<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
MARK ONE
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD
FROM TO
--------------- --------------
Commission File Number 2-90200
-------
FIRST MCMINNVILLE CORPORATION
----------------------------------------------------
(Exact Name of Registrant 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 and Zip Code)
(615) 473-4402
--------------------------------------------------
(Registrant's Telephone Number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--------- ---------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock outstanding: 536,007 shares at July 28, 1997
1
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited consolidated financial statements of the registrant and its
wholly-owned subsidiary, First National Bank of McMinnville (the "Bank"), are as
follows:
Consolidated Balance Sheets - June 30, 1997 and December 31, 1996.
Consolidated Statements of Earnings - For the three months and six months
ended June 30, 1997 and 1996.
Consolidated Statements of Cash Flows - For the six months ended June 30,
1997 and 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
2
<PAGE> 3
FIRST MCMINNVILLE CORPORATION
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------- ------------
(In Thousands)
Assets
<S> <C> <C>
Loans $ 110,344 109,664
Less: Allowance for loan losses (1,775) (1,724)
--------- --------
Net loans 108,569 107,940
Securities:
Held to maturity, at cost (market value $50,063,000 and
$55,232,000, respectively) 49,307 54,521
Available-for-sale, at market (amortized cost $35,564,000
and $24,468,000, respectively) 35,490 24,288
Interest-bearing deposits in other banks 100 100
Federal funds sold 4,650 --
--------- --------
Total earning assets 198,116 186,849
Cash and due from banks 4,716 3,532
Bank premises and equipment, net of accumulated depreciation 2,269 2,368
Accrued interest receivable 2,029 1,903
Deferred tax asset 365 405
Other real estate 55 69
Other assets 586 606
--------- --------
$ 208,136 195,732
========= ========
Liabilities and Stockholders' Equity
Deposits $ 169,664 159,746
Securities sold under repurchase agreements 4,491 2,531
Federal fund purchased -- 500
Accrued interest and other liabilities 2,319 2,930
--------- --------
Total liabilities 176,474 165,707
--------- --------
Stockholders' equity:
Common stock, $2.50 par value; authorized 5,000,000 shares,
issued 580,537 shares and 579,537 shares at June 30, 1997
and December 31, 1996, respectively 1,514 1,512
Additional paid-in capital 1,568 1,512
Retained earnings 30,884 29,321
Net unrealized losses on available-for-sale securities, net of
income tax benefits of $28,000 and $68,000, respectively (46) (111)
--------- --------
33,920 32,234
Less cost of treasury stock of 43,618 shares at June 30, 1997
and 42,754 shares at December 31, 1996 (2,258) (2,209)
--------- --------
Total stockholders' equity 31,662 30,025
--------- --------
$ 208,136 195,732
========= ========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
3
<PAGE> 4
FIRST MCMINNVILLE CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1997 1996 1997 1996
-------- ------- -------- -------
(Dollars In Thousands (Dollars in Thousands
Except Per Share Amounts) Except Per Share Amounts)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 2,410 2,261 $ 4,774 4,558
Interest and dividends on securities:
Taxable securities 1,114 955 2,115 1,876
Tax exempt from Federal income taxes 272 335 577 653
Interest on federal funds sold 81 43 110 74
Interest on interest-bearing deposits in other banks and
other interest 1 1 3 3
-------- ------- -------- -------
Total interest income 3,878 3,595 7,579 7,164
-------- ------- -------- -------
Interest expense:
Interest on negotiable order of withdrawal accounts 120 117 237 237
Interest on money market demand and savings accounts 287 238 559 482
Interest on certificates of deposit 1,331 1,252 2,584 2,513
Interest on securities sold under repurchase agreements
and short term borrowings 25 20 47 41
Interest on Federal funds purchased -- 3 10 3
-------- ------- -------- -------
Total interest expense 1,763 1,630 3,437 3,276
-------- ------- -------- -------
Net interest income 2,115 1,965 4,142 3,888
Provision for loan losses 30 -- 60 --
-------- ------- -------- -------
Net interest income after provision for loan
losses 2,085 1,965 4,082 3,888
-------- ------- -------- -------
Other income:
Service charges on deposit accounts 126 137 247 263
Other fees and commissions 60 42 119 75
Commissions and fees on fiduciary activities 6 6 17 12
Security gains related to available-for-sale securities -- -- 9 4
Other income 10 7 20 17
-------- ------- -------- -------
202 192 412 371
-------- ------- -------- -------
Other expenses:
Salaries and employee benefits 625 568 1,178 1,061
Occupancy expenses, net 55 48 110 107
Furniture and equipment expense 24 24 45 42
Data processing expense 53 59 107 111
Security losses related to available-for-sale securities -- 89 -- 89
FDIC insurance 5 -- 10 1
Other operating expenses 207 206 413 423
-------- ------- -------- -------
969 994 1,863 1,834
-------- ------- -------- -------
Earnings before income taxes 1,318 1,163 2,631 2,425
Income taxes 413 358 799 722
-------- ------- -------- -------
Net earnings $ 905 805 $ 1,832 1,703
======== ======= ======== =======
Weighted average number of shares outstanding 536,122 547,616 536,267 548,581
======== ======= ======== =======
Net earnings per share $ 1.69 1.47 $ 3.42 3.10
======== ======= ======== =======
Dividends per share $ .50 .50 $ .50 .50
======== ======= ======== =======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
4
<PAGE> 5
FIRST MCMINNVILLE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
-------- -------
(In Thousands)
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 7,427 7,157
Fees and commissions received 403 367
Interest paid (3,119) (3,340)
Cash paid to suppliers and employees (1,614) (1,581)
Income taxes paid (822) (688)
-------- -------
Net cash provided by operating activities 2,275 1,915
-------- -------
Cash flows from investing activities:
Proceeds from maturities of held-to-maturity securities 8,027 13,760
Proceeds from maturities of available-for-sale securities 3,133 3,476
Proceeds from sales of available-for-sale securities 1,323 3,663
Purchase of held-to-maturity securities (2,809) (18,573)
Purchase of available-for-sale securities (15,521) (4,731)
Loans made to customers, net of repayments (689) (1,634)
Purchase of premise and equipment (16) (265)
Proceeds from sales of other real estate 14 --
-------- -------
Net cash used in investing activities (6,538) (4,304)
-------- -------
Cash flows from financing activities:
Net increase (decrease) in non-interest bearing, savings and
NOW deposit accounts 1,570 488
Net increase in time deposits 8,348 1,886
Increase (decrease) in securities sold under repurchase
agreement 1,960 (945)
Increase (decrease) in Federal funds purchased (500) 2,000
Dividends paid (1,290) (1,239)
Payments to acquire treasury stock (49) (196)
Advances on line of credit -- 45
Repayment of advances on line of credit -- (45)
Proceeds from sales of common stock 58 --
-------- -------
Net cash provided by financing activities 10,097 1,994
-------- -------
Net increase (decrease) in cash and cash equivalents 5,834 (395)
Cash and cash equivalents at beginning of period 3,532 5,172
-------- -------
Cash and cash equivalents at end of period $ 9,366 4,777
======== =======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
5
<PAGE> 6
FIRST MCMINNVILLE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------- ------
(In Thousands)
<S> <C> <C>
Reconciliation of net earnings to net cash provided by
operating activities:
Net earnings $ 1,832 1,703
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 115 101
Provision for loan losses 60 --
Securities losses related to available-for-sale -- 89
Security gains related to available-for-sale (9) (4)
FHLB dividend reinvestment (22) (21)
Decrease (increase) in other assets, net 16 15
Increase in other liabilities 91 72
Decrease (increase) in interest receivable (126) 24
Increase (decrease) in interest payable 318 (64)
------- ------
Total adjustments 443 212
------- ------
Net cash provided by operating activities $ 2,275 1,915
======= ======
Supplemental schedule of non-cash activities:
Non-cash transfers from loans to other real estate $ -- 41
======= ======
Unrealized gain (loss) in value of securities available-for-sale,
net of income taxes of $40,000 in 1997 and income
tax benefits of $304,000 in 1996 $ 66 (618)
======= ======
</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 and its wholly-owned subsidiary, First National Bank of
McMinnville.
The accompanying consolidated financial statements have been prepared, without
audit, pursuant to 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 June 30, 1997 and December 31, 1996, and the results of operations for the
six months and three months ended June 30, 1997 and 1996 and changes in cash
flows for the six months ended June 30, 1997 and 1996. 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, 1996. 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>
Six Months Ended
June 30,
--------------------
1997 1996
------- ------
(In Thousands)
<S> <C> <C>
Balance, January 1, 1997 and 1996, respectively $ 1,724 1,562
Add (deduct):
Losses charged to allowance (22) (68)
Recoveries credited to allowance 13 18
Provision for loan losses 60 --
------- ------
Balance, June 30, 1997 and 1996, respectively $ 1,775 1,512
======= ======
</TABLE>
7
<PAGE> 8
FIRST MCMINNVILLE CORPORATION
FORM 10-Q, 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 Company 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, 1996 for a more 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 $4.7 million mature or reprice within the next twelve months.
A secondary source of liquidity is the Bank's loan portfolio. At
June 30, 1997 commercial, consumer and other loans of approximately $33.9
million and mortgage loans of approximately $6.9 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-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
As for liabilities, certificates of deposit of $100,000 or greater
of approximately $24.0 million will become due during the next twelve months.
The Bank's deposit base increased approximately $9.9 million during the six
months ended June 30, 1997. Securities sold under repurchase agreements
increased approximately $2 million during the six months ended June 30, 1997.
The deposit base increased approximately $7.7 million during the first quarter
of 1997. Securities sold under repurchase agreements also increased
approximately $1.0 million during the first three months of 1997. Federal funds
sold were $4,650,000 at June 30, 1997 as compared to Federal funds sold of
$1,022,000 at March 31, 1997 and Federal funds purchased of $500,000 at December
31, 1996, respectively.
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 subsidiary bank is limited by banking regulatory agencies as
to the amount of dividends that it can pay. At June 30, 1997, the Bank can
declare during the remainder of 1997 cash dividends in an aggregate amount not
to exceed approximately $5.6 million, exclusive of any 1997 net earnings,
without prior approval of the Comptroller of the Currency. However, most of
these funds will be retained for use in the Company'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 will result in or that are
reasonably 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 stockholders' equity to total assets was 15.2% at June
30, 1997 and 15.3% at December 31, 1996. Total assets increased 6.3% during the
six months ended June 30, 1997. The annualized rate of return on stockholders'
equity for the first six months of 1997 was 12.3% compared to 11.7% for the
comparable period in 1996. Because of the relatively high percentage of equity
capital, the return on equity is lower than the reported average for many banks
in the Bank's peer group. Dividends of $269,000 and $274,000 or $.50 per share
were declared in the six months ended June 30, 1997 and 1996, respectively. Cash
dividends will be increased in the remainder of 1997 over 1996 only in the
discretion of the Board of Directors and as profits permit. Dividends paid
during 1996 were $2.40 per share. No material changes in the mix or cost of
capital is anticipated in the foreseeable future.
The subsidiary bank has entered into a contract to build a new
branch at a total estimated cost of $125,000. At June 30, 1997, approximately
$2,000 has been incurred related to this project which is scheduled to open
during the third quarter of 1997. The Bank closed one branch during the second
quarter of 1997. The Bank also completed the renovations of the main office
during the first quarter of 1996. At the present time there are no other
material commitments for capital expenditures.
9
<PAGE> 10
FIRST MCMINNVILLE CORPORATION
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
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 total risk based 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 total capital. National banks must maintain a Tier 1
capital to risk-based assets of at least 4.0%, a total capital to risk-based
assets ratio of at least 8.0% and a leverage capital ratio defined as Tier 1
capital to average total assets for the most recent quarter 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 total
capital to risk-based ratio of 28.8% and a leverage ratio of 15.3%, and is
classified as "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 exceeded the
minimums required under these Federal Reserve Board guidelines.
RESULTS OF OPERATIONS
Net earnings were $1,832,000 for the six months ended June 30,
1997 as compared to $1,703,000 for the same period in 1996. Net earnings were
$905,000 for the quarter ended June 30, 1997 as compared to $805,000 during the
same quarter in 1996.
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 in interest rates encountered in recent years.
10
<PAGE> 11
FIRST MCMINNVILLE CORPORATION
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
RESULTS OF OPERATIONS, CONTINUED
The Registrant's interest income, excluding tax equivalent
adjustments, increased by $415,000 or 5.79% and $461,000 or 6.9% during the six
months ended June 30, 1997 and 1996, respectively. Interest income for the
quarter ended June 30, 1997 increased $283,000 or 7.87% over the quarter ended
June 30, 1996, and $177,000 or 4.78% from the first quarter of 1997. The
increases were primarily attributable to an increase in average earning assets.
The ratio of average earning assets to total average assets was 96.3% for the
six months ended June 30, 1997 and 95.5% for the same period in 1996.
Interest expense increased by $161,000 for the six months ended
June 30, 1997 or 4.9% compared to the same period in 1996. Interest expense for
the quarter ended June 30, 1997 increased $133,000 or 8.2% as compared to the
quarter ended June 30, 1996. Interest expense for the quarter ended June 30,
1997 increased $89,000 or 5.3% compared to the first quarter of 1997. The
increase in interest expense can be attributable to an increase in weighted
average interest rates, as well as an increase in average interest bearing
liabilities.
The foregoing resulted in net interest income of $4,142 for the
six months ended June 30, 1997, an increase of $254,000 or 6.5% compared to the
prior year period. Net interest income for the quarter ended June 30, 1997
increased $150,000 or 7.6% over the second quarter of 1996 and $88,000 or 4.3%
over the first quarter in 1997.
The provision for loan losses was $60,000 for the first six months
of 1997. The Bank made no provision for the first six months of 1996. 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 June 30, 1997:
<TABLE>
<CAPTION>
June 30, 1997
---------------------------
Past Due
90 Days Non-Accrual
-------- -----------
(In Thousands)
<S> <C> <C>
Real estate loans $ 33 --
Installment loans -- --
Commercial 12 --
---- ----
$ 45 --
==== ====
Renegotiated loans $ --
==== ====
</TABLE>
11
<PAGE> 12
FIRST MCMINNVILLE CORPORATION
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
RESULTS OF OPERATIONS, CONTINUED
At June 30, 1997, loans which include the above, totaling
$7,408,000, were included in the Company's internal classified loan list. Of
these loans $1,030,000 are real estate and $6,378,000 are commercial and other.
The collateral values securing these loans are estimated at approximately
$11,687,000, ($1,561,000 related to real property and $10,126,000 related to
commercial and other 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 agreed
repayment terms. The classifications include four performing working capital
loans in the amounts of $695,000, $639,000, $747,000 and $2,038,000. These
borrowers have experienced losses or other adverse effects in recent years which
resulted in the classifications. These lines are secured by collateral
(consisting of real estate and personal property) for which management has made
valuations which indicate an estimated value of $200,000, $933,000, $1,373,000
and $2,866,000, 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.
There were no material amounts of other interest-bearing assets
(interest-bearing deposits with other banks, municipal bonds, etc.) at June 30,
1997 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
$36,000 or 9.8% during the six months ended June 30, 1997 as compared to the
same period in 1996. The increase for the quarter ended June 30, 1997 was
$10,000 or 5.2% as compared to the comparable quarter in 1996. The increase in
the first six months of 1997 and the quarter ended June 30, 1997, was due
primarily to an increase in other fees and commissions of $44,000 combined with
a decrease in service charges on deposit accounts totaling $16,000. Commissions
and service charges are monitored continually to insure maximum return based on
costs and competition.
Securities gains during the six months ended June 30, 1997 and
1996 amounted to $9,000 and $4,000, respectively, and related to transactions in
the available-for-sale category. The gains during 1997 and 1996 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
$118,000 or 6.8% during the first six months of 1997 as compared to the same
period in 1996. The increase for the quarter ended June 30, 1997 was $64,000 or
7.1% as compared to the quarter ended June 30, 1996. The increases in the first
six months of 1997 was primarily attributable to an increase in employee
salaries and benefits of $117,000 or 11.0%. Fixed assets costs should increase
slightly with the opening of the new branch.
12
<PAGE> 13
FIRST MCMINNVILLE CORPORATION
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
RESULTS OF OPERATIONS, CONTINUED
There were no securities losses during the six months ended June
30, 1997. Securities losses during the six months ended June, 1996 amounted to
$89,000 related to transactions in the available-for-sale category. The losses
during 1996 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 effect on
the Registrant's liquidity, capital resources or operations.
IMPACT OF INFLATION
The primary impact which inflation has on the results of the
Registrant'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 affects non-interest expenses as goods and services are purchased, although
this has not appeared to have a significant effect on net earnings. If the
inflation rate stays flat or increases slightly, the effect on profits will not
be significant.
13
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of stockholders was held April 8, 1997.
(b) Election of the following members of the board of directors:
Paul O. Barnes, Henry N. Boyd and Dean I. Gillespie
(c) (1) Each of the above directors were elected by the following
tabulation:
<TABLE>
<CAPTION>
Number of Broker
Shares Voting For Against Withheld Non-Votes
------------- --- ------- -------- ---------
<S> <C> <C> <C> <C>
401,307 398,285 0 3,022 0
</TABLE>
The following directors terms of office were continued after the
meeting:
Robert W. Jones, Charles C. Jacobs, J. Gregory Brock,
G.B. Greene, Doug Milner, John J. Savage, Jr.,
Carl M. Stanley and W.B. Whitson
(2) The election of Maggart & Associates, P.C. as independent
auditors for the Company was as follows:
<TABLE>
<CAPTION>
Number of Broker
Shares Voting For Against Withheld Non-Votes
------------- --- ------- -------- ---------
<S> <C> <C> <C> <C>
401,307 372,717 14,680 13,910 0
</TABLE>
(3) The adoption, approval and ratification of the First McMinnville
Corporation 1997 Stock Option Plan:
<TABLE>
<CAPTION>
Number of Broker
Shares Voting For Against Withheld Non-Votes
------------- --- ------- -------- ---------
<S> <C> <C> <C> <C>
401,307 264,666 120,538 16,103 0
</TABLE>
(d) Not Applicable.
14
<PAGE> 15
PART II. OTHER INFORMATION, CONTINUED
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 June 30, 1997 (unaudited) and is qualified
in its entirety by reference to such financial statements as set forth
in the Company's quarterly report on Form 10-Q for the period ending
June 30, 1997.
(b) No reports on Form 8-K have been filed during the quarter for which
this report is filed.
15
<PAGE> 16
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: August 3, 1997 /s/ Charles C. Jacobs
-------------- -------------------------------------
Charles C. Jacobs
President and Chief Executive Officer
DATE: August 3, 1997 /s/ Kenny D. Neal
-------------- ---------------------------------
Kenny D. Neal
Chief Financial and Accounting Officer
16
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,716
<INT-BEARING-DEPOSITS> 100
<FED-FUNDS-SOLD> 4,650
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 35,490
<INVESTMENTS-CARRYING> 49,307
<INVESTMENTS-MARKET> 50,063
<LOANS> 110,344
<ALLOWANCE> 1,775
<TOTAL-ASSETS> 208,136
<DEPOSITS> 169,664
<SHORT-TERM> 4,491
<LIABILITIES-OTHER> 2,319
<LONG-TERM> 0
0
0
<COMMON> 1,514
<OTHER-SE> 30,148
<TOTAL-LIABILITIES-AND-EQUITY> 208,136
<INTEREST-LOAN> 4,774
<INTEREST-INVEST> 2,692
<INTEREST-OTHER> 113
<INTEREST-TOTAL> 7,579
<INTEREST-DEPOSIT> 3,380
<INTEREST-EXPENSE> 3,437
<INTEREST-INCOME-NET> 4,142
<LOAN-LOSSES> 60
<SECURITIES-GAINS> 9
<EXPENSE-OTHER> 1,863
<INCOME-PRETAX> 2,631
<INCOME-PRE-EXTRAORDINARY> 2,631
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,832
<EPS-PRIMARY> 3.42
<EPS-DILUTED> 3.42
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 45
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 7,408
<ALLOWANCE-OPEN> 1,724
<CHARGE-OFFS> 22
<RECOVERIES> 13
<ALLOWANCE-CLOSE> 1,775
<ALLOWANCE-DOMESTIC> 1,775
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
