<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
MARK ONE
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
FOR THE TRANSITION PERIOD
FROM TO
--------------- ---------------
Commission File Number 2-90200
-------
FIRST MCMINNVILLE CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer As Specified in its Charter)
Tennessee 62-1198119
------------------------------- ----------------------------
(State or Other Jurisdiction of (IRS Employer Identification
Incorporation or Organization) Number)
200 East Main Street, McMinnville, TN 37110
--------------------------------------------
(Address of Principal Executive Offices)
(615) 473-4402
---------------------------
(Issuer's Telephone Number)
Not Applicable
---------------------------------------------------
Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
------- -------
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: 552,043 .
--------------
Transitional Small Business Disclosure Format (check one):
YES NO X
-------- --------
Total number of sequentially-numbered pages 17
-----
Exhibit index is at sequentially-numbered page 16
------
1
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited consolidated financial statements of the small business issuer
and its wholly-owned subsidiary are as follows:
Consolidated Balance Sheets - September 30, 1995 and December 31, 1994.
Consolidated Statements of Earnings - For the three months and nine
months ended September 30, 1995 and 1994.
Consolidated Statements of Cash Flows - For the nine months ended
September 30, 1995 and 1994.
2
<PAGE> 3
FIRST MCMINNVILLE CORPORATION
Consolidated Balance Sheets
September 30, 1995 and December 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- -------------
(In Thousands)
<S> <C> <C>
Assets
------
Loans $ 98,363 92,193
Less: Allowance for loan losses (1,628) (1,448)
--------- ---------
Net loans 96,735 90,745
Securities:
Held-to-maturity, at cost (market value
$51,921,000 and $54,457,000, respectively) 50,940 56,472
Available-for-sale, at market (amortized cost
$26,487,000 and $24,715,000, respectively) 26,542 23,804
Interest-bearing deposits in other banks 100 100
Federal funds sold 5,975 -
--------- ---------
Total earning assets 180,292 171,121
Cash and due from banks 4,093 4,028
Bank premises and equipment, net of
accumulated depreciation 1,821 1,654
Accrued interest receivable 2,015 1,922
Deferred tax asset 296 641
Other real estate 521 524
Other assets 721 596
--------- ---------
$ 189,759 180,486
========= =========
Liabilities and Stockholders' Equity
------------------------------------
Deposits $ 153,897 148,631
Securities sold under repurchase agreements 4,421 2,292
Federal funds purchased - 600
Short-term notes payable 1 -
Other liabilities 2,411 2,511
--------- ---------
Total liabilities 160,730 154,034
--------- ---------
Stockholders' equity:
Common stock, $2.50 par value; authorized
5,000,000 shares and issued 579,537 shares 1,512 1,512
Additional paid-in capital 1,512 1,512
Retained earnings 27,352 25,305
Net unrealized gains (losses) on available-
for-sale securities, net of tax expense
of $21,000 and tax benefits of $236,000,
respectively 35 (565)
--------- ---------
30,411 27,764
Less cost of treasury stock of 27,494 shares
at September 30, 1995 and 26,117 shares at
December 31, 1994 (1,382) (1,312)
--------- ---------
Total stockholders' equity 29,029 26,452
--------- ---------
$ 189,759 180,486
========= =========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
3
<PAGE> 4
FIRST MCMINNVILLE CORPORATION
Consolidated Statements of Earnings
Three Months Ended September 30, 1995 and 1994
and Nine Months Ended September 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------
1995 1994 1995 1994
---- ---- ---- ----
(Dollars In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 2,209 1,867 6,418 5,384
Interest on dividends on securities:
Taxable securities 931 935 2,784 2,750
Tax exempt from Federal income taxes 294 317 896 1,002
Interest on federal funds sold 63 25 100 85
Interest on interest-bearing deposits in other
banks and other interest 1 1 3 6
-------- ------- ------- -------
Total interest income 3,498 3,145 10,201 9,227
-------- ------- ------- -------
Interest expense:
Interest on negotiable order of withdrawal
accounts 131 138 427 387
Interest on money market demand and savings
accounts 286 304 888 884
Interest on certificates of deposit 1,214 768 3,343 2,165
Interest on securities sold under repurchase
agreements 6 22 70 61
Interest on federal funds purchased 17 2 17 2
-------- ------- ------- -------
Total interest expense 1,654 1,234 4,745 3,499
-------- ------- ------- -------
Net interest income 1,844 1,911 5,456 5,728
Provision for loan losses 40 60 160 180
-------- ------- ------- -------
Net interest income after provision
for loan losses 1,804 1,851 5,296 5,548
-------- ------- ------- -------
Other income:
Service charges on deposit accounts 120 70 345 228
Other fees and commissions 40 52 113 122
Commissions and fees on fiduciary activities 6 4 15 23
Security gains related to available-for-sale
securities 42 7 79 232
Other income 15 14 47 48
-------- ------- ------- -------
Total other income 223 147 599 653
-------- ------- ------- -------
Other expenses:
Salaries and employee benefits 477 442 1,502 1,458
Occupancy expenses, net 45 45 148 146
Furniture and equipment expense 22 22 55 62
Data processing expense 52 27 149 87
Security losses related to available-for-sale
securities - - 24 243
Other operating expenses 213 279 757 856
-------- ------- ------- -------
Total other expenses 809 815 2,635 2,852
-------- ------- ------- -------
Earnings before income taxes 1,218 1,183 3,260 3,349
Income taxes 343 322 937 921
-------- ------- ------- -------
Net earnings $ 875 861 2,323 2,428
======== ======= ======= =======
Weighted average number of shares outstanding 552,199 554,656 552,739 555,108
======== ======= ======= =======
Per share amounts:
Net earnings $ 1.58 1.55 4.20 4.38
======== ======= ======= =======
Dividends $ - - .50 .48
======== ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
4
<PAGE> 5
FIRST MCMINNVILLE CORPORATION
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1995 and 1994
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
1995 1994
---- ----
(In Thousands)
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 9,914 9,148
Fees and commissions received 544 421
Interest paid (4,118) (3,219)
Cash paid to suppliers and employees (2,237) (2,477)
Income taxes paid (953) (972)
--------------- --------------
Net cash provided by operating activities 3,150 2,901
--------------- --------------
Cash flows from investing activities:
Proceeds from maturities of held-to-maturity
securities 8,631 23,001
Proceeds from maturities of available-for-sale
securities 4,677 -
Proceeds from sales of available-for-sale
securities 9,145 23,613
Purchase of available-for-sale securities (15,512) (9,730)
Proceeds from maturities of interest bearing
deposits in other banks - 100
Purchase of held-to-maturity securities (3,099) (37,969)
Loans made to customers, net of repayments (6,150) (9,806)
Purchase of premise and equipment (329) (22)
Proceeds from sales of other real estate 3 249
--------------- --------------
Net cash used in investing activities (2,634) (10,564)
--------------- --------------
Cash flows from financing activities:
Net increase (decrease) in non-interest
bearing, savings and NOW deposit accounts (1,778) 3,266
Net increase in time deposits 7,044 2,695
Increase (decrease) in securities sold under
repurchase agreement 2,129 (41)
Increase (decrease) in Federal funds purchased (600) 1,600
Dividends paid (1,203) (1,112)
Payments to acquire treasury stock (69) (66)
Advances on line of credit 14 -
Repayment of advances on line of credit (13) -
--------------- --------------
Net cash provided by financing
activities 5,524 6,342
--------------- --------------
Net increase (decrease) in cash and cash
equivalents 6,040 (1,321)
Cash and cash equivalents at beginning of
period 4,028 5,966
--------------- --------------
Cash and cash equivalents at end of period $ 10,068 4,645
=============== ==============
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
5
<PAGE> 6
FIRST MCMINNVILLE CORPORATION
Consolidated Statements of Cash Flows, Continued
Nine Months Ended September 30, 1995 and 1994
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
(In Thousands)
<S> <C> <C>
Reconciliation of net earnings to net cash
provided by operating activities:
Net earnings $ 2,323 2,428
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 162 116
Provision for loan losses 160 180
Security losses related to available-
for-sale 24 243
Security gains related to available-
for-sale (79) (232)
FHLB dividend reinvestment (27) (19)
Decrease in refundable income taxes 39 -
Increase in interest receivable (93) (60)
Decrease in taxes payable (55) (51)
Increase in interest payable 627 280
Increase in other assets (164) (92)
Increase in other liabilities 233 108
-------------- -----------
Total adjustments 827 473
-------------- -----------
Net cash provided by operating
activities $ 3,150 2,901
============== ===========
</TABLE>
Supplemental schedule of noncash activities:
On January 1, 1994, the Company classified $61,719,000
as securities available-for-sale upon adoption of the
provisions of Statement of Financial Accounting
Standards No. 115.
During the nine months ended September 30, 1994, the
Company transferred $20,004,000 in investment
securities classified as available-for-sale to
investment securities held-to-maturity. These
transfers of the investment securities were
recorded at their fair market value which
approximated their book value at the date
of the transfer.
See accompanying notes to consolidated financial statements (unaudited).
6
<PAGE> 7
FIRST MCMINNVILLE CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
Basis of Presentation
The unaudited consolidated financial statements include the accounts of First
McMinnville Corporation (Company) and its wholly-owned subsidiary, The First
National Bank of McMinnville (Bank).
The accompanying consolidated financial statements have been prepared, without
audit, in accordance with the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations.
In the opinion of management, the statements contain all adjustments and
disclosures necessary to summarize fairly the financial position of the Company
as of September 30, 1995 and December 31, 1994, and the results of operations
for the nine months and three months ended September 30, 1995 and 1994 and
changes in cash flows for the nine months ended September 30, 1995 and 1994.
All significant intercompany transactions have been eliminated. The interim
consolidated financial statements should be read in conjunction with the notes
to the consolidated financial statements presented in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1994. The results for
interim periods are not necessarily indicative of results to be expected for
the complete fiscal year.
Allowance for Loan Losses
Transactions in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------
1995 1994
---- ----
(In Thousands)
<S> <C> <C>
Balance, January 1, 1995 and 1994,
respectively $ 1,448 1,222
Add (deduct):
Losses charged to allowance (15) (33)
Recoveries credited to allowance 35 9
Provision for loan losses 160 180
------------ ----------
Balance, September 30, 1995 and 1994,
respectively $ 1,628 1,378
============ ==========
</TABLE>
7
<PAGE> 8
FIRST MCMINNVILLE CORPORATION
Notes to Consolidated Financial Statements, Continued
(Unaudited)
Effect of Change in Accounting for Investment Securities
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 115 (SFAS No. 115), "Accounting for Certain Investments in Debt
and Equity Securities", effective January 1, 1994. Under the provisions of the
Statement, securities are to be classified in three categories and accounted
for as follows:
_ Debt securities that the enterprise has the positive intent and
ability to hold to maturity are classified as held-to-maturity
securities and reported at amortized cost.
_ Debt and equity securities that are bought and held principally for
the purpose of selling them in the near term are classified as
trading securities and reported at fair value, with unrealized gains
and losses included in earnings.
_ Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as
available-for-sale securities and reported at fair value, with
unrealized gains and losses excluded from earnings and reported in a
separate component of shareholders' equity.
No securities have been classified as trading securities. The effect of the
adoption of SFAS No. 115 as of January 1, 1994, was to increase the capital of
the Company by $992,000 which represents the unrealized appreciation in
securities available-for-sale of $1,599,000 less applicable taxes of $607,000.
Earnings Per Common Share
Earnings per share is computed based upon the weighted average number of common
shares outstanding during the year. On September 13, 1994, the Board of
Directors declared a two-for-one stock split, effected in the form of a 100%
stock dividend payable October 1, 1994 to shareholders of record on September
13, 1994. The weighted average number of shares outstanding used in the
computation of earnings per share and dividends per share has been
retroactively adjusted to reflect the stock split.
8
<PAGE> 9
FIRST MCMINNVILLE CORPORATION
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operations
The purpose of this discussion is to provide insight into the
financial condition and results of operations of the Registrant and its
subsidiary. This discussion should be read in conjunction with the
consolidated financial statements. Reference should also be made to the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1994 for
a complete discussion of factors that impact liquidity, capital and the results
of operations.
Liquidity and Interest Rate Sensitivity Management
The concept of liquidity involves the ability of the Registrant
and its subsidiary to meet future cash flow requirements, particularly those of
customers who are either withdrawing funds from their accounts or borrowing to
meet their credit needs.
Proper asset/liability management is designed to maintain
stability in the balance of interest-sensitive assets to interest-sensitive
liabilities in order to provide a stable growth in net interest margins.
Earnings on interest-sensitive assets such as loans tied to the prime rate of
interest and federal funds sold, may vary considerably from fixed rate assets
such as long-term investment securities and fixed rate loans.
Interest-sensitive liabilities such as large certificates of deposit and money
market certificates, generally require higher costs than fixed rate instruments
such as passbook savings.
Banks, in general, must maintain large cash balances to meet
day-to-day cash flow requirements as well as maintaining required reserves for
regulatory agencies. The cash balances maintained are the primary source of
liquidity. Federal funds sold, which are basically overnight or short-term
loans to other banks that increase the other bank's required reserves, are also
a major source of liquidity.
The Company's investment portfolio consists of earning assets that
provide interest income. For those securities classified as held-to-maturity
the Company has the ability and intention to hold these securities until
maturity. Securities classified as available for sale include securities
intended to be used as part of the Company's asset/liability strategy and/or
securities that may be sold in response to changes in interest rate, prepayment
risk, the need or desire to increase capital and similar economic factors.
Securities totaling approximately $7.0 million mature or reprice within the
next twelve months.
A secondary source of liquidity is the Bank's loan portfolio. At
September 30, 1995 commercial loans of approximately $18.0 million and other
loans (mortgage and consumer) of approximately $17.6 million either will become
due or will be subject to rate adjustments within twelve months. Continued
emphasis will be placed on structuring adjustable rate loans.
9
<PAGE> 10
FIRST MCMINNVILLE CORPORATION
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation,
Continued
As for liabilities, certificates of deposit of $100,000 or greater
of approximately $22.4 million will become due during the next twelve months.
The Bank's deposit base increased approximately $5.3 million during the nine
months ended September 30, 1995. Securities sold under repurchase agreements
increased approximately $2.1 million during the nine months ended September 30,
1995 and approximately $1.9 million during the three months ended September 30,
1995. The deposit base increased approximately $2.8 million during the three
months ended September 30, 1995.
Historically, there has been no significant reduction in
immediately withdrawable accounts such as negotiable order of withdrawal
accounts, money market demand accounts, demand deposit and regular savings.
Management anticipates that there will be no significant withdrawals from these
accounts in the future.
The Bank is limited by banking regulatory agencies as to the
amount of dividends that it can pay. At September 30, 1995, the Bank can
declare during the remainder of 1995 cash dividends in an aggregate amount not
to exceed approximately $5.4 million, exclusive of any 1995 net earnings,
without prior approval of the Comptroller of the Currency. However, most of
these funds will be retained for use in the Bank's operations rather than being
paid out in dividends. It is anticipated that with present maturities, the
anticipated growth in deposit base, and the efforts of management in its
asset/liability management program, liquidity will not pose a problem in the
foreseeable future. At the present time there are no known trends or any known
commitments, demands, events or uncertainties that management believes will
result in or that are reasonable likely to result in the Company's liquidity
changing in any material way.
Capital Resources
A primary source of capital is internal growth through retained
earnings. The ratio of stockholder's equity to total assets was 15.3% at
September 30, 1995 and 14.7% at December 31, 1994. Total assets increased 5.1%
during the nine months ended September 30, 1995. The annualized rate of return
on stockholders' equity for the first nine months of 1995 was 11.2% compared to
12.1% for the comparable period in 1994. Because of the high percentage of
equity capital, the return on equity is lower than the average for banks in the
Bank's peer group. Dividends of $276,000 and $264,000 or $.50 and $.48 per
share, respectively, were declared in the nine months ended September 30, 1995
and 1994, respectively. Cash dividends will be increased in the remainder of
1995 over 1994 only as profits permit. Dividends paid during 1994 were $2.15
per share. No material changes in the mix or cost of capital is anticipated in
the foreseeable future.
The Bank currently has plans to build a new branch and to remodel
the main office at a total estimated cost of $700,000. At September 30, 1995,
approximately $250,000 has been incurred related to these projects. At the
present time there are no other material commitments for capital expenditures.
10
<PAGE> 11
FIRST MCMINNVILLE CORPORATION
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation,
Continued
Regulations of the Comptroller of the Currency establish required
minimum capital levels for the Bank. Under these regulations, national banks
must maintain certain capital levels as a percentage of average total assets
(leverage capital ratio) and as a percentage of total risk-based assets
(risk-based capital ratio). Under the risk- based requirements, various
categories of assets and commitments are assigned a percentage related to
credit risk ranging from 0% for assets backed by the full faith and credit of
the United States to 100% for loans other than residential real estate loans
and certain off-balance sheet commitments. Total capital is characterized as
either Tier 1 capital which includes common shareholders' equity, noncumulative
perpetual preferred stock and a limited amount of cumulative perpetual
preferred - or Tier 2 capital which includes the allowance for loan losses up
to 1.25% of risk weighted assets, perpetual preferred stock, subordinated debt
and various other hybrid capital instruments, subject to various limits.
Goodwill is not includable in Tier 1 or Tier 2 capital. National banks must
maintain a Tier 1 capital to risk-based assets of at least 4.0%, a Tier 2
capital to risk-based assets ratio of at least 8.0% and a leverage capital
ratio defined as Tier 1 capital to adjusted total assets of at least 4.0%. The
same ratios are also required in order for a national bank to be considered
"adequately capitalized" under the OCC's "prompt corrective action"
regulations, which impose certain operating restrictions on institutions which
are not adequately capitalized. The Bank has a Tier 1 risk-based ratio of
27.5%, a Tier 2 capital to risk-based ratio of 28.7% and a Tier 1 leverage
ratio of 15.5%, and was considered "well capitalized" under the regulations.
The Federal Reserve Board imposes consolidated capital guidelines
on bank holding companies which have more than $150 million in consolidated
assets. These guidelines require bank holding companies to maintain
consolidated capital ratios which are essentially the same as the minimum
capital levels required for national banks. The Company's consolidated capital
ratios were substantially the same as those set forth above for the Bank, and
substantially exceeded the minimums required under these Federal Reserve Board
guidelines.
11
<PAGE> 12
FIRST MCMINNVILLE CORPORATION
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation,
Continued
Results of Operations
Net earnings were $2,323,000 for the nine months ended September
30, 1995 as compared to $2,428,000 for the same period in 1994. Net earnings
were $875,000 for the quarter ended September 30, 1995 as compared to $861,000
during the same quarter in 1994.
As in most financial institutions, a major element in analyzing
the statement of earnings is net interest income which is the excess of
interest earned over interest paid. This is particularly true with the
volatility of interest rates encountered in recent years.
The Company's interest income, excluding tax equivalent
adjustments, increased by $974,000 or 10.6% during the nine months ended
September 30, 1995 as compared to the comparable period in 1994. Interest
income for the quarter ended September 30, 1995 increased $353,000 or 11.2%
when compared to the quarter ended September 30, 1994 and $111,000 or 3.3% as
compared to the second quarter of 1995. Such increases were primarily
attributable to an increase in weighted average interest rates, together with
an increase in higher yielding earning assets during the nine months ended
September 30, 1995 as evidenced by an increase in loans of approximately $6.2
million and a decrease in securities of approximately $2.8 million. The ratio
of average earning assets to total average assets was 94.9% for the nine months
ended September 30, 1995 as compared to 95.4% for the year ended December 31,
1994.
Interest expense increased by $1,246,000 for the nine months ended
September 30, 1995 or 35.6% as compared to the same period in 1994. Interest
expense for the quarter ended September 30, 1995 increased $420,000 or 34.0% as
compared to the quarter ended September 30, 1994. Interest expense for the
quarter ended September 30, 1995 increased $56,000 or 3.5% over the quarter
ended June 30, 1995. Such increases in interest expense can be attributable to
an increase in weighted average interest rates combined with an increase in
interest bearing liabilities.
The foregoing resulted in net interest income of $5,456,000 for
the nine months ended September 30, 1995, a decrease of $272,000 or 4.7%
compared to the prior year period. Net interest income for the quarter ended
September 30, 1995 decreased $67,000 or 3.5% as compared to the third quarter
of 1994 and increased $55,000 or 3.1% over the quarter ended June 30, 1995.
12
<PAGE> 13
FIRST MCMINNVILLE CORPORATION
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation,
Continued
Results of Operations, Continued
The provision for loan losses was $160,000 and $180,000 for the
first nine months of 1995 and 1994, respectively. The provision was $40,000
and $60,000 for the quarters ended September 30, 1995 and 1994, respectively.
The provision for loan losses is based on past loan experience and other
factors which, in management's judgment, deserve current recognition in
estimating possible loan losses. Such factors include past loan loss
experience, growth and composition of the loan portfolio, review of specific
loan problems, the relationship of the allowance for loan losses to outstanding
loans, and current economic conditions that may affect the borrower's ability
to repay. Management has in place a system that is designed to identify and to
monitor loan problems on a timely basis.
The following schedule details selected information as to
non-performing loans of the Company at September 30, 1995:
<TABLE>
<CAPTION>
September 30, 1995
----------------------------
Past Due
90 Days Non-Accrual
-------- -----------
(In Thousands)
<S> <C> <C>
Real estate loans $ 25 -
Installment loans 255
Commercial, financial and agricultural loans 10 407
------------ --------------
$ 290 407
============ ==============
Renegotiated loans $ - -
============ ==============
</TABLE>
At September 30, 1995, loans which include the above, totaling
$8,669,000 were included in the Company's internal classified loan list. Of
these loans $6,589,000 are real estate and $2,080,000 are personal. The
collateral values securing these loans total approximately $15,932,000,
($14,221,000 related to real property and $1,711,00 related to personal loans).
Such loans are listed as classified when information obtained about possible
credit problems of the borrower has prompted management to question the ability
of the borrower to comply with the repayment terms of the loan agreement. The
classifications include three performing working capital loans in the amounts
of $1,987,930, $658,380 and $407,235, respectively. These borrowers have
experienced losses in recent years which resulted in the classifications.
These lines are secured by collateral (consisting of real estate and personal
property). The collateral valuations received by management indicate an
estimated value of $5,352,371, $811,774 and $551,095, respectively. The loan
classifications do not represent or result from trends or uncertainties which
management expects will materially impact future operating results, liquidity
or capital resources.
13
<PAGE> 14
FIRST MCMINNVILLE CORPORATION
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation,
Continued
Results of Operations, Continued
There were no material amounts of other interest-bearing assets
(interest-bearing deposits with other banks, municipal bonds, etc.) at
September 30, 1995 which would be required to be disclosed as past due,
non-accrual, restructured or potential problem loans, if such interest-bearing
assets were loans.
Non-interest income excluding securities transactions increased
$99,000 or 23.5% during the nine months ended September 30, 1995 as compared to
the same period in 1994. The increase for the quarter ended September 30, 1995
was $41,000 or 29.3% as compared to the comparable quarter in 1994. The
increases were due primarily to an increase in customer service charges on
deposit accounts. Commissions and service charges are monitored continually to
insure maximum return based on costs and competition.
Securities gains during the nine months ended September, 1995
amounted to $79,000 as compared to gains of $232,000 for the comparable period
in 1994. The gains during 1995 and 1994 related to transactions in the
available- for-sale category. These gains were incurred primarily in
conjunction with management's strategies to restructure the investment
portfolio to improve the quality of the portfolio, to improve maturity
distribution and to maintain a flexible position to react to market conditions.
Non-interest expense, excluding securities transactions, increased
$2,000 or .1% during the first nine months of 1995 as compared to the same
period in 1994. The decrease for the quarter ended September 30, 1995 was
$6,000 or .7% as compared to the quarter ended September 30, 1994. The slight
increase during the nine months ended September 30, 1995 resulted primarily
from increases in salary and employee benefits and an increase in data
processing expenses which resulted from the installation of new equipment to
provide customers with check imaging services. These increases were offset by
a decrease in the FDIC assessment rate effective for the second half of 1995.
The increase in data processing cost related to the check imaging services is
expected to generate net savings in postage and other handling costs. The
slight decrease in other expenses in the quarter ended September 30, 1995 as
compared to the third quarter of 1994 resulted primarily from the impact of the
reduced FDIC assessment rate which became effective during the third quarter of
1995. The decrease in the FDIC assessment during the quarter more than offset
the increase in salaries and employee benefits. Except as noted above, fixed
asset costs are expected to remain stable in the remainder of 1995.
14
<PAGE> 15
FIRST MCMINNVILLE CORPORATION
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation,
Continued
Results of Operations, Continued
Securities losses during the nine months ended September 30, 1995
and 1994 amounted to $24,000 and $243,000, respectively, related to
transactions in the available-for-sale category. The losses were incurred
primarily in conjunction with management's strategies to restructure the
investment portfolio to improve the quality of the portfolio, to improve
maturity distribution and to maintain a flexible position to react to market
conditions.
Management is not aware of any current recommendations by the
regulatory authorities which, if implemented, would have a material adverse
effect on the Company's liquidity, capital resources or operations.
Impact of Inflation
The primary impact which inflation has on the results of the
Company's operations is evidenced by its effects on interest rates. Interest
rates tend to reflect, in part, the financial market's expectations of the
level of inflation and, therefore, will generally rise or fall as the level of
expected inflation fluctuates. To the extent interest rates paid on deposits
and other sources of funds rise or fall at a faster rate than the interest
income earned on funds, loans or invested, net interest income will vary.
Inflation also impacts on non-interest expenses as goods and services are
purchased, although this has not had a significant effect on net earnings. If
the inflation rate stays flat or increases slightly, the effect on profits is
not expected to be significant.
15
<PAGE> 16
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 -- Financial Data Schedule (for SEC purposes only).
(b) No reports on Form 8-K have been filed during the quarter for which
this report is filed.
16
<PAGE> 17
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.
FIRST MCMINNVILLE CORPORATION
---------------------------------
(Registrant)
DATE: 11-10-95 /s/ Charles C. Jacobs
---------------------------- --------------------------------
Charles C. Jacobs
President and Chief Executive
Officer
DATE: 11-10-95 /s/ Kenny D. Neal
---------------------------- --------------------------------
Kenny D. Neal
Chief Financial and Accounting
Officer
17
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<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 4,093
<INT-BEARING-DEPOSITS> 136,012
<FED-FUNDS-SOLD> 5,975
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 26,542
<INVESTMENTS-CARRYING> 50,940
<INVESTMENTS-MARKET> 51,921
<LOANS> 98,363
<ALLOWANCE> 1,628
<TOTAL-ASSETS> 189,759
<DEPOSITS> 153,897
<SHORT-TERM> 4,422
<LIABILITIES-OTHER> 2,411
<LONG-TERM> 0
<COMMON> 1,512
0
0
<OTHER-SE> 27,517
<TOTAL-LIABILITIES-AND-EQUITY> 189,759
<INTEREST-LOAN> 6,418
<INTEREST-INVEST> 3,680
<INTEREST-OTHER> 103
<INTEREST-TOTAL> 10,201
<INTEREST-DEPOSIT> 4,658
<INTEREST-EXPENSE> 4,745
<INTEREST-INCOME-NET> 5,456
<LOAN-LOSSES> 160
<SECURITIES-GAINS> 55
<EXPENSE-OTHER> 2,611
<INCOME-PRETAX> 3,260
<INCOME-PRE-EXTRAORDINARY> 3,260
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,323
<EPS-PRIMARY> 4.20
<EPS-DILUTED> 4.20
<YIELD-ACTUAL> 0
<LOANS-NON> 407
<LOANS-PAST> 290
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 8,669
<ALLOWANCE-OPEN> 1,448
<CHARGE-OFFS> 15
<RECOVERIES> 35
<ALLOWANCE-CLOSE> 1,628
<ALLOWANCE-DOMESTIC> 1,628
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
