SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 8-K/A
AMENDMENT TO CURRENT REPORT ON FORM 8-K
Filed Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): November 12, 1993
TEMPLE-INLAND INC.
(Exact name of registrant as specified in its charter)
Delaware 1-8634 75-1903917
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
303 South Temple Drive, Diboll, Texas 75941
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (409)829-2211
AMENDMENT NO. 1
The Registrant's Current Report on Form 8-K dated November 12, 1993 (the "Form
8-K") is hereby amended and supplemented as follows. Terms used with initial
capital letters and not defined herein shall have the meaning ascribed to such
terms in the Form 8-K.
ITEM 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
ITEM 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
The following financial statements and pro forma financial
information are hereby filed as part of this Report.
(a) Financial Statements of Business Acquired
(1) Audited consolidated financial statements of American
Federal Bank, F.S.B. as of December 31, 1992 and 1991.
(2) Unaudited financial statements of American Federal
Bank, F.S.B. which include a condensed consolidated
balance sheet at September 30, 1993, and condensed
consolidated statements of income and cash flows for
the nine months ended September 30, 1993 and 1992,
respectively.
(b) Pro Forma Financial Information (Unaudited)
Pro forma condensed consolidated balance sheet of Temple-
Inland Inc. at October 2, 1993, and pro forma condensed
consolidated statements of income for the nine months ended
October 2, 1993, and year ended January 2, 1993.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
TEMPLE-INLAND INC.
By: /s/ David H. Dolben
David H. Dolben
Vice President and
Chief Accounting Officer
January 28, 1994
AMERICAN FEDERAL BANK, F.S.B.
Consolidated Financial Statements
As Of December 31, 1992 And 1991
Together With Auditors' Report
AMERICAN FEDERAL BANK, F.S.B.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1992 AND 1991
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
TABLE OF CONTENTS
Page
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1
CONSOLIDATED STATEMENTS OF OPERATIONS 2
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION 3
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY 4
CONSOLIDATED STATEMENTS OF CASH FLOWS 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholder and Board of Directors of
American Federal Bank, F.S.B.:
We have audited the accompanying consolidated statements of financial
condition of American Federal Bank, F.S.B. (a Federal stock savings bank whose
common stock is wholly owned by a subsidiary of Lone Star Technologies, Inc.)
and subsidiaries as of December 31, 1992 and 1991, and the related
consolidated statements of operations, stockholder's equity and cash flows for
the years then ended. These financial statements are the responsibility of
the Bank's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Federal Bank, F.S.B.
and subsidiaries as of December 31, 1992 and 1991, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen & Co.
Dallas, Texas,
February 12, 1993 (except for the matters discussed in
Note 17, as to which the date is November 12, 1993)
AMERICAN FEDERAL BANK, F.S.B.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
(All Dollar Amounts in Thousands)
1992 1991
REVENUE ON EARNING ASSETS:
Interest income -
Short-term assets $ 2,701 $ 10,261
Loans 57,844 24,624
Loans held for sale 227 6,921
Investment securities 12,250 3,717
Securities held for sale 1,436 -
Receivables from the Fund - 13,527
Total interest income 74,458 59,050
Net revenue on assets guaranteed by the Fund 59,648 97,649
Total revenue on earning assets 134,106 156,699
INTEREST EXPENSE:
Deposits 75,213 112,035
Borrowed funds 3,591 12,740
Total interest expense 78,804 124,775
Net revenue before provision
for possible loan losses 55,302 31,924
PROVISION FOR POSSIBLE LOAN LOSSES 4,930 1,704
Net revenue after provision
for possible loan losses 50,372 30,220
NON-INTEREST INCOME:
Deposit services 2,341 2,104
Gain on sales of assets 509 6,576
Unrealized losses on securities held for sale (192) -
Annuity fees and other 5,059 2,545
Total non-interest income 7,717 11,225
NON-INTEREST EXPENSES:
Compensation and benefits 18,045 18,423
Occupancy and equipment 4,915 4,461
Marketing and public relations 2,076 1,048
Legal and professional fees 1,949 1,616
Deposit insurance premiums 3,384 3,745
Data processing 4,060 3,031
Amortization of goodwill and intangibles 1,720 1,466
Office and other expenses 3,876 3,117
Total non-interest expenses 40,025 36,907
NET INCOME BEFORE EXTRAORDINARY ITEM 18,064 4,538
EXTRAORDINARY LOSS ON PREPAYMENT OF BORROWED FUNDS - 967
NET INCOME $ 18,064 $ 3,571
See accompanying notes.
AMERICAN FEDERAL BANK, F.S.B.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AS OF DECEMBER 31, 1992 AND 1991
(All Dollar Amounts in Thousands)
ASSETS 1992 1991
CASH AND DUE FROM BANKS $ 27,278 $ 18,543
SHORT TERM ASSETS 29,340 137,021
LOANS (including Loans Held for Sale
of $1,532 in 1992 and $3,229 in 1991) 803,125 310,060
Less - Allowance for possible
loan losses (37,740) (9,374)
Net loans 765,385 300,686
SECURITIES HELD FOR SALE 63,359 -
INVESTMENT SECURITIES (Estimated fair value
of $220,130 in 1992 and $230,035 in 1991) 219,758 228,283
ASSETS GUARANTEED BY THE FUND 529,094 816,267
RECEIVABLES FROM THE FUND 22,258 131,844
REAL ESTATE INVESTMENTS 6,970 -
REAL ESTATE OWNED 21,346 1,767
ACCRUED INTEREST RECEIVABLE 10,761 14,809
OTHER ASSETS 18,994 18,607
Total assets $ 1,714,543 $ 1,667,827
LIABILITIES AND STOCKHOLDER'S EQUITY 1992 1991
LIABILITIES:
Deposits $ 1,400,291 $ 1,468,332
Borrowed funds 180,071 75,388
Other liabilities and
accrued expenses 17,364 15,614
Total liabilities 1,597,726 1,559,334
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDER'S EQUITY:
Preferred stock - -
Common stock; $.01 par value; 200,000
shares authorized; 80,000 shares issued
and outstanding 1 1
Paid-in capital 47,999 47,999
Retained earnings-restricted 68,817 60,493
Total stockholder's equity 116,817 108,493
Total liabilities and
stockholder's equity $ 1,714,543 $ 1,667,827
See accompanying notes.
<TABLE>
AMERICAN FEDERAL BANK, F.S.B.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
(All Dollar Amounts in Thousands)
<CAPTION>
Total
Preferred Stock Common Paid-In Retained Stockholder's
Class A Class B Class C Stock Capital Earnings Equity
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1990 $ - $ - $ - $ 1 $47,999 $56,922 $104,922
Net income - - - - - 3,571 3,571
December 31, 1991 - - - 1 47,999 60,493 108,493
Net income - - - - - 18,064 18,064
Dividends paid - - - - - (9,740) (9,740)
December 31, 1992 $ - $ - $ - $ 1 $47,999 $68,817 $116,817
</TABLE>
See accompanying notes.
AMERICAN FEDERAL BANK, F.S.B.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
(All Dollar Amounts in Thousands)
1992 1991
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 18,064 $ 3,571
Adjustments to reconcile net income to
net cash provided by operating activities-
Provisions for losses 6,192 26,483
Net principal collected on loans
held for sale 1,698 11,623
Sales of loans - (3,778)
Purchase of securities held for sale,
net of re-payments (63,927) -
Accrued interest receivable (2,108) (1,566)
Accrued Fund assistance 12,326 28,871
Interest credited to deposits 53,813 76,133
Net accretion and amortization (2,999) (4,830)
Other liabilities and
accrued expenses (10,288) (6,193)
Net cash provided by
operating activities 12,771 130,314
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities (65,692) (236,931)
Maturities and collections of securities 159,906 53,456
Loan originations and acquisitions (389,594) (173,351)
Loan principal collections 221,395 66,701
Principal collected on guaranteed assets 31,848 30,552
Principal collected on interest-bearing
Fund receivables - 603,705
Sales and writedowns of guaranteed assets 360,594 479,249
Purchase of real estate for investment (6,970) -
Net cash acquired in acquisitions 116,333 -
Other 2,651 2,099
Cash provided by
investing activities 430,471 825,480
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits (443,313) (360,461)
Proceeds from borrowed funds 418,036 473,050
Repayment of borrowed funds (507,171) (1,092,947)
Dividends paid (9,740) -
Cash used for
financing activities (542,188) (980,358)
NET DECREASE IN CASH AND EQUIVALENTS ( 98,946) (24,564)
CASH AND EQUIVALENTS, BEGINNING BALANCE 155,564 180,128
CASH AND EQUIVALENTS, ENDING BALANCE $ 56,618 $ 155,564
COMPONENTS OF CASH AND EQUIVALENTS AT DECEMBER 31:
Cash and due from banks $ 27,278 $ 18,543
Short term assets 29,340 137,021
Total cash and equivalents $ 56,618 $ 155,564
See accompanying notes.
AMERICAN FEDERAL BANK, F.S.B.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
(All Dollar Amounts in Millions)
1. INITIAL ACQUISITIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Initial Acquisition
American Federal Bank, F.S.B. (the "Bank"), a wholly owned subsidiary of LSST
Financial Services Corporation ("LSST"), was formed under agreements among the
Federal Savings and Loan Insurance Corporation (the "FSLIC", or "FDIC", as
successor), the Bank and LSST, a wholly owned subsidiary of Lone Star
Technologies, Inc. ("Lone Star"). The Bank acquired substantially all
tangible assets, subject to the provisions of an assistance agreement (the
"Agreement"), and assumed all deposits and secured liabilities of 12 insolvent
institutions ("Closed Associations") from the FSLIC on August 18, 1988.
Purchase Method of Accounting
The acquisitions of the Closed Associations were recorded under the purchase
method of accounting. Resulting premiums and discounts are being amortized
over the respective estimated remaining lives of assets acquired and
liabilities assumed, and goodwill is being amortized over 10 years, all using
the level-yield method. For current year acquisitions see Note 3.
Principles of Consolidation and Basis of Presentation
Investments in and advances to subsidiaries which are guaranteed assets have
been substantially liquidated and, accordingly, are not consolidated with the
accounts of the Bank. The accompanying consolidated financial statements
include the accounts of the Bank and its nonguaranteed subsidiaries. All
intercompany balances and transactions have been eliminated in consolidation.
Loans
Loans originated for sale are carried at the lower of aggregate cost or
estimated market value. Non-guaranteed residential mortgage loans totaling
$54 million were transferred to held for investment at the lower of cost or
market in 1991. Net gains on loans previously sold of $5 million were
recognized in 1991.
Interest and Fee Income on Loans
Interest on loans is recognized when earned. Interest accruals (including
discount accretion and premium amortization) are discontinued and accrued
interest receivable is reversed when a loan becomes 90 days delinquent, or
sooner if management deems collectibility uncertain. Interest income on non-
accrual loans is generally recognized as payments are received.
Discounts and premiums are recognized using the level-yield method over the
expected lives of the portfolios acquired, adjusted for actual prepayments.
Yields will differ if the actual lives differ significantly from the
estimates.
Fee income on loans held for investment is deferred and amortized over the
contractual term of the loan by the level-yield method. Fee income on loans
held for sale is deferred until the loan is sold. Costs associated with loan
originations are expensed as incurred and approximated $0.23 million in 1992.
Allowances for Possible Loan Losses and Other Receivables
The Bank maintains an allowance for possible loan losses which, in
management's opinion, is adequate to absorb losses inherent in the loan
portfolio. However, the ultimate adequacy of the allowance is dependent on
future economic factors which are beyond management's control.
The adequacy of the allowance is evaluated by loan portfolio segment and
periodic reviews are made of mortgage and commercial loans in an attempt to
identify potential problems. Factors considered in these reviews include
general business and economic conditions, specific loan performance status,
collateral value and borrower's financial condition. Loans are classified as
either satisfactory (pass), special mention, substandard, doubtful or loss
based either on specific reviews or on performance status for loans not
specifically reviewed. Loans classified as loss are charged-off when
identified. The amount of allowance considered adequate is then determined by
applying factors, which are based upon management's judgment and experience,
to the loan portfolio segments and classifications, including loans classified
as satisfactory (pass).
For originated loans, a provision is made monthly in amounts necessary to
maintain an adequate allowance for possible loan losses. For loan portfolios
acquired, allowances for credit losses are established as an allocation of the
purchase price for each portfolio. Allowances on purchased portfolios are
only available to absorb losses incurred in each purchased portfolio. The
performance of acquired portfolios is evaluated periodically and, if
necessary, additional provisions are made to maintain an adequate allowance
for loan losses.
The Bank also provides a valuation allowance for receivables from the Fund
based upon management's evaluation of amounts claimed for reimbursement
pursuant to the Agreement. The Agreement is subject to interpretation and
amounts claimed may differ from amounts ultimately received.
Loan Servicing
Income on loans serviced for others is based upon a percentage of principal
balance and is recognized as payments are received. Loan servicing costs are
incurred as a fixed amount per loan under a subservicing agreement and are
charged to expense as incurred.
The Bank's loan servicing portfolio totaled $97 million (3,418 loans) and $105
million (3,622 loans) at December 31, 1992 and 1991, respectively. Escrow
funds held in trust by the Bank totaled $15 million and $9 million at December
31, 1992 and 1991, respectively.
Securities
Securities are classified as held for investment or held for sale at the time
of purchase.
Securities held for sale are carried at the lower of amortized cost or market
value. Any gains or losses on securities which may be sold are determined by
specific identification. Securities held for investment are carried at
amortized cost. Amortization is computed under a method which approximates
level yield and is adjusted for changes in prepayment estimates. Yields will
differ if the actual lives are significantly different than the estimates.
Fair value is determined based on quoted market prices or indications of
value.
The Bank has adequate liquidity and capital, and it is management's intent to
hold securities held for investment to maturity. See Note 17.
Real Estate Owned
Real estate owned includes property acquired through foreclosure, or in-
substance foreclosure, and is carried at the lower of cost or fair value, as
determined by appraisal, less estimated selling expenses. Property is
considered to be in-substance foreclosed when its fair value and other factors
indicate that ownership has effectively transferred to the Bank. Net costs of
operating real estate owned were $0.66 million and $0.24 million for the years
ending December 31, 1992 and 1991, respectively.
Real Estate Investments
Real estate held for investment is carried at cost, adjusted for accumulated
depreciation. Real property is depreciated using the straight line method
over the estimated useful life of the asset. Revenue from property operations
is recognized using the accrual method of accounting.
Income Taxes
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," requires an asset and liability approach for financial reporting
purposes. Deferred tax assets and liabilities will be adjusted for changes in
income tax rates or statutes. The Bank expects to adopt this standard when it
becomes mandatory in 1993 and does not anticipate any material effect on
financial condition or results of operations.
Shared Loss Limitation
The effect of the shared loss limitation provided by the Agreement through
August 17, 1991, was estimated quarterly and adjusted to actual in the third
quarter of 1991.
Cash Flow Information
The accompanying consolidated statements of cash flows include cash, due from
banks, and short term assets with original maturities of three months or less
as cash and equivalents. Interest paid on liabilities during the years ended
December 31, 1992 and 1991, was $79 million and $131 million, respectively.
Following are significant noncash investing and financing activities for the
years ended December 31:
1992 1991
Transfer of loans from held for
sale to held for investment $ - $ 54
Foreclosures and repossessions of assets 18 3
Fair Value Estimates
"Fair Value" among financial institutions may not be comparable due to the
wide range of permitted valuation techniques and numerous estimates which must
be made given the absence of active secondary markets for many financial
instruments. This lack of uniform valuation methodologies also introduces a
greater degree of subjectivity to these estimated fair values.
2. TERMS OF THE ASSISTANCE AGREEMENT WITH THE FSLIC RESOLUTION FUND (The
"Fund"):
The Agreement expires on August 17, 1998, except for certain tax-sharing and
indemnification provisions which may survive. Major assistance provisions of
the Agreement include:
- Yield maintenance on guaranteed assets;
- Shared gains from the liquidation of guaranteed assets; and
- Reimbursement for capital losses incurred on the disposition of
guaranteed assets and writedowns.
During 1992 and 1991, the FDIC took the following actions to reduce the cost
of the Agreement: Prepayment of the Fund note receivable in 1991, $583
million; writedowns of guaranteed assets, $78 million and $365 million in 1992
and 1991, respectively; and prepayment of the receivable for fair value
adjustments in 1991, $7 million.
The Bank also settled disputes with the FDIC regarding the management of
certain guaranteed assets and the fair value of nonguaranteed assets. These
settlements required charges of $24 million against 1991 net revenue on assets
guaranteed by the Fund.
Other cost reduction options available to the FDIC include additional
writedowns and purchases of covered assets. However, during 1992, the
Agreement was amended to preclude any FDIC-directed purchases in 1993.
Beginning in 1994, writedowns or purchases of guaranteed assets by the FDIC
are limited to $100 million in any six-month period, and any purchases would
be eligible for shared gains. The Bank anticipates that guaranteed asset
balances and related assistance income will continue to decline in 1993 and
subsequent years.
3. CURRENT YEAR ACQUISITIONS:
Americity Federal Savings Bank, F.S.B.
Effective June 30, 1992, the Bank acquired Americity Federal Savings Bank
("Americity"). In accordance with the purchase method, the Bank recorded at
fair value approximately $416 million in assets, primarily mortgage loans and
short term investments, and $363 million in liabilities, primarily time
deposits and borrowings from the Federal Home Loan Bank of Dallas (the
"FHLB"). The resulting premiums and discounts are being amortized over the
estimated remaining lives of the assets acquired and liabilities assumed.
Although discovery continues, no material amounts of goodwill or other
intangibles are expected to be recognized.
The purchase price of $53 million is subject to a $6.5 million contingency
reserve, all or a portion of which may be returned to the Bank should certain
events occur between June 30, 1992 and January 4, 1994. Subsequent to June
30, 1992, $0.13 million was returned to the Bank and $1.37 million was
released to the former shareholders of Americity. The remaining balance in
the contingency reserve at December 31, 1992, approximated $5 million.
Subsequent to the acquisition, the Bank received notification from the United
States Department of the Treasury of potential penalties of $3.2 million
relating to certain alleged violations of the Bank Secrecy Act by Americity
prior to the acquisition. Management intends to vigorously protest any such
penalties. However, any penalties assessed would be reimbursed from the
contingency reserve to the extent available. Accordingly, no loss accrual has
been recorded.
Following are the proforma condensed results of operations for the Bank as if
the acquisition had occurred on January 1, 1992 and 1991:
For the Years Ended
December 31,
1992 1991
Net revenue after provision for possible loan losses $ 53 $ 35
Non-interest income 8 6
Non-interest expense 43 42
Gains on sales of assets 2 19
Net income before extraordinary items 20 18
Extraordinary loss on prepayment of
borrowed funds - (1)
Net income $ 20 $ 17
Banking Center Acquisitions
During 1992, the Bank acquired in two separate transactions, 10 banking
centers in the Dallas metroplex. Included in the acquisitions were assets of
$6 million, primarily consumer loans, and deposits of $175 million. The
assumption price of $1.6 million is being amortized over a 16 month period.
All other costs were expensed as incurred.
4. NON BANK SUBSIDIARIES:
During 1992, the Bank formed and began operating three non bank subsidiaries,
Southern Associated Services, Inc. ("SASI"), AFB Group, Inc. and Stanford
Equities, Inc. ("SEI"), all of which are non- guaranteed subsidiaries. SASI
provides real estate appraisal, appraisal review, and environmental assessment
services to the Bank and other third parties, generating gross revenues of
approximately $450 thousand during the year ending December 31, 1992. The
primary business of AFB Group, Inc., is the sale of mutual fund products, for
which it receives a fee. AFB Group, Inc. generated gross revenues of
approximately $444 thousand for the year ending December 31, 1992. SEI was
formed for the purpose of acquiring and operating multifamily real estate. In
December of 1992, SEI acquired a 335 unit apartment complex in Lewisville,
Texas. The purchase price of $7 million was financed by the Bank.
5. CASH AND EQUIVALENTS:
The Bank is required to maintain nonearning reserves with the Federal Reserve
Bank and to maintain assets eligible for liquidity as defined by the Office of
Thrift Supervision ("OTS"). These reserves and liquid asset requirements
averaged $5 million and $72 million, respectively, for December 1992, and $6
million and $73 million, respectively, for December 1991.
The carrying value of cash, due from banks and short term assets of $57
million at December 31, 1992, is a reasonable estimate of fair value.
6. LOANS:
<TABLE>
<CAPTION>
December 31, 1992
Fixed Adjustable Non- December 31,
Rate Rate Accrual Total 1991
<S> <C> <C> <C> <C> <C>
Residential mortgage principally
secured by property in Texas $220 $262 $ 17 $ 499 $209
Commercial mortgage-
Single family construction - 27 1 28 9
Multifamily 13 107 2 122 28
Retail 1 25 1 27 21
Office 1 13 - 14 7
Land acquisition and
development - 13 3 16 7
Other 1 8 - 9 3
Total commercial mortgage 16 193 7 216 75
Commercial and industrial 2 26 - 28 12
Consumer 88 5 1 94 58
326 486 25 837 354
Undisbursed loan funds - (15) - (15) (10)
Deferred loan fees (1) (1) - (2) (1)
Unamortized (discounts) and
premiums on purchased loans, net (9) (10) - (19) (36)
316 460 25 801 307
Loans held for sale 2 - - 2 3
Total $318 $ 460 $ 25 $ 803 $ 310
</TABLE>
Substantially all commercial mortgage loans are secured by property in the
Dallas area and the portfolio is well diversified among property types and
borrowers. The Bank's lending policy emphasizes loans with significant
borrower equity which are secured by property with existing cash flows in
excess of repayment requirements.
The consumer portfolio consists primarily of automobile loans and loans
secured by deposits. Unearned discounts on consumer loans were $0.08 million
and $0.23 million at December 31, 1992 and 1991, respectively.
The fair value of performing loans is estimated by discounting future cash
flows using the current rates at which similar loans would be made by the Bank
to borrowers with similar credit ratings and for the same remaining
maturities, adjusted for estimated prepayments. Pricing adjustments for
demographics and costs of credit enhancements for non-conforming residential
mortgage loans have not been made as the Bank intends to hold its loans to
maturity. The fair value of nonperforming loans and loans classified doubtful
is based on estimated collateral value. The fair value of net loans
outstanding approximated $818 million at December 31, 1992, however, changes
in the assumptions could have a material effect on the estimate of fair value.
Interest lost on non-accrual loans was $1.3 million in 1992 and $0.37 million
in 1991.
Loan Commitments and Letters of Credit
Residential mortgage $ 2
Commercial mortgage 16
Commercial and industrial 12
Consumer 16
Total $ 46
Loan commitments are generally issued with either fixed expiration dates or
other termination terms. Most commitments are expected to be funded and are
subject to the same underwriting standards and collateral requirements as
loans.
The cost to terminate or sell loan commitments and letter of credit
obligations is estimated using the Bank's current fee structure and
approximated $0.45 million at December 31, 1992.
The Bank has arrangements with correspondent lenders whereby residential
mortgage loans are originated by the Bank and sold under recourse agreements
with terms ranging from 60 days to six months. Loans sold under such
agreements approximated $13 million at December 31, 1992. Fee income
attributable to loans sold with recourse is recognized at the time of sale and
approximated $0.2 million on loans for which a recourse obligation existed at
December 31, 1992.
7. CHANGES IN ALLOWANCE FOR POSSIBLE LOAN LOSSES:
1992 1991
Beginning balance $ 9 $ 8
Provision for possible loan losses 5 2
Acquired allowances 31 -
Charge-offs, net (7) (1)
Ending balance $ 38 $ 9
8. SECURITIES:
December 31,
1992 1991
Book Estimated Book Estimated
Value Fair Value Value Fair Value
Investment Securities-
U.S. Government Agency
Certificates $ 32 $ 32 $ 39 $ 39
Collateralized mortgage
obligations and other 179 179 181 183
FHLB stock - restricted 9 9 8 8
Total $ 220 $ 220 $ 228 $ 230
The weighted average contractual maturity of securities held for sale and
investment securities is 269 months; however, the expected maturities will
differ significantly because borrowers may have the right to prepay
obligations without prepayment penalties. Premiums on securities are
amortized over a weighted average life of 3 years.
Fair value is estimated using quoted market prices or market indications of
value.
Gross unrealized gains on securities approximated $0.8 million and $2 million
at December 31, 1992, and 1991, respectively. Gross unrealized losses on
securities approximated $0.4 million and $0.1 million at December 31, 1992,
and 1991, respectively.
December 31, 1992
Fixed Adjustable
Rate Rate Total
Held for Sale:
Collateralized mortgage
obligations $ 63 $ - $ 63
Held for Investment:
GNMA certificates $ - $ 5 $ 5
FHLMC certificates - 5 5
FNMA certificates - 22 22
Collateralized mortgage
obligations and other 57 122 179
FHLB stock - restricted - 9 9
Total $ 57 $163 $220
The indices generally used to reprice adjustable rate securities held by the
Bank include U.S. Treasury yields, average cost of funds in the 11th Federal
Home Loan Bank district, and LIBOR. The repricing of these securities may be
limited to both periodic and lifetime caps.
Collateralized mortgage obligations represent interests in pools of loans.
The Bank's investment policy requires such securities to be investment grade
instruments. Credit risk on these investments is minimized by one or more of:
the distribution priority of the senior tranches; guarantees of a federal
agency or overcollateralization of the respective pools; and other credit
enhancements.
9. ASSETS GUARANTEED BY THE FUND:
Estimates of Fund assistance for asset valuation guarantees are based on the
difference between book values and estimated recovery values. Amounts
received from the Fund will depend upon actual liquidation proceeds.
<TABLE>
<CAPTION>
December 31,
Estimated Fund
Recovery Assistance Book Value
Asset Type 1992 1991 1992 1991 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Land and land development $104 $185 $ 95 $ 97 $199 $282
Multifamily residential 122 150 9 41 131 191
Other commercial real estate 75 111 12 22 87 133
Retail facilities 41 64 15 29 56 93
Single family residential 39 69 5 19 44 88
Commercial and industrial 1 5 2 6 3 11
Consumer loans and related collateral 2 5 - 2 2 7
Subsidiaries 5 3 - 2 5 5
Other - 2 2 4 2 6
Total $ 389 $ 594 $ 140 $ 222 $ 529 $ 816
</TABLE>
The Fund guarantees do not extend to assets owned by other lenders serviced by
the Bank which were $27 million and $38 million at December 31, 1992 and 1991,
respectively.
The Bank had letters of credit outstanding of $1 million and $4 million at
December 31, 1992 and 1991, respectively. Amounts funded under these letters
of credit would be guaranteed by the Fund.
Estimated recovery is judgmental in nature and is based upon various
indications of value, including broker opinions, net present value of
estimated cash flows, recent marketing efforts and other similar
methodologies. Due to the nature of Fund assistance and related guarantees,
the book value of assets guaranteed by the Fund of $529 million approximates
fair value at December 31, 1992.
<TABLE>
<CAPTION>
Years Ended December 31,
1992 1991
Net Revenue on Actual Assistance Total Actual Assistance Total
Guaranteed Assets Yield Income Revenue Yield Income Revenue
<S> <C> <C> <C> <C> <C> <C>
Loans $19 $ (1) $18 $16 $ 5 $21
Real estate (1) 43 42 - 74 74
Subsidiaries - - - 3 (1) 2
Other - - - - 1 1
Total $ 18 $ 42 $ 60 $ 19 $ 79 $ 98
</TABLE>
Capital loss reimbursements received from the Fund approximated $187 million
and $443 million, respectively, for the years ending December 31, 1992 and
1991.
10. DEPOSITS:
<TABLE>
<CAPTION>
December 31, 1992 December 31, 1991
Stated Interest Stated Interest
Balance Rates Expense Balance Rates Expense
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing $ 51 - $ - $ 36 - $ -
Savings 33 3.00% 1 21 4.50% 1
Transaction accounts 322 2.83% 10 315 4.42% 15
Certificates of deposit-
Less than 3% 30 3
3% - 4% 243 -
4% - 5% 222 66
5% - 6% 142 252
6% - 7% 160 236
7% - 8% 89 189
8% - 9% 67 289
Greater than 9% 41 61
994 5.40% 64 1,096 6.85% 96
Total $1,400 4.56% $ 75 $1,468 6.13% $ 112
</TABLE>
Maturities of certificates of deposit at December 31, 1992:
<TABLE>
<CAPTION>
1993 1994 Thereafter Total
<S> <C> <C> <C> <C>
Less than 4% $260 $ 13 $ - $273
4% to 6% 254 68 42 364
6% and greater 165 56 136 357
Total $ 679 $ 137 $ 178 $ 994
</TABLE>
Large certificates of deposit totaled $163 million and $215 million at
December 31, 1992 and 1991, respectively. Brokered funds totaled $29 million
and $46 million at December 31, 1992 and 1991, respectively.
For non-interest bearing, savings and transaction accounts, fair value
approximates book value. For certificates of deposit, fair value is estimated
based on discounting future cash flows at the Bank's December 31, 1992
offering rates over the estimated remaining contractual maturities of the
certificates. The fair value of deposits approximated $1.421 billion at
December 31, 1992, however, changes in assumptions could materially effect the
estimated fair value.
The Bank has entered into interest rate swaps with notional amounts of $190
million to hedge the interest rate risk associated with longer term fixed rate
loans funded by short term deposits. For notional amounts of $10 million, the
Bank makes LIBOR based semi-annual interest payments which averaged 3.19% at
December 31, 1992 and receives semi-annual payments at fixed rates which
averaged 7.47% at December 31, 1992. For notional amounts of $180 million,
the Bank makes semi-annual interest payments at fixed rates which averaged
7.39% at December 31, 1992 and receives LIBOR based semi-annual interest
payments which averaged 3.94% at December 31, 1992. The net cost of these
swaps is recorded as a component of interest expense and totaled $2.9 million
in 1992. The swaps terminate in 1993 ($10 million), 1997 ($10 million) and
2002 ($170 million). However, $140 million of notional amounts, terminating
in 2002, amortizes semi-annually according to changes in certain indices as
specified by the contract. Performance by the other parties is
unconditionally guaranteed by third party intermediaries and management
anticipates full performance.
The cost of terminating the swaps is estimated based on market quotations and
approximated $5 million at December 31, 1992.
11. BORROWED FUNDS:
December 31,
1992 1991
FHLB advances maturing in:
1992 $ - $ 75
1993 16 -
1994 125 -
1997 32 -
1998 3 -
1999 1 -
177 75
Other borrowed funds 3 -
Total $ 180 $ 75
Weighted average rate 4.08% 4.44%
The Bank's obligations to the FHLB are secured by blanket assignments of
assets approximating $1 billion, consisting primarily of single family
mortgage loans and securities. The Bank's additional borrowing capacity
approximated $295 million at December 31, 1992. As of December 31, 1992, the
Bank had committed to borrow an additional $100 million from the FHLB (see
Note 17).
The fair value of borrowed funds is estimated based on discounted cash flows
at current FHLB advance rates over the remaining terms of the advances. Fair
value approximated $180 million at December 31, 1992.
During 1991, the Bank prepaid FHLB advances totaling $25 million and incurred
a prepayment fee of $1 million which was recognized as an extraordinary loss.
12. INCOME TAXES:
The Bank files a consolidated federal income tax return with Lone Star and its
subsidiaries. Any tax savings realized through the utilization of certain
items, as defined in the Agreement, in the consolidated federal income tax
return of Lone Star must be paid to the Fund.
Years Ended
December 31,
Reconciliation of Net Income 1992 1991
Net income per financial statements $ 18 $ 4
Tax-exempt income (42) (100)
Purchase accounting adjustments
and goodwill amortization - 7
Excess tax basis losses (190) (450)
Other (1) (11)
Net operating loss for federal income tax (215) (550)
Tax-exempt assistance 216 549
Nondeductible expense reimbursement - (7)
Net operating income (loss)
pursuant to the Agreement $ 1 $ (8)
The reconciliation of net income for 1991 has been restated to reflect actual
tax return amounts.
The Bank meets the statutory requirements which provide certain tax benefits
to savings and loan associations, principally a special bad debt deduction
based on a percentage of taxable income (currently 8%) or on historical loan
loss experience formulas. Because Lone Star has consolidated net operating
losses available to offset taxable income before application of the tax
benefit provisions of the Agreement, no federal income tax benefits are
payable to the Fund.
The Bank has net operating loss carryforwards incurred since inception of $1.4
billion for federal income tax purposes and $181 million pursuant to the
Agreement. Additionally, net operating loss carryforwards acquired at August
18, 1988 total approximately $455 million. The use of these acquired net
operating loss carryforwards is subject to significant limitations and
considered remote. However, the Bank will reimburse the Fund to the extent
that any of these acquired loss carryforwards are eventually used to reduce
Lone Star's consolidated federal income taxes.
Effective June 30, 1992, Americity was acquired by the Bank. The acquisition
and immediate liquidation of Americity into the Bank were nontaxable
transactions for Federal and State Income tax purposes. The Bank is
responsible for the tax associated with Americity's final June 30, 1992
Federal and State Income tax returns which is estimated to be $3.6 million.
13. CAPITAL AND LIQUIDITY:
Reconciliation of Stockholder's Equity at December 31, 1992
Asset
Capital Ratio
Stockholder's equity $117
Core deposit intangible (2)
Investments in and advances to
non-includable subsidiaries (7)
108
Core capital to assets ratio 6.32%
Supervisory goodwill (5)
103
Tangible capital to tangible assets ratio 6.03%
Supervisory goodwill 5
Allowance for losses 11
$ 119
Total capital to risk weighted assets ratio 17.52%
The Bank currently exceeds all capital standards promulgated by the OTS. Net
income and capital for the years ended December 31, 1992 and 1991 agree with
amounts reported to the OTS.
During 1992, the Bank paid cash dividends of $9.7 million to its parent, LSST.
LSST has made application to the OTS to release the Bank from its capital
maintenance agreement. Until approved, dividend payments cannot exceed 50% of
current period earnings unless prior OTS approval is obtained. Such approval
was obtained for dividends paid in 1992.
Liquidity
The principal sources of liquidity are the renewal of deposits, loan and
securities payments, liquidations of guaranteed assets, reimbursements from
the Fund, liquidation of securities held for sale and earnings. The Bank may
borrow up to a maximum amount of 50% of total assets or more under certain
conditions from the FHLB, subject to collateral restrictions, and has unused
lines totaling $401 million from retail deposit brokers. The sources of
liquidity are considered by management to be sufficient to fund loan
commitments and to meet other obligations of the Bank.
14. PREFERRED STOCK:
Authorized preferred stock consists of Class A convertible preferred stock,
$1.00 par value, 960,000 shares; Class B convertible preferred stock, $1.00
par value, 960,000 shares; and Class C preferred stock, $5,000 par value,
100,000 shares. No preferred shares were outstanding at December 31, 1992 or
1991.
15. EMPLOYEE BENEFIT PLAN:
The Bank sponsors a qualified employee savings plan covering substantially all
of its employees. The plan allows participants to make pretax contributions
with the Bank contributing up to 3% of the participants' base salaries. All
amounts contributed to the plan are deposited in a trust fund administered by
a national bank. The total expense in 1992 and 1991 was $0.28 million and
$0.29 million, respectively.
16. COMMITMENTS AND CONTINGENCIES:
The Bank is a party to various claims and lawsuits. Substantially all
litigation and related costs are indemnified and reimbursable under the terms
of the Agreement. Unindemnified claims and lawsuits are incidental to the
ordinary course of business and are not expected to have a material effect on
the consolidated financial statements.
The 1992 compliance examination conducted by the OTS identified a limited
number of currency transactions in violation of the Bank Secrecy Act, other
than the Americity violations discussed in Note 3. It is uncertain at this
time whether the OTS and/or the United States Department of the Treasury will
assess monetary penalties. Accordingly, no loss contingency has been accrued.
Potential losses range from $0 to $3 million. Management believes that it is
unlikely that a material amount of penalties will be assessed and would
vigorously protest any such assessment.
The Bank and OTS are currently discussing whether a Supervisory Agreement will
be executed as a result of the aforementioned compliance examination.
Management believes that such agreement, if one is executed, would have no
material effect on financial condition or results of operations.
The Bank has entered into noncancelable operating leases for certain premises
and equipment. Minimum future lease payments at December 31, 1992 are $9
million. Rental expense totaled $2.5 million and $2.3 million for the years
ended December 31, 1992 and 1991, respectively. The Bank has entered into
contracts for data processing and item processing services at estimated annual
costs of $2 million with expiration dates of March, 1995, and November, 1996.
During 1991, the Plan of Reorganization for Lone Star Steel Company ("LSS"),
Lone Star's other major operating unit, was approved by its creditors and
confirmed by the Bankruptcy Court. There have been no intercompany
transactions between the Bank and LSS, and the Plan had no effect on the
financial statements of the Bank.
17. SUBSEQUENT EVENTS:
In March and April 1993, the Bank entered into additional interest rate swap
arrangements with notional amounts of $215 million. These swap arrangements
were terminated in October 1993, resulting in a gain of approximately
$1.7 million. Additionally, in March 1993, the Bank prepaid $55 million in
FHLB advances resulting in prepayment penalties of $1.4 million.
In April 1993, the Bank sold its South Texas banking centers. This sale
resulted in a gain of approximately $1.1 million. The Bank funded the sale
with advances from the FHLB and proceeds from the sales of securities held for
sale.
On November 12, 1993, Lone Star sold LSST and the Bank to Guaranty Federal
Bank, F.S.B. ("Guaranty") for approximately $156 million. The accompanying
financial statements have been prepared on the historical cost basis of
accounting and no adjustments have been made to reflect the purchase by
Guaranty.
CONDENSED CONSOLIDATED BALANCE SHEET
AMERICAN FEDERAL BANK, F.S.B.
(Unaudited)
September 30,
1993
(in millions)
ASSETS
Cash and cash equivalents $ 89.4
Mortgage-backed and investment securities 20.0
Covered assets 437.2
Loans receivable 725.7
Loans and investments held for sale 150.0
Other assets 54.1
Total assets $ 1,476.4
LIABILITIES AND SHAREHOLDER'S EQUITY
Deposits $ 1,036.9
Advances from Federal Home Loan Bank 278.8
Other borrowings 2.7
Other liabilities 27.8
Total liabilities 1,346.2
Shareholder's equity 130.2
Total liabilities and shareholder's equity $ 1,476.4
See Notes to Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AMERICAN FEDERAL BANK, F.S.B.
(Unaudited)
September 30,
For the nine months ended 1993 1992
(in millions)
Revenue on earning assets:
Interest income:
Loans receivable $ 52.2 $ 39.0
Mortgage-backed and investment securities 7.8 10.5
Other earning assets .9 2.6
Total interest income 60.9 52.1
Net revenue on assets guaranteed by the FSLIC
Resolution Fund 27.1 49.3
Total revenue on earning assets 88.0 101.4
Interest expense:
Deposits 40.0 57.6
Borrowed funds 7.3 2.2
Total interest expense 47.3 59.8
Net revenues before provision
for loan losses 40.7 41.6
Provision for loan losses .4 3.7
Net revenue after provision for loan losses 40.3 37.9
Noninterest income 8.7 6.2
Noninterest expense:
Compensation and benefits 17.8 13.1
Other 17.8 15.6
Total noninterest expense 35.6 28.7
Net income $ 13.4 $ 15.4
See Notes to Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
AMERICAN FEDERAL BANK, F.S.B.
(Unaudited)
September 30,
For the nine months ended 1993 1992
(in millions)
Cash provided by (used for) operating activities:
Net income $ 13.4 $ 15.4
Adjustments to reconcile net income to net cash:
Purchases of securities held for sale,
net of repayment 39.4 ( 71.2)
Accrued FSLIC Resolution Fund assistance ( .8) 10.0
Other 4.2 ( 5.5)
56.2 ( 51.3)
Cash provided by (used for) investing activities:
Purchase of securities ( 10.9) ( 52.0)
Sales, maturities and collections of securities 82.9 120.9
Loan originations and acquisitions ( 253.4) (259.8)
Loan principal collections 278.2 137.8
Principal collected on guaranteed assets 20.6 24.3
Sales and writedowns of guaranteed assets 87.6 322.6
Sales of real estate for investment 8.4 -
Cash used for sale of branches ( 181.3) -
Net cash acquired in acquisitions - 116.3
Other 18.6 ( 1.3)
50.7 408.8
Cash provided by (used for) financing activities:
Net decrease in deposits ( 174.3) (287.3)
Proceeds from borrowed funds 1,209.7 342.5
Repayment of borrowed funds (1,109.5) (507.1)
Dividends paid - ( 3.6)
( 74.1) (455.5)
Net increase (decrease) in cash and cash
equivalents 32.8 ( 98.0)
Cash and cash equivalents at beginning of period 56.6 155.5
Cash and cash equivalents at end of period $ 89.4 $ 57.5
See Notes to Condensed Consolidated Financial Statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN FEDERAL BANK, F.S.B.
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying interim condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year.
NOTE B - SUBSEQUENT EVENT
On November 12, 1993, Guaranty Federal Bank, F.S.B. ("Guaranty") acquired 100
percent (100%) of the outstanding stock of American Federal Bank, F.S.B. for a
cash purchase price of approximately $155.7 million. The accompanying
financial statements have been prepared on the historical cost basis of
accounting and no adjustments have been made to reflect the purchase by
Guaranty.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TEMPLE-INLAND INC. AND SUBSIDIARIES
(Unaudited)
The following pro forma condensed consolidated balance sheet at October 2,
1993, and the pro forma condensed consolidated statements of income for the
nine months ended October 2, 1993 and year ended January 2, 1993, give effect
to the acquisition of one hundred percent (100%) of the outstanding stock of
American Federal Bank, F.S.B. ("American Federal Bank") by Guaranty Federal
Bank, F.S.B. ("Guaranty"), a wholly-owned indirect subsidiary of Temple-Inland
Inc ("Temple-Inland"). The pro forma information is based on the historical
financial statements of Temple-Inland and American Federal Bank giving effect
to the transaction under the purchase method of accounting and the assumptions
and adjustments in the accompanying notes to the pro forma condensed
consolidated financial statements.
The pro forma financial statements have been prepared based upon the financial
statements of American Federal Bank filed with this Report. These pro forma
results have been prepared for informational purposes only and do not purport
to be indicative of what would have occurred had the combination been in
effect on the dates indicated or of the results which may occur in the future.
<TABLE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
TEMPLE-INLAND INC. AND SUBSIDIARIES
(Unaudited)
<CAPTION>
Historical
American Pro Forma Pro Forma
At October 2, 1993 Temple-Inland Federal Bank Adjustments Consolidated
(in millions)
<S> <C> <C> <C> <C>
Assets
Cash $ 975.5 $ 89.4 $(155.7)(a) $ 909.2
Investments 4,724.3 20.0 - 4,744.3
Covered assets 340.7 437.2 5.0 (b) 782.9
Loans receivable 1,828.5 725.7 38.9 (b) 2,593.1
Trade and other receivables 225.0 - - 225.0
Inventories 812.7 150.0 - 962.7
Property and equipment 2,361.2 3.3 ( .6)(b) 2,363.9
Other assets 441.4 50.8 .4 (b) 501.8
9.2 (c)
Total assets $11,709.3 $1,476.4 $(102.8) $13,082.9
Liabilities and Shareholders' Equity
Deposits $ 5,461.3 $1,036.9 $ 15.5 (b) $ 6,513.7
Securities sold under repurchase
agreements and Federal Home
Loan Bank advances 2,315.3 278.8 ( .5)(b) 2,593.6
Long-term debt 1,109.9 - - 1,109.9
Deferred income taxes 116.0 - - 116.0
Short-term borrowings 34.4 2.7 - 37.1
Postretirement benefits 128.9 - - 128.9
Other liabilities 839.8 27.8 12.4 (b) 880.0
Total liabilities 10,005.6 1,346.2 27.4 11,379.2
Shareholders' equity 1,703.7 130.2 (155.7)(a) 1,703.7
16.3 (b)
9.2 (c)
Total liabilities and
shareholders' equity $11,709.3 $1,476.4 $(102.8) $13,082.9
</TABLE>
See Notes to Pro Forma Condensed Consolidated Balance Sheet.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
TEMPLE-INLAND INC. AND SUBSIDIARIES
(Unaudited)
The following pro forma adjustments have been applied to the pro forma
condensed consolidated balance sheet at October 2, 1993.
(a) To reflect the cash purchase price of approximately $155.7 million to
acquire all of the outstanding stock of American Federal Bank.
(b) To reflect the estimated fair value adjustments to American Federal
Bank's historical carrying values of its assets and liabilities.
Net Assets
Increase
(Decrease)
(in millions)
- Covered assets $ 5.0
- Loans receivable 38.9
- Property and equipment ( .6)
- Other assets:
- Goodwill $( 4.1)
- Core deposit intangible 6.6
- Real estate owned ( 1.5)
- Other assets ( .6)
.4
- Deposits ( 15.5)
- FHLB advances .5
- Other liabilities ( 12.4)
$ 16.3
(c) To reflect American Federal Bank earnings from September 30, 1993
through the effective purchase date, November 12, 1993.
<TABLE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
TEMPLE-INLAND INC. AND SUBSIDIARIES
(Unaudited)
<CAPTION>
Historical
For the nine months ended American Pro Forma Pro Forma
October 2, 1993 Temple-Inland Federal Bank Adjustments Consolidated
(in millions, except per share data)
<S> <C> <C> <C> <C>
Revenues
Manufacturing net sales $ 1,599.0 $ - $ - $ 1,599.0
Financial services revenues 467.4 96.7 ( 6.3)(a) 551.7
( 6.1)(b)
2,066.4 96.7 ( 12.4) 2,150.7
Costs and expenses
Manufacturing costs and expenses 1,514.9 - - 1,514.9
Financial services expenses 415.4 83.3 ( 3.1)(b) 495.6
1,930.3 83.3 ( 3.1) 2,010.5
Operating income 136.1 13.4 ( 9.3) 140.2
Parent Company Interest - net ( 51.9) - - ( 51.9)
Other 1.9 - - 1.9
Income before taxes 86.1 13.4 ( 9.3) 90.2
Taxes on Income 25.8 - 1.3 (c) 27.1
Income from continuing operations $ 60.3 $ 13.4 $( 10.6) $ 63.1
Income per share from continuing
operations $1.09 $1.14
Weighted average number of
shares outstanding 55.5 55.5
</TABLE>
See Notes to Pro Forma Condensed Consolidated Statement of Income.
<TABLE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
TEMPLE-INLAND INC. AND SUBSIDIARIES
(Unaudited)
<CAPTION>
Historical
For the year ended American Pro Forma Pro Forma
January 2, 1993 Temple-Inland Federal Bank Adjustments Consolidated
(in millions, except per share data)
<S> <C> <C> <C> <C>
Revenues
Manufacturing net sales $ 2,075.4 $ - $ - $ 2,075.4
Financial services revenues 637.8 141.8 ( 10.4)(a) 755.9
( 13.3)(b)
2,713.2 141.8 ( 23.7) 2,831.3
Costs and expenses
Manufacturing costs and expenses 1,917.6 - - 1,917.6
Financial services expenses 573.4 123.7 ( 5.8)(b) 691.3
2,491.0 123.7 ( 5.8) 2,608.9
Operating income 222.2 18.1 ( 17.9) 222.4
Parent Company Interest - net ( 47.4) - - ( 47.4)
Other 2.2 - - 2.2
Income before taxes 177.0 18.1 ( 17.9) 177.2
Taxes on Income 30.1 - - 30.1
Income from continuing operations $ 146.9 $ 18.1 $( 17.9) $ 147.1
Income per share from continuing
operations $2.65 $2.65
Weighted average number of
shares outstanding 55.5 55.5
</TABLE>
See Notes to Pro Forma Condensed Consolidated Statement of Income.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
TEMPLE-INLAND INC. AND SUBSIDIARIES
(Unaudited)
The following pro forma adjustments have been applied to the pro forma
condensed consolidated statements of income for the nine months ended October
2, 1993, and the year ended January 2, 1993, to give effect to the acquisition
of American Federal Bank, assuming the transaction was consummated
December 29, 1991.
Increase (Decrease)
In Income
Nine Months
Ended Year Ended
October 2, January 2,
1993 1993
(in millions)
(a) To reflect the decrease in interest
on earning assets resulting from
the reduction in funds available for
investment due to the cash purchase
price of approximately $155.7 million;
interest rate assumed equals Guaranty's
actual yield on earning assets for the
applicable periods. $( 6.3) $(10.4)
(b) To reflect accretion (amortization) of
purchase accounting adjustments.
Financial services revenues:
- Covered assets ( .9) ( 2.0)
- Loans receivable ( 5.2) (11.3)
( 6.1) (13.3)
Financial services expenses:
- Property and equipment .1 .2
- Goodwill 1.7 1.7
- Core deposit intangible ( 1.0) ( 1.3)
- Deposits 2.4 5.4
- FHLB advances ( .1) ( .2)
3.1 5.8
(c) To adjust taxes for pro forma adjustments. ( 1.3) -
$(10.6) $(17.9)
INDEX TO EXHIBITS
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
23 Consent of Arthur Andersen & Co.
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated February 12, 1993 included in this Form 8-K, into the
following Temple-Inland Inc. registration statements, (i) Post-Effective
Amendment Number 3 to Registration Statement Number 2-88202 on Form S-8, (ii)
Registration Statement Number 33-20431 on Form S-3, (iii) Registration
Statement Number 33-23132 on Form S-8, (iv) Post-Effective Amendment Number 1
to Registration Statement Number 33-25650 on Form S-8, (v) Post-Effective
Amendment Number 1 to Registration Statement Number 33-27286 on Form S-8, (vi)
Post-Effective Amendment Number 3 to Registration Statement Number 33-31004 on
Form S-8, (vii) Post-Effective Amendment Number 2 to Registration Statement
Number 33-32124 on Form S-8, (viii) Registration Statement Number 33-36393 on
Form S-8, (ix) Registration Statement Number 33-37597 on Form S-8, (x)
Registration Statement Number 33-40381 on Form S-8, (xi) Registration
Statement Number 33-43801 on Form S-8, (xii) Registration Statement Number 33-
43802 on Form S-8, (xiii) Registration Statement Number 33-43978 on Form S-3,
(xiv) Registration Statement Number 33-50880 on Form S-3, (xv) Registration
Statement Number 33-48034 on Form S-8, (xvi) Registration Statement Number 33-
54388 on Form S-8, and (xvii) Registration Statement Number 33-63104 on Form
S-8.
/S/ Arthur Andersen & Co.
Dallas, Texas
January 27, 1994
