<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, 1996
[ ] 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: October 16, 1996 - 536,783.
--------------------------
Transitional Small Business Disclosure Format (check one):
YES NO X
----- -----
Total number of sequentially-numbered pages 16
----
Exhibit index is at sequentially-numbered page 15
----
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, 1996 and December 31, 1995.
Consolidated Statements of Earnings - For the three months and nine months
ended September 30, 1996 and 1995.
Consolidated Statements of Cash Flows - For the nine months ended September
30, 1996 and 1995.
2
<PAGE> 3
FIRST MCMINNVILLE CORPORATION
Consolidated Balance Sheets
September 30, 1996 and December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(In Thousands)
<S> <C> <C>
Assets
Loans $105,654 100,859
Less: Allowance for loan losses (1,563) (1,562)
-------- -------
Net loans 104,091 99,297
Securities:
Held-to-maturity, at cost (market value
$55,523,000 and $49,839,000, respectively) 55,277 48,837
Available-for-sale, at market (amortized cost
$25,242,000 and $32,073,000, respectively) 24,675 32,269
Interest-bearing deposits in other banks 100 100
Federal funds sold - 300
-------- -------
Total earning assets 184,143 180,803
Cash and due from banks 6,299 4,872
Bank premises and equipment, net of
accumulated depreciation 2,300 1,881
Accrued interest receivable 2,189 2,015
Deferred tax asset 534 245
Other real estate 146 305
Other assets 540 542
-------- -------
$196,151 190,663
======== =======
Liabilities and Stockholders' Equity
Deposits $157,841 154,551
Securities sold under repurchase agreements 4,190 4,213
Federal funds purchased 1,800 -
Other liabilities 2,321 3,010
-------- -------
Total liabilities 166,152 161,774
-------- -------
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 29,535 27,171
Net unrealized gains (losses) on available-
for-sale securities, net of tax benefits
of $215,000 and income taxes of $74,000,
respectively (351) 122
-------- -------
32,208 30,317
Less cost of treasury stock of 42,754 shares
at September 30, 1996 and 28,366 shares at
December 31, 1995 (2,209) (1,428)
-------- -------
Total stockholders' equity 29,999 28,889
-------- -------
$196,151 190,663
======== =======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
3
<PAGE> 4
FIRST MCMINNVILLE CORPORATION
Consolidated Statements of Earnings
Three Months Ended September 30, 1996 and 1995
and Nine Months Ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ------- -------
1996 1995 1996 1995
-------- ------- ------- -------
(Dollars In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 2,304 2,209 6,862 6,418
Interest on dividends on securities:
Taxable securities 1,022 931 2,898 2,784
Tax exempt from Federal income taxes 331 294 984 896
Interest on federal funds sold - 63 74 100
Interest on interest-bearing deposits in other
banks and other interest 2 1 5 3
-------- ------- ------- -------
Total interest income 3,659 3,498 10,823 10,201
-------- ------- ------- -------
Interest expense:
Interest on negotiable order of withdrawal
accounts 119 131 356 427
Interest on money market demand and savings
accounts 242 286 724 888
Interest on certificates of deposit 1,246 1,214 3,759 3,343
Interest on securities sold under repurchase
agreements and short-term borrowings 59 23 103 87
-------- ------- ------- -------
Total interest expense 1,666 1,654 4,942 4,745
-------- ------- ------- -------
Net interest income 1,993 1,844 5,881 5,456
Provision for loan losses 30 40 30 160
-------- ------- ------- -------
Net interest income after provision
for loan losses 1,963 1,804 5,851 5,296
-------- ------- ------- -------
Other income:
Service charges on deposit accounts 127 120 390 345
Other fees and commissions 50 40 125 113
Commissions and fees on fiduciary activities 8 6 20 15
Security gains related to available-for-sale
securities 49 42 53 79
Other income 5 15 22 47
-------- ------- ------- -------
Total other income 239 223 610 599
-------- ------- ------- -------
Other expenses:
Salaries and employee benefits 507 477 1,568 1,502
Occupancy expenses, net 60 45 167 148
Furniture and equipment expense 23 22 65 55
Data processing expense 69 52 180 149
Security losses related to available-for-sale
securities 57 - 146 24
Other operating expenses 214 213 638 757
-------- ------- ------- -------
Total other expenses 930 809 2,764 2,635
-------- ------- ------- -------
Earnings before income taxes 1,272 1,218 3,697 3,260
Income taxes 337 343 1,059 937
-------- ------- ------- -------
Net earnings $ 935 875 2,638 2,323
======== ======= ======= =======
Weighted average number of shares outstanding 538,635 552,199 545,242 552,739
======== ======= ======= =======
Per share amounts:
Net earnings $ 1.74 1.58 4.84 4.20
======== ======= ======= =======
Dividends $ - - .50 .50
======== ======= ======= =======
</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, 1996 and 1995
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
1996 1995
-------- -------
(In Thousands)
<S> <C> <C>
Cash flows from operating activities:
Interest received $10,605 9,914
Fees and commissions received 557 544
Interest paid (4,877) (4,118)
Cash paid to suppliers and employees (2,286) (2,237)
Income taxes paid (1,025) (953)
------- ------
Net cash provided by operating
activities 2,974 3,150
------- ------
Cash flows from investing activities:
Proceeds from maturities of held-to-maturity
securities 14,897 8,631
Proceeds from maturities of available-for-sale
securities 4,549 4,677
Proceeds from sales of available-for-sale
securities 8,944 9,145
Purchase of available-for-sale securities (6,724) (15,512)
Purchase of held-to-maturity securities (21,324) (3,099)
Loans made to customers, net of repayments (4,865) (6,150)
Purchase of premise and equipment (571) (329)
Proceeds from sales of other real estate 200 3
------- ------
Net cash used in investing
activities (4,894) (2,634)
------- ------
Cash flows from financing activities:
Net increase (decrease) in non-interest
bearing, savings and NOW deposit accounts 770 (1,778)
Net increase in time deposits 2,520 7,044
Increase (decrease) in securities sold under
repurchase agreement (23) 2,129
Increase (decrease) in Federal funds purchased 1,800 (600)
Dividends paid (1,239) (1,203)
Payments to acquire treasury stock (781) (69)
Advances on line of credit 45 14
Repayment of advances on line of credit (45) (13)
------- ------
Net cash provided by financing
activities 3,047 5,524
------- ------
Net increase in cash and cash equivalents 1,127 6,040
Cash and cash equivalents at beginning of
period 5,172 4,028
------- ------
Cash and cash equivalents at end of period $ 6,299 10,068
======= ======
</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, 1996 and 1995
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
--------- -------
(In Thousands)
<S> <C> <C>
Reconciliation of net earnings to net cash
provided by operating activities:
Net earnings $ 2,638 2,323
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 152 162
Provision for loan losses 30 160
Security losses related to available-
for-sale 146 24
Security gains related to available-
for-sale (53) (79)
FHLB dividend reinvestment (31) (27)
Decrease in refundable income taxes 25 39
Increase in interest receivable (174) (93)
Increase in taxes payable 9 (55)
Increase in interest payable 65 627
Increase in other assets (35) (164)
Increase in other liabilities 202 233
--------- -------
Total adjustments 336 827
--------- -------
Net cash provided by operating
activities $ 2,974 3,150
========= =======
Supplemental schedule of noncash activities:
Non-cash transfers from loans to other
real estate $ 41 73
========= =======
Unrealized gain (loss) in value of
securities available-for-sale, net of
income tax benefit of $289,000 in 1996
and income taxes of $367,000 in 1995 $(473,000) 599,000
========= =======
</TABLE>
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, 1996 and December 31, 1995, and the results of operations
for the nine months and three months ended September 30, 1996 and 1995 and
changes in cash flows for the nine months ended September 30, 1996 and 1995.
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, 1995. 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,
--------------------
1996 1995
------ -----
(In Thousands)
<S> <C> <C>
Balance, January 1, 1996 and 1995,
respectively $1,562 1,448
Add (deduct):
Losses charged to allowance (77) (15)
Recoveries credited to allowance 48 35
Provision for loan losses 30 160
------ -----
Balance, September 30, 1996 and 1995,
respectively 1,563 1,628
====== =====
</TABLE>
7
<PAGE> 8
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, 1995 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 Company 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 $7.4 million mature or reprice within the next twelve
months.
A secondary source of liquidity is the Bank's loan portfolio. At
September 30, 1996 commercial loans of approximately $17.0 million and other
loans (mortgage and consumer) of approximately $19.9 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.
8
<PAGE> 9
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 $21.3 million will become due during the next twelve months. The
Bank's deposit base increased approximately $3.3 million during the nine months
ended September 30, 1996. Securities sold under repurchase agreements
decreased approximately $23,000 during the nine months ended September 30, 1996
and increased approximately $922,000 during the three months ended September
30, 1996. The deposit base increased approximately $3,290,000 during the nine
months ended September 30, 1996.
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, 1996, the Bank can declare during
the remainder of 1996 cash dividends in an aggregate amount not to exceed
approximately $5.4 million, exclusive of any 1996 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,
1996 and 15.2% at December 31, 1995. Total assets increased 2.9% during the
nine months ended September 30, 1996. The annualized rate of return on
stockholders' equity for the first nine months of 1996 was 11.9% compared to
11.2% for the comparable period in 1995. The high percentage of equity capital
to total assets contributes to a return on equity lower than the average for
banks in the Bank's peer group. Dividends of $274,000 and $276,000 or $.50 per
share were declared in the nine months ended September 30, 1996 and 1995,
respectively. Cash dividends will be paid or increased in the remainder of
1996 over 1995 only as profits permit. Dividends paid during 1995 were $2.25
per share. No material changes in the mix or cost of capital is anticipated in
the foreseeable future.
The Bank completed the construction of a new branch facility during the
third quarter of 1996 and renovated the main office during the first quarter of
1996. At the present time, there are no material commitments for capital
expenditures.
9
<PAGE> 10
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
27.3%, a Tier 2 capital to risk-based ratio of 28.6% and a Tier 1 leverage
ratio of 15.4%, 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 at
September 30, 1996.
10
<PAGE> 11
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 $2,638,000 for the nine months ended September 30, 1996
as compared to $2,323,000 for the same period in 1995. Net earnings were
$935,000 for the quarter ended September 30, 1996 as compared to $875,000
during the same quarter in 1995.
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 $622,000 or 6.1% during the nine months ended September 30, 1996
as compared to the comparable period in 1995. Interest income for the quarter
ended September 30, 1996 increased $161,000 or 4.6% when compared to the
quarter ended September 30, 1995 and $64,000 or 1.8% as compared to the second
quarter of 1996. The increases were primarily attributable to an increase in
average earning assets. The ratio of average earning assets to total average
assets was 95.6% for the nine months ended September 30, 1996 as compared to
94.9% for the year ended December 31, 1995.
Interest expense increased by $197,000 for the nine months ended September
30, 1996 or 4.2% as compared to the same period in 1995. Interest expense for
the quarter ended September 30, 1996 increased $12,000 or .7% as compared to
the quarter ended September 30, 1995. Interest expense for the quarter ended
September 30, 1996 increased $36,000 or 2.2% over the quarter ended June 30,
1996. Such increases in interest expense can be attributable primarily to an
increase in average interest bearing liabilities.
The foregoing resulted in net interest income of $5,881,000 for the nine
months ended September 30, 1996, an increase of $425,000 or 7.8% compared to
the prior year period. Net interest income for the quarter ended September 30,
1996 increased $149,000 or 8.1% as compared to the third quarter of 1995 and
increased $28,000 or 1.4% over the quarter ended June 30, 1996.
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, Continued
The provision for loan losses was $30,000 and $160,000 for the first nine
months of 1996 and 1995, respectively. The provision was $30,000 and $40,000
for the quarters ended September 30, 1996 and 1995, respectively. The
reduction in the provision during 1996 resulted from management's conclusion
that the allowance for possible loan losses was adequate to cover any potential
loan losses. 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, 1996:
<TABLE>
<CAPTION>
September 30, 1995
-------------------------
Past Due
90 Days Non-Accrual
--------- -----------
(In Thousands)
<S> <C> <C>
Real estate loans $222 -
Installment loans 3 -
Commercial, financial and agricultural loans 715 -
---- ----
$940 -
==== ====
Renegotiated loans $ - -
==== ====
</TABLE>
At September 30, 1996, loans which include the above, totaling $7,974,270
were included in the Company's internal classified loan list. Of these loans
$5,024,583 are real estate and $2,949,687 are personal. The collateral values
securing these loans total approximately $11,143,000, ($8,281,000 related to
real property and $2,862,000 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. Loans are placed on
non-accrual when it becomes doubtful, in the judgment of management, that
principal and interest will be realized. The classifications include five
performing working capital loans in the amounts of $2,119,584, $776,091,
$730,807, $835,690 and $606,000, 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 $2,866,000, $739,000, $1,403,000, $320,000 and $933,000,
respectively. Without these collateral valuations some or all of these loans
might be placed on non-accrual. 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.
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
There were no material amounts of other interest-bearing assets
(interest-bearing deposits with other banks, municipal bonds, etc.) at
September 30, 1996 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 $37,000 or
7.1% during the nine months ended September 30, 1996 as compared to the same
period in 1995. The increase for the quarter ended September 30, 1996 was
$9,000 or 5.0% as compared to the comparable quarter in 1995. The increases
were due primarily to an increase in customer service charges on deposit
accounts. Commissions and service charges are monitored continually to seek
maximum return based on costs and competition.
Securities gains and losses during the nine months ended September 30,
1996 amounted to $53,000 and $146,000, respectively, as compared to gains of
$79,000 and $24,000 for the comparable period in 1995. The gains during 1996
and 1995 related to transactions in the available-for-sale category. These
gains and 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.
Non-interest expense, excluding securities transactions, increased $7,000
or .3% during the first nine months of 1996 as compared to the same period in
1995. The increase for the quarter ended September 30, 1996 was $64,000 or
7.9% as compared to the quarter ended September 30, 1995. The slight increase
during the nine months ended September 30, 1996 resulted primarily from
increases in salary and employee benefits, an increase in data processing
expenses which resulted from the installation of new equipment to provide
customers with check imaging services, and increased occupancy expenses due to
the opening of a new branch facility during the third quarter of 1996. These
increases were offset by a decrease in the FDIC assessment rate which was
effective for the second half of 1995. Fixed asset costs are expected to
remain stable in the remainder of 1996.
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.
13
<PAGE> 14
FIRST MCMINNVILLE CORPORATION
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation, Continued
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.
14
<PAGE> 15
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 Financial Data Schedule (for SEC use only) - This schedule
contains summary financial information extracted from the financial
statements of the Company at September 30, 1996 (unaudited) as is
qualified in its entirety by reference to such financial statements as set
forth in the Company's quarterly report on Form 10-QSB for the period
ending September 30, 1996.
(b) No reports on Form 8-K have been filed during the quarter for which this
report is filed.
15
<PAGE> 16
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
FIRST MCMINNVILLE CORPORATION
(Registrant)
DATE: November 8, 1996 /s/ Charles C. Jacobs
---------------- -------------------------------------
Charles C. Jacobs
President and Chief Executive Officer
DATE: November 8, 1996 /s/ Kenny D. Neal
---------------- --------------------------------------
Kenny D. Neal
Chief Financial and Accounting Officer
16
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FIRST MCMINNVILLE CORPORATION FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,299
<INT-BEARING-DEPOSITS> 100
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 24,675
<INVESTMENTS-CARRYING> 55,277
<INVESTMENTS-MARKET> 55,523
<LOANS> 105,654
<ALLOWANCE> 1,563
<TOTAL-ASSETS> 196,151
<DEPOSITS> 157,841
<SHORT-TERM> 5,990
<LIABILITIES-OTHER> 2,321
<LONG-TERM> 0
0
0
<COMMON> 1,512
<OTHER-SE> 28,487
<TOTAL-LIABILITIES-AND-EQUITY> 196,151
<INTEREST-LOAN> 6,862
<INTEREST-INVEST> 3,882
<INTEREST-OTHER> 79
<INTEREST-TOTAL> 10,823
<INTEREST-DEPOSIT> 4,839
<INTEREST-EXPENSE> 4,942
<INTEREST-INCOME-NET> 5,881
<LOAN-LOSSES> 30
<SECURITIES-GAINS> (93)
<EXPENSE-OTHER> 2,618
<INCOME-PRETAX> 3,697
<INCOME-PRE-EXTRAORDINARY> 3,697
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,638
<EPS-PRIMARY> 4.84
<EPS-DILUTED> 4.84
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 940
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 7,974
<ALLOWANCE-OPEN> 1,562
<CHARGE-OFFS> 77
<RECOVERIES> 48
<ALLOWANCE-CLOSE> 1,563
<ALLOWANCE-DOMESTIC> 1,563
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
