SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
FOR THE QUARTER PERIOD ENDED
SEPTEMBER 30, 1996
CNB Bancshares, Inc. 0-11510
(Exact name of registrant as specified in its charter) (Commission file number)
Indiana 35-1568731
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
20 N.W. Third Street, Evansville, Indiana 47739
(Address of principal executive office) (Zip Code)
(812) 464-3400
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------ ------
As of October 31, 1996, there were 19,255,576 outstanding shares, without
par value, of the registrant.
Exhibit index is on page 24.
Page
INDEX
Page No.
PART I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheet 1
Consolidated Condensed Statement
of Income 2
Consolidated Condensed Statement of
Changes in Shareholders'Equity 3
Consolidated Statement of Cash Flows 4
Notes to Consolidated Financial Statements 5-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11-21
PART II. Other Information 22
Signatures 23
Exhibit Index 24
Page
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
<TABLE>
CNB Bancshares, Inc.
Consolidated Balance Sheet
(In thousands except for share data)
(Unaudited)
<CAPTION>
September 30, December 31, September 30,
1996 1995 1995
------------- ------------ ------------
<S> <C> <C> <C>
Assets
Cash and due from banks $ 120,386 $ 130,239 $ 100,906
Federal funds sold and
other short-term money
market investments 787 8,546 12,643
----------- ---------- ----------
Total cash and cash equivalents 121,173 138,785 113,549
Real estate loans held for sale 4,754 222,157 15,076
Investment securities available
for sale 1,303,800 972,320 604,749
Investment securities held to
maturity (Market value $250,338
at September 30, 1996, $199,966
at December 31, 1995, and
$563,841 at September 30, 1995) 252,056 198,240 565,450
Loans, net of unearned income 2,139,247 1,971,454 2,179,234
Less: Allowance for loan losses 30,106 28,806 28,446
---------- ---------- ----------
Net loans 2,109,141 1,942,648 2,150,788
Premises and equipment 69,680 66,224 67,275
Foreclosed properties 2,456 1,727 2,391
Intangible assets 31,509 23,741 23,443
Interest receivable and other assets 87,571 62,840 66,917
---------- ---------- ----------
Total assets $3,982,140 $3,628,682 $3,609,638
========== ========== ==========
Liabilities
Deposits:
Non-interest bearing $ 319,526 $ 322,706 $ 295,634
Interest bearing 2,557,890 2,467,283 2,493,264
---------- ---------- ----------
Total deposits 2,877,416 2,789,989 2,788,898
Securities sold under repurchase
agreements 503,738 325,271 309,786
Federal funds purchased 38,315 18,370 20,070
Other short-term borrowings 9,474 7,441 12,477
Long-term debt 206,282 158,046 153,954
Interest payable and other
liabilities 42,881 31,872 36,066
---------- ---------- ----------
Total liabilities 3,678,106 3,330,989 3,321,251
Shareholders' equity
Preferred stock, no par or stated value
Shares authorized & unissued: 2,000,000
Common stock, $1 stated value
Shares authorized: 50,000,000
Shares issued: 19,255,238 at
September 30, 1996, 17,894,770 at
December 31, 1995, and 17,853,193
at September 30, 1995 19,255 17,895 17,853
Capital surplus 267,429 246,492 247,597
Retained earnings 23,528 29,672 21,007
Net unrealized gains (losses)
on investment securities
available for sale (6,178) 3,634 1,930
---------- ---------- ----------
Total shareholders' equity 304,034 297,693 288,387
---------- ---------- ----------
Total liabilities &
shareholders' equity $3,982,140 $3,628,682 $3,609,638
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
Page 1
<TABLE>
CNB Bancshares, Inc.
Consolidated Condensed Statement of Income
(In thousands, except for share data)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest Income
Loans, including fees:
Taxable $48,713 $49,733 $142,025 $144,776
Tax exempt 358 420 1,104 1,281
Real estate loans held
for sale 1,100 562 4,562 1,411
Investment securities:
Taxable 23,416 17,657 64,509 50,561
Tax exempt 2,273 1,325 5,923 3,697
Federal funds sold and
other short-term money
market investments 185 386 767 1,262
------- ------- -------- --------
Total interest income 76,045 70,083 218,890 202,988
Interest Expense
Deposits 29,165 28,734 86,360 79,510
Short-term borrowings 6,511 4,460 16,476 13,656
Long-term debt 2,975 3,378 8,166 10,635
------- ------- -------- --------
Total interest expense 38,651 36,572 111,002 103,801
------- ------- -------- --------
Net Interest Income 37,394 33,511 107,888 99,187
Provision for loan losses 2,334 979 5,921 4,030
------- ------- -------- --------
Net Interest Income After
Provision For Loan Losses 35,060 32,532 101,967 95,157
Non-Interest Income
Net securities gains 134 86 688 1,288
Other non-interest income 15,925 12,401 41,024 33,268
------- ------- -------- --------
Total non-interest income 16,059 12,487 41,712 34,556
Non-Interest Expense
SAIF assessment 4,963 4,963
Salaries, benefits,
occupancy, other
operating expenses 35,728 29,057 97,902 88,025
------- ------- -------- --------
Income Before Income Taxes 10,428 15,962 40,814 41,688
Income taxes 3,032 5,926 13,894 15,407
------- ------- -------- --------
Net Income $ 7,396 $10,036 $ 26,920 $ 26,281
======= ======= ======== ========
Net Income Per Share $ 0.38 $ 0.53 $ 1.40 $ 1.37
======= ======= ======== ========
Average common and equivalent
shares outstanding 19,402,490 19,055,062 19,166,753 19,181,087
========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
Page 2
<TABLE>
CNB Bancshares, Inc.
Consolidated Condensed Statement of Changes in Shareholders' Equity
(In thousands)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Beginning Balance $303,535 $284,272 $297,693 $273,828
Net income 7,396 10,036 26,920 26,281
Cash dividends declared (3,928) (3,579) (11,437) (10,140)
Dividends reinvested 839 761 2,635 2,253
Purchase and retirement
of common stock (5,174) (10,410) (11,753) (21,265)
Issuance of common stock
related to acquisition
of subsidiaries 5,879 6,286 5,879
Exercise of options and
conversion of stock purchase
contracts and debentures 2,236 676 3,306 1,327
Other shares issued 196 360
Change in unrealized gains/losses
on investment securities
available for sale (870) 752 (9,812) 9,864
-------- -------- -------- --------
Ending Balance $304,034 $288,387 $304,034 $288,387
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
Page 3
<TABLE>
CNB Bancshares, Inc.
Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
Operating Activities:
Net income $ 26,920 $ 26,281
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,595 8,048
Provision for loan losses 5,921 4,030
Amortization of premiums and discounts on
securities 1,234 1,118
Net gains on securities (688) (1,288)
Loans originated for sale (60,095) (131,375)
Proceeds from sale of loans 141,117 127,965
Increase in other assets, net of
amortization (25,278) (20,302)
Increase in other liabilities 10,149 9,213
-------- --------
Net Cash Provided by Operating Activities 109,875 23,690
Investing Activities:
Cash and cash equivalents of subsidiaries
acquired, net of purchase price 2,869 3,935
Proceeds from the maturity of investment
securities available for sale 188,820 94,579
Proceeds from the sale of investment
securities available for sale 254,025 175,122
Purchase of investment securities available
for sale (605,200) (313,213)
Proceeds from the maturity of investment
securities held to maturity 9,411 37,123
Purchase of investment securities held to
maturity (52,040) (62,716)
Net increase in loans (158,383) (37,870)
Purchase of bank premises and equipment (7,811) (6,542)
-------- --------
Net Cash Used by Investing Activities (368,309) (109,582)
Financing Activities:
Net increase in deposits 13,355 140,703
Net increase (decrease) in short-term borrowings 196,611 (15,445)
Payment and maturity of long-term debt (140,585) (189,711)
Proceeds and renewals of long-term borrowings 191,200 133,795
Proceeds from exercise of stock options 796 1,079
Payment of cash dividends (11,437) (9,341)
Proceeds from common stock issued for dividend
reinvestment plan 2,635 2,253
Purchase and retirement of common stock (11,753) (21,265)
-------- --------
Net Cash Provided by Financing Activities 240,822 42,068
-------- --------
Net Decrease in Cash and Cash Equivalents (17,612) (43,824)
Cash and Cash Equivalents at January 1, 138,785 157,373
-------- --------
Cash and Cash Equivalents at September 30, $121,173 $113,549
======== ========
Supplemental disclosure:
Cash paid for:
Interest $110,045 $100,317
Income taxes 12,787 15,252
Non-cash investing and financing activities:
Common stock issued for acquisitions 6,286 5,879
Stock issued in exchange of debentures and
equity contracts and pursuant to employee
benefit plans 2,746 258
</TABLE>
See notes to consolidated financial statements.
Page 4
CNB BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of CNB Bancshares,
Inc. (Corporation) and its wholly-owned subsidiaries, after elimination of all
material intercompany accounts and transactions.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and do not include all the information and footnotes
required for a complete presentation of statements. The Corporation's
accounting and reporting policies for interim financial reporting are consistent
with those followed for annual financial reporting. In the opinion of
management, all adjustments (consisting of normal recurring accruals) necessary
for a fair presentation of the results of operations for the periods reported
have been included in the foregoing interim consolidated financial statements.
The interim results of operations presented are not necessarily indicative of
the results that may be expected for the full year. A complete description of
the Corporation's accounting policies and complete footnotes are contained in
the 1995 Annual Report to Shareholders.
NOTE 2: BUSINESS COMBINATIONS
Information relating to mergers and acquisitions since October 1, 1995, for
which stock was issued includes:
Merger Common Shares Method of
Date Issued Accounting
DuQuoin Bancorp, Inc.,
DuQuoin, Illinois May 17, 1996 524,160 Pooling*
Southern Finance Co., Inc.,
Madisonville, Kentucky December 1, 1995 33,529 Pooling*
Service Financial, Inc.,
Harriman, Tennessee December 1, 1995 38,917 Pooling*
* Accounted for as a pooling of interests without restatement of prior
periods as the amounts involved were not material to the Corporation's
financial results.
On May 31, 1996, the Corporation acquired $11,785,000 of loans from 12
offices of Money One Credit Company, acquired a portion of the insurance
policy customer base from Evansville Insurance Group and purchased Small,
Parker and Blossom, Inc., a third party administrator of employee benefit
plans. Goodwill originated from these acquisitions totaled approximately
$6,375,000 and is being amortized on a straight line basis not exceeding 15
years. These acquisitions were accounted for under the purchase method of
accounting, and accordingly, the consolidated financial statements include
the assets and liabilities from the May 31, 1996 transaction date forward.
The amounts involved in these transactions were not material to the
Corporation's financial results.
Page 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE 2: BUSINESS COMBINATIONS (continued):
On October 11, 1996, the Corporation announced the signing of a definitive
agreement to acquire all of the outstanding shares of BMC Bancshares, Inc.
(BMC), parent company for Bank of Mt. Carmel, Illinois. Under terms of the
agreement, the Corporation will issue approximately 856,000 shares of its common
stock. The transaction will be accounted for under the pooling of interests
method of accounting and is subject to approval by BMC shareholders and
appropriate regulatory agencies. Although the Corporation anticipates that the
merger will be completed during the first quarter of 1997, there can be no
assurance that the acquisition will be completed. At September 30, 1996, BMC
had total assets and shareholders' equity of $99,778,000 and $13,497,000,
respectively.
NOTE 3: INVESTMENT SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available for Sale at
September 30, 1996:
U.S. Treasury $ 7,198 $ 18 $ 7,216
Federal agencies:
Bonds and notes 213,220 611 $ (1,246) 212,585
Mortgage-backed
securities 953,810 2,813 (12,508) 944,115
State and municipal 36,009 835 (202) 36,642
Collateralized
mortgage obligations 77,919 684 (1,121) 77,482
Other securities 25,816 85 (141) 25,760
---------- ------- ---------- ----------
Total $1,313,972 $ 5,046 $ (15,218) $1,303,800
========== ======= ========== ==========
Held to Maturity at
September 30, 1996:
Federal agencies:
Mortgage-backed
securities $ 107,907 $ 77 $ (3,244) $ 104,740
State and municipal 141,390 2,866 (1,382) 142,874
Collateralized
mortgage obligations 2,759 (35) 2,724
---------- ------- ---------- ----------
Total $ 252,056 $ 2,943 $ (4,661) $ 250,338
========== ======= ========== ==========
</TABLE>
Net unrealized gains or (losses) on investment securities available for sale,
net of tax, at September 30, 1996, December 31, 1995 and September 30, 1995,
were $(6,178,000), $3,634,000, and $1,930,000, respectively. The amortized cost
and estimated market value of investment securities at September 30, 1996, by
contractual maturity, are shown in the following table. Expected maturities
will differ from contractual maturities because issuers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Page 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE 3: INVESTMENT SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY
(continued)
<TABLE>
<CAPTION>
Available for Sale Held to Maturity
Amortized Market Amortized Market
Cost Value Cost Value
<S> <C> <C> <C> <C>
Maturity distribution
at September 30, 1996:
Due in one year or less $ 14,840 $ 14,768 $ 272 $ 275
Due after one year through
five years 183,569 183,360 17,802 18,413
Due after five years through
ten years 51,710 51,862 37,735 38,484
Due after ten years 8,342 8,476 85,581 85,702
Mortgage-backed securities 953,810 944,115 107,907 104,740
Collateralized mortgage
obligations 77,919 77,482 2,759 2,724
---------- ---------- -------- --------
Total debt securities 1,290,190 1,280,063 252,056 250,338
Equity securities 23,782 23,737
---------- ---------- -------- --------
Total $1,313,972 $1,303,800 $252,056 $250,338
========== ========== ======== ========
</TABLE>
Proceeds from sales of investment securities available for sale during the
nine months ended September 30, 1996, were $254,025,000. Gross gains and losses
realized on those sales were $1,236,000 and $548,000, respectively.
NOTE 4: IMPAIRED LOANS
At September 30, 1996, impaired loans totaled $14,073,000. An allowance for
loan losses of $1,725,000 was recorded for impaired loans totaling $9,389,000.
At December 31, 1995, impaired loans totaled $14,149,000. An allowance of
$1,212,000 was recorded for impaired loans totaling $7,448,000. The average
balance for impaired loans was $14,548,000 for the nine months ended September
30, 1996.
NOTE 5: ACCOUNTING FOR MORTGAGE SERVICING RIGHTS
At September 30, 1996, December 31, 1995, and September 30, 1995, and the
carrying value of mortgage servicing rights, which are reported as intangible
assets on the consolidated balance sheet, were $3,356,000, $589,000, and
$324,000, respectively. The impact of recognizing originated mortgage servicing
rights (OMSRs) as assets in the Corporation's financial statements was an
increase in non-interest income of $2,767,000 and $324,000 for the nine months
ended September 30, 1996 and 1995, respectively. OMSRs of $3,128,000 and
$334,000 were capitalized during the first nine months of 1996 and 1995,
respectively. For purposes of measuring impairment, the Corporation stratified
mortgage servicing rights on the basis of loan term, interest rate and type of
interest rate (fixed or adjustable). The servicing assets were reduced only by
normal amortization of $361,000 and $10,000 for the nine month periods ended
September 30, 1996 and 1995, respectively. No valuation allowance was required
at September 30, 1996, December 31, 1995, or September 30, 1995.
Page 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE 6: INTEREST RATE CONTRACTS
Through the purchase of interest rate cap agreements (caps), the Corporation
has reduced the impact of increased interest rates on its costs to acquire
certain repurchase agreements and long-term borrowings being hedged. These caps
entitle the Corporation to receive periodic payments from counterparties based
upon the notional amount of the caps and the excess of the index rate over the
strike price. Amortization of premiums paid for interest rate caps totaled
$1,060,000 and $962,000 for the nine months ended September 30, 1996 and 1995,
respectively. This expense was offset by counterparty reimbursements of
$586,000 during the nine months ended September 30, 1996, and $1,059,000 during
the nine months ended September 30, 1995.
At September 30, 1996, the notional amount of the interest rate caps was
$235,000,000. The caps are indexed to LIBOR with contract strike prices ranging
from 4 percent to 7 percent and mature from 1997 to 1999. The carrying value
and estimated market value of the caps at September 30, 1996, was $2,033,000 and
$1,449,000, respectively.
The Corporation has entered into interest rate swaps as a hedge against
certain long-term borrowings to manage its interest rate sensitivity. The
contracts represent an exchange of interest payments and the underlying
principal balances of the liabilities are not affected. At September 30, 1996,
the Corporation had swaps with a notional value and market value of $45,000,000
and $533,000, respectively. The agreements require the Corporation to pay a
fixed rate of interest ranging from 5.77% to 6.12% and receive a variable rate
based on three-month LIBOR. The agreements terminate on or prior to January 12,
2001. The Corporation paid $1,653,000 while receiving $1,567,000 from these
agreements during the nine months ended September 30, 1996.
The Corporation is exposed to credit losses in the event of nonperformance by
the counterparties but has no off-balance sheet credit risk of accounting loss.
Although collateral or other security is not obtained, the Corporation minimizes
its credit risk by monitoring the credit standing of the counterparties and
anticipates that the counterparties will be able to fully satisfy their
obligation under the agreements.
At September 30, 1996, option forward contracts outstanding, if exercised,
committed the Corporation to sell $107,786,000 par value of mortgage-backed
securities during the fourth quarter of 1996. Fees received from these
contracts have been deferred until completion of the transactions.
Page 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE 7: LONG-TERM DEBT
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1996 1995 1995
------------ ----------- ------------
<S> <C> <C> <C>
Parent Company:
Convertible subordinated
debentures, 7.50%,
redemptions of $1,125
annually beginning in
2001, balance due 2011 $ 6,164 $ 6,538 $ 6,601
Redeemable subordinated
debentures, 9.50% redeemed
August 1996 2,187 2,192
Notes payable, unsecured:
9.81%, payable $600 annually
through 1996, balance due in
1997 3,000 3,000 3,600
Variable rate adjusted with
changes in LIBOR, payable
$250 quarterly through 2000
(6.04%, 6.69% and 6.63% at
September 30, 1996,
December 31, 1995, and
September 30, 1995,
respectively) 4,750 5,500 5,750
Variable rate adjusted with
changes in LIBOR, due 1997
(6.04% at September 30,
1996) 12,200
Subsidiaries:
Federal Home Loan Bank advances,
due at various dates through
2014 (weighted average rates
of 5.64%, 5.89% and 5.90%
at September 30, 1996,
December 31, 1995 and
September 30, 1995,
respectively) 157,867 115,794 115,783
Notes payable, revolving credit
agreement, secured by finance
receivables, variable rate
adjusted with changes in
LIBOR (6.03%, 6.63% and
6.63% at September 30, 1996,
December 31, 1995, and
September 30, 1995,
respectively) 17,088 19,851 14,882
Other, including capitalized
leases 5,213 5,176 5,146
-------- -------- --------
Total $206,282 $158,046 $153,954
======== ======== ========
</TABLE>
Qualifying unencumbered mortgage loans held in the loan portfolio that equal
at least 170 percent of the aggregate amount of advances have been pledged as
collateral for the Federal Home Loan Bank advances. The $12.2 million variable
rate unsecured note payable of the parent company and the $17.1 million
revolving credit agreement secured by finance receivables were paid effective
October 1, 1996, with funds generated from additional repurchase agreement
borrowings.
Page 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE 8: STOCK DIVIDEND
On October 18, 1995, the Corporation declared a one-for-twenty stock dividend,
distributed November 20, 1995. A one-for-twenty stock dividend was also
declared on September 10, 1996, and distributed October 11, 1996. All share
data included in the financial statements, notes and Management's Discussion and
Analysis has been adjusted for these stock dividends.
NOTE 9: NET INCOME PER SHARE
Net income per share has been computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding during each
period. The assumed conversion of the convertible subordinated debentures into
common shares had no material dilutive effect on net income per share.
Page 10
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview
Net income for the three months ended September 30, 1996, was $7,396,000
compared to $10,036,000 earned in the same period of 1995. Net income per
share, adjusted for the 5% stock dividend declared September 10, 1996, was $.38
for the three months ended September 30, 1996, compared to $.53 for the three
months ended September 30, 1995. On September 30, 1996, legislation was enacted
imposing a one-time special assessment on deposits insured by the Savings
Association Insurance Fund (SAIF) and decreasing the future assessment rate on
these deposits. As a result, the Corporation recorded a $5.0 million charge, or
$3.0 million after income taxes. Future FDIC assessments are estimated to be
reduced approximately $1.1 million annually due to the change in FDIC rates.
Excluding the charge for the SAIF assessment, net income was $10,441,000 or $.54
per share for the quarter ended September 30, 1996.
Net income for the first nine months of 1996 was $26,920,000 compared to
$26,281,000 earned in the same period of 1995, an increase of 2.4 percent. Net
income per share was $1.40 and $1.37 for the nine months ended September 30,
1996 and 1995, respectively. Excluding the SAIF recapitalization charge, net
income was $29,965,000 or $1.56 per share. The increased earnings, excluding
the SAIF assessment, was due to an improved net interest margin and continued
growth in earning assets which resulted in an 8.8 percent increase in net
interest income over the first nine months of 1995. The net interest margin was
4.18 percent for the nine months ended September 30, 1996, compared to 4.13
percent for the nine months ended September 30, 1995. During the first nine
months of 1996 average earning assets were 8.0 percent greater than during the
same period of 1995.
As a result of the SAIF assessment, net income of $7,396,000 for the third
quarter of 1996 decreased from 1996 first and second quarter results of
$9,685,000 and $9,839,000, respectively. Net income per share was $.51 each for
the first two quarters of 1996, compared to $.38 for third quarter 1996.
The Corporation's total assets at September 30, 1996 were $3,982 million,
which were 9.7 percent greater than the $3,629 million at December 31, 1995, and
10.3 percent greater than total assets at September 30, 1995. Total loans of
$2,139 million at September 30, 1996, increased from $1,972 million at December
31, 1995, but decreased from $2,179 million from one year ago. The efforts
begun during the fourth quarter 1995 to sell or securitize a significant amount
of residential real estate loans were completed during the third quarter 1996.
Initiated to provide more flexibility in balance sheet management, the
Corporation securitized $162 million of fixed rate mortgages and $73 million of
adjustable rate mortgages during the first and third quarters of 1996,
respectively.
Page 11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Overview, continued:
Annualized returns on average assets and average shareholders' equity for the
nine months ended September 30, 1996, were .95 percent and 11.91 percent,
respectively, compared with 1.00 percent and 12.30 percent for the same period
of 1995. For the quarter ended September 30, 1996, annualized returns on
average assets and average shareholders' equity were .75 percent and 9.54
percent, respectively, compared to 1.12 percent and 14.11 percent in the third
quarter of 1995. Excluding the $3.0 million after tax charge for the SAIF
assessment, annualized returns on average assets and average shareholders'
equity were 1.06 percent and 13.47 percent, respectively for the third quarter
1996.
Cash dividends, adjusted for the 5% stock dividend declared September 10,
1996, of $.20 per share were declared during the third quarter of 1996 compared
with $.19 per share during the same period of 1995, representing an increase of
5.3 percent. For the nine months ended September 30, 1996 and 1995, total
dividends declared were $11,437,000 and $10,140,000, respectively.
Net Interest Income
Net interest income is the Corporation's largest component of income and
represents the difference between interest and fees earned on loans and
investments and the interest paid on interest bearing liabilities. Net interest
income was $107,888,000 for the nine months ended September 30, 1996, compared
with $99,187,000 for the same period in 1995. Net interest income for the most
recent quarter was $37,394,000 compared to $33,511,000 for the three months
ended September 30, 1995. The increased net interest income was the result of a
10.4 percent and 8.0 percent increase in average earning assets on a quarter and
year-to-date basis, respectively, compared to 1995 periods, and an improved net
interest margin. Net interest income for the most recent quarter was $1,292,000
greater than the $36,102,000 recorded in the second quarter of 1996 due to the
effects of a slightly lower net interest margin offsetting a $129.9 million
increase in average earning assets.
The interest margin is a percentage computed by dividing net interest income
on a fully taxable equivalent basis ("FTE") by average earning assets and
represents a measure of basic earnings on interest bearing assets held by the
Corporation. The annualized net interest margins were 4.18 percent and 4.13
percent, respectively, for the nine months ended September 30, 1996 and 1995.
Average earning assets for the nine months ended September 30, 1996, increased
to $3,549 million from $3,285 million for the same period in 1995. Average
loans decreased by $81.5 million to $2,048 million for the first nine months of
1996 and represented 57.7 percent of earning assets compared to 64.8 percent in
1995. Investment securities increased by 27.5 percent for the first nine months
of 1996 compared to 1995 and represented 39.7 percent and 33.6 percent of
earning assets for similar periods of 1996 and 1995, respectively. This shift
in earning asset mix is primarily the result of the Corporation securitizing
approximately $235 million of residential mortgage loans as discussed under the
Loans caption. As a result of continued efforts to alter the mix and reprice
earning assets and interest bearing liabilities acquired in recent thrift
acquisitions, the Corporation has been able to improve the net interest margin
from 4.07 percent for the third quarter of 1995 to 4.15 percent for the third
quarter of 1996. The net interest margin for the first and second quarters of
1996 was 4.21 percent and 4.19 percent, respectively.
Page 12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Net Interest Income, continued:
The continuing decline in the net interest margin from the first quarter 1996
is due in part the first and third quarter loan securitizations, which
negatively impacted the margin by 2 basis points. In addition, the Corporation
implemented a bank-owned life insurance program during the third quarter,
resulting in an additional 2 basis point negative impact to the margin. Both
transactions result in certain revenues being classified as non-interest income
rather than interest income.
An ongoing objective of the Corporation's asset/liability management policy is
to match rate-adjustable assets and liabilities at similar maturity horizons so
that changes in interest rates will not result in wide fluctuations in net
interest income. The rate sensitivity position is computed for various
repricing intervals by calculating rate sensitivity gaps. The Corporation had a
cumulative one-year negative gap on September 30, 1996, of $37.9 million which
represented 1.0 percent of the $3,701 million in earning assets at that date
and, in the opinion of management, represented a balanced position. Net
interest income at financial institutions with negative gaps tends to increase
in periods of falling interest rates and decline as interest rates rise.
Non-Interest Income
During the first nine months of 1996, non-interest income, which includes
deposit fees, insurance commissions, trust fees, credit card and other non-
interest fees on loans, mortgage loan origination and servicing revenues,
investment products fees, and net securities gains, was $41,712,000 compared to
$34,556,000 reported for the same period in 1995. Net security gains of
$688,000 were recorded during the first nine months of 1996 compared to
$1,288,000 for the same period of 1995. Non-interest income excluding net
securities gains totaled $41,024,000, which represented an increase of 23.3
percent over the same period of 1995.
Non-Interest Income
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Increase
1996 1995 (Decrease)
<S> <C> <C> <C>
Service charges on deposit accounts $ 9,235 $ 7,943 $1,292
Mortgage loan origination and servicing 8,681 6,247 2,434
Insurance premiums and commissions 6,012 5,373 639
Trust fees 4,775 3,847 928
Credit card and other non-interest fees
on loans 3,998 3,787 211
Investment products fees 2,616 2,214 402
Net securities gains 688 1,288 (600)
Other 5,707 3,857 1,850
------- ------ ------
Total non-interest income $41,712 $34,556 $7,156
======= ======= ======
</TABLE>
Page 13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Non-Interest Income, continued:
Service charges on deposit accounts increased by $1,292,000 or l6.3 percent
due to increased volumes and improved efforts to collect a greater percentage of
assessable fees. Mortgage loan origination and servicing fees increased by
$2,434,000 during the nine months of 1996 compared to the same period of 1995.
Third quarter 1995 included a $1.8 million gain from the sale of servicing
rights related to a $220 million portfolio. The securitization of residential
mortgage loans during the first and third quarters of 1996, as subsequently
discussed under Loans, generated net gains of $4,914,000. This was partially
offset by the closing of an East Coast mortgage banking subsidiary during the
second quarter of 1995 which resulted in fewer mortgage loan originations and
related revenues during the current year. Insurance commissions increased
$639,000 for the first three quarters of 1996 compared to 1995 due to increased
casualty insurance premiums written and sales of credit life and disability
insurance offered by the Corporation's banks. Trust fees increased by $928,000
or 24.1 percent compared to the first nine months of 1995 due to benefit plan
administration fees of $597,000 resulting from the May 31, 1996 acquisition of
Small, Parker and Blossom, and an increase in the number of accounts and market
value of assets managed. Investment products fees increased by 18.2 percent to
$2,616,000 as the Corporation continued to place greater emphasis on the sale of
annuities, mutual funds and other non-traditional banking products. Other
income increased to $5,707,000 during the nine months ended September 30, 1996,
from $3,857,000 for the comparable period of 1995. This increase is due in part
to $619,000 of revenue from the expiration of interest rate option contracts,
$228,000 increase in income from a bank-owned life insurance program, increased
administrative service and direct marketing revenues of $113,000 and non-
customer ATM access fees of $295,000, a new revenue source in 1996.
Non-Interest Expense
Non-interest expense, which includes personnel, occupancy costs, equipment and
other operating expenses was $102,865,000 for the nine months ended September
30, 1996, compared to $88,025,000 for the same period of 1995, an increase of
16.9 percent. Excluding the one-time SAIF charge of $5.0 million, non-interest
expenses increased $9,877,000 or 11.2 percent from the nine months ended
September 30, 1995.
Salaries and employee benefits increased by $6,125,000 or 13.9 percent for the
nine month period in 1996 over 1995. The period ended September 30, 1996
included $1,209,000 of severance expense due to the continuing centralization
efforts of the Corporation. The 1995 period also included severance expense of
$1,045,000, related to acquisitions completed in August 1995. Performance-based
incentives and commissions increased $2,413,000 during the first three quarters
of 1996 compared to 1995 due to increased sales activity and earnings. A portion
of the salary expense increase is due to increased staff from acquisitions where
prior periods were not restated and the remaining increase is generally due to
normal salary increases and related expenses associated with increased business
activity. Occupancy expenses increased by $493,000 to $6,458,000 and equipment
expense increased by $311,000 to $5,369,000 during the first three quarters of
1996 due to additional banking offices, as compared to the same period of 1995.
Advertising and promotion expense increased by $763,000 during the nine months
Page 14
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Non-Interest Expense, continued:
ended September 30, 1996, compared to the same period one year ago due to
increased marketing efforts related to loan and deposit promotions, Corporate
identity promotions and non-traditional banking services. Expenses for postage
and freight increased by $335,000 during the first nine months of 1996 compared
to 1995 primarily due to mailing promotional materials related to various loan
and deposit direct marketing campaigns and increased communications with a
larger customer and shareholder base. FDIC assessments increased by $3,088,000
during the nine months ended September 30, 1996, compared to the same period of
1995 due to the one-time SAIF recapitalization charge of $4,963,000.
Legislation enacted by Congress imposed a one-time special assessment of $.657
per $100 of deposits insured by SAIF which included $871 million of deposits the
Corporation acquired in prior year thrift acquisitions. As a result of the
legislation and related assessment, the annual assessment rates for SAIF-insured
deposits will decrease from $.23 to $.0644 while the annual assessment rate for
deposits insured by the Bank Insurance Fund will increase from $.00 to $.0129.
The Corporation expects its future FDIC assessment to be reduced approximately
$1.1 million annually due to the change in FDIC rates. Other expenses were
increased by $3,394,000 during the first three quarters of 1996 compared to the
same period of 1995. One-time charges of $1,983,000, related to the closure of
five offices recorded during first quarter 1996 and non-recurring charges for
equipment write-offs and other operational charges of $946,000 recorded during
the third quarter 1996 accounted for most of the increase. Operating expenses
as a percentage of core revenues, commonly referred to as the efficiency ratio,
improved from 65.1 percent to 63.1 percent during the first nine months of 1995
and 1996, respectively.
Non-Interest Expense
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Increase
1996 1995 (Decrease)
<S> <C> <C> <C>
Salaries and employee benefits $ 50,148 $44,023 $ 6,125
Data processing and other services 8,997 8,832 165
Occupancy 6,458 5,965 493
Equipment 5,369 5,058 311
Advertising and promotion 3,370 2,607 763
Professional fees 2,948 2,798 150
Printing and supplies 2,722 2,706 16
Postage and freight 2,649 2,314 335
FDIC assessments 6,436 3,348 3,088
Other 13,768 10,374 3,394
------- ------- -------
Total non-interest expense $102,865 $88,025 $14,840
======== ======= =======
</TABLE>
Page 15
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Income Tax Expense
Income tax expense was $13,894,000 for the nine months ended September 30,
1996, compared with $15,407,000 for the same period in 1995. The effective tax
rate was 34.0 percent and 37.0 percent for the nine months ended September 30,
1996 and 1995, respectively. The decline in the effective tax rate can be
attributed to an increase in tax free income from tax exempt sources, including
municipal investments and bank owned-life insurance and tax credits from low-
income housing investments.
Loans
Total loans were $2,139 million at September 30, 1996, compared to $1,971
million at December 31, 1995, and $2,179 million at September 30, 1995. The
loan portfolio increased by $167.8 million from year-end 1995 but decreased by
$40.0 million or 1.8 percent from one year ago. At year-end 1995, management
made a decision to sell or securitize a significant amount of residential
mortgage loans and reclassified $209 million from the loan portfolio to real
estate loans held for sale. Approximately $162 million of fixed rate
residential loans were securitized during the first quarter 1996 and $38 million
that could not be securitized was returned to the loan portfolio. Management
continued its efforts to sell or securitize residential mortgage loans
throughout 1996 and during the second quarter, after learning that certain
adjustable rate loans could be securitized, reclassified approximately $70
million of adjustable rate first mortgages to real estate loans held for sale.
These loans were securitized during the third quarter and the securities were
sold. No significant additional amount of portfolio loans is expected to be
securitized but current production of residential loans will continue to be sold
or securitized from time-to-time.
Loans Outstanding
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1996 1995 1995
<S> <C> <C> <C>
Commercial, industrial and
agricultural production
loans $ 603,707 $ 555,571 $ 342,363
Tax exempt loans 20,564 23,354 22,891
Real estate mortgage loans:
Commercial and agricultural 158,435 136,941 337,057
Construction 67,563 48,690 70,016
Residential 709,697 665,986 878,633
Consumer loans 579,281 540,912 528,274
---------- ---------- ----------
Total loans $2,139,247 $1,971,454 $2,179,234
========== ========== ==========
</TABLE>
Page 16
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Loans, continued:
Commercial loans totaled $603.7 million at September 30, 1996, compared to
$555.6 million at December 31, 1995 and $342.4 million at September 30, 1995.
As of December 31, 1995, the Corporation reclassified $215 million of real
estate mortgage loans secured by owner-occupied commercial or service related
businesses. Management believes that classifying such loans as commercial loans
is more consistent with their underwriting criteria and also more accurately
reflects the credit risk associated with such loans. As prior year's loan
balances in the accompanying table have not been reclassified using the new
criteria, the $261.3 million increase in commercial loans must be viewed in the
context of the reclassification.
Real estate mortgage loans, which consist of residential, commercial and
agricultural loans secured by real estate and construction loans, totaled $935.7
million at September 30, 1996, compared to $1,286 million one year prior.
Residential real estate loans decreased as the Corporation securitized
approximately $235 million of first mortgage real estate loans as previously
discussed. The Corporation has continued to experience demand for new
residential real estate mortgage loans, but has sold a significant amount of new
production during the current quarter. In addition to residential real estate
mortgages reported as loans, the Corporation held $4.8 million and $222.2
million of real estate loans for sale at September 30, 1996, and December 31,
1995, respectively. These loans were $15.1 million at September 30, 1995.
Consumer loans at September 30, 1996, were $38.4 million greater than at
December 31, 1995, and $51.0 million greater than at September 30, 1995. Of
this increase from year-end, $18.9 million is the result of 1996 acquisitions.
Consumer loan balances have continued to increase during 1996 due to additional
indirect volume generated by automobile dealers and due to direct mail and in-
office promotions. Consumer loan balances have also increased as a result of
increased revolving home equity lines of credit outstandings.
The Corporation's loan portfolio contains no loans to foreign governments,
foreign enterprises, foreign operations of domestic companies, nor any
concentrations to borrowers engaged in the same or similar industries that
exceed 10 percent of total loans.
Asset Quality
The allowance for loan losses is maintained at a level considered adequate to
absorb potential loan losses based upon quarterly evaluations of the loan
portfolio by management and the boards of directors of the Corporation and each
subsidiary bank. These evaluations include consideration of past loan loss
experience, changes in the composition of the portfolio, the volume and
condition of loans outstanding, expected cash flows or the observable market
price of the loans or the fair value of the collateral for impaired loans, as
well as current economic conditions.
The allowance for loan losses was $30.1 million at September 30, 1996,
representing 1.41 percent of total loans, compared with $28.8 million at
December 31, 1995, which represented 1.46 percent of total loans. At September
30, 1995, the allowance for loan losses was $28.4 million and represented 1.31
Page 17
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Asset Quality (continued)
Summary of Allowance for Loan Losses
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
Beginning balance $28,806 $28,502
Allowance of subsidiaries at acquisition date 1,872 600
Provision for loan losses 5,921 4,030
Loans charged-off (9,142) (6,075)
Recoveries 2,649 1,389
------- -------
Ending balance $30,106 $28,446
======= =======
Percent of total loans 1.41% 1.31%
======= =======
</TABLE>
percent of total loans. Annualized net charge-offs to average loans was .42
percent during the first nine months of 1996 compared to .29 percent for the
same period of 1995. The increase is primarily due to a single $1.6 million
commercial loan previously classified as non-accrual, being charged off during
the second quarter and increased consumer and credit card charge-offs. The
provision for loan losses to average loans was .39 percent and .25 percent for
the nine months ending September 30, 1996 and 1995, respectively. Annualized
net charge-offs and the provision for loan losses to average loans was .35% and
.44%, respectively, for the third quarter 1996. The allowance for loan losses
to non-performing loans was 152 percent at September 30, 1996, compared to 138
percent at December 31, 1995, and 135 percent at September 30, 1995.
Risk assets consist of non-performing loans, foreclosed properties and loans
90 days or more past due but accruing. Although these assets have more than a
normal risk of loss, they will not necessarily result in a higher level of
future charge-offs or losses.
Page 18
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Asset Quality (continued)
<TABLE>
Non-Performing and Risk Assets
(in thousands)
<CAPTION>
September 30, December 31, September 30,
1996 1995 1995
<S> <C> <C> <C>
Non-accrual loans:
Commercial, agricultural, and
tax exempt $10,057 $10,393 $ 7,639
Real estate mortgage 6,715 6,326 9,758
Consumer 1,799 3,194 2,815
------- ------- -------
Total non-accrual 18,571 19,913 20,212
Restructured loans:
Commercial, agricultural, and
tax exempt 668 479 368
Real estate mortgage 584 464 565
Consumer 42 5
------- ------- -------
Total restructured 1,294 948 933
------- ------- -------
Total non-performing loans 19,865 20,861 21,145
Foreclosed properties 2,456 1,727 2,391
------- ------- -------
Total non-performing assets 22,321 22,588 23,536
90 days or more past due:
Commercial, agricultural, and
tax exempt 482 344 199
Real estate mortgage 1,936 1,285 1,475
Consumer 1,472 598 1,180
------- ------- -------
Total 90 days or more past
due 3,890 2,227 2,854
------- ------- -------
Total risk assets $26,211 $24,815 $26,390
======= ======= =======
Risk assets to loan-related
assets 1.22% 1.26% 1.21%
======= ======= =======
</TABLE>
Non-performing loans consist of loans classified as troubled debt
restructurings and loans on non-accrual status. As indicated by the previous
table, the Corporation's non-performing loans as of September 30, 1996, totaled
$19.9 million, a decrease of $1.0 million from December 31, 1995. The non-
performing loans to total loans ratio was .93 percent on September 30, 1996, as
compared to 1.06 percent on December 31, 1995, and .97 percent on September 30,
1995. Total risk assets equaled 1.22% of loan-related assets at September 30,
1996, compared to 1.26% at December 31, 1995. In addition to loans classified
as non-performing, there were other loans totaling $4.4 million, at September
30, 1996, where the borrowers are experiencing difficulties and management is
closely monitoring the borrowers' abilities to comply with payment terms.
However, conditions at this time do not warrant classification as non-
performing.
Page 19
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Deposits and Other Sources of Funds
Total deposits were $2,877 million at September 30, 1996, compared to $2,790
million and $2,789 million at December 31, 1995, and September 30, 1995,
respectively. Since December 31, 1995, non-interest bearing deposits, which
were seasonally high at year-end, declined by $3.2 million and interest bearing
deposits increased by $90.6 million. Non-interest bearing deposits increased
from September 30, 1995 by $23.9 million while interest bearing deposits
increased by $64.6 million. The mix of interest bearing deposits is continuing
to shift to certificates of deposit as competitive pricing on these products
modified customers' previous preferences of interest bearing checking, savings
and money market deposit accounts.
Securities sold under repurchase agreements are acquired in national markets
as well as from the Corporation's commercial customers as part of a cash
management service. Repurchase agreements were $503.7 million, $325.3 million,
and $309.8 million at September 30, 1996, December 31, 1995, and September 30,
1995, respectively, and play a key role in funding earning assets. A portion of
these repurchase agreements, acquired to fund certain fixed rate earning assets,
is being hedged by interest rate caps.
Long-term debt totaled $206.3 million at September 30, 1996, compared to
$158.0 million at December 31, 1995, and $154.0 million at September 30, 1995.
Advances from the Federal Home Loan Bank accounted for $157.9 million of total
long-term debt at September 30, 1996.
Investment Securities
Total investment securities available for sale and held to maturity
represented 42.0 percent of earning assets at September 30, 1996, compared to
34.7 percent at December 31, 1995, and September 30, 1995. This increase in
the investment portfolio is primarily the result of the Corporation securitizing
approximately $235 million of residential mortgage loans, as discussed
previously. The portfolio has continued to shift toward investments in
mortgage-backed securities, predominately underwritten to the standards of, and
guaranteed by government sponsored enterprises. These securities generally
yield 70-100 basis points more than comparable U.S. Treasury securities.
Mortgage-backed securities differ from traditional debt securities in that they
have uncertain maturity dates and are priced based on estimated prepayment rates
on the underlying mortgages. Prepayment rates generally can be expected to
increase during periods of lower interest rates as the underlying mortgages are
refinanced at lower market rates. Conversely, the average lives of these
securities generally are extended as interest rates increase. The estimated
average life of these securities and the overall portfolio was 3.1 years and 3.8
years, respectively, at September 30, 1996.
Page 20
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Liquidity and Capital Resources
Liquidity is a measure of the Corporation's ability to meet its customers'
present and future deposit withdrawals and increased loan demand without unduly
penalizing earnings. The Corporation manages its liquidity needs through a
coordinated asset/liability management program directed by the Funds Management
and Investment Committee.
Liquidity is provided by projecting credit demand and other financial needs
and then maintaining sufficient cash and assets readily convertible into cash or
available federal funds lines to meet these requirements. The Corporation has
provided for its liquidity needs through growth in core deposits, maturing loans
and investments in its securities portfolio, and by maintaining adequate
balances in other short-term securities and money market assets. At September
30, 1996, the Corporation had $280,907,000 in investment securities maturing
within one year. The Corporation additionally has federal funds lines and other
borrowing sources available to it and its banks. Investment securities maturing
within one year and unused borrowing sources are considered by management to
provide adequate liquidity in view of projected needs.
Total shareholders' equity at September 30, 1996, was $304.0 million, compared
to $297.7 million at December 31, 1995. The Federal Reserve Board has
established a minimum leverage ratio of 3.0 percent for the most highly rated
bank holding companies that do not anticipate significant growth. All other
institutions are required to maintain a ratio of 4.0 to 5.0 percent depending on
their particular circumstances and risk profile. This ratio is defined as
shareholders' equity less non-qualifying intangible assets, as a percentage of
the sum of quarter to date total average assets less non-qualifying intangible
assets. The Corporation's leverage ratio at September 30, 1996, was 7.21
percent as compared to 7.56 percent at the end of 1995. The Federal Reserve
Board has also adopted risk-based capital guidelines which assign various risk
weightings to assets and off-balance sheet items and set minimum capital
requirements. Banks are required to have core capital (Tier 1) of at least 4.0
percent of risk weighted assets and total capital of 8.0 percent of risk
weighted assets. Tier 1 capital consists primarily of shareholders' equity less
intangible assets; and total capital consists of Tier 1 capital, certain long-
term debt and convertible debentures and a portion of the allowance for loan
losses. Under the provisions of the Federal Deposit Insurance Corporation
Improvement Act of 1991, institutions must have a leverage ratio of 5.0 percent
or above, Tier 1 capital to risk-based assets of 6.0 percent or above, and total
capital to risk-based assets of 10.0 percent or above in order to qualify as
well capitalized. At September 30, 1996, the Corporation's leverage, Tier 1 and
total capital ratios were 7.21 percent, 11.97 percent, and 13.48 percent,
respectively, well above all regulatory minimums. Furthermore, each of the
Corporation's subsidiary banks has been rated as "well capitalized" by the
Federal Deposit Insurance Corporation. The Corporation is not aware of any
current recommendations by its regulatory authorities or any other known trends,
events, or uncertainties that will have or that are reasonably likely to have a
material effect on its liquidity, capital resources, or operations.
Page 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Changes in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K
Exhibits
a. The following exhibit is submitted herewith:
27 - Financial Data Schedule
Reports on Form 8-K
b. A report on Form 8-K dated September 11, 1996, was filed
disclosing the Corporation has retained KPMG Peat Marwick LLP
as its independent auditors for the fiscal year ending
December 31, 1996, replacing Geo. S. Olive & Co., LLC, its
current auditors.
No other information is required to be filed under Part II of the form.
Page 22
CNB Bancshares, Inc.
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CNB Bancshares, Inc.
-----------------------------------
(Registrant)
Date November 8, 1996 by /s/ James J. Giancola
-------------------- -----------------------------------
James J. Giancola,
President and Chief Executive Officer
Date November 8, 1996 by /s/ Ralph L. Alley
-------------------- -----------------------------------
Ralph L. Alley, Senior Vice President
and Controller, Treasurer
(Principal Accounting Officer)
Page 23
EXHIBIT INDEX
Reg. S-K
Exhibit No. Description of Exhibit Page
- ---------- ---------------------- ----
27 Financial Data Schedule 25
Page 24
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from CNB
Bancshares Inc.'s consolidated balance sheet as of September 30, 1996 and the
consolidated statement of income for the nine months ended September 30, 1996,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 120,386
<INT-BEARING-DEPOSITS> 262
<FED-FUNDS-SOLD> 525
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,303,800
<INVESTMENTS-CARRYING> 252,056
<INVESTMENTS-MARKET> 250,338
<LOANS> 2,144,001
<ALLOWANCE> 30,106
<TOTAL-ASSETS> 3,982,140
<DEPOSITS> 2,877,416
<SHORT-TERM> 551,527
<LIABILITIES-OTHER> 42,881
<LONG-TERM> 206,282
0
0
<COMMON> 19,255
<OTHER-SE> 284,779
<TOTAL-LIABILITIES-AND-EQUITY> 3,982,140
<INTEREST-LOAN> 147,691
<INTEREST-INVEST> 70,432
<INTEREST-OTHER> 767
<INTEREST-TOTAL> 218,890
<INTEREST-DEPOSIT> 86,360
<INTEREST-EXPENSE> 111,002
<INTEREST-INCOME-NET> 107,888
<LOAN-LOSSES> 5,921
<SECURITIES-GAINS> 688
<EXPENSE-OTHER> 102,865
<INCOME-PRETAX> 40,814
<INCOME-PRE-EXTRAORDINARY> 40,814
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,920
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.40
<YIELD-ACTUAL> 4.18
<LOANS-NON> 18,571
<LOANS-PAST> 3,890
<LOANS-TROUBLED> 1,294
<LOANS-PROBLEM> 4,446
<ALLOWANCE-OPEN> 28,806
<CHARGE-OFFS> 9,142
<RECOVERIES> 2,649
<ALLOWANCE-CLOSE> 30,106
<ALLOWANCE-DOMESTIC> 25,788
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 4,318
</TABLE>
