -----
2,418 3,755 342
Operating expenses 3,594 3,711 591
------- ------ -----
Income (loss) before taxes (1,176) 44 (249)
Income taxes (benefit) (420) 15 (84)
------- ------ -----
Net income (loss) $ (756) $ 29 $(165)
======== ====== =====
</TABLE>
. SUBSEQUENT EVENTS
On July 31, 1995, the sale of the premises and equipment of UFC was completed
resulting in no material gain or loss.
On August 4, 1995, the Company completed its merger with CNB. Company
shareholders received 1.366 shares of CNB common stock for each of the Company
common shares held.
. SALE OF UNION SECURITY MORTGAGE, INC.
On May 31, 1993, the Bank sold the operations and stock of its wholly-owned
California mortgage bank subsidiary, USM. Immediately prior to the sale, all
non-acquired assets and liabilities, principally loans held for sale and the
loans serviced by others portfolio of $720,000,000, were transferred to the
Bank. The sales price consisted of a cash payment for the net assets and
liabilities sold and post-closing date payments to be made based on a percentage
of loans funded by USM over the twelve months following May 31, 1993. Post-
closing date payments pertaining to the volume of loans funded during June and
July 1993 were computed based upon a larger percentage factor than payments
thereafter.
8
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
. SALE OF UNION SECURITY MORTGAGE, INC. (CONTINUED)
The sale resulted in a fourth quarter 1993 pre-tax gain of $747,000, which
included $237,000 of post-closing date payments for loans closed in June 1993.
Remaining post-closing date payments of $962,000 were recorded as additional
gain on sale in fiscal 1994.
Summarized operating results of USM are as follows:
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED
MAY 31, 1993
--------------------
<S> <C>
Net interest income $ 344
Operating income 4,786
------
5,130
Operating expenses 5,829
------
Income (loss) before taxes (699)
Income taxes (benefit) (150)
------
Net income (loss) $ (549)
======
</TABLE>
9
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
. INVESTMENT SECURITIES
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES
AVAILABLE FOR SALE
At June 30, 1995
Federal Agencies $31,765 $884 $32,649
Corporate 3,616 3,616
------- ---- ---- -------
Totals $35,381 $884 $36,265
======= ==== ==== =======
INVESTMENT SECURITIES HELD
TO MATURITY
At June 30, 1994
Federal Agencies $22,928 $ 18 $178 $22,768
Corporate 3,616 3,616
------- ---- ---- -------
Totals $26,544 $ 18 $178 $26,384
======= ==== ==== =======
</TABLE>
The amortized cost and estimated market value of investments at June 30, 1995 by
contractual maturity, are shown below:
<TABLE>
<CAPTION>
AMORTIZED COST MARKET VALUE
-------------- ------------
<S> <C> <C>
Due in one year or less $ 0 $ 0
Due after one year through five years 31,765 32,649
Due after five years through ten years 3,616 3,616
------- -------
$35,381 $36,265
======= =======
</TABLE>
With the Company's intention to convert Union Federal to commercial bank status,
and with the current regulatory environment discouraging "structured notes", it
was determined to revise the Bank's investment policy. Accordingly, during the
quarter ended December 1994, the Company eliminated its "held to maturity"
securities portfolios primarily by (1) selling its entire portfolio of federal
agency "step-up" securities, which are a form of "structured notes" and (2)
reclassifying the remaining $9.6 million of investment securities and $95.4
million of mortgage-backed securities to be available for sale. These securities
had unrealized losses of $180,000 and $2,970,000 respectively when reclassified.
Gross losses of $533,000 were recorded on the sale of the $14.2 million
amortized cost and principal amount of the structured notes. There were no sales
of investment securities during the years ended June 30, 1994 and 1993. Net
unrealized gain on investment securities available for sale, net of tax, was
$530,000 at June 30, 1995.
10
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
. MORTGAGE-BACKED SECURITIES
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
AT JUNE 30, 1995
Mortgage Backed Securities Available
for Sale
FNMA participation certificates $ 31,509 $ 423 $ 164 $ 31,768
GNMA participation certificates 12,332 495 0 12,827
FHLMC participation certificates 59,473 630 347 59,756
Collateralized mortgage obligations 42,329 351 160 42,520
Other participation certificates 114,381 825 4,102 111,104
-------- ------ ------ --------
Totals $260,024 $2,724 $4,773 $257,975
======== ====== ====== ========
AT JUNE 30, 1994
Mortgage Backed Securities Held
to Maturity
FNMA participation certificates $ 24,704 $ 34 $ 392 $ 24,346
GNMA participation certificates 1,529 41 1,570
FHLMC participation certificates 50,344 190 699 49,835
Collateralized mortgage obligations 22,091 364 21,727
Other participation certificates 144,895 773 2,436 143,232
-------- ------ ------ --------
Totals $243,563 $1,038 $3,891 $240,710
======== ====== ====== ========
</TABLE>
Proceeds from sales of mortgage-backed securities available for sale during
fiscal 1995 were $1,970,000 with gross losses realized on those sales of
$768,000. There were no sales of mortgage-backed securities during the years
ended June 30, 1994 or 1993. Net unrealized loss on mortgage-backed securities
available for sale at June 30, 1995 was $1,229,000.
11
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
. LOANS RECEIVABLE
<TABLE>
<CAPTION>
JUNE 30 1995 1994
------- -------- --------
<S> <C> <C>
Real estate mortgage loans
One-to-four family residential $149,965 $118,116
Multi-family dwellings 16,399 14,574
Non-residential real estate 15,778 16,371
Construction 4,948 5,004
Consumer loans 15,048 16,075
Commercial loans 4,270 4,291
-------- --------
Total loans 206,408 174,431
-------- --------
Undisbursed portion of loans (1,964) (4,319)
Unearned interest and fees (699) (660)
Allowance (1,964) (1,535)
-------- --------
(4,627) (6,514)
-------- --------
Totals $201,781 $167,917
======== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30 1995 1994 1993
------------------ ------ ------ -----
<S> <C> <C> <C>
Allowance for loan losses
Balances at beginning of period $1,535 $ 800 $ 648
Provision for loan losses 1,100 914 285
Loans charged off (696) (189) (152)
Recoveries 25 10 19
------ ------ -----
Balances at end of period $1,964 $1,535 $ 800
====== ====== =====
</TABLE>
At June 30, 1995, the Bank had real estate mortgage loans and mortgage-backed
securities totaling $258,274,000 (170% of outstanding advances) pledged as
collateral for advances from the Federal Home Loan Bank of Indianapolis.
12
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
The amount of loans serviced for the benefit of others was $599,250,000,
$661,980,000 and $787,270,000 at June 30, 1995, 1994 and 1993. Of these loans
serviced, $507,600,000, $551,834,000 and $730,450,000 pertain to loans
originated by USM which are serviced by a subservicing agency. Loan servicing
fees for loans originated by USM, net of costs of this subservicing arrangement,
were $835,000, $1,233,000 and $827,000 for June 30, 1995, 1994 and 1993. Costs
of subservicing are included in other operating expenses.
The Bank had a total of $2,588,000, $168,000 and $426,000 of nonaccrual loans at
June 30, 1995, 1994 and 1993. Additional interest of approximately $44,000,
$6,000 and $25,000 would have been recorded for the same periods had income on
these loans been accounted for on the accrual basis.
. REAL ESTATE OWNED
<TABLE>
<CAPTION>
JUNE 30 1995 1994
------- -------- --------
<S> <C> <C>
Real estate owned $ 856 $ 1,624
Allowance for losses (150) (152)
-------- --------
Totals $ 706 $ 1,472
======== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30 1995 1994 1993
------------------ ----- -------- --------
<S> <C> <C> <C>
Balances at beginning of period $ 152 $ 159 $ 211
Provision for losses 31 61
Real estate charged off (2) (38) (113)
----- -------- --------
Balances $ 150 $ 152 $ 159
===== ======== ========
</TABLE>
. PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
JUNE 30 1995 1994
------- -------- --------
<S> <C> <C>
Cost
Land $ 2,862 $ 2,637
Buildings and land improvements 8,969 8,915
Furniture, fixtures and equipment 7,321 7,227
-------- --------
Total cost 19,152 18,779
Accumulated depreciation (10,299) (9,613)
-------- --------
Net $ 8,853 $ 9,166
======== ========
</TABLE>
13
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
. ACCRUED INTEREST RECEIVABLE
<TABLE>
<CAPTION>
JUNE 30 1995 1994
------- ------ ------
<S> <C> <C>
Mortgage-backed securities $2,080 $1,792
Loans receivable 1,221 941
Investments and other 1,005 222
------ ------
Totals $4,306 $2,955
====== ======
</TABLE>
. DEPOSITS
<TABLE>
<CAPTION>
1995 1994
------------------- -------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
JUNE 30 AMOUNT RATE AMOUNT RATE
------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Deposits
Certificates $227,017 5.70% $230,338 4.60%
Passbook savings account 46,586 2.75 57,104 2.75
NOW and checking accounts 41,792 3.36 58,168 2.92
Money market deposit accounts 33,394 4.76 26,604 2.85
Non-interest bearing accounts 10,783 10,702
-------- --------
Total deposits $359,572 $382,916
======== ========
</TABLE>
<TABLE>
<CAPTION>
1995 1994
------------------- ------------------
JUNE 30 AMOUNT PER CENT AMOUNT PER CENT
------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Certificates maturing in
1 year and less $121,885 53.7% $120,643 52.4%
1 to 2 years 55,485 24.4 59,446 25.8
2 to 3 years 26,453 11.7 24,760 10.7
Over 3 years 23,194 10.2 25,489 11.1
-------- ----- -------- -----
Totals $227,017 100.0% $230,338 100.0%
======== ===== ======== =====
</TABLE>
14
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
The table below sets forth the amount, by interest rates, of savings deposits in
the Bank as of the dates indicated:
<TABLE>
<CAPTION>
JUNE 30 1995 1994
------- -------- --------
<S> <C> <C>
4% and under $108,877 $242,498
4.01% to 6% 145,046 107,368
6.01% to 8% 100,660 22,409
8.01% to 10% 4,699 10,049
Over 10% 290 592
-------- --------
Totals $359,572 $382,916
======== ========
</TABLE>
Interest expense for deposit accounts is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30 1995 1994 1993
------------------ ------- -------- --------
<S> <C> <C> <C>
NOW and money market accounts $ 2,544 $ 2,493 $ 2,584
Passbook savings accounts 1,293 1,436 1,461
Certificate accounts 11,342 11,152 13,284
------- -------- --------
Totals $15,179 $ 15,081 $ 17,329
======= ======== ========
</TABLE>
The aggregate amount of certificates of deposit with a minimum denomination of
$100,000 was approximately $22,791,000 and $22,072,000 at June 30, 1995 and
1994.
. ADVANCES FROM FEDERAL HOME LOAN BANK
<TABLE>
<CAPTION>
1995 1994
------------------- ------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
YEARS ENDING JUNE 30 AMOUNT RATE AMOUNT RATE
---------------------- -------- -------- ------- --------
<S> <C> <C> <C> <C>
1995 $33,000 4.92%
1996 $114,000 6.57% 15,000 9.29
1997 15,000 6.31
1999 and after 22,926 6.47 20,800 4.78
-------- -------
Totals $151,926 $68,800
======== =======
</TABLE>
15
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
The terms of a security agreement with the FHLB require the Bank to pledge as
collateral for advances both qualifying first mortgage loans and mortgage-backed
securities in an amount equal to at least 170 percent of these advances and all
stock in the FHLB. Generally, advances are subject to restrictions or penalties
in the event of prepayment.
. INCOME TAXES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30 1995 1994 1993
------------------ ------ ------ ------
<S> <C> <C> <C>
Income tax expense
Currently payable
Federal $ 465 $2,156 $2,276
State 51 560 812
------ ------ ------
516 2,716 3,088
------ ------ ------
Deferred
Federal 2,320 (506) 5
State (94) (138) 1
------ ------ ------
2,226 (644) 6
------ ------ ------
Total income tax expense $2,742 $2,072 $3,094
====== ====== ======
Deferred provision relating to
Depreciation $ (40)
Loan fees (109)
Gain on loan sales (3)
Compensation 55
Other 103
------
Deferred provision $ 6
======
Reconciliation of federal statutory
income tax to actual
Tax expense
Federal statutory income tax at 34% $ 73 $1,955 $2,735
State franchise tax, net of federal
benefit (29) 274 536
Tax credits (201) (150) (150)
Bad debt deduction 2,775 (120)
Other, net 124 (7) 93
------ ------ ------
Actual tax expense $2,742 $2,072 $3,094
====== ====== ======
</TABLE>
16
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
A cumulative deferred tax (liability) asset of $(2,157,000) and $580,000 is
included in other liabilities and assets, respectively. The components of the
liabilities and assets are as follows:
<TABLE>
<CAPTION>
JUNE 30 1995 1994
------- ------- ------
<S> <C> <C>
Differences in accounting for loan fees $ 186 $ 197
Differences in depreciation methods (445) (390)
Differences in accounting for stock dividend (236) (236)
Differences in accounting for pensions and
other employee benefits (109) 285
Differences in accounting for warranty losses
on sold loans 1,002 434
Differences in accounting for bad debt (2,937) 223
Other 382 67
------- ------
$(2,157) $ 580
======= ======
Assets $ 1,570 $1,491
Liabilities (3,727) (911)
------- ------
$(2,157) $ 580
======= ======
</TABLE>
During 1994, the Company adopted SFAS No. 109. As a result, the beginning
deferred tax liability was reduced by $300,000, which is reported as the
cumulative effect of a change in accounting method. A valuation allowance was
not required at any time during 1995 or 1994.
At June 30, 1994, retained earnings included approximately $8,163,000 for which
no deferred federal income tax liability had been recognized. This amount
represented an allocation of income to bad debt deductions as of December 31,
1987 for tax purposes only. The unrecorded deferred income tax liability on the
above amount was approximately $2,775,000. During 1995, because of the
Company's intent to convert to a commercial bank, this deferred income tax
liability of $2,775,000 was recorded with a corresponding increase in income tax
expense.
. STOCKHOLDERS' EQUITY AND REGULATORY MATTERS
The Financial Institutions Reform, Recovery and Enforcement Act of 1989 requires
thrifts to maintain core capital and tangible capital of at least 3% and 1.5%,
respectively, of adjusted total assets and, subject to a phase-in period, risk-
based capital of at least 8% of risk-weighted assets. At June 30, 1995, the
Bank exceeded these capital requirements.
The Company's principal source of income and funds is dividends from its savings
association banking subsidiary and is not subject to any regulatory restrictions
on the payment of dividends to its stockholders. However, the Office of Thrift
Supervision (OTS) regulations set restriction on the amount of dividends the
Bank may pay. At June 30, 1995, total stockholders' equity of the banking
subsidiary was $38,313,000 of which $11,089,000 was available for the payment of
dividends without prior approval by the OTS.
17
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
Effective October 30, 1991, Union Federal Savings Bank converted from a mutual
savings bank to a stock savings bank with all of its stock being issued to the
Company which issued 1,851,981 shares of its common stock with a $.01 per share
par value. Net proceeds of the Company's stock issuance after costs were
$17,091,000. The acquisition of the Bank by the Company was accounted for as if
it were a pooling of interest.
At the time of conversion, a liquidation account was established in an amount
equal to the Bank's net worth as reflected in the latest statement of condition
used in its final conversion offering circular. The liquidation account is
maintained for the benefit of eligible deposit account holders who maintain
their deposit accounts in the Bank after conversion. In the event of a complete
liquidation (and only in such an event), each eligible deposit account holder
will be entitled to receive a liquidation distribution from the liquidation
account in the amount of the then current adjusted subaccount balance for
deposit accounts then held, before any liquidation distribution may be made to
stockholders. Except for the repurchase of stock and payment of dividends, the
existence of the liquidation account will not restrict the use or application of
net worth. The initial balance of the liquidation account was $22,890,000.
The Company is authorized to issue 1,000,000 shares of preferred stock, $.01 par
value, which remain unissued at June 30, 1995. In the event any preferred
shares are issued, the Board of Directors is authorized to fix the designation,
powers, preferences and rights of the shares and any qualifications, limitation
or restrictions thereon.
The Bank is required to maintain reserve funds in cash and/or on deposit with
the Federal Reserve Bank. The reserve required was $3,342,000 at June 30, 1995.
. EMPLOYEE BENEFIT PLANS
The Bank is a participant in a pension fund known as the Financial Institutions
Retirement Fund (FIRF). This plan is a multi-employer plan; separate actuarial
valuations are not made with respect to each participating employer. According
to FIRF administrators, the market value of the fund's assets exceeded the value
of vested benefits in the aggregate as of June 30, 1994, the date of the latest
actuarial valuation. Pension expense recorded for the year ended June 30, 1995
was $269,000. No pension expense was recorded for the two years ended June 30,
1994. Due to the Internal Revenue Service's full funding limit, contributions
to the plan had not been required since June 1987. This plan provides pension
benefits for substantially all of the Bank's employees.
The Bank has adopted an employee savings plan under which employees can
contribute up to 12% of their annual salaries. The Bank will match, as a
minimum, 25% of employees' contributions up to 6% of salaries. At the
discretion of the Board of Directors, additional matching up to 100% can be
made.
18
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
Also, at the discretion of the Board of Directors, an officer and employee bonus
can be paid based upon a predetermined formula based on earnings and net worth.
For the years ended June 30, 1995, 1994 and 1993, the Bank expensed $150,000,
$649,000 and $752,000 for the bonus arrangement. Amounts expensed by the
Company under this bonus arrangement can be used to fund contributions to the
Company's Employee Stock Ownership Plan (ESOP), or can be paid directly to
employees.
As noted above, the Company has established an ESOP to provide Bank employees an
opportunity to acquire shares of the Company's common stock. The costs of the
ESOP are expensed by the Bank through contributions in amounts determined by the
Board of Directors. These contributions are allocated among participants based
upon compensation. The bank's contributions to the ESOP were $274,000, $690,000
and $117,710 for fiscal years 1995, 1994 and 1993, of which $16,810, $40,800 and
$68,960 (the amounts of interest incurred on the ESOP debt) are classified as
interest expense. The ESOP borrowed $1,296,390 from a third party lender which
was repayable over seven years and guaranteed by the Company. This loan was
paid off in fiscal 1995. The loan was previously included in other liabilities
on the Company's balance sheet and also as an offset in stockholders' equity.
The Company had $676,000 of overnight deposits pledged as collateral for this
loan at June 30, 1994. The proceeds from the loan were used to purchase 129,639
shares of the Company's common stock.
Also, in conjunction with the conversion, the Board of Directors of the Company
established a Recognition and Retention Plan and Trust (RRP). The Company
contributed $600,050 to the RRP for the purchase of 55,560 shares of Company
common stock. Effective with the conversion on October 30, 1991, awards of
grants for these shares were issued to various officers and employees of the
Company. These awards vest at a rate of 20% per year commencing June 30, 1992.
The unearned compensation portion of these stock awards is presented as a
reduction of stockholders' equity.
The Board of Directors of the Company adopted (subsequently ratified by the
stockholders), a Stock Option and Incentive Plan (Option Plan) with
authorization to grant incentive stock options, non-qualified stock options,
stock appreciation rights, limited stock appreciation rights and restricted
stock. Upon the conversion, the Company reserved 185,198 shares of its common
stock and also granted options to purchase 161,308 shares of common stock at $10
per share (the stock issuance price at conversion) to various officers and non-
employee directors. These options are exercisable over a ten-year period.
During 1995, 19,446 options were exercised. During 1994, options to purchase
17,170 shares were granted under this Option Plan to various officers at an
exercise price of $23.06. No options were exercised during 1994. During 1993,
6,482 options were exercised and none awarded. At June 30, 1995, there were a
total of 152,550 options outstanding at an average option price of $11.47 of
which 121,745 were exercisable at that date.
. RESERVE FOR WARRANTY LOSSES
In the ordinary course of business, the Bank and UFC have liability under
representations and warranties made to purchasers and insurers of mortgage loans
and the purchasers of servicing rights. Under certain circumstances, they may
become liable for the unpaid principal and interest on defaulted loans (whether
recourse or non-recourse) or other loans if there has been a breach of
representations or warranties. While the Bank owned USM, USM originated, sold
and serviced conventional single family residential loans through its offices in
Santa Ana and Woodland Hills, California. UFC and USM customarily sold all of
the loans that they originated to
19
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
. RESERVE FOR WARRANTY LOSSES (CONTINUED)
buyers in the secondary market on a non-recourse basis, either as individual
whole loans or as a packaged pool of loans. However, subsequent to the sale of
the loans originated, UFC and USM remained potentially liable for losses
incurred by a purchaser, including unpaid principal and interest, under certain
representations and warranties made to the purchaser at the time of sale. In
certain circumstances (for example, when the debtor made fraudulent
misrepresentations to UFC and USM in the origination process), UFC and USM were
liable for a purchaser's losses on a defaulted loan, regardless of whether the
loan was recourse or non-recourse, if there had been breach of the
representations and warranties made to the purchaser by UFC and USM. Such fraud
might occur with respect to tax returns, employment verifications, and deposits
and appraisals provided at the time of origination. In connection with the sale
of USM on June 1, 1993, the Bank contractually assumed liabilities for losses to
the buyer of USM and repurchase demands resulting from breaches of the
representations and warranties. Moreover, in certain cases the Bank separately
guaranteed USM's obligations to loan purchasers pursuant to guarantees signed by
the Bank prior to the sale of USM. Of the $1.8 billion of loans originated by
USM, the Company estimates the remaining balance of the loans to be
approximately $1.3 billion. UFC originated approximately $640 million of loans
from its inception in January 1993 through June 30, 1995.
At June 30, 1995, the Company had 15 warranty loss claims pending on loans with
an unpaid principal balance of $3.2 million, with the estimated potential loss
from these known claims and a claim expected to be made totaling $675,000. In
addition to the pending claims, the Company has been notified that it may be
required to repurchase up to $1.4 million of other problem loans. The Company's
allowance for warranty losses was $2,537,000 at June 30, 1995, which management
considers adequate to cover pending and future warranty claims for its mortgage
banking operations.
A summary of the activity in the reserve for warranty losses follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1995 1994 1993
------- ------ -----
<S> <C> <C> <C>
Beginning balance $ 1,366 $ 0 $ 0
Provision 2,514 1,482 456
Losses recognized (1,343) (116) (456)
------- ------ -----
Ending balance $ 2,537 $1,366 $ 0
======= ====== =====
</TABLE>
20
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
. COMMITMENTS AND CONTINGENT LIABILITIES AND FINANCIAL INSTRUMENTS WITH OFF
BALANCE SHEET RISK
In the normal course of business there are outstanding commitments and
contingent liabilities which are not included in the accompanying consolidated
financial statements.
At June 30, 1995, the Bank, excluding UFC, had outstanding commitments to extend
credit, which amounted to $3,400,000 consisting of $1,960,000 with adjustable
rates and $1,440,000 with fixed rates ranging from 7.1% to 10.0%.
At June 30, 1995, UFC had commitments to fund loans of approximately $44,300,000
with fixed rates varying from 7.1% to 9.5%. UFC had commitments to sell all but
$1,100,000 of these loans. Commitments to fund loans are agreements to lend to
a customer as long as there is no violation of any condition established in the
contract. Commitments to sell loans to permanent investors generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
Also, external market forces impact the probability of commitments being
exercised; therefore, total commitments outstanding do not necessarily represent
future cash requirements.
The Company is also subject to claims and lawsuits which arise primarily in the
ordinary course of business. Based on information presently available and
advice received from legal counsel representing the Company in connection with
such claims and lawsuits, it is the opinion of management that the disposition
or ultimate determination of such claims and lawsuits will not have a material
adverse effect on the consolidated financial position or the results of
operations of the Company.
The Bank has entered into employment contracts with six of its officers which
provide for the continuation of salary and certain benefits for specified
periods of time under certain conditions. Under the terms of the agreements,
these payments could occur in the event of involuntary termination for other
than cause following a change in control of the Company. The contingent
liability under the agreements in the event of a change in control is
approximately $1,300,000 at June 30, 1995 and 1994.
21
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
. BUSINESS SEGMENT INFORMATION
The Company's operations have been classified into two business segments:
community banking and mortgage banking. The community banking segment involves
primarily the traditional activities of obtaining retail deposits and the making
of mortgage and other types of loans and other traditional community banking
activities. The mortgage banking segment involves the making, purchasing,
selling and servicing of one-to-four family and single family loans.
Financial information by business segment is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net Interest Income Before Provision
for Loan Losses
Community banking $ 13,300 $ 13,266 $ 14,728
Mortgage banking 371 66 336
-------- -------- --------
$ 13,671 $ 13,332 $ 15,064
======== ======== ========
Net Income Before Taxes
Community banking $ 3,071 $ 4,994 $ 7,860
Mortgage banking (2,855) 757 184
-------- -------- --------
$ 216 $ 5,751 $ 8,044
======== ======== ========
Total Assets
Community banking $539,664 $493,848 $476,177
Mortgage banking 23,531 10,035 13,349
-------- -------- --------
$563,195 $503,883 $489,526
======== ======== ========
Loans Serviced for Others
Community banking $ 59,305 $ 65,380 $ 56,800
Mortgage banking 539,945 596,600 730,470
-------- -------- --------
$599,250 $661,980 $787,270
======== ======== ========
</TABLE>
The gain on the sale of the California mortgage bank subsidiary of $962,000 and
$747,000 for 1994 and 1993 is included in the mortgage banking net income before
taxes presented above. The significant pretax loss from mortgage banking for
the year ended June 30, 1995 was due to the losses from UFC operations of
$1,176,000 and the provision for warranty losses on loans previously sold by USM
of $2,514,000.
22
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
. FAIR VALUE OF FINANCIAL INSTRUMENTS
In December 1991, the Financial Accounts Standards Board issued Statement of
Financial Accounting Standards No. 107, Disclosures About Fair Value of
Financial Instruments. This standard extends the existing fair value disclosure
practices for some instruments by requiring entities to disclose the fair value
of financial instruments for which it is practicable to estimate fair value.
The following methods and assumptions were used to estimate the fair value of
each type of financial instrument.
CASH, CASH EQUIVALENTS AND FHLB STOCK
For these instruments, the carrying value on the reporting date is a reasonable
estimate of fair value.
INVESTMENT SECURITIES AND MORTGAGE-BACKED SECURITIES
For investment securities and mortgage-backed securities, fair values are based
on quoted market prices, if available. For securities where quoted prices are
not available, fair value is estimated based on market prices of similar
securities.
LOANS AND LOANS HELD FOR SALE
For most residential mortgage loans and certain other homogeneous categories of
loans, fair value is estimated by discounting future cash flows using current
rates at which similar loans would be made to borrowers with similar credit
rates for the same remaining maturities.
DEPOSIT LIABILITIES
The fair value of demand deposits, savings accounts and certain money market
deposits is the amount payable on demand at the reporting date. The fair value
of fixed-maturity certificates of deposit is estimated using the rates currently
offered for deposits of similar remaining maturities.
BORROWINGS
The carrying amount of short-term borrowings is a reasonable estimate of fair
value. For long-term borrowings, the fair value is estimated using the rates
currently offered for borrowings of similar remaining maturities.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The carrying values of these items are not material to the Company's financial
condition.
23
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
The carrying amount and estimated fair values of the Company's financial
instruments at June 30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
----------------- ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term investments $ 14,519 $ 14,519 $ 28,002 $ 28,002
FHLB stock 7,852 7,852 6,101 6,101
Investment securities 0 0 26,544 26,384
Investment securities available for sale 36,265 36,265 0 0
Mortgage-backed securities 0 0 243,563 240,710
Mortgage-backed securities available for sale 257,975 257,975 0 0
Mortgage loans held for sale 24,380 24,380 9,623 9,623
Loans 201,781 203,240 167,917 169,252
Interest receivable 4,306 4,306 2,955 2,955
Deposits 359,572 358,471 382,916 380,903
Short-term borrowings 114,000 114,000 33,000 33,000
Long-term borrowings 37,926 38,192 35,800 36,378
Interest payable 2,298 2,298 1,424 1,424
</TABLE>
24
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
. CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
Presented below is condensed financial information as to financial position,
results of operations and cash flows of the Company:
CONDENSED STATEMENT OF FINANCIAL INFORMATION
<TABLE>
<CAPTION>
JUNE 30 1995 1994
------- ------- -------
<S> <C> <C>
Assets
Cash $ 3,284 $ 737
Investments 6,718
Investment in subsidiary 38,313 37,481
Other Assets 1,347 1,182
------- -------
$42,944 $46,118
======= =======
Liabilities and Stockholders' Equity
Accounts payable and accrued expenses $ (496) $ (267)
Stockholders' equity 43,440 46,385
------- -------
$42,944 $46,118
======= =======
</TABLE>
25
<PAGE>
UF BANCORP, INC. AND SUBSIDIARY CORPORATIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLE DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED WITH RESPECT TO 1995)
CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30 1995 1994 1993
------------------ ------- ------- -------
<S> <C> <C> <C>
Income
Dividends from subsidiary $ 1,796 $ 5,149 $ 5,760
Interest income 166 176 210
------- ------- -------
Total Income 1,962 5,325 5,970
Expenses 1,048 331 415
------- ------- -------
Income before income tax benefit and
equity in undistributed earnings of
subsidiary 914 4,994 5,555
Income tax benefit 300 53 70
------- ------- -------
Income before equity in undistributed
earnings of subsidiary 1,214 5,047 5,625
Equity in undistributed earnings of
subsidiary (3,740) (1,068) (675)
------- ------- -------
Net income (loss) $(2,526) $ 3,979 $ 4,950
======= ======= =======
CONDENSED STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30 1995 1994 1993
------------------ ------- ------- -------
Operating activities
Net income (loss) $(2,526) $ 3,979 $ 4,950
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Equity in undistributed earnings of
subsidiary 3,740 1,068 675
Amortization of unearned compensation 120 120 120
Changes in other assets and accrued
expenses (393) 1,034 (1,140)
------- ------- -------
Net cash provided by operating
activities 941 6,201 4,605
------- ------- -------
Investing activities
Purchase of investment securities (5,459) (4,497)
Proceeds from investment securities
maturities 6,718 3,320 2,034
Investment in limited partnership (826)
Capital contributed to Bank subsidiary (5,000)
------- ------- -------
Net cash provided (used) by investing
activities 1,718 (2,965) (2,463)
------- ------- -------
Financing activities
Net proceeds from issuance of stock 476
Purchase of treasury stock (2,238) (1,961)
Cash dividends (923) (788) (748)
Proceeds from exercise of stock options 194 65
Proceeds from tax benefits of ESOP,
stock options and RRP 141 93 104
------- ------- -------
Net cash used by financing activities (112) (2,933) (2,540)
------- ------- -------
Net increase (decrease) in cash 2,547 303 (398)
Cash, beginning of year 737 434 832
------- ------- -------
Cash, end of year $ 3,284 $ 737 $ 434
======= ======= =======
</TABLE>
26
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
UF Bancorp, Inc.
Evansville, Indiana
We have audited the consolidated statement of financial condition of UF
Bancorp, Inc. and subsidiary corporations as of June 30, 1994 and the
related consolidated statements of operations, changes in stockholders'
equity and cash flows for each of the two years in the period ended June
30, 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 did not
audit the financial statements of Union Security Mortgage, Inc., a wholly-
owned subsidiary (sold effective May 31, 1993), which statements reflect
net loss of $(549,000) for the eleven months ended May 31, 1993. Those
statements were audited by other auditors who report has been furnished to
us and our opinion, insofar as it relates to the amounts included for Union
Security Mortgage, Inc., is based solely on the report of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in 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
and the report of other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements described above present fairly, in all
material respects, the consolidated financial position of UF Bancorp, Inc.
and subsidiary corporations as of June 30, 1994 and the results of their
operations and their cash flows for each of the two years in the period
ended June 30, 1994 in conformity with generally accepted accounting
principles.
As discussed in the Notes to Consolidated Financial Statements, the Company
changed its method of accounting for income taxes on July 1, 1993.
GEO. S. OLIVE & CO. LLC
Evansville, Indiana
August 7, 1994
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
June 30, 1995
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Proforma CNB/UFB
CNB UFB Adjustments Combined
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Assets
Cash and due from banks $ 114,146 $ 12,566 (1) $(5,170) $ 121,542
Interest bearing deposits in other banks 1,716 453 2,169
Federal funds sold 11,674 1,500 (1) (1,500) 11,674
Real estate loans held for sale 5,346 24,380 29,726
Investment securities available for sale 285,971 302,092 588,063
Investment securities held to maturity 510,164 - 510,164
Loans 1,933,405 204,380 2,137,785
Allowance for loan losses 26,543 2,599 29,142
---------- -------- ------- ----------
Net loans 1,906,862 201,781 2,108,643
Premises and equipment 60,030 8,853 68,883
Other real estate owned 1,946 706 2,652
Other assets 66,438 10,864 77,302
---------- -------- ------- ----------
Total Assets $2,964,293 $563,195 $(6,670) $3,520,818
========== ======== ======= ==========
Liabilities
Deposits $2,266,084 $359,572 (1) $(5,170) $2,620,486
Repurchase agreements 324,013 - 324,013
Federal funds purchased 21,925 - (1) (1,500) 20,425
Short-term borrowings 14,136 - 14,136
Long-term borrowings 67,334 151,926 219,260
Other liabilities 30,194 8,257 38,451
---------- -------- ------- ----------
Total Liabilities 2,723,686 519,755 (6,670) 3,236,771
Shareholders' Equity
Common stock 14,738 19 (2) 2,204 16,961
Capital surplus 194,527 18,146 (2) (7,512) 205,161
Retained earnings 29,471 31,402 60,873
Treasury stock - (5,308)(2) 5,308 -
Unearned compensation (120) (120)
Net unrealized security gains (losses) 1,871 (699) 1,172
---------- -------- ------- ----------
Total Shareholders' Equity 240,607 43,440 - 284,047
---------- -------- ------- ----------
Total Liabilities and Equity $2,964,293 $563,195 $(6,670) $3,520,818
========== ======== ======= ==========
</TABLE>
See notes to pro forma combined condensed financial statements.
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
December 31, 1994
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Proforma CNB/UFB
CNB UFB Adjustments Combined
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Assets
Cash and due from banks $ 105,638 $ 15,689 (1) $(2,447) $ 118,880
Interest bearing deposits in other banks 5,171 2,171 7,342
Federal funds sold 16,200 13,500 29,700
Real estate loans held for sale 1,260 10,406 11,666
Investment securities available for sale 221,418 292,609 514,027
Investment securities held to maturity 549,861 - 549,861
Loans 1,917,982 193,702 2,111,684
Allowance for loan losses 26,615 1,889 28,504
---------- -------- ------- ----------
Net loans 1,891,367 191,813 2,083,180
Premises and equipment 59,584 8,919 68,503
Other real estate owned 2,943 874 3,817
Other assets 65,645 14,465 80,110
---------- -------- ------- ----------
Total Assets $2,919,087 $550,446 $(2,447) $3,467,086
========== ======== ======= ==========
Liabilities
Deposits $2,242,643 $354,082 (1) $(2,447) $2,594,278
Repurchase agreements 319,965 - 319,965
Federal funds purchased 27,000 - 27,000
Short-term borrowings 9,938 - 9,938
Long-term borrowings 58,077 151,933 210,010
Other liabilities 24,204 7,747 31,951
---------- -------- ------- ----------
Total Liabilities 2,681,827 513,762 (2,447) 3,193,142
Shareholders' Equity
Common stock 15,009 19 (2) 2,177 17,205
Capital surplus 202,945 17,810 (2) (7,485) 213,270
Retained earnings 21,125 30,162 51,287
Treasury stock - (5,308)(2) 5,308 -
ESOP loan guarantee (180) (180)
Unearned compensation (180) (180)
Net unrealized security gains (losses) (1,819) (5,639) (7,458)
---------- -------- ------- ----------
Total Shareholders' Equity 237,260 36,684 - 273,944
---------- -------- ------- ----------
Total Liabilities and Equity $2,919,087 $550,446 $(2,447) $3,467,086
========== ======== ======= ==========
</TABLE>
See notes to pro forma combined condensed financial statements.
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Year Ended December 31, 1994
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
(a) (b) (c)
Pro Forma Pro Forma
CNB UFB Adjustments Combined
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Interest income $195,467 $31,852 $ - $227,319
Interest expense 87,255 18,520 - 105,775
-------- ------- --------- --------
Net interest income 108,212 13,332 - 121,544
Provision for loan losses 6,319 914 - 7,233
-------- ------- --------- --------
Net interest income after
provision for losses 101,893 12,418 - 114,311
Non-interest income 37,352 8,131 - 45,483
Non-interest expense 97,707 14,798 - 112,505
-------- ------- --------- --------
Income before income taxes 41,538 5,751 - 47,289
Income taxes 14,705 2,072 - 16,777
-------- ------- --------- --------
Net income $ 26,833 $ 3,679 - $ 30,512
======== ======= ========= ========
Net income per common share
Primary $ 1.82 $ 1.57 $ 1.77
Fully diluted $ 1.78 $ 1.57 $ 1.75
Average Shares Outstanding 14,717 2,348 17,065
Fully Diluted Shares Outstanding 15,291 2,348 17,639
</TABLE>
See notes to pro forma combined condensed financial statements.
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Year Ended December 31, 1993
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
(a) (b) (c)
Pro Forma Pro Forma
CNB UFB Adjustments Combined
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Interest income $177,206 $35,791 $ - $212,997
Interest expense 80,764 20,727 - 101,491
-------- ------- --------- --------
Net interest income 96,442 15,064 - 111,506
Provision for loan losses 3,605 285 - 3,890
-------- ------- --------- --------
Net interest income after
provision for losses 92,837 14,779 - 107,616
Non-interest income 33,910 8,433 - 42,343
Non-interest expense 87,867 15,168 - 103,035
-------- ------- --------- --------
Income before income taxes
cumulative effect of accounting change 38,880 8,044 - 46,924
Income taxes 12,914 3,094 - 16,008
-------- ------- --------- --------
Income before cumulative effect of
accounting change 25,966 4,950 - 30,916
Cumulative effect of change in accounting
for income taxes 1,568 300 1,868
-------- ------- --------- --------
Net income $ 27,534 $ 5,250 - $ 32,784
======== ======= ========= ========
Net income per common share
Primary $ 1.93 $ 2.13 $ 1.94
Fully diluted $ 1.87 $ 2.13 $ 1.90
Average Shares Outstanding 14,270 2,468 16,738
Fully Diluted Shares Outstanding 15,084 2,468 17,552
</TABLE>
See notes to pro forma combined condensed financial statements.
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Year Ended December 31, 1992
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
(a) (b) (c)
Pro Forma Pro Forma
CNB UFB Adjustments Combined
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Interest income $187,882 $39,600 $ - $227,482
Interest expense 95,950 26,419 - 122,369
-------- ------- --------- --------
Net interest income 91,932 13,181 - 105,113
Provision for loan losses 8,960 231 - 9,191
-------- ------- --------- --------
Net interest income after
provision for losses 82,972 12,950 - 95,922
Non-interest income 28,313 8,274 - 36,587
Non-interest expense 81,359 13,744 - 95,103
-------- ------- --------- --------
Income before income taxes 29,926 7,480 - 37,406
Income taxes 8,550 2,735 - 11,285
-------- ------- --------- --------
Net income $ 21,376 $ 4,745 $ - $ 26,121
======== ======= ========= ========
Net income per common share
Primary $ 1.52 $ 1.92 $ 1.57
Fully diluted $ 1.48 $ 1.92 $ 1.54
Average Shares Outstanding 14,077 2,477 16,554
Fully Diluted Shares Outstanding 14,931 2,477 17,408
</TABLE>
See notes to pro forma combined condensed financial statements.
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Six Months Ended June 30, 1995
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
(a) (b) (c)
Pro Forma Pro Forma
CNB UFB Adjustments Combined
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Interest income $113,296 $19,671 $ - $132,967
Interest expense 54,145 13,084 - 67,229
-------- ------- --------- --------
Net interest income 59,151 6,587 - 65,738
Provision for loan losses 2,966 85 - 3,051
-------- ------- --------- --------
Net interest income after
provision for losses 56,185 6,502 - 62,687
Non-interest income 18,670 2,790 - 21,460
Non-interest expense 52,056 6,524 - 58,580
-------- ------- --------- --------
Income before income taxes 22,799 2,768 - 25,567
Income taxes 8,377 1,042 - 9,419
-------- ------- --------- --------
Net income $ 14,422 $ 1,726 $ - $ 16,148
======== ======= ========= ========
Net income per common share $ 0.97 $ 0.74 $ 0.93
Average Shares Outstanding 14,941 2,342 17,283
</TABLE>
See notes to pro forma combined condensed financial statements.
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (Unaudited)
UFB's results of operations included in the pro forma financial statements are
for the years ended June 30, 1994, 1993 and 1992, respectively, since UFB was on
a June 30 fiscal year. As a result of changing its fiscal year from June 30 to
December 31, retained earnings have been reduced by $4,252,000 attributable to
UFB's net loss for the six months ended December 31, 1994. Retained earnings
were further reduced by the payment of dividends totaling $438,000 during the
same six-month period. Revenues and expenses for this six-month period totaled
$18,719,000 and $22,971,000, respectively. Also as a result of the change in
fiscal years, surplus was increased by $476,000 due to the exercise of stock
options.
The following pro forma adjustments are necessary to record the Merger
(1) To reflect elimination of significant intercompany accounts:
30-Jun-95 31-Dec-94
--------- ---------
Deposits $ 5,170 $ 2,477
Federal Funds Purchased 1,500 -
Cash and Due from Banks (5,170) (2,477)
Federal Funds Sold (1,500) -
(2) To reflect exchange of shares of UFB Common for shares of CNB Common and
the cancellation of UFB treasury stock, retaining the historical cost basis of
assets, liabilities and equity through the treatment as a pooling of interest:
30-Jun-95 31-Dec-94
--------- ---------
Common stock $ 2,204 $ 2,177
Capital surplus (7,512) (7,485)
Treasury stock 5,308 5,308
