-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, nKlglVeKSgvb83BjUOHnW2GFxXBddRla5R6Ag9Ju6xK+OZyZ5157rfztDjCZeEQh ujuQJ/1301QidNek9Gsgmw== 0000950144-95-000736.txt : 19950616 0000950144-95-000736.hdr.sgml : 19950616 ACCESSION NUMBER: 0000950144-95-000736 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950323 SROS: MSE SROS: NYSE SROS: PHLX FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNION PLANTERS CORP CENTRAL INDEX KEY: 0000100893 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 620859007 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-10160 FILM NUMBER: 95522715 BUSINESS ADDRESS: STREET 1: 7130 GOODLETT FARMS PKWY CITY: CORDOVA STATE: TN ZIP: 38018 BUSINESS PHONE: 9013836000 MAIL ADDRESS: STREET 1: 7130 GOODLETT FARMS PKWY CITY: CORDOVA STATE: TN ZIP: 38018 10-K405 1 UNION PLANTERS FORM 10-K405 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - --- ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1994 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to ---------- ---------- Commission File No. 1-10160 UNION PLANTERS CORPORATION (Exact name of registrant as specified in its charter) Tennessee 62-0859007 (State of incorporation) (IRS Employer Identification No.) 7130 Goodlett Farms Parkway, Memphis, Tennessee 38018 (address of principal executive offices and zip code) Registrant's telephone number, including area code: (901) 383-6000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Common Stock having a par New York Stock Exchange value of $5 per share (name of each exchange (title of class) on which registered) SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: 8% Cumulative, Convertible Preferred Stock, Series E having a stated value of $25 per share (title of class) 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 requirement for the past 90 days. Yes X No ------ ------ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by nonaffiliates of the registrant at February 28, 1995 was approximately $909,444,000. INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON STOCK. CLASS OUTSTANDING AT FEBRUARY 28, 1995 Common Stock having a par 40,325,357 value of $5 per share (title of class) DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K ----------------- Documents Incorporated into which Incorporated ---------------------- ----------------------- 1. Certain parts of the Annual Report to Shareholders Items 1, 2, 5, 6, 7, and 8 for the year ended December 31, 1994 2. Certain parts of the Definitive Proxy Statement for Part III the Annual Shareholders Meeting to be held April 27, 1995
2 FORM 10-K CROSS-REFERENCE INDEX
Page Number ----------- PART I Item 1. Business 3 Item 1a. Executive Officers of the Registrant 11 Item 2. Properties 11 Item 3. Legal Proceedings 12 Item 4. Submission of Matters to a Vote of Security Holders * PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters 14 Item 6. Selected Financial Data 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 Item 8. Financial Statements and Supplementary Data 14 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure * PART III Item 10. Directors and Executive Officers of the Registrant 14 Item 11. Executive Compensation 14 Item 12. Security Ownership of Certain Beneficial Owners and Management 14 Item 13. Certain Relationships and Related Transactions 15 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 15 SIGNATURES 16 * Not Applicable
-2- 3 PART I ITEM 1. BUSINESS GENERAL Union Planters Corporation (the Corporation), a $10.0 billion multi-bank holding company and savings and loan holding company incorporated in 1971 under the laws of the state of Tennessee and headquartered in Memphis, Tennessee, is the second-largest financial institution holding company headquartered in Tennessee. The Corporation at December 31, 1994 had the largest deposit base of any Tennessee bank holding company headquartered in Tennessee. The Corporation's activities are conducted through its two principal banking subsidiaries, the $2.2 billion Union Planters National Bank (UPNB) headquartered in Memphis, Tennessee and the $2.0 billion Sunburst Bank, Mississippi, headquartered in Grenada, Mississippi; 40 other banking subsidiaries and five savings and loan subsidiaries located in Tennessee, Mississippi, Arkansas, Louisiana, Alabama, and Kentucky (collectively, banking subsidiaries). Reference is made to the 1994 Annual Report to Shareholders for a listing of communities served on page 70, Table 15, and the map on the inside cover of the report for additional information regarding the size, locations, and markets served by the Corporation's subsidiaries. The Corporation, through its subsidiaries, provides a diversified range of banking and financial services in the communities in which it operates, including consumer, commercial and corporate lending; retail banking; mortgage banking; and other ancillary financial services normally furnished by full-service financial institutions. The Corporation also is engaged in mortgage servicing; investment management and trust service; the issuance and servicing of credit and debit cards; and the origination, packaging, and securitization of loans, primarily the government-guaranteed portions of Small Business Administration (SBA) loans. GOVERNMENTAL SUPERVISION AND REGULATION OF FINANCIAL INSTITUTIONS As a bank holding company, the Corporation is subject to the regulation and supervision of the Federal Reserve. In addition, as a savings and loan holding company, the Corporation is registered with the Office of Thrift Supervision (the "OTS") and is subject to OTS regulations, supervision and reporting requirements. The Corporation's bank subsidiaries that are national banking associations are subject to supervision and examination by the Office of the Comptroller of the Currency (the "Comptroller") and the Federal Deposit Insurance Corporation (the "FDIC"). State bank subsidiaries of the Corporation which are members of the Federal Reserve System are subject to supervision and examination by the Federal Reserve and the state banking authorities of the states in which they are located. State bank subsidiaries which are not members of the Federal Reserve System are subject to supervision and examination by the FDIC and the state banking authorities of the states in which they are located. The Corporation's savings bank subsidiaries are subject to supervision and examination by the OTS. The Corporation's banking subsidiaries are subject to various requirements and restrictions, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans and other extensions of credit that may be granted and the interest that may be charged thereon, and limitations on the types of investments that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operations of the banks. In addition to the impact of regulation, the subsidiary banks are affected significantly by the actions of the Federal Reserve as it attempts to control the money supply and credit availability in order to influence the economy. The Bank Holding Company Act of 1956 ("BHCA"), as amended, generally requires the prior approval of the Federal Reserve where a bank holding company proposes to acquire direct or indirect ownership or control of more than five percent of the voting shares of any bank or otherwise to acquire control of a bank or to merge or consolidate with any other bank holding company. The BHCA generally prohibits the Federal Reserve from approving an application by a bank holding company to acquire a bank located in another state before September 29, 1995, unless such an acquisition is specifically authorized by statute of the state in which the bank to be acquired is located. Tennessee has adopted reciprocal regional interstate banking legislation permitting Tennessee-based bank holding companies to acquire banks and bank holding companies in certain other states and allowing bank holding companies located in certain states other than Tennessee to acquire banks and bank holding companies located in Tennessee. A bank holding company is generally prohibited under the BHCA from acquiring voting shares of any company which is not a bank, and from engaging in any activities other than those of banking or of -3- 4 managing or controlling banks or furnishing services to, or performing services for its subsidiaries. An exception to these prohibitions permits a bank holding company to engage in, or to acquire an interest in a company, such as a thrift institution, which engages in activities that the Federal Reserve has determined are so closely related to banking or managing or controlling banks as to be a proper incident thereto. CAPITAL ADEQUACY The Federal Reserve has adopted risk-based capital guidelines for bank holding companies. The minimum guideline for the ratio of total capital ("Total Capital") to risk-weighted assets (including certain off-balance-sheet activities such as standby letters of credit) is eight percent. At least half of the Total Capital must be composed of "Tier 1 Capital" which consists of common shareholders' equity, minority interests in the equity accounts of consolidated subsidiaries, noncumulative perpetual preferred stock and a limited amount of cumulative perpetual preferred stock, less goodwill ("Tier 1 Capital"). The remainder, which is Tier 2 Capital, may consist of subordinated debt (or certain other qualifying debt issued prior to March 12, 1988), other preferred stock and a limited amount of loan loss reserves. In addition, the Federal Reserve has established minimum leverage ratio guidelines for bank holding companies. These guidelines provide for a minimum ratio of Tier 1 Capital to average total assets, less goodwill (the "Leverage Ratio") of three percent for bank holding companies that meet certain specified criteria, including those having the highest regulatory rating. All other bank holding companies generally are required to maintain a Leverage Ratio of at least three percent plus an additional cushion of 100 to 200 basis points. The guidelines also provide that bank holding companies experiencing internal growth or making acquisitions are expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. Furthermore, the Federal Reserve has indicated that it will consider a "tangible Tier 1 capital leverage ratio" (deducting all intangibles) and other indicia of capital strength in evaluating proposals for expansion or new activities. The Federal Reserve has not advised the Corporation of any specific minimum Leverage Ratio applicable to the Corporation. The federal bank regulatory agencies have issued various proposals to amend the risk-based capital guidelines for banks and bank holding companies. Under one proposal, banks would be required to give explicit consideration to interest-rate risk as an element of capital adequacy by maintaining capital to compensate for such risk in an amount measured by the bank's exposure to interest rate risk in excess of a regulatory threshold. A proposal recently issued by the Federal Reserve and expected to be joined in by the other bank regulatory agencies increases the amount of capital required to be carried against certain long-term derivative contracts; in addition, the proposal recognizes the effect of certain bilateral netting arrangements in reducing potential future exposure under these contracts. The Corporation believes that these changes will not, if adopted, have a material effect on the company's compliance with capital adequacy requirements. Failure to meet minimum capital requirements can subject an institution to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC and a prohibition on the taking of brokered deposits. As described below, under the "Prompt Corrective Action" regulations, substantial additional restrictions can be imposed upon FDIC-insured institutions that fail to meet applicable capital requirements. See "Prompt Corrective Action" below. At December 31, 1994, the Corporation's total risk based capital ratio was 14.75%, its Tier 1 Capital ratio was 12.22% and its Leverage Ratio was 7.18%. In addition, each of the Corporation's banking subsidiaries satisfied the minimum capital requirements applicable to it and had the requisite capital levels to qualify as a "well-capitalized" institution under the prompt corrective action provisions discussed below. PROMPT CORRECTIVE ACTION The Federal Deposit Insurance Corporation Improvement Act ("FDICIA") enacted in December 1991 requires the federal banking regulators to take prompt corrective action in respect of depository institutions that do not meet their minimum capital requirements. FDICIA establishes five capital tiers: "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized" and "critically undercapitalized." Under capital regulations, a bank is defined to be well capitalized if it maintains a Leverage Ratio of at least five percent, a Tier 1 Capital ratio of at least six percent and a Total Capital ratio of at least 10% and is not otherwise in a "troubled condition" as specified by its -4- 5 appropriate federal regulatory agency. A bank is defined to be adequately capitalized if it meets all of its minimum capital requirements as described above under "Capital Adequacy." In addition, a bank will be considered to be undercapitalized if it fails to meet any minimum required measure, significantly undercapitalized if it is significantly below such measure and critically undercapitalized if it fails to maintain a level of tangible equity equal to not less than two percent of total assets. A bank may be deemed to be in a capitalization category that is lower than is indicated by its actual capital position if it receives an unsatisfactory examination rating. Regardless of their capital levels, all institutions are restricted from making any capital distribution or paying any management fees that would cause the institution to fail to satisfy the minimum levels to be considered adequately capitalized. An undercapitalized institution is: (i) subject to increased monitoring by the appropriate federal banking regulator; (ii) required to submit an acceptable capital restoration plan within 45 days; (iii) subject to asset growth limits; and (iv) required to obtain prior regulatory approval for acquisitions, branching and new lines of business. The capital restoration plan must include a guarantee by the institution's holding company that the institution will comply with the plan until it has been adequately capitalized on average for four consecutive quarters. Pursuant to the guarantee, the institution's holding company would be liable up to the lesser of five percent of the institution's total assets or the amount necessary to bring the institution into capital compliance as of the date it failed to comply with its capital restoration plan. If the controlling bank holding company should fail to fulfill its obligations under the guarantee and should file (or should have filed against it) a petition under the federal Bankruptcy Code, the appropriate federal banking regulator could have a claim as a general creditor of the bank holding company, and, if the guarantee were deemed to be a commitment to maintain capital under the federal Bankruptcy Code, the claim would be entitled to priority in such bankruptcy proceeding over the claims of third-party creditors of the bank holding company. The regulatory agencies have discretionary authority to reclassify well capitalized institutions as adequately capitalized or to impose on adequately capitalized institutions requirements or actions specified for undercapitalized institutions if the agency should determine after notice and an opportunity for hearing that the institution is in an unsafe or unsound condition or is engaging in an unsafe or unsound practice, which can consist of the receipt of an unsatisfactory examination rating if the deficiencies cited are not corrected. A significantly undercapitalized institution, as well as any undercapitalized institution which should fail to submit an acceptable capital restoration plan, may be subject to regulatory demands for recapitalization; broader application of restrictions on transactions with affiliates; limitations on interest rates paid on deposits, asset growth and other activities; possible replacement of directors and officers; and restrictions on capital distributions by any bank holding company controlling the institution. Any company controlling the institution could also be required to divest the institution or the institution could be required to divest subsidiaries. The senior executive officers of a significantly undercapitalized institution may not receive bonuses or increases in compensation without prior regulatory approval and the institution is prohibited from making payments of principal or interest on its subordinated debt. If an institution should become critically undercapitalized, the institution would be subject to conservatorship or receivership within 90 days unless periodic determinations are made that forbearance from such action would better protect the deposit insurance fund. Unless appropriate findings and certifications are made by the appropriate federal bank regulatory agencies, a critically undercapitalized institution must be placed in receivership if it should remain critically undercapitalized on average during the calendar quarter beginning 270 days after the date it became critically undercapitalized. DIVIDEND RESTRICTIONS The Corporation is a legal entity separate and distinct from its banking subsidiaries and nonbank subsidiaries. The Corporation's revenues (on a parent company only basis) result, in significant part, from dividends paid to the Corporation by its subsidiaries. The right of the Corporation, and consequently the right of creditors and shareholders of the Corporation, to participate in any distribution of the assets or earnings of any subsidiary through the payment of such dividends or otherwise is necessarily subject to the prior claims of creditors of the subsidiary (including depositors, in the case of banking subsidiaries), except to the extent that claims of the Corporation in its capacity as a creditor may be recognized. There are statutory and regulatory requirements applicable to the payment of dividends by the Corporation's banking subsidiaries to the Corporation. Each national banking association subsidiary of the Corporation is required by federal law to obtain the prior approval of the Comptroller for the payment of dividends if the total of all dividends declared by the board of directors of such bank in any year -5- 6 would exceed the total of (i) such bank's net profits (as defined and interpreted by regulation) for that year plus (ii) the retained net profits (as defined and interpreted by regulation) for the preceding two years, less any required transfers to surplus. In addition, national banks may only pay dividends to the extent that their retained net profits (including the portion transferred to surplus) exceed statutory bad debts (as defined by regulation). The Corporation's state-chartered bank subsidiaries are subject to similar restrictions on the payment of dividends by the respective state laws under which they are organized. Furthermore, as described above under "Prompt Corrective Action," all depository institutions are prohibited from paying any dividends, making other distributions or paying any management fees if, after such payment, the depository institution would fail to satisfy its minimum capital requirements. In accordance with the specified calculations, at December 31, 1994, approximately $22 million was available for distribution to the Corporation without obtaining prior regulatory approval. Future dividends will primarily depend upon the level of earnings of the subsidiary banks of the Corporation. It is the policy of the Federal Reserve that bank holding companies should pay dividends only out of current earnings. Federal banking regulators also have the authority to prohibit banks and bank holding companies from paying a dividend if they should deem such payment to be an unsafe or unsound practice. In addition, it is the position of the Federal Reserve Board that as a bank holding company, the Corporation is expected to act as a source of financial strength to each of its subsidiary banks. See "Support of Subsidiary Banks" below. SUPPORT OF SUBSIDIARY BANKS Under Federal Reserve policy, the Corporation is expected to act as a source of financial strength to its banking subsidiaries and, where required, to commit resources to support each of such subsidiaries. This support may be required at times when, absent such Federal Reserve policy, the Corporation may not be inclined to provide it. Moreover, if one of its subsidiary banks should become undercapitalized, under FDICIA the Corporation would be required to guarantee the subsidiary bank's compliance with its capital plan in order for such plan to be accepted by the federal regulatory authority. See "Prompt Corrective Action" above. Under the "cross guarantee" provisions of the Federal Deposit Insurance Act, any FDIC-insured subsidiary of the Corporation may be held liable for any loss incurred by, or reasonably expected to be incurred by, the FDIC in connection with (i) the "default" of any other commonly controlled FDIC-insured subsidiary or (ii) any assistance provided by the FDIC to any commonly controlled FDIC- insured subsidiary "in danger of default." "Default" is defined generally as the appointment of a conservator or receiver and "in danger of default" is defined generally as the existence of certain conditions indicating that a default is likely to occur in the absence of regulatory assistance. Because it is a bank holding company, any capital loans made by the Corporation to subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. In the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment over the claims of certain other creditors of the bank holding company. TRANSACTIONS WITH AFFILIATES Provisions of the Federal Reserve Act impose restrictions on the type, quantity and quality of transactions between "affiliates" (as defined below) of an insured bank and the insured bank (including its bank holding company and its nonbank subsidiaries). The purpose of these restrictions is to prevent misuse of the resources of an insured institution by its uninsured affiliates. An exception to most of these restrictions is provided for transactions between two insured banks that are within the same holding company where the holding company owns 80% or more of each of these banks (the "sister bank" exception). The restrictions also do not apply to transactions between an insured bank and its wholly owned subsidiaries. These restrictions include limitations on the purchase and sale of assets and extensions of credit by the insured bank to its holding company or its nonbank subsidiaries. An insured bank and its subsidiaries are limited in engaging in "covered transactions" with their nonbank or nonsavings bank affiliates to the following amounts: (i) in the case of any one such affiliate, the aggregate amount of covered transactions of the insured bank and its subsidiaries may not exceed 10% of the capital stock and surplus of the insured bank and (ii) in the case of all affiliates, the aggregate amount of covered transactions of the insured bank and its subsidiaries may not exceed 20% of the capital stock and surplus of the bank. "Covered transactions" are defined by statute to include loans or other extensions of credit as well as purchases of securities issued by an affiliate; purchases of assets (unless otherwise exempted -6- 7 by the Federal Reserve); the acceptance of securities issued by the affiliate as collateral for a loan; and the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate. Further, provisions of the BHCA, as amended, prohibit a bank holding company and its subsidiaries from engaging in certain tie-in arrangements in connection with any extension of credit, lease or sale of property or furnishing of services. As used herein, "affiliate" means generally any company that controls the insured bank, a company which is under common control with the insured bank and a bank subsidiary of the insured bank. FDIC INSURANCE ASSESSMENTS The subsidiary banks of the Corporation are subject to FDIC deposit insurance assessments. The FDIC has adopted a risk-based premium schedule which has increased the assessment rates for most FDIC-insured depository institutions. Under the present schedule, the annual premiums range from $.23 to $.31 for every $100 of deposits. As noted in the following paragraph, there is a proposal to reduce the minimum annual premium for banks (but not savings associations) from $.23 to $.04 per $100 of deposits. Each financial institution is assigned to one of three capital groups -- well capitalized, adequately capitalized or undercapitalized -- and further assigned to one of three subgroups within a capital group on the basis of supervisory evaluations by the institution's primary federal and, if applicable, state supervisors and on the basis of other information relevant to the institution's financial condition and the risk posed to the applicable insurance fund. Therefore, the actual assessment rate applicable to a particular institution will depend in part upon the risk assessment classification so assigned to the institution by the FDIC. The legislation adopted in August 1989 to provide for the resolution of insolvent savings associations also required the FDIC to establish separate deposit insurance funds -- the Bank Insurance Fund ("BIF") for banks and the Savings Association Insurance Fund ("SAIF") for savings associations. The law also requires the FDIC to set deposit insurance premium assessments at such levels as will cause BIF and SAIF to reach their "designated reserve ratios" of 1.25 percent of the deposits insured by them within a reasonable period of time. Because of the low costs of resolving bank insolvencies in the last few years, BIF is expected to reach its designated reserve ratio within one or two years at which time the FDIC will be required to lower deposit insurance assessment rates on banks to those substantially lower levels that will maintain the balance in BIF in the required relationship to insured bank deposits. It has been proposed that the annual bank deposit insurance minimum premium should be reduced from $.23 to $.04 per $100 of deposits. However, the balance in SAIF is not expected to reach the designated reserve ratio for far longer than it is expected the BIF to reach its mandated balance, as the law provides that a significant portion of the costs of resolving past insolvencies of savings associations must be paid from this source. Accordingly, while the BIF and SAIF assessment rates are presently the same, it is likely that SAIF rates will be significantly higher than BIF rates in the future. Since the Corporation acquired substantial amounts of SAIF-insured deposits from savings associations during the years from 1989 to the present which cannot be converted from SAIF to BIF insurance under present law, it may be required to pay insurance assessments on these acquired deposits at rates significantly higher than the rates charged by BIF. At December 31, 1994, the Corporation had approximately $6.4 billion BIF-insured deposits and $1.5 billion SAIF-insured deposits. While the amount of additional deposit insurance assessments to be incurred cannot be calculated at this time because the differential likely to develop between SAIF and BIF is not known, the Corporation does not expect that such additional deposit insurance costs will have a significant, adverse effect on its earnings. OTHER BANKING LEGISLATION In addition to the matters noted above, FDICIA made other significant changes to the federal banking laws in 1991. FDICIA instituted certain changes to the supervisory process, including provisions that mandate certain regulatory agency actions against undercapitalized institutions within specified time limits. Standards for Safety and Soundness. FDICIA requires the federal bank regulatory agencies to prescribe, by regulation, standards for all insured depository institutions and depository-institution holding companies relating to: (i) internal controls, information systems and audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest-rate risk exposure; (v) asset growth; and (vi) compensation, fees and benefits. Where safety and soundness is an issue or where a depository institution is subject to a regulatory order, it is prohibited from entering into or providing employment contracts, compensation or benefit arrangements, stock option plans, fee arrangements or other compensatory arrangements that would provide excessive compensation, fees or benefits or could lead to material -7- 8 financial loss, but (subject to certain exceptions) may not prescribe specific compensation levels or ranges for directors, officers or employees. In addition, the federal banking regulatory agencies are required to prescribe, by regulation, standards specifying: (i) maximum classified assets to capital ratios; (ii) minimum earnings sufficient to absorb losses without impairing capital; and (iii) to the extent feasible, a minimum ratio of market value to book value for publicly traded shares of depository institutions and depository institution holding companies. Brokered Deposits. The FDIC has adopted regulations governing the receipt of brokered deposits. Under the regulations, a bank may not lawfully accept, roll over or renew brokered deposits unless (i) it is well capitalized or (ii) it is adequately capitalized and receives a waiver from the FDIC. A bank that may not receive brokered deposits also may not offer "pass-through" insurance on certain employee benefit accounts. Whether or not it has obtained such a waiver, an adequately capitalized bank may not pay an interest rate on any deposits in excess of 75 basis points over certain prevailing market rates specified by regulation. There are no such restrictions on a bank that is well capitalized. Because the Corporation's banking subsidiaries at December 31, 1994, had the requisite capital levels to qualify as well capitalized institutions, the Corporation believes the brokered deposits regulation will have no material effect on the funding or liquidity of any of its banking subsidiaries. Consumer Protection Provisions. FDICIA seeks to encourage enforcement of existing consumer protection laws and enacted new consumer-oriented provisions including a requirement of notice to regulators and customers of any proposed branch closing and provisions intended to encourage the offering of "lifeline" banking accounts and lending in distressed communities. FDICIA also requires depository institutions to make additional disclosures to depositors with respect to the rate of interest paid on and the terms of their deposit accounts. Institutional Exposure. FDICIA also requires the Federal Reserve to prescribe standards which limit the risks posed by an insured institution's "exposure" to any other depository institution to limit the risks that the failure of a large depository institution would pose to another insured depository institution. FDICIA broadly defines "exposure" to include extensions of credit to the other institution; purchases of, or investments in, securities issued by the other institution; securities issued by the other institution and accepted as collateral for an extension of credit to any person; and all similar transactions which the Federal Reserve has defined by regulation to be "exposure." The Federal Reserve has promulgated procedures and "benchmark" standards to limit an insured depository institution's credit and settlement exposure to each of its correspondent banks. Miscellaneous. FDICIA also made extensive changes in the applicable rules regarding audit, examinations and accounting. FDICIA generally requires annual, on-site, full-scope examinations by each FDIC-insured bank's primary federal regulator. FDICIA also imposes new responsibilities on management, the independent audit committee and outside accountants to develop, approve or attest to reports regarding the effectiveness of internal controls, legal compliance and off-balance-sheet liabilities and assets. Depositor Preference. Legislation recently enacted by Congress establishes a nationwide depositor preference rule in the event of a bank failure. Under this arrangement, all deposits and certain other claims against a bank, including the claim of the FDIC as subrogee of insured depositors, would receive payment in full before any general creditor of the bank would be entitled to any payment in the event of an insolvency or liquidation of the bank. Interstate Banking and Community Development Legislation. In September 1994, legislation was enacted that is expected to have a significant effect in restructuring the banking industry in the United States. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 facilitates the interstate expansion and consolidation of banking organizations (i) by permitting bank holding companies that are adequately capitalized and adequately managed, one year after enactment of the legislation (i.e., after September 29, 1995), to acquire banks located in states outside their home states regardless of whether such acquisitions are prohibited under the law of any state; (ii) by permitting the interstate merger of such banks after June 1, 1997, subject to the right of individual states to "opt in" or to "opt out" of this authority before that date; (iii) by permitting banks to establish new branches on an interstate basis provided that such action is specifically authorized by the law of the host state; (iv) by permitting one year after enactment of the legislation a bank to engage in certain agency relationships (receive deposits, renew time deposits, close loans, service loans and receive payments on loans and other obligations) as agent for any bank or thrift affiliate, whether the affiliate is located in the same State or a different State than the agent bank; and (v) by permitting foreign banks to establish, with approval of the regulators, in the United States branches outside their home states to the same extent that -8- 9 national or state banks located in the home state would be authorized to do so. One effect of this legislation would be to permit the Corporation to acquire banks and bank holding companies located in any state and to permit banking organizations located in any state to acquire banks and bank holding companies headquartered in Tennessee. Overall, this legislation is likely to have the effects of increasing consolidation and competition and promoting geographic diversification in the banking industry. The Riegle Community Development and Regulatory Improvement Act, also enacted in September 1994, is intended to (i) increase the flow of loans to businesses in distressed communities by providing incentives to lenders to provide credit within those communities; (ii) remove impediments to the securitization of small business loans; (iii) provide for a reduction in paperwork and to streamline bank regulation through, for example, the coordination of examinations in a bank holding company context, a reduction in the number of currency transaction reports required, improvements to the National Flood Insurance Program that include enabling lenders to force place flood insurance; and (iv) increase the level of consumer protection provided to customers in banking transactions. The Corporation believes that these provisions of the new law will not have a material effect on its operation. PERSONNEL As of February 28, 1995, the Corporation, including all subsidiaries, had 5,360 employees (including 851 part-time employees). STATISTICAL DISCLOSURES The statistical information required by Item 1 may be found in the 1994 Annual Report to Shareholders, and, to the extent indicated, is incorporated herein by reference, as follows:
Page in the Corporation's 1994 Annual Report to Shareholders* ------------------------- Guide 3 Disclosure ------------------ I. Distribution of Assets, Liabilities, and Shareholders' Equity; Interest Rates and Interest Differential A. Average Balance Sheet 27 B. Net Interest Earnings Analysis 27 C. Rate/Volume Analysis 28 II. Investment Portfolio A. Book Value of Investment Securities 32, 48, 49 and 50 B. Maturities of Investment Securities 49 and 50 C. Investment Securities Concentrations Not applicable III. Loan Portfolio A. Types of Loans 29 and 50 B. Maturities and Sensitivity of Loans to Changes in Interest Rates Follows this table C. Risk Elements 1. Nonaccrual, Past Due 90 Days or More, and Restructured Loans 29 2. Potential Problem Loans 20 3. Foreign Outstandings Not significant 4. Loan Concentrations 19 D. Other Interest-Bearing Assets Not significant IV. Summary of Loan Loss Experience A. Analysis of Allowance for Loan Losses 30 B. Allocation of the Allowance for Loan Losses 29
-9- 10
Page in the Corporation's 1994 Annual Report to Shareholders* ------------------------- V. Deposits A. Average Balances 27 and 28 B. Maturities of Large Denomination Certificates of Deposit Follows this table C. Foreign Deposit Liability Disclosure Not significant VI. Return on Equity and Assets A. Return on Assets 9 B. Return on Equity 9 C. Foreign Deposit Liability Disclosure Not significant D. Equity to Assets Ratio 9 VII. Short-Term Borrowings 51 and 52 *Unless otherwise noted
The following table presents the maturities and sensitivities of the Corporation's loans to changes in interest rates at December 31, 1994:
DUE DUE AFTER ONE DUE AFTER WITHIN BUT WITHIN FIVE ONE YEAR FIVE YEARS YEARS -------- ------------- --------- (DOLLARS IN THOUSANDS) Commercial, Financial, and Agricultural $826,537 $349,075 $189,117 Real Estate-Construction 151,060 53,648 20,883 -------- -------- -------- Total $977,597 $402,723 $210,000 ======== ======== ======== Fixed Rate $294,796 $ 97,274 ======== ======== Variable Rate $107,927 $112,726 ======== ========
The following table presents maturities of certificates of deposit of $100,000 and over and other time deposits of $100,000 and over:
DECEMBER 31, 1994 ------------ (DOLLARS IN THOUSANDS) Under 3 Months $297,279 3 to 6 Months 131,407 6 to 12 Months 103,207 Over 12 Months 175,443 -------- Total $707,336 ========
-10- 11 ITEM 1A. EXECUTIVE OFFICERS OF THE REGISTRANT The following lists the executive officers of the Corporation. Information regarding the executive officers, their ages, their present positions held with the Corporation and its subsidiaries, and their principal occupations for the last five years are as follows:
Position of Executive Officers Name with the Corporation and UPNB Age ---- ------------------------------ ----- Benjamin W. Rawlins, Jr. Chairman of the Board and 57 Chief Executive Officer of the Corporation; Chairman of the Board and Chief Executive Officer of UPNB Jackson W. Moore President and Chief Operating Officer 46 of the Corporation Jack W. Parker Executive Vice President and 48 Chief Financial Officer of the Corporation; Executive Vice President of UPNB M. Kirk Walters Senior Vice President, Treasurer, and 54 Chief Accounting Officer of the Corporation; Senior Vice President of UPNB James A. Gurley Executive Vice President of the Corporation; 61 Executive Vice President of UPNB
Mr. Rawlins has been Chairman of the Board of the Corporation and UPNB since April 1989 and January 1986, respectively. He has also served as Chief Executive Officer of the Corporation and UPNB since September 1984. Mr. Rawlins was President of the Corporation from September 1984 until he was elected Chairman. Mr. Moore has been President of the Corporation since April 1989. In April 1994, Mr. Moore was elected Chief Operating Officer of the Corporation. He is also Chairman of PSB Bancshares, Inc. and is a Vice President and Director of its subsidiary, The Peoples Savings Bank (not an affiliate bank of the Corporation), located in Clanton, Alabama. He has served on the Boards of the Corporation and UPNB since 1986. Mr. Parker has been Executive Vice President and Chief Financial Officer of the Corporation since March 1990. He has been an Executive Vice President and Chief Financial Officer of UPNB since March 1990. From 1987 until being elected to these positions with the Corporation, he was an Executive Vice President of UPNB and President of the Mortgage Banking Group of UPNB. Mr. Walters was elected Senior Vice President of the Corporation in November 1990 and has been Chief Accounting Officer since February 1990. He has been Treasurer of the Corporation since 1985. He was a Vice President of the Corporation from 1975 until he was elected to his current position. Mr. Walters has been an officer of UPNB for more than twenty years and is currently a Senior Vice President. Mr. Gurley was elected Executive Vice President of the Corporation in November 1990. He was a Vice President of the Corporation from 1980 until he was elected Executive Vice President. He has been an officer of UPNB for more than twenty years and is currently an Executive Vice President. ITEM 2. PROPERTIES The Corporation's corporate headquarters are located in the company-owned Union Planters Administrative Center at 7130 Goodlett Farms Parkway, Memphis, Tennessee, a two-building complex located near the center of Shelby County. In addition to being the corporate headquarters, it contains approximately 250,000 square feet of space and houses Bank Cards, Mortgage Servicing and Origination, Funds Management, Data Processing, Operations, Human Resources, Financial, Legal, Credit and Review, Alternative Investments and Insurance Products. -11- 12 UPNB's headquarters is located in a 70,000-square-foot company-owned building in East Memphis. In addition to being its headquarters, the building also houses UPNB's Commercial Group, Trust Group, Brokerage Services, Retail Group Administration and Marketing. As of March 1, 1995, the Corporation operated 195 banking offices in Tennessee, 124 in Mississippi, 15 in Louisiana, 34 in Arkansas, 7 in Alabama, and 5 locations in Kentucky. The majority of these locations are owned. The subsidiaries also operate 282 twenty-four hour automated teller locations. There are no material encumbrances on any of the company-owned properties. ITEM 3. LEGAL PROCEEDINGS The Corporation and/or various subsidiaries are parties to various pending civil actions, all of which are being defended vigorously. Based upon present information, including evaluations of certain actions by outside counsel, management believes that neither the Corporation's financial position, results of operations, nor liquidity will be materially affected by the ultimate resolution of pending or threatened legal proceedings. There were no significant developments during the fourth quarter of 1994 in any pending or threatened legal proceedings which would alter such opinion. UPNB and one of its officers are co-defendants in two civil actions seeking $29 million (after trebling) filed on or about July 25, 1985 in the U.S. Bankruptcy Court for the Eastern District of Missouri by the trustee for a failed grocery and its shareholders purportedly predicated upon an August 1981 $115,000 loan by the First National Bank of Gibson County, Tennessee, later acquired by UPNB, to finance the shareholders' acquisition of the grocery business from other defendants unrelated to UPNB. The actions allege that the defendants subsequently conspired to defraud the plaintiffs of their rights in the grocery. As this matter has been dormant since UPNB filed a motion for summary judgment in 1985, and after considering the damage amounts in issue, management has concluded that this action should be deleted from future reports. The Corporation's broker/dealer subsidiaries (now inactive) are among the more than eighty defendants in various actions brought by purchasers of $400 million in housing revenue bonds issued by the Health, Educational, and Housing Facility Board of the City of Memphis, Tennessee and by purchasers of bonds that were part of seven other taxable municipal issues. These actions were transferred to the United States District Court for the Eastern District of Louisiana for pretrial proceedings captioned In Re: Taxable Municipal Bond Securities Litigation, Multi-district Litigation ("MDL") 863. Focusing upon the fact that the bond sale proceeds were initially invested and remain in "guaranteed investment contracts" ("GICs") issued by Executive Life Insurance Company ("ELIC"), whose own investments were allegedly concentrated in so-called "junk bonds" of declining value, the lawsuits in MDL 863 allege that the offering materials failed to make adequate disclosures and that the bonds represented a scheme among the Executive Life organization, Drexel Burnham Lambert, Inc., and the other defendants to raise money for "junk bond" purchases, rather than for public purposes. ELIC is in conservatorship, interest on the bonds is in default, and Drexel is in Chapter 11 reorganization. The complaint for the Memphis issue requests certification of a plaintiff class including substantially all persons who purchased a Memphis bond through April 9, 1990, either in the original $400 million Memphis bond underwriting, in which a broker/dealer subsidiary of the Corporation participated, or in the secondary market, wherein such subsidiary sold a total of approximately $120 million par value in Memphis bonds. The class claims in respect of the Memphis issue seek to impose joint and several liability upon, among others, numerous defendants who participated in the underwriting, including such subsidiary. In addition, a number of individual actions naming the Corporation's broker/dealer subsidiaries have been brought by secondary market purchasers. The class and individual plaintiffs predicate their claims upon Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 promulgated thereunder, the Investment Company Act, the Investment Advisors Act, common law fraud, negligent misrepresentation, gross and ordinary negligence, breach of fiduciary duty, the Tennessee Securities Act, and other laws. For relief, the various complaints seek a declaratory judgment that the Memphis bonds were void from their inception, rescission of all plaintiffs' purchases, punitive damages, prejudgment interest, and other relief. On January 28, 1993, the California Supreme Court declined to review a lower court ruling to the effect that claims to ELIC assets by policyholders, annuitants, and holders of GICs are to be treated as equal in priority in the distribution of such assets. While related terms and enforceability are unclear, the Corporation's broker/dealer subsidiaries have joined in a common defense with other members of the syndicate which underwrote the bonds the subject of the litigation. During the third quarter of 1994, most of the representatives of the plaintiffs in the various class actions agreed in principle to settle all claims -12- 13 against the underwriting participants. Such settlement has been given tentative approval by the court, and is subject to a number of preconditions, including final approval by the court. Notice of the settlement will be distributed to all members of the putative plaintiff classes and such class members have been given the right to opt out of the settlement agreement and continue to pursue claims against the underwriters. A small number of class members have already indicated their intent to do so. However, should such opt-out claims reach a certain threshold, the underwriting defendants may withdraw their settlement offer. All of the individual secondary market suits against the Corporation's subsidiaries that were consolidated in the litigation have been resolved. The remaining claim asserted against such subsidiaries is in arbitration and involves a $100,000 par value sale. On May 30, 1991, in an action originally filed by UPNB in the Circuit Court of Cook County, Illinois, Chancery Division, seeking to foreclose on a single parcel of mortgaged residential property, the defendant debtors filed a counterclaim against UPNB and the Corporation individually and on the purported behalf of a requested class which would have consisted essentially of all persons who had a mortgage loan serviced by UPNB at any time during the past ten years. The counterclaim alleged that UPNB, like other participants in the mortgage loan industry, engaged in a regular practice of charging mortgage debtors greater amounts to escrow for estimated property taxes and insurance than is allowed by law and applicable loan agreements. The counterclaim sought recovery of all excess charges and/or interest thereon, and other relief. The class action aspects of this counterclaim have been dismissed, leaving only a setoff claim by the defendant debtors with respect to the foreclosure. On February 16, 1993, an action was filed in the Circuit Court of Choctaw County, Alabama as an individual action and as a purported class action against UPNB and UPC with theories of recovery and relief requested similar to the Illinois counterclaim. During the first quarter of 1995, UPNB and the Corporation entered into a definitive settlement with attorneys for the plaintiffs in both actions, which settlement agreement would resolve both actions without material loss. Consummation of the settlement agreement is dependent on certain contingencies, including court approval and approval of such settlement by a requisite percentage of the members of the putative plaintiff class, but is expected to occur in 1995. Based on the damage amounts apparently at issue, management has concluded that this matter should be deleted from future reports. On or about July 10, 1991, UPNB was joined with nine other banks as defendants in a civil action in the Circuit Court of Shelby County, Tennessee. The suit as originally filed alleged that the banks unlawfully conspired to fix the charges for checks drawn on insufficient funds and sought compensatory and punitive damages of $25 million against each defendant and certification of a class of plaintiffs comprised of all depositors who have been charged the NSF fees. The suit was amended on or about July 12, 1991, August 2, 1991, and again on November 25, 1991 to add plaintiffs and to include claims of unfair and deceptive trade practices, breach of contract, tortious conduct, violation of provisions of the UCC, treble damages under the Tennessee Consumer Protection Act, and usury. The amendments also broadened the class and the claims to seek recovery for fees charged for deposited third-party checks which were returned uncollected. In March 1992, the state court proceeding was dismissed; plaintiffs subsequently appealed the dismissal, and on February 23, 1993, the Tennessee Court of Appeals affirmed the dismissal of five of the six counts in the state court action but reversed the dismissal of the count alleging violation of the contractual duty of good faith and fair dealing, holding that the plaintiffs met bare minimum pleading requirements to permit that claim to go forward. During the third quarter of 1993, class certification was granted by the state court, with the plaintiff class apparently consisting of all persons in the United States who, in the six years prior to the filing of the complaint were charged the fees described above. However, on December 17, 1993, the defendants' motion for summary judgment was granted on the remaining breach of contract claim. Plaintiffs have appealed that ruling. Further, on May 22, 1992, substantially the same group of plaintiffs filed a civil action in the U.S. District Court for the Western District of Tennessee against UPNB and eight other banks, alleging violations of the Sherman Act, the federal anti-trust statute prohibiting the fixing of prices by competitors, as well as the Tennessee Consumer Protection Act, requesting certification of a similarly broad class, and sought injunctive relief and damages for the class members in amounts, according to the suit, "which are presently undetermined but believed to be more than $100 million." The complaint also sought treble damages and a jury trial. On March 19, 1993, the federal court granted defendants' motion to dismiss the Tennessee Consumer Protection Act claim, but permitted the Sherman Act claim to remain at that stage of the proceedings. On September 15, 1993, the defendants filed a motion for summary judgment seeking dismissal of the Sherman Act claim, which was granted by the court during the first quarter of 1994. The plaintiffs filed a motion for reconsideration, which motion was denied and plaintiffs appealed to the United States Court of Appeals for the 6th Circuit. Certain subsidiaries of the Corporation and UPNB were threatened in 1989 with a civil action by the FDIC for the estate of a closed savings association. If filed, the action would reportedly seek -13- 14 compensatory damages of at least $37 million and other relief, including an injunction against transferring or encumbering any assets until any judgments were paid, based upon allegations of wrongdoing in the sale of covered call options to the closed savings association. A tolling and forbearance agreement, entered into by all parties to the threatened action in 1989, continues in effect. The FDIC has been furnished information by the Corporation which it asserts demonstrates the lack of merit in the threatened action and believes that such action, if nevertheless filed, can be resolved without material loss. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The information required by Item 5 is included in the Corporation's 1994 Annual Report to Shareholders on page 33 under the heading Table 14, "Selected Quarterly Data," which is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information required by Item 6 is included in the Corporation's 1994 Annual Report to Shareholders on page 9 under the heading "Selected Financial Data," and which is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by Item 7 is included in the Corporation's 1994 Annual Report to Shareholders on pages 10-34 under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition," and which is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by Item 8 is included in the Corporation's 1994 Annual Report to Shareholders on pages 35-69 and on page 33 under the heading Table 14, "Selected Quarterly Data," and which is incorporated herein by reference. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by Item 10 as to the directors of the Corporation is included under the heading "Proposal I: Election of Directors" on pages 1-5 and under the heading "Director Compensation" on page 5 of the definitive proxy statement of the Corporation to be used in soliciting the proxies for the Annual Meeting of shareholders to be held on April 27, 1995 (Proxy Statement) and which is incorporated herein by reference. The information concerning "Executive Officers of the Registrant" is included in Part I (Item 1a) of this Form 10-K in accordance with Instruction 3 to paragraph (b) of Item 401 of Regulation S-K. ITEM 11. EXECUTIVE COMPENSATION The information required by Item 11 as to compensation of directors and executive officers is included under the heading "Proposal I: Election of Directors" on pages 1-5 and under the heading "Certain Information as to Management" on pages 7-14 of the Proxy Statement which is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by Item 12 as to certain beneficial owners and management is included under the heading "Proposal I: Election of Directors" on pages 1-5 of the Proxy Statement which is incorporated herein by reference. -14- 15 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by Item 13 as to transactions and relationships with certain directors and executive officers of the Corporation and their associates is included under the heading "Certain Relationships and Transactions" on page 14 of the Proxy Statement which is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) The following audited consolidated financial statements of Union Planters Corporation and Subsidiaries, included in the Corporation's 1994 Annual Report to Shareholders, are incorporated herein by reference in Item 8:
Page in Annual Report -------------- Management's Responsibility for Financial Reporting 35 Report of Independent Accountants 35 Consolidated Balance Sheet -- December 31, 1994 and 1993 36 Consolidated Statement of Earnings -- Years ended December 31, 1994, 1993, and 1992 37 Consolidated Statement of Changes in Shareholders' Equity -- Years ended December 31, 1994, 1993, and 1992 38 Consolidated Statement of Cash Flows -- Years ended December 31, 1994, 1993, and 1992 39 Notes to Consolidated Financial Statements 40
(a) (2) All schedules have been omitted, since the required information is either not applicable, not deemed material, or is included in the respective consolidated financial statements or in the notes thereto. (a) (3) Exhibits: The exhibits listed in the Exhibit Index on pages i and ii, following page 16 of this Form 10-K are filed herewith or are incorporated herein by reference. (b) Reports on Form 8-K:
Date of Current Report Subject ---------------------- ------------------------------------------- October 20, 1994 Press Release announcing third quarter 1994 operating results and filing 1993 consolidated financial statements of Union Planters Corporation effective October 20, 1994 January 13, 1995 Acquisition of Grenada Sunburst System Corporation (GSSC) on December 31, 1994 January 31, 1995 Amendment to January 13, 1995 Current Report on Form 8-K for the GSSC acquisition to file the unaudited pro forma financial information
-15- 16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. UNION PLANTERS CORPORATION (Registrant) By: /s/ Benjamin W. Rawlins, Jr. --------------------------------------------------- Benjamin W. Rawlins, Jr., Chairman of the Board and Chief Executive Officer Date: March 22, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on the 22nd of March, 1995. /s/ Benjamin W. Rawlins, Jr. /s/ Jack W. Parker - ----------------------------------------------- ---------------------------------------------- Benjamin W. Rawlins, Jr. Jack W. Parker Chairman of the Board, Chief Executive Officer, Executive Vice President and and Director Chief Financial Officer /s/ Jackson W. Moore /s/ M. Kirk Walters - ----------------------------------------------- ---------------------------------------------- Jackson W. Moore M. Kirk Walters President, Chief Operating Officer, Senior Vice President, Treasurer, and and Director Chief Accounting Officer /s/ Albert M. Austin - ----------------------------------------------- ---------------------------------------------- Albert M. Austin Stanley D. Overton Director Director /s/ Marvin E. Bruce /s/ Dr. V. Lane Rawlins - ----------------------------------------------- ---------------------------------------------- Marvin E. Bruce Dr. V. Lane Rawlins Director Director /s/ George W. Bryan /s/ Mike P. Sturdivant - ----------------------------------------------- ---------------------------------------------- George W. Bryan Mike P. Sturdivant Director Director /s/ Robert B. Colbert, Jr. /s/ Richard A. Trippeer, Jr. - ----------------------------------------------- ---------------------------------------------- Robert B. Colbert, Jr. Richard A. Trippeer, Jr. Director Director /s/ C. J. Lowrance III - ----------------------------------------------- C. J. Lowrance III Director
-16- 17 EXHIBIT INDEX 3 (a) Restated Charter of Incorporation, as amended December 17, 1992, of Union Planters Corporation (incorporated by reference to Exhibit 3(a) to the Annual Report on Form 10-K dated December 31, 1993) 3 (b) Amended and Restated By-Laws, as amended February 28, 1995, of Union Planters Corporation (Filed herewith) 4 (a) Rights Agreement, dated January 19, 1989 between Union Planters Corporation and Union Planters National Bank, including Form of Rights Certificate (Exhibit A), and a Form Summary of Rights (Exhibit B) (Incorporated by reference to Exhibit 1 to Union Planters Corporation's Current Report dated as of January 19, 1989 on Form 8-K filed February 1, 1989 Commission File No. 0-6919) 4 (b) Indenture dated April 1, 1989 between Union Planters Corporation and LaSalle National Bank for $34,500,000 of 10 1/8% Subordinated Capital Debentures due 1999 * 4 (c) Indenture dated October 1, 1992 between Union Planters Corporation and The First National Bank of Chicago (Trustee) for $40,250,000 of 8 1/2% Subordinated Notes due 2002 *** 4 (d) Subordinated Indenture dated October 15, 1993 between Union Planters Corporation and The First National Bank of Chicago for $75,000,000 of 6.25% Subordinated Notes due 2003 **** 10 (a) Employment Agreement between Union Planters Corporation and Benjamin W. Rawlins, Jr. (incorporated by reference to Exhibit 10(a) to the Annual Report on Form 10-K dated December 31, 1992) 10 (b) Employment Agreement between Union Planters Corporation and Jackson W. Moore (incorporated by reference to Exhibit 10(c) to the Annual Report on Form 10-K dated December 31, 1992) 10 (c) Deferred Compensation Agreements between Union Planters Corporation and certain highly compensated officers (incorporated by reference to Exhibit 10(g) to the Annual Report on Form 10-K dated December 31, 1989) 10 (d) Union Planters Corporation 1983 Stock Incentive Plan ** 10 (e) (1) Amended Union Planters Corporation 1983 Stock Incentive Plan ***** 10 (f) Union Planters Corporation 1992 Stock Incentive Plan (incorporated by reference to Exhibit 10(g) to the Annual Report on Form 10-K dated December 31, 1993 filed on March 28, 1994 Commission File No. 1-10160) 10 (g) Deferred Compensation Agreements between Union Planters Corporation and Union Planters National Bank and certain outside directors (incorporated by reference to Exhibit 10(m) to the Annual Report on Form 10-K dated December 31, 1989 filed on March 26, 1990 Commission File No. 0-6919) 10 (h) Executive Deferred Compensation Agreement between Union Planters Corporation and certain highly compensated officers (incorporated by reference to Exhibit 10(n) to the Annual Report on Form 10-K dated December 31, 1989 filed on March 26, 1990 Commission File No. 0-6919) 11 Computation of Per Share Earnings (Filed herewith) 13 Annual Report to Security Holders (Filed herewith) 21 Subsidiaries of the Registrant (Filed herewith) -i- 18 EXHIBIT INDEX (continued) 23 Consent of Price Waterhouse LLP (Filed herewith) 27 Financial Data Schedule (Filed herewith) * Incorporated by reference to exhibit number 4 filed as part of Registration Statement No. 33-27784 ** Incorporated by reference to exhibit 4(a) filed as part of Registration Statement No. 33-35928 *** Incorporated by reference to exhibit number 4 filed as part of Registration Statement No. 33-52434 **** Incorporated by reference to Exhibit Number 4(d) filed as part of Registration Statement No. 33-50655 ***** Incorporated by reference to Exhibit Number 4 filed as part of Registration Statement No. 33-23306 -ii- EX-3.(B) 2 AMENDED & RESTATED BY-LAWS 1 EXHIBIT 3(b) AMENDED AND RESTATED BYLAWS OF UNION PLANTERS CORPORATION (A TENNESSEE CORPORATION) _______________________________________ ARTICLE I MEETINGS OF SHAREHOLDERS Section 1. Annual Meeting. The annual meeting of the shareholders of the Corporation for the election of Directors and for the transaction of such other business as may come before the meeting shall be held on the fourth Thursday in April of each year (subsequent to the year 1972) if not a legal holiday, and if a legal holiday at such time as shall be designated by the Board. If the annual meeting shall not be held on the day hereinabove provided for, the Board shall call a special meeting for the election of Directors as soon thereafter as convenient, and in any event not later than 30 days after said day. Section 2. Special Meetings. Special meetings of the shareholders, unless otherwise prescribed by law, may be called for any purpose or purposes whatsoever at any time by the Chairman of the Board, the President, the Secretary or the holders of not less than one tenth (1/10) of the shares entitled to vote at such meeting. Section 3. Notice of Meeting; Waiver of Notice. Written or printed notice stating the place, day, hour, purpose or purposes for which the meeting is called and the person or persons calling the meeting shall be delivered either personally or by mail or at the direction of the Chairman of the Board, the President, the Secretary or other person or persons calling the meeting to each shareholder entitled to vote at the meeting. If mailed, such notice shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting and shall be deemed to be delivered when deposited in the United States Mail addressed to the shareholder at his address as it appears on the stock transfer records of the Corporation, with postage thereon prepaid. If delivered personally, such notice shall be delivered not less than five (5) nor more than sixty (60) days before the date of the meeting and shall be deemed delivered when actually received by the shareholder. A certificate of the Secretary or other person giving the notice, or of a transfer agent of the Corporation, that the notice required by this Section has been given, in the absence of fraud, shall be prima facie evidence of the facts therein stated. Whenever the shareholders -1- 2 of this Corporation are authorized to take any action after notice or after the lapse of a prescribed period of time, such action may be taken without notice and without the lapse of such period of time, if at any time before or after such action is completed each shareholder entitled to such notice or entitled to participate in the action to be taken, (or his attorney-in-fact or proxy holder), shall submit a signed waiver of notice of such requirement. When a meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted that might have been transacted on the original date of the meeting. However, if after the adjournment the Board shall fix a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record on the new record date entitled to vote at the meeting. Section 4. Place of Meetings. Meetings of the shareholders may be held at such place, either within or without the State of Tennessee, as may be set by the Board. If the Board shall fail to set the place of the meeting, the meeting shall be held at the principal office of the Corporation. Section 5. Quorum. At all meetings of the shareholders, the holders of a majority of the shares of stock of the Corporation entitled to vote, present in person or by proxy, shall constitute a quorum for the transaction of any business, except as otherwise provided by statute or by the Charter or these Bylaws. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any of those present. A meeting may be adjourned despite the absence of a quorum. The absence from any meeting of holders of the number of shares of stock of the Corporation in excess of a majority thereof which may be required by the laws of the State of Tennessee or other applicable statute, the Charter, or these Bylaws, for action upon any given matter, shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if there shall be present thereat, in person or by proxy, holders of the number of shares of stock of the Corporation required for action in respect of such other matter or matters. Section 6. Organization. At each meeting of the shareholders, the Chairman of the Board or in his absence or inability to act, the Vice chairman, or in the absence or inability to act of the Chairman of the Board and the Vice Chairman, the President, shall act as Chairman of the meeting. The Secretary, or in his absence or inability to act, any person appointed by the Chairman of the meeting shall act as Secretary of the meeting and keep the minutes thereof. -2- 3 Section 7. Order of Business. The order of business at all meetings of the shareholders shall be as determined by the Chairman of the meeting. Section 8. Voting; Consent of Shareholders in lieu of Meeting. Except as otherwise provided by statute or the Charter, each holder of record of shares of stock of the Corporation having voting power shall be entitled at each meeting of the shareholders to one vote upon each matter submitted to a vote for every share of such stock standing in his name on the record of shareholders of the Corporation: a. On the date fixed by the Board in accordance with Section 6 of Article VI hereof as the record date for the determination of the shareholders who shall be entitled to notice of and to vote at such meeting; or b. If such record date shall not have been fixed for the determination of shareholders entitled to notice of or entitled to vote at a meeting of shareholders, the date on which notice of the meeting is mailed shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section, such determination shall apply to any adjournment thereof. Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent without a meeting may authorize another person or persons to act for him by proxy. Every proxy must be signed by the shareholder or his attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable prior to its use at the pleasure of the shareholder executing it, except as otherwise provided in this Section or by law. The authority of the holder of a proxy to act shall not be revoked by the incompetence or the death of the shareholder who executed the proxy unless, before the authority is exercised, written notice of an adjudication of such incompetence or the death of the shareholder who executed the proxy unless, before the authority is exercised, written notice of an adjudication of such incompetence or written notice of such death is received by the corporate officer responsible for maintaining the list of shareholders. A proxy authorized by a shareholder which is entitled "irrevocable proxy" an which states it is irrevocable is irrevocable when it is held by one of the following or a nominee of any of the following: (a) a pledge; (b) a person who has purchased or agreed to purchase the shares; -3- 4 (c) a person designated by or under an agreement comporting with the law. Notwithstanding a provision in a proxy stating that it is irrevocable, the proxy becomes revocable after the pledge is redeemed or such agreement has terminated. A proxy may be revoked notwithstanding a provision making it irrevocable, by a purchaser of shares without knowledge of the existence of the provision unless the existence of the proxy and its irrevocability is noted conspicuously on the face or back of the certificate representing such shares. Whenever shareholders are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by all of the persons or entities entitled to vote thereon. If a vote shall be taken on any question, then unless required by statute, or determined by the Chairman of the meeting to be advisable, any such vote need not be by ballot. On a vote by ballot, each ballot shall be signed by the shareholder voting, or by his proxy, if there be such proxy, and shall state the number of shares voted. Section 9. List of Shareholders. A list of shareholders of the Corporation as of the record date, certified by the officer responsible for the preparation or by the Corporation's transfer agent, shall be open for inspection at any meeting of the shareholders. If the right to vote at any meeting is challenged, the Chairman of the meeting may rely on such list as evidence of the right of the persons challenged to vote at such meeting. Section 10. Inspectors of Election. The Board may, in advance of any meeting of shareholders, appoint two or more inspectors to act at such meeting or at any adjournment thereof. If the inspectors shall not be so appointed, or if any of them shall fail to appear or act, the Chairman of the meeting may, and on request of any shareholder entitled to vote thereat shall, appoint inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the results, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. On request of the Chairman of the meeting or any shareholder -4- 5 entitled to vote thereat, the inspectors shall make a report in writing of any challenge, request or matter determined by them, and shall execute a certificate of the facts found by them. No director or candidate for the office of director shall act as inspector of an election of directors. Inspectors need not be shareholders of the Corporation. Section 11. Examination of Corporate Records by Shareholders. Any person who shall have been a shareholder of record for at least six (6) months immediately preceding his demand, or who shall be the holder of record of at least five percent (5%) of all of the outstanding shares of the Corporation, upon written demand stating the purpose thereof, shall have the right to examine, in person, or by agent or attorney, at any reasonable time or times, for any proper purpose, the Corporation's books and records of account and the minutes and records of meetings of shareholders, the Board and the Committees o the Board, and to make extracts therefrom. Notwithstanding the foregoing, upon proof of proper purpose by a shareholder of the Corporation, irrespective of the period of time during which such shareholder shall have been a shareholder of record and irrespective of the percentage of outstanding shares held by him, a court having equity jurisdiction in Shelby County, Tennessee, may compel the production for examination by such shareholder of the books, documents and records of the Corporation. By resolution the Board may adopt further policies in respect of the right of the shareholders of the Corporation to inspect said books and records provided that said policies shall not be more restrictive than the provisions of applicable law at the time. ARTICLE II BOARD OF DIRECTORS Section 1. General Powers. Except as otherwise provided by law or by the Charter, the business and affairs of the Corporation shall be managed by the Board of Directors. The Board may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by statute or the charter directed or required to be exercised or done by the shareholders. Section 2. Number, Classification, Election, etc. The number of directors of the corporation shall be twelve (12) who shall be divided into three classes designated Class I, Class II and Class III as follows: Class I consists of four (4) directors elected to hold office for a term expiring at the 1997 Annual Meeting of Shareholders at which their respective successors are to be elected for a term expiring at the 2000 Annual Meeting; -5- 6 Class II consists of four (4) directors elected to hold office for a term expiring at the 1995 Annual Meeting of Shareholders at which their respective successors are to be elected for a term expiring at the 1998 Annual Meeting; and Class III consists of four (4) directors elected to hold office for a term expiring at the 1996 Annual Meeting of shareholders at which their respective successors are to be elected for a term expiring at the 1999 Annual Meeting. Thereafter, each class of directors shall be elected to hold office for terms expiring on the third annual meeting succeeding the annual meeting at which they were last elected. The successor to any director who shall have been elected by the directors to fill a vacancy on the Board shall serve only until the next annual meeting of shareholder for a term expiring at the same time as the terms of the other members of the same class. Notwithstanding the foregoing, any director whose term shall expire at any annual meeting shall continue to serve until such time as his successor shall have been duly elected and shall have qualified unless his position on the Board shall have been abolished by action taken to reduce the size of the Board prior to said meeting. No amendment of the Bylaws decreasing the number of directors shall have the effect of shortening the term of any director. All directors shall be at least 21 years of age. Mandatory retirement is established at age 70, except as to persons who were Directors on February 21, 1985, to be effective at the regular Annual Shareholders Meeting following the 70th birthday. Directors need not be shareholders of the Corporation or need they be residents of Tennessee. Except as otherwise provided by law or by the Charter, the directors shall be elected by written ballot at annual meetings of shareholders. Article NINTH of the Corporation's Charter, as amended by the shareholders on April 16, 1981, provides that the number of directors of the Corporation shall be as provided in these Bylaws from time to time but shall not be less than 7 nor more than 25 and establishes guidelines for increasing the number of directors by amendment of the Bylaws by two-thirds vote of the directors then in office. Section 3. Place of Meeting. Regular meetings of the Board shall be held at such place within or without the State of Tennessee as the Board may from time to time determine. Special meetings may be held at such place in Shelby County, Tennessee, as may be determined by the person calling said meeting. In all cases the place of the meeting shall be specified in the notice thereof. Section 4. Organization Meeting. The Board of Directors shall meet for the purpose of organization, the election of officers, and the transaction of other business as soon as practicable after each annual meeting of the shareholders, on the same day and at the same place where such annual meeting shall -6- 7 be held. Notice of such meeting need not be given if held at said time and place. Such meeting may be held at any other time or place (within or without the State of Tennessee) which shall be specified in a notice thereof given as hereinafter provided in Section 7 of this ARTICLE II. Section 5. Regular Meetings. Regular meetings of the Board of Directors of this Corporation shall be held on the fourth Thursday of each month at 9:30 a.m., in the Fourth Floor Executive Conference Room, Union Planters Administrative Center, 7130 Goodlett Farms Parkway, Memphis, Tennessee. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which otherwise would be held on that day shall be held at the same hour on the next succeeding business day. Notice of regular meetings of the Board need not be given except as otherwise required by law. Section 6. Special Meetings. Special meetings of the Board may be called by the Chairman of the Board, the President, and Executive Vice President, the Secretary or any three or more Directors of the Corporation. Section 7. Notice of Meetings. Notice of each special meeting of the Board (and of each regular meeting for which notice shall be required) shall be given by the Secretary or by or under the supervision of the persons calling the meeting as hereinafter provided in this Section 7, in which notice shall be stated the time and place of the meeting. Notice of each such meeting shall be delivered to each director, either personally or by telephone, telegraph, cable or other method of communication, at least 24 hours before the time at which such meeting is to be held, or by first-class mail, postage prepaid, addressed to him at his residence or usual place of business, and deposited in the mail at least two days before the day on which the meeting is to be held. Notice of any such meeting need not be given to any director who shall, either before or after the meeting, submit a signed waiver of notice or who shall attend such meeting (other than for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened). Neither the business to be transacted at, nor the purpose of any regular or special meeting of the Board, need be specified in the notice or waiver of notice of such meeting unless otherwise required by law of the Bylaws. Section 8. Quorum and Manner of Acting. A majority of the entire Board shall be present in person at any meeting of the Board in order to constitute a quorum for the transaction of business at such meeting, and except as otherwise expressly required by the Charter, these Bylaws or any applicable statute, the act of a majority of the directors present at any meeting at which a quorum is present shall be act of the Board. In the absence of a quorum at any meeting of the Board, a majority of -7- 8 the directors present thereat may adjourn such meeting to another time and place until a quorum shall be present thereat. Notice of the time and place of any such adjourned meeting shall be given to the directors who were not present at the time of the adjournment and, unless such time and place were announced at the meeting at which the adjournment was taken, to the other directors. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. Section 9. Organization. At each meeting of the Board, the Chairman of the Board, or, in his absence or inability to act, the Vice Chairman, or, in his absence or inability to act, the President, or in his absence or inability to act, another director chosen by a majority of the directors present shall act as Chairman of the meeting and preside thereat. The Secretary or, in his absence or inability to act, any person appointed by the Chairman shall act as Secretary of the meeting and keep the minutes thereof. Section 10. Resignations. Any director of the Corporation may resign at any time by giving written notice of his resignation to the Board or to the Chairman of the Board, the Vice Chairman or to the President or to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 11. Vacancies. Newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board for any reason (other than the removal of directors without cause or for cause) may be filled by vote of a majority of the directors then in office, although less than a quorum exists. Vacancies occurring on the Board by reason of the removal of directors without cause or for cause may be filled for the duration of the term of the class by vote of the shareholders, provided, however, if the shareholders shall fail to fill a vacancy so created, the vacancy shall be filled by the directors in the manner specified in the preceding sentence. No person who has attained the age of seventy (70) years shall be appointed to fill any vacancy. Section 12. Removal of Directors. Any or all of the directors of the Corporation may be removed with or without cause by vote of the holders of sixty-six and two-thirds percent (66 2/3%) or more of the outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors. -8- 9 Section 13. Action by Written Consent. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting on written consent, setting forth the action so taken, signed by all of the directors entitled to vote thereon. The instrument of consent shall be filed with the minutes of the proceedings of the Board of Directors. ARTICLE III EXECUTIVE AND OTHER COMMITTEES Section 1. Executive Committee. The Board may, by resolution adopted by a majority of the entire Board, designate an Executive Committee consisting of five (5) or more of the directors of the Corporation, which Committee shall have and may exercise all of the authority of the Board of Directors with respect to all matters other than: (a) The adoption, amendment or repeal of any Bylaw; (b) The submission to shareholders of any action requiring shareholders' authorization; (c) The filling of vacancies in the Board of Directors or in any committee thereof; (d) The declaration of dividends or making of other corporate distributions; (e) The issuance of Common Stock, Preferred Stock or any other obligation of the Corporation exchangeable for or convertible into its capital stock of any class or any warrant, right or option to acquire the same; or (f) the removal or replacement of any officer elected by the Board or appointed by the Chairman of the Board or President pursuant to authority conferred upon them or either of them by the Board. The Board may designate one or more directors as alternate members of the Executive Committee, who may replace any absent member or members at any meeting of such committee. The Executive Committee shall serve at the pleasure of the Board. The Executive Committee shall keep written minutes of its proceedings and shall report such minutes to the Board. All such proceedings shall be subject to revision or alteration by the Board; provided, however, that third parties shall not be prejudiced by such revision or alteration. Section 2. Other Committees. The Board may, by resolution adopted by a majority of the entire Board, designate other Committees, each consisting of three or more of the directors -9- 10 of the Corporation, which Committees, except as otherwise proscribed by statute, shall have and may exercise the authority of the Board to the extent that such authority shall be conferred by resolutions designating such Committee or Committees adopted by vote of a majority of the entire Board. Section 3. General. A majority of any committee may determine its action and fix the time and place of its meetings, unless the Board shall otherwise provide. In the absence or disqualification of any member of any committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place and stead of any such absent or disqualified member. In determining the existence of a quorum, the Secretary of the Corporation shall not be counted unless he shall be a director of the Corporation and shall have been duly appointed as a member of such committee. The Board shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternate members to replace any absent or disqualified member, or to dissolve any such committee. Nothing herein shall be deemed to prevent the Board from appointing one or more committees consisting in whole or in part of persons who are not directors of the Corporation; provided, however, that no such committee shall have or may exercise any authority or power of the Board in the management of the business or affairs of the Corporation. ARTICLE IV OFFICERS Section 1. Number and Qualifications. The officers of the Corporation shall include the Chairman of the Board, the Vice Chairman, the President, one or more Executive Vice Presidents, one or more Vice Presidents, the Treasurer and the Secretary. Any two or more offices may be held by the same person, except the offices of President and Secretary. Such officers shall be elected by the Board of Directors each year at the organizational meeting held after the Annual Meeting of shareholders, each to hold office until the meeting of the Board following the next Annual Meeting of the shareholders and until his successor shall have been duly elected and shall have qualified, or until his death, or until he shall have resigned or have been removed in the manner provided by law and these Bylaws. The Board may from time to time elect, or delegate to the Chairman of the Board the power to appoint such other officers (including one or more Assistant Vice Presidents, one or more Assistant Treasurers, and one or more Assistant Secretaries) and such agents, as may be necessary or desirable to carry on the business of the Corporation. Such other officers and agents shall have such duties and shall -10- 11 hold their offices for such terms as may be prescribed by the Board or by the appointing authority. Section 2. Resignations. Any officer of the Corporation may resign at any time by giving written notice of his resignation to the Board, the Chairman of the Board, the Vice Chairman, the President or the Secretary. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 3. Removal. Any officer or agent of the Corporation may be removed, either with or without cause, at any time, by the vote of the majority of the entire Board at any meeting of the Board, or, except in the case of an officer or agent elected or appointed by the Board, by the Chairman of the Board or the President. Section 4. Vacancies. A vacancy in any office, whether arising from death, resignation, removal or any other cause, may be filled by the Board at any regular or special meeting for the unexpired portion of the term of the office which shall be vacant, in the manner prescribed in these Bylaws for the regular election or appointment to such office. Section 5. The Chairman. The Chairman of the Board shall be the Chief Executive Officer of the Corporation and shall have the general and active management of the business of the Corporation and shall have general and active supervision and direction over the business and affairs of the Corporation and over its several officers, agents and employees, subject, however, to the control of the Board. He shall, if present, preside at each meeting of the Shareholders and of the Board. He shall perform all duties incident to the office of the Chairman of the Board and such other duties as may, from time to time, be assigned to him by the Board. The Chairman of the Board shall be authorized to do or cause to be done all things appropriate, including preparation, execution and filing of any Registration Statements or other documents to effectuate the registration of the Corporation's securities (when necessary or desirable) with the Securities and Exchange Commission pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, and to effectuate the registration of the Corporation's securities as may be necessary or desirable pursuant to the securities laws of any state. The Chairman is also authorized to execute and cause to be filed on behalf of the Corporation any reports which may be required by the securities laws or other laws of the United States or of any state pursuant to any regulations adopted with respect thereto. -11- 12 Section 5(a). The Vice Chairman. The Vice Chairman shall have those duties assigned to him by the Chairman or the Board. In the case of the absence of the Chairman or his inability to act, the Vice Chairman shall perform the duties of the Chairman, and when so acting shall have all of the powers of, and be subject to all the restrictions upon, the Chairman. Section 6. The President. The President shall have general and active supervision and direction over the other officers, agents and employees and shall see that their duties are properly performed, subject, however, to the control of the Board. Concurrently with the Chairman of the Board, the president is hereby authorized to do or cause to be done all things appropriate, including preparation, execution and filing of the registration of the Corporation's securities (when necessary or desirable) with the Securities and Exchange Commission pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, and to effectuate registration of the Corporation's Securities as may be necessary or desirable pursuant to the securities laws of any state. The President is also authorized to execute and cause to be filed on behalf of the Corporation any reports which may be required by the securities laws or other laws of the United States or any state or pursuant to any regulations adopted with respect thereto. In the case of the absence of the Chairman of the Board and the Vice Chairman or their inability to act, the President shall perform the duties of the Chairman of the Board, and when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Chairman of the Board. He shall perform all duties incident to the office of the Chairman of the Board and such other duties as, from time to time, may be assigned to him by the Board or these Bylaws. Section 7. Executive Vice-President. At the request of the Chairman of the Board, the Vice Chairman and the President, or in the case of their absence or inability to act, the Executive Vice-President shall perform the duties of the Chairman of the Board, the Vice Chairman and the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the Chairman of the Board, the Vice Chairman and the President. The executive Vice-President shall perform all duties incident to the office of Executive Vice-President and such other duties as from time to time may be assigned to him by the Board, the Chairman of the Board, the Vice Chairman, the President, or by these Bylaws. one Executive Vice-President shall be the chief financial officer of the Corporation. Section 8. Vice Presidents. Each Vice-President shall perform all such duties as from time to time may be assigned to him by the Board, the Chairman of the Board, the Vice Chairman or the president. Vice-Presidents shall have seniority based upon length of service as Vice-President. Unless the Board shall -12- 13 otherwise provide, the Senior Vice-President shall perform the duties of the Executive Vice-President in case of his absence or inability to act, or if an Executive Vice-President shall not have been appointed by the Board. Section 9. The Treasurer. The Treasurer shall: (a) Have charge and custody of, and be responsible for, all the funds and securities of the Corporation; (b) Keep full and accurate records of receipts and disbursements in books belonging to the Corporation. (c) Cause all monies and other valuables to be deposited to the credit of the Corporation; (d) Receive, and give receipts for, monies due and payable to the Corporation from any source whatsoever; (e) Disburse the funds of the Corporation and supervise the investment of its funds as ordered or authorized by the proper vouchers therefor; and (f) In general, perform all the duties incident to the office of Treasurer, and such other duties as from time to time may assigned to him by the Board, the President, the Vice Chairman or the Chairman of the Board. Section 10. The Secretary. The Secretary shall: (a) Keep or cause to be kept in one or more books provided for the purpose, the minutes of all meetings of the Board, the committees of the Board and the shareholders; (b) See that all notices are duly given in accordance with the provisions of these Bylaws and as required by law; (c) Be custodian of the records and the seal of the Corporation and affix and attest the seal to all stock certificates of the Corporation (unless the seal of the Corporation on such certificates shall be facsimile as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal; (d) See that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; (e) In general, perform all the duties incident to the office of Secretary and such other duties as from time -13- 14 to time may be assigned to him by the Board, the Chairman of the Board, the Vice Chairman or the President. Section 11. Officers' Bond or Other Security. If required by the Board, any officer of the Corporation shall give a bond or other security for the faithful performance of his duties, in such amount and with such surety or sureties as the Board may require. ARTICLE V INDEMNIFICATION The Corporation does hereby indemnify its directors and officers to the fullest extent permitted by the laws of the State of Tennessee and by ARTICLE TWELFTH of its Charter. The Corporation may indemnify any other person to the extent permitted by the Charter and by applicable law. ARTICLE VI SHARES, ETC. Section 1. Stock Certificates. Each shareholder of the Corporation shall be entitled upon request to have a certificate in such form conforming to law as shall be approved by the Board, representing the number of shares of stock of the Corporation owned by him. The certificates representing shares of stock shall be signed in the name of the Corporation by the Chairman of the Board or the President or a Vice-President or an Assistant Vice-President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and sealed with the seal of the Corporation (which seal may be a facsimile engraved or printed); provided, however, that where any such certificate is countersigned by a transfer agent and/or a registrar (other than the Corporation or one of its employees), the signatures of the Chairman of the Board, President, Vice-President, Secretary, or Treasurer upon such certificates may be facsimiles, engraved or printed. In case any officer who shall have signed such certificate shall have ceased to be such officer before such certificates shall be issued, they may nevertheless be issued by the Corporation with the same effect as if such officer were still in office at the date of their issue. Section 2. Books of Account and Record of Shareholders. There shall be kept correct and complete books and records of account, minutes of the proceedings of its shareholders, Board of Directors and the committees of the Board, and of all the business and transactions of the Corporation. There shall also be kept at the office of its transfer agent or at both, a record containing the names and addresses of all shareholders of the Corporation, the number of shares of stock held by each, and the -14- 15 dates when they became the owners of record thereof. Such shareholder records may be in written form, on magnetic tape, disk pack storage, or in any other form capable of being converted into written form within a reasonable time for visual inspection. Section 3. Transfers of Shares. Transfers of shares of stock of the Corporation shall be made on the stock records of the Corporation only upon authorization by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with a transfer agent or transfer clerk, and on surrender of the certificate or certificates for such shares properly endorsed or accompanied by a duly executed stock transfer power and the payment of all applicable taxes with respect to the transfer. Except as otherwise provided by law, the Corporation shall be entitled to recognize the exclusive right of a person in whose name any share or shares stand on the record of shareholders as the owner of such shares or shares for all purposes, including, without limitation, the right to receive dividends or other distributions, and to vote as such owner, and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in any such share or shares on the part of any other person. Whenever any transfers of shares shall be made for collateral security and not absolutely, and written notice thereof shall be given to the Secretary or to such transfer agent or transfer clerk, such facts shall be stated in the entry of the transfer. Section 4. Regulations. The Board may make such additional rules and regulations, not inconsistent with applicable law, the Charter or these Bylaws, as it may deem expedient concerning the issue, transfer, and registration of certificates for shares of stock of the Corporation. It may appoint one or more transfer agents or one or more transfer clerks and one or more registrars, and may require all certificates for shares of stock to bear the signature or signatures of any of them. Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any certificate(s) representing shares of the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of such certificate(s), and the corporation may issue a new certificate or certificates of stock in the place of any certificate theretofore issued by it which the owner thereof shall allege to have been lost or destroyed or which shall have been mutilated. As a condition precedent to the issuance of replacement certificates, such owner or his legal representative as principal shall give to the Corporation a bond with "open" (unlimited) penalty and in such form and with such surety or sureties as the person designated by the Board in his absolute discretion shall determine to be sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or destruction of any such certificate, -15- 16 or the issuance of a new certificate. Any transfer agent which may be appointed by the Corporation shall be and is hereby designated as the person to make the determination whether the bond furnished meets the requirements of this Section 5 unless the Board, by resolution, shall designate some other person to do so. Anything herein to the contrary notwithstanding, the Board, in its absolute discretion, may refuse to issue any such new certificate, except pursuant to legal proceedings under the laws of the State of Tennessee. Section 6. Fixing of Record Dates. The Board may fix, in advance, a date not less than ten (10) days prior to the date then fixed for the holding of any meeting of the shareholders as the time as of which the shareholders entitled to notice of and to vote at such meeting or whose consent or dissent is required or may be expressed for any purpose, as the case may be, shall be determined, and all persons who as holders or record of voting stock at such time, and no others, shall be entitled to such notice of, and to vote at such meeting or to express their consent or dissent, as the case may be. The Board may fix in advance a date not more than sixty (60) days and not less than ten (10) days prior to the date fixed for the payment of any dividends; or for the making of any distribution; or for the allotment of rights to subscribe for securities of the Corporation; or for the delivery of evidences of rights or evidence of interests arising out of any change, conversion or exchange of capital stock or other securities; as the record date for the determination of shareholders entitled to receive any such dividend, distribution, allotment, rights or interests, and in such case only the shareholders of record at the time so fixed shall be entitled to receive such dividend, distribution, allotment, rights or interests. ARTICLE VII OFFICES Section 1. Principal Office. The principal office of the Corporation shall be at 67 Madison Avenue in the City of Memphis, County of Shelby, and State of Tennessee, or at such other address as may be fixed by the Board. Section 2. Other Offices. The Corporation may also have an office or offices other than said principal office at such place or places, either within or without the State of Tennessee, as the Board shall from time to time determine or the business of the Corporation may require. -16- 17 ARTICLE VIII FISCAL YEAR The fiscal year of the Corporation shall be the calendar year. ARTICLE IX SEAL The form of seal of the Corporation shall be determined by the Board of Directors. ARTICLE X MISCELLANEOUS Section 1. Reports to Shareholders. The books of account of the Corporation shall be examined by an independent firm of public accountants at the close of each annual period of the Corporation and at such other times, if any, as may be directed by the Board. A report to the shareholders based upon such examination shall be mailed to each shareholder of the Corporation of record on such date with respect to each report as may be determined by the Board, at his address as the same appears on the stock transfer records of the Corporation. Each such report shall show the assets and liabilities of the Corporation as of the close of the annual or other period covered by the report. This report shall also show the Corporation's income and expenses from the period from the end of the Corporation's preceding fiscal year to the close of the annual or other period covered by the report any other information which may be required by law or regulation lawfully adopted and shall set forth such other matters as the Board or such independent firm of public accountants shall determine. Section 2. Selection and Termination of Firm of Independent Public Accountants. The independent auditors and accountants for the Corporation shall be selected by the Board at a meeting held within thirty (30) days before the beginning of the fiscal year and before the Annual Meeting of Shareholders except that any vacancy occurring between Annual Meetings as a result of the resignation of the accountants may be filled by the vote of a majority of those members of the entire Board who are not salaried officers or employees of the Corporation or of any affiliate of the Corporation. Such selection shall be submitted for ratification or rejection at the next succeeding Annual Meeting of Shareholders if such meeting be held, or at the next succeeding Special Meeting of Shareholders in said fiscal year if the Annual Meeting shall not be held on the date designated in the Bylaws therefor; provided, however, that a Special Meeting of Shareholders -17- 18 need not be called to ratify or reject the selection by the Board of independent auditors and accountants in the above manner to fill a vacancy occurring between Annual Meeting as a result of the resignation of said auditors and accountants. The employment of such accountants shall be conditioned upon the right of the Corporation, either by the unanimous vote of the entire Board of Directors or by vote of a majority of the outstanding voting securities at any meeting called for the purpose, to terminate such employment without penalty. If the selection of accountants shall be rejected by the Shareholders or their employment be terminated by the Shareholders in the manner provided above, the vacancy so occurring may be filled by the vote of a majority of the outstanding voting securities either at the meeting at which the rejection or termination by the Shareholders occurred or, if not so filled, at a subsequent meeting which shall be called for the purpose. ARTICLE XI AMENDMENTS These Bylaws may be amended or repealed, in whole or in part, or new Bylaws may be adopted, by the Board of Directors at any meeting thereof by vote of a majority of the entire Board, unless a greater affirmative vote is required by the Charter; provided, however, that notice of such meeting shall have been given as provided in these Bylaws, which notice shall mention that amendment or repeal of the Bylaws, or the adoption of new Bylaws, is one of the purposes of the meeting. Any such Bylaws adopted by the Board may be amended or repealed, or new Bylaws may be adopted by vote of the shareholders of the Corporation, at any annual or special meeting thereof; provided, however, that notice of such meeting shall have been given as provided in these Bylaws, which notice shall mention that amendment or repeal of these Bylaws, or the adoption of new Bylaws, is one of the purposes of such meeting. ARTICLE XII SHAREHOLDER PROPOSALS TO BE PRESENTED AT ANNUAL MEETINGS Any proposal of a shareholder which is to be presented at any annual meeting of shareholders shall be sent so as to be received by the Corporation at its principal offices not less than one hundred twenty (120) days in advance of the date of the Corporation's proxy statement issued in connection with the previous year's annual meeting of shareholders. Updated February 28, 1995 -18- EX-11 3 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 Page 1 of 2 UNION PLANTERS CORPORATION COMPUTATION OF EARNINGS PER SHARE
YEARS ENDED DECEMBER 31, --------------------------------------------------- 1994 1993 1992 ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Primary Earnings Per Share - -------------------------- Computation for Statement of Earnings - ------------------------------------- Reconciliation of earnings to amounts used for primary earnings per share: Net earnings $ 58,608 $ 92,552 $ 63,250 Less: Preferred stock dividends Series B (352) (352) (352) Series C (1,491) (1,790) (1,790) Series D (494) (494) (247) Series E (6,216) (5,832) (3,777) ---------- ---------- ---------- Net earnings applicable to primary earnings per share $ 50,055 $ 84,084 $ 57,084 ========== ========== ========== Reconciliation of weighted average number of shares to amount used in primary earnings per share computation: Average shares outstanding 39,920,194 35,123,751 31,764,149 Average common equivalent shares: Assumed exercise of options 135,144 187,286 145,851 ---------- ---------- ---------- Primary average shares outstanding 40,055,338 35,311,037 31,910,000 ========== ========== ========== Primary earnings per share $1.25 $2.38 $1.79 ===== ===== =====
2 EXHIBIT 11 Page 2 of 2 UNION PLANTERS CORPORATION COMPUTATION OF EARNINGS PER SHARE
YEARS ENDED DECEMBER 31, ------------------------------------------------- 1994 1993 1992 ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Fully Diluted Earnings Per Share - -------------------------------- Computation for Statement of Earnings - ------------------------------------- Earnings used for fully diluted earnings per share: Net earnings $ 58,608 $ 92,552 $ 63,250 Less: Preferred stock dividends Series C (1,491) (1,790) (1,790) Series D (494) -- -- Series E (6,216) -- -- ----------- ----------- ----------- Net earnings applicable to fully diluted earnings per share $ 50,407 $ 90,762 $ 61,460 =========== =========== =========== Reconciliation of weighted average number of shares to amount used in fully diluted earnings per share computation: Average shares outstanding 39,920,194 35,123,751 31,764,149 Average common equivalent shares: Assumed exercise of options 137,121 205,365 163,420 Assumed conversion of preferred stock: Series B 339,768 339,768 339,768 Series D -- 253,655 127,521 Series E -- 3,618,515 2,359,290 ----------- ----------- ----------- Fully diluted average shares outstanding 40,397,083 39,541,054 34,754,148 =========== =========== =========== Fully diluted earnings per share $1.25 $2.30 $1.77 ===== ===== =====
EX-13 4 ANNUAL REPORT TO SECURITY HOLDERS 1 UNION PLANTERS CORPORATION (Logo) 1994 ANNUAL REPORT 2 UNION PLANTERS CORPORATION (Logo) MARKET AREAS SERVED TENNESSEE, MISSISSIPPI, ARKANSAS, LOUISIANA, ALABAMA, AND KENTUCKY (Figure 1 - The inside front cover of Exhibit 13 (Union Planters Corporation's Annual Report to Shareholders for 1994) contains a map of the states of Tennessee, Mississippi, Arkansas, Louisiana, Alabama, and Kentucky showing the counties where Union Planters Corporation affiliates have banking locations and the headquarters for Union Planters Corporation and Union Planters National Bank.) 3 UNION PLANTERS CORPORATION AND SUBSIDIARIES FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------ DECEMBER 31, 1994 1993 % CHANGE - ------------------------------------------------------------------------------------------------------ (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) FOR THE YEAR Earnings before extraordinary item and accounting changes $ 58,608 $ 89,976 (34.9)% Extraordinary item, net of taxes -- (3,206) Accounting changes, net of taxes -- 5,782 Net earnings 58,608 92,552 (36.7) PER COMMON SHARE Primary Earnings before extraordinary item and accounting changes $ 1.25 $ 2.31 (45.9)% Extraordinary item, net of taxes -- (.09) Accounting changes, net of taxes -- .16 Net earnings 1.25 2.38 (47.5) Fully diluted Earnings before extraordinary item and accounting changes 1.25 2.23 (43.9) Extraordinary item, net of taxes -- (.08) Accounting changes, net of taxes -- .15 Net earnings 1.25 2.30 (45.7) Cash dividends .88 .72 22.2 Book value 16.01 16.29 (1.7) AT YEAR END Assets $10,015,069 $9,029,893 10.9% Earning assets 9,132,310 8,341,524 9.5 Loans, net of unearned income 5,949,128 4,653,368 27.8 Allowance for losses on loans 122,089 114,353 6.8 Deposits 8,417,842 7,671,621 9.7 Shareholders' equity 730,707 682,002 7.1 RATIOS Return on average assets .58% 1.04% Return on average common equity 7.40 15.55 Net interest income (taxable-equivalent) as a percentage of average earning assets 4.39 4.44 Allowance for losses on loans as a percentage of loans 2.05 2.46 Nonperforming loans as a percentage of loans .32 .59 Nonperforming assets as a percentage of loans and foreclosed properties .42 .78 Allowance for losses on loans as a percentage of nonperforming loans 641 414 Shareholders' equity to assets 7.30 7.55 Leverage ratio 7.18 7.23 Tier 1 capital to risk-weighted assets 12.22 13.58 Total capital to risk-weighted assets 14.75 16.40 - ------------------------------------------------------------------------------------------------------
CONTENTS
PAGE ---- Letter to Shareholders..................................................................... 2 Consolidated Balance Sheet and Statement of Earnings....................................... 3 Economic Outlook........................................................................... 5 Selected Financial Data.................................................................... 9 Management's Discussion and Analysis of Results of Operations and Financial Condition...... 10 Financial Tables........................................................................... 25 Selected Quarterly Data.................................................................... 33 Report of Management....................................................................... 35 Report of Independent Accountants.......................................................... 35 Consolidated Financial Statements.......................................................... 36 Notes to Consolidated Financial Statements................................................. 40 Banks and Communities Served............................................................... 70 Executive Officers and Directors........................................................... 71 Corporate Information...................................................................... 72
1 4 TO OUR SHAREHOLDERS Last year marked a significant increase in the size and value of our banking franchise. At the end of 1994 total assets reached $10 billion, an increase of 60% over the previous year, and shareholders' equity reached $731 million. We are pleased to present this annual report and encourage you to review the financial statements and management's discussion and analysis for details on our performance and financial condition. We now serve customers with 380 banking locations in a six-state area. Total loans grew to $5.9 billion and total deposits reached $8.4 billion, giving us the largest deposit base of any bank holding company headquartered in Tennessee. Acquisitions accounted for the bulk of the asset growth. The largest of these was Grenada Sunburst System Corporation (GSSC), parent company of the $2.0 billion Sunburst Bank, Mississippi and the $500 million Sunburst Bank, Louisiana. Grenada is only seventy miles from Memphis and GSSC represents an excellent fit with Union Planters because of its similar community banking focus and balanced commercial and consumer lending operations. This acquisition increased our market share in north Mississippi and expanded bank services to central and south Mississippi and south Louisiana. Combining these two strong southeastern banking franchises creates an organization with a market capitalization exceeding one billion dollars and an equity capital base of $731 million. Our larger size gives us access to more funding sources, improved profitability opportunities and a broader, more diversified loan portfolio and deposit base. In general, the banking industry has excess capacity and competitive forces are bringing about consolidation and restructuring to lower future costs. Last fall, we joined the growing list of banks planning to restructure and we subsequently announced specific planned branch divestitures and staff reductions. The restructuring plans resulted in significant charges to last year's fourth quarter. While no one likes large charges, the restructuring will result in improved profitability this year and in the future. Also, in the fourth quarter, we recognized the cost of a consumer loan marketing program that was initiated in the last half of the year. To date, new loans outstanding under this program are approximately $225 million. In addition, we took losses on sales of investment securities to improve our book yields and provide funding for loan growth. In total, we recorded certain charges for the year of approximately $51 million after tax reducing our 1994 net income to $58.6 million or $1.25 per share, down from $92.6 million or $2.30 per share for 1993. We expect earnings to recover this year as we benefit from higher investment portfolio yields, a larger consumer loan portfolio and the restructuring and focus on integrating our recent acquisitions. As a result of a growing economy and our loan risk management strategies, our asset quality measures are the best in the Corporation's history. At year end nonperforming assets were only $25 million or .42% of loans and foreclosed properties and our allowance for losses on loans was $122.1 million or 2.05% of loans. While it is not likely that we can improve on these measures, our high level of reserves should serve us well in any economic slow down. Economic growth has always been one of the principal determinants of bank earnings. We have experienced above average economic performance in our Mid-South market area for the last several years and anticipate a continuation this year. (Please see the following section.) While we may experience some further rate increases as the Federal Reserve responds to inflationary concerns, we do not expect increasing rates to produce any significant impact on our operating results. Industry consolidation is likely to continue and we believe the best performing banks will be those that increase their market share and control their operating expenses. Our deposit market share now exceeds 25% in 42 of the 105 counties we serve and we will be looking for strategic acquisitions to further increase market share. Reduction and control of operating expenses will continue to be our primary focus over the next several years. With our strong balance sheet, we are well positioned to compete in our market area. We welcome our new shareholders and invite you to participate in our automatic dividend reinvestment program which offers a five percent discount and no brokerage fees on share purchases. Thank you for your support. Yours very truly, /s/ Benjamin W. Rawlins, Jr. - ---------------------------- Benjamin W. Rawlins, Jr. Chairman and Chief Executive Officer 2 5 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
DECEMBER 31, -------------------------- 1994 1993 ----------- ---------- (DOLLARS IN THOUSANDS) ASSETS Cash and due from banks $ 488,722 $ 363,360 Interest-bearing deposits at financial institutions 10,641 26,675 Federal funds sold and securities purchased under agreements to resell 29,953 78,149 Trading account securities 155,951 153,482 Loans held for resale 24,493 134,206 Investment securities Available for sale (Amortized cost December 31, 1994: $1,975,897; Fair value December 31, 1993: $815,360) 1,928,984 808,554 Held to maturity (Fair value: $1,009,969 and $2,542,808, respectively) 1,033,160 2,487,090 Loans 5,980,581 4,679,256 Less: Unearned income (31,453) (25,888) Allowance for losses on loans (122,089) (114,353) ----------- ---------- Net loans 5,827,039 4,539,015 Premises and equipment 204,136 189,080 Accrued interest receivable 87,509 70,332 Goodwill and other intangibles 50,236 47,293 Other assets 174,245 132,657 ----------- ---------- TOTAL ASSETS $10,015,069 $9,029,893 ============ ========== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Noninterest-bearing $ 1,380,737 $1,172,251 Certificates of deposit of $100,000 and over 559,593 593,381 Other interest-bearing 6,477,512 5,905,989 ----------- ---------- Total deposits 8,417,842 7,671,621 Short-term borrowings 415,171 275,537 Federal Home Loan Bank advances 224,103 192,792 Long-term debt 116,848 117,379 Accrued interest, expenses, and taxes 72,211 52,766 Other liabilities 38,187 37,796 ----------- ---------- TOTAL LIABILITIES 9,284,362 8,347,891 ----------- ---------- Shareholders' equity Preferred stock Convertible 87,298 87,298 Nonconvertible -- 17,250 Common stock, $5 par value; 50,000,000 shares authorized; 40,179,474 issued and outstanding (35,447,702 in 1993) 200,897 177,238 Additional paid-in capital 69,204 59,969 Net unrealized gain (loss) on available for sale securities (28,527) -- Retained earnings 401,835 340,247 ----------- ---------- TOTAL SHAREHOLDERS' EQUITY 730,707 682,002 ----------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $10,015,069 $9,029,893 ============ ==========
3 6 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS
YEARS ENDED DECEMBER 31, ------------------------------------------- 1994 1993 1992 ----------- ----------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) INTEREST INCOME Interest and fees on loans $ 460,617 $ 375,567 $ 314,814 Interest on investment securities Taxable 156,429 151,538 142,663 Tax-exempt 32,406 29,825 22,238 Interest on deposits at financial institutions 718 1,742 4,915 Interest on federal funds sold and securities purchased under agreements to resell 3,637 5,092 5,250 Interest on trading account securities 9,143 6,194 6,648 Interest on loans held for resale 1,107 7,432 7,250 ----------- ----------- ----------- Total interest income 664,057 577,390 503,778 ----------- ----------- ----------- INTEREST EXPENSE Interest on deposits 235,815 213,197 209,035 Interest on short-term borrowings 20,082 7,230 8,040 Interest on Federal Home Loan Bank advances and long-term debt 19,882 13,253 5,555 ----------- ----------- ----------- Total interest expense 275,779 233,680 222,630 ----------- ----------- ----------- NET INTEREST INCOME 388,278 343,710 281,148 PROVISION FOR LOSSES ON LOANS 3,636 16,558 27,182 ----------- ----------- ----------- NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON LOANS 384,642 327,152 253,966 NONINTEREST INCOME Service charges on deposit accounts 52,590 46,532 35,590 Bank card income 10,192 9,749 8,632 Mortgage servicing income 9,095 9,239 9,400 Trust service income 7,889 7,566 6,871 Profits and commissions from trading activities 5,537 11,577 12,252 Investment securities gains (losses) (20,298) 4,495 14,019 Other income 28,557 30,767 25,845 ----------- ----------- ----------- Total noninterest income 93,562 119,925 112,609 ----------- ----------- ----------- NONINTEREST EXPENSE Salaries and employee benefits 160,862 150,383 116,764 Net occupancy expense 25,750 23,356 19,401 Equipment expense 26,451 23,986 18,836 Other expense 185,772 121,956 124,463 ----------- ----------- ----------- Total noninterest expense 398,835 319,681 279,464 ----------- ----------- ----------- EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM, AND ACCOUNTING CHANGES 79,369 127,396 87,111 Applicable income taxes 20,761 37,420 23,861 ----------- ----------- ----------- EARNINGS BEFORE EXTRAORDINARY ITEM AND ACCOUNTING CHANGES 58,608 89,976 63,250 Extraordinary item -- defeasance of debt, net of taxes -- (3,206) -- Accounting changes, net of taxes -- 5,782 -- ----------- ----------- ----------- NET EARNINGS $ 58,608 $ 92,552 $ 63,250 ============ ============ ============ EARNINGS PER COMMON SHARE PRIMARY Earnings before extraordinary item and accounting changes $ 1.25 $ 2.31 $ 1.79 Extraordinary item -- defeasance of debt, net of taxes -- (.09) -- Accounting changes, net of taxes -- .16 -- ----------- ----------- ----------- NET EARNINGS $ 1.25 $ 2.38 $ 1.79 ============ ============ ============ FULLY DILUTED Earnings before extraordinary item and accounting changes $ 1.25 $ 2.23 $ 1.77 Extraordinary item -- defeasance of debt, net of taxes -- (.08) -- Accounting changes, net of taxes -- .15 -- ----------- ----------- ----------- NET EARNINGS $ 1.25 $ 2.30 $ 1.77 ============ ============ ============
4 7 STRONG ECONOMIC EXPANSION SUPPORTS REGION Union Planters Corporation serves a six-state market area which includes Tennessee, Mississippi, Eastern Arkansas, Southern Louisiana, Northern Alabama and Southern Kentucky. Significant contributors to the area's diverse and growing economy are agriculture, heavy and light manufacturing industry, outstanding transportation opportunities, natural gas and petroleum production and refining, chemicals, aerospace and other high-tech industries and the entertainment industry. The region's spectacular economic success story has only recently begun to be recognized. Record employment and personal income increases have elevated the hopes and aspirations of all citizens of the UPC market area. The long-term economic outlook for the region is more positive than ever before. For the first time, structural barriers to economic progress are being removed by the unprecedented growth and prosperity being experienced throughout the region. Improvements in productivity derived from new investments in plant and equipment have allowed the region's employers to increase wages and salaries and still remain competitive in international markets. - -------------------------------------------------------------------------------- ECONOMIC ACTIVITY IN THE UPC MARKET AREA - Strong employment growth above national rate - Income increases above the national rate - Low unemployment rates in nearly all counties - Very tight urban labor markets - Strong, diversified manufacturing base - Growing export sector - Agricultural sector remains stable and exports grow - Casino gaming aids tourism in Mississippi - New manufacturing capital investments increase worker productivity - Strong employment growth in service industries - Low cost of living adds to the area's attractiveness - Low-tax environments aid the region's growth - Area's quality of life factors highly ranked nationally - Pro-business environment and attitudes benefit the region - Favorable labor relations, wage rates, and working conditions attract employers - -------------------------------------------------------------------------------- Strong regional political leadership and conservative financial policies have kept the tax burden low for both businesses and residents of the region. Attractive tax rates, competitive packages of economic incentives, abundant and affordable resources, a central geographic location, and the overall quality of life have helped make the region attractive for foreign and domestic businesses interested in developing new facilities. Unlike other areas of the nation where manufacturing is declining as a source of employment and income, the UPC market area continues to build and rely on the substantial economic strength of its manufacturing base. Approximately 30 percent of the region's total product is accounted for by manufacturing. By comparison, less than 20 percent of the nation's output is a result of manufacturing. Gains in manufacturing employment have contributed substantially to the economic recovery of many areas of the region. Over 31 percent of the region's rural jobs are in manufacturing, and many communities have much higher manufacturing employment levels. In addition, recent gains in capital-intensive and high-tech manufacturing employment have offset the losses that have occurred in low-wage and low-tech clothing and textile firms. As a result, rural and urban wage and salary increases can be explained, in part, by the transition taking place in the region's manufacturing base. 5 8 In Tennessee, the economic expansion has been nothing short of phenomenal. For example, in November 1993, U.S. News & World Report ranked Tennessee number 7 among the 50 states in economic recovery since 1991. The report cited the auto industry as helping boost the state's employment rate by 4.4 percent, versus a national rate of 1.8 percent. Tennessee ranked number 11 in income growth rate and number 14 in new business growth rate. And, the state's economy continued to expand in 1994. In April 1994, Dow Jones ranked Tennessee as the strongest economy in the South. Over the 12-month period ending in December 1994, employment in Tennessee grew by 80,200 jobs. Manufacturing added 6,300 new jobs, the trade sector (retail and wholesale) added 22,100 jobs, and the service sector added 18,200 jobs. Approximately 50 percent of the service jobs were in the business and health services categories. Between 1989 and 1993, the Tennessee economy created 160,300 new jobs, a gain of 7.4 percent. In June 1994, the U.S. Department of Commerce listed Tennessee's growth in personal income as number one among the 50 states. Per capita income in Tennessee increased from $9,800 to $18,434 during the past decade -- an increase of 87 percent. Since 1969, constant-dollar per capita income in the state has grown 10.4 percent annually versus 7.1 percent growth for the nation. In 1969, Tennessee's per capita income was 76.9 percent of the U.S. average. By 1992, that percentage had grown to 88.0 percent, a 1.0 percentage point gain every two years. In August 1994, Tennessee's unemployment rate was 4.7 percent, the lowest unemployment rate in the South. Statewide unemployment has ranked below the national average since July 1991. All of Tennessee's metropolitan areas had unemployment rates of 4 percent or less at the end of 1994. Strong employment growth in rural areas has resulted in steady declines in unemployment rates for those areas. An October 1994 report issued by the U.S. Department of Commerce indicated that Tennessee ranked second in the nation in the creation of new jobs since 1991. For example, employers working with the Memphis Area Chamber of Commerce announced 147 new projects that created 11,141 jobs and $1,114,617,000 in investments in plant and equipment in the Memphis area since 1990. All of these projects represented major additions to the economic base of the community. Among the companies announcing major expansions in 1994 and 1995 were International Paper, Auto Zone, Federal Express, Northwest Airlines, Williams-Sonoma, Pfizer, Reebok, and Nissin Foods. The multimodal distribution networks emanating from Memphis have made it a leader in recruiting distribution facilities to the city. Federal Express, headquartered in Memphis, is the nation's largest overnight package delivery business with over 20,000 employees located in Memphis and over 100,000 worldwide. Federal Express' overnight delivery services have made Memphis the ideal location for time-sensitive distribution and high-value-added manufacturing establishments that seek to minimize inventory costs and maximize customer service. Similar reports are available for communities throughout the state of Tennessee. Companies like Martin Marietta Corporation with 15,926 employees in the Oak Ridge/Knoxville area, Saturn Corporation with 7,573 employees in the Spring Hill/Nashville area, and Nissan Motor Corporation with 5,820 employees in the Smyrna/Nashville area are representative of the corporations present in UPC's region. Levi Strauss & Company, North American Philips Corporation, Textron, Kroger Company, Henry I. Siegel Company, and E. I. DuPont de Nemours & Company have numerous production, distribution, and administrative centers throughout the area. Schering-Plough, Promus, Kellogg, Coors, Sharp, and Smith & Nephew Richards, are large employers in West Tennessee, while Aluminum Company of America, Eastman Chemical, and United Parcel Service are large employers in East Tennessee. In Nashville, Opryland USA, Inc., with over 8,000 employees, is the largest single employer. Columbia/HCA Healthcare, Shoney's, Murray Ohio Manufacturing, United Parcel Service, South Central Bell, and Bridgestone/Firestone USA are all major contributors to the Nashville economy with over 2,500 employees each. Similar employment patterns and experiences have occurred in other areas of UPC's region. In Baton Rouge, key industrial segments reflect the region's association with petroleum refining and chemical and paper producers. Dow, Exxon, Uniroyal, BASF Wyndotte, Georgia Pacific, James River, and Ciba-Geigy are a few of the industrial giants located in the Baton Rouge area. In Mississippi, both U.S. industrial giants and home-grown industries are major contributors to the market place. Peavey Electronics in Meridian, McRae's Department Stores in Jackson, McCarty Farms 6 9 in Magee, Bill's Dollar Stores in Jackson, and Delta Pride Catfish in Indianola are a few Mississippi-based employers with from $100 million to over $1.0 billion in sales. The Mississippi economy has outperformed the nation in many areas. A November 1994 story in U.S. News & World Report indicated that Mississippi ranked eighth in terms of overall economic growth from 1991-1994. Mississippi led all Southern states in the rankings. Tennessee ranked sixteenth, Louisiana ranked nineteenth, and Arkansas ranked twentieth in economic growth among all states. Mississippi was ranked eighth in employment growth, fourth in income growth, and eighth in new business growth. Mississippi businesses reported a record 1,045,400 jobs in November 1994. All major industrial groups reported gains except textiles and apparel. Services accounted for 19,800 new jobs, and manufacturing generated 4,200 new jobs from November 1993 to 1994. Nearly all parts of the state have benefited from the gains in employment. For example, Tupelo in Lee County in northeast Mississippi is the most heavily industrialized area in the state. With a population of only 31,000, Tupelo has over 17,000 people employed in manufacturing. By contrast, Tunica County in the northwest corner of the state (once the poorest county in the nation) is now the home of seven casinos with 2,000 hotel rooms and a thriving entertainment industry. Retail sales tripled in Tunica County in 1994 -- the highest growth rate in the state. Since approved in 1992, casinos have created 28,000 jobs in Mississippi. As in other states in the region, agriculture continues to be an important source of employment and income in Mississippi. Farm production reached a record $4.51 billion in 1994, up $544 million from 1993. Poultry and eggs accounted for almost $1.078 billion of the total and was the top agricultural enterprise in Mississippi in 1994. It surpassed forestry, which recorded production of $1.070 billion. 1994 was also a record year for cotton production, up 40 percent from 1993. Income from cotton was $844 million, up $216 million from 1993. Historically tied to the agricultural crops of cotton, rice, and soybeans, Eastern Arkansas' economic base is increasingly diversified and linked to the future of the manufacturing, service, and retail trade sectors in the region. Jonesboro is the largest city in the region, the hub of an increasingly vibrant rural market area. North Alabama has also been an economic success story. The growth of the aerospace industry and a critical mass of complementary employers tied to that industry have created a high-growth, high-tech environment. In addition, the Tennessee River and the Tennessee-Tombigbee connection to the Gulf provide waterborne transportation opportunities for many area employers. Decatur, located on the Tennessee River, is home to plants or operations of Amoco Chemical, Monsanto Textiles, 3-M Company, Alpo Pet Foods, Con-Agra, and General Electric. With the increasingly diverse economy and broad-based economic growth represented in this region, it is easy to see why the economic outlook for UPC's market area for 1995 is so bright. Nearly every community has had an increase in employment and income opportunities. Nearly every industry has increased its employment levels, capital investments, and output. Whether large or small, urban or rural, communities and businesses throughout the region have experienced unprecedented prosperity in the last few years. And, the trend established recently should set the stage for a stronger, more promising future for all the region's residents. Report prepared by Dr. John E. Gnuschke, Director of the Bureau of Business and Economic Research at The University of Memphis. 7 10 EMPLOYMENT GROWTH FOR STATE AND MAJOR MARKETS (1988-1994)
EMPLOYMENT % CHANGE --------------------- ----------- 1988 1994 (1988-1994) ------- ------- ----------- (IN THOUSANDS) Tennessee 2,225 2,562 15.1 Memphis 419 499 19.1 Nashville 504 596 18.3 Knoxville 272 332 22.1 Mississippi 1,048 1,163 11.0 Alabama 1,751 1,933 10.4 Arkansas 1,037 1,162 12.1 Louisiana 1,712 1,811 5.8 Baton Rouge 245 265 8.2 Kentucky 1,575 1,742 10.6 United States 114,222 124,608 9.1
----------------------------------------------- Source: Statistical Abstract of the U.S., 1990; The Labor Market Report, Aug. 1989 and Jan. 1995; News, U.S. Department of Labor, Dec. 1994; Employment and Earnings, U.S. Department of Labor, Dec. 1988 and Nov. 1994. MAJOR MARKET UNEMPLOYMENT RATES (NOT SEASONALLY ADJUSTED)
DECEMBER --------------------- 1993 1994 ------- ------- Tennessee 4.6% 3.1% Memphis 4.4 3.2 Nashville 3.2 2.1 Knoxville 3.8 2.7 Mississippi 5.1 5.4 Alabama 7.0 5.0 Arkansas 6.0 5.1 Louisiana 7.2 7.2 Baton Rouge 6.5 6.5 Kentucky 5.4 4.4 United States 6.0 5.1
----------------------------------------------- Source: The Labor Market Report, Feb. 1995; Mississippi Labor Market Report, Jan. 1995; Alabama Labor Market News, Jan. 1995; Bureau of Labor Statistics PER CAPITA INCOME FOR METRO AREAS (1987 DOLLARS)
1970 1980 1990 ------- ------- ------- All metro counties in U.S. $12,080 $14,769 $17,186 Memphis, TN $ 9,592 $12,650 $15,340 % of U.S. 79.4 85.7 89.3 Nashville, TN $10,142 $12,724 $15,964 % of U.S. 84.0 86.2 92.9 Knoxville, TN $ 8,961 $11,804 $14,189 % of U.S. 74.2 80.0 82.6 Jackson, MS $ 9,255 $12,194 $13,413 % of U.S. 76.6 82.6 78.0 Decatur, AL $ 8,701 $10,482 $13,090 % of U.S. 72.0 71.0 76.2 Baton Rouge, LA $ 9,536 $13,668 $13,835 % of U.S. 78.9 92.5 80.5 Craighead Co./Jonesboro, AR $ 8,184 $10,468 $11,860 % of U.S.* 93.9 96.0 95.1
----------------------------------------------- * % of non-metro income. 8 11 UNION PLANTERS CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL DATA
YEARS ENDED DECEMBER 31, (1) --------------------------------------------------------------- 1994 1993 1992 1991 1990 ----------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA Net interest income..................................... $ 388,278 $ 343,710 $ 281,148 $ 233,790 $ 206,529 Provision for losses on loans........................... 3,636 16,558 27,182 34,203 26,304 Investment securities gains (losses).................... (20,298) 4,495 14,019 2,624 83 Other noninterest income................................ 113,860 115,430 98,590 90,697 92,076 Noninterest expense..................................... 398,835 319,681 279,464 238,475 231,733 ----------- ---------- ---------- ---------- ---------- Earnings before income taxes, extraordinary item, and accounting changes.................................... 79,369 127,396 87,111 54,433 40,651 Applicable income taxes................................. 20,761 37,420 23,861 11,537 5,408 ----------- ---------- ---------- ---------- ---------- Earnings before extraordinary item and accounting changes............................................... 58,608 89,976 63,250 42,896 35,243 Extraordinary item -- defeasance of debt, net of taxes................................................. -- (3,206) -- -- -- Accounting changes, net of taxes........................ -- 5,782 -- -- -- ----------- ---------- ---------- ---------- ---------- Net earnings............................................ $ 58,608 $ 92,552 $ 63,250 $ 42,896 $ 35,243 ========== ========= ========= ========= ========= PER COMMON SHARE DATA(2) Primary Earnings before extraordinary item and accounting changes............................................. $ 1.25 $ 2.31 $ 1.79 $ 1.32 $ 1.03 Extraordinary item -- defeasance of debt, net of taxes............................................... -- (.09) -- -- -- Accounting changes, net of taxes...................... -- .16 -- -- -- Net earnings.......................................... 1.25 2.38 1.79 1.32 1.03 Fully diluted Earnings before extraordinary item and accounting changes............................................. 1.25 2.23 1.77 1.32 1.03 Extraordinary item -- defeasance of debt, net of taxes............................................... -- (.08) -- -- -- Accounting changes, net of taxes...................... -- .15 -- -- -- Net earnings.......................................... 1.25 2.30 1.77 1.32 1.03 Cash dividends.......................................... .88 .72 .60 .48 .48 Book value.............................................. 16.01 16.29 14.02 12.77 11.77 BALANCE SHEET DATA (AT PERIOD END) Total assets............................................ $10,015,069 $9,029,893 $7,493,004 $5,928,496 $6,095,531 Loans, net of unearned income........................... 5,949,128 4,653,368 3,585,769 3,132,924 3,376,435 Allowance for losses on loans........................... 122,089 114,353 89,827 67,989 67,505 Investment securities................................... 2,962,144 3,295,644 2,793,950 1,777,754 1,773,508 Deposits................................................ 8,417,842 7,671,621 6,441,991 5,145,181 5,182,379 Short-term borrowings................................... 415,171 275,537 321,976 222,510 362,364 Long-term debt(3) Parent company........................................ 114,790 114,729 74,292 38,163 44,662 Subsidiary banks...................................... 226,161 195,442 21,756 10,083 4,469 Total shareholders' equity.............................. 730,707 682,002 529,496 425,970 383,349 Average assets............................................ 10,025,383 8,857,216 6,934,718 5,928,927 6,096,808 Average shareholders' equity.............................. 778,232 639,874 494,529 398,651 386,800 Average shares outstanding (in thousands) Primary............................................... 40,055 35,311 31,910 31,752 33,738 Fully diluted......................................... 40,397 39,541 34,754 32,105 34,078 PROFITABILITY AND CAPITAL RATIOS Return on average assets................................ .58% 1.04% .91% .72% .58% Return on average common equity......................... 7.40 15.55 13.48 10.80 9.12 Net interest income (taxable-equivalent) to average earning assets(4)..................................... 4.39 4.44 4.62 4.54 4.02 Loans/deposits.......................................... 70.67 60.66 55.66 60.89 65.15 Common and preferred dividend payout ratio.............. 64.68 31.81 35.72 35.66 43.08 Equity/assets (period end).............................. 7.30 7.55 7.07 7.19 6.29 Average shareholders' equity/average total assets....... 7.76 7.22 7.13 6.72 6.34 Leverage ratio(5)....................................... 7.18 7.23 7.11 7.10 6.18 Tier 1 capital to risk-weighted assets(5)............... 12.22 13.58 13.35 11.91 9.98 Total capital to risk-weighted assets(5)................ 14.75 16.40 15.44 14.13 12.09 ASSET QUALITY RATIOS Allowance/period end loans.............................. 2.05 2.46 2.51 2.17 2.00 Nonperforming loans/total loans......................... .32 .59 1.32 1.09 1.07 Allowance/nonperforming loans........................... 641 414 190 200 187 Nonperforming assets/loans and foreclosed properties.... .42 .78 1.69 1.74 1.81 Provision/average loans................................. .07 .37 .77 1.04 .78 Net charge-offs/average loans........................... .09 .30 .60 1.02 .85
- --------------- (1) Reference is made to "Basis of Presentation" in Note 1 to the consolidated financial statements. (2) Share and per share amounts have been retroactively restated for material acquisitions accounted for as poolings of interests. (3) Long-term debt includes subordinated notes and debentures, obligations under capital leases, mortgage indebtedness, and notes payable with maturities greater than one year. Subsidiary banks' long-term debt is primarily FHLB advances. (4) Calculation does not include the impact of the unrealized gain or loss on available for sale investment securities. (5) The risk-based capital ratios are based upon capital guidelines prescribed by federal bank regulatory authorities. Under those guidelines, the required minimum Tier 1 and Total Capital risk-weighted assets ratios are 4% and 8%, respectively. The required minimum leverage ratio of Tier 1 capital to total adjusted assets is 3% to 5% (5% for bank holding companies effecting acquisitions). 9 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION CORPORATE OVERVIEW Union Planters Corporation (the Corporation), a $10.0 billion multi-bank and savings and loan holding company incorporated in 1971 under the laws of Tennessee and headquartered in Memphis, Tennessee, is the second largest financial institution holding company in Tennessee. At December 31, 1994, the Corporation had the largest deposit base of any bank holding company headquartered in Tennessee. The Corporation's activities are conducted through its two principal banking subsidiaries, the $2.2 billion Union Planters National Bank (UPNB) headquartered in Memphis, Tennessee and the $2.0 billion Sunburst Bank, Mississippi headquartered in Grenada, Mississippi and 40 other banking subsidiaries and five savings and loan subsidiaries located in Tennessee, Mississippi, Arkansas, Louisiana, Alabama, and Kentucky. Reference is made to the listing of Communities Served on page 70, Table 15, and the map on the inside cover of this report for additional information regarding the size, locations, and markets served by the Corporation's subsidiaries. Through its subsidiaries, the Corporation provides a diversified range of financial services in the communities in which it operates including consumer, commercial and corporate lending; retail banking; mortgage banking; and other ancillary financial services traditionally furnished by full-service financial institutions. The Corporation also is engaged in mortgage servicing; investment management and trust service; the issuance and servicing of credit and debit cards; and the origination, packaging, and securitization of loans, primarily the government-guaranteed portions of Small Business Administration (SBA) loans. This section of the annual report provides a narrative discussion and analysis of the Corporation's results of operations and financial condition. The consolidated financial statements and related notes and the financial tables which follow this discussion should be considered an integral part of this analysis. ACQUISITIONS Acquisitions have been and are expected to continue to be an important part of the expansion of the Corporation's business. The Corporation completed four acquisitions in 1992, twelve in 1993, and thirteen in 1994, adding approximately $1.6 billion in total assets in 1992, $1.3 billion in total assets in 1993, and $3.8 billion in 1994. The Corporation's largest acquisition to date was the acquisition of Grenada Sunburst System Corporation (GSSC) which was completed December 31, 1994. Prior to its merger into the Corporation, GSSC had been a multi-bank holding company headquartered in Grenada, Mississippi, having total assets of approximately $2.5 billion. GSSC was the third-largest financial institution headquartered in Mississippi. The two major subsidiaries of GSSC were Sunburst Bank, Mississippi and Sunburst Bank, Louisiana, having total assets of $2.0 billion and $500 million, respectively. Reference is made to Note 2 to the consolidated financial statements and Table 3 for additional information concerning the institutions acquired during the last three years. Management's philosophy has been to provide additional diversification of the revenue sources and earnings of the Corporation through the acquisition of well-managed, small- and medium-size financial institutions, allowing them, where practicable, to remain separate entities and to retain their local characteristics and boards of directors along with substantial autonomy in their day-to-day operations in order to grow within their markets without disruption. Certain larger strategic acquisitions have also been made to enhance the value of the Corporation's franchise. This philosophy has made the Corporation an attractive acquiror of financial institutions. Certain functions such as loan review, audit, payroll, insurance management, data processing, and investment portfolio management are centralized or outsourced as appropriate. Management believes that this philosophy provides its subsidiary institutions with an environment which promotes high performance. The Corporation expects to continue to take advantage of the consolidation of the financial industry as attractive opportunities are presented. Future acquisitions are primarily expected to be well-managed, in-market institutions having significant local market share in contiguous markets. The 10 13 level of acquisition activity is expected to slow in 1995 as management focuses on the integration of recent acquisitions and completes the reorganization of its existing operations, including its restructuring as discussed below. Future acquisitions may entail the payment by the Corporation of consideration in excess of the book value of the underlying net assets acquired and may result in the issuance of additional shares of the Corporation's Common and Preferred Stock or additional indebtedness, which may rank senior to outstanding subordinated debt, and therefore, could have a dilutive effect on earnings or book value per share of the Corporation. REORGANIZATIONS OF BANKING SUBSIDIARIES As of July 1, 1994, the Corporation internally reorganized UPNB and formed four new banking subsidiaries: Union Planters Bank of East Tennessee, National Association; Union Planters Bank of Middle Tennessee, National Association; Union Planters Bank of Chattanooga, National Association; and Union Planters Bank of Jackson, National Association (collectively, the Regional Banks). The Corporation injected equity of $101.7 million into the new Regional Banks, a majority of the funds ($98 million) having been provided through a dividend from UPNB. Each of the Regional Banks acquired from UPNB, at book value, substantially all of the assets and assumed all the liabilities of the UPNB branches located in its region. The reassignment of these branches to separate regional banks was intended to permit a local management team and board of directors to focus on the needs and opportunities within the local market and is consistent with the Corporation's regional banking philosophy. UPNB continues to operate branches in the Memphis, Tennessee area. The transfer of branches held by UPNB had no material impact on the consolidated financial condition, results of operations, or liquidity of the Corporation. As part of the integration of GSSC into the Corporation, an internal reorganization of Sunburst Bank, Mississippi is expected to occur in 1995. This reorganization is expected to involve the sale and transfer of certain branch locations of Sunburst Bank, Mississippi among five separate banks (two existing banks and three new banks). The locations have been selected along geographic lines among banks headquartered in Clarksdale, New Albany, Grenada, Jackson, Hattiesburg, and Southaven, Mississippi. The Mississippi reorganization will be similar to the reorganization of UPNB in 1994. The new banks will carry the name of Union Planters. Consistent with management's philosophy, each bank will be managed independently, will have a local board of directors, and certain functions will be centralized. Management has also implemented a plan to internally merge and consolidate certain of its banking subsidiaries in contiguous market areas to improve operating efficiencies. This plan is expected to reduce the number of banking subsidiaries from 47 at December 31, 1994 to approximately 30 by year end 1995. In connection with this plan, certain banks will change their names to Union Planters and this is expected to enhance efficiencies in marketing their services. Through March 1, 1995, the number of banks has been reduced to 38. Finally, management expects to form a specialty banking subsidiary which will include the following operations of the Corporation: bank card, trust, mortgage banking, consumer loan company, insurance activities, SBA loan trading operations, and investment services. This subsidiary will serve all of the Corporation's banks by providing them with a variety of products and services to offer to their customers. Management believes that these reorganizations will enable the Corporation to improve the efficiencies of its operations and its profitability in the future. The day-to-day decision-making process will be at the local level which will facilitate providing better service to customers. EARNINGS OVERVIEW Operating Results The Corporation reported net earnings of $58.6 million in 1994, a 37% decrease in net earnings from $92.6 million in 1993, compared to $63.3 million in 1992. Fully diluted earnings per common share were $1.25 in 1994, compared to $2.30 and $1.77 in 1993 and 1992, respectively. Returns on average assets (ROA) and average common equity (ROE) were .58% and 7.40%, respectively, in 1994, versus 1.04% and 15.55%, respectively, in 1993. ROA and ROE in 1992 were .91% and 13.48%, respectively. Included in net earnings in 1994 were the following items which reduced earnings after taxes by approximately $52.0 million: (i) restructuring and other merger related charges totaling $29.2 million 11 14 after-tax; (ii) investment securities losses of $13.1 million after-tax; and (iii) consumer loan marketing program expenses totaling $9.7 million after-tax. Partially offsetting these items was a $1.3 million after-tax favorable litigation settlement. Net earnings for 1993 included a net benefit of $2.6 million, or $.07 per fully diluted common share, from the cumulative effect of certain accounting changes partially offset by an extraordinary item related to the in-substance defeasance of debt. See Notes 9, 15, and 16 to the consolidated financial statements for additional information regarding these items. Table 1 presents a summary of the Corporation's consolidated results identifying certain operating income and expense items (unusual or infrequently occurring) for each of the last five years. Earnings after taxes and before the identified items and the extraordinary item and accounting changes in 1993, were $109.3 million in 1994, compared to $92.9 million and $67.6 million, respectively, in 1993 and 1992. Excluding certain operating items identified in Table 1, earnings in 1994 improved compared to 1993 and 1992. The improvement is attributable to continued growth of net interest income due primarily to acquisitions and a decline in the provision for losses on loans as asset quality continues to improve. Noninterest income declined in 1994 due primarily to a decline in profits and commissions from trading activities. Noninterest expense continued to grow primarily due to acquisitions. The following sections describe more fully the significant charges to operating earnings during 1994. The impact of these charges did not have a material adverse impact on the liquidity of the Corporation during 1994 and management expects the Corporation to have sufficient liquidity to meet the requirements of the restructuring plan described below. Approximately $38 million of the charges discussed below were noncash charges in 1994. Restructuring Charges In connection with the acquisition of GSSC, management adopted a specific plan of restructuring related to its operations in order to facilitate the consolidation of the two organizations and to improve operating efficiencies and profitability throughout the Corporation. Management engaged a consulting firm to assist in identifying performance improvement opportunities and to assist in restructuring branch operations. During 1994, the Corporation incurred fees and expenses of approximately $2.2 million related to the services provided by the consulting firm which is nationally recognized in the banking field. The restructuring plan included a review of the branch operations of the Corporation to determine appropriate staffing levels and to determine "best" practices for branch operations. Individual branch operations were reviewed to determine whether certain branches should be closed or divested. Additionally, all sources of fee income were reviewed to identify new opportunities for additional noninterest income. The net interest margin was also evaluated to identify potential for improvement. A review was also made of the operations of the Corporation and GSSC to identify consolidation opportunities and efficiencies to be gained from the consolidation of the two companies. Based upon recommendations of the consulting firm and in connection with the restructuring plan, the Corporation offered to certain employees in the fourth quarter of 1994 early retirement/voluntary severance plans. The eligible employees were provided the details of these plans during the quarter and were required to decide whether to elect one of the plans by mid-December. Three hundred eighty-eight employees elected to accept the early retirement/voluntary severance plans which resulted in a pretax charge to earnings of approximately $12.5 million. Those employees electing to accept these plans have either ceased their employment as of December 31, 1994 or will leave the Corporation by mid-1995. The Plan also included an involuntary severance plan. This plan provides for the additional reduction of approximately 600 employees through attrition, changes in systems and work procedures, job consolidation, branch divestitures, and other specific reductions. Prior to the end of 1994, management communicated to all employees the Corporation's involuntary severance plan in connection with the offering of the voluntary plans discussed above. Also, management specifically identified the locations, job classifications, and total number of employees to be terminated in connection with the Plan. Management does not expect any significant changes to this plan which resulted in a pretax charge to earnings in 1994 of approximately $3.8 million. 12 15 In connection with the Plan, 38 branch locations have been identified for closure or divestiture. The branch closures or divestitures are subject to obtaining regulatory approvals and, barring unforeseen regulatory restrictions, are expected to occur as soon as possible. Management does not expect any significant changes to the Plan. During the fourth quarter of 1994, management accrued $10.5 million (pretax) of branch-closure/divestiture costs related to the branches identified for closure or divestiture, including write-downs of properties, costs of lease and vendor contract cancellations, and write-off of assets. Management expects that the restructuring of the Corporation's operations will produce a more efficient organization. The implementation of the Plan will continue in 1995 and early 1996. Management is devoting significant resources to completion of the Plan to realize the positive benefits as soon as possible. Based on the average salaries of the affected employees or positions, management estimates that the staff reductions associated with its restructuring plan will result in cost savings of approximately $25 to $30 million annually. Cost savings resulting from branch closings and divestitures are not expected to be significant (approximately $1 million to $3 million), since most of the branches identified for divestiture are older branch locations where book values of properties and equipment are minimal. Other savings from implementation of the Plan cannot be quantified at this time. Merger Related Expenses In connection with the acquisition of GSSC and several other financial institutions during 1994, the Corporation incurred acquisition expenses totaling approximately $14.9 million. These expenses included legal and accounting fees, financial advisory services, employment contract payments, postretirement benefit expenses related to the employees of the entities whose acquisitions were accounted for as poolings of interests who were given credit for prior service, costs for write-down of data processing equipment and cancellation of vendor contracts, printing, finders fees, expenses related to employee benefit plans of acquired entities, and other merger-related expenses. Consumer Loan Marketing Program During the fourth quarter of 1994, the Corporation initiated and completed a consumer loan marketing program intended to increase the number of account relationships and outstandings in the consumer loan portfolio. The cost of this program was $14.4 million, $9.7 million after-tax. The program has resulted in the establishment of approximately 250,000 new account relationships and approximately $185 million in consumer loans outstanding through the end of January 1995. Management expects additional increases in both account relationships and loans in 1995. Detailed analyses of results of operations and financial condition of the Corporation follow. Reference is made to the financial tables at the end of this discussion for additional information regarding the Corporation's financial condition and results of operations. EARNINGS ANALYSIS NET INTEREST INCOME Net interest income is the single most significant component of the Corporation's earnings. For purposes of this discussion, net interest income has been adjusted to a fully-taxable-equivalent basis for certain tax-exempt loans and investments. Reference is made to Tables 4 and 5 which present the Corporation's average balance sheet and rate/volume analysis for each of the three years ended December 31, 1994. Net interest income for 1994 was $406.3 million, an increase of 13% over 1993. Net interest income was $360.6 million and $293.7 million, respectively, in 1993 and 1992. The improvement in net interest income for 1994 was primarily attributable to a higher volume of average earning assets, predominately growth from acquisitions and some loan growth from existing operations. Loans increased from existing operations approximately 16% which contributed significantly to the increase in the loan to deposit ratio from 61% at December 31, 1993 to 71% at December 31, 1994. The growth in 1993 compared to 1992 was also attributable to a higher level of average earning assets primarily from acquisitions. Also contributing to the increase was growth in noninterest-bearing demand deposits which provided additional investable funds. These deposits increased 15% from 1993 to 1994, and increased 13 16 35% from 1992 to 1993. Most of the increase is attributable to acquisitions. In 1992 and 1993, the low interest-rate environment caused an increase in noninterest-bearing demand deposits, as individuals were less concerned with their balances in these deposits and corporate customers were required to maintain higher compensating balances because of the low interest credit for their balances. The net interest margin was 4.39% in 1994, down from 4.44% in 1993 and 4.62% in 1992. The decline reflects the effects of rising interest rates in 1994 in which earning assets repriced at a slower rate than interest-bearing liabilities. This is also reflected in the interest-rate spread which was 3.89% in 1994 compared to 4.00% in 1993 and 4.11% in 1992. INTEREST INCOME The following table presents the breakdown of average earning assets for the last three years.
1994 1993 1992 ----- ----- ----- Average earning assets (In billions)................................ $9.3 $8.1 $6.4 Comprised of: Loans............................................................. 58.7% 55.3% 55.6% Investment securities............................................. 38.5 40.6 38.9 Other earning assets.............................................. 2.8 4.1 5.5 - --------------- Taxable-equivalent yield on average earning assets.................. 7.37% 7.32% 8.12%
Taxable-equivalent interest income increased 15% in 1994 to $682.1 million, as compared to $594.3 million in 1993 and $516.3 million in 1992. The growth in average earning assets is the reason for the increase, with average loans accounting for the largest portion of the increase. Most of the growth has resulted from acquisitions. Average investment securities accounted for most of the growth in 1992 and 1993, due to the weak loan growth during that period of time and because in 1992, the Corporation acquired certain deposits of Metropolitan (see Note 2 to the consolidated financial statements) from the RTC which provided a significant amount of cash that was invested primarily in investment securities. INTEREST EXPENSE The following table presents the breakdown of average interest-bearing liabilities for the last three years.
1994 1993 1992 ----- ----- ----- Average interest-bearing liabilities (In billions).................. $7.9 $7.0 $5.6 Comprised of: Deposits.......................................................... 89.7% 93.2% 94.3% Short-term borrowings............................................. 6.0 3.7 4.6 FHLB Advances and long-term debt.................................. 4.3 3.1 1.1 - --------------- Rate paid on interest-bearing liabilities........................... 3.48% 3.32% 4.01%
In 1994, interest expense increased 18% to $275.8 million as compared with $233.7 million and $222.6 million, respectively, in 1993 and 1992. The increase in interest expense is attributable to an increase in the volume of average interest-bearing liabilities. Also contributing to the increase was the rising interest-rate environment in 1994. The increase between 1993 and 1992 is also related to an increase in the volume of interest-bearing liabilities resulting primarily from acquisitions which was partially offset by a declining interest-rate environment. Net interest income is expected to improve in 1995. Management has restructured portions of the investment securities portfolio in 1994 in response to higher interest rates to further improve net interest income and to provide liquidity for current and anticipated loan growth. Emphasis will continue to be placed on improvement of net interest income as one of management's primary goals. PROVISION FOR LOSSES ON LOANS The provision for losses on loans (the provision) is the charge to earnings to increase the allowance for losses on loans to cover potential losses inherent in the loan portfolio. Management's policy is to maintain the allowance for losses on loans at a level considered necessary to absorb all estimated losses inherent in the loan portfolio. Note 1 to the consolidated financial statements 14 17 describes the methodology used by management to determine the level of the allowance for losses on loans. In 1994, the provision was $3.6 million compared to $16.6 million and $27.2 million, respectively, for 1993 and 1992. The decline in the level of the provision is directly related to the improvement in asset quality and the decline in the level of nonperforming loans. The level of the provision in the future is expected to depend primarily on loan growth and the level of net charge-offs. NONINTEREST INCOME The components of noninterest income are presented in Table 1 and in Note 14 to the consolidated financial statements. Investment Securities Gains and Losses In 1994, the Corporation recognized investment securities losses of $20.3 million compared to investment securities gains of $4.5 million and $14.0 million, respectively, in 1993 and 1992. During the third quarter of 1994, the Corporation restructured a portion of the available for sale portfolio in response to higher interest rates. It is expected that increased book yields will result in additional interest income of approximately $8.5 million annually due to the sale of approximately $430 million of securities having an average maturity of thirteen months and the reinvestment of the proceeds in securities having an average maturity of approximately 30 months. During the fourth quarter of 1994, management elected to sell certain low-yielding available for sale securities totaling approximately $460 million to fund current and anticipated loan growth and to reduce short-term borrowings. Also included in securities losses in 1994 is a $2.8 million loss due to an other-than-temporary impairment in the fair value of certain available for sale securities which were sold in January 1995. The securities gains in 1993 and 1992 related to restructuring activities within the investment securities portfolio. Other Noninterest Income Excluding investment securities gains and losses and items identified in Table 1, noninterest income decreased $2.8 million in 1994 to $111.7 million. This compares to noninterest income of $114.5 million and $95.1 million, respectively, in 1993 and 1992. The decline in noninterest income in 1994 is due to a $6.0 million decline in profits and commissions from trading account activities. This reflects a decline in revenues from the Corporation's SBA trading and Capital Market operations and a decline in the activities of Sunburst Financial Group (acquired by the Corporation as part of the GSSC acquisition). Management discontinued the Corporation's Capital Market operations in the second quarter of 1994 in response to a decline in revenues over the preceding three years. Revenues from this operation were $467,000 in 1994 compared to $2.1 million and $5.5 million, respectively, in 1993 and 1992. For 1994, the Corporation's Capital Market operations had a loss before taxes of $317,000 compared to earnings before taxes of $474,000 in 1993 and $2.5 million in 1992. Revenues from the Corporation's SBA trading operations declined $3.2 million to $3.4 million in 1994 and revenues of Sunburst Financial Group declined $1.2 million to $1.7 million in 1994. This compares to revenues of $6.6 million and $4.6 million in 1993 and 1992, respectively, for the SBA trading operations. For the same periods, the Sunburst Financial Group had revenues of $2.9 million and $2.1 million, respectively. The decline in revenue in these operations is due to lower levels of activity. Revenues from these operations are volatile and future levels cannot be predicted with any certainty. Offsetting the declines discussed above was an increase in service charges on deposit accounts of 13% in 1994 and 31% in 1993. The increase is due to acquisitions, lower credit rates on corporate demand deposit accounts, and to a lesser extent, an increase in service fees. Bank card income also has increased over the last three years, increasing 5% in 1994 and 13% in 1993. Bank card income represents both cardholder and merchant fees and is an area of emphasis for the Corporation. Growth is expected in this area in 1995 as a result of the consumer loan marketing program undertaken in 1994 which has been discussed above. 15 18 Trust service income has increased 4% in 1994 to $7.9 million compared to $7.6 million and $6.9 million, respectively, in 1993 and 1992. Mortgage servicing income, which had been an area of growth in the past, has declined over the last three years. Mortgage servicing revenues were $9.4 million in 1992, compared to $9.2 million in 1993 and to $9.1 million in 1994. The decline in revenue is attributable to the low interest-rate environment over these three years which resulted in a high level of refinancing activity. Table 1 presents certain operating income items for the last five years. In 1994 the Corporation made a favorable litigation settlement which contributed $2.2 million to noninterest income. In 1993 and 1992, noninterest income included gains from a troubled debt restructuring of $901,000 and $3.5 million, respectively. NONINTEREST EXPENSE The components of noninterest expense are presented in Table 1 and in Note 14 to the consolidated financial statements. Table 1 identifies certain operating expenses, including the restructuring and other merger-related expenses and the consumer loan marketing program discussed above, which totaled $58.2 million in 1994. Expenses in 1993 included charges attributable to provisions for conversion of data processing systems, accelerated amortization of intangibles, provisions for litigation settlements, merger related expenses, and write-offs of intangibles totaling $10.1 million. Noninterest expense in 1992 included similar expenses totaling $24.5 million. Noninterest expense, before those certain expenses identified in Table 1, increased 10% in 1994, to $340.6 million, compared to $309.6 million and $255.0 million, respectively, in 1993 and 1992. Salaries and employee benefit expenses are the largest component of noninterest expense and totaled $160.9 million in 1994 compared to $150.4 million and $116.8 million, respectively, in 1993 and 1992. The growth in this category of expense is attributable mostly to acquisitions. Also contributing to the increase were regular salary increases and increased benefit costs, primarily medical costs. Full-time-equivalent employees have increased from 2,539 in 1992 to 3,003 in 1993 and to 5,029 in 1994. As discussed earlier, the Corporation's restructuring Plan will reduce the total number of employees by approximately 1,000 by the end of 1995 which is expected to reduce salary and employee benefit costs by approximately $25 to $30 million annually. Effective January 1, 1993, the Corporation adopted the provisions of SFAS Nos. 106 and 112 which changed the accounting for postretirement and postemployment expense benefits. The Corporation elected to expense, on January 1, 1993, the accumulated postretirement and postemployment obligations of $9.6 million ($5.9 million after taxes) upon adoption, instead of amortizing the obligations to expense over 20 years as permitted by the new standards. The ongoing expense related to these standards is not significant. Included in the merger related expenses discussed above is approximately $2.1 million of expense related to these benefits due to the Corporation granting employees of acquired entities, accounted for as poolings of interests, credit for prior service. Occupancy and equipment expense increased 10% in 1994 to $52.2 million, following a 24% increase from 1992 to 1993. The increase is related to acquisitions which increased the number of branch locations being operated by the Corporation. The increase in expense was limited due to negative goodwill resulting from the Fidelity acquisition in 1992 which enabled the Corporation to write down the fixed assets of Fidelity by the amount of negative goodwill which has resulted in a lower occupancy and equipment expense of approximately $2.3 million annually. 16 19 Other significant increases or decreases in other noninterest expense are summarized as follows:
INCREASE (DECREASE) --------------------------------- 1994 VS. 1993 1993 VS. 1992 -------------- -------------- (DOLLARS IN THOUSANDS) FDIC insurance assessment......................................... $ 587 $ 4,402 Advertising and promotion......................................... 2,121 1,704 Stationery and supplies........................................... 2,021 2,105 Postage and other carrier......................................... 1,326 1,808 Amortization of goodwill and other intangibles.................... (1,586) 2,054 Other contracted services......................................... (148) 1,406 Communications.................................................... 532 1,149 Legal fees........................................................ 1,894 (3,972) Other real estate expense......................................... (2,814) (1,156) Audit fees........................................................ 1,093 1,130 Other personnel services.......................................... 1,489 386 -------------- -------------- Total................................................... $ 6,515 $ 11,016 ========== ==========
As discussed above, management is committed to improving the profitability of the Corporation. A major focus will be to reduce noninterest expenses where practicable and to control future increases. Management's goal is to achieve an expense ratio (noninterest income excluding investment securities gains or losses minus noninterest expense divided by average total assets) of 2.00%. The expense ratio for 1994, excluding certain operating expenses identified in Table 1, was 2.28%. Management believes the plans implemented in 1994 and 1995 will make it possible for the Corporation to attain this goal. TAXES Applicable income taxes consist of provisions for federal and state income taxes. For 1994, applicable income taxes were $20.8 million compared to $37.4 million (before an extraordinary item and the cumulative effect of accounting changes), and $23.9 million, respectively, in 1993 and 1992. Effective tax rates before the extraordinary item and accounting changes for 1994, 1993, and 1992 were 26.2%, 29.4%, and 27.4%, respectively. The variances from statutory rates are attributable primarily to tax-exempt income from investment securities and loans. There were no changes in tax law during 1994 which would impact the tax provision. During the third quarter of 1993, the Omnibus Budget Reconciliation Act of 1993 was enacted and, among other provisions, increased the corporate federal income tax rate from 34% to 35% retroactive to January 1, 1993. This legislation resulted in a $2.6 million reduction in the tax provision for 1993. This reduction was primarily due to the deduction of previously nondeductible amortization of certain intangible assets and the impact on the net deferred tax asset of the increase in the federal tax rate. These benefits were partially offset by the increase in the federal tax rate for the current year provision. For additional information regarding the Corporation's effective tax rate and the composition of its income tax expense for the last three years, see Note 16 to the consolidated financial statements. The realization of approximately $6.7 million of the net deferred tax asset of $69.2 million is dependent upon the generation of future taxable income sufficient to offset future deductions. Management believes that, based upon historical earnings and anticipated future earnings, normal operations will continue to generate sufficient future taxable income to realize all of these benefits. Because income could be generated without requiring changes in the current operating environment of the Corporation, no extraordinary strategies are deemed necessary by management to generate sufficient income for purposes of realizing the net deferred tax asset. The criteria for the recognition of the net deferred tax asset for regulatory capital purposes are more stringent than for financial statement purposes and allow only limited anticipation of future taxable income. Accordingly, $2.5 million of the Corporation's net deferred tax asset does not qualify as capital for regulatory purposes. See Table 13 for risk-based capital calculations. 17 20 FINANCIAL CONDITION ANALYSIS At December 31, 1994, the Corporation reported $10.0 billion in total assets compared to $9.0 billion at the end of 1993. As discussed above, the consolidated balance sheet has grown significantly due to the Corporation's acquisition program. Average assets were $10.0 billion in 1994, compared to $8.9 billion and $6.9 billion, respectively, in 1993 and 1992. The following is a more detailed discussion of the changes in the financial condition of the Corporation between 1994 and 1993. INVESTMENT SECURITIES The Corporation's investment securities portfolio of $2.9 billion at December 31, 1994, consisted of securities available for sale of $1.9 billion, which are carried on the consolidated balance sheet at fair value, and securities held to maturity of $1.0 billion, which are carried at amortized cost. As reflected in Note 4 to the consolidated financial statements, the available for sale securities portfolio at December 31, 1994 had unrealized gains of $3.0 million and unrealized losses of $50.0 million as compared to $7.3 million and $532,000, respectively, at year end 1993. Investment securities held to maturity at year end 1994, had unrealized gains of $9.2 million and unrealized losses of $32.3 million compared to $59.1 million and $3.4 million, respectively, at year end 1993. The decline in the market values in both of these portfolios is due primarily to the rising market-interest-rate environment in 1994. On January 1, 1994, the Corporation adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (SFAS No. 115), which specifies the accounting and reporting requirements for all investments in debt securities and for equity securities that have readily determinable fair values. Notes 1 and 4 to the consolidated financial statements provide additional information regarding the adoption of SFAS No. 115. The adoption of SFAS No. 115 is expected to provide the Corporation with greater flexibility in managing its interest-rate risk. Available for sale securities can be sold, if needed, to react to changing interest rates and to meet the Corporation's funding needs. U.S. Treasury and government agency obligations represent approximately 77.9% of the investment securities portfolio at December 31, 1994. The Corporation has some credit risk in the investment securities portfolio, however management does not consider this risk to be significant. The REMIC and CMO issues in the investment securities portfolio are 85% U.S. Government Agency issues; the remaining 15% are readily marketable, nonagency collateralized mortgage obligations backed by agency-pooled collateral or whole-loan collateral. All nonagency issues currently held are rated "AAA" by either Standard & Poors or Moodys. The REMIC and CMO portions of the investment securities portfolio include approximately 43% in floating-rate issues, the majority being indexed to LIBOR or PRIME. Normal practice is to purchase investment securities at or near par value to reduce the risk of premium write-offs on unexpected prepayments. The limited credit risk in the investment securities portfolio consists of the holdings of nonagency CMOs, municipal obligations and corporate stocks, notes and debentures which accounted for 1.7%, 17.5%, and 2.9%, respectively, of the investment securities portfolio at December 31, 1994. At December 31, 1994, the Corporation had approximately $26.4 million of structured notes, which constitutes approximately .89% of its investment securities portfolio. Structured notes have uncertain cash flows which are driven by interest-rate movements and may expose a company to greater market risk than traditional medium-term notes. All of the Corporation's investments of this type are government agency issues (primarily Federal Home Loan Bank and Federal National Mortgage Association). The structured notes vary in type but primarily include step-up bonds and index-amortizing notes. These securities are carried in the Corporation's available for sale securities portfolio and the unrealized loss in these securities at December 31, 1994 was approximately $1.5 million. The market risk associated with the structured notes is not considered material to the Corporation's financial position, results of operations, or liquidity. LOANS At December 31, 1994, loans were $5.9 billion, an increase of $1.3 billion over December 31, 1993. Excluding the impact of acquisitions, loans increased approximately $768 million, or approximately 18 21 16%. Average loans were $5.4 billion in 1994 compared to $4.5 billion and $3.5 billion, respectively, in 1993 and 1992. The Corporation's loan to deposit ratio was 71% at December 31, 1994 compared to 61% at December 31, 1993. Table 7 presents the composition of the loan portfolio for each of the last five years. The loan growth over the last two years has been primarily from acquisitions. The majority of the growth has been real estate loans secured by single family residential mortgages which increased 36% to $2.0 billion at December 31, 1994. Single family residential mortgages comprise a significant portion of the loan portfolios of the institutions acquired during the last few years. Additionally, management has emphasized consumer loans, primarily credit card loans. Credit card and other related plans increased $159 million to $264 million at December 31, 1994 and other consumer loans increased $173 million to $920 million compared to December 31, 1993. Management expects slower internal loan growth in 1995. Growth is expected primarily in consumer loans as a result of the consumer loan marketing program discussed above and some growth of commercial, financial and agricultural loans is expected. Real estate lending for single family residential loans is expected to grow but at a much slower pace because mortgage interest rates have risen significantly. ALLOWANCE FOR LOSSES ON LOANS The allowance for losses on loans (the allowance) at December 31, 1994 was $122.1 million, or 2.05% of loans, which is an increase of $7.7 million over December 31, 1993. Management's policy is to maintain the allowance at a level deemed sufficient to absorb estimated losses in the loan portfolio. The allowance is reviewed quarterly according to the methodology described in Note 1 to the consolidated financial statements. Tables 8 and 10 present detailed information regarding the allowance for the last five years. The major reason for the growth in the allowance in 1994 was the $9.3 million increase in the allowance attributable to acquisitions. Net charge-offs for the year were $5.2 million or .09% of average loans. This compares to net charge-offs of $13.6 million or .30% of average loans in 1993. The provision for losses on loans was $3.6 million in 1994 compared to $16.6 million in 1993. All of the provision in 1994 had been recorded by GSSC prior to its acquisition by the Corporation on December 31, 1994. Gross charge-offs in 1994 were $18.4 million compared to $23.7 million in 1993. The decline related primarily to commercial, financial, and agricultural loans while there was an increase in real estate loan charge-offs. Recoveries in 1994 were $13.3 million compared to $10.1 million for 1993. The increase in recoveries is related to commercial, financial, and agricultural and real estate mortgage loans which experienced heavy charge-offs in prior years. Because of the significant improvement in the Corporation's asset quality, management does not expect any significant change in the allowance for losses on loans. Some increase in the provision for losses on loans is expected as loan growth occurs. The Corporation's ratios of the allowance to loans and allowance to nonperforming loans are among the highest in the Southeast. LOAN CONCENTRATIONS Management believes that the loan portfolio is adequately diversified. The Corporation's loan portfolio is spread over six states (Tennessee, Mississippi, Arkansas, Louisiana, Alabama, and Kentucky) which reduces the risks associated with changing local economic conditions. At December 31, 1994, the Corporation had no concentrations of loans to a single industry equaling 10% or more of total loans. The Corporation's largest concentration of loans is in single family residential loans, comprising 34% of the portfolio, which historically have had low loss experience. Management has also emphasized diversification between large and smaller-sized loans in an effort to lessen the risks in the portfolio. At December 31, 1994, the Corporation's largest loan relationship was $17.5 million and there were only 27 loan relationships exceeding $10 million. NONPERFORMING ASSETS Nonperforming assets (consisting of nonaccrual and restructured loans, other real estate, and other foreclosed properties) decreased 31% to $25.0 million, or .42% of loans and foreclosed properties, 19 22 at December 31, 1994. This compares to $36.4 million, or .78% of loans and foreclosed properties, at December 31, 1993. The significant decline was attributable to one restructured loan which was removed from this classification because it had performed in compliance with its renegotiated terms and has demonstrated the ability to make payments over a period of time. Nonaccrual loans declined 7% between 1993 and 1994. The decrease in nonperforming assets was partially offset by the impact of acquisitions in 1994 which increased nonperforming assets by approximately $3.8 million. Foreclosed properties at December 31, 1994 were $6.0 million compared to $8.8 million at year end 1993. Loans 90 days or more past due represented .10% of loans at December 31, 1994 compared to .19% at year end 1993. The improvement in asset quality has resulted in a significant increase in the allowance coverage of nonperforming loans. At December 31, 1994, the allowance was 641% of nonperforming loans which makes the coverage of these loans among the highest in the Southeast. Management expects some increase in nonperforming assets as loan growth occurs but does not anticipate any significant increases. POTENTIAL PROBLEM ASSETS Potential problem assets consist of assets which are generally secured and not currently considered nonperforming and include those assets where information about possible credit problems has caused management to have serious doubts as to the ability of such borrowers to comply with present repayment terms. Historically, these assets have been loans that become nonperforming. At December 31, 1994, the Corporation had potential problem assets (all loans) of $11.6 million, comprised of 32 loans, the largest being $1.4 million. OTHER EARNING ASSETS Other earning assets include interest-bearing deposits at financial institutions, federal funds sold, securities purchased under agreements to resell, trading account securities, and loans held for resale. In total, these assets represented approximately 2% of the Corporation's earning assets at December 31, 1994 compared to 5% at December 31, 1993. The largest component, $156 million at December 31, 1994, of other earning assets is trading account securities, which consist primarily of the government-guaranteed portions of SBA loans. The decline in other earning assets between 1993 and 1994 relates predominately to loans held for resale, an $85 million decline in mortgage loans held for resale and a $24 million decline resulting from management's decision to discontinue during 1994 the Capital Market operations which had purchased, pooled, and securitized portfolios of whole mortgage loans, consumer paper and other financial instruments. The changes in interest-bearing deposits at financial institutions, federal funds sold, and securities purchased under agreements to resell relate primarily to the Corporation's funding needs, since these assets are used as short-term money market investments. DEPOSITS The Corporation's deposit base is its primary source of liquidity. Total deposits consist of deposits from the communities the Corporation serves with no out-of-market deposits. Tables 4 and 6 present the average balances and rates paid on the Corporation's deposits. Average total deposits increased 9% to $8.3 billion in 1994, primarily due to acquisitions. This compares to average total deposits of $7.6 billion in 1993. At December 31, 1994, total deposits were $8.4 billion. Excluding the impact of acquisitions, total deposits decreased approximately $111 million and $278 million, respectively, in 1994 and 1993. The composition of average deposits over the last three years was as follows:
1994 1993 1992 ---- ---- ---- Noninterest-bearing demand deposits..................................... 15% 14% 13% Money market deposits................................................... 18 23 24 Savings deposits........................................................ 21 16 13 Certificates of deposit over $100,000................................... 7 8 8 Other time deposits..................................................... 39 39 42
20 23 Growth has occurred in noninterest-bearing demand deposits, primarily accounts of individuals and businesses. This growth relates to the low interest-rate environment in which customers are not as concerned about balances in these accounts because the yields on alternative investments are low and businesses have been required to offset the lower earning credit rates with higher balances. This trend is expected to reverse as interest rates rise. The decline in other time deposits relates to customers seeking alternative investments in the low interest-rate environment which has resulted in deposits leaving the banking system. CAPITAL Shareholders' equity had a net increase of $49 million in 1994 to $731 million. Shareholders' equity increased $64 million from the issuance of the Corporation's Common Stock in connection with acquisitions, $21 million from retained net earnings, and $9 million from Common Stock issued in connection with benefit plans. Partially offsetting these increases was the unrealized loss on available for sale securities of $28 million, net of taxes, and the redemption of the Corporation's Series C Preferred Stock during the fourth quarter of 1994 which reduced Preferred Stock $17 million. At December 31, 1994, the ratio of shareholders' equity to total assets was 7.30% compared to 7.55% at year end 1993. The key to continued growth and profitability of the Corporation is to maintain adequate levels of capital. The capital adequacy of a bank holding company is determined based upon the level of capital as well as asset quality, liquidity, earnings history, economic conditions, and the level of acquisition activity. Management's goal is to maintain all its banks in the "well-capitalized" category for regulatory capital. At year end 1994, the Corporation and all its subsidiaries were in this category. In addition to management's capital goals, the Corporation and its subsidiaries must satisfy the capital guidelines of The Federal Reserve Board (FRB), the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS) and various state banking regulatory agencies. These agencies require the maintenance of minimum amounts of capital based on risk-adjusted assets such that higher risk assets will have a higher level of capital supporting them. The regulatory capital guidelines divide capital into two tiers, Tier 1 capital and Tier 2 capital. Tier 1 capital for the Corporation consists of shareholders' equity, adding back the unrealized loss on available for sale debt securities, then deducting goodwill and certain other intangibles and the disallowed portion of the Corporation's net deferred tax asset. Tier 2 capital for the Corporation consists of qualifying subordinated debt and a portion of the allowance for losses on loans. In determining the risk-based capital requirements, assets are assigned risk weights of zero to 100 percent, depending upon the regulatory assigned levels of credit risk associated with such assets. Off-balance-sheet items are included in the calculation of risk-adjusted assets through conversion factors established by the regulatory agencies. Table 13 presents the Corporation's risk-based capital computations for the last three years. At December 31, 1994, the Corporation's Tier 1 and Total capital to risk-weighted assets ratios were 12.22% and 14.75%, respectively, compared to 13.58% and 16.40%, respectively, at year end 1993. The regulatory agencies require "well-capitalized" institutions to have Tier 1 and Total capital ratios of 6% and 10%, respectively. In addition to the risk-based capital requirements, the regulatory agencies have established leverage capital requirements. This ratio is computed by dividing Tier 1 capital by unadjusted (not risk-weighted) quarterly average total assets. The Corporation's leverage ratio at December 31, 1994 was 7.18% compared to 7.23% at year end 1993, and compared to the regulatory guideline of 5% for "well-capitalized" institutions. The FDIC monitors risk-based capital requirements and requires weaker institutions to pay higher deposit insurance premiums while allowing well-capitalized institutions to pay less. The deposit insurance assessments currently range from 23 cents per $100 of deposits for well-capitalized institutions to 31 cents for the weakest institutions. These premiums are currently under review and it is expected that the premium for Bank Insurance Fund (BIF) institutions will decrease from $.23 to $.04 per $100 of deposits and the premium for the Savings Association Insurance Fund (SAIF) (fund for savings and loan associations) will likely remain the same for the foreseeable future. At December 31, 1994, the Corporation had approximately $6.9 billion BIF insured deposits and $1.5 billion SAIF insured deposits. 21 24 LIQUIDITY Liquidity for the Corporation is a measure of its ability to meet cash flow requirements for deposit withdrawals, to make new loans and loan commitments, and to take advantage of attractive investment opportunities. The Corporation's primary sources of liquidity are its deposit base (discussed previously), available for sale investment securities, and money market investments. Liquidity is also achieved through short-term borrowings, borrowings under available credit lines, and issuance of securities and debt instruments in the marketplace. As the parent company, the Corporation's sources of liquidity are management fees from subsidiaries, dividends from subsidiaries, and working capital. The number of financial institutions owned by the Corporation provides the parent company with a diversified base for the source of dividends should one or more of the subsidiaries have capital needs and be unable to pay dividends to the parent. At December 31, 1994, the parent company had cash and cash equivalents of $86 million and had working capital of $78 million. As of January 1, 1995, the Corporation's banking subsidiaries could have paid dividends to the parent company without prior regulatory approval of approximately $22 million. The amount of dividends available without regulatory approval has declined from December 31, 1993 due to the $98 million special dividend paid by UPNB incidental to the formation and capitalization of four new Tennessee banking subsidiaries. See the "Reorganizations of Banking Subsidiaries" discussion above. Management believes that the parent company has adequate liquidity to meet its cash needs, including the payment of dividends and servicing its long-term debt. ASSET/LIABILITY MANAGEMENT Asset/liability management is considered to be one of the most important aspects of the Corporation's efforts to sustain profitability. Management's goal is to maximize net interest income within acceptable levels of interest-rate risk and liquidity. To achieve this goal, a proper balance must be maintained between assets and liabilities with respect to size, maturity, repricing, rate of return, and degree of risk. The Corporation's Funds Management Committee oversees the conduct of global asset/liability management for the Corporation. The Committee reviews the asset/liability structure and interest-rate sensitivity of each subsidiary and that of the consolidated Corporation. While the Corporation grants wide latitude to the management of each subsidiary, it is the policy of the Corporation that each subsidiary establish policies for the proper conduct of balance sheet management. These policies contain, at a minimum, limits on interest-rate sensitivity, guidelines for liquidity maintenance, and capital ratio guidelines. Table 11 presents the Corporation's interest rate sensitivity analysis at December 31, 1994. The analysis has been made at a point-in-time and could change on a daily basis. This analysis alone cannot be used to predict how the Corporation is positioned to react to changing interest rates. Other factors such as the mix of earning assets and interest-bearing liabilities, interest-rate spreads, and the level of interest rates impact the Corporation's net interest income. Balance sheet simulation analysis has been conducted to determine the impact on net interest income for the coming twelve months under several interest rate scenarios. One such scenario uses rates at December 31, 1994, and holds the rates and volumes constant for simulation. When this projection is subjected to immediate and parallel shifts in interest rate ("rate shock") of 200 basis points, first rising and then falling, the annual impact of the "rate shock" at December 31, 1994 on the Corporation's net interest income was a negative $9 million and $4 million pretax, respectively, which is within the Corporation's policy limit of 5% of shareholders' equity. OFF-BALANCE-SHEET INSTRUMENTS The Corporation, on a limited basis, uses off-balance-sheet financial instruments to manage interest-rate risk. Note 17 to the consolidated financial statements presents the Corporation's off-balance-sheet exposure. The Corporation entered into certain interest-rate swaps for purposes other than trading during 1993 to synthetically alter the repricing and maturity characteristics of certain on-balance sheet assets and liabilities. Other than the variable maturity feature of the interest-rate swaps related to loans which is discussed in Note 17 to the consolidated financial statements, the interest-rate swaps are straight forward and noncomplex. There has been no change in the notional amounts outstanding since 22 25 December 31, 1993. At December 31, 1994, the interest-rate swaps outstanding had a net unrealized loss of $16 million. Reference is made to Note 17 for detailed information regarding the Corporation's interest rate swaps outstanding. The Corporation does have risk in the variable-rate loan swaps related to the possible extension of the maturity in the event of increased interest rates. As interest rates rise, the Corporation may be placed in a net payor position for a period of time, not to exceed January 1999. However, the loans underlying the swaps would also contribute more to net interest income. Accordingly, the Corporation believes there is minimal risk that these swaps will have any significant impact on net interest income. FAIR VALUE OF FINANCIAL INSTRUMENTS The required disclosures regarding the fair values of financial instruments are included in Note 18 to the consolidated financial statements along with a summary of the methods and assumptions used by the Corporation in determining the fair values. The differences between the fair values and book values are primarily caused by differences between contractual and market interest rates. Fair values have varied from period-to-period due to the composition of the consolidated balance sheet and changes in the interest-rate environment. Management's opinion is that the information required in the SFAS No. 107 disclosure does not meaningfully reflect the underlying value of the Corporation. Comparisons of the fair value with other financial institutions may not be meaningful due to differences in the assumptions and methods used in determining fair value. Therefore, this information is not used by management to manage the Corporation and its banking subsidiaries. Other methods, including the asset/liability management philosophy discussed previously, are used. FOURTH QUARTER 1994 RESULTS The Corporation reported a net loss of $16.8 million, or $.47 per share, for the fourth quarter of 1994, compared to net earnings of $20.7 million, or $.51 per fully diluted common share, for the same period in 1993. The fourth quarter results included a $27.2 million after-tax charge related to the GSSC merger and the restructuring of the operations of the Corporation and a $9.7 million after-tax expense related to a consumer loan marketing program (see previous discussion). The results also include an after-tax loss of $8.4 million on available for sale investment securities sold. Earnings (after taxes) before these charges and the investment securities losses would have been $28.5 million for the fourth quarter of 1994, compared to $24.5 million for the same period in 1993. Net interest income for the fourth quarter of 1994 improved $14.4 million over the same period in 1993 to $100.4 million. The improvement is primarily attributable to acquisitions. The net interest margin for the quarter was 4.47% compared to 4.35% for the fourth quarter of 1993. The margin was improved by loan growth (acquisitions and core loan growth) of $1.3 billion, or 28% between 1993 and 1994. During the fourth quarter of 1994, management elected to sell certain low-yielding securities to fund current and anticipated loan growth and to reduce short-term borrowings. This resulted in the sale of approximately $460 million of securities at an after-tax loss of approximately $8.4 million. Noninterest income for the fourth quarter of 1994, excluding investment securities losses, was $27.5 million compared to $29.2 million for the same period in 1993. The decline was primarily attributable to a decline in profits and commissions from trading activities. The previously discussed charges together with charges arising from acquisitions significantly impacted noninterest expense for the fourth quarter of 1994. For the fourth quarter of 1994, noninterest expense was $143.3 million compared to $79.6 million for the same period in 1993. DIVIDENDS The Corporation paid cash dividends on its Common Stock outstanding totaling $20.1 million, or $.88 per share, in 1994 compared to $13.0 million, or $.72 per share, in 1993. Dividends totaling $8.6 million were paid on the Corporation's Preferred Stock outstanding, compared to $8.5 million in 1993. The Preferred Stock dividends are expected to decline in 1995 due to the redemption of the Series C Preferred Stock in the fourth quarter of 1994 and management's plan to call for redemption which would be expected to result in conversion of the Series D Preferred Stock in mid-year 1995. Dividends on these series of preferred stock were $1.5 million and $494,000, respectively, in 1994. If 23 26 additional shares of Series E Preferred Stock are issued in connection with acquisitions (see Note 2 to the consolidated financial statements), the expected decline in dividends would be partially offset. The only current contractual restriction on the Corporation's ability to pay dividends is a line of credit agreement which limits dividends to 60% of the previous year's net earnings, as originally reported. The lower level of earnings in 1994 as a result of the significant charges incurred and the current dividend levels will require the Corporation to obtain a waiver of this requirement in 1995 and management expects that such a waiver will be granted. CAPITAL EXPENDITURES In the normal course of business, the Corporation replaces furniture and equipment and builds new branch locations to better serve its customers. In addition, the Corporation evaluates opportunities to improve productivity and control risk through technology investments. The amount of these planned expenditures in 1995 is not considered significant. IMPACT OF PROPOSED ACCOUNTING STANDARDS In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for Impairment of a Loan" (which takes effect for fiscal years beginning after December 15, 1994) as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -- Income Recognition and Disclosures" issued in October 1994. SFAS No. 114 prescribes a valuation methodology for impaired loans as defined by the standard. Generally, a loan is considered impaired if management believes that it is probable that all amounts due will not be collected according to the contractual terms as stipulated in the loan agreement. An impaired loan must be valued using the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or fair value of the loan's underlying collateral. The Corporation expects to adopt SFAS No. 114 prospectively in 1995. It is anticipated that the adoption of SFAS No. 114 will not have a material effect on the Corporation's financial condition, results of operations or liquidity. 24 27 TABLE 1. SUMMARY OF CONSOLIDATED RESULTS
YEARS ENDED DECEMBER 31, ----------------------------------------------------------------- 1994 1993 1992 1991 1990 --------- --------- --------- --------- --------- (DOLLARS IN THOUSANDS) Interest income..................................... $ 664,057 $ 577,390 $ 503,778 $ 512,887 $ 551,091 Interest expense.................................... (275,779) (233,680) (222,630) (279,097) (344,562) --------- --------- --------- --------- --------- NET INTEREST INCOME................................. 388,278 343,710 281,148 233,790 206,529 PROVISION FOR LOSSES ON LOANS....................... (3,636) (16,558) (27,182) (34,203) (26,304) --------- --------- --------- --------- --------- NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON LOANS............................................. 384,642 327,152 253,966 199,587 180,225 --------- --------- --------- --------- --------- NONINTEREST INCOME Service charges on deposit accounts............... 52,590 46,532 35,590 33,626 29,344 Bank card income.................................. 10,192 9,749 8,632 7,684 7,008 Mortgage servicing income......................... 9,095 9,239 9,400 8,047 7,593 Trust service income.............................. 7,889 7,566 6,871 6,809 6,713 Profits and commissions from trading activities... 5,537 11,577 12,252 15,467 24,394 Other income...................................... 26,357 29,866 22,332 19,064 17,024 --------- --------- --------- --------- --------- Total noninterest income.................... 111,660 114,529 95,077 90,697 92,076 --------- --------- --------- --------- --------- NONINTEREST EXPENSE Salaries and employee benefits.................... 160,862 150,383 116,764 108,490 113,500 Net occupancy expense............................. 25,750 23,356 19,401 16,772 18,035 Equipment expense................................. 26,451 23,986 18,836 16,796 17,237 Other expense..................................... 127,535 111,825 99,964 83,796 82,564 --------- --------- --------- --------- --------- Total noninterest expense................... 340,598 309,550 254,965 225,854 231,336 --------- --------- --------- --------- --------- 155,704 132,131 94,078 64,430 40,965 OTHER OPERATING ITEMS Investment securities gains (losses).............. (20,298) 4,495 14,019 2,624 83 Restructuring charges and other merger related expenses........................................ (43,791) (2,113) -- -- -- Consumer loan marketing program expenses.......... (14,446) -- -- -- -- Gain on sale of collateral related to a troubled debt............................................ -- 901 3,513 -- -- Write-off of intangibles.......................... -- (1,209) -- (1,053) -- Accelerated amortization of mortgage servicing rights................................ -- (500) (8,200) -- -- Accelerated amortization of other intangibles..... -- (1,385) (1,649) -- -- Provisions for conversion of data processing systems......................................... -- (4,424) -- -- -- Provisions for abandoned property................. -- -- (5,200) (1,643) (272) Provisions for litigation settlements............. -- (500) (9,450) (9,925) (125) Favorable litigation settlement................... 2,200 -- -- -- -- --------- --------- --------- --------- --------- EARNINGS BEFORE TAXES, EXTRAORDINARY ITEM, AND ACCOUNTING CHANGES...................... 79,369 127,396 87,111 54,433 40,651 Taxes............................................... (20,761) (37,420) (23,861) (11,537) (5,408) --------- --------- --------- --------- --------- EARNINGS BEFORE EXTRAORDINARY ITEM AND ACCOUNTING CHANGES.......................... 58,608 89,976 63,250 42,896 35,243 Extraordinary item -- defeasance of debt, net of taxes............................................. -- (3,206) -- -- -- Accounting changes Postretirement/postemployment benefits............ -- (5,907) -- -- -- Income taxes...................................... -- 11,689 -- -- -- --------- --------- --------- --------- --------- NET EARNINGS................................ $ 58,608 $ 92,552 $ 63,250 $ 42,896 $ 35,243 ========= ========= ========= ========= =========
25 28 TABLE 2. CONTRIBUTION TO FULLY DILUTED EARNINGS PER SHARE
YEARS ENDED DECEMBER 31, ----------------------------------------------- 1994 1993 1992 1991 1990 ------- ------- ------- ------- ------- Net interest income-FTE................................................. $ 10.06 $ 9.12 $ 8.45 $ 7.64 $ 6.42 Provision for losses on loans........................................... (0.09) (0.42) (0.78) (1.07) (0.77) ------- ------- ------- ------- ------- Net interest income after provision for losses on loans-FTE............. 9.97 8.70 7.67 6.57 5.65 ------- ------- ------- ------- ------- Noninterest income Service charges on deposits........................................... 1.30 1.18 1.02 1.05 0.86 Bank card income...................................................... 0.25 0.25 0.25 0.24 0.21 Mortgage servicing income............................................. 0.22 0.23 0.27 0.25 0.22 Trust service income.................................................. 0.20 0.19 0.20 0.21 0.20 Profits and commissions from trading activities....................... 0.14 0.29 0.35 0.48 0.72 Investment securities gains (losses).................................. (0.50) 0.11 0.40 0.08 -- Other income.......................................................... 0.70 0.78 0.75 0.60 0.49 ------- ------- ------- ------- ------- Total noninterest income........................................ 2.31 3.03 3.24 2.91 2.70 ------- ------- ------- ------- ------- Noninterest expense Salaries and employee benefits........................................ (4.44) (3.80) (3.36) (3.38) (3.33) Net occupancy expense................................................. (0.64) (0.59) (0.56) (0.52) (0.53) Equipment expense..................................................... (0.65) (0.61) (0.54) (0.52) (0.51) Other expense......................................................... (4.14) (3.08) (3.58) (3.00) (2.43) ------- ------- ------- ------- ------- Total noninterest expense....................................... (9.87) (8.08) (8.04) (7.42) (6.80) ------- ------- ------- ------- ------- Earnings before income taxes-FTE, extraordinary item, and accounting changes............................................ 2.41 3.65 2.87 2.06 1.55 Applicable income taxes-FTE............................................. (0.96) (1.37) (1.05) (0.72) (0.52) ------- ------- ------- ------- ------- Earnings before extraordinary item and accounting changes....... 1.45 2.28 1.82 1.34 1.03 Extraordinary item and accounting changes, net of taxes................. -- 0.07 -- -- -- Preferred stock dividends............................................... (0.20) (0.05) (0.05) (0.02) -- ------- ------- ------- ------- ------- Net earnings.................................................... $ 1.25 $ 2.30 $ 1.77 $ 1.32 $ 1.03 ======= ======= ======= ======= ======= Change in net earnings applicable to fully diluted earnings per share using previous year average shares outstanding........................ $ (1.02) $ 0.84 $ 0.60 $ 0.21 $ 1.49 Change in average shares outstanding.................................... (0.03) (0.31) (0.15) 0.08 (0.01) ------- ------- ------- ------- ------- Change in net earnings.......................................... $ (1.05) $ 0.53 $ 0.45 $ 0.29 $ 1.48 ======= ======= ======= ======= ======= Average fully diluted shares (in thousands)............................. 40,397 39,541 34,754 32,105 34,078 ======= ======= ======= ======= =======
- --------------- FTE -- Fully taxable equivalent TABLE 3. ACQUISITIONS -- BALANCES AT RESPECTIVE DATES OF ACQUISITION(1)
1994 --------------------------------------------- 1992 1993(2) GSSC(2) BNF OTHERS TOTAL ---------- ---------- ---------- -------- -------- ---------- (DOLLARS IN THOUSANDS) ASSETS Interest-bearing deposits at financial institutions................................... $ -- $ 16,998 $ 996 $ -- $ 31,712 $ 32,708 Loans, net of unearned income.................... 578,913 649,153 1,737,970 173,885 538,712 2,450,567 Allowance for losses on loans.................... (15,669) (16,607) (33,068) (1,744) (9,376) (44,188) ---------- ---------- ---------- -------- -------- ---------- Net loans...................................... 563,244 632,546 1,704,902 172,141 529,336 2,406,379 Investment securities............................ 290,143 422,187 518,506 94,301 272,376 885,183 Intangible assets................................ 19,668 18,188 7,960 -- 11,897 19,857 Cash and cash equivalents........................ 669,712 119,424 166,123 2,162 92,848 261,133 Other real estate owned, net..................... 7,501 3,371 2,945 -- 1,554 4,499 Premises and equipment........................... 9,716 27,797 42,247 5,200 18,403 65,850 Other assets..................................... 29,469 19,178 74,292 2,588 18,649 95,529 ---------- ---------- ---------- -------- -------- ---------- TOTAL ASSETS................................... $1,589,453 $1,259,689 $2,517,971 $276,392 $976,775 $3,771,138 ========= ========= ========= ======== ======== ========= LIABILITIES Deposits......................................... $1,457,112 $1,111,644 $2,259,813 $228,481 $857,674 $3,345,968 Other interest-bearing liabilities............... 360 18,903 56,286 15,000 20,677 91,963 Other liabilities................................ 23,013 17,575 28,150 3,276 13,410 44,836 ---------- ---------- ---------- -------- -------- ---------- TOTAL LIABILITIES.............................. $1,480,485 $1,148,122 $2,344,249 $246,757 $891,761 $3,482,767 ========= ========= ========= ======== ======== ========= PURCHASE PRICE/CAPITAL CONTRIBUTION/EQUITY AT RESPECTIVE DATES OF ACQUISITION FOR POOLINGS..... $ 108,968 $ 111,567 $ 173,722 $ 29,635 $ 85,014 $ 288,371 ========= ========= ========= ======== ======== =========
- --------------- (1) Amounts are balances of the institutions acquired at their respective dates of acquisition except for certain poolings of interest which were not considered material and whose balances are as of January 1 of the year they were acquired. (See Note 2 to the consolidated financial statements for additional information.) (2) GSSC acquired Eastover Bank for Savings in 1993. The balances acquired are included in the amounts for GSSC and are not included in the 1993 balances above. 26 29 TABLE 4. AVERAGE BALANCE SHEET AND AVERAGE INTEREST RATES
YEAR-TO-DATE DECEMBER 31, ------------------------------------------------------------------------------------------ 1994 1993 1992 ----------------------------- ---------------------------- ---------------------------- INTEREST FTE INTEREST FTE INTEREST FTE AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE ----------- -------- ------ ---------- -------- ------ ---------- -------- ------ (DOLLARS IN THOUSANDS) ASSETS Interest-bearing deposits at financial institutions........... $ 13,225 $ 718 5.43 % $ 46,724 $ 1,742 3.73% $ 101,851 $ 4,915 4.83 % Federal funds sold and securities purchased under agreements to resell........................... 87,735 3,637 4.15 160,894 5,092 3.16 141,159 5,250 3.72 Trading account securities......... 161,634 9,143 5.66 121,412 6,194 5.10 105,116 6,648 6.32 Investment securities (1) and (2) Taxable securities............... 3,037,857 156,429 5.15 2,834,599 152,031 5.36 2,154,533 143,173 6.65 Tax-exempt securities............ 523,617 48,924 9.34 466,075 44,939 9.64 321,865 33,007 10.25 ----------- -------- ---------- -------- ---------- -------- Total investment securities................. 3,561,474 205,353 5.77 3,300,674 196,970 5.97 2,476,398 176,180 7.11 Loans, net of unearned income (1), (3), and (4)..................... 5,426,880 463,227 8.54 4,492,943 384,297 8.55 3,532,480 323,311 9.15 ----------- -------- ---------- -------- ---------- -------- Total earning assets (1), (2), and (3)............... 9,250,948 682,078 7.37 8,122,647 594,295 7.32 6,357,004 516,304 8.12 -------- -------- -------- Cash and due from banks............ 408,506 385,990 307,334 Premises and equipment............. 211,011 183,749 135,114 Allowance for losses on loans...... (124,400) (112,775) (86,199) Other assets....................... 279,318 277,605 221,465 ----------- ---------- ---------- Total assets................. $10,025,383 $8,857,216 $6,934,718 ========== ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Money market accounts.............. $ 1,471,733 36,453 2.48 $1,762,708 41,400 2.35 $1,449,987 42,349 2.92 Savings deposits................... 1,762,406 40,798 2.31 1,185,810 28,599 2.41 765,875 21,744 2.84 Certificates of deposit of $100,000 and over......................... 551,615 22,131 4.01 602,533 22,175 3.68 509,054 22,758 4.47 Other time deposits................ 3,317,570 136,433 4.11 3,011,095 121,023 4.02 2,509,570 122,184 4.87 Short-term borrowings Federal funds purchased and securities sold under agreements to repurchase....... 466,905 19,841 4.25 254,499 6,926 2.72 244,626 7,729 3.16 Other............................ 7,125 241 3.38 9,107 304 3.34 8,578 311 3.63 Federal Home Loan Bank advances.... 217,587 10,847 4.99 131,246 5,363 4.09 15,254 667 4.37 Long-term debt Subordinated capital notes and debentures..................... 116,272 8,547 7.35 81,126 7,447 9.18 41,311 4,340 10.51 Other............................ 4,740 488 10.30 4,623 443 9.58 6,341 548 8.64 ----------- -------- ---------- -------- ---------- -------- Total interest-bearing liabilities................ 7,915,953 275,779 3.48 7,042,747 233,680 3.32 5,550,596 222,630 4.01 Noninterest-bearing demand deposits........................... 1,226,289 -- 1,066,909 -- 790,733 -- ----------- -------- ---------- -------- ---------- -------- Total sources of funds....... 9,142,242 275,779 8,109,656 233,680 6,341,329 222,630 -------- -------- -------- Other liabilities.................... 104,909 107,686 98,860 Shareholders' equity................. 778,232 639,874 494,529 ----------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY....... $10,025,383 $8,857,216 $6,934,718 ========== ========= ========= NET INTEREST INCOME(1)............... $406,299 $360,615 $293,674 ======== ======== ======== INTEREST RATE SPREAD(1).............. 3.89 % 4.00% 4.11 % ====== ====== ====== NET INTEREST MARGIN(1)............... 4.39 % 4.44% 4.62 % ====== ====== ====== TAXABLE-EQUIVALENT ADJUSTMENTS Loans.............................. $ 1,503 $ 1,298 $ 1,247 Securities......................... 16,518 15,607 11,279 -------- -------- -------- Total........................ $ 18,021 $ 16,905 $ 12,526 ======== ======== ========
- --------------- (1) Taxable-equivalent yields are calculated assuming 35%, 35%, and 34% income tax rates in 1994, 1993, and 1992, respectively. State taxes are calculated at 6% without any tax-exempt exclusion. (2) Yields are calculated on historical cost and exclude the impact of the unrealized gain (loss) on available for sale securities. (3) Includes loan fees, immaterial in amount, in both interest income and the calculation of the yield on loans. (4) Including loans on nonaccrual status. 27 30 TABLE 5. ANALYSIS OF VOLUME AND RATE CHANGES
1994 VERSUS 1993 1993 VERSUS 1992 ------------------------------- ------------------------------- INCREASE INCREASE (DECREASE) (DECREASE) DUE TO CHANGE DUE TO CHANGE IN:(1) IN:(1) ------------------ TOTAL ------------------ TOTAL AVERAGE AVERAGE INCREASE AVERAGE AVERAGE INCREASE VOLUME RATE (DECREASE) VOLUME RATE (DECREASE) ------- -------- ---------- ------- -------- ---------- (DOLLARS IN THOUSANDS) INTEREST INCOME Interest-bearing deposits at financial institutions..................................... $(1,597) $ 573 $ (1,024) $(2,234) $ (939) $ (3,173) Federal funds sold and securities purchased under agreements to resell............................. (2,742) 1,287 (1,455) 681 (839) (158) Trading account securities......................... 2,220 729 2,949 941 (1,395) (454) Investment securities Taxable securities............................... 10,622 (6,224) 4,398 39,781 (30,923) 8,858 Tax-exempt securities............................ 5,410 (1,425) 3,985 14,009 (2,077) 11,932 ------- -------- ---------- ------- -------- ---------- Total investment securities.................... 16,032 (7,649) 8,383 53,790 (33,000) 20,790 ------- -------- ---------- ------- -------- ---------- Loans.............................................. 79,721 (791) 78,930 83,269 (22,283) 60,986 ------- -------- ---------- ------- -------- ---------- TOTAL INTEREST INCOME.......................... 93,634 (5,851) 87,783 136,447 (58,456) 77,991 ------- -------- ---------- ------- -------- ---------- INTEREST EXPENSE Money market accounts.............................. (7,114) 2,167 (4,947) 8,196 (9,145) (949) Savings deposits................................... 13,391 (1,192) 12,199 10,515 (3,660) 6,855 Certificates of deposit of $100,000 and over....... (1,956) 1,912 (44) 3,802 (4,385) (583) Other time deposits................................ 12,551 2,859 15,410 22,143 (23,304) (1,161) Federal funds purchased and securities sold under agreements to repurchase......................... 7,720 5,195 12,915 302 (1,105) (803) Other short-term borrowings........................ (67) 4 (63) 19 (26) (7) Federal Home Loan Bank advances.................... 4,110 1,374 5,484 4,743 (47) 4,696 Subordinated capital notes and debentures.......... 2,787 (1,687) 1,100 3,716 (609) 3,107 Other long-term debt............................... 11 34 45 (160) 55 (105) ------- -------- ---------- ------- -------- ---------- TOTAL INTEREST EXPENSE......................... 31,433 10,666 42,099 53,276 (42,226) 11,050 ------- -------- ---------- ------- -------- ---------- CHANGE IN NET INTEREST INCOME........................ $62,201 $(16,517) $ 45,684 $83,171 $(16,230) $ 66,941 ======= ======== ========== ======= ======== ========== PERCENTAGE INCREASE IN NET INTEREST INCOME OVER PRIOR PERIOD............................................. 12.67% 22.79% ========== ==========
- --------------- (1) The change due to both rate and volume has been allocated to change due to volume and change due to rate in proportion to the relationship of the absolute dollar amounts of the change in each. TABLE 6. AVERAGE DEPOSITS(1)
DECEMBER 31, -------------------------------------------------------------- 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) Noninterest-bearing demand................................. $1,226,289 $1,066,909 $ 790,733 $ 669,720 $ 657,018 Money market(2)............................................ 1,471,733 1,762,708 1,449,987 1,166,033 1,113,533 Savings(3)................................................. 1,762,406 1,185,810 765,875 584,126 533,860 Other time(4).............................................. 3,317,570 3,011,095 2,509,570 2,134,329 2,072,364 ---------- ---------- ---------- ---------- ---------- TOTAL AVERAGE CORE DEPOSITS............................ 7,777,998 7,026,522 5,516,165 4,554,208 4,376,775 Certificates of deposit of $100,000 and over............... 551,615 602,533 509,054 556,435 649,094 ---------- ---------- ---------- ---------- ---------- TOTAL AVERAGE DEPOSITS................................. $8,329,613 $7,629,055 $6,025,219 $5,110,643 $5,025,869 ========= ========= ========= ========= =========
- --------------- (1) Table 4 presents the average rate paid on the above deposit categories for the three years ended December 31, 1994. (2) Includes money market savings accounts and super NOW accounts. (3) Includes regular savings accounts, NOW accounts and premium savings accounts. (4) Includes certificates of deposit of less than $100,000, investment savings deposits, IRA's, and Christmas Club accounts. 28 31 TABLE 7. COMPOSITION OF THE LOAN PORTFOLIO
DECEMBER 31, -------------------------------------------------------------- 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) Commercial, financial, and agricultural.................. $1,364,729 $1,152,159 $ 939,824 $ 934,072 $1,139,067 Real estate -- construction.............................. 225,591 160,633 99,443 85,807 105,264 Real estate -- mortgage Secured by 1-4 family residential...................... 2,035,290 1,495,878 1,158,108 842,918 844,019 Other mortgage loans................................... 990,779 875,112 654,864 550,809 500,734 Home equity.............................................. 140,305 117,475 109,217 74,440 67,507 Consumer Credit cards and other related plans................... 263,927 105,333 76,608 68,425 82,616 Other consumer loans................................... 919,618 746,752 552,573 571,442 640,371 Direct lease financing................................... 40,342 25,914 16,493 32,768 36,477 ---------- ---------- ---------- ---------- ---------- TOTAL LOANS........................................ 5,980,581 4,679,256 3,607,130 3,160,681 3,416,055 Less: Unearned income.................................. 31,453 25,888 21,361 27,757 39,620 ---------- ---------- ---------- ---------- ---------- TOTAL LOANS, NET OF UNEARNED INCOME................ $5,949,128 $4,653,368 $3,585,769 $3,132,924 $3,376,435 ========= ========= ========= ========= =========
TABLE 8. ALLOCATION OF THE ALLOWANCE FOR LOSSES ON LOANS BY CATEGORY OF LOANS AND THE PERCENTAGE OF LOANS BY CATEGORY TO TOTAL LOANS OUTSTANDING
DECEMBER 31, -------------------------------------------------------------------------------------------------------------- 1994 1993 1992 1991 1990 --------------------- --------------------- -------------------- -------------------- -------------------- PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE OF LOANS TO OF LOANS TO OF LOANS TO OF LOANS TO OF LOANS TO AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS -------- ----------- -------- ----------- ------- ----------- ------- ----------- ------- ----------- (DOLLARS IN THOUSANDS) Commercial, financial, and agricultural.... $ 37,229 22% $ 48,637 25% $38,818 26% $27,661 29% $29,940 33% Real estate -- construction.... 4,924 4 3,068 3 1,762 3 3,347 3 2,005 3 Real estate -- mortgage........ 47,117 51 43,662 51 34,003 50 21,594 44 20,433 40 Consumer.......... 32,291 22 18,461 21 14,914 20 14,832 23 14,638 23 Direct lease financing....... 528 1 525 -- 330 1 555 1 489 1 -------- --- -------- --- ------- --- ------- --- ------- --- Total....... $122,089 100% $114,353 100% $89,827 100% $67,989 100% $67,505 100% ======== ========== ======== ========== ======= ========== ======= ========== ======= ==========
- --------------- Note: The allocation of the allowance is presented based in part on evaluations of specific loans, past history, and economic conditions within specific industries or geographic areas. Since all of these factors are subject to change, the current allocation of the allowance is not necessarily indicative of the breakdown of future losses. TABLE 9. NONACCRUAL, RESTRUCTURED, AND PAST DUE LOANS AND FORECLOSED PROPERTIES
DECEMBER 31, ------------------------------------------------------- 1994 1993 1992 1991 1990 ------- ------- ------- ------- ------- (DOLLARS IN THOUSANDS) Nonaccrual loans................................................ $17,476 $18,846 $44,067 $30,439 $30,881 Restructured loans.............................................. 1,564 8,778 3,154 3,606 5,273 ------- ------- ------- ------- ------- Total nonperforming loans............................... 19,040 27,624 47,221 34,045 36,154 ------- ------- ------- ------- ------- Foreclosed property Other real estate owned, net.................................. 5,434 8,054 13,327 20,322 25,026 Other foreclosed properties................................... 559 761 434 444 545 ------- ------- ------- ------- ------- Total foreclosed properties............................. 5,993 8,815 13,761 20,766 25,571 ------- ------- ------- ------- ------- Total nonperforming assets.............................. $25,033 $36,439 $60,982 $54,811 $61,725 ======= ======= ======= ======= ======= Loans 90 days or more past due and not on nonaccrual status..... $ 5,874 $ 9,070 $ 5,256 $ 6,549 $14,118 ======= ======= ======= ======= ======= Nonperforming loans as a percentage of loans.................... .32% .59% 1.32% 1.09% 1.07% Nonperforming assets as a percentage of loans plus foreclosed properties.................................................... .42 .78 1.69 1.74 1.81 Allowance for losses on loans as a percentage of nonperforming loans........................................... 641 414 190 200 187 Loans 90 days or more past due and not on nonaccrual status as a percentage of loans........................................... .10 .19 .15 .21 .42
29 32 TABLE 10. ALLOWANCE FOR LOSSES ON LOANS
YEARS ENDED DECEMBER 31, ------------------------------------------------------------------ 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) Balance at beginning of period......................... $ 114,353 $ 89,827 $ 67,989 $ 67,505 $ 62,108 Loans charged off Commercial, financial, and agricultural.............. 5,323 11,830 22,577 23,297 23,413 Real estate-construction............................. 248 65 411 759 1,533 Real estate-mortgage................................. 3,834 2,885 4,547 4,379 3,963 Consumer............................................. 9,033 8,883 9,006 14,699 9,917 Direct lease financing............................... 1 9 20 75 129 ---------- ---------- ---------- ---------- ---------- Total charge-offs.............................. 18,439 23,672 36,561 43,209 38,955 ---------- ---------- ---------- ---------- ---------- Recoveries on loans previously charged off Commercial, financial, and agricultural.............. 6,454 4,962 10,663 5,525 5,646 Real estate-construction............................. 72 59 108 63 195 Real estate-mortgage................................. 2,756 688 487 567 604 Consumer............................................. 3,882 4,323 4,195 3,181 3,994 Direct lease financing............................... 123 39 86 154 21 ---------- ---------- ---------- ---------- ---------- Total recoveries............................... 13,287 10,071 15,539 9,490 10,460 ---------- ---------- ---------- ---------- ---------- Net charge-offs........................................ 5,152 13,601 21,022 33,719 28,495 Provision charged to expense........................... 3,636 16,558 27,182 34,203 26,304 Increase due to acquisitions........................... 9,252 21,569 15,678 -- 7,588 ---------- ---------- ---------- ---------- ---------- Balance at end of period............................... $ 122,089 $ 114,353 $ 89,827 $ 67,989 $ 67,505 ========= ========= ========= ========= ========= Loans, net of unearned income, at end of period........ $5,949,128 $4,653,368 $3,585,769 $3,132,924 $3,376,435 ========= ========= ========= ========= ========= Average loans, net of unearned income, during period... $5,426,880 $4,492,943 $3,532,480 $3,294,623 $3,368,971 ========= ========= ========= ========= ========= Ratios: Allowance at end of period to loans, net of unearned income............................................. 2.05% 2.46% 2.51% 2.17% 2.00% Allowance at end of period to average loans, net of unearned income.................................... 2.25 2.55 2.54 2.06 2.00 Net charge-offs to average loans, net of unearned income.................................... .09 .30 .60 1.02 .85
30 33 TABLE 11. RATE SENSITIVITY ANALYSIS AT DECEMBER 31, 1994
INTEREST-SENSITIVE WITHIN -------------------------------------------------------------------------------- 0-30 31-90 91-180 181-365 1-2 2-5 OVER NONINTEREST- DAYS(B) DAYS DAYS DAYS YEARS YEARS 5 YEARS BEARING TOTAL ------- ------ ------ ------- ------ ------ ------- ------------ ------- (DOLLARS IN MILLIONS) ASSETS Loans and leases........... $1,637 $ 512 $552 $ 771 $ 469 $1,346 $ 675 $ 19 $ 5,981 Investment securities...... 459 235 335 393 581 637 322 -- 2,962 Other earning assets....... 111 105 2 1 1 1 -- -- 221 Other assets............... -- -- -- -- -- -- -- 851 851 ------- ------ ------ ------- ------ ------ ------- ------------ ------- TOTAL ASSETS....... $2,207 $ 852 $889 $ 1,165 $1,051 $1,984 $ 997 $ 870 $10,015 ====== ====== ===== ====== ====== ====== ====== ========= ======= SOURCES OF FUNDS Money market deposits...... $ 82 $ 370 $ -- $ 383 $ -- $ 549 $ -- $ -- $ 1,384 Other savings and time deposits................ 585 1,170 662 640 372 1,639 25 -- 5,093 Time deposits over $100,000................ 107 109 113 83 79 67 2 -- 560 Short-term borrowings.............. 413 2 -- -- -- -- -- -- 415 Federal Home Loan Bank advances................ 101 27 10 17 15 34 20 -- 224 Long-term debt............. -- -- -- -- -- -- 117 -- 117 Noninterest-bearing deposits................ -- -- -- -- -- -- -- 1,381 1,381 Other liabilities.......... -- -- -- -- -- -- -- 110 110 Shareholders' equity....... -- -- -- -- -- -- -- 731 731 ------- ------ ------ ------- ------ ------ ------- ------------ ------- TOTAL SOURCES OF FUNDS............ $1,288 $1,678 $785 $ 1,123 $ 466 $2,289 $ 164 $ 2,222 $10,015 ====== ====== ===== ====== ====== ====== ====== ========= ======= INTEREST RATE SWAPS.......... $ (150 ) $ (10) $(50) $ 0 $ 50 $ 160 $ 0 $ 0 INTEREST RATE SENSITIVITY GAP........................ 769 (836) 54 42 635 (145) 833 (1,352) CUMULATIVE INTEREST RATE SENSITIVITY GAP............ 769 (67) (13) 29 664 519 1,352 0 CUMULATIVE GAP AS A PERCENTAGE OF TOTAL ASSETS..................... 8 % (1)% 0% 0% 7% 5% 13% 0%
- --------------- MANAGEMENT HAS MADE THE FOLLOWING ASSUMPTIONS IN THE ABOVE ANALYSIS: (a) Assets and liabilities are generally assigned to a period based upon their earliest repricing period when the repricing is less than the contractual maturity. (b) Nonaccrual loans are included in the noninterest-bearing category. (c) Fixed-rate mortgage loan maturities are based on the principal-prepayment patterns of comparable mortgage-backed securities. (d) The scheduled maturities of mortgage-backed securities and CMOs incorporate principal prepayments of these securities using current and consensus interest rate forecasts in conjunction with the latest three month historical prepayment schedules. (e) Investment securities available for sale are currently treated in the same manner as comparable securities in the investment securities held to maturity portfolio in that they are scheduled according to the earlier of their contractual maturities or earliest repricing dates; however, the maturities of callable agency securities are scheduled according to their call dates when valued at a premium to par. (f) Money market deposits and savings deposits that have no contractual maturities are scheduled according to the Corporation's best estimate of their repricing sensitivity to changes in market rates. This varies by product type and market. (g) If all money market, NOW and savings deposits had been included in the 0-30 Days category above, the cumulative gap as a percentage of total assets would have been negative (23%), (22%), (22%), (17%), (11%), and positive 5%, respectively, for the 0-30 Days, 31-90 Days, 91-180 Days, 181-365 Days, 1-2 Years, and 2-5 Years categories at December 31, 1994. 31 34 TABLE 12. INVESTMENT SECURITIES AND OTHER EARNING ASSETS
DECEMBER 31, ------------------------------------ 1994 1993 1992 ---------- ---------- ---------- (DOLLARS IN THOUSANDS) U.S. Government obligations U.S. Treasury............................................ $ 927,754 $ 919,482 $ 760,152 U.S. Government Agencies................................. 1,379,105 1,703,469 1,535,319 ---------- ---------- ---------- Total U.S. Government obligations................ 2,306,859 2,622,951 2,295,471 Obligations of state and political subdivisions............ 519,134 519,919 377,673 Other investment securities................................ 136,151 152,774 120,806 ---------- ---------- ---------- Total investment securities...................... 2,962,144 3,295,644 2,793,950 Interest-bearing deposits at financial institutions........ 10,641 26,675 104,234 Federal funds sold and securities purchased under resale agreements............................................... 29,953 78,149 92,354 Trading account securities................................. 155,951 153,482 109,584 Loans held for resale...................................... 24,493 134,206 154,615 ---------- ---------- ---------- Total investment securities and money market assets......................................... $3,183,182 $3,688,156 $3,254,737 ========= ========= =========
TABLE 13. RISK-BASED CAPITAL
DECEMBER 31, ------------------------------------ 1994 1993 1992 ---------- ---------- ---------- (DOLLARS IN THOUSANDS) TIER 1 CAPITAL Shareholders' equity..................................... $ 730,707 $ 682,002 $ 529,496 Minority interest in consolidated subsidiaries........... 1,088 1,588 1,588 Less goodwill and one-half of investment in unconsolidated subsidiaries........................... (38,138) (33,049) (10,741) Less disallowed deferred tax asset....................... (2,494) (1,861) -- Add unrealized loss on available for sale securities..... 28,527 -- -- ---------- ---------- ---------- TOTAL TIER 1 CAPITAL............................. 719,690 648,680 520,343 TIER 2 CAPITAL Allowance for losses on loans............................ 74,204 60,397 49,656 Qualifying long-term debt................................ 74,540 74,479 32,000 Less one-half of investment in unconsolidated subsidiaries.......................................... (18) (136) (147) ---------- ---------- ---------- TOTAL CAPITAL.................................... $ 868,416 $ 783,420 $ 601,852 ========= ========= ========= RISK-WEIGHTED ASSETS....................................... $5,888,361 $4,775,858 $3,897,154 ========= ========= ========= RATIOS Equity to assets......................................... 7.30% 7.55% 7.07% Leverage ratio........................................... 7.18 7.23 7.11 Tier 1 capital to risk-weighted assets................... 12.22 13.58 13.35 Total capital to risk-weighted assets.................... 14.75 16.40 15.44
- --------------- Regulatory minimums for institutions considered "well-capitalized" are 5%, 6%, and 10% for the leverage, Tier 1 capital to risk-weighted assets, and Total capital to risk-weighted assets ratios, respectively. As of December 31, 1994, all of the Corporation's banking subsidiaries were considered "well-capitalized" for FDIC deposit insurance assessments. 32 35 TABLE 14. SELECTED QUARTERLY DATA
1994 QUARTERS ENDED(1) AND(2) ------------------------------------------------------------ MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL -------- -------- ------------ ----------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Net interest income.................... $ 91,464 $ 97,064 $ 99,310 $ 100,440 $ 388,278 Provision for losses on loans.......... (815) (985) (991) (845) (3,636) Investment securities gains (losses)... 105 169 (8,111) (12,461) (20,298) Noninterest income..................... 28,314 28,075 30,000 27,471 113,860 Noninterest expense.................... (82,727) (86,136) (86,706) (143,266) (398,835) -------- -------- ------------ ----------- --------- Earnings (loss) before income taxes.... 36,341 38,187 33,502 (28,661) 79,369 Applicable income taxes (benefit)...... 10,954 11,935 9,768 (11,896) 20,761 -------- -------- ------------ ----------- --------- Net earnings (loss).................... $ 25,387 $ 26,252 $ 23,734 $ (16,765) $ 58,608 ======== ======== ========== ========== ========= PER COMMON SHARE DATA Net earnings (loss) Primary........................... $ .58 $ .60 $ .54 $ (.47) $ 1.25 Fully diluted..................... .56 .58 .52 (.47) 1.25 Dividends............................ .21 .21 .23 .23 .88 UPC COMMON STOCK DATA (3) High trading price................... $ 26.25 $ 28.75 $ 26.00 $ 24.50 $ 28.75 Low trading price.................... 23.13 24.75 23.50 19.63 19.63 Closing price........................ 24.88 26.75 24.50 20.88 20.88 Trading volume (in thousands) (4).... 1,878 1,791 2,565 2,886 9,120
1993 QUARTERS ENDED(1) AND(2) ------------------------------------------------------------ MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL -------- -------- ------------ ----------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Net interest income.................... $ 82,982 $ 87,667 $ 87,069 $ 85,992 $ 343,710 Provision for losses on loans.......... (4,930) (6,554) (3,049) (2,025) (16,558) Investment securities gains............ 669 2,467 685 674 4,495 Noninterest income..................... 26,580 29,416 30,212 29,222 115,430 Noninterest expense.................... (76,503) (80,988) (82,565) (79,625) (319,681) -------- -------- ------------ ----------- --------- Earnings before income taxes, extraordinary item, and accounting changes.............................. 28,798 32,008 32,352 34,238 127,396 Applicable income taxes................ 9,146 10,328 7,625 10,321 37,420 -------- -------- ------------ ----------- --------- Earnings before extraordinary item and accounting changes................... 19,652 21,680 24,727 23,917 89,976 Extraordinary item, net of taxes....... -- -- -- (3,206) (3,206) Accounting changes, net of taxes....... 5,782 -- -- -- 5,782 -------- -------- ------------ ----------- --------- Net earnings...................... $ 25,434 $ 21,680 $ 24,727 $ 20,711 $ 92,552 ======== ======== ========== ========== ========= PER COMMON SHARE DATA Earnings before extraordinary item and accounting changes Primary........................... $ .52 $ .55 $ .63 $ .61 $ 2.31 Fully diluted..................... .50 .53 .61 .59 2.23 Net earnings Primary........................... .68 .55 .63 .52 2.38 Fully diluted..................... .65 .53 .61 .51 2.30 Dividends............................ .18 .18 .18 .18 .72 UPC COMMON STOCK DATA(3) High trading price................... $ 29.13 $ 29.25 $ 30.00 $ 28.75 $ 30.00 Low trading price.................... 22.50 22.63 25.00 23.63 22.50 Closing price........................ 29.00 25.75 29.00 25.13 25.13 Trading volume (in thousands)(4)..... 3,059 1,926 2,008 2,800 9,793
- --------------- (1) Certain quarterly amounts have been reclassified to conform with current financial reporting presentation. (2) Quarterly amounts for 1994 have been restated for all 1994 acquisitions accounted for using the pooling of interests method of accounting. In addition, quarterly amounts for 1993 have been restated only for the 1994 acquisitions of BNF BANCORP, Inc. and Grenada Sunburst System Corporation both of which were considered significant acquisitions. (3) Union Planters Corporation's Common Stock is listed on the New York Stock Exchange (NYSE) and is traded under the symbol UPC. All share prices represent closing prices as reported by the NYSE. There were approximately 13,700 holders of the Corporation's Common Stock as of December 31, 1994. (4) Trading volume represents the total volume for the period shown as reported by NYSE. 33 36 TABLE 15. UNION PLANTERS CORPORATION'S BANKING SUBSIDIARIES
DECEMBER 31, 1994 ----------------------------------- ASSETS LOANS DEPOSITS EQUITY ------ ------ -------- ------ (DOLLARS IN MILLIONS) TENNESSEE Union Planters National Bank................................. $2,165 $1,094 $1,322 $167.3 Union Planters Bank of Middle Tennessee, N.A................. 929 463 859 61.2 Union Planters Bank of Jackson, N.A.......................... 274 157 253 15.5 Union Planters Bank of East Tennessee, N.A................... 258 169 237 19.5 Union Planters Bank of West Tennessee........................ 207 105 187 14.4 First Federal Savings Bank in Maryville...................... 172 104 160 10.2 Liberty Federal Savings Bank in Paris........................ 172 120 148 14.2 Bank of Goodlettsville....................................... 171 100 154 11.0 First National Bank of Shelbyville........................... 162 71 145 13.5 The First National Bank of Crossville........................ 162 72 148 10.5 Citizens Bank in Cookeville.................................. 154 91 142 10.8 Bank of Roane County in Harriman............................. 134 90 117 8.5 Union Planters Bank of Chattanooga, N.A...................... 131 74 117 11.9 Central State Bank in Lexington.............................. 107 63 99 6.8 First State Bank of Brownsville.............................. 99 44 86 5.3 Security Trust Federal Savings and Loan Association.......... 99 58 73 7.4 Bank of East Tennessee in Morristown......................... 89 32 77 7.3 Bank of Commerce in Woodbury................................. 77 44 67 6.2 Dekalb County Bank & Trust Company in Alexandria............. 74 42 65 5.6 Farmers Union Bank in Ripley................................. 63 37 54 8.1 Citizens Bank & Trust Company in Wartburg.................... 61 34 55 4.1 First Citizens Bank of Hohenwald............................. 56 36 46 4.2 Bank of Trenton and Trust Company............................ 44 22 40 2.6 Union Planters Bank, FSB in Dyersburg........................ 40 24 29 2.4 Erin Bank & Trust Company.................................... 37 15 33 4.2 First State Bank of Fayette County in Somerville............. 31 15 29 2.2 The Commercial Bank of Obion................................. 29 10 25 3.7 Peoples Bank of Elk Valley in Fayetteville................... 26 17 23 2.3 Pickett County Bank and Trust Company in Byrdstown........... 24 15 21 1.5 Cumberland City Bank......................................... 22 14 20 1.8 ------ ------ -------- ------ Total Tennessee.................................... $6,069 $3,232 $4,831 $444.2 ====== ====== ====== ====== MISSISSIPPI Sunburst Bank, Mississippi................................... $2,013 $1,416 $1,807 $134.3 United Southern Bank of Clarksdale........................... 335 179 289 26.5 First National Bank in New Albany............................ 149 94 134 12.2 ------ ------ -------- ------ Total Mississippi.................................. $2,497 $1,689 $2,230 $173.0 ====== ====== ====== ====== ARKANSAS Mercantile Bank in Jonesboro................................. $ 248 $ 187 $ 214 $ 22.0 Security Bank in Paragould................................... 112 65 102 8.2 First State Bank of Newport.................................. 55 29 48 5.7 First National Bank in Clinton............................... 53 41 48 3.8 First Southern Bank in Earle................................. 41 19 38 2.4 Searcy County Bank in Marshall............................... 35 20 31 3.3 Bank of Weiner............................................... 31 18 28 2.5 Mercantile Bank in Mammoth Spring............................ 30 20 27 2.6 Mercantile Bank in Hardy..................................... 29 21 24 2.0 The Bank of Rector........................................... 28 14 25 2.5 Farmers & Merchants Bank in Pocahontas....................... 18 11 17 1.3 ------ ------ -------- ------ Total Arkansas..................................... $ 680 $ 445 $ 602 $ 56.3 ====== ====== ====== ====== LOUISIANA Sunburst Bank, Louisiana..................................... $ 502 $ 322 $ 454 $ 37.0 ====== ====== ====== ====== ALABAMA BANKFIRST in Decatur......................................... $ 273 $ 185 $ 231 $ 20.6 ====== ====== ====== ====== KENTUCKY Simpson County Bank in Franklin.............................. $ 110 $ 79 $ 102 $ 6.7 ====== ====== ====== ======
34 37 REPORT OF MANAGEMENT The accompanying financial statements and related financial information in this annual report were prepared by the management of Union Planters Corporation in accordance with generally accepted accounting principles and, where appropriate, reflect management's best estimates and judgment. Management is responsible for the integrity, objectivity, consistency, and fair presentation of the financial statements and all financial information contained in this annual report. Management maintains and depends upon internal accounting systems and related systems of internal controls. The internal control systems are designed to ensure that transactions are properly authorized and recorded in the Corporation's financial records and to safeguard the Corporation's assets from material loss or misuse. The Corporation utilizes internal monitoring mechanisms and an extensive external audit to monitor compliance with, and assess the effectiveness of, the system of internal accounting controls. Management believes the Corporation's system of internal accounting control provides reasonable assurance that the Corporation's assets are safeguarded and that its financial records are reliable. The Audit Committee of the Board of Directors meets periodically with representatives of the Corporation's independent accountants and management to review accounting policies, control procedures, and audit and regulatory examination reports. The independent accountants have free access to the Committee, with and without the presence of management, to discuss the results of their audit work and their evaluation of the adequacy of internal controls and the quality of financial reporting. The financial statements have been audited by Price Waterhouse LLP, independent accountants, who were engaged to express an opinion as to the fairness of presentation of such financial statements. /s/ Benjamin W. Rawlins, Jr. /s/ Jack W. Parker - ---------------------------- ---------------------------- Benjamin W. Rawlins, Jr. Jack W. Parker Chairman of the Board and Executive Vice President and Chief Executive Officer Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Union Planters Corporation In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of earnings, of changes in shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Union Planters Corporation and its subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Corporation's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 1 to the consolidated financial statements, the Corporation changed its methods of accounting for investment securities in 1994 and for postretirement benefits, postemployment benefits and income taxes in 1993. /s/ Price Waterhouse LLP - ------------------------ PRICE WATERHOUSE LLP Memphis, Tennessee January 26, 1995 35 38 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
DECEMBER 31, -------------------------- 1994 1993 ----------- ---------- (DOLLARS IN THOUSANDS) ASSETS Cash and due from banks.................................................... $ 488,722 $ 363,360 Interest-bearing deposits at financial institutions........................ 10,641 26,675 Federal funds sold and securities purchased under agreements to resell..... 29,953 78,149 Trading account securities................................................. 155,951 153,482 Loans held for resale...................................................... 24,493 134,206 Investment securities Available for sale (Amortized cost December 31, 1994: $1,975,897; Fair value December 31, 1993: $815,360)...................................... 1,928,984 808,554 Held to maturity (Fair value: $1,009,969 and $2,542,808, respectively)... 1,033,160 2,487,090 Loans...................................................................... 5,980,581 4,679,256 Less: Unearned income.................................................... (31,453) (25,888) Allowance for losses on loans....................................... (122,089) (114,353) ----------- ---------- Net loans........................................................... 5,827,039 4,539,015 Premises and equipment..................................................... 204,136 189,080 Accrued interest receivable................................................ 87,509 70,332 Goodwill and other intangibles............................................. 50,236 47,293 Other assets............................................................... 174,245 132,657 ----------- ---------- TOTAL ASSETS........................................................ $10,015,069 $9,029,893 ============ ========== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Noninterest-bearing...................................................... $ 1,380,737 $1,172,251 Certificates of deposit of $100,000 and over............................. 559,593 593,381 Other interest-bearing................................................... 6,477,512 5,905,989 ----------- ---------- Total deposits...................................................... 8,417,842 7,671,621 Short-term borrowings...................................................... 415,171 275,537 Federal Home Loan Bank advances............................................ 224,103 192,792 Long-term debt............................................................. 116,848 117,379 Accrued interest, expenses, and taxes...................................... 72,211 52,766 Other liabilities.......................................................... 38,187 37,796 ----------- ---------- TOTAL LIABILITIES................................................... 9,284,362 8,347,891 ----------- ---------- Commitments and contingent liabilities (Notes 7, 15, 17, and 19)........... -- -- Shareholders' equity Preferred stock (Note 10) Convertible............................................................ 87,298 87,298 Nonconvertible......................................................... -- 17,250 Common stock, $5 par value; 50,000,000 shares authorized; 40,179,474 issued and outstanding (35,447,702 in 1993)............................. 200,897 177,238 Additional paid-in capital............................................... 69,204 59,969 Net unrealized gain (loss) on available for sale securities.............. (28,527) -- Retained earnings........................................................ 401,835 340,247 ----------- ---------- TOTAL SHAREHOLDERS' EQUITY.......................................... 730,707 682,002 ----------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.......................... $10,015,069 $9,029,893 ============ ==========
The accompanying notes are an integral part of these financial statements. 36 39 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS
YEARS ENDED DECEMBER 31, ------------------------------------------- 1994 1993 1992 ----------- ----------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) INTEREST INCOME Interest and fees on loans.................................. $ 460,617 $ 375,567 $ 314,814 Interest on investment securities Taxable................................................... 156,429 151,538 142,663 Tax-exempt................................................ 32,406 29,825 22,238 Interest on deposits at financial institutions.............. 718 1,742 4,915 Interest on federal funds sold and securities purchased under agreements to resell................................ 3,637 5,092 5,250 Interest on trading account securities...................... 9,143 6,194 6,648 Interest on loans held for resale........................... 1,107 7,432 7,250 ----------- ----------- ----------- Total interest income................................ 664,057 577,390 503,778 ----------- ----------- ----------- INTEREST EXPENSE Interest on deposits........................................ 235,815 213,197 209,035 Interest on short-term borrowings........................... 20,082 7,230 8,040 Interest on Federal Home Loan Bank advances and long-term debt...................................................... 19,882 13,253 5,555 ----------- ----------- ----------- Total interest expense............................... 275,779 233,680 222,630 ----------- ----------- ----------- NET INTEREST INCOME.................................. 388,278 343,710 281,148 PROVISION FOR LOSSES ON LOANS................................. 3,636 16,558 27,182 ----------- ----------- ----------- NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON LOANS.............................................. 384,642 327,152 253,966 NONINTEREST INCOME Service charges on deposit accounts......................... 52,590 46,532 35,590 Bank card income............................................ 10,192 9,749 8,632 Mortgage servicing income................................... 9,095 9,239 9,400 Trust service income........................................ 7,889 7,566 6,871 Profits and commissions from trading activities............. 5,537 11,577 12,252 Investment securities gains (losses)........................ (20,298) 4,495 14,019 Other income................................................ 28,557 30,767 25,845 ----------- ----------- ----------- Total noninterest income............................. 93,562 119,925 112,609 ----------- ----------- ----------- NONINTEREST EXPENSE Salaries and employee benefits.............................. 160,862 150,383 116,764 Net occupancy expense....................................... 25,750 23,356 19,401 Equipment expense........................................... 26,451 23,986 18,836 Other expense............................................... 185,772 121,956 124,463 ----------- ----------- ----------- Total noninterest expense............................ 398,835 319,681 279,464 ----------- ----------- ----------- EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM, AND ACCOUNTING CHANGES................................. 79,369 127,396 87,111 Applicable income taxes 20,761 37,420 23,861 ----------- ----------- ----------- EARNINGS BEFORE EXTRAORDINARY ITEM AND ACCOUNTING CHANGES............................................ 58,608 89,976 63,250 Extraordinary item -- defeasance of debt, net of taxes........ -- (3,206) -- Accounting changes, net of taxes.............................. -- 5,782 -- ----------- ----------- ----------- NET EARNINGS......................................... $ 58,608 $ 92,552 $ 63,250 ============ ============ ============ NET EARNINGS APPLICABLE TO COMMON SHARES............. $ 50,055 $ 84,084 $ 57,084 ============ ============ ============ EARNINGS PER COMMON SHARE PRIMARY Earnings before extraordinary item and accounting changes................................................. $ 1.25 $ 2.31 $ 1.79 Extraordinary item -- defeasance of debt, net of taxes.... -- (.09) -- Accounting changes, net of taxes.......................... -- .16 -- ----------- ----------- ----------- NET EARNINGS......................................... $ 1.25 $ 2.38 $ 1.79 ============ ============ ============ FULLY DILUTED Earnings before extraordinary item and accounting changes................................................. $ 1.25 $ 2.23 $ 1.77 Extraordinary item -- defeasance of debt, net of taxes.... -- (.08) -- Accounting changes, net of taxes.......................... -- .15 -- ----------- ----------- ----------- NET EARNINGS......................................... $ 1.25 $ 2.30 $ 1.77 ============ ============ ============ AVERAGE SHARES OUTSTANDING Primary..................................................... 40,055,338 35,311,037 31,910,000 Fully diluted............................................... 40,397,383 39,541,054 34,754,148
The accompanying notes are an integral part of these financial statements. 37 40 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
NET UNREALIZED GAIN (LOSS) ON ADDITIONAL AVAILABLE PREFERRED COMMON PAID-IN FOR SALE RETAINED STOCK STOCK CAPITAL SECURITIES EARNINGS TOTAL --------- -------- ---------- ------------ -------- -------- (DOLLARS IN THOUSANDS) BALANCE, JANUARY 1, 1992........................ $ 21,650 $ 92,636 $ 59,593 $ -- $120,430 $294,309 Effect of merger with: Grenada Sunburst System Corporation......... -- 65,711 (33,711) -- 99,661 131,661 Net earnings.................................. -- -- -- -- 63,250 63,250 Cash dividends Common Stock, $.60 per share................ -- -- -- -- (9,965) (9,965) Series B Preferred Stock, $8.00 per share... -- -- -- -- (352) (352) Series C Preferred Stock, $2.59 per share... -- -- -- -- (1,790) (1,790) Series D Preferred Stock, $ .97 per share... -- -- -- -- (247) (247) Series E Preferred Stock, $1.72 per share... -- -- -- -- (3,777) (3,777) Pooled institutions prior to pooling........ -- -- -- -- (6,463) (6,463) Common shares issued under employee benefit plans and dividend reinvestment plan, net of shares repurchased.......................... -- 1,309 4,738 -- (2,522) 3,525 Sale of 2,200,000 shares of Series E Preferred Stock, net of issuance costs................ 55,000 -- (2,650) -- -- 52,350 Issuance of 253,655 shares of Series D Preferred Stock for an acquisition (Note 2).......................................... 5,200 -- -- -- -- 5,200 Net change in unrealized depreciation on marketable equity securities................ -- -- -- -- 1,795 1,795 --------- -------- ---------- ------------ -------- -------- BALANCE, DECEMBER 31, 1992...................... 81,850 159,656 27,970 -- 260,020 529,496 Net earnings.................................. -- -- -- -- 92,552 92,552 Cash dividends Common Stock, $.72 per share................ -- -- -- -- (13,015) (13,015) Series B Preferred Stock, $8.00 per share... -- -- -- -- (352) (352) Series C Preferred Stock, $2.59 per share... -- -- -- -- (1,790) (1,790) Series D Preferred Stock, $1.95 per share... -- -- -- -- (494) (494) Series E Preferred Stock, $2.00 per share... -- -- -- -- (5,832) (5,832) Pooled institutions prior to pooling........ -- -- -- -- (7,957) (7,957) Common shares issued under employee benefit plans and dividend reinvestment plan, net of shares repurchased.......................... -- 1,260 5,852 -- (1,892) 5,220 Issuance of 2,638,652 shares of Common Stock for acquisitions (Note 2)................... -- 13,193 8,302 -- 18,296 39,791 Issuance of 908,522 shares of Series E Preferred Stock for acquisitions (Note 2)... 22,713 -- 7,274 -- -- 29,987 Issuance of 625,000 shares of Common Stock related to the conversion/acquisition of First Federal Savings Bank of Maryville, (Note 2).................................... -- 3,125 10,561 -- -- 13,686 Net change in unrealized depreciation on marketable equity securities................ -- -- -- -- 656 656 Other......................................... (15) 4 10 -- 55 54 --------- -------- ---------- ------------ -------- -------- BALANCE, DECEMBER 31, 1993...................... 104,548 177,238 59,969 -- 340,247 682,002 Net earnings.................................. -- -- -- -- 58,608 58,608 Cash dividends Common Stock, $.88 per share................ -- -- -- -- (20,144) (20,144) Series B Preferred Stock, $8.00 per share... -- -- -- -- (352) (352) Series C Preferred Stock, $2.16 per share... -- -- -- -- (1,491) (1,491) Series D Preferred Stock, $1.95 per share... -- -- -- -- (494) (494) Series E Preferred Stock, $2.00 per share... -- -- -- -- (6,216) (6,216) Pooled institutions prior to pooling........ -- -- -- -- (9,212) (9,212) Common shares issued under employee benefit plans and dividend reinvestment plan, net of shares repurchased.......................... -- 1,973 9,623 -- (2,063) 9,533 Issuance of 4,337,167 shares of Common Stock for acquisitions (Note 2)................... -- 21,686 (388) -- 42,952 64,250 Redemption of Series C Preferred Stock........ (17,250) -- -- -- -- (17,250) Cumulative effect of adoption of SFAS No. 115 on January 1, 1994.......................... -- -- -- 11,978 -- 11,978 Change in unrealized gain (loss) on available for sale securities, net of taxes........... -- -- -- (40,505) -- (40,505) --------- -------- ---------- ------------ -------- -------- BALANCE, DECEMBER 31, 1994...................... $ 87,298 $200,897 $ 69,204 $(28,527) $401,835 $730,707 ======== ======== ========= =========== ======== ========
The accompanying notes are an integral part of these financial statements. 38 41 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, ------------------------------------- 1994 1993 1992 --------- ----------- ----------- (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Net earnings..................................................... $ 58,608 $ 92,552 $ 63,250 Reconciliation of net earnings to net cash provided (used) by operating activities: Cumulative effect of accounting changes, net of taxes.......... -- (5,782) -- Provision for losses on loans and other real estate............ 4,466 19,219 30,998 Depreciation and amortization.................................. 20,307 17,719 14,450 Amortization and write-off of intangibles...................... 8,785 11,634 17,320 Provisions for abandoned property.............................. -- -- 5,200 Provisions for litigation settlements.......................... -- 500 9,450 Provisions for conversion of data processing systems........... -- 4,424 -- Provisions for restructuring charges........................... 24,264 -- -- Provisions for other merger-related expenses................... 14,012 -- -- Net amortization of investment securities...................... 3,689 5,756 1,311 Net realized losses (gains) on sale of investment securities... 17,498 (4,495) (14,019) Write-down of securities available for sale.................... 2,800 -- -- Deferred income tax expense (benefit).......................... 5,233 65 (10,205) (Increase) decrease in assets Trading account securities and loans held for resale......... 108,965 (23,854) (114,306) Accrued interest receivable and other assets................. (25,552) 44,087 14,126 Decrease in accrued interest, expenses, taxes, and other liabilities.................................................. (23,598) (45,406) (22,211) Other, net..................................................... 896 (5,758) 3,031 --------- ----------- ----------- Net cash provided (used) by operating activities............. 220,373 110,661 (1,605) --------- ----------- ----------- INVESTING ACTIVITIES Net decrease in short-term investments........................... 42,943 94,517 73,626 Proceeds from sales of securities available for sale............. 869,723 450,102 322,349 Proceeds from maturities and calls of securities available for sale........................................................... 914,226 353,504 28,446 Purchases of securities available for sale....................... (866,666) (675,424) (158,585) Proceeds from sales of securities held to maturity............... 225 28,742 118,352 Proceeds from maturities and calls of securities held to maturity....................................................... 218,352 1,301,785 739,943 Purchases of securities held to maturity......................... (599,730) (1,418,241) (1,765,715) Net decrease (increase) in loans................................. (767,524) (195,004) 103,195 Net cash received from purchases of financial institutions....... 72,084 108,043 568,758 Purchases of premises and equipment, net......................... (23,903) (26,768) (20,433) --------- ----------- ----------- Net cash (used) provided by investing activities............. (140,270) 21,256 9,936 --------- ----------- ----------- FINANCING ACTIVITIES Net decrease in deposits......................................... (111,453) (278,221) (160,302) Net (decrease) increase in short-term borrowings................. 137,596 (58,727) 99,266 Proceeds from FHLB advances and long-term debt, net.............. 76,059 241,061 51,581 Repayment and defeasance of FHLB advances and long-term debt..... (63,917) (43,591) (5,179) Redemption of preferred stock.................................... (17,250) -- -- Proceeds from issuance of preferred stock, net................... -- -- 52,350 Proceeds from issuance of common stock, net...................... 12,696 19,720 7,808 Purchase and retirement of common stock, net..................... (3,163) (1,786) (4,311) Cash dividends paid.............................................. (38,208) (29,137) (21,778) --------- ----------- ----------- Net cash (used) provided by financing activities............. (7,640) (150,681) 19,435 --------- ----------- ----------- Net increase (decrease) in cash and cash equivalents............... 72,463 (18,764) 27,766 Cash and cash equivalents at the beginning of the period........... 441,469 460,233 432,467 --------- ----------- ----------- Cash and cash equivalents at the end of the period................. $ 513,932 $ 441,469 $ 460,233 ========== ============ ============ SUPPLEMENTAL DISCLOSURES Cash paid for Interest....................................................... $ 269,941 $ 231,591 $ 277,492 Taxes.......................................................... 56,875 38,590 30,345 Loans transferred to other real estate through foreclosure....... 5,503 9,484 10,095 Unrealized loss on securities available for sale................. (46,913) -- --
The accompanying notes are an integral part of these financial statements. 39 42 UNION PLANTERS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting and reporting policies of Union Planters Corporation (the Corporation) and its subsidiaries conform with generally accepted accounting principles and general practices within the financial services industry. The following is a summary of the more significant accounting policies of the Corporation. BASIS OF CONSOLIDATION. The consolidated financial statements include the accounts of the Corporation and its subsidiaries after elimination of significant intercompany accounts and transactions. BASIS OF PRESENTATION. Prior period consolidated financial statements are restated to include the accounts of material acquisitions accounted for using the pooling of interests method of accounting. Business combinations accounted for as purchases are included in the consolidated financial statements from the respective dates of acquisition. Assets and liabilities of financial institutions accounted for as purchases are adjusted to their fair values as of the dates of acquisition. Certain 1992 and 1993 amounts have been reclassified to conform with 1994 financial reporting presentation. STATEMENT OF CASH FLOWS. Cash and cash equivalents include cash and due from banks and federal funds sold. Federal funds sold in the amounts of $25,210,000, $78,109,000, and $92,354,000 at December 31, 1994, 1993, and 1992, respectively, are included in cash and cash equivalents. TRADING ACCOUNT SECURITIES. Trading account securities are stated at fair value and consist primarily of securities backed by the government-guaranteed portion of Small Business Administration (SBA) loans. Gains and losses on sales and fair value adjustments related to these securities are included in profits and commissions from trading activities. INVESTMENT SECURITIES. The Corporation adopted Statement of Financial Accounting Standard No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (SFAS No. 115) on January 1, 1994. Management reviewed the securities portfolio and classified securities as either held to maturity or available for sale. In determining such classifications, securities expected to be held to maturity were classified in the amortized historical cost portfolio. Available for sale securities are carried at fair value with unrealized gains and losses included in shareholders' equity on an after-tax basis. As a result of adoption, the Corporation initially reclassified $1.6 billion in securities to the available for sale category and recorded a $12.0 million increase in shareholders' equity incidental thereto. Prior to the adoption of SFAS No. 115, management determined the appropriate classification of securities at the time of purchase. If management had the intent and the Corporation had the ability at the time of purchase to hold the securities until maturity, they were classified as held for investment and carried at amortized historical cost. Securities purchased and intended to be held for indefinite periods of time and not intended to be held to maturity were classified as held for sale and carried at the lower of aggregate cost or market value. Investment transactions are recorded on a trade-date basis. Realized gains and losses resulting from the sale of securities and other than temporary impairments in value of securities are reported in noninterest income. Gains and losses on the sales of investment securities are computed by the specific identification method. LOANS HELD FOR RESALE. Loans held for resale include mortgage and other loans and are carried at the lower of cost or market. LOANS. Loans are stated at the principal amount outstanding. Interest income on loans is accrued using constant yield methods, except for unearned income which is recorded as income using a method which approximates the interest method. Loan origination fees and direct loan origination costs are deferred and recognized over the life of the related loans as adjustments to interest income. NONPERFORMING LOANS. Nonperforming loans consist of nonaccrual loans and renegotiated loans which have been restructured in accordance with the criteria set forth in SFAS No. 15 "Accounting by Debtors and Creditors for Troubled Debt Restructurings." Loans, other than installment and mortgage loans, are generally placed on nonaccrual status and interest is not recorded if, in management's 40 43 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) opinion, payment in full of principal or interest is not expected or when payment of principal or interest is more than 90 days past due, unless it is both well-secured and in the process of collection. Upon the occurrence of an adverse change in the account status (e.g., loan is past due, filing of bankruptcy or wage earner, repossession of collateral, foreclosure, or death of the borrower), installment and mortgage loans (including accrued interest) are written down to the net realizable value of the underlying collateral. Such loans are reviewed periodically for further write-downs until fully liquidated. Income recognized on revolving credit loans is discontinued upon the occurrence of an adverse change and the loans are fully charged off if no payment is received for 180 days. In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for Impairment of a Loan" (which takes effect for fiscal years beginning after December 31, 1994) as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -- Income Recognition and Disclosures" issued in October 1994. SFAS No. 114 prescribes a valuation methodology for impaired loans as defined by the standard. Generally, a loan is considered impaired if management believes that it is probable that all amounts due will not be collected according to the contractual terms stipulated in the loan agreement. An impaired loan must be valued using the present value of expected future cash flows discounted at the loan's effective interest rate, the loans observable market price, or fair value of the loan's underlying collateral. The Corporation expects to adopt SFAS No. 114 prospectively in 1995. It is anticipated that the adoption of SFAS No. 114 will not have a material effect on the Corporation's financial condition, results of operations, or liquidity. ALLOWANCE FOR LOSSES ON LOANS. The allowance for losses on loans represents management's estimate of potential losses inherent in the existing loan portfolio. The allowance for losses on loans is increased by the provision for losses on loans charged to expense and reduced by loans charged off, net of recoveries. The provision for losses on loans is determined based on management's assessment of several factors: current and anticipated economic conditions and the related impact on specific borrowers and industry groups, historical loan loss experience, the level of classified and nonperforming loans, reviews and evaluations of specific loans, changes in the nature and volume of the loan portfolio, and the results of regulatory examinations. In evaluating the adequacy of the allowance, management makes certain estimates and assumptions which are susceptible to change in the near term. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions. PREMISES AND EQUIPMENT. Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation expense is computed using the straight-line method and is charged to operating expense over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the shorter of the initial term of the respective lease or the estimated useful life of the improvement. Costs of major additions and improvements are capitalized. Interest expense incurred on funds expended on major construction projects is capitalized as a cost of such projects during the construction period. Expenditures for maintenance and repairs are charged to operations as incurred. GOODWILL AND OTHER INTANGIBLES. The unamortized costs in excess of the fair value of acquired net tangible assets are included in goodwill and other intangibles. Identifiable intangibles, except for premiums on purchased deposits which are amortized on a straight-line method over ten years, are amortized over the estimated periods benefitted. The remaining costs (goodwill) are generally amortized on a straight-line basis over 15 years. For acquisitions where the fair value of net assets acquired exceeds the purchase price, the resulting negative goodwill is allocated proportionally to noncurrent, nonmonetary assets. Management periodically evaluates whether events or circumstances have occurred that would result in impairment in the value or life of goodwill or other intangibles. Management considers an intangible to be potentially impaired if internally generated management reports for respective business units show a net loss before amortization of intangibles. The recoverability of the asset is then evaluated using undiscounted historical and future earnings projections. Core deposit intangibles are reviewed periodically to determine performance versus expected "run-off" and adjustments in the amortization of these core deposit intangibles are made accordingly. MORTGAGE SERVICING RIGHTS. Mortgage servicing rights represent the cost of mortgage servicing purchased from others. These costs are amortized in proportion to, and over the period of, estimated 41 44 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) net servicing income based on the historical and projected prepayments of the underlying loans. At December 31, 1994 and 1993, mortgage servicing rights were $4,947,000 and $4,298,000, respectively, and is included in other assets. OTHER REAL ESTATE. Property acquired through foreclosure is stated at the lower of the recorded amount of the loan or the estimated net realizable value reduced by estimated selling costs. When a reduction of the recorded amount to the net realizable value is required at the time of foreclosure, the difference is charged to the allowance for losses on loans. Any subsequent reduction is charged to other real estate expense and a valuation reserve is established for the potential declines in appraised values. Other real estate is recorded net of the valuation reserve. Revenues and expenses associated with operating or disposing of other real estate are recorded in the period in which they are incurred. At December 31, 1994 and 1993, other real estate totaled $5,434,000 and $8,054,000, respectively, and is included in other assets. EMPLOYEE BENEFIT PLANS. The Corporation sponsors two qualified employee benefit plans for substantially all employees of the Corporation and its subsidiaries. One is a 401(k) plan with matching employer contributions based on length of service. Employer contributions, provided through a Flexible Benefits Plan, may also be directed to the 401(k) plan at the election of the employee. The second is a noncontributory employee stock ownership plan, which is funded by discretionary employer contributions approved by the Board of Directors. All costs of the plans are expensed as incurred. Benefit plans of acquired companies are terminated at the date of acquisition. In accordance with SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and SFAS No. 112, "Employers' Accounting for Postemployment Benefits," postretirement and postemployment benefits are charged to expense during the years that the employee renders service. The Corporation elected to recognize the accumulated postretirement and postemployment benefit obligations upon adoption of SFAS Nos. 106 and 112 on January 1, 1993, which approximated $8.3 million ($5.1 million after tax) and $1.3 million ($807,000 after tax), respectively. INCOME TAXES. The Corporation files a consolidated federal income tax return with its subsidiaries, with the exception of credit life insurance subsidiaries which file separate returns. State income taxes are computed on either a separate company or consolidated basis depending upon state laws. The Corporation and its subsidiaries file a consolidated state return for all business in the state of Tennessee. Income tax expense is based on income reported for financial accounting purposes, and includes deferred taxes resulting from the recognition of certain transactions in different periods for tax reporting purposes in accordance with SFAS No. 109, "Accounting for Income Taxes" (SFAS No. 109). Effective January 1, 1993, the Corporation adopted the provisions of SFAS No. 109 and recorded a tax benefit for the cumulative effect of the accounting change of $11.7 million. Effective January 1, 1994, the Corporation adopted SFAS No. 115, the impact of which at December 31, 1994, was to increase the cumulative net deferred tax asset by $18.4 million. INTEREST-RATE SWAPS. The Corporation uses interest-rate swaps for purposes other than trading as part of its asset/liability management activities. The Corporation's activities are all end-user related. Interest-rate swaps are entered into in order to synthetically alter the repricing and maturity characteristics of certain on-balance-sheet assets and liabilities. The net differential to be paid or received on the interest-rate swap is recognized as a yield adjustment to the related asset or liability over the life of the swap agreement. If the instrument being synthetically altered is disposed of, the swap agreement is marked to market. Thereafter, the interest-rate swap is accounted for in the consolidated financial statements at its fair value with any unrealized gains and losses recognized in the period incurred. If the interest-rate swap agreement is terminated, the gain or loss is deferred and amortized over the remaining life of the related asset or liability. EARNINGS PER SHARE. Primary earnings per common share is adjusted for all preferred stock dividends. Primary earnings per common share is computed based on the weighted average common shares outstanding and common stock equivalents which would arise from the assumed exercise of outstanding stock options unless their effect would be antidilutive. Fully diluted earnings per common share is computed using the weighted average common shares and equivalents. Common stock equivalents are increased by the assumed conversion of convertible preferred stock into common stock as if converted 42 45 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) at the beginning of the period unless the effect would be antidilutive. Earnings for fully diluted earnings per common share are adjusted for preferred stock dividends on nonconvertible preferred stock. NOTE 2. MERGERS, ACQUISITIONS, AND REORGANIZATIONS CONSUMMATED ACQUISITIONS Poolings of Interests The Corporation consummated nine acquisitions in 1994 and four acquisitions in 1993 which were accounted for using the pooling of interests method of accounting. The tables below summarize the acquisitions accounted for as poolings of interests that were considered immaterial to the Corporation; therefore, prior year amounts with respect to these acquisitions have not been restated. 1994 ACQUISITIONS
COMMON TOTAL ASSETS AT TOTAL EQUITY AT DATE SHARES JANUARY 1, JANUARY 1, INSTITUTION ACQUIRED ISSUED 1994 1994 - ----------------------------------------------- -------- --------- ---------------- --------------- (DOLLARS IN MILLIONS) Mid-South Bancorp, Inc......................... 1/1/94 839,542 $184.7 $11.9 First National Bancorp of Shelbyville, Inc..... 3/1/94 974,886 170.0 12.2 Clin-Ark Bancshares, Inc....................... 4/1/94 217,768 50.3 4.2 Liberty Bancshares, Inc........................ 7/1/94 1,223,353 180.1 20.0 Earle Bankshares, Inc.......................... 8/1/94 320,112 42.5 6.6 Commercial Bancorp, Inc........................ 11/1/94 189,391 28.6 3.7 Mid South Bancshares, Inc...................... 12/1/94 572,115 126.0 5.6 --------- ------- ------ Total................................ 4,337,167 $782.2 $64.2 ======== =========== ===========
1993 ACQUISITIONS
COMMON TOTAL ASSETS AT TOTAL EQUITY AT DATE SHARES JANUARY 1, JANUARY 1, INSTITUTION ACQUIRED ISSUED 1993 1993 - ----------------------------------------------- -------- --------- ---------------- --------------- (DOLLARS IN MILLIONS) Garrett Bancshares, Inc........................ 5/31/93 613,088 $173.7 $ 4.8 Hogue Holding Company, Inc..................... 9/1/93 219,274 38.5 4.4 Central State Bancorp, Inc..................... 9/1/93 630,355 107.8 10.7 First Financial Services, Inc.................. 10/1/93 447,906 86.0 8.4 --------- ------- ------ Total................................ 1,910,623 $406.0 $28.3 ======== =========== ===========
Eliminations have been made for material intercompany transactions with the above pooled companies. The 1994 acquisitions contributed approximately $11.1 million, $2.0 million, and $1.8 million to 1994 net interest income, noninterest income, and net earnings, respectively, of the Corporation through their respective dates of acquisition. The 1993 acquisitions listed in the table above contributed approximately $10.1 million, $1.5 million, and $2.1 million to 1993 net interest income, noninterest income, and net earnings, respectively, of the Corporation through their respective dates of acquisition. The acquisitions of Grenada Sunburst System Corporation (GSSC) and BNF BANCORP, Inc. (BNF) were accounted for using the pooling of interests method of accounting and were considered material to the Corporation. Financial information for all periods has been restated for these acquisitions. Eliminations have been made for material intercompany transactions. The tables below summarize these two acquisitions.
AT DATE OF ACQUISITION COMMON ------------------- DATE SHARES TOTAL TOTAL INSTITUTION ACQUIRED ISSUED ASSETS EQUITY - ------------------------------------------------ -------- ---------- -------- ------ (DOLLARS IN MILLIONS) GSSC............................................ 12/31/94 13,776,357 $2,518.0 $173.7 BNF............................................. 9/1/94 2,000,329 276.4 29.6 ---------- -------- ------ Total.................................... 15,776,686 $2,794.4 $203.3 ========= ======= ======
43 46 NOTE 2. MERGERS, ACQUISITIONS, AND REORGANIZATIONS (CONTINUED) The following table summarizes the impact of the GSSC acquisition on the Corporation's net interest income, noninterest income, and earnings before extraordinary item and accounting changes. The impact of the BNF acquisition for 1993 and 1992 has been reported in the Corporation's previously restated 1993 consolidated financial statements. The BNF acquisition for the period January 1, 1994 to acquisition date contributed $7.0 million and $779,000, respectively, to net interest income and noninterest income and decreased net earnings approximately $410,000.
EARNINGS BEFORE EXTRAORDINARY ITEM AND NET INTEREST NONINTEREST ACCOUNTING INCOME (1) INCOME (1) CHANGES ------------ ----------- --------------- (DOLLARS IN THOUSANDS) 1994 Union Planters......................................... $274,558 $ 63,513 $44,859 GSSC................................................... 113,720 30,049 13,749 ------------ ----------- --------------- Union Planters pooled............................... $388,278 $ 93,562 $58,608 ========= ========= ============ 1993 Union Planters......................................... $242,669 $ 89,090 $65,364 GSSC................................................... 101,041 30,835 24,612 ------------ ----------- --------------- Union Planters pooled............................... $343,710 $ 119,925 $89,976 ========= ========= ============ 1992 Union Planters......................................... $199,392 $ 87,274 $45,023 GSSC................................................... 81,756 25,335 18,227 ------------ ----------- --------------- Union Planters pooled............................... $281,148 $ 112,609 $63,250 ========= ========= ============
- --------------- (1) To be consistent with industry practice, net interest income for the Corporation has been restated to reflect the reclassification of certain fees arising from credit card loans to noninterest income. The amounts reclassified for the years ended December 31, 1993 and 1992 were $3.1 million and $2.8 million, respectively, which compared to $4.1 million in 1994. 44 47 NOTE 2. MERGERS, ACQUISITIONS, AND REORGANIZATIONS (CONTINUED) Purchase Acquisitions The Corporation acquired four institutions in 1992, eight institutions in 1993, and four institutions in 1994 in transactions which were accounted for as purchases. The table below summarizes these acquisitions:
TOTAL ASSETS DATE PURCHASE RESULTING AT DATE OF INSTITUTION ACQUIRED CONSIDERATION PRICE INTANGIBLES ACQUISITION - -------------------------------- -------- --------------------- -------- ----------- ------------ (DOLLARS IN MILLIONS) Metropolitan Federal Savings and Loan Association (Metropolitan)(a) and (j)..... 3/27/92 Cash $ 16.5 $16.5 $ 603 Fidelity Bancshares, Inc. (Fidelity)(j)................. 3/30/92 Cash 77.4 -- 821 Southeastern Bancshares, Inc. (SBI)(b)...................... 7/1/92 253,655 Shares of 5.2 1.1 77 Series D Preferred Stock Bank of Commerce................ 11/1/92 Cash 9.9 2.1 89 Bank of East Tennessee (BOET)(c)..................... 1/1/93 648,786 Shares of 25.3 7.0 231 Series E Preferred Stock Security Trust Federal Savings and Loan Association and SaveTrust Federal Savings Bank.......................... 1/1/93 Cash 22.0 3.0 261 First Federal Savings Bank(d)... 2/26/93 625,000 Shares of NM(d) -- 187 Common Stock (Conversion/ Acquisition) Eastover Bank for Savings (Eastover)(e)................. 3/1/93 637,867 Shares of 10.9 1.7 416 Common Stock and Cash First State Bancshares, Inc. (FSB)(f)...................... 3/12/93 Cash and Common Stock 3.9 .4 34 (90,162 Shares) First Cumberland Bank(j)........ 3/15/93 Cash .2 -- 20 Farmers Union Bank.............. 4/1/93 Cash 9.5 4.2 78 Erin Bank & Trust Company....... 6/1/93 259,736 Shares of 8.3 2.1 43 Series E Preferred Stock Anderson County Bank............ 3/1/94 Cash 2.5 .7 22 Security Federal Savings and Loan Association(g)........... 4/19/94 Cash .4 .4 15 Tennessee Bancorp, Inc. (TBI)(h)...................... 5/1/94 Cash 13.5 5.9 99 Cherokee Valley Federal Savings Association(i)................ 9/23/94 Cash 4.4 4.4 59 ----------- ------------ Total................. $49.5 $3,055 ======== =========
- --------------- (a) The Corporation, through UPNB, assumed approximately $585 million in insured deposit liabilities of the former Metropolitan Federal Savings and Loan Association. The purchase and assumption transaction was facilitated through the Resolution Trust Corporation (RTC) which declared UPNB the successful bidder. UPNB also acquired approximately $82 million in assets and received cash from the RTC totaling approximately $487 million. (b) SBI is the parent company of DeKalb County Bank and Trust Company. (c) The Corporation previously held 17.93% of the common stock of BOET ($3.4 million). On January 1, 1993, the Corporation purchased an additional 43.93% of the common stock of BOET in exchange for the Corporation's Series E Preferred Stock ($11.1 million). Effective May 3, 1993, the Corporation acquired the remaining common stock of BOET in exchange for the Corporation's Series E Preferred Stock ($10.8 million). (d) Maryville was a mutual savings bank which, pursuant to a conversion/acquisition, converted to a federal stock charter. All of the stock of Maryville was acquired by the Corporation in exchange for a capital contribution totaling approximately 45 48 NOTE 2. MERGERS, ACQUISITIONS, AND REORGANIZATIONS (CONTINUED) $14.1 million derived in part from the proceeds of a public offering of the Corporation's Common Stock made in connection with the conversion/acquisition. (e) Eastover was acquired by GSSC through its wholly-owned Mississippi banking subsidiary, Sunburst Bank, Mississippi. (f) FSB is the parent company of First State Bank of Fayette County. (g) Two subsidiaries of the Corporation assumed approximately $14 million of deposits and acquired assets (primarily loans) of the former Security Federal Savings and Loan Association from the RTC and simultaneously sold certain loans to a third party. (h) TBI was the parent company of Tennessee National Bank in Columbia, Tennessee, whose assets and liabilities at date of acquisition were transferred to UPNB and later became part of the assets and liabilities of Union Planters Bank of Middle Tennessee, N.A. (i) A subsidiary of the Corporation assumed approximately $54 million of deposits and acquired assets (primarily loans) of the former Cherokee Valley Federal Savings Association from the RTC. Subsequently, certain asset purchase options were exercised resulting in the assumption of three branches and approximately $26.5 million in loans. (j) Combined with UPNB. NM -- Not meaningful. Intangibles are being amortized primarily using the straight-line method over periods ranging from 7 to 15 years. The recording of the acquisition of Maryville resulted in negative goodwill of approximately $9.4 million, $8.1 million of which was deducted from noncurrent, nonmonetary assets (premises and equipment, fair value adjustment of loans, prepaid software, and mortgage servicing rights). The remaining negative goodwill of $1.3 million was recorded in other liabilities and is being accreted over seven years. The following unaudited pro forma information summarizes the pro forma impact of the acquisitions completed during 1994 and 1993 which were accounted for as purchases assuming consummation of all such transactions on January 1, 1993. The pro forma information does not include the historical results of the acquisitions purchased from the RTC, since they were failed financial institutions and their historical results would not be representative of future operating results. The unaudited pro forma results are not necessarily representative of the actual results that would have occurred or which may occur in the future.
YEARS ENDED DECEMBER 31, ------------------------- 1994 1993 --------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net interest income................................................ $ 389,245 $ 355,313 Provision for losses on loans...................................... (3,473) (19,547) Noninterest income................................................. 93,629 122,272 Noninterest expense................................................ (400,446) (330,644) --------- --------- Earnings before income taxes, extraordinary item, and accounting changes.......................................................... 78,955 127,394 Applicable income taxes............................................ 20,667 37,824 --------- --------- Earnings before extraordinary item and accounting changes.......... 58,288 89,570 Extraordinary item and accounting changes, net of taxes............ -- 2,618 --------- --------- Net earnings....................................................... $ 58,288 $ 92,188 ========= ========= Earnings per common share Earnings before extraordinary item and accounting changes Primary....................................................... $ 1.24 $ 2.24 Fully diluted................................................. 1.24 2.17 Net earnings Primary....................................................... 1.24 2.32 Fully diluted................................................. 1.24 2.24
46 49 NOTE 2. MERGERS, ACQUISITIONS, AND REORGANIZATIONS (CONTINUED) The following details the net cash received from acquisitions of financial institutions which were accounted for using the purchase method of accounting and from acquisitions which were accounted for as poolings of interests and considered immaterial to the Corporation:
YEARS ENDED DECEMBER 31, ----------------------------------------- 1994 1993 1992 --------- ----------- ----------- (DOLLARS IN THOUSANDS) Fair value of assets acquired........................ $ 976,775 $ 1,663,791 $ 1,589,453 Liabilities assumed.................................. (891,761) (1,557,038) (1,480,485) Issuance of Common Stock............................. (64,250) (39,791) -- Issuance of Preferred Stock.......................... -- (30,127) (5,200) Less previous investment in entities acquired........ -- (3,387) (3,173) --------- ----------- ----------- Cash paid for purchases of financial institutions.... 20,764 33,448 100,595 Cash and cash equivalents acquired................... (92,848) (141,491) (669,353) --------- ----------- ----------- Net cash received from purchases of financial institutions.................................. $ (72,084) $ (108,043) $ (568,758) ========= ========== ==========
REORGANIZATION OF UNION PLANTERS NATIONAL BANK (UPNB) During 1994, the Corporation internally reorganized UPNB into five national bank subsidiaries. This reorganization and the resulting transfer of certain branches held by UPNB into four newly-organized banks had no material impact on the consolidated financial condition, results of operations or liquidity of the Corporation. PENDING ACQUISITIONS The Corporation has signed definitive agreements pursuant to which it would acquire the entities listed below and, subject to various approvals and satisfaction of certain contractual conditions precedent, all are expected to be consummated in the third quarter of 1995.
ANTICIPATED APPROXIMATE METHOD OF TOTAL INSTITUTION CONSIDERATION ACCOUNTING ASSETS - --------------------------------------------- ----------------------- ------------ ----------- (DOLLARS IN MILLIONS) First Bancshares of Eastern Arkansas, Parent Approximately $9.3 Purchase $ 55 Company of First National Bank in West million Memphis, AR First Bancshares of N.E. Arkansas, Parent Approximately $9.3 Purchase 58 Company of First National Bank of million Osceola, AR Planters Bank & Trust Co. in Forrest City, AR Common Stock Pooling of 52 Approximately Interests 341,000 shares First State Bancorp, Inc., Parent Company of Series E Preferred Purchase 130 ---------- First Exchange Bank, Tiptonville, TN Stock Approximately 407,000 shares Total $ 295 ==========
NOTE 3. RESTRICTIONS ON CASH AND DUE FROM BANKS The Corporation's banking subsidiaries are required to maintain noninterest-bearing average reserve balances with the Federal Reserve Bank. Average balances required to be maintained for such purposes during 1994 and 1993 were $77 million and $63 million, respectively. 47 50 NOTE 4. INVESTMENT SECURITIES The amortized cost and fair values of investment securities are summarized as follows:
DECEMBER 31, 1994 ------------------------------------------- UNREALIZED AMORTIZED ----------------- FAIR COST GAINS LOSSES VALUE ---------- ------- ------- ---------- (DOLLARS IN THOUSANDS) AVAILABLE FOR SALE SECURITIES U.S. Government obligations U.S. Treasury...................................... $ 484,414 $ 745 $ 9,302 $ 475,857 U.S. Government agencies Collateralized mortgage obligations............. 325,084 33 11,221 313,896 Mortgage-backed................................. 816,683 1,061 22,669 795,075 Other........................................... 211,922 189 4,426 207,685 ---------- ------- ------- ---------- Total U.S. Government obligations............. 1,838,103 2,028 47,618 1,792,513 Other stocks and securities.......................... 137,794 1,018 2,341 136,471 ---------- ------- ------- ---------- Total available for sale securities........... $1,975,897 $ 3,046 $49,959 $1,928,984 ========= ======= ======= ========= HELD TO MATURITY SECURITIES U.S. Government obligations U.S. Treasury...................................... $ 451,897 $ 40 $13,250 $ 438,687 U.S. Government agencies........................... 62,449 15 3,881 58,583 ---------- ------- ------- ---------- Total U.S. Government obligations............. 514,346 55 17,131 497,270 Obligations of states and political subdivisions..... 518,583 9,097 15,212 512,468 Other................................................ 231 -- -- 231 ---------- ------- ------- ---------- Total held to maturity securities............. $1,033,160 $ 9,152 $32,343 $1,009,969 ========= ======= ======= =========
DECEMBER 31, 1993 ------------------------------------------ UNREALIZED AMORTIZED ---------------- FAIR COST GAINS LOSSES VALUE ---------- ------- ------ ---------- (DOLLARS IN THOUSANDS) HELD FOR SALE SECURITIES U.S. Government obligations U.S. Treasury....................................... $ 121,240 $ 913 $ 3 $ 122,150 U.S. Government agencies Collateralized mortgage obligations.............. 141,853 694 105 142,442 Mortgage-backed.................................. 369,378 4,579 355 373,602 Other............................................ 128,904 1,064 25 129,943 ---------- ------- ------ ---------- Total U.S. Government obligations.............. 761,375 7,250 488 768,137 Other stocks and securities........................... 47,179 88 44 47,223 ---------- ------- ------ ---------- Total held for sale securities................. $ 808,554 $ 7,338 $ 532 $ 815,360 ========= ======= ====== ========= HELD FOR INVESTMENT SECURITIES U.S. Government obligations U.S. Treasury....................................... $ 798,242 $ 9,458 $ 327 $ 807,373 U.S. Government agencies Collateralized mortgage obligations.............. 446,274 1,700 1,277 446,697 Mortgage-backed.................................. 421,770 7,030 273 428,527 Other............................................ 195,290 2,253 450 197,093 ---------- ------- ------ ---------- Total U.S. Government obligations.............. 1,861,576 20,441 2,327 1,879,690 Obligations of states and political subdivisions...... 519,919 36,867 948 555,838 Other securities Federal Reserve Bank/Federal Home Loan Bank stock............................................ 33,435 -- -- 33,435 Collateralized mortgage obligations................. 39,036 177 114 39,099 Other............................................... 33,124 1,624 2 34,746 ---------- ------- ------ ---------- Total other securities......................... 105,595 1,801 116 107,280 ---------- ------- ------ ---------- Total held for investment securities........... $2,487,090 $59,109 $3,391 $2,542,808 ========= ======= ====== =========
48 51 NOTE 4. INVESTMENT SECURITIES (CONTINUED) For the year ended December 31, 1994, the Corporation had gross realized gains of $1,158,000 and gross realized losses of $18,768,000, respectively, on available for sale securities. Included in 1994 securities losses is a $1.7 million loss due to an other-than-temporary impairment in the fair value of certain available for sale securities which were sold in January, 1995. Also included in securities losses in 1994 is a $1.1 million loss which represents the recognition of the unrealized loss on an interest-rate swap related to the securities sold. In addition, for the years ended December 31, 1993 and 1992, the Corporation had gross realized gains of $6,064,000 and $15,932,000, respectively, and gross realized losses of $1,569,000 and $1,913,000, respectively, on all investment securities. Investment securities having a carrying value of approximately $1.017 billion and $953 million at December 31, 1994 and 1993, respectively, were pledged to secure public and trust funds on deposit and securities sold under agreements to repurchase. On January 1, 1994, and in connection with the adoption of SFAS No. 115, $1.6 billion of securities were transferred to the available for sale category of securities. In addition, approximately $446 million (fair value approximately $436 million) of securities were transferred to available for sale securities related to financial institutions acquired in 1994 in order to maintain the Corporation's existing interest-rate-risk position and credit-risk policies. During 1993, the Corporation transferred approximately $333 million of securities in the held for investment category to the held for sale category. The transfers were made because of regulatory concerns regarding certain securities, the restructure of the portfolios of certain financial institutions acquired, and in anticipation of the adoption of SFAS No. 115. Approximately $225,000 of held to maturity securities sold in 1994 related to the sale of deposits and certain assets of a wholly-owned banking subsidiary and that subsidiary's subsequent liquidation. The maturities and weighted average yields of investment securities as of December 31, 1994 are as follows:
MATURING --------------------------------------------------------------------------- AFTER ONE BUT WITHIN ONE WITHIN FIVE AFTER FIVE BUT YEAR YEARS WITHIN TEN YEARS AFTER TEN YEARS ---------------- ---------------- ---------------- ------------------ AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD -------- ----- -------- ----- -------- ----- ---------- ----- (TAXABLE-EQUIVALENT BASIS/DOLLARS IN THOUSANDS) AVAILABLE FOR SALE SECURITIES U.S. Government obligations U.S. Treasury...................... $159,168 4.96% $320,275 5.75 % $ 150 7.75 % $ 4,821 9.00 % U.S. Government agencies Collateralized mortgage obligations.................... 2,890 5.27 35,310 6.01 35,556 6.16 251,328 6.43 Mortgage-backed.................. 4,409 6.36 54,226 6.98 36,166 7.78 721,882 5.68 Other............................ 56,264 5.66 89,739 5.24 5,243 6.94 60,676 6.65 -------- -------- -------- ---------- Total U.S. Government obligations.................... 222,731 5.17 499,550 5.81 77,115 6.98 1,038,707 5.93 Obligations of states and political subdivisions....................... 100 6.73 356 7.29 -- -- 103 9.35 Other stocks and securities Federal Reserve Bank and Federal Home Loan Bank stock............. -- -- -- -- -- -- 43,387 6.16 Bonds, notes, and debentures....... 728 7.30 7,443 8.91 100 7.50 -- -- Collateralized mortgage obligations...................... 24 10.24 5,249 6.34 30,609 6.37 16,321 6.57 Other.............................. 28,201 5.99 35 5.50 -- -- 5,138 8.31 -------- -------- -------- ---------- Total other stocks and securities..................... 28,953 6.02 12,727 7.83 30,709 6.37 64,846 6.43 -------- -------- -------- ---------- Total available for sale securities..................... $251,784 5.27% $512,633 5.86 % $107,824 6.80 % $1,103,656 5.96 % ========= ========= ========= ========== HELD TO MATURITY SECURITIES U.S. Government obligations U.S. Treasury...................... $ 1,013 4.26% $450,884 6.13 % $ -- -- % $ -- -- % U.S. Government agencies........... 1,550 5.39 53,371 4.73 7,499 6.34 29 7.14 -------- -------- -------- ---------- Total U.S. Government obligations.................... 2,563 4.94 504,255 5.98 7,499 6.34 29 7.14 Obligations of states and political subdivisions....................... 39,494 9.94 108,831 9.32 80,016 9.15 290,242 9.18 Other................................ 15 5.50 35 5.50 -- -- 181 8.63 -------- -------- -------- ---------- Total held to maturity securities..................... $ 42,072 9.63% $613,121 6.57 % $ 87,515 8.91 % $ 290,452 9.18 % ========= ========= ========= ==========
The weighted average yields are calculated by dividing the sum of the individual security yield weights (effective yield times book value) by the total book value of the securities. The taxable- 49 52 NOTE 4. INVESTMENT SECURITIES (CONTINUED) equivalent yield gives effect to the disallowance of interest expense for federal income tax purposes related to certain tax-exempt securities. The contractual maturities of mortgage-backed securities and collateralized mortgage obligations have not been adjusted for prepayments and generally represent obligations which are expected to have principal-weighted average lives of five years or less or are variable rate instruments. The amortized cost and fair value of debt securities at December 31, 1994 by contractual maturities are shown below. Expected maturities of mortgage-backed and related securities will differ from contractual maturities because some borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
AVAILABLE FOR SALE HELD TO MATURITY --------------------------- --------------------------- AMORTIZED COST FAIR VALUE AMORTIZED COST FAIR VALUE -------------- ---------- -------------- ---------- (DOLLARS IN THOUSANDS) Maturing Within one year........................ $ 223,584 $ 222,226 $ 42,072 $ 42,462 After one but within five years........ 512,633 499,781 613,121 598,477 After five but within ten years........ 107,824 103,564 87,515 87,523 After ten years........................ 1,056,231 1,027,453 290,452 281,507 -------------- ---------- -------------- ---------- 1,900,272 1,853,024 1,033,160 1,009,969 Equity securities...................... 75,625 75,960 -- -- -------------- ---------- -------------- ---------- Total.......................... $1,975,897 $1,928,984 $1,033,160 $1,009,969 ============ ========= ============ =========
NOTE 5. LOANS Loans are summarized as follows:
DECEMBER 31, ------------------------- 1994 1993 ---------- ---------- (DOLLARS IN THOUSANDS) Commercial, financial, and agricultural............................. $1,364,729 $1,152,159 Real estate -- construction......................................... 225,591 160,633 Real estate -- mortgage Secured by 1-4 family residential................................. 2,035,290 1,495,878 Other mortgage.................................................... 990,779 875,112 Home equity......................................................... 140,305 117,475 Consumer Credit cards and other plans...................................... 263,927 105,333 Other consumer.................................................... 919,618 746,752 Direct lease financing.............................................. 40,342 25,914 ---------- ---------- Total loans.................................................... $5,980,581 $4,679,256 ========= =========
Nonperforming loans are summarized as follows:
DECEMBER 31, ------------------- 1994 1993 ------- ------- (DOLLARS IN THOUSANDS) Nonaccrual loans......................................................... $17,476 $18,846 Restructured loans....................................................... 1,564 8,778 ------- ------- Total............................................................... $19,040 $27,624 ======= =======
Total interest earned on nonaccrual and restructured loans in 1994 and 1993 was $511,000 and $1.4 million, respectively. Interest income that would have been earned under the original terms of these loans in 1994 and 1993 was $1.5 million and $2.2 million, respectively. There were no significant outstanding commitments to lend additional funds related to the above restructured loans at December 31, 1994. Certain of the Corporation's bank subsidiaries, principally UPNB, have granted loans to the Corporation's directors, executive officers, and their affiliates. These loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable 50 53 NOTE 5. LOANS (CONTINUED) transactions with unrelated persons and do not involve more than normal risks of collectability. The aggregate dollar amount of these loans was $26.9 million and $33.1 million at December 31, 1994 and 1993, respectively. During 1994, $106.9 million of new loans and advances under credit lines were made to directors, executive officers, and their affiliates; repayments totaled approximately $103.8 million. Additionally, the balance at December 31, 1993 was reduced by $9.3 million for loans related to individuals who are no longer directors of the Corporation. NOTE 6. ALLOWANCE FOR LOSSES ON LOANS The changes in the allowance for losses on loans are summarized as follows:
1994 1993 1992 -------- -------- -------- (DOLLARS IN THOUSANDS) Balance, January 1......................................... $114,353 $ 89,827 $ 67,989 Increases due to acquisitions............................ 9,252 21,569 15,678 Provision for losses on loans............................ 3,636 16,558 27,182 Recoveries of loans previously charged off............... 13,287 10,071 15,539 Loans charged off........................................ (18,439) (23,672) (36,561) -------- -------- -------- Balance, December 31....................................... $122,089 $114,353 $ 89,827 ======== ======== ========
NOTE 7. PREMISES AND EQUIPMENT, LEASED ASSETS, AND LEASE COMMITMENTS Premises and equipment are summarized as follows:
DECEMBER 31, --------------------- 1994 1993 -------- -------- (DOLLARS IN THOUSANDS) Land................................................................... $ 42,143 $ 36,795 Buildings and improvements............................................. 154,070 130,911 Leasehold improvements................................................. 10,242 7,266 Equipment.............................................................. 129,646 111,265 Construction in progress............................................... 3,316 16,660 -------- -------- 339,417 302,897 Less accumulated depreciation and amortization......................... 135,281 113,817 -------- -------- Total premises and equipment......................................... $204,136 $189,080 ======== ========
At December 31, 1994, the above amounts included properties, carried at the lower of cost or fair value, having a net book value of $6.8 million which were held for sale, principally branch locations identified for closure or divestiture in connection with the Corporation's restructuring plan (see Note 13). Rental expense, net of sublease rental income, under all operating leases totaled $7.9 million in 1994, $9.0 million in 1993, and $6.7 million in 1992. At December 31, 1994, minimum future rental commitments under noncancellable operating leases were as follows:
OPERATING LEASES ---------------------- (DOLLARS IN THOUSANDS) 1995..................................................................... $ 6,379 1996..................................................................... 4,953 1997..................................................................... 3,639 1998..................................................................... 2,883 1999..................................................................... 2,684 Later years.............................................................. 10,874 ---------- Total minimum lease payments........................................... $ 31,412 =================
NOTE 8. SHORT-TERM BORROWINGS Short-term borrowings include federal funds purchased and securities sold under agreements to repurchase, commercial paper, and other short-term borrowings. Federal funds purchased arise from 51 54 NOTE 8. SHORT-TERM BORROWINGS (CONTINUED) the Corporation's market activity with its correspondent banks and generally mature in one business day. Securities sold under agreements to repurchase are secured by U.S. government and agency securities. Short-term borrowings are summarized as follows:
DECEMBER 31, ---------------------------------- 1994 1993 1992 -------- -------- -------- (DOLLARS IN THOUSANDS) Year-end balance Federal funds purchased and securities sold under agreements to repurchase.............................. $411,789 $264,573 $313,466 Commercial paper......................................... 2,951 10,941 8,325 Other short-term borrowings.............................. 431 23 185 -------- -------- -------- Total short-term borrowings........................... $415,171 $275,537 $321,976 ======== ======== ======== Federal funds purchased and securities sold under agreements to repurchase Daily average balance.................................... $466,905 $254,499 $244,626 Weighted average interest rate........................... 4.25% 2.72% 3.16% Maximum outstanding at any month end..................... $703,996 $338,176 $341,186 Weighted average interest rate at December 31............ 5.45% 2.84% 2.95%
NOTE 9. FEDERAL HOME LOAN BANK ADVANCES AND LONG-TERM DEBT FEDERAL HOME LOAN BANK (FHLB) ADVANCES The Corporation's banking and thrift subsidiaries had outstanding advances from the FHLB of $224.1 million and $192.8 million at December 31, 1994 and 1993, respectively, under Blanket Agreements for Advances and Security Agreements (the "Agreements"). The Agreements entitle the Corporation's subsidiaries to borrow funds from the FHLB to fund mortgage loan programs and to satisfy certain other funding needs. Of the amounts borrowed at December 31, 1994, $139 million were at variable rates and $85 million were at fixed rates with interest rates ranging from 4.13% to 9.00% and maturities ranging from 1995 to 2014. At December 31, 1994, FHLB advances that mature within one year, one to five years, and after five years were $31.9 million, $45.3 million, and $146.9 million, respectively. The value of collateral (primarily mortgage loans) under the Agreements generally must be 150% of the $224.1 million outstanding at December 31, 1994, and at that date the Corporation had an adequate amount of loans to satisfy collateral requirements. The Corporation entered into a $10 million ("notional amount") interest-rate swap to convert a portion of the FHLB advances from fixed-rate to floating-rate debt (see Note 17). LONG-TERM DEBT The Corporation's long-term debt is summarized as follows:
DECEMBER 31, --------------------- 1994 1993 -------- -------- (DOLLARS IN THOUSANDS) 6.25% Subordinated Notes due 2003.................................... $ 74,540 $ 74,479 8 1/2% Subordinated Notes due 2002................................... 40,250 40,250 Obligations under capital leases..................................... 1,818 2,294 Other long-term debt................................................. 240 356 -------- -------- Total long-term debt............................................ $116,848 $117,379 ======== ========
In October 1993, the Corporation effected a shelf registration of $150 million of the Corporation's subordinated debt securities. On November 2, 1993, the Corporation issued in a public offering thereunder $75 million of 6.25% Subordinated Capital Notes due 2003 (6.25% Notes) at 99.305%. Interest on the 6.25% Notes is payable semiannually on May 1 and November 1. The 6.25% Notes are not redeemable prior to maturity and will mature on November 1, 2003. The 6.25% Notes are subordinated to all present and future senior indebtedness of the Corporation and payment may be accelerated only in the case of the bankruptcy of the Corporation. The 6.25% Notes qualify as Tier 2 capital under regulatory risk-based capital guidelines. The Corporation also entered into an interest- 52 55 NOTE 9. FEDERAL HOME LOAN BANK ADVANCES AND LONG-TERM DEBT (CONTINUED) rate swap agreement with a notional amount of $50 million to convert a portion of this fixed-rate debt to a floating LIBOR rate for two and one-half years. In October 1992, the Corporation completed a public offering of $40.25 million of 8 1/2% Subordinated Notes (8 1/2% Notes). The 8 1/2% Notes mature on October 1, 2002, and interest is payable quarterly. The 8 1/2% Notes are unsecured debt obligations of the Corporation and are subordinated in right of payment to all senior indebtedness of the Corporation. The Corporation, at its option, may redeem the 8 1/2% Notes on or after October 1, 1997, at par value plus accrued interest, upon 30 days notice. The Corporation is obligated to repay 100% of the principal amount plus accrued interest, up to an aggregate amount of $1 million, of 8 1/2% Notes tendered for prepayment by the personal representatives of deceased holders in any one year. The 8 1/2% Notes do not qualify for Tier 2 capital. The Corporation issued 10 1/8% Subordinated Capital Debentures (10 1/8% Debentures) in a public offering in 1989. In November 1993, the Corporation used approximately $39 million of the net proceeds of the 6.25% Notes to in-substance defease the 10 1/8% Debentures. Direct obligations of the U.S. Government were purchased and placed in an irrevocable trust which provides cash flows matching the principal and interest debt service requirements to retire the 10 1/8% Debentures on April 1, 1996. This transaction resulted in an extraordinary loss in the fourth quarter of 1993 of $5.2 million ($3.2 million net of taxes). At December 31, 1994 and 1993, the outstanding balance of the 10 1/8% Debentures totaled $34 million which is not reflected in the accompanying consolidated balance sheet. Annual principal repayment requirements for long-term debt for the years 1995 through 1999 are $613,000, $297,000, $633,000, $297,000, and $119,000, respectively. The ability of the Corporation to service its long-term debt obligations is dependent upon the future profitability of its banking subsidiaries and their ability to pay dividends to the Corporation (see Note 12). Line of Credit In June 1993, the Corporation entered into an unsecured $25 million credit agreement which expires May 31, 1996. No borrowings were outstanding at December 31, 1994 and 1993. The line of credit is for working capital purposes and as a commercial paper backup. The credit agreement contains performance measurements and restrictive covenants relating to dividends, acquisitions, sale of assets, and indebtedness which the Corporation must meet. The Corporation's dividends are restricted to no more than 60% of consolidated net earnings for the preceding fiscal year. Accordingly, the Corporation will be required to obtain a waiver of the dividend restriction during 1995 and management expects that such a waiver will be granted. 53 56 NOTE 10. SHAREHOLDERS' EQUITY PREFERRED STOCK The Corporation's preferred stock is summarized as follows:
DECEMBER 31, -------------------- 1994 1993 ------- -------- (DOLLARS IN THOUSANDS) PREFERRED STOCK, WITHOUT PAR VALUE, 10,000,000 SHARES AUTHORIZED: CONVERTIBLE Series A Preferred Stock, 250,000 shares authorized, none issued.................................................... $ -- $ -- Series B, $8.00 Nonredeemable, Cumulative, Convertible Preferred Stock (stated at liquidation value of $100 per share), 44,000 shares issued and outstanding................................................ 4,400 4,400 Series D, 9.5% Redeemable, Cumulative, Convertible Preferred Stock (stated at liquidation value of $20.50 per share), 253,655 shares issued and outstanding.................................. 5,200 5,200 Series E, 8% Cumulative, Convertible Preferred Stock (stated at liquidation value of $25 per share), 3,107,922 shares issued and outstanding................................................ 77,698 77,698 ------- -------- Total convertible preferred stock......................... 87,298 87,298 NONCONVERTIBLE Series C, 10 3/8% Increasing Rate, Redeemable, Cumulative Preferred Stock (stated at liquidation value of $25 per share), no shares issued and outstanding at December 31, 1994; 690,000 shares issued and outstanding at December 31, 1993............. -- 17,250 ------- -------- Total preferred stock..................................... $87,298 $104,548 ======= ========
SERIES A PREFERRED STOCK (SHARE PURCHASE RIGHTS PLAN). In 1989, the Board of Directors of the Corporation adopted a Share Purchase Rights Plan and distributed a dividend of one Preferred Share Purchase Right (Right) for each outstanding share of the Corporation's $5 par value Common Stock and for each share issued thereafter. The Rights are generally designed to deter coercive takeover tactics and to encourage all persons interested in acquiring control of the Corporation to deal with each shareholder on a fair and equal basis. Each Right trades in tandem with its respective share of common stock until the occurrence of certain events, in which case it would separate from the common stock and entitle the registered holder, subject to the terms of the Rights Agreement, to purchase certain equity securities at a price below their market value. The Corporation has authorized 250,000 shares of Series A Preferred Stock for issuance under the Share Purchase Rights Plan, none of which have been issued. SERIES B PREFERRED STOCK. The Corporation issued 44,000 shares of $8.00 Nonredeemable, Cumulative, Convertible Preferred Stock, Series B (Series B Preferred Stock), in a private transaction in connection with the acquisition of Steiner Bank in 1989. Such shares bear a dividend rate of $8.00 per share per annum; dividends are cumulative and are payable quarterly. The holders of shares of Series B Preferred Stock have the right, at their option, after November 30, 1994, to convert each share into 7.722 shares (339,768 shares in total) of the Corporation's Common Stock. As of December 31, 1994, no shares had been converted. The Series B Preferred Stock is not subject to any sinking fund provisions and has no preemptive rights. Holders of Series B Preferred Stock have no voting rights except as may be required by law and in certain other limited circumstances. SERIES D PREFERRED STOCK. In July 1992, in connection with the acquisition of Southeastern Bancshares, Inc. (see Note 2), the Corporation issued 253,655 shares of 9.5% Redeemable, Cumulative, Convertible Preferred Stock, Series D (Series D Preferred Stock) in a private offering. Such shares have no par value but have a stated value of $20.50 per share on which dividends accrue at 9.5% per annum. Dividends are cumulative and payable quarterly. Such shares have a liquidation preference of $20.50 per share plus unpaid dividends accrued thereon and, at the Corporation's option, with the prior approval of the Federal Reserve, are subject to redemption by the Corporation at any time and from time to time on or after July 1, 1995. At any time prior to redemption, each share of Series D 54 57 NOTE 10. SHAREHOLDERS' EQUITY (CONTINUED) Preferred Stock is convertible at the option of the holder into one share of the Corporation's Common Stock. Holders of the Series D Preferred Stock have no voting rights except as may be required by law and in certain other limited circumstances. Management intends to call for redemption the Series D Preferred Stock on July 1, 1995. It is expected that the holders thereof would convert their Series D shares to shares of the Corporation's Common Stock unless the price of the Corporation's Common Stock falls below $20.50. SERIES E PREFERRED STOCK. In February 1992, the Corporation completed a public offering of 2,200,000 shares of 8% Cumulative, Convertible Preferred Stock, Series E (Series E Preferred Stock). Such shares have a stated value of $25 per share, on which dividends accrue at a rate of 8% per annum; dividends are cumulative and are payable quarterly. The Series E Preferred Stock is not subject to any sinking fund provisions and has no preemptive rights. Such shares have a liquidation preference of $25 per share plus unpaid dividends accrued thereon, and with the prior approval of the Federal Reserve, may be redeemed by the Corporation in whole or in part at any time after March 31, 1997 at $25.00 per share. At any time prior to redemption, each share of Series E Preferred Stock is convertible, at the option of the holder, into 1.25 shares of the Corporation's Common Stock. Holders of Series E Preferred Stock have no voting rights except for those provided by law and in certain other limited circumstances. On January 1, 1993, the Corporation acquired an additional 43.93% of BOET in exchange for 331,741 shares of the Corporation's Series E Preferred Stock. The Corporation acquired the remaining outstanding stock of BOET on May 3, 1993 in exchange for an additional 317,045 shares of Series E Preferred Stock. The Corporation also acquired Erin Bank & Trust Company in exchange for 259,736 shares of Series E Preferred Stock on June 1, 1993. See Note 2 for additional information regarding these acquisitions. SERIES C PREFERRED STOCK. In August 1991, the Corporation completed a public offering of 690,000 shares of 10 3/8% Increasing Rate, Redeemable, Cumulative Preferred Stock, Series C (Series C Preferred Stock). Dividends were cumulative and payable quarterly at a rate of $.648 per quarter. On October 31, 1994, the Corporation redeemed all outstanding Series C Preferred Stock at $25 per share plus all dividends accrued and unpaid to that date. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN The Dividend Reinvestment and Stock Purchase Plan (the Plan) authorizes the issuance of 1,000,000 shares, including an increase of 500,000 shares by the Corporation's Board of Directors on January 26, 1995, of authorized but previously unissued Common Stock to shareholders who choose to invest all or a portion of their cash dividends or make optional cash purchases. On certain investment dates, shares may be purchased with reinvested dividends and optional cash payments at a price of 95% and 100%, respectively, of their fair market value, without brokerage commissions. Shares issued under this Plan totaled 116,678, 68,188, and 93,407 shares in 1994, 1993, and 1992, respectively. 55 58 NOTE 11. UNION PLANTERS CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION CONDENSED BALANCE SHEET
DECEMBER 31, --------------------- 1994 1993 -------- -------- (DOLLARS IN THOUSANDS) ASSETS Noninterest-bearing cash in subsidiary bank.......................... $ 990 $ 799 Demand note receivable from subsidiary bank.......................... 84,932 101,356 Advances to and receivable from subsidiaries......................... 5,981 2,955 Investment securities available for sale............................. 1,854 1,324 Investment in banking subsidiaries................................... 686,798 644,581 Investment in savings and loan subsidiaries.......................... 59,007 58,476 Investment in nonbank subsidiaries................................... 7,139 2,817 Premises and equipment............................................... 4,955 161 Other assets......................................................... 23,476 6,322 -------- -------- TOTAL ASSETS...................................................... $875,132 $818,791 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Commercial paper..................................................... $ 2,951 $ 10,941 Long-term debt....................................................... 114,790 114,729 Loans from and payables to subsidiary banks.......................... 13,695 362 Other liabilities.................................................... 12,989 10,757 Shareholders' equity................................................. 730,707 682,002 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........................ $875,132 $818,791 ======== ========
CONDENSED STATEMENT OF EARNINGS
YEARS ENDED DECEMBER 31, ---------------------------------- 1994 1993 1992 -------- -------- -------- (DOLLARS IN THOUSANDS) INCOME Dividends from bank subsidiaries (Note 12)............... $145,950 $ 25,893 $ 20,656 Dividends from savings and loan subsidiaries............. 18,594 2,199 -- Management fees from subsidiaries........................ 18,508 7,198 5,902 Interest from subsidiaries............................... 3,913 1,358 1,523 Interest and dividends on investments, loans, and interest-bearing deposits............................. 29 62 279 Investment securities gains (losses)..................... (71) -- 38 Other income............................................. 1,634 1,283 43 -------- -------- -------- Total income.......................................... 188,557 37,993 28,441 -------- -------- -------- EXPENSES Interest expense Short-term borrowings................................. 159 235 334 Long-term debt........................................ 8,503 7,447 4,504 Salaries and employee benefits........................... 11,185 6,029 4,973 Occupancy and equipment expense.......................... 4,947 924 851 Legal fees and provision for litigation settlements...... 1,092 321 3,924 Other expense............................................ 11,155 4,439 3,055 -------- -------- -------- Total expenses........................................ 37,041 19,395 17,641 -------- -------- -------- EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM, ACCOUNTING CHANGES, AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES............................ 151,516 18,598 10,800 Tax benefit................................................ (4,847) (4,092) (2,271) -------- -------- -------- EARNINGS BEFORE EXTRAORDINARY ITEM, ACCOUNTING CHANGES, AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES........................................ 156,363 22,690 13,071 Extraordinary item-defeasance of debt, net of taxes........ -- (3,206) -- Accounting changes, net of taxes........................... -- 2,479 -- -------- -------- -------- EARNINGS BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES........................................ 156,363 21,963 13,071 Equity in undistributed earnings of subsidiaries........... (97,755) 70,589 50,179 -------- -------- -------- NET EARNINGS.......................................... $ 58,608 $ 92,552 $ 63,250 ======== ======== ========
56 59 NOTE 11. UNION PLANTERS CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION (CONTINUED) CONDENSED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, ----------------------------------- 1994 1993 1992 --------- -------- -------- (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Net earnings............................................ $ 58,608 $ 92,552 $ 63,250 Equity in undistributed (earnings) of subsidiaries...... 97,755 (70,589) (50,179) Cumulative effect of accounting changes................. -- (2,479) -- Provision for deferred income taxes..................... 239 (1,898) -- Other, net.............................................. (15,133) 3,908 3,268 --------- -------- -------- Net cash provided by operating activities............ 141,469 21,494 16,339 --------- -------- -------- INVESTING ACTIVITIES Net decrease in short-term investments.................. -- -- 15,000 Proceeds from sales of available for sale securities.... 197 123 4,710 Net increase in investment in and receivables from subsidiaries......................................... (119,921) (16,916) (48,624) Purchases of premises and equipment..................... (5,156) -- (211) --------- -------- -------- Net cash used in investing activities................ (124,880) (16,793) (29,125) --------- -------- -------- FINANCING ACTIVITIES Net (decrease) increase in commercial paper............. (7,990) 2,616 (3,141) Proceeds from issuance of long-term debt, net........... -- 73,641 38,850 Repayment and defeasance of long-term debt.............. -- (34,042) (4,121) Net proceeds from loans and payables to subsidiaries.... 13,333 -- (1,947) Proceeds from issuance of preferred stock, net.......... -- -- 52,350 Redemption of preferred stock........................... (17,250) -- -- Proceeds from issuance of common stock, net............. 11,245 19,611 7,673 Purchases and retirement of common stock, net........... (3,164) (1,786) (4,311) Cash dividends paid..................................... (28,996) (21,180) (15,315) --------- -------- -------- Net cash (used) provided by financing activities..... (32,822) 38,860 70,038 --------- -------- -------- Net (decrease) increase in cash and cash equivalents...... (16,233) 43,561 57,252 Cash and cash equivalents at the beginning of the year.... 102,155 58,594 1,342 --------- -------- -------- Cash and cash equivalents at the end of the year.......... $ 85,922 $102,155 $ 58,594 ========= ======== ========
- --------------- Noncash Investing Activities. See Note 2 regarding acquisitions in 1994, 1993, and 1992. NOTE 12. RESTRICTIONS ON DIVIDENDS AND LOANS FROM SUBSIDIARIES The amount of dividends which the Corporation's subsidiaries may pay is limited by applicable laws and regulations. For the subsidiary national banks, prior regulatory approval is required if dividends declared in any year would exceed net earnings of the current year (as defined under the National Bank Act) plus retained net profits for the preceding two years. The payment of dividends by state-chartered bank subsidiaries is regulated by applicable laws in Alabama, Arkansas, Louisiana, Mississippi, Kentucky, and Tennessee and the regulations of the Federal Deposit Insurance Corporation (FDIC). The payment of dividends by savings and loan subsidiaries is subject to the regulations of the Office of Thrift Supervision (OTS). The Corporation has adopted for its state-chartered bank subsidiaries internal dividend policies that have received approval from the various state banking commissioners, subject to restrictions. The current policy for Alabama, Arkansas, and Mississippi subsidiary banks requires a minimum ratio of 7% tangible equity capital (equity less goodwill and other intangibles) to tangible assets and paying dividends only equal to the excess without prior approval. The internal policy adopted for Tennessee banks requires a 6% tangible equity capital to tangible assets ratio and a 7% tangible primary capital (tangible equity plus the allowance for losses on loans) to tangible assets ratio be maintained by the subsidiaries. The policy approved for the Corporation's Kentucky operations is the same as for Tennessee except that Kentucky requires the use of Tier 1 capital instead of tangible equity and 57 60 NOTE 12. RESTRICTIONS ON DIVIDENDS AND LOANS FROM SUBSIDIARIES (CONTINUED) average quarterly assets instead of period end assets. The Corporation has not received from Louisiana approval of its internal policy. At January 1, 1995, the banking subsidiaries could have paid dividends to the Corporation aggregating $22 million without prior regulatory approval. Future dividends will be dependent on the level of earnings of the subsidiary financial institutions. UPNB requested permission and received approval in 1994 to pay a special dividend in connection with the reorganization of UPNB into five separately chartered banks (Note 2). The special dividend of $98 million was paid on July 1, 1994. This dividend substantially reduced the amounts available to the Corporation as dividends from the Corporation's subsidiaries without obtaining prior regulatory approval. The Corporation's banking subsidiaries are limited by federal law in the amount of credit which they may extend to their nonbank affiliates, including the Corporation. Loans to a single nonbank affiliate may not exceed 10%, and loans to all nonbank affiliates may not exceed 20% of an individual bank's net assets plus its allowance for losses on loans. Such loans must be collateralized by assets having market values of 100% to 130% of the loan amount depending on the nature of the collateral. The law imposes no restrictions upon extensions of credit between FDIC-insured banks which are wholly-owned subsidiaries of the Corporation. NOTE 13. RESTRUCTURING AND MERGER RELATED CHARGES RESTRUCTURING CHARGES In the fourth quarter of 1994, the Corporation adopted and began implementation of a specific formal restructuring plan to improve operating efficiencies and profitability throughout the Corporation. The plan provides for the reduction of the number of employees in all subsidiaries of the Corporation through specific voluntary and involuntary separation plans, the closure or divestiture of certain branches of the banking subsidiaries, and the consolidation of certain of the Corporation's subsidiary banks and branches operating in the same or adjacent geographic locations. Management engaged a nationally recognized consulting firm in 1994 to assist in identifying performance improvement opportunities and to assist in restructuring branch operations. The Corporation incurred fees and expenses of approximately $2.2 million in 1994 related to the services provided by the consulting firm. The Corporation's plan includes a reduction in total staff of approximately 20% throughout its six-state operating region. These reductions will come from all levels and functions of the Corporation. The voluntary early retirement and voluntary separation plans were offered to eligible employees during the fourth quarter of 1994. Three hundred eighty-eight eligible employees elected by mid- December to accept these plans resulting in charges of $12.5 million. Additional reductions of approximately 600 employees will be achieved through attrition, changes in systems and work procedures, job consolidation, branch divestitures, and other specific reductions. These reductions will be facilitated by an involuntary separation plan which the Corporation communicated to all employees in connection with the offering of the voluntary plans discussed above. A charge of $3.8 million was recorded for expected involuntary separations in connection with the plan. All amounts accrued are expected to be paid out by mid-1995 for the voluntary plans and by the end of 1995 for the involuntary plan. The Corporation also identified 38 branch locations for closure or divestiture. These branch closings and divestitures are expected to be completed in 1995 barring any unforeseen regulatory restrictions. Charges associated with these divestitures totaled $10.5 million in 1994. 58 61 NOTE 13. RESTRUCTURING AND MERGER RELATED CHARGES (CONTINUED) The following table provides a reconciliation of the restructuring charges and the remaining liabilities and reserves at December 31, 1994:
RESTRUCTURING RESERVES ------------------------------------------------ EMPLOYEE ASSET SEVERANCE WRITE-DOWNS OTHER TOTAL --------- ----------- ------ ------- (DOLLARS IN THOUSANDS) Restructuring charge............................. $16,262(a) $10,478 $2,189 $28,929 Less: Cash payments.............................. (3,830) -- (835) (4,665) Noncash items.............................. -- (1,144) -- (1,144) --------- ----------- ------ ------- Balance at December 31, 1994..................... $12,432 $ 9,334 $1,354 $23,120 ======== ========== ====== =======
- --------------- (a) Includes special termination medical benefits of approximately $2.6 million reserved for eligible employees under the voluntary early retirement plan. MERGER RELATED CHARGES Incidental to the acquisition of GSSC and several other acquisitions during 1994, the Corporation incurred certain expenses related to the mergers totaling approximately $14.9 million. These expenses included legal and accounting fees, financial advisory services, employment contract payments, postretirement and postemployment benefit expense related to the employees of entities which were acquired in transactions accounted for as poolings of interests and who were given credit for prior service, costs for write-down of data processing equipment and cancellation of vendor contracts, printing, finders fees, expenses related to employee benefit plans of acquired entities, and other merger related expenses. 59 62 NOTE 14. OTHER NONINTEREST INCOME AND EXPENSE The major components of other noninterest income and expense are summarized as follows:
YEARS ENDED DECEMBER 31, -------------------------------- 1994 1993 1992 -------- -------- -------- (DOLLARS IN THOUSANDS) OTHER NONINTEREST INCOME Credit life insurance commissions.......................... $ 4,221 $ 3,906 $ 3,342 Customer ATM usage fees.................................... 2,719 1,580 965 Litigation settlement...................................... 2,200 -- -- VSIBG partnership earnings................................. 1,819 3,652 3,920 Brokerage fee income....................................... 1,356 1,520 1,288 Sale of servicing.......................................... 854 1,035 639 Gain on troubled debt restructuring........................ -- 901 3,513 Other...................................................... 15,388 18,173 12,178 -------- -------- -------- Total other noninterest income.......................... $ 28,557 $ 30,767 $ 25,845 ======== ======== ======== OTHER NONINTEREST EXPENSE Restructuring and other merger-related expenses(a) Salaries and benefits................................... $ 16,262 $ -- $ -- Consultant fees......................................... 2,189 -- -- Asset writedowns........................................ 10,478 -- -- Other merger related expenses........................... 14,862 2,113 -- FDIC insurance assessments................................. 18,466 17,879 13,477 Consumer loan marketing program............................ 14,446 -- -- Advertising and promotion.................................. 10,959 8,838 7,134 Stationery and supplies.................................... 10,101 8,080 5,975 Postage and other carrier.................................. 9,194 7,868 6,060 Amortization of goodwill and other intangibles............. 6,684 8,270 6,216 Other contracted services.................................. 6,639 6,787 5,381 Communications............................................. 6,377 5,845 4,696 Legal fees................................................. 5,163 3,269 7,241 Other personnel services................................... 3,993 2,504 2,118 Dues, subscriptions, and contributions..................... 3,808 3,632 2,751 Merchant credit card charges............................... 3,568 4,611 3,929 Audit fees................................................. 3,467 2,374 1,244 Taxes other than income taxes.............................. 3,407 3,231 2,243 Brokerage and clearing fees................................ 2,969 4,414 4,009 Insurance.................................................. 2,594 2,020 1,768 Miscellaneous charge-offs.................................. 2,498 1,520 1,300 Travel..................................................... 2,232 2,284 1,827 Amortization and write-offs of mortgage servicing rights(b)............................................... 2,101 3,364 11,104 Federal Reserve fees....................................... 1,671 1,740 1,733 Consultant fees............................................ 1,358 876 871 Other real estate expense.................................. 774 3,588 4,744 Provisions for litigation settlements...................... -- 500 9,450 Provisions for abandoned property.......................... -- -- 5,200 Provisions for conversion of data processing systems(c).... -- 4,424 -- Other...................................................... 19,512 11,925 13,992 -------- -------- -------- Total other noninterest expense......................... $185,772 $121,956 $124,463 ======== ======== ========
- --------------- (a) See Note 13. (b) 1992 includes $8.2 million of accelerated amortization of purchased mortgage servicing rights due to accelerated prepayments of the underlying mortgage loans. (c) During 1993, the Corporation entered into a contract for conversion of the software systems used by its subsidiaries to a common system. A provision of $4.4 million was recorded for the write-off of existing systems contracts as well as conversion costs. 60 63 NOTE 15. EMPLOYEE BENEFIT PLANS 401(K) RETIREMENT SAVINGS PLAN. The Corporation's 401(k) Retirement Savings Plan (401(k) Plan) is available to employees having one or more years of service who work in excess of 1,000 hours a year. Employees may voluntarily contribute 1 to 16 percent of their gross compensation on a pretax basis up to a maximum of $9,240 in 1994, subject to certain Internal Revenue Service restrictions (amount may change from year to year based on the cost of living index), and the Corporation makes a matching contribution of 50 to 100 percent of the amounts contributed by the employee depending upon his or her eligible years of service. The Corporation's matching contribution is limited to employee contributions of up to 6% of their compensation. The Corporation's Flexible Benefit Plan allows employees to allocate a portion of their available benefit dollars to the 401(k) Plan as additional employer contributions. The Corporation's contributions to the 401(k) Plan for 1994, 1993, and 1992 were $2.0 million, $1.8 million, and $1.6 million, respectively. EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST. The Employee Stock Ownership Plan and Trust (ESOP) is noncontributory and covers employees having one or more years of service who work in excess of 1,000 hours a year. The amounts of contributions to the ESOP are determined annually at the discretion of the Board of Directors and were $2 million, $2 million, and $1.6 million for 1994, 1993, and 1992, respectively. At December 31, 1994, the ESOP held 1,134,390 shares of the Corporation's Common Stock, all of which were allocated to participants. STOCK INCENTIVE PLANS. Certain employees and directors of the Corporation and its subsidiaries are eligible to receive options or restricted stock grants under the 1992 Stock Incentive Plan (1992 Plan). A maximum of 1,600,000 shares of the Corporation's Common Stock may be issued through the exercise of nonstatutory or incentive stock options and as restricted stock awards. The option price is the fair market value of the Corporation's shares at the date of grant. Options granted generally become exercisable in installments of 20% to 33 1/3% each year beginning one year from date of grant. The 1992 Plan replaced the 1983 Stock Incentive Plan which had essentially the same provisions as the 1992 Plan. The 1983 Plan expired March 9, 1993; however, options issued through that date continue to be outstanding and exercisable under the terms of the grants. Additional information, with respect to the number of shares of the Corporation's Common Stock which are subject to stock options issued under the 1983 and 1992 Plans, is as follows:
YEARS ENDED DECEMBER 31, --------------------- 1994 1993 -------- -------- Options Outstanding, beginning of year....................................... 587,610 479,419 Granted.............................................................. 243,172 287,532 Exercised............................................................ (190,628) (165,104) Canceled or surrendered.............................................. (30,122) (14,237) -------- -------- Outstanding, end of year............................................. 610,032 587,610 ======== ======== Options becoming exercisable during the year........................... 182,344 237,730 ======== ======== Options exercisable at end of year..................................... 412,142 432,310 ======== ========
Exercise prices ranged from $6.88 to $28.13 in 1994 and from $6.88 to $28.00 in 1993. Prior to its acquisition, BNF had options to acquire 121,487 shares of its common stock outstanding at December 31, 1993. The options for employees were granted in 1986 and 1992 under two separate plans and options for directors were granted under a single plan in 1992. Exercise prices ranged from $6.35 to $11.79 during 1993. During 1994, 71,737 options were exercised prior to the consummation of the merger. The remaining 49,750 options of BNF were converted to 53,627 equivalent options to acquire shares of Common Stock of the Corporation as part of the acquisition at exercise prices ranging from $6.35 to $11.79. Subsequent to the acquisition, options were exercised to acquire 3,100 shares. Prior to its acquisition, GSSC had options outstanding and exercisable which were issued in February, 1993 and December, 1994 in connection with a three-year incentive compensation plan to eligible executive officers at exercise prices ranging from $22.375 to $29.875. Incidental to the acquisition, these options were converted to 97,319 equivalent options to acquire shares of the Corporation's Common Stock as part of the acquisition at exercise prices ranging from $15.40 to $20.56. 61 64 NOTE 15. EMPLOYEE BENEFIT PLANS (CONTINUED) RETIREE HEALTH CARE AND LIFE INSURANCE. The Corporation provides certain health care and life insurance benefits to retired employees who had completed twenty years of unbroken full-time service immediately prior to retirement and who have attained age 60 or more. Health care benefits are provided partially through an insurance company (for retirees age 65 or more) and partially through direct payment of claims. Prior to January 1, 1993, health care premiums and claims and life insurance benefits ($2,500 per claim) were recognized as expense when paid. In 1992, retiree health care and life insurance costs were $390,000. Effective January 1, 1993, the Corporation adopted SFAS No. 106 which requires that retiree health care and life insurance benefits be charged to expense during the years in which the employee renders service. The Corporation elected to recognize the accumulated benefit obligation in the first quarter of 1993 which approximated $8.3 million ($5.1 million after tax). The following table reflects the Corporation's net periodic postretirement benefit costs for 1994 and 1993 which were determined assuming a discount rate of 7% for 1994 and 8% for 1993 and an expected return on plan assets of 5%:
DECEMBER 31, ------------------- 1994 1993 ----- ----- (DOLLARS IN THOUSANDS) Service cost........................................................ $ 198 $ 170 Interest cost of accumulated postretirement benefit obligation...... 713 682 Amortization of unrecognized net loss............................... 84 -- Return on Plan assets............................................... (286) (220) ----- ----- Total..................................................... $ 709 $ 632 ===== =====
The following table sets forth the Plans' funded status and the amounts reported in the Corporation's consolidated balance sheet:
DECEMBER 31, ------------------- 1994 1993 ------- ------- (DOLLARS IN THOUSANDS) Fair value of Plan assets................................................ $ 9,114 $ 5,757 ------- ------- Accumulated postretirement benefit obligation (APBO): Retirees............................................................... 10,524 7,061 Fully eligible plan participants....................................... 160 181 Other active plan participants......................................... 2,810 3,357 ------- ------- Total APBO..................................................... 13,494 10,599 ------- ------- APBO in excess of Plan assets.................................. $(4,380) $(4,842) ======= ======= Reconciliation of fund's status to reported amounts: Accrued liability included in balance sheet, including unfunded portion of transition obligation............................................ $(4,477) $(3,190) Unrecognized net gain (loss)........................................... 97 (1,652) ------- ------- APBO in excess of Plan assets.................................. $(4,380) $(4,842) ======= =======
The assumed discount rate used to measure the APBO was 8% at December 31, 1994 and 7% at December 31, 1993. The weighted average health care cost trend rate in 1994 was 12%, gradually declining to an ultimate projected rate in 2001 of 5%. A one percentage point increase in the assumed health care cost trend rates for each future year would increase the aggregate of the service and interest cost components of the 1994 net periodic postretirement benefit cost by $96,000 and would have increased the APBO as of December 31, 1994 by $788,000. The Corporation has established a Voluntary Employees' Beneficiary Association Trust (VEBA) and through December 31, 1994, had made contributions into the VEBA of $9.0 million, the maximum amount deductible for federal income tax purposes. The VEBA is expected to earn 5% on trust assets consisting of short-term tax-free municipal securities. Additional contributions will be made to the VEBA by the Corporation annually which will be the source of funding for future postretirement benefits. 62 65 NOTE 15. EMPLOYEE BENEFIT PLANS (CONTINUED) POSTEMPLOYMENT BENEFITS. The Corporation also adopted SFAS No. 112 as of January 1, 1993, which requires that such costs be charged to expense over the employees' relevant service period. The Corporation's analysis determined this liability to be $1.3 million ($807,000 net of tax benefit) at January 1, 1993, consisting primarily of postemployment medical claims and related administrative expenses in excess of expected premiums to be paid by employees. The liability amount was adjusted to $600,000 at December 31, 1993 and to $300,000 at December 31, 1994, due to a significant decrease in claims. The liability amount will be reviewed annually and adjusted as management should deem necessary based on actual experience. Annual expenses for these benefits are not expected to vary significantly from the amounts which have previously been expensed as incurred. ACQUIRED INSTITUTIONS. Certain of the financial institutions acquired have sponsored various employee benefit and retirement plans which were terminated at acquisition. Such plans have been or are in the process of being liquidated and the employees now participate in the Corporation's benefit and retirement plans. Any liabilities related to the liquidation of the plans have been recorded at December 31, 1994. NOTE 16. INCOME TAXES The components of income tax expense are as follows:
YEARS ENDED DECEMBER 31, --------------------------- 1994 1993 1992 ------- ------- ------- (DOLLARS IN THOUSANDS) Current tax expense Federal......................................................... $12,994 $30,821 $28,763 State........................................................... 2,534 6,534 5,303 ------- ------- ------- Total current tax expense.................................... 15,528 37,355 34,066 ------- ------- ------- Deferred tax expense (benefit) Federal......................................................... 4,280 (12,911) (10,230) State........................................................... 953 (4,397) 25 ------- ------- ------- Total deferred tax expense (benefit)......................... 5,233 (17,308) (10,205) ------- ------- ------- Total income tax expense................................ $20,761 $20,047 $23,861 ======= ======= =======
For 1993, income tax expense (benefit) included in the financial statements is summarized as follows (Dollars in thousands): Applicable income taxes.................................................... $37,420 Tax benefit related to extraordinary item.................................. (2,040) Tax benefit related to the cumulative effect of changes in accounting methods.................................................................. (15,333) ------- Total income tax expense......................................... $20,047 =======
63 66 NOTE 16. INCOME TAXES (CONTINUED) Deferred tax assets/liabilities are comprised of the following:
AS OF DECEMBER 31, ------------------- 1994 1993 ------- ------- (DOLLARS IN THOUSANDS) Deferred tax assets Losses on loans and other real estate.................................. $41,104 $39,946 Provisions for litigation settlements.................................. 602 1,349 Postretirement and postemployment benefits............................. 1,329 1,478 Amortization of intangibles............................................ 2,171 1,547 Net operating loss carryforwards for tax purposes...................... 2,241 2,352 Depreciation........................................................... 1,678 3,129 Deferred compensation plans............................................ 5,030 3,495 Debt defeasance........................................................ 1,130 2,023 Unrealized loss on securities.......................................... 18,385 -- Restructuring costs.................................................... 4,932 -- Other deferred items................................................... 11,907 6,160 ------- ------- Total deferred tax assets...................................... 90,509 61,479 ------- ------- Deferred tax liabilities Book over tax basis in purchased loans................................. 6,849 9,950 Stock basis difference................................................. 1,937 1,649 Prepaid expenses....................................................... 2,679 411 Other deferred items................................................... 9,858 1,122 ------- ------- Total deferred tax liabilities................................. 21,323 13,132 ------- ------- Net deferred tax asset......................................... $69,186 $48,347 ======= =======
The change in the deferred tax asset during the year is a result of the adoption of SFAS No. 115, which created a deferred tax asset of $18.4 million (see Note 1); the addition of deferred tax assets of acquired companies; and current period deferred tax expense of $5,233,000. The realization of a portion of the deferred tax asset is based upon management's conclusion that future operating profits will generate sufficient taxable income to utilize the related deductions and loss carryforwards. Net operating loss carryforwards of approximately $6.3 million are available to offset future taxable income, subject to certain statutory limitations, and expire in the years 2001 to 2006. Income tax expense as a percentage of earnings before income taxes is reconciled with the statutory federal income tax rate of 35% for 1994 and 1993 and 34% for 1992 as follows:
YEARS ENDED DECEMBER 31, --------------------------------- 1994 1993 1992 -------- -------- ------- (DOLLARS IN THOUSANDS) Computed "expected" tax..................................... $ 27,779 $ 44,590 $29,618 State income taxes, net of federal tax benefit.............. 2,267 4,370 3,516 Tax-exempt interest, net.................................... (11,410) (11,368) (7,958) Amortization of goodwill.................................... 1,532 1,466 1,711 Alternative minimum tax provision (credit) in excess of regular tax............................................... -- -- (914) Other, net.................................................. 593 (1,638) (2,112) -------- -------- ------- Applicable income tax............................. $ 20,761 $ 37,420 $23,861 ======== ======== =======
Income tax expense (benefit) applicable to securities transactions was ($7.1) million for 1994, $1.8 million for 1993, and $5.5 million for 1992. Retained earnings at December 31, 1994 and 1993 includes approximately $7,450,000 representing bad debt deductions of thrifts for which no deferred taxes have been provided. These amounts represent an allocation of income to bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which would be subject to the then 64 67 NOTE 16. INCOME TAXES (CONTINUED) current corporate income tax rate. The unrecorded deferred income tax liability on this amount was approximately $2,790,000 at December 31, 1994 and 1993. Effective January 1, 1993, the Corporation adopted SFAS No. 109. The cumulative tax effect of this change in accounting method increased net earnings $11.7 million in 1993. Reference is made to Note 1 for further discussion of accounting changes. NOTE 17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK In the normal course of business, the Corporation becomes a party to various types of financial instruments in order to meet the financing needs of its customers and to reduce its exposure to fluctuations in interest rates. These instruments involve, to varying degrees, elements of credit and interest rate risk which are not reflected in the accompanying consolidated financial statements. For these instruments, the exposure to credit loss is limited to the contractual amount of the instrument. The Corporation follows the same credit policies in making commitments and contractual obligations as it does for on-balance-sheet instruments. The following table presents the contractual amounts of these types of instruments.
CONTRACT AMOUNT DECEMBER 31, ------------------- 1994 1993 ---- ---- (DOLLARS IN MILLIONS) FINANCIAL INSTRUMENTS WHOSE CONTRACT AMOUNTS REPRESENT CREDIT RISK Commitments to extend credit (excluding credit card plans)......... $906 $642 Commitments to extend credit under credit card plans............... 975 207 Standby, commercial, and similar letters of credit................. 65 51
Commitments to extend credit are legally binding agreements to lend to customers for specific purposes, at stipulated rates, with fixed expiration and review dates if the conditions in the agreement are met, and may require payment of a fee. Since many of the commitments normally expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Collateral held, if any, varies but may include accounts receivable, inventory, property, plant and equipment, income producing properties, or securities. Loan commitments having an original maturity of one year or less or which are unconditionally cancelable totaled $1.7 billion and loan commitments having a maturity over one year which are not cancelable totaled $168 million. Letters of credit are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Corporation in some cases holds various types of collateral to support those commitments for which collateral is deemed necessary. The outstanding letters of credit expire between 1995 and 2004. Other off-balance-sheet instruments entered into are forward contracts, interest-rate swap agreements, and commitments to purchase or sell when-issued securities. The following table presents the notional amounts of these types of instruments.
NOTIONAL AMOUNT DECEMBER 31, ------------------- 1994 1993 ---- ---- (DOLLARS IN MILLIONS) FINANCIAL INSTRUMENTS WHOSE NOTIONAL CONTRACT AMOUNTS EXCEED THE AMOUNTS OF ACTUAL CREDIT RISK Forward contracts.................................................. $ 28 $ 38 Interest-rate swap agreements...................................... 310 316 When-issued securities Commitments to sell.............................................. 41 56 Commitments to purchase.......................................... 33 87
Forward contracts are contracts for delayed delivery of securities or money market instruments in which the seller agrees to make delivery at a specified future date of a specified instrument, at a specified price or yield. Risks arise from the possible inability of the counterparties to meet the terms of their contracts and from market movements in securities values and interest rates. The Corporation 65 68 NOTE 17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED) as seller utilizes short-term forward commitments to deliver mortgages to protect the Corporation against rate changes which could impact the value of mortgage originations to be securitized or otherwise sold to investors. Such commitments to deliver mortgages generally have maturities of 90 days or less. An interest-rate swap generally involves the exchange of floating for fixed-rate interest payment streams on a specified notional principal amount for an agreed upon period of time without the exchange of the underlying principal amounts. Notional principal amounts often are used to express the volume of these transactions, however the amounts potentially subject to credit risk would be much smaller. The Corporation's credit risk involves the possible default of the counterparty. The Corporation has a policy for its use of derivative products for purposes other than trading, including interest-rate swaps, which has been approved and is monitored by the Funds Management Committee and the Board of Directors. The policy establishes individual positions for derivative products not to exceed $100 million notional amount and that open positions in the aggregate shall not exceed 10% of consolidated total assets. Any exceptions to the policy must be approved by the Board of Directors. The open positions are reviewed monthly by the Funds Management Committee to monitor compliance with established policies. As of December 31, 1994, there are no positions which would be regarded as an exception under the Corporation's policy. The Corporation entered into the following interest-rate swap agreements to synthetically alter the repricing and maturity characteristics of certain on-balance sheet assets and liabilities. The Corporation receives fixed-rate payments and pays variable-rate payments. The interest-rate swaps were intended to convert specific assets (loans and investment securities) from floating-rate to fixed-rate instruments and to convert certain long-term debt from a fixed-rate to a floating-rate. The Corporation is the end-user on all interest-rate swaps and does not act as a dealer in these instruments. A summary of the Corporation's interest-rate swaps at December 31, 1994 follows:
CURRENT RATES(a) 1994 ------------------- YEAR-TO-DATE NOTIONAL VARIABLE FIXED NET INTEREST UNREALIZED AMOUNT RATE RATE MATURITY INCOME GAIN BALANCE SHEET INSTRUMENTS ------------- PAID RECEIVED DATE IMPACT (LOSS) - -------------------------------- -------- -------- -------- ------------ ---------- (IN MILLIONS) (IN MILLIONS) Loans(b)........................ $ 150 5.50% 5.22% 1/96-99 (c) $1.1 $(14.2) Securities...................... 100 6.66 4.44 6/95 (.1) --(d) Long-term debt debentures....... 50 6.04 4.46 5/96 (.1) (2.1) Long-term debt FHLB advances.... 10 6.38 9.13 3/98 .5 .3 ------ ----- ---------- Total................. $ 310 $1.4 $(16.0) ========== ========= ========
- --------------- (a) The variable rates paid are tied to the three-month LIBOR rate for the loans and the FHLB advance swaps and the six- month LIBOR rate for the investment securities and the debentures swaps. The next repricing dates for the variable rates paid for the loans, long-term debt debentures, and long-term debt FHLB advances are January 1995, May 1995, and March 1995, respectively. The securities swap will not reprice prior to maturity. These variable rates may change significantly in the future due to changes in the financial markets and interest rates. (b) The loan interest-rate swap was entered into to reduce the volatility of net interest income. At the time the swap was executed, management reduced the risk associated with stable or further declining interest rates and the resultant impact on net interest income. (c) This interest-rate swap's amortization period may change quarterly based on changes in the underlying index rate. If the index rate should be less than or equal to 5.3125% on January 5, 1996, the swap would terminate on that date. If the index rate should remain at the current rate (6.25% as of January 26, 1995) through January 5, 1996 and thereafter, the swap would mature at a rate of $26 million each quarter beginning July 5, 1996 through April 7, 1997. The swap maturity has the potential to extend to January 1999 in the event the index rate should be equal to or exceed 8.3125% on January 5, 1996 and for the remainder of the term of the swap. (d) Management sold the securities related to this interest-rate swap in January 1995 (see Note 4). At December 31, 1994, the Corporation recognized a $1.1 million loss on this interest-rate swap.
When-issued securities are commitments to either purchase or sell securities when, as and if they are issued. The trades are contingent upon the actual issuance of the security. These transactions represent conditional commitments made by the Corporation and risk arises from the possible inability of the counterparties to meet the terms of their contracts and from market movements in securities values and interest rates. 66 69 NOTE 17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED) In the normal course of business, the Corporation sells mortgage loans and makes certain limited representations and warranties to the purchaser. Management does not expect any significant losses to arise from these representations and warranties which are normally given in the business. CONCENTRATIONS OF CREDIT RISK. Through its subsidiary banks in Tennessee, Mississippi, Arkansas, Louisiana, Alabama, and Kentucky, the Corporation grants commercial, agricultural, residential, and consumer loans to customers throughout those states. The amount and percentage of total loans outstanding by the state in which the subsidiaries were headquartered at December 31, 1994 were as follows: Tennessee $3.2 billion (54%), Mississippi $1.7 billion (28%), Arkansas $445 million (8%), Louisiana $322 million (6%), Alabama $185 million (3%), and Kentucky $79 million (1%). Although the Corporation has a diversified loan portfolio, the ability of its debtors to honor their contracts is to some extent dependent upon economic conditions found throughout the above states and the surrounding areas. NOTE 18. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying values and fair values of the Corporation's financial instruments are summarized as follows:
DECEMBER 31, 1994 DECEMBER 31, 1993 ----------------------- ----------------------- CARRYING FAIR CARRYING FAIR VALUE VALUE VALUE VALUE ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) FINANCIAL ASSETS Cash and short-term investments........... $ 529,316 $ 529,316 $ 468,184 $ 468,184 Trading account securities................ 155,951 155,951 153,482 153,482 Loans held for resale..................... 24,493 24,493 134,206 134,206 Investment securities -- available for sale................................... 1,928,984 1,928,984 808,554 815,360 Investment securities -- held to maturity............................... 1,033,160 1,009,969 2,487,090 2,542,808 Net loans................................. 5,827,039 5,661,671 4,539,015 4,608,060 FINANCIAL LIABILITIES Demand deposits........................... 4,549,495 4,549,495 4,109,301 4,109,301 Time deposits............................. 3,868,347 3,843,989 3,562,320 3,596,072 Short-term borrowings..................... 415,171 415,171 275,537 275,537 Federal Home Loan Bank advances........... 224,103 218,353 192,792 192,703 Long-term debt, excluding capital lease obligations............................ 115,030 102,205 115,085 115,085 OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS Forward contracts......................... -- (37) -- 190 When-issued securities Commitments to sell.................... -- -- -- 4 Commitments to purchase................ -- -- -- -- Interest-rate swaps....................... (1,455) (17,127) (133) 1,772
The following methods and assumptions were used by the Corporation in estimating the fair value for financial instruments: CASH AND SHORT-TERM INVESTMENTS. The carrying amount for cash and short-term investments approximates the fair value of the assets. Included in this classification are cash and due from banks (nonearning assets), federal funds sold, securities purchased under agreements to resell, and interest- bearing deposits at financial institutions. INVESTMENT SECURITIES. Fair values of these instruments are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on the quoted values of similar instruments. TRADING ACCOUNT SECURITIES. These instruments are carried in the consolidated balance sheet at values which approximate their fair values based on quoted market prices of similar instruments. LOANS HELD FOR RESALE. These instruments are carried in the consolidated balance sheet at the lower of cost or market. The fair values of these instruments are based on subsequent liquidation values of the instruments which did not result in any significant gains or losses. 67 70 NOTE 18. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) LOANS. The fair values of loans are estimated using discounted cash flow analyses and using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality and risk. DEMAND DEPOSITS. The fair values of these instruments (i.e., checking accounts, savings accounts, money market deposit accounts, and NOW accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount). TIME DEPOSITS. The fair values of time deposits (i.e., certificates of deposit, IRAs, investment savings, etc.) are estimated using a discounted cash flow calculation that applies interest rates currently being offered on these instruments to a schedule of aggregated expected monthly maturities on time deposits. SHORT-TERM BORROWINGS. The carrying amount of short-term borrowings (i.e., federal funds purchased, securities sold under agreements to repurchase, commercial paper, and other short-term borrowings) approximates their fair values. FEDERAL HOME LOAN BANK ADVANCES. The fair value of these advances is estimated using discounted cash flow analyses and using the FHLB-quoted rates of borrowing for advances with similar terms. LONG-TERM DEBT. The fair value of long-term debt is based on quoted market prices for the Corporation's publicly traded debt. OFF-BALANCE-SHEET FINANCING INSTRUMENTS. Fair values of off-balance-sheet instruments are based on current settlement values (forward contracts), quoted market prices (interest-rate swaps), and current market values for when-issued securities. The fair value of interest-rate swaps represents the gross unrealized gain (loss) in these contracts. The fair value of commitments to extend credit and letters of credit (see Note 17) are not presented, since management believes the fair value to be insignificant, as the instruments are expected to expire unused and the fees charged on such instruments are not significant. NOTE 19. CONTINGENT LIABILITIES The Corporation and/or various subsidiaries are parties to various pending civil actions, all of which are being defended vigorously. Additionally, the Corporation and/or its subsidiaries are parties to various legal proceedings that have arisen in the ordinary course of business. Management is of the opinion, based on present information, including evaluations of outside counsel, that neither the Corporation's financial position, results of operations, nor liquidity will be materially affected by the ultimate resolution of such pending or threatened legal proceedings. The Corporation's former broker/dealer subsidiaries are among the more than 80 defendants in various lawsuits consolidated in a Louisiana federal district court alleging violations of Federal and other securities laws in connection with the 1986 underwriting and subsequent sale of $400 million of housing revenue bonds issued by the Health, Educational, and Housing Facility Board of the City of Memphis, Tennessee, as well as the underwriting and sale of seven other taxable municipal bond issues. Substantially all of the proceeds of the sale of these bonds had been placed in guaranteed investment contracts with Executive Life Insurance Company. The bonds were rated AAA by Standard & Poors at the time of issuance, and maintained such rating until January 1990, when the bonds were downgraded. The market price of the bonds has since declined significantly. One of such subsidiaries participated in the underwriting of the Memphis issue and is a defendant in purported class claims based on that issue. Several individual actions against these subsidiaries alleging violations in secondary market sales of such issues have been consolidated in the litigation. During the third quarter of 1994, most of the representatives of the plaintiffs in the various class actions agreed in principle to settle all claims against the underwriting participants. Such settlement has been given tentative approval by the court, and is subject to a number of preconditions, including final approval by the court. Notice of the settlement will be distributed to all members of the putative plaintiff classes and such class members have been given the right to opt out of the settlement agreement and continue to pursue claims against the underwriters. A small number of class members have already indicated their intent to do so. However, should such opt-out claims reach a certain threshold, the underwriting defendants may withdraw their settlement offer. All of the individual secondary market suits against 68 71 NOTE 19. CONTINGENT LIABILITIES (CONTINUED) the Corporation's subsidiaries that were consolidated in the litigation have been resolved. The remaining claim asserted against such subsidiaries is in arbitration and involves a $100,000 par value sale. Certain subsidiaries of the Corporation were threatened in 1989 with a civil action by the FDIC for the estate of a closed savings association. If filed, the action would reportedly seek compensatory damages of at least $37 million, and other relief including an injunction against transferring or encumbering any assets until any judgments were paid, based upon allegations of wrongdoing in the sale of covered call options to the closed savings association. An agreement between all parties to the threatened action providing for the forbearance of the filing of such action and the tolling of applicable statutes of limitation, entered into in 1989, continues in effect. The Corporation has furnished the FDIC with information assertedly demonstrating the lack of merit in the threatened action and believes that such action, if nevertheless filed, can be resolved without material loss. 69 72 UNION PLANTERS CORPORATION BANKS AND COMMUNITIES SERVED
OFFICES ------- TENNESSEE UNION PLANTERS NATIONAL BANK Bartlett, Collierville, Cordova, Germantown, Memphis......................................... 34 UNION PLANTERS BANK OF MIDDLE TENNESSEE, N.A. Antioch, Brentwood, Columbia, Dickson, Eagleville, Franklin, Gallatin, Goodlettsville, Hendersonville, Lebanon, Lewisburg, Madison, Mt. Juliet, Mt. Pleasant, Murfreesboro, Nashville, and Smyrna...................................... 31 UNION PLANTERS BANK OF EAST TENNESSEE, N.A.* Alcoa, Clinton, Greenback, Knoxville, Maryville, Oak Ridge, and Townsend......................... 19 UNION PLANTERS BANK OF JACKSON, N.A. Jackson and Milan............................... 10 UNION PLANTERS BANK OF WEST TENNESSEE* Dyersburg, Gibson, Humboldt, Martin, Rutherford, Trenton, Union City, and Yorkville.............. 13 UNION PLANTERS BANK OF THE TENNESSEE VALLEY* Harriman, Kingston, Lenoir City, Oliver Springs, Rockwood, Sunbright, and Wartburg............... 8 FIRST NATIONAL BANK OF SHELBYVILLE* Fayetteville, Monteagle, Shelbyville, and Tracy City............................................ 8 LIBERTY FEDERAL SAVINGS BANK Camden, Huntington, McKenzie, Paris, and Waverly......................................... 6 BANK OF GOODLETTSVILLE Goodlettsville, Springfield, and White House.... 4 THE FIRST NATIONAL BANK OF CROSSVILLE Crossville and Fairfield Glade.................. 5 CITIZENS BANK IN COOKEVILLE Algood, Baxter, Cookeville, and Monterey........ 6 UNION PLANTERS BANK OF CHATTANOOGA, N.A. Chattanooga, Cleveland, and East Ridge.......... 8 CENTRAL STATE BANK Jackson and Lexington........................... 4 FIRST STATE BANK Brownsville and Stanton......................... 4 SECURITY TRUST FEDERAL SAVINGS AND LOAN ASSOCIATION Clinton, Greeneville, Kingston, Knoxville, Morristown, and Oak Ridge....................... 7 BANK OF EAST TENNESSEE Morristown and Talbott.......................... 5 BANK OF COMMERCE IN WOODBURY Auburntown and Woodbury......................... 3 DEKALB COUNTY BANK & TRUST COMPANY Alexandria, Celina, Dowelltown, and Smithville...................................... 5 FARMERS UNION BANK Ripley.......................................... 3 FIRST CITIZENS BANK OF HOHENWALD.................... 3 OFFICES ------- UNION PLANTERS BANK, FSB Dyersburg and Newbern........................... 3 ERIN BANK & TRUST COMPANY........................... 1 FIRST STATE BANK OF FAYETTE COUNTY IN SOMERVILLE.... 1 THE COMMERCIAL BANK OF OBION........................ 2 PICKETT COUNTY BANK AND TRUST COMPANY IN BYRDSTOWN.. 1 CUMBERLAND CITY BANK................................ 1 MISSISSIPPI SUNBURST BANK Ackerman, Baldwyn, Bassfield, Bay St. Louis, Biloxi, Calhoun City, Charleston, Cleveland, Clinton, Collins, Collinsville, Columbus, Crystal Springs, Decatur, Derma, Ellisville, Eupora, Forest, Greenville, Greenwood, Grenada, Gulfport, Hattiesburg, Hazlehurst, Houston, Itta Bena, Jackson, Kosciusko, Laurel, Leland, Louisville, Meridian, Moorhead, Moss Point, Mount Olive, Newton, Ocean Springs, Oxford, Pascagoula, Pearl, Petal, Philadelphia, Prentiss, Ridgeland, Shaw, Southaven, Sumner, Terry, Tupelo, Union, Water Valley, West Point, and Winona...................................... 100 UNITED SOUTHERN BANK Batesville, Clarksdale, Drew, Friars Point, Lambert, Lula, Olive Branch, Oxford, Pope, and Sledge.......................................... 15 FIRST NATIONAL BANK IN NEW ALBANY Ashland, Blue Mountain, Hickory Flat, New Albany, Ripley, and Tupelo...................... 9 ARKANSAS UNION PLANTERS BANK OF NORTHEAST ARKANSAS* Bono, Brookland, Fisher, Hardy, Jonesboro, Mammoth Spring, Newport, Rector, Sidney, Tuckerman, and Weiner........................... 18 SECURITY BANK Marmaduke and Paragould......................... 4 FIRST NATIONAL BANK Bee Branch, Clinton, Fairfield Bay, and Mountain View............................................ 4 FIRST SOUTHERN BANK Crawfordsville, Earle, and Marion............... 3 SEARCY COUNTY BANK Leslie and Marshall............................. 2 FARMERS & MERCHANTS BANK Maynard, Pocahontas, and Reyno.................. 3 LOUISIANA SUNBURST BANK OF BATON ROUGE........................ 15 ALABAMA BANKFIRST, A FEDERAL SAVINGS BANK Athens, Decatur, Hartselle, and Moulton......... 7 KENTUCKY SIMPSON COUNTY BANK Adairville and Franklin......................... 5 ------- TOTAL............................................... 380 ======
- --------------- The above schedule reflects banks merged and names changed through March 1, 1995. Those banks for which names have changed or which were merged with other banks are identified with an "*." 70 73 UNION PLANTERS CORPORATION EXECUTIVE OFFICERS BENJAMIN W. RAWLINS, JR. Chairman and Chief Executive Officer JACKSON W. MOORE President and Chief Operating Officer JACK W. PARKER Executive Vice President and Chief Financial Officer JAMES A. GURLEY Executive Vice President M. KIRK WALTERS Senior Vice President, Treasurer, and Chief Accounting Officer BOARD OF DIRECTORS ALBERT M. AUSTIN Chairman of the Board Cannon, Austin and Cannon, Inc. MARVIN E. BRUCE Chairman of the Board (Retired) TBC Corporation GEORGE W. BRYAN Senior Vice President Sara Lee Corporation ROBERT B. COLBERT, JR. Chairman of the Board (Retired) Signal Apparel Co., Inc. C. J. LOWRANCE III President Lowrance Brothers & Co., Inc. JACKSON W. MOORE President and Chief Operating Officer Union Planters Corporation STANLEY D. OVERTON Chairman of the Board Union Planters Bank of Middle Tennessee, N.A. BENJAMIN W. RAWLINS, JR. Chairman of the Board and Chief Executive Officer Union Planters Corporation Union Planters National Bank DR. V. LANE RAWLINS President The University of Memphis MIKE P. STURDIVANT President Due West Gin Co., Inc. RICHARD A. TRIPPEER, JR. President R. A. Trippeer, Inc. 71 74 CORPORATE INFORMATION ANNUAL MEETING Thursday, April 27, 1995 at 10:00 a.m. Union Planters Administrative Center Assembly Room C 7130 Goodlett Farms Parkway Memphis, Tennessee 38018 CORPORATE OFFICES 7130 Goodlett Farms Parkway Memphis, Tennessee 38018 CORPORATE MAILING ADDRESS P. O. Box 387 Memphis, Tennessee 38147 TRANSFER AGENT AND REGISTRAR Union Planters National Bank Corporate Trust Operations 6200 Poplar Avenue, Suite 300 Memphis, Tennessee 38119 (901) 383-6960 DIVIDEND PAYING AGENT Union Planters National Bank Corporate Trust Operations 6200 Poplar Avenue, Suite 300 Memphis, Tennessee 38119 (901) 383-6960 INDEPENDENT ACCOUNTANTS Price Waterhouse LLP STOCK AND OPTION LISTINGS Common NYSE Symbol: UPC Wall Street Journal: UnPlantr Series E Convertible Preferred NASDAQ NMS Symbol: UPCPO Wall Street Journal: UnPlantr pfE Options Philadelphia Stock Exchange FOR FINANCIAL INFORMATION, CONTACT Jack W. Parker Executive Vice President and Chief Financial Officer (901) 383-6781 FORM 10-K Copies of the Corporation's Annual Report on Form 10-K as filed with the Securities and Exchange Commission are available on request by calling the Legal Division at (901) 383-6584. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN The Plan allows Union Planters shareholders to reinvest their dividends in Union Planters common stock at a 5% discount from market. No brokerage commissions or service charges are paid by shareholders. The Plan also permits those participating in the Plan to buy additional shares with optional cash payments and no brokerage commissions. Full details are available by calling (901) 383-6960 or writing Union Planters Corporate Trust Operations. The Corporation's banking subsidiaries are members of the FDIC and are Equal Housing Lenders. UPC and its subsidiaries are Equal Opportunity Employers. 72 75 UNION PLANTERS CORPORATION P. O. BOX 387 MEMPHIS, TENNESSEE 38147 EX-21 5 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 PAGE 1 OF 3 SUBSIDIARIES OF THE REGISTRANT UNION PLANTERS CORPORATION, Registrant, A registered bank holding company and savings and loan holding company
State or Percentage Jurisdiction of Voting Name of Registrant Under Laws of Securities and Subsidiaries Which Organized Owned - ------------------ --------------- --------- Union Planters Corporation (Registrant) Tennessee Union Planters National Bank (a) United States 99.93%(1) Chickasaw Capital Corporation (b) Tennessee 100.00% Investment Group Mortgage Corporation (b) and (g) Tennessee 100.00% Tennessee Bancorp, Inc. (b), (g), and (ee) Tennessee 100.00% Union Planters Bank of Chattanooga, National Association (a) United States 100.00% Union Planters Bank of Middle Tennessee, National Association (a) United States 100.00% Union Planters Bank of East Tennessee, National Association (a) United States 100.00% Foothills Financial Services (c) Tennessee 100.00% Union Planters Bank of Jackson, National Association (a) United States 100.00% Union Planters Investment Bankers Corporation (a) and (g) Tennessee 100.00% Union Planters Investment Bankers Group, Inc. (d) and (g) Tennessee 100.00% UMIC, Inc. (d) and (g) Tennessee 100.00% UMIC Securities Corporation (d) and (g) Tennessee 100.00% Union Planters Bank of the Tennessee Valley (a) Tennessee 100.00% First National Bank of Crossville (a) United States 100.00% Union Planters Bank of West Tennessee (a) Tennessee 100.00% Summit Insurance, Inc. (e) Tennessee 100.00% Southeastern Bancshares, Inc. (a) Tennessee 100.00% DeKalb County Bank & Trust Company (f) Tennessee 100.00% First Citizens Bank of Hohenwald (a) Tennessee 100.00% Citizens Bank, Cookeville, Tennessee (a) Tennessee 100.00% Pickett County Bank and Trust Company (a) Tennessee 100.00% United Southern Bank (a) Mississippi 100.00% First National Bank, New Albany, MS (a) United States 100.00% Cumberland City Bank (a) Tennessee 100.00% Planters Life Insurance Company (a) Arizona 100.00% North Arkansas Bancshares, Inc. (a) Arkansas 100.00% Union Planters Bank of Northeast Arkansas (h) Arkansas 100.00% Searcy County Bank (h) Arkansas 100.00% First National Bank (h) United States 100.00% First North Central Insurance, Inc. (i) and (g) Arkansas 100.00% First Southern Bank (a) Arkansas 100.00% Southwestern Investment Company (a) Tennessee 100.00% Union Planters-Great American Acquisition Tennessee 100.00% Corporation (a) and (g) Bank of East Tennessee (a) Tennessee 100.00% Southeastern Credit Life Insurance Company (j) Arizona 100.00% Security Trust Federal Savings and Loan Association (a) United States 100.00% S.T. Service Corporation (k), (g), and (ee) Tennessee 100.00% Commerce Capital Corporation (k), (g), and (ee) Tennessee 100.00% Union Planters Bank, FSB (a) United States 100.00% First Service Corporation (l) and (g) Tennessee 100.00% Northwest Tennessee Savings and Loan Association, Inc. (l), (g), and (ee) Tennessee 100.00% NWT Service Corporation (m), (g), and (ee) Tennessee 100.00% First State Bancshares, Inc. (a) and (ff) Tennessee 100.00% First State Bank of Fayette County (n) Tennessee 100.00% First Cumberland Bank (a) and (g) Tennessee 100.00% Farmers Union Bank (a) Tennessee 100.00%
2 EXHIBIT 21 PAGE 2 OF 3 SUBSIDIARIES OF THE REGISTRANT (continued) UNION PLANTERS CORPORATION, Registrant, A registered bank holding company and savings and loan holding company
State or Percentage Jurisdiction of Voting Name of Registrant Under Laws of Securities and Subsidiaries Which Organized Owned - ------------------ --------------- --------- Garrett Bancshares, Inc. (a) Tennessee 100.00% Bank of Goodlettsville (o) Tennessee 100.00% Erin Bank & Trust Company (a) Tennessee 100.00% First Financial Services, Inc. (a) Tennessee 100.00% First State Bank (p) Tennessee 100.00% First State Leasing, Inc. (q) and (g) Tennessee 100.00% Bank of Commerce, Woodbury, Tennessee (a) Tennessee 100.00% Bancom Services, Inc. (r) and (g) Tennessee 100.00% Central State Bancorp, Inc. (a) Tennessee 100.00% Central State Bank (s) Tennessee 100.00% Mid-South Bancorp, Inc. (a) Kentucky 100.00% Simpson County Bank (t) Kentucky 100.00% General Trust Company (t) and (g) Tennessee 100.00% First National Bancorp of Shelbyville (a) Tennessee 100.00% First National Bank of Shelbyville (u) United States 100.00% Liberty Bancshares, Inc. (a) Tennessee 100.00% Liberty Federal Savings Bank (v) United States 100.00% Northwest Tennessee Service Corporation (w) Tennessee 100.00% BNF Bancorp, Inc. (a) Delaware 100.00% BANKFIRST, a federal savings bank (x) United States 100.00% Sunbelt Financial Services, Inc. (y) Alabama 100.00% The Commercial Bancorp, Inc. (a) Tennessee 100.00% The Commercial Bank (z) Tennessee 100.00% Mid South Bancshares, Inc. (a) Arkansas 100.00% Security Bank (aa) Arkansas 100.00% Farmers and Merchants Bank (aa) Arkansas 100.00% Farmers & Merchants Development Corp. (bb) Arkansas 100.00% Sunburst Bank, Mississippi (a) Mississippi 100.00% Sunburst Mortgage Corporation (cc) Mississippi 100.00% Sunburst Financial Services, Inc. (cc) Mississippi 100.00% System Properties, Inc. (cc) Mississippi 100.00% Sunburst Building, Inc. (cc) Mississippi 100.00% Sunburst Bank, Louisiana (a) Louisiana 100.00% Capbanc Leasing Corporation (dd) Louisiana 100.00% Capital Equity Corporation (dd) Louisiana 100.00% Collection Accounts (dd) Louisiana 100.00% Mainstreet Development Corporation (dd) Louisiana 100.00% Sunburst Financial Group, Inc. (a) Delaware 100.00% HFB Acquisition Company, Inc. (a) and (g) Tennessee 100.00% Union Planters-FAC Acquisition Company (a) and (g) Tennessee 100.00%
________________________ (1) Balance held by Directors of the Bank as director's qualifying shares (a) Subsidiary of Union Planters Corporation (b) Subsidiary of Union Planters National Bank (c) Subsidiary of Union Planters Bank of East Tennessee, N.A. (d) Subsidiary of Union Planters Investment Bankers Corporation (e) Subsidiary of Union Planters Bank of West Tennessee 3 EXHIBIT 21 PAGE 3 OF 3 SUBSIDIARIES OF THE REGISTRANT (continued) UNION PLANTERS CORPORATION, Registrant, A registered bank holding company and savings and loan holding company (f) Subsidiary of Southeastern Bancshares, Inc. (g) Inactive subsidiary (h) Subsidiary of North Arkansas Bancshares, Inc. (i) Subsidiary of First National Bank (j) Subsidiary of Bank of East Tennessee (k) Subsidiary of Security Trust Federal Savings and Loan Association (l) Subsidiary of Union Planters Bank, FSB (m) Subsidiary of Northwest Tennessee Savings and Loan Association, Inc. (n) Subsidiary of First State Bancshares, Inc. (o) Subsidiary of Garrett Bancshares, Inc. (p) Subsidiary of First Financial Services, Inc. (q) Subsidiary of First State Bank (r) Subsidiary of Bank of Commerce (s) Subsidiary of Central State Bancorp, Inc. (t) Subsidiary of Mid-South Bancorp, Inc. (u) Subsidiary of First National Bancorp of Shelbyville (v) Subsidiary of Liberty Bancshares, Inc. (w) Subsidiary of Liberty Federal Savings Bank (x) Subsidiary of BNF Bancorp, Inc. (y) Subsidiary of BANKFIRST, a federal savings bank (z) Subsidiary of The Commercial Bancorp, Inc. (aa) Subsidiary of Mid South Bancshares, Inc. (bb) Subsidiary of Farmers and Merchants Bank (cc) Subsidiary of Sunburst Bank, Mississippi (dd) Subsidiary of Sunburst Bank, Louisiana (ee) Charter in process of being surrendered (ff) Charter in process of being sold EX-23 6 CONSENT OF PRICE WATERHOUSE LLP 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the previously filed Registration Statements on Form S-3 (Nos. 33-27814 and 33-50655) and Form S-8 (Nos. 2-87392, 33-23306, 33-35928, 33-53454, and 33-55257) of Union Planters Corporation of our report dated January 26, 1995 appearing on page 35 of the Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. /s/ Price Waterhouse LLP - ------------------------ PRICE WATERHOUSE LLP Memphis, Tennessee March 22, 1995 EX-27 7 FINANCIAL DATA SCHEDULE
9 1,000 YEAR DEC-31-1994 JAN-01-1994 DEC-31-1994 488,722 10,641 29,953 155,951 1,928,984 1,033,160 1,009,969 5,949,128 122,089 10,015,069 8,417,842 415,171 110,398 340,951 200,897 0 87,298 442,512 10,015,069 461,724 188,835 13,498 664,057 235,815 275,779 388,278 3,636 (20,298) 398,835 79,369 58,608 0 0 58,608 1.25 1.25 4.39 17,476 5,874 1,564 11,600 114,353 18,439 13,287 122,089 122,089 0 0
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