-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IA3IqT0J44idYyXnOj4hSpX/yw0umaEIJS+hbmqVpuHIPKVFyqBwTClKg9qjmzJ7 35HQvC5nOMSOUHQM2/JmaA== 0000950144-96-001013.txt : 19960320 0000950144-96-001013.hdr.sgml : 19960320 ACCESSION NUMBER: 0000950144-96-001013 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960319 SROS: NYSE 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: 96536191 BUSINESS ADDRESS: STREET 1: 7130 GOODLETT FARMS PKWY CITY: MEMPHIS STATE: TN ZIP: 38018 BUSINESS PHONE: 9013836000 MAIL ADDRESS: STREET 1: 7130 GOODLETT FARMS PKWY CITY: MEMPHIS STATE: TN ZIP: 38018 10-K405 1 UNION PLANTERS CORPORATION FORM 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ------ EXCHANGE ACT OF 1936 (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) (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 Sections 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 29, 1996 was approximately $1,340,033,000. INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON STOCK CLASS OUTSTANDING AT FEBRUARY 29, 1996 Common Stock having a par 45,565,914 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 Items 1, 2, 5, 6, 7, and 8 to Shareholders for the year ended December 31, 1995 2. Certain parts of the Definitive Proxy Part III Statement for the Annual Shareholders Meeting to be held April 25, 1996
2 FORM 10-K CROSS-REFERENCE INDEX
Page PART I Item 1. Business 3 Item 1a. Executive Officers of the Registrant 14 Item 2. Properties 14 Item 3. Legal Proceedings 15 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 16 Item 6. Selected Financial Data 16 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 16 Item 8. Financial Statements and Supplementary Data 16 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure * PART III Item 10. Directors and Executive Officers of the Registrant 16 Item 11. Executive Compensation 16 Item 12. Security Ownership of Certain Beneficial Owners 16 and Management Item 13. Certain Relationships and Related Transactions 16 PART IV Item 14. Exhibits, Financial Statement Schedules, 17 and Reports on Form 8-K SIGNATURES 18 * Not Applicable
2 3 PART I ITEM 1. BUSINESS GENERAL Union Planters Corporation (the "Corporation"), an $11.3 billion 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. At December 31, 1995, the Corporation had the largest deposit base of any bank holding company headquartered in Tennessee. The Corporation's activities are conducted through its principal banking subsidiary, the $2.2 billion Union Planters National Bank ("UPNB") headquartered in Memphis, Tennessee, 35 other banking subsidiaries and two savings and loan subsidiaries located in Tennessee, Mississippi, Missouri, Arkansas, Louisiana, Alabama, and Kentucky (collectively, "banking subsidiaries"). Reference is made to the 1995 Annual Report to Shareholders for a listing of communities served on page 31, 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 banking 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. PENDING ACQUISITION On March 8, 1996, the Corporation entered into an Agreement and Plan of Merger to acquire all of the outstanding stock of Leader Financial Corporation ("LFC"), a publicly traded Tennessee thrift holding company, in a tax-free acquisition to be accounted for as a pooling of interests. Pursuant to the merger agreement, the Corporation will exchange 1.525 shares of its Common Stock, or approximately 16.6 million shares, for each outstanding common share of LFC. The merger is subject to satisfaction of certain contractual conditions to closing, regulatory and shareholder approvals, and is expected to be consummated in the fourth quarter of 1996. At December 31, 1995, LFC reported approximately $3.1 billion in total assets, $1.6 billion in total deposits, $247 million in shareholders' equity, and 1995 net earnings of approximately $37 million. CERTAIN REGULATORY CONSIDERATIONS GENERAL As a bank holding company, the Corporation is subject to the regulation and supervision of the Federal Reserve Board under the Bank Holding Company Act of 1956 ("BHCA"). 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 regulation, supervision, and reporting requirements. Each of the Corporation's banking subsidiaries is a member of the Federal Deposit Insurance Corporation ("FDIC"), and as such, its deposits are insured by the FDIC to the maximum extent provided by law. The Corporation's banking subsidiaries which are national banking associations, including its principal subsidiary, UPNB, are subject to supervision and examination by the Office of the Comptroller of the Currency (the "Comptroller") and 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 Board 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 banking subsidiaries. In addition to the impact 3 4 of regulation, the banking subsidiaries are affected significantly by the actions of the Federal Reserve Board as it attempts to control the money supply and credit availability in order to influence the economy. The BHCA requires every bank holding company to obtain the prior approval of the Federal Reserve Board before (i) it may acquire direct or indirect ownership or control of any voting shares of any bank if, after such acquisition, the bank holding company would directly or indirectly own or control more than 5.0% of the voting shares of the bank; (ii) it or any of its subsidiaries, other than a bank, may acquire all or substantially all of the assets of a bank; or (iii) it may merge or consolidate with any other bank holding company. The BHCA further provides that the Federal Reserve Board may not approve any transaction that would result in a monopoly or would be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any section of the United States, or the effect of which may be substantially to lessen competition or to tend to create a monopoly in any section of the country, or that in any other manner would be in restraint of trade, unless the anticompetitive effects of the proposed transaction are clearly outweighed by the public interest in meeting the convenience and needs of the community to be served. The Federal Reserve Board is also required to consider the financial and managerial resources and future prospects of the bank holding companies and banks concerned and the convenience and needs of the community to be served. Consideration of financial resources generally focuses on capital adequacy, and consideration of convenience and needs issues includes the parties' performance under the Community Reinvestment Act of 1977, as amended (the "CRA"), both of which are discussed below. The BHCA, as amended by the interstate banking provisions of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("the Interstate Banking Act"), which became effective on September 29, 1995, repealed the prior statutory restrictions on interstate acquisitions of banks by bank holding companies, such that the Corporation and any other bank holding company located in Tennessee may now acquire a bank located in any other state, and a bank holding company outside Tennessee may lawfully acquire any Tennessee-based bank, regardless of state law to the contrary, in either case subject to certain deposit-percentage and other restrictions. The Interstate Banking Act also generally provides that, after June 1, 1997, national and state-chartered banks may branch interstate through acquisitions of banks in other states. By adopting legislation prior to that date, a state has the ability either to "opt in" and accelerate the date after which interstate branching is permissible or to "opt out" and prohibit interstate branching altogether. Tennessee has recently "opted in." The BHCA generally prohibits the Corporation from engaging in activities other than banking or managing or controlling banks or other permissible subsidiaries and from acquiring or retaining direct or indirect control of any company engaged in any activities other than those activities determined by the Federal Reserve Board to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In determining whether a particular activity is permissible, the Federal Reserve Board must consider whether the performance of such an activity reasonably can be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency that outweigh possible adverse effects such as undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices. For example, factoring accounts receivable, acquiring or servicing loans, leasing personal property, conducting discount securities brokerage activities, performing certain data processing services, acting as agent or broker in selling credit life insurance and certain other types of insurance in connection with credit transactions, and performing certain insurance underwriting activities have all been determined by the Federal Reserve Board to be permissible activities of bank holding companies. The BHCA does not place territorial limitations on permissible nonbanking activities of bank holding companies. Despite prior approval, the Federal Reserve Board has the power to order a bank holding company or its subsidiaries to terminate any activity or to terminate its ownership or control of any subsidiaries when it has reasonable cause to believe that continuation of such activity or such ownership or control constitutes a serious risk to the financial safety, soundness, or stability of any bank subsidiary of that bank holding company. CAPITAL The Federal Reserve Board has adopted risk-based capital guidelines for bank holding companies. The minimum guideline for the ratio ("Risk-Based Capital Ratio") of total capital ("Total Capital") to risk-weighted assets (including certain off-balance-sheet activities such as standby letters of credit) is 8%. 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 4 5 amount of cumulative perpetual preferred stock, less goodwill and excluding the unrealized gain or loss, net of taxes, on available for sale securities. The remainder, which is "Tier 2 Capital," may consist of limited amounts 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 Board 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 3% 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 3% 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 Board 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 Board has not advised the Corporation of any specific minimum Leverage Ratio applicable to the Corporation. The federal bank regulatory agencies maintain the Risk Based Capital guidelines for banks and bank holding companies under continuing review. 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 Board and 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's Management believes that these changes, if adopted, will not have a material effect on the Corporation's compliance with capital adequacy requirements. Failure to meet 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, substantial additional restrictions can be imposed upon FDIC-insured institutions that fail to meet applicable capital requirements. See "Prompt Corrective Action" discussion below. At December 31, 1995, the Corporation's Total Risk-Based Capital Ratio was 16.35%, its Tier 1 Risk-Based Capital Ratio (i.e., its ratio of Tier 1 Capital to risk-weighted assets) was 12.64% and its Leverage Ratio was 8.09%. 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. Each of the banking subsidiaries is subject to Risk-Based and Leverage Capital Ratio requirements adopted by their respective federal regulators which are substantially similar to those adopted by the Federal Reserve Board. As of December 31, 1995, the Total and Tier 1 Risk-Based Capital and Leverage Ratios of UPNB, the Corporation's largest bank subsidiary, were 15.69%, 14.43% and 9.08%, respectively. Neither the Corporation nor any of the banking subsidiaries has been advised by any federal banking agency of any specific minimum capital ratio requirement applicable to it. PROMPT CORRECTIVE ACTION The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), and the joint regulations thereunder adopted by the federal banking agencies, require the 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 5%, a Tier 1 Risk-Based Capital Ratio of at least 6% and a Total Risk-Based Capital Ratio of at least 10% and is not otherwise in a "troubled condition" as determined by its appropriate federal regulatory agency. A bank is defined to be adequately capitalized if it meets all of its minimum capital requirements as described under "Capital" above. In addition, a bank will be considered "undercapitalized" if it fails to meet any minimum required measure, "significantly undercapitalized" if it is significantly below such measure, and 5 6 "critically undercapitalized" if it fails to maintain a level of tangible equity equal to not less than 2% 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 required 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. Such 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 5% 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 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. 6 7 COMMUNITY REINVESTMENT All of the Corporation's banking subsidiaries are subject to the provisions of the CRA and the federal banking agencies' other implemented regulations. Under the CRA, all financial institutions have a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of their entire communities, including low-to-moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the federal banking agencies, in connection with their examination of a depository institution, to assess the institution's record in assessing and meeting the credit needs of the community served by that institution, including low-to-moderate income neighborhoods. The regulatory agency's assessment of the institution's record is made available to the public. Further, such assessment is required of any institution which has applied to: (i) charter a national bank; (ii) obtain deposit insurance coverage for a newly chartered institution; (iii) establish a new branch office that will accept deposits; (iv) relocate an office; or (v) merge or consolidate with, or acquire the assets or assume the liabilities of, a federally regulated financial institution. In the case of a bank holding company applying for approval to acquire a bank or bank holding company, the Federal Reserve Board will assess the records of each subsidiary depository institution of the applicant bank holding company, and such records may be the basis for denying the application. Based on their most recent CRA compliance examinations, the Corporation's subsidiary banks and thrifts all received at least a "satisfactory" CRA rating. Since December 1993, the federal banking agencies have had under consideration a revision of their CRA regulations in order to provide clearer guidance to depository institutions on the nature and extent of their CRA obligations and the methods by which those obligations would be assessed and enforced. In response to widespread criticisms of the December 1993 proposal, the agencies on September 26, 1994, issued a revised proposal which was adopted substantially as proposed on April 17, 1995. Under these new CRA regulations, which are now effective, the earlier process-based CRA assessment factors were replaced with a new evaluation system which would rate institutions based on their actual performance in meeting community credit needs. The evaluation system used to judge an institution's CRA performance consists of three tests: a lending test; an investment test; and a service test. Each of these tests will be applied by the institution's federal regulator in an assessment context that would take into account such factors as: (i) demographic data pertaining to the community, (ii) the institution's capacity and constraints, (iii) the institution's product offerings and business strategy, and (iv) data on the prior performance of the institution and similarly situated lenders. The new lending test -- the most important of the three tests for all institutions other than wholesale and limited purpose (e.g., credit card) banks -- will be used to evaluate an institution's lending activities as measured by its home-mortgage loans, small business and farm loans, community-development loans and, at the option of the institution, its consumer loans. The institution's regulator will weigh each of these lending categories to reflect their relative importance to the institution's overall business and, in the case of community development loans, the characteristics and needs of the institution's service area and the opportunities available for this type of lending. Assessment criteria for the lending test will include: (i) geographical distribution of the institution's lending; (ii) distribution of the institution's home mortgage and consumer loans among different economic segments of the community; (iii) the number and amount of small business and small farm loans made by the institution; (iv) the number and amount of community-development loans outstanding; and (v) the institution's use of innovative or flexible lending practices to meet the needs of low-to-moderate income individuals and neighborhoods. At the election of an institution or if particular circumstances so warrant, the banking agencies will take into account in making their assessments lending by the institution's affiliates as well as community-development loans made by the lending consortia and other lenders in which the institution has invested. As part of the new regulation, all financial institutions will be required to report data on their small business and small farm loans as well as their home mortgage loans, which are currently required to be reported under the Home Mortgage Disclosure Act. The focus of the investment test will be the degree to which the institution is helping to meet the needs of its service area through qualified investments that (i) benefit low-to-moderate income individuals and small businesses or farms, (ii) address affordable housing needs, or (iii) involve donations of branch offices to minority or women's depository institutions. Assessment of an institution's performance under the investment test will be based upon the dollar amount of the institution's qualified investments, its use of innovative or complex techniques to support community-development initiatives, and its responsiveness to credit and community-development needs. The service test will evaluate an institution's systems for delivering retail banking services, taking into account such factors as (i) the geographical distribution of the 7 8 institution's branch offices and ATMs, (ii) the institution's record of opening and closing branch offices and ATMs, and (iii) the availability of alternate product-delivery systems such as home banking and loan production offices in low-to-moderate income areas. The federal regulators will also consider an institution's community-development service as part of the service test. A separate community-development test will be applied to wholesale or limited purpose financial institutions. Smaller institutions, i.e, those having total assets of less than $250 million, will be evaluated under more streamlined criteria. In addition, a financial institution will have the option of having its CRA performance evaluated based on a strategic plan of up to five years in length that is developed in cooperation with local community groups. In order to be rated under a strategic plan, the institution will be required to obtain the prior approval of its federal regulator. The joint agency CRA regulation provides that an institution evaluated under a given test will receive one of five ratings for that test: outstanding, high satisfactory, low satisfactory, needs to improve, or substantial noncompliance. An institution will then receive a certain number of points for its rating on each test and the points will be combined to produce an overall composite rating of either outstanding, satisfactory, needs to improve, or substantial non-compliance. Under the agencies' rating guidelines, an institution that receives an "outstanding" rating on the lending test will receive a rating of at least "satisfactory", and no institution can receive an overall rating of "satisfactory" unless it receives a rating of at least "low satisfactory" on its lending test. In addition, evidence of discriminatory or other illegal credit practices would adversely affect an institution's overall rating. Under the new regulations, an institution's CRA rating would continue to be taken into account by its regulator in considering various types of applications. DIVIDEND RESTRICTIONS The Corporation is a legal entity separate and distinct from its banking subsidiaries and its nonbanking 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 rights 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 to the Corporation by its banking subsidiaries. Each national banking association subsidiary of the Corporation is required by federal law to obtain the prior approval of the Comptroller for the declaration of dividends if the total of all dividends to be declared by the board of directors of such bank in any year 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 banking 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 January 1, 1996, approximately $35 million was available for distribution to the Corporation without obtaining prior regulatory approval. Future dividends will depend upon the level of earnings of the banking subsidiaries of the Corporation. It is the policy of the Federal Reserve Board 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. SUPPORT OF BANKING SUBSIDIARIES Under Federal Reserve Board 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 Board policy, the Corporation may not be inclined to provide it. Moreover, if one of its banking subsidiaries should become undercapitalized, under FDICIA the Corporation would be 8 9 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 discussion under "Prompt Corrective Action" above. Under the "cross guarantee" provisions of the Federal Deposit Insurance Act (the "FDI 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 its banking subsidiaries 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 banking subsidiary will be assumed by the bankruptcy trustee and entitled to a priority of payment over certain other creditors of the bank holding company, including the holders of its subordinated debt. 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 a bank holding company and its nonbank subsidiaries). The purpose of these restrictions is to prevent misuse of the resources of the 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 by the Federal Reserve Board), the acceptance of securities issued by the affiliate as collateral for a loan and the issuance of a guarantee, acceptance or letter of credit issued 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 subsidiary of the insured bank. FDIC INSURANCE ASSESSMENTS In July 1993, the FDIC adopted a new risk-based assessment system for insured depository institutions that takes into account the risks attributable to different categories and concentrations of assets and liabilities. The new system, which went into effect on January 1, 1994, and replaces a transitional system that the FDIC had utilized for the 1993 calendar year, assigns an institution to one of three capital categories: (i) well capitalized, (ii) adequately capitalized, and (iii) undercapitalized. These three categories are substantially similar to the "prompt corrective action" categories described above with the "undercapitalized" category including institutions that are undercapitalized, significantly undercapitalized and critically undercapitalized for prompt corrective action purposes. An institution is also assigned by the FDIC to one of three supervisory subgroups within each capital group. The supervisory subgroup to which an institution is assigned is based on a supervisory evaluation provided to the FDIC by the institution's primary federal regulator and information which the FDIC determines to be relevant to the institution's financial condition and the risk posed to the deposit insurance funds (which may include, if applicable, information provided by the institution's state supervisor). An institution's insurance assessment rate is then determined based on the capital category and supervisory category to which it is assigned. Under the final risk-based assessment system, as well as the prior transitional system, there are nine assessment risk classifications (i.e., 9 10 combinations of capital groups and supervisory subgroups) to which different assessment rates are applied. Assessment rates for members of both the Bank Insurance Fund ("BIF") and the Savings Association Insurance Fund ("SAIF") for the first half of 1995, as they had been during 1994, ranged from 23 basis points (0.23% of deposits) per year for an institution in the highest category (i.e., "well capitalized" and "healthy") to 31 basis points (0.31% of deposits) for an institution in the lowest category (i.e., "undercapitalized" and "substantial supervisory concern"). These rates were established for both funds to achieve a designated ratio of reserves to insured deposits (i.e., 1.25%) within a specified period of time. Once the designated ratio for the BIF was reached, which occurred in 1995, the FDIC was authorized to reduce the minimum assessment rate below 23 basis points and to set future assessment rates at such levels that would maintain a fund's reserve ratio at the designated level. On December 11, 1995, the FDIC adopted final regulations reducing the assessment rates for BIF-member banks. Under the revised schedule, BIF-member banks, commencing January 1, 1996, will now pay assessments ranging from 0 basis points to 27 basis points. At the same time, the FDIC elected to retain the existing assessment rate of 23 to 31 basis points, depending upon the institution's risk classification, for SAIF members for the foreseeable future given the undercapitalized status of that insurance fund. The FDIC deposit insurance assessment is expected to be $2,000 per "well-capitalized" BIF-insured bank for the year 1996. On July 28, 1995, the FDIC, the Treasury Department and the OTS released statements outlining a proposed plan ("Proposed Plan") to recapitalize the SAIF. The Proposed Plan, which is pending both as a stand-alone measure and as a part of the proposed budget reconciliation legislation, would require all SAIF-member institutions to pay a special one-time assessment of approximately 85 basis points based on the amount of SAIF-assessable deposits. The special assessment would result in a significant recapitalization of the SAIF so as to enable the fund to reach its designated reserve ratio. The Proposed Plan would make other statutory changes that would strengthen the SAIF fund: the assessment base for the payments on the Financing Corporation ("FICO") bonds would be expanded to include the deposits of both BIF- and SAIF-insured institutions; the unspent funds of the RTC would be made available to cover any extraordinary and unanticipated SAIF losses until the BIF and SAIF shall be merged (a part of the Proposed Plan not supported by the Treasury Department); and the BIF and SAIF would be merged as soon as possible but no later than the beginning of 1998. The Proposed Plan would also reduce the minimum average assessment rate required under the FDI Act for a fund that is undercapitalized or has outstanding borrowings from the Treasury or the Federal Financing Bank from 23 basis points to 8 basis points. The Proposed Plan also includes special rules for undercapitalized institutions that could not pay the special assessment without increasing the risk of losses to the SAIF. Other legislative proposals made in connection with the Proposed Plan have included combining the thrift and bank charters into a single unified charter and requiring all thrifts to become banks or state-chartered savings banks. 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, 1995, 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. SAFETY AND SOUNDNESS STANDARDS The FDI Act, as amended by the FDICIA and the Riegle Community Development and Regulatory Improvement Act of 1994, requires the federal bank regulatory agencies to prescribe standards, by regulations or guidelines, relating to the internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest-rate-risk exposure, asset growth, asset quality, earnings, stock valuation and compensation, fees and benefits and such other operational and managerial standards as the agencies may deem appropriate. The federal bank regulatory agencies adopted, effective August 9, 1995, a set of guidelines prescribing safety and soundness standards pursuant to FDICIA, as amended. The guidelines establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest-rate exposure, asset growth and compensation, fees 10 11 and benefits. In general, the guidelines require, among other things, appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines. The guidelines prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director, or principal stockholder. The federal banking agencies determined that stock valuation standards were not appropriate. In addition, the agencies adopted regulations that authorize, but do not require, an agency to order an institution that has been given notice by an agency that it is not satisfying any one or more of such safety and soundness standards to submit a compliance plan. If, after being so notified, an institution should fail to submit an acceptable compliance plan or should fail in any material respect to implement an accepted compliance plan, the agency must issue an order directing action to correct the deficiency and may issue an order directing other actions of the types to which an undercapitalized association is subject under the "prompt correction action" provisions of FDICIA. See "Prompt Corrective Action" above. If an institution should fail to comply with such an order, the agency may seek to enforce such order in judicial proceedings and to impose civil money penalties. The federal bank regulatory agencies also proposed guidelines for asset quality earning standards. 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, including the holders of its subordinated debt securities, would be entitled to any payment in the event of an insolvency or liquidation of the bank. PROPOSED LEGISLATION Because of concerns relating to the competitiveness and the safety and soundness of the industry, the Congress continues to consider a number of wide-ranging proposals for altering the structure, regulation, and competitive relationships of the nation's financial institutions. Among such bills are proposals to combine banks and thrifts into a unified charter, to alter the statutory separation of commercial and investment banking, and to further expand the powers of depository institutions, bank holding companies, and competitors of depository institutions. It cannot be predicted whether or in what form any of these proposals will be adopted or the extent to which the business of the Corporation may be affected thereby. PERSONNEL As of February 29, 1996, the Corporation, including all subsidiaries, had 5,690 employees (including 1,221 part-time employees). 11 12 STATISTICAL DISCLOSURES The statistical information required by Item 1 may be found in the 1995 Annual Report to Shareholders (Exhibit 13 hereto) and, to the extent indicated, is incorporated herein by reference, as follows:
Page in the Corporation's 1995 Annual Report to Guide 3 Disclosure Shareholders* ------------------ -------------------------- I. Distribution of Assets, Liabilities, and Shareholders' Equity; Interest Rates and Interest Differential A. Average Balance Sheet 22 B. Net Interest Earnings Analysis 22 C. Rate/Volume Analysis 23 II. Investment Portfolio A. Book Value of Investment Securities 27, 44, and 45 B. Maturities of Investment Securities 45 C. Investment Securities Concentrations not applicable III. Loan Portfolio A. Types of Loans 24 and 46 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 24 2. Potential Problem Loans 14 3. Foreign Outstandings Not significant 4. Loan Concentrations 13 D. Other Interest-Bearing Assets Not significant IV. Summary of Loan Loss Experience A. Analysis of Allowance for Loan Losses 25 B. Allocation of the Allowance for Loan Losses 24 V. Deposits A. Average Balances 22 and 23 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 4 B. Return on Equity 4 C. Dividend Payout Ratio 4 D. Equity to Assets Ratio 4 VII. Short-Term Borrowings 47 and 48
*Unless otherwise noted 12 13 The following table presents the maturities and sensitivities of the Corporation's loans to changes in interest rates at December 31, 1995:
DUE DUE AFTER ONE DUE AFTER WITHIN BUT WITHIN FIVE ONE YEAR FIVE YEARS YEARS -------- ------------- --------- (DOLLARS IN THOUSANDS) Commercial, Financial, and Agricultural $ 917,385 $437,366 $ 95,299 Real Estate - Construction 255,338 42,995 24,368 ---------- -------- -------- Total $1,172,723 $480,361 $119,667 ========== ======== ======== Fixed Rate $336,648 $ 83,114 ======== ======== Variable Rate $143,713 $ 36,553 ======== ========
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, 1995 --------------------- (DOLLARS IN THOUSANDS) Under 3 Months $298,445 3 to 6 Months 227,925 6 to 12 Months 187,753 Over 12 Months 187,631 -------- Total $901,754 ========
13 14 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 58 Chief Executive Officer of the Corporation; Chairman of the Board and Chief Executive Officer of UPNB Jackson W. Moore President and Chief Operating 47 Officer of the Corporation Jack W. Parker Executive Vice President and 49 Chief Financial Officer of the Corporation; Executive Vice President and Chief Financial Officer of UPNB M. Kirk Walters Senior Vice President, Treasurer, 55 and Chief Accounting Officer of the Corporation; Senior Vice President of UPNB James A. Gurley Executive Vice President of the 62 Corporation; Executive Vice President of UPNB
Mr. Rawlins has been Chairman of the Boards 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 and 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 BankCards, Mortgage Servicing and Origination, Funds Management, Data Processing, Operations, Human Resources, Financial, Legal, Credit and Review, Marketing, and Alternative Investments and Insurance Products. 14 15 UPNB's headquarters is located in a 70,000 square-foot company-owned building in East Memphis. In addition to its headquarters, the building also houses UPNB's Commercial Group, Trust Group, Brokerage Services, and Retail Group Administration. As of March 1, 1996, the Corporation operated 188 banking offices in Tennessee, 116 in Mississippi, 30 in Missouri, 44 in Arkansas, 15 in Louisiana, 7 in Alabama, and 5 locations in Kentucky. The majority of these locations are owned. The subsidiaries also operate 324 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. 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 upon 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 pending or threatened legal proceedings. Certain of the Corporation's Mississippi banks ("UPC Banks") are defendants in various lawsuits pending in state and Federal courts in Mississippi related to the collateral protection insurance program in effect in the UPC Banks in the 1980s and 1990s. Three of the federal actions (filed in late 1995) purport to have been brought as class actions and include allegations that premiums were excessive and improperly calculated; coverages were improper and not disclosed; and improper payments were paid to the UPC Banks by the insurance companies, allegedly constituting violations of various state and federal statutes and the common laws. The CPI programs appear to have been substantially similar in many respects to CPI programs of other Mississippi banks, often with the same insurance carriers. Consequently, there are now approximately 13 similar putative class actions (several of which have been assigned to the U. S. District Court for the Southern District of Mississippi, Southern Division) pending against at least five Mississippi banks (including those against the UPC Banks), various insurance agencies and carriers based upon their CPI programs. The relief sought in the purported class actions includes actual damages, treble damages under certain statutes, other statutory damages, and unspecified punitive damages, while one of the individual suits seeks actual damages of $5 million and another seeks $25 million in punitive damages. The Corporation's broker/dealer subsidiaries (now inactive) were among the numerous defendants in various individual and class actions pending in the United States District Court for the Eastern District of Louisiana involving the issuance and sale of eight taxable municipal bond issues. During the fourth quarter of 1995, the court approved settlement of these actions (which settlement was without material loss to the Corporation) and dismissed the actions with prejudice as they related to the Corporation and its subsidiaries. In July 1991, UPNB was joined with nine other banks as defendants in a civil action in the Circuit Court of Shelby County, Tennessee, which, as ultimately amended, alleged that the banks unlawfully conspired to fix the charges for checks drawn on insufficient funds ("NSF") and sought recovery for fees charged for deposited third-party checks which were returned uncollected, included claims of unfair and deceptive trade practices, breach of contract, tortious conduct, violation of provisions of the UCC and usury, and sought compensatory and punitive damages of $25 million against each defendant, treble damages under the Tennessee Consumer Protection Act and certification of a class of plaintiffs comprised of all depositors who have been charged the NSF fees. In March 1992, the state court proceeding was dismissed and in 1993 the Tennessee Court of Appeals affirmed the dismissal of the proceeding. During the fourth quarter of 1995, the Tennessee Supreme Court reversed its earlier decision declining to review the state court action and agreed to hear the plaintiffs' appeal. In May 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 (which prohibits price-fixing by competitors) and the Tennessee Consumer Protection Act, requesting certification of a similarly broad class, and sought injunctive relief and damages for more than $100 million. During 1993 and 1994, the federal court granted defendants' motions to dismiss the claims. Plaintiffs' motion for reconsideration was unsuccessful, as were plaintiffs' appeals to the United States Court of Appeals for the Sixth Circuit. On January 6, 1996, the U. S. Supreme Court denied plaintiffs' petition for review of the Sixth Circuit Court's decision, thus terminating the federal action. 15 16 Certain subsidiaries of the Corporation were threatened in 1989 with a civil action by the FDIC for the estate of a closed savings association, which action would reportedly seek compensatory damages of at least $37 million and other relief resulting from the sale of covered call options to such association. A tolling and forbearance agreement, entered into by all parties to the threatened action in 1989, continues in effect. During the fourth quarter of 1995, counsel for the FDIC indicated that the FDIC does not intend to pursue this matter. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The information required by Item 5 is included in Table 14 captioned "Selected Quarterly Data" included in the Corporation's 1995 Annual Report to Shareholders on pages 28 and 29 and is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information required by Item 6 is included under the heading "Selected Financial Data" in the Corporation's 1995 Annual Report to Shareholders on page 4 and 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 under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition" in the Corporation's 1995 Annual Report to Shareholders on pages 5 - 31 and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by Item 8 is included in the Corporation's 1995 Annual Report to Shareholders on pages 32 - 63 and in Table 14 captioned "Selected Quarterly Data" on pages 28 and 29 which are 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 proxies for the Annual Meeting of shareholders to be held on April 25, 1996 ("Proxy Statement") 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 9 - 16 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. 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 16 17 heading "Certain Relationships and Transactions" on page 16 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 1995 Annual Report to Shareholders, are incorporated herein by reference in Item 8:
Page in Annual Report ------------- Report of Management 32 Report of Independent Accountants 33 Consolidated Balance Sheet - 34 December 31, 1995 and 1994 Consolidated Statement of Earnings - 35 Years ended December 31, 1995, 1994, and 1993 Consolidated Statement of Changes in Shareholders' 36 Equity - Years ended December 31, 1995, 1994, and 1993 Consolidated Statement of Cash Flows - 37 Years ended December 31, 1995, 1994, and 1993 Notes to Consolidated Financial Statements 38
(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 18 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 26, 1995 Press Release announcing Third Quarter 1995 operating results November 6, 1995 Subordinated Capital Notes due 2005 November 16, 1995 Interim Unaudited Financial Statements of Capital Bancorporation, Inc., dated as of and for the three and nine months ended September 30, 1995 and 1994 December 8, 1995 Proforma Financial Statements dated September 30, 1995 January 5, 1996 Acquisition of Capital Bancorporation, Inc. on December 31, 1995 March 8, 1996 Union Planters Corporation and Leader Financial Corporation enter into an agreement and plan of merger pursuant to which Leader will be acquired by Union Planters Corporation
17 18 SIGNATURES Pursuant to the requirements of Sections 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 18, 1996 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 18th of March, 1996. /s/ Benjamin W. Rawlins, Jr. /s/ Jack W. Parker - --------------------------------------- -------------------------------- Benjamin W. Rawlins, Jr. Jack W. Parker Chairman of the Board, Chief Executive Executive Vice President and Officer, 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 Director and Chief Accounting Officer /s/ Albert M. Austin /s/ Stanley D. Overton - --------------------------------------- -------------------------------- Albert M. Austin Stanley D. Overton Director Director /s/ Dr. V. Lane Rawlins - --------------------------------------- ------------------------------- Marvin E. Bruce Dr. V. Lane Rawlins Director Director /s/ George W. Bryan - --------------------------------------- -------------------------------- 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 /s/ Milton J. Womack - --------------------------------------- -------------------------------- C. J. Lowrance III Milton J. Womack Director Director 18 19 EXHIBIT INDEX 3(a) Restated Charter of Incorporation, as amended July 21, 1995, of Union Planters Corporation (filed herewith) 3(b) Amended and Restated Bylaws, as amended February 28, 1995, of Union Planters Corporation (incorporated by reference to Exhibit 3(b) to the Annual Report on Form 10-K dated December 31, 1994) 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 Registration Statement on Form 8-A dated as of January 19, 1989 on Form 8-K filed February 1, 1989, Commission File No. 0-6919) 4(b) Indenture dated as of 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 as of 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 as of October 15, 1993 between the Corporation and The First National Bank of Chicago as Trustee**** 4(e) Form of Subordinated Debt Security (6.25% Subordinated Notes due 2003)****** 4(f) Form of Subordinated Debt Security (6 3/4% Subordinated Notes due 2005)******* 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, filed on March 26, 1990, Commission File No. 0-6919) 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) 10(i) Union Planters Corporation Supplemental Executive Retirement Plan for Executive Officers (incorporated by reference to Exhibit 10 to the Quarterly Report on Form 10-Q dated March 31, 1995) 10(j) Union Planters Corporation Executive Deferred Compensation Plan for Executives dated February 23, 1996 (filed herewith) i 20 EXHIBIT INDEX (continued) 10(k) Agreement and Plan of Merger, dated as of March 8, 1996, by and between Union Planters Corporation and Leader Financial Corporation (incorporated by reference to Exhibit 2.1 to Union Planters Corporation's Current Report on Form 8-K dated March 8, 1996, filed on March 12, 1996) 10(l) Stock Option Agreement, dated March 9, 1996, issued by Leader Financial Corporation to Union Planters Corporation (incorporated by reference to Exhibit 2.2 to Union Planters Corporation's Current Report on Form 8-K dated March 8, 1996, filed on March 12, 1996) 11 Computation of Per Share Earnings (filed herewith) 13 1995 Annual Report to Security Holders (filed herewith) 21 Subsidiaries of the Registrant (filed herewith) 23 Consent of Price Waterhouse LLP (filed herewith) 27 Financial Data Schedule (for SEC use only) (filed herewith) * Incorporated by reference to Exhibit 4 filed as part of Registration Statement No. 33-27784, filed March 31, 1989 ** Incorporated by reference to Exhibit 4(a) filed as part of Registration Statement No. 33-35928, filed July 23, 1990 *** Incorporated by reference to Exhibit 4 filed as part of Registration Statement No. 33-52434, filed October 19, 1992 **** Incorporated by reference to Exhibit 4(a) filed as part of Registration Statement No. 33-50655, filed October 21, 1993 ***** Incorporated by reference to Exhibit No. 4 filed as part of Registration Statement No. 33-23306, filed April 15, 1988 ****** Incorporated by reference to Exhibit 4(b) filed as part of Registration Statement No. 33-50655, filed October 21, 1993 ******* Incorporated by reference to Exhibit 4(b) filed as part of Registration Statement No. 33-63791, filed October 27, 1995 ii EX-3.A 2 RESTATED CHARTER 1 Exhibit 3(a) RESTATED CHARTER OF UNION PLANTERS CORPORATION ------------------------- FIRST: CORPORATE NAME: The name of the Corporation is: * * * UNION PLANTERS CORPORATION * * * (hereinafter sometimes referred to as the "Corporation"). SECOND: DURATION: The duration of the Corporation is perpetual. THIRD: PRINCIPAL OFFICE: The address of the principal office of the Corporation in the State of Tennessee shall be 7130 Goodlett Farms Parkway, in the City of Cordova, County of Shelby. The registered agent is George V. Kinney, Cashier, 7130 Goodlett Farms Parkway, Cordova, Shelby County, Tennessee 38018. FOURTH: TYPE OF CORPORATION: The corporation is for profit. FIFTH: CORPORATE PURPOSES: Subject to any limitations which may be imposed upon its activities by applicable law, the Corporation is formed to engage in any lawful act or activity for which corporations may be organized under the Tennessee Business Corporation Act. Specifically, but not by way of limitation, the Corporation is formed for the following purposes: (a) To acquire by purchase; by subscription; by exchange; in exchange for its Common Stock, Preferred Stock, bonds, debentures or other obligations; or to acquire in any other manner; or to organize de novo; and to take, receive, hold, own, sell, assign, transfer, exchange, pledge, hypothecate, dispose of or otherwise deal with any interest in any business whether or not represented by shares of stock, shares, bonds, debentures, notes, participation certificates, warrants, rights, options, and without limitation any securities or instruments evidencing rights or options to receive, purchase or subscribe for any interest in any business (wherever located or organized) or any securities, whether issued by or created by any person, firm, association, corporation, national banking association, state-chartered bank, trust company, savings bank, business trust, syndicate, limited partnership, organization, or by any other entity; and to possess and exercise in respect thereof any and all of the rights, powers and privileges of owners or holders who are natural persons including, without limitation, the exercise of any voting rights pertaining thereto; (b) To purchase or otherwise acquire any property, tangible or intangible, whether real, personal or mixed and wherever located and to receive, hold, manage, use, dispose of and otherwise exercise all rights, powers and privileges of ownership thereof; (c) To promote, finance, advise, counsel and assist in any way, any person or any business entity in which the Corporation shall have any interest of any kind; (d) To do all things necessary or desirable to enhance the value of or to protect or preserve the interest of the Corporation in any business entity, securities or other property of any type which it may own or in which it may have any interest of any kind; and (e) To render assistance, counsel and advice to any person or entity and to serve or represent the same in any capacity whatsoever, whether or not the Corporation shall have any ownership interest in such person or entity. SIXTH: CAPITAL STOCK: The total number of shares of all classes of stock to which the Corporation shall have authority to issue is hundred and ten million (110,000,000) shares, which shall be divided into two classes as follows: ten million (10,000,000) shares of Preferred Stock without par value (Preferred Stock) and one hundred million (100,000,000) shares of Common Stock of the par value of $5.00 per share (Common Stock). The designations, voting powers, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions of the above classes of stock and other general provisions relating thereto shall be as follows: PREFERRED STOCK (a) Shares of Preferred Stock may be issued in one or more series at such time or times and for such consideration or considerations as the Board of Directors may determine. All shares of any one series shall be of equal rank and identical in all respects except the dates from which dividends accrue or accumulate with respect thereto may vary. (b) The Board of Directors is expressly authorized at any time, and from time to time, to provide for the issuance of shares of Preferred Stock in one or more series, with such voting powers, full or limited, but not to exceed one vote per share, or without voting powers and with such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or Page 1 of Union Planters Corporation Charter 2 resolutions providing for the issuance thereof adopted by the Board of Directors, and as are not stated and expressed in this Charter, or any Amendment thereto, including, (but without limiting the generality of the foregoing) the following: (1) The distinctive designation and number of shares comprising such series, which number may (except where otherwise provided by the Board of Directors in creating such series) be increased or decreased (but not below the number of shares then outstanding) from time to time by action of the Board of Directors; (2) The dividend rate or rates on the shares of such series and the relation which such dividends shall bear to the dividends payable on any other class or classes of capital stock; the terms and conditions upon which and the periods in respect of which dividends shall be payable; whether and upon what conditions such dividends shall be cumulative, non-cumulative or partially cumulative and, if cumulative or partially cumulative, the date or dates from which dividends shall accumulate; (3) Whether the shares of such series shall be callable or redeemable, the limitations and restrictions with respect to such call or redemption, the time or times when, the price or prices at which, and the manner in which such shares shall be callable or redeemable, including the manner of selecting shares of such series for call or redemption if less than all shares are to be called or redeemed; (4) The amount payable upon shares of such series upon the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Corporation; (5) Whether the shares of such series shall be subject to the operation of a purchase, retirement or sinking fund, and, if so, whether and upon what conditions such purchase, retirement sinking fund shall be cumulative, partially cumulative or non-cumulative, the extent to which and the manner in which such fund shall be applied to the purchase, call or redemption of the shares or such series for retirement or to other corporate purposes and the terms and provisions relative to the operation thereof; (6) Whether the shares of such series shall be convertible into or exchangeable for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation, and, if so convertible or exchangeable, the price or prices or the rate or rates of conversion or exchange, and the method, if any, of adjusting the same, and any other terms and conditions of such conversion or exchange, provided, however, that no shares of any such series shall be convertible into shares of any other class or series having prior or superior rights and preferences as to dividends or distributions of assets upon liquidation, and provided further that shares without par value shall not be convertible into shares with par value unless that part of the stated capital of the Corporation represented by such shares without par value is, at the time of conversion, at least equal to the aggregate par value of the shares into which the shares without par value are to be converted; (7) The voting powers, full and/or limited, if any, of the shares of such series; and whether and under what conditions the shares of such series (alone or together with the shares of one or more other series having similar provisions) shall be entitled to vote separately as a single class, for the election of one or more additional directors of the Corporation in case of dividend arrearage or other specified events, or upon other specified matters; (8) Whether the issuance of any additional shares of such series, or of any shares of any other series, shall be subject to restrictions as to issuance, or as to the powers, preferences or rights of any such other series; and (9) Any other preferences, privileges and powers, and relative, participating, optional or other special rights, and qualifications, limitations or restrictions of such series, as the Board of Directors may deem advisable and as shall be consistent with the provisions of the laws of the State of Tennessee and of this Charter. (c) No dividends shall be paid or declared or set apart on any particular series of Preferred Stock in respect of any period unless accumulated dividends shall be or shall have been paid, or declared and set apart for payment, pro rata on all shares of Preferred Stock at the time outstanding of each other series, so that the amount of dividends declared on such particular series shall bear the same ratio to the amount declared on each such other series as the dividend rate of such particular series shall bear to the dividend rate of such other series. (d) Unless and except to the extent otherwise required by law or provided in the resolution or resolutions of the Board of Directors creating any series of Preferred Stock pursuant to this ARTICLE SIXTH, the holders of the Preferred Stock shall have no voting power with respect to any matter whatsoever. (e) Shares of Preferred Stock called, redeemed, converted, exchanged, purchased, retired or surrendered to the Corporation, or which have been issued and reacquired in any manner, shall, upon compliance with any applicable provisions of the Tennessee Business Corporation Act, have the status of authorized and unissued shares of Preferred Stock and may be reissued by the Board of Directors as part of the series of which they were originally a part or may be reclassified into and reissued as part of a new series or as a part of any other series, all subject to the protective conditions or restrictions of any outstanding series of Preferred Stock. SERIES A PREFERRED STOCK (f) Pursuant to the authority vested in the Board of Directors in accordance with the provisions of this ARTICLE SIXTH of the Charter, the Board of Directors does hereby create, authorize and provide for the issuance of Series A Preferred Stock out of the class of 10,000,000 shares of preferred stock, no par value (the "Preferred Stock"), having the voting powers, designation, relative, participating, optional and other special rights, preferences, and qualifications, limitations and restrictions thereof that are set forth as follows: (1) Designation and Amount. The shares of such series shall be designated as Series A Preferred Stock ("Series A Preferred Stock") and the number of shares constituting such series shall be 250,000. Such number of shares may be adjusted by appropriate action of the Board of Directors. (2) Dividends and Distributions. (a) Subject to the prior and superior rights of the holders of any shares of any other series of Preferred Stock or any other shares of preferred stock of the Corporation ranking prior and superior to the shares of Series A Preferred Stock with respect to dividends, each holder of one one-hundredth (1/100) of a share (a "Unit") of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for that purpose, (i) dividends payable in cash on the 1st day of January, April, July and October in each year (each such date being a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of such Unit of Series A Preferred Stock, in an amount per Unit (rounded Page 2 of Union Planters Corporation Charter 3 to the nearest cent) equal to the greater of (x) $.01 or (y) subject to the provision for adjustment hereinafter set forth, the aggregate per share amount of all cash dividends declared on shares of the common stock of the Corporation, par value $5.00 per share, (the "Common Stock") since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of a Unit of Series A Preferred Stock, and (ii) subject to the provision for adjustment hereinafter set forth, quarterly distributions (payable in kind) on each Quarterly Dividend Payment Date in an amount per Unit equal to the aggregate per share amount of all non-cash dividends or other distributions (other than a dividend payable in shares of Common Stock or a subdivision of the outstanding share of Common Stock, by reclassification or otherwise) declared on shares of Common Stock since the immediately preceding Quarterly Dividend Payment Date, or with respect to the first Quarterly Dividend Payment Date, since the first issuance of a Unit of Series A Preferred Stock. In the event that the Corporation shall at any time after January 19, 1989 (the "Rights Declaration Date") (i) declare or pay any dividend on outstanding shares of Common Stock payable in shares of Common Stock, or (ii) subdivide outstanding shares of Common Stock or (iii) combine outstanding shares of Common Stock into a smaller number of shares, then in each such case the amount to which the holder of a Unit of Series A Preferred Stock was entitled immediately prior to such event pursuant to the preceding sentence shall be adjusted by multiplying such amount of a fraction the numerator of which shall be the number of shares of Common Stock that are outstanding immediately after such event and the denominator of which shall be the number of shares of Common Stock that were outstanding immediately prior to such event. (b) The Corporation shall declare a dividend or distribution on Units of Series A Preferred Stock as provided in paragraph (a) above immediately after it declares a dividend or distribution on the shares of Common Stock (other than a dividend payable in shares of Common Stock); provided, however that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend payment Date, a dividend of $.01 per Unit on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (c) Dividends shall begin to accrue and shall be cumulative on each outstanding Unit of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issuance of such Unit of Series A Preferred Stock, unless the date of issuance of such Unit is prior to the record date for the First Quarterly Dividend Payment Date, in which case, dividends on such Unit shall begin to accrue from the date of issuance of such Unit, or unless the date of issuance is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of Units of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on Units of Series A Preferred Stock in an amount less than the aggregate amount of all such dividends at the time accrued and payable on such Units shall be allocated pro rata on a unit-by-unit basis amount all Units of Series A Preferred Stock at the time outstanding. The Board of Directors may fix a record date for the determination of holders of Units of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. (3) Voting Rights. The holders of Units of Series A Preferred Stock shall have the following voting rights. (a) Subject to the provision for adjustment hereinafter set forth, each Unit of Series A Preferred Stock shall entitle the holder thereof to one vote on all matters submitted to a vote of the shareholders of the Corporation. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivide outstanding shares of Common Stock or (iii) combine the outstanding shares of Common Stock into a smaller number of shares, then in each such case the number of votes per Unit to which holders of Units of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately after such event and the denominator of which shall be the number of shares of Common Stock that were outstanding immediately prior to such event. (b) Except as otherwise provided herein or by law, the holders of Units of Series A Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of shareholders of the Corporation. (c) Except as set forth herein or required by law, holders of Units of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of shares of Common Stock as set forth herein) for the taking of any corporate action. (4) Certain Restrictions. (a) Whenever quarterly dividends or other dividends or distributions payable on Units of Series A Preferred Stock as provided in paragraph 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on outstanding Units of Series A Preferred Stock shall have been paid (or set aside for payment) in full, the Corporation shall not: (i) declare or pay dividends on, make any other distributions or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior to the Series A Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity as to dividends with the Series A Preferred Stock, except for dividends paid ratably on Units of Series A Preferred Stock and shares of all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of such Units and all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, provided, however, that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock ranking junior (both as to dividends and upon liquidation, dissolution or winding up) to the Series A Preferred Stock; or (iv) purchase or otherwise acquire for consideration any Units of Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such Units. (b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this paragraph 4, purchase or otherwise acquire such shares at such time and in such manner. (5) Reacquired Shares. Any Units of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such Units shall, upon their cancellation, become authorized but unissued Units of Preferred Page 3 of Union Planters Corporation Charter 4 Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. (6) Liquidation, Dissolution or Winding Up. (a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, no distribution shall be made (i) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless the holders of Units of Series A Preferred Stock shall have received, subject to adjustment as hereinafter provided in paragraph (b), the greater of either (y) $90.00 per Unit plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not earned or declared, to the date of such payment, or (z) the amount equal to the aggregate per share amount to be distributed to holders of shares of Common Stock, or (ii) to the holders of shares of stock ranking on a parity upon liquidation, dissolution or winding up with the Series A Preferred Stock, unless simultaneously therewith distributions are made ratably on Units of Series A Preferred Stock and all other shares of such parity stock in proportion to the total amounts to which the holders of Units of Series A Preferred Stock are entitled under Clause (i)(y) of this sentence and to which the holders of such shares of such parity stock are entitled, in each case upon such liquidation dissolution or winding up. (b) in the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on outstanding shares of Common Stock payable in shares of Common Stock, or (ii) subdivide outstanding shares of Common Stock, or (iii) combine outstanding shares of Common Stock into a smaller number of shares, then in each such case the aggregate amount to which holders of Units of Series A Preferred Stock were entitled immediately prior to such event pursuant to clause (i)(z) of paragraph (1) of this paragraph 6 shall be adjusted by multiplying such amount by a fraction the numerator of which shall be the number of shares of Common Stock that are outstanding immediately after such event and the denominator of which shall be the number of shares of Common Stock that were outstanding immediately prior to such event. (7) Share Exchange, Merger, Etc. In case the Corporation shall enter into any share exchange, merger, combination or other transaction in which the shares of Common Stock are exchanged for or converted into other stock or securities, cash and/or any other property, then in any such case Units of Series A Preferred Stock shall at the same time be similarly exchanged for or converted into an amount per Unit (subject to the provision for adjustment hereinafter set forth) equal to the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is converted or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on outstanding shares of Common Stock payable in shares of Common Stock, or (ii) subdivide outstanding shares of Common Stock, or (iii) combine outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the immediately preceding sentence with respect to the exchange or conversion of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which shall be the number of shares of Common Stock that are outstanding immediately after such event and the denominator of which shall be the number of shares of Common Stock that were outstanding immediately prior to such event. (8) Redemption. The Units of Series A Preferred Stock shall not be redeemable at the option of the Corporation or any holder thereof. Notwithstanding the foregoing sentence of this Section, the Corporation may acquire Units of Series A Preferred Stock in any other manner permitted by law and the Charter or Bylaws of the Corporation. (9) Ranking. The Units of Series A Preferred Stock shall rank junior to all other series of the Preferred Stock and to any other class of preferred stock that hereafter may be issued by the Corporation as to the payment of dividends and the distribution of assets, unless the terms of any such series or class shall provide otherwise. (10) Amendment. The Charter, including without limitation the provisions hereof, shall not hereafter be amended, either directly or indirectly, or through merger or share exchange with another corporation, in any manner that would alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect the holders thereof adversely without the affirmative vote of the holders of a majority or more of the outstanding Units of Series A Preferred Stock, voting separately as a class. (11) Fractional Shares. The Series A Preferred Stock may be issued in Units or other fractions of a share, which Units or fractions shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Preferred Stock. SERIES B PREFERRED STOCK (g) Pursuant to the authority vested in the Board of Directors in accordance with the provisions of this Article VI of the Charter, the Board of Directors of Union Planters Corporation (the "Corporation") does hereby create, authorize and provide for the issuance of a new series of preferred stock out of the authorized class of 10,000,000 shares of preferred stock, no par value (the "Preferred Stock"), having the voting powers, designations, relative participating, optional and other special rights, preferences, qualifications, limitations and restrictions thereof that are set forth as follows: 1. Designation and Amount. The shares of such series shall be designated as Series B $8.00 Nonredeemable Cumulative Convertible Preferred Stock (the "Series B Preferred Stock") and the number of shares constituting such series shall be 44,000. Such number of shares may be adjusted by appropriate action of this Board of Directors. 2. Dividends and Distributions. (a) Subject to the prior and superior rights of the holders of any shares of any other series of Preferred Stock of the Corporation ranking prior and superior to the shares of Series B Preferred Stock with respect to dividends, the holders of the Series B Preferred Stock, in preference to the holders of the $5.00 par value common stock of the Corporation (the "UPC Common Stock"), and any other capital stock of the Corporation ("Capital Stock") ranking junior to the Series B Preferred Stock as to the payment of dividends, shall be entitled to receive as and if declared by the Board of Directors out of funds legally available for that purpose, cumulative cash dividends at, but not exceeding, $8.00 per share per annum and no more. (b) Dividends upon shares of Series B Preferred Stock shall be cumulative so that if in respect of any past quarterly dividend period or periods, full dividends accrued on the outstanding shares of Series B Preferred Stock shall not have been paid, the aggregate deficiency shall be fully paid or declared or set aside for payment before (i) any dividend shall be declared and paid or set aside for payment on UPC Common Stock, or any other Capital Stock ranking junior to the Series B Preferred Stock as to the payment of dividends, (ii) any other distribution of assets shall be made with respect to UPC Common Stock or any other Capital Stock ranking junior to the Series B Preferred Stock as to the payment of dividends, and (iii) the redemption or purchase of any shares of Page 4 of Union Planters Corporation Charter 5 Series B Preferred Stock, UPC Common Stock, or any other Capital Stock ranking on a parity with or junior to the Series B Preferred Stock as to the payment of dividends by the Corporation. (c) Cash dividends on the Series B Preferred Stock shall commence to accrue and shall be cumulative from the Effective Date of the Merger between Union Planters - Steiner Acquisition Company and Steiner Holdings pursuant to that Merger Agreement dated June 9, 1989 between UPC, Subsidiary, Steiner Bank, Arnold Steiner and Mary Steiner (the "Merger Agreement"); and, otherwise, from the Quarterly Dividend Payment Date on which cash dividends were paid on Series B Preferred Stock (in respect of a dividend on Series B Preferred Stock) next preceding the date of issuance of such shares of Series B Preferred Stock. (d) Cash dividends on shares of Series B Preferred Stock shall be payable quarterly on the third Friday of February, May, August and November (a "Quarterly Dividend Payment Date") and will have the same record date for the payment of dividends as the record date for payment of dividends on UPC Common Stock, and, if there is no record date for the payment of dividends on UPC Common Stock, then the record date for the payment of dividends of the Series B Preferred Stock shall be that date which is 15 days prior to a given Quarterly Dividend Payment Date. 3. No Preemptive Rights. No holders of Series B Preferred Stock shall be entitled, as of right, to purchase or subscribe for any part of the unissued Series B Preferred Stock, UPC Common Stock, or Capital Stock, or to purchase or subscribe for any bonds, certificates of indebtedness, debentures, or other securities convertible into or carrying options, warrants or rights to purchase stock or other securities of the Corporation, or to purchase or subscribe for any stock or any securities of the Corporation purchased by the Corporation or by its nominee or nominees, or to have any other preemptive rights now or hereafter defined by the laws of the State of Tennessee; provided, however, that this section shall not be deemed to prohibit the exercise by the holders of UPC Series B Preferred Stock of Rights issued pursuant to the UPC Share Purchase Rights Agreement. 4. Liquidation. (a) In the event of the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of Series B Preferred Stock shall be entitled to receive, after payment or provision for payment of all debts, but before any distribution of assets may be made to the holders of UPC Common Stock, or any other Capital Stock of the Corporation ranking junior to the Series B Preferred Stock as to liquidation, out of assets of the Corporation available for distributions to its stockholders, $100 per share, plus, in each case, accrued and unpaid dividends thereon to the date of payment thereof. After such payment has been made in full to the holders of the outstanding shares of Series B Preferred Stock (or funds necessary for the payment have been set aside in trust for the account of such holders so as to be and continue to be available therefor), the holders of Series B Preferred Stock shall be entitled to no further distribution, and the remaining assets of the Corporation shall be divided and distributed among the holders of UPC Common Stock (subject to any prior rights of any holders of any other Capital Stock of the Corporation entitled to participate with the UPC Common Stock as to the distribution of assets) then outstanding according to their respective shares. If on liquidation, dissolution or winding up, the net assets of the Corporation available for distribution among the holders of Series B Preferred Stock are insufficient to permit full payment to them, the entire net assets of the Corporation so available for distribution shall be distributed ratably among the holders of Series B Preferred Stock and the holders of any other Capital Stock ranking on a parity with the Series B Preferred Stock as to liquidation and distribution of assets. Nothing herein contained shall be construed to prohibit the retirement of Series B Preferred Stock by purchase, and neither the purchase of Series B Preferred Stock, the consolidation or merger of the Corporation, nor the sale or transfer of all or substantially all of the assets of the Corporation as an entirety shall be deemed a "liquidation, dissolution or winding up of the Corporation" within the meaning of this paragraph 4. 5. Right to Vote. Except to the extent that the power or right to vote is granted or required pursuant to the Tennessee Business Corporation Act, as amended from time to time, the Series B Preferred Stock shall have no power or right to vote. 6. Conversion of Series B Preferred Stock. The holders of shares of Series B Preferred Stock shall have the right, at their option, any time after that date which is five (5) years after the Effective Date of the Merger, to convert such shares into shares of UPC Common Stock on the following terms and conditions: (a) Except as provided in subsection (c) of this Section 6, each share of Series B Preferred Stock shall be convertible into that number of shares of UPC Common Stock determined by dividing (i) the product of the multiplication of the number of Series B Preferred Shares issued in the Merger by $100, by (ii) $12.95, then dividing that number by the number of Series B Preferred Shares issued in the Merger (the "Conversion Ratio"). (b) Except as provided in subsection (c) of this Section 6, the estate of Arnold Steiner and the trustees of the trusts which receive assets of the Estate of Bernard S. Steiner, Jr. pursuant to the provisions of the last will and testament of Bernard S. Steiner, Jr., and which shall have received Series B Preferred Stock pursuant to the Merger and such last will and testament, shall have the right to convert the shares of Series B Preferred Stock they own in accordance with the Conversion Ratio within five (5) years from the Effective Date of the Merger, (i) as to the estate of Arnold Steiner, upon the death of Arnold Steiner, and as to each such trust, upon the death(s) of the oldest permissible income beneficiary of that particular trust; (ii) should there be a change in control (as defined in Section 2(a) of the Bank Holding Company Act of 1956, as amended, 12 U.S.C. Section 1841(a) of UPC; and (iii) should UPC issue any other preferred stock having priority as to the payment of dividends or as to liquidation preference over that of the Series B Preferred Stock. (c) If any Series B Preferred Stock shall be converted into UPC Common Stock at a time when the UPC Common Stock into which such Series B Preferred Stock is convertible has attached or attributable thereto Rights issued pursuant to the UPC Share Purchase Rights Agreement, the surrender of such Series B Preferred Stock shall effectively cancel all Rights attached or attributable to the share(s) of Series B Preferred Stock so converted. (d) If at any time, or from time to time, the Corporation shall (i) declare and pay, on or in respect of, UPC Common Stock any dividend payable in shares of UPC Common Stock, (ii) subdivide the outstanding shares of UPC Common Stock into a greater number of shares, or contract the number of outstanding shares of Series B Preferred Stock by combining such shares into a smaller number of shares, or (iii) contract the number of outstanding shares of UPC Common Stock by combining such shares into a smaller number of shares, or subdivide the outstanding shares of Series B Preferred Stock into a greater number of shares of Series B Preferred Stock, the Conversion Ratio shall be proportionately adjusted as of such time. (e) If the Corporation consolidates with or merges into any corporation or reclassifies outstanding shares of UPC Common Stock (other than by way of subdivision or contraction of such shares) each share of Series B Preferred Stock shall thereafter be convertible into the number of shares of stock or other securities or property of the Corporation, or of the entity resulting from such consolidation or merger, to which a holder of the number of shares of UPC Common Stock deliverable upon conversion of such share of Series B Preferred Stock would have been entitled upon such consolidation, merger or reclassification, had the holder of such share of Series B Preferred Stock exercised his right of conversion and had such shares been issued and outstanding and had such holder been the holder of record of such UPC Common Stock at the time of such consolidation, merger or reclassification; and the Corporation shall make lawful provision therefor as a part of such consolidation, merger or reclassification. Page 5 of Union Planters Corporation Charter 6 (f) Whenever the Conversion Ratio is required to be adjusted, as herein provided, the Corporation shall promptly file with the transfer agent for the UPC Common Stock and simultaneously provide to each holder of record of Series B Preferred Stock a statement signed by the President or a Vice President or the Secretary or the Treasurer setting forth the adjusted Conversion Ratio, determined as so provided. Such statement shall set forth in reasonable detail such facts as may be necessary to show the reason for and the manner of computing such adjustment. (g) On presentation and surrender to the Corporation at any office or agency maintained for the transfer of Series B Preferred Stock or the certificates of Series B Preferred Stock so to be converted, duly endorsed for transfer, the holder of such Series B Preferred Stock shall be entitled, subject to the limitations herein contained, to receive in exchange therefor a certificate or certificates for fully paid and nonassessable shares, and cash for fractional shares of UPC Common Stock or other securities pursuant to subsection (e) above, on the basis aforesaid. The Series B Preferred Stock shall be deemed to have been converted and the person converting the same to have become the holder of record of UPC Common Stock, for the purpose of receiving dividends and for all other purposes whatever as of the date when the certificate or certificates for such Series B Preferred Stock are surrendered to the Corporation as aforesaid. The Corporation shall not be required to make any such conversion, and no surrender of the Series B Preferred Stock shall be effective for such purposes, while the books for the transfer of either class of stock are closed for any purpose, but the surrender of such shares of Series B Preferred Stock for conversion during any period while such books are closed shall become effective for all purposes of conversion immediately upon the reopening of such books, as if the conversion had been made on the date such shares of Series B Preferred Stock were surrendered. (h) The Corporation shall pay any and all taxes which may be imposed upon it with respect to the issuance and delivery of UPC Common Stock upon the conversion of the Series B Preferred Stock as herein provided. The Corporation shall not be required in any event to pay any transfer or other taxes by reason of the issuance of such UPC Common Stock in names other than those in which the Series B Preferred Stock surrendered for conversion may stand, and no such conversion or issuance of UPC Common Stock shall be made unless and until the person requesting such issuance has paid to the Corporation the amount of any such tax, or has established to the satisfaction of the Corporation and its transfer agent, if any, that such tax has been paid or is not required. Upon any conversion of Series B Preferred Stock as herein provided, no adjustment or allowance shall be made for dividends on the Series B Preferred Stock so converted, and all rights to dividends, if any, shall cease and be deemed satisfied; however, except as provided in the next sentence hereof, nothing in this section shall be deemed to relieve the Corporation from its obligation to pay any dividends which shall have been declared and shall be payable to holders of Series B Preferred Stock of record as of a date prior to such conversion even though the payment date for such dividend is subsequent to the date of conversion. 7. Reservation of UPC Common Stock. The Corporation shall, so long as any of the Series B Preferred Stock is outstanding, reserve and keep available out of its authorized and unissued UPC Common Stock, solely for the purpose of effecting the conversion of the Series B Preferred Stock, such number of shares of UPC Common Stock as shall, from time to time, be sufficient to effect the conversion of all shares of the Series B Preferred Stock then outstanding. The Corporation shall, from time to time, increase its authorized UPC Common Stock and take such other actions as may be necessary to permit the issuance from time to time of the shares of the UPC Common Stock, as fully paid and nonassessable shares, upon the conversion of the Series B Preferred Stock as herein provided. 8. Definitions. For purposes hereof: (a) The term "outstanding", when used in reference to shares of stock, shall mean issued shares, excluding shares held by the Corporation or a subsidiary thereof, and shares called for redemption, funds for the redemption of which shall have been set aside by the Corporation or deposited in trust; (b) The amount of dividends "accrued" on any share of Series B Preferred Stock as of any quarterly dividend date shall be deemed to be the amount of any unpaid dividends accumulated thereon to and including such quarterly dividend date, whether or not earned or declared, and the amount of dividends "accrued" on any shares of Series B Preferred Stock as at any date other than a quarterly dividend date shall be deemed to be (i) the amount of any unpaid dividends accumulated thereon to and including the last preceding quarterly dividend date, whether or not earned or declared, plus (ii) an amount calculated on the basis of the annual dividend rate fixed for the shares of Series B Preferred Stock (8%) for the period after such last preceding quarterly dividend date to and including the date as of which the calculation is made, based on a 360-day year or 12 consecutive 30-day months. 9. Redemption. The shares of Series B Preferred Stock shall not be redeemable at the option of the Corporation or any holder thereof. Notwithstanding the foregoing sentence of this Section, the Corporation may acquire Series B Preferred Stock in any other manner permitted by law and its Charter or Bylaws. 10. Ranking. The Series B Preferred Stock shall rank superior to that of the Corporation's Series A Preferred Stock as well as to all other series of the Corporation's preferred stock, unless the designation of rights and preferences for any other series of the Corporation's preferred stock expressly provides otherwise. 11. Amendment. The Charter, including without limitations the provisions hereof, shall not hereafter be amended, either directly or indirectly, or through merger or share exchange with another corporation, in any manner that would alter or change the powers, preferences or special rights of the Series B Preferred Stock so as to affect the holders thereof adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of Series B Preferred Stock, voting separately as a class; provided, however, that this paragraph shall have no affect on the ability of the Corporation to amend the Rights Agreement or redeem the UPC Preferred Share Purchase Rights in accordance therewith. 12. Fractional Shares. The Series B Preferred Shares may be issued in units or other fractions of a share, which units or fractions shall entitle the holder, in proportion to such holder's fractional shares, to exercise such rights, receive dividends, and participate in all distributions and derive the benefit of all other rights of holders of Series B Preferred Stock. SERIES C PREFERRED STOCK (h) Pursuant to the authority vested in the Board of Directors of Union Planters Corporation (the "Corporation") by the provisions of this Article Sixth of the Charter and by the provisions of the Tennessee Business Corporation Act, the Board of Directors of the Corporation does hereby create, authorize and provide for the issuance of a new series of preferred stock out of the Corporation's authorized class of 10,000,000 shares of no par value preferred stock (the "Preferred Stock"), having the designation, relative participating, optional and other special rights, preferences, qualifications, limitations and restrictions provided hereafter: 1. Designation and Amount. The shares of such series shall be designated as 10 3/8% Increasing Rate, Redeemable, Cumulative Preferred Stock, Series C (the "Series C Preferred Stock") and the number of shares of Preferred Stock constituting such Series C Preferred Stock shall be 690,000. Such number of shares of Series C Preferred Stock may be adjusted hereafter by appropriate action of the Board of Directors. The Series C Preferred Stock shall have a stated value (the "Stated Value") of $25.00 per share. Page 6 of Union Planters Corporation Charter 7 2. Dividends and Distributions. (a) The holders of shares of Series C Preferred Stock, in preference to the holders of the $5.00 par value common stock of the Corporation (the "UPC Common Stock") shall be entitled to receive when and as declared by the Board of Directors, out of funds legally available for the purpose, cumulative cash dividends payable quarterly at the rate per share set forth in paragraph 2(c) below, on the fifteenth day (or, if such fifteenth day is not a Business Day, on the next Business Day) of February, May, August and November in each year (a "Quarterly Dividend Payment Date"), in respect of the Quarterly Dividend Period next preceding such fifteenth day, and no other dividend or dividends. Such dividends shall be payable to holders of the Series C Preferred Stock on such date as is not more than 30 nor less than 10 days prior to the particular Quarterly Dividend Payment Date. As used herein, a "Quarterly Dividend Period" means a period of three months ending on the last day of January, April, July or October. Subject to the provisions of paragraph (c) of Section Sixth of the Charter, dividends on account of arrears for any past Quarterly Dividend Period(s) may be declared and paid at any time, without reference to any regular Quarterly Dividend Payment Date to holders of record on such date not exceeding 30 or less than 10 days preceding the payment date thereof as may be fixed by the Board of Directors. The amount of dividend per share payable for any Quarterly Dividend Period less than a full Quarterly Dividend Period shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in the period for which payable. (b) Preferred dividends upon shares of Series C Preferred Stock shall commence to accrue and be cumulative from (but not including) the day upon which the initial issuance of shares of Series C Preferred Stock occurs. (c) For each Quarterly Dividend Period ending on or before October 31, 1994, preferred dividends payable with respect to each such Quarterly Dividend Period shall be $0.648438 per share. For each Quarterly Dividend Period ending after November 1, 1994 and on or before October 31, 1995, preferred dividends payable with respect to each such Quarterly Dividend Period shall be $0.679688 per share. For each Quarterly Dividend Period ending after November 1, 1995, and on or before October 31, 1996, preferred dividends payable with respect to each such Quarterly Dividend Period shall be $0.710938 per share. For each Quarterly Dividend Period ending after November 1, 1996, preferred dividends payable with respect to such Quarterly Dividend Periods shall be $0.742188 per share. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments which may be in arrears. (d) For purposes hereof, "Business Day" shall mean any day upon which commercial banks in the City of Memphis, Tennessee, are required to be open for the transaction of their general banking business. 3. No Preemptive Rights. Holders of shares of Series C Preferred Stock shall not be entitled, as of right, to purchase or subscribe for any part of the unissued Series C Preferred Stock, any UPC Common Stock, or any other capital stock of the Corporation, or to purchase or subscribe for any bonds, certificates of indebtedness, debentures, or other securities convertible into or carrying options, warrants or rights to purchase any stock or other securities of the Corporation, or to purchase or subscribe for any stock or any securities of the Corporation purchased by the Corporation or by its nominee or nominees, or to have any other preemptive rights now or hereafter defined by the laws of the State of Tennessee. 4. Liquidation. In the event of the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of Series C Preferred Stock shall be entitled to receive, after payment or provision for payment of all debts, but before any distribution of assets may be made to the holders of UPC Common Stock or any other stock of the Corporation ranking junior to the Series C Preferred Stock as to the distribution of assets on liquidation, dissolution or winding up of the Corporation, out of assets of the Corporation available for distributions to its shareholders, $25.00 per share (the "Liquidation Value"), plus, in each case, accrued and unpaid dividends thereon from (but not including) the day of initial issuance to the date of payment thereof. After such payment has been made in full to the holders of the outstanding shares of Series C Preferred Stock (or funds necessary for the payment have been set aside in trust for the account of such holders so as to be and continue to be available therefor), the holders of Series C Preferred Stock shall be entitled to no further distributions, and the remaining assets of the Corporation shall be divided and distributed among the holders of UPC Common Stock (subject to any prior rights of any holders of any other capital stock of the Corporation entitled to participate with the UPC Common Stock as to the distribution of assets) then outstanding according to their respective rights as shareholders. If, upon any liquidation, dissolution or winding up of the Corporation, the net assets of the Corporation, or proceeds thereof available for distribution among the holders of Series C Preferred Stock should be insufficient to permit payment in full of the preferential amount aforesaid and liquidating payments on any other Preferred Stock ranking, as to liquidation, dissolution or winding up, on a parity with the Series C Preferred Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of Series C Preferred Stock and the holders of any such other Preferred Stock ratably in accordance with the respective amounts which would be payable on such shares of Series C Preferred Stock and on any such other Preferred Stock if all amounts payable thereon were paid in full. Neither the consolidation or merger of the Corporation with or into any other corporation or corporations, nor a reorganization of the Corporation alone, nor the sale or transfer by the Corporation of all or substantially all of its assets shall be deemed a "liquidation, dissolution or winding up of the Corporation" within the meaning of this paragraph 4. 5. Right to Vote. (a) Except as hereinafter provided for and as otherwise from time to time required by law, the Series C Preferred Stock shall have no voting rights. (b) So long as any shares of the Series C Preferred Stock remain outstanding, the consents of the holders of at least two-thirds (2/3ds) of the shares of Series C Preferred Stock outstanding at the time (voting separately as a class together with all other series of Preferred Stock of the Corporation ranking on a parity with the Series C Preferred Stock either as to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up and upon which like voting rights have been conferred and are exercisable) given in person or by proxy, either in writing or at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following: (i) the authorization, creation or issuance of a new class or series of shares of capital stock having rights, preferences or privileges prior to the Series C Preferred Stock, or any increase in the number of authorized shares of any class or series having rights, preferences or privileges prior to the Series C Preferred Stock; or (ii) the amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Corporation's Charter which would materially and adversely affect any right, preference, privilege or voting power of the Series C Preferred Stock or of the holders thereof; provided, however, that any increase in the amount of authorized UPC Common Stock or Preferred Stock or the authorization, creation or issuance of any other series of UPC Common Stock or Preferred Stock, in each case ranking on a parity with or junior to the Series C Preferred Stock with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. Page 7 of Union Planters Corporation Charter 8 (c) The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of Series C Preferred Stock shall have been redeemed or called for redemption and funds shall have been deposited in trust in an amount sufficient to effect such redemption. 6. Redemption. (a) The shares of Series C Preferred Stock shall be redeemable, in whole or in part, only at the option of the Corporation by resolution of its Board of Directors and with the prior written consent of the Board of Governors of the Federal Reserve System, or of the appropriate Federal Reserve Bank acting under delegated authority, or their successors, at any time and from time to time on or after October 31, 1994 at $25.00 per share, plus all dividends accrued and unpaid on such Series C Preferred Stock from (but not including) the day of issuance up to the day fixed for redemption. Notwithstanding the foregoing sentence of this Section, the Corporation may acquire Series C Preferred Stock in any other manner permitted by law and its Charter or Bylaws. (b) In the event that less than the entire amount of the Series C Preferred Stock outstanding is to be redeemed at any one time, the shares to be redeemed shall be selected by lot or pro rata (as nearly as may be) or by any other method determined by the Board of Directors of the Corporation in its sole discretion to be equitable. Notice of any redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares selected for redemption at such holders' respective addresses as the same shall appear on the stock register of the Corporation. Each such notice shall state: (1) the redemption date; (2) the number of shares of Series C Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price and the manner in which the redemption price is to be paid and delivered; (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (5) that dividends on the shares to be redeemed will cease to accrue on such redemption date. No failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for redemption. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the holder receives the notice. Upon such redemption date, or upon such earlier date as the Board of Directors shall designate for payment of the redemption price (unless the Corporation shall default in the payment of the redemption price as set forth in such notice), the holders of shares of Series C Preferred Stock selected for redemption and to whom notice has been duly given shall cease to be shareholders with respect to such shares of Series C Preferred Stock and shall have no interest in or claim against the Corporation by virtue thereof and shall have no dividend, voting or other rights with respect to such shares except the right to receive the moneys payable upon such redemption from the Corporation or otherwise, without interest thereon, upon surrender (and endorsement, if required by the Corporation) of the certificates, and the shares evidenced and represented thereby shall no longer be deemed to be outstanding. The Corporation's obligation to provide funds for redemption shall be deemed fulfilled if, on or before the redemption date, the Corporation shall deposit with a bank or trust company (which may be an affiliate of the Corporation), having an office or agency in Memphis, Tennessee and having a capital and surplus of at least $50,000,000, or with any other such bank or trust company located in the continental United States as may be designated from time to time by the Corporation, funds necessary for such redemption, in trust, with irrevocable instructions that such funds be applied to the redemption of the shares of Series C Preferred Stock so called for redemption. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any funds so deposited and unclaimed at the end of six years from such redemption date shall be repaid or released to the Corporation, after which the holder or holders of such shares of Series C Preferred Stock so called for redemption shall look only to the Corporation for payment of the redemption price. Upon redemption of Series C Preferred Stock in the manner set out herein, or upon the purchase of Series C Preferred Stock by the Corporation, the Series C Preferred Stock so acquired by the Corporation shall be retired and canceled and shall be restored to the status of authorized but unissued shares of Preferred Stock, without designation as to series, and may thereafter be issued, but not as shares of Series C Preferred Stock. 7. Ranking. (a) Any class or series of stock of the Corporation shall be deemed to rank: (i) "prior to" the Series C Preferred Stock if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Series C Preferred Stock; and (ii) "on a parity with" the Series C Preferred Stock if the holders of such class or series of stock and the holders of the Series C Preferred Stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority one over the other whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share of such other class or series of stock are different from those of the Series C Preferred Stock. (b) The Series C Preferred Stock shall rank on a parity with both the Corporation's Series B Preferred Stock and the Series A Preferred Stock, if and when such Series A Preferred Stock should be issued. 8. Debt Obligations. The Corporation, at any time and from time to time, may authorize the issue of debt obligations, whether or not subordinated, without the approval of the shareholders. 9. Conversion or Exchange. The holders of the Series C Preferred Stock shall not have any rights herein to convert such shares into, or exchange such shares for, shares of any other class or classes or any other series of any class or classes of capital stock (or any other equity or debt security) of the Corporation. SERIES D PREFERRED STOCK (i) Pursuant to the authority vested in the Board of Directors of Union Planters Corporation (the "Corporation") by the provisions of this Article Sixth of its Charter and by the provisions of the Tennessee Business Corporation Act, the Board of Directors of the Corporation does hereby create, authorize and provide for the issuance of a new series of preferred stock out of the Corporation's authorized class of 10,000,000 shares of preferred stock having no par value (the "Preferred Stock"), having the designation, relative participating, optional and other special rights, preferences, qualifications, limitations and restrictions provided hereafter: 1. Designation and Amount. The shares of such series shall be designated as the: 9.5% REDEEMABLE, CUMULATIVE, CONVERTIBLE, PREFERRED STOCK, SERIES D (the "Series D Preferred Stock") and the number of shares of Preferred Stock constituting such Series D Preferred Stock shall be 253,659. Such number of shares of Series D Preferred Stock may be adjusted hereafter by appropriate action of the Board of Directors. The Series D Preferred Stock shall have a stated value of $20.50 per share (the "Stated Value"). 2. Dividends and Distributions. (a) The holders of shares of Series D Preferred Stock, in preference to the holders of the $5.00 par value common stock of the Corporation (the "UPC Common Stock") shall be entitled to receive when, as and if declared by the Board of Directors, out of funds Page 8 of Union Planters Corporation Charter 9 legally available for the purpose, cumulative cash dividends payable quarterly at the annual rate of 9.5% of the Stated Value thereof on the fifteenth day (or, if such fifteenth day should not be a Business Day, on the next Business Day) of February, May, August and November in each year (a "Quarterly Dividend Payment Date"), in respect of the Quarterly Dividend Period next preceding such fifteenth day, and no other dividend or dividends. Such dividends shall be payable to holders of record of the Series D Preferred Stock on such date as may be fixed by the Board of Directors which date shall not be more than 30 nor less than 10 days prior to the applicable Quarterly Dividend Payment Date. As used herein, a "Quarterly Dividend Period" means a period of three calendar months ending on the last day of January, April, July and October. Subject to the provisions of paragraph (c) of Article Sixth of the Charter, dividends on account of arrears for any past Quarterly Dividend Period(s) may be declared and paid at any time designated by the Board of Directors, without reference to any regular Quarterly Dividend Payment Date, to holders of record on such date as may be fixed by the Board of Directors, which date shall not be more than 30 nor less than 10 days preceding the designated payment date. The amount of dividend per share payable for any Quarterly Dividend Period less than a full Quarterly Dividend Period shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in the period with respect to which it is payable. (b) Preferred dividends upon shares of Series D Preferred Stock shall commence to accrue and be cumulative from the day upon which the original issuance of shares of Series D Preferred Stock shall occur which shall be deemed to be the effective date of the merger of Southeastern Bancshares, Inc. with and into Union Planters - SBI Acquisition Company, both of which are Tennessee corporations. (c) No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments which may be in arrears. (d) For purposes hereof, a "Business Day" shall mean any day on which commercial banks in the City of Memphis, Tennessee, are required to be open for the transaction of their general banking businesses. 3. No Preemptive Rights. The holders of shares of Series D Preferred Stock shall not be entitled, as of right, to purchase or subscribe for any part of the unissued Series D Preferred Stock, any UPC Common Stock, or any other capital stock of the Corporation, or to purchase or subscribe for any bonds, certificates of indebtedness, debentures, or other securities convertible into, or carrying options, warrants or rights to purchase, any stock or other securities of the Corporation, or to purchase or subscribe for any stock or any securities of the Corporation purchased by the Corporation or by its nominee or nominees, or to have any other preemptive rights now or hereafter defined by the laws of the State of Tennessee. 4. Liquidation. In the event of the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of Series D Preferred Stock shall be entitled to receive, after payment or provision for payment of all debts but before any distribution of assets may be made to the holders of UPC Common Stock or any other stock of the Corporation ranking junior to the Series D Preferred Stock as to the distribution of assets on liquidation, dissolution or winding up of the Corporation, out of assets of the Corporation available for distributions to its shareholders, $20.50 per share (the "Liquidation Value"), plus, in each case, accrued and unpaid dividends thereon from (but not including) the day of original issuance to the date of payment thereof. After such payment has been made in full to the holders of the outstanding shares of Series D Preferred Stock (or funds necessary for such payment have been set aside in trust for the account of such holders so as to be and to continue to be available therefor), the holders of Series D Preferred Stock shall be entitled to no further distributions, and the remaining assets of the Corporation shall be divided and distributed among the holders of UPC Common Stock (subject to any senior rights of any holders of any other capital stock of the Corporation entitled to participate with the UPC Common Stock as to the distribution of assets) then outstanding according to their respective rights as shareholders. If, upon any liquidation, dissolution or winding up of the Corporation, the net assets of the Corporation, or proceeds thereof available for distribution among the holders of Series D Preferred Stock should be insufficient to permit payment in full of the preferential amount aforesaid and liquidating payments on any other Preferred Stock ranking, as to liquidation, dissolution or winding up, on a parity with the Series D Preferred Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of Series D Preferred Stock and the holders of any such other Preferred Stock ranking on a parity with the Series D Preferred Stock ratably in accordance with the respective amounts which would be payable on such shares of Series D Preferred Stock and on any such other Preferred Stock ranking on a parity with the Series D Preferred Stock if all amounts payable thereon were paid in full. Neither the consolidation or merger of the Corporation with or into any other corporation or corporations, nor a reorganization of the Corporation alone, nor the sale or transfer by the Corporation of all or substantially all of its assets shall be deemed a "liquidation, dissolution or winding up of the Corporation" within the meaning of this paragraph 4. 5. Right of Holders of Series D Shares to Vote. (a) Except as hereinafter provided for and as otherwise from time to time required by law, the Series D Preferred Stock shall have no voting rights except for those which may be required by the laws of the State of Tennessee. (b) So long as any shares of Series D Preferred Stock remain outstanding, the consents of the holders of at least two-thirds (2/3ds) of the shares of Series D Preferred Stock outstanding at the time (voting separately as a class together with all other series of Preferred Stock of the Corporation ranking on a parity with the Series D Preferred Stock either as to dividends or the distribution of assets upon liquidation, dissolution or winding up and upon which like voting rights have been conferred and are exercisable) given in person or by proxy, either in writing or at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following actions: (i) the authorization, creation or issuance of a new class or series of shares of capital stock of the Corporation having rights, preferences or privileges senior to the Series D Preferred Stock, or any increase in the number of authorized shares of any class or series having rights, preferences or privileges senior to the Series D Preferred Stock; or (ii) the amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Corporation's Charter which would materially and adversely affect any right, preference, privilege or voting power of the Series D Preferred Stock or of the holders thereof; provided, however, that any increase in the amount of authorized UPC Common Stock or Preferred Stock or the authorization, creation or issuance of any other series of UPC Common Stock or Preferred Stock, in each case ranking on a parity with, or junior to the Series D Preferred Stock with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to "materially and adversely affect" such rights, preferences, privileges or voting powers of the Series D Preferred Stock. (c) The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected (i) all outstanding shares of Series D Preferred Stock shall have been redeemed or called for redemption and (ii) funds shall have been deposited in trust in an amount sufficient to effect such redemption as provided herein. 6. Redemption. Page 9 of Union Planters Corporation Charter 10 (a) The shares of Series D Preferred Stock shall be redeemable, in whole or in part, only at the option of the Corporation by resolution of its Board of Directors but only with the prior consent of the Board of Governors of the Federal Reserve System, or of the appropriate Federal Reserve Bank acting under delegated authority, or their successors, at any time and from time to time on or after the third anniversary of the Effective Time of the Merger of SBI with and into Union Planters - SBI Acquisition Company at Twenty and 50/100 Dollars ($20.50) per share (the "Redemption Price"), plus all dividends accrued and unpaid on such Series D Preferred Stock from (but not including) the day of original issuance up to the Redemption Date (as defined below). Notwithstanding the foregoing sentence of this Section, the Corporation may acquire Series D Preferred Stock in any other lawful manner permitted by its Charter or Bylaws. (b) In the event that less than the entire amount of Series D Preferred Stock outstanding is to be redeemed at any one time, the shares to be redeemed shall be selected by lot or pro rata (as nearly as may be) or by any other method determined by the Board of Directors of the Corporation in its sole discretion to be equitable. (c) Notice of any redemption, whether whole or partial, shall be given by United States first class mail, postage prepaid, deposited in the mail not less than 30 nor more than 60 days prior to the Redemption Date, addressed to each holder of record of the shares selected for redemption at such holders' respective addresses as the same shall appear on the stock register of the Corporation. Each such notice shall state: (1) the date designated by the Board of Directors as the "Redemption Date"; (2) the number of shares of Series D Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the Redemption Price and the manner in which the Redemption Price is to be paid and delivered; (4) the place or places where certificates representing and evidencing such shares are to be surrendered for payment of the Redemption Price; and (5) that dividends on the shares to be redeemed will cease to accrue on such Redemption Date. No failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for redemption. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the holder receives the notice. On the Redemption Date, or on such earlier date as the Board of Directors shall designate for payment of the Redemption Price (unless the Corporation shall default in the payment of the Redemption Price as set forth in such notice), the holders of shares of Series D Preferred Stock selected for redemption and to whom notice has been duly given shall cease to be shareholders with respect to such shares of Series D Preferred Stock and shall have no interest in, or claim against the Corporation by virtue thereof and shall have no dividend, voting or other rights with respect to such shares except the right to receive the moneys payable upon such redemption from the Corporation or otherwise, without interest thereon, upon surrender (and proper endorsement, if required by the Corporation) of the certificates, and the shares represented thereby shall no longer be deemed to be outstanding. The Corporation's obligation to provide funds for redemption shall be deemed fulfilled if, on or before the Redemption Date, the Corporation shall have deposited with a bank or trust company (which may be an affiliate of the Corporation), having an office or agency in Memphis, Tennessee, having a capital and surplus of at least $50,000,000, or with any other such bank or trust company located in the continental United States as may be designated from time to time by the Corporation, funds necessary for such redemption, in trust, with irrevocable instructions that such funds be applied to the redemption of the shares of Series D Preferred Stock so called for redemption. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any funds so deposited and unclaimed at the end of six years from such Redemption Date shall be repaid or released to the Corporation, after which the holder or holders of such shares of Series D Preferred Stock so called for redemption shall look only to the Corporation for payment of the Redemption Price. Upon redemption of Series D Preferred Stock in the manner set out herein, or upon the purchase of Series D Preferred Stock by the Corporation, the Series D Preferred Stock so acquired by the Corporation shall be retired and canceled and shall be restored to the status of authorized but unissued shares of Preferred Stock, without designation as to series, and may thereafter be issued, but not as shares of Series D Preferred Stock. 7. Ranking. (a) Any class or series of stock of the Corporation shall be deemed to rank: (i) "senior to" the Series D Preferred Stock if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Series D Preferred Stock; and (ii) "on a parity with" the Series D Preferred Stock if the holders of such class or series of stock and the holders of the Series D Preferred Stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority one over the other whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share of such other class or series of stock are different from those of the Series D Preferred Stock. (b) The Series D Preferred Stock shall rank on a parity with the Corporation's Series B Preferred Stock, the Corporation's Series C Preferred Stock and the Corporation's Series A Preferred Stock, if and when shares of such Series A Preferred Stock should be issued. 8. Conversion of Series D Preferred Stock. The registered holders of shares of Series D Preferred Stock shall have the right, at their option, to convert such shares into shares of UPC Common Stock (and, upon the occurrence of a certain type of merger, into other assets) on the following terms and conditions: (a) The registered holders of the Series D Preferred Stock shall have the right at any time after the date of its original issuance but prior to the Redemption Date designated in the notice of redemption given to such holders in accordance with the provisions of Section 6, to convert each share of the Corporation's Series D Preferred Stock registered in the name of such holders into one (1) share of the Corporation's Common Stock having a par value of $5.00 per share. The Series D Preferred Stock shall not be convertible into any other class or classes or any other series of any class or classes of capital stock (or any other equity or debt security) of the Corporation. (b) On presentation and surrender to the Corporation at any office or agency maintained for the transfer of the Series D Preferred Stock (the "Transfer Agent") of the certificates representing and evidencing Series D Preferred Stock so to be converted, duly endorsed for conversion, the holder of such Series D Preferred Stock shall be entitled, subject to the limitations herein contained, to receive in exchange therefor a certificate or certificates for fully paid and nonassessable shares, and cash for fractional shares (if any) of UPC Common Stock or other securities pursuant to subsection (d) below on the basis set forth. The Series D Preferred Stock shall be deemed to have been converted and the person converting the same shall be deemed to have become the holder of record of UPC Common Stock, for the purpose of receiving dividends and for all other purposes whatsoever as of the date when the certificate or certificates representing and evidencing such Series D Preferred Stock shall have been surrendered to the Transfer Agent as aforesaid. The holder of Series D Preferred Stock shall be responsible for selection of the method of delivery to the Transfer Agent of any share certificates intended to be surrendered for conversion and the Corporation shall have no risk or liability for the loss or late delivery of certificates for conversion. Properly endorsed certificates must be physically received by the Transfer Agent no later than the close of business on the Business Day next preceding the designated Redemption Date in order for the conversion to become effective. The Corporation shall not be required to make any such conversion, and no surrender of the Series D Preferred Stock shall be effective for such purposes, while the books for the transfer of either class of stock are closed for any purpose, but the surrender of such shares of Series D Preferred Stock for conversion during any period while such books are closed shall become effective for all purposes of conversion immediately upon the reopening of such books, as if the conversion had been made on the date such shares of Series D Preferred Stock were surrendered. Page 10 of Union Planters Corporation Charter 11 (c) If at any time, or from time to time, the Corporation should (i) declare and pay on, or in respect of, the UPC Common Stock any dividend payable in shares of UPC Common Stock; or (ii) subdivide the outstanding shares of UPC Common Stock into a greater number of shares, or contract the number of outstanding shares of Series D Preferred Stock by combining such shares into a smaller number of shares; or (iii) contract the number of outstanding shares of the UPC Common Stock by combining such shares into a smaller number of shares, or (iv) subdivide the outstanding shares of Series D Preferred Stock into a greater number of shares of Series D Preferred Stock, the Conversion Ratio shall be proportionately adjusted as of such time. (d) If the Corporation should consolidate with, or merge into any corporation or reclassify outstanding shares of UPC Common Stock (other than by way of subdivision or contraction of such shares), each share of Series D Preferred Stock shall thereafter be convertible into the number of shares of stock or other securities or property of the Corporation, or of the entity resulting from such consolidation or merger, to which a holder of the number of shares of UPC Common Stock deliverable upon conversion of such share of Series D Preferred Stock would have been entitled upon such consolidation, merger or reclassification, had the holder of such share of Series D Preferred Stock exercised his right of conversion and had such shares been issued and outstanding and had such holder been the holder of record of such UPC Common Stock at the time of such consolidation, merger or reclassification and the Corporation shall make lawful provision therefor as a part of such consolidation, merger or reclassification. (e) Whenever the conversion ratio or the type of consideration other than UPC Common Stock receivable by the holder upon conversion of the Series D Preferred Stock is required to be adjusted, as herein provided, the Corporation shall promptly file with the transfer agent for the UPC Common Stock and simultaneously provide to each holder of record of Series D Preferred Stock a statement signed by the President or a Vice President or the Secretary or the Treasurer setting forth the adjusted conversion ratio and, if applicable, a description of the consideration receivable upon consummation, determined as so provided. Such statement shall set forth in reasonable detail such facts as may be necessary to show the reason for and the manner of computing such adjustments. (f) The Corporation shall pay any and all taxes which may be imposed upon it with respect to the issuance and delivery of UPC Common Stock upon the conversion of the Series D Preferred Stock as herein provided. The Corporation shall not be required in any event to pay any transfer or other taxes by reason of the issuance of such UPC Common Stock in names other than those in which the Series D Preferred Stock surrendered for conversion may stand, and no such conversion or issuance of UPC Common Stock shall be made unless and until the person requesting such issuance has paid to the Corporation the amount of any such tax, or has established to the satisfaction of the Corporation and its transfer agent, if any, that such tax has been paid or is not required. Upon any conversion of Series D Preferred Stock as herein provided, no adjustment or allowance shall be made for dividends on the Series D Preferred Stock so converted, and all rights to dividends, if any, shall cease and be deemed satisfied; provided, however, that nothing in this section shall be deemed to relieve the Corporation from its obligation to pay any dividends which shall have been declared and shall be payable to holders of Series D Preferred Stock of record as of a date prior to such conversion even though the payment date for such dividend may be subsequent to the date of conversion. (g) If any shares of Series D Preferred Stock should be converted into UPC Common Stock at a time when the UPC Common Stock into which such Series D Preferred Stock is convertible has attached or attributable thereto Rights issued pursuant to the UPC Share Purchase Rights Agreement, the surrender of such Series D Preferred Stock shall effectively cancel all Rights attached or attributable to the share(s) of Series D Preferred Stock so converted. 9. Reservation of UPC Common Stock. The Corporation shall, so long as any of the Series D Preferred Stock shall remain outstanding, reserve and keep available out of its authorized and unissued UPC Common Stock, solely for the purpose of effecting the conversion of the Series D Preferred Stock, such number of shares of UPC Common Stock as shall, from time to time, be sufficient to effect the conversion of all shares of the Series D Preferred Stock then outstanding. The Corporation shall, from time to time, increase its authorized UPC Common Stock and take such other actions as may be necessary to permit the issuance from time to time of the shares of the UPC Common Stock, as fully paid and nonassessable shares, upon the conversion of the Series D Preferred Stock in the manner herein provided. 10. Debt Obligations. The Corporation, at any time and from time to time, may authorize the issuance of debt obligations, whether or not subordinated, without the approval of any of its shareholders. 11. Definitions. For purposes of subparagraph (i) of Article Sixth of the Charter: (a) The term "outstanding", when used in reference to shares of stock, shall mean shares which are authorized and issued, excluding shares held by the Corporation or by a subsidiary of the Corporation (other than in a fiduciary capacity), and excluding shares called for redemption, funds for the redemption of which shall have been set aside by the Corporation or deposited in trust in the manner provided herein; (b) The amount of dividends "accrued" on any share of Series D Preferred Stock as of the last day of the applicable Quarterly Dividend Period (the "Quarterly Dividend Date") shall be deemed to be the amount of any unpaid dividends accumulated thereon to and including such Quarterly Dividend Date, whether or not earned or declared, and the amount of dividends "accrued" on any shares of Series D Preferred Stock as at any date other than a Quarterly Dividend Date shall be deemed to be (i) the amount of any unpaid dividends accumulated thereon to and including the last preceding Quarterly Dividend Date, whether or not earned or declared, plus (ii) an amount calculated on the basis of the annual dividend rate fixed for the shares of Series D Preferred Stock (9.5%) for the period subsequent to such last preceding Quarterly Dividend Date to and including the date as of which the calculation is made, based on a 360-day year of 12 consecutive 30-day months and the actual number of days elapsed in the latter period. SERIES E PREFERRED STOCK (j) Pursuant to the authority vested in the Board of Directors of Union Planters Corporation (the "Corporation") by the provisions of this Article Sixth of its Charter and by the provisions of the Tennessee Business Corporation Act, the Board of Directors of the Corporation does hereby create, authorize and provide for the issuance of a new series of preferred stock out of the Corporation's authorized class of 10,000,000 shares of preferred stock having no par value (the "Preferred Stock"), having the designation, relative participating, optional and other special rights, preferences, qualifications, limitations and restrictions provided hereafter: 1. Designation and Amount. The shares of such series shall be designated as the: 8% CUMULATIVE, CONVERTIBLE, PREFERRED STOCK, SERIES E (the "Series E Preferred Stock") and the number of shares of Preferred Stock constituting such Series E Preferred Stock shall be 4,500,000. Such number of shares of Series E Preferred Stock may be adjusted hereafter by appropriate action of the Board of Directors. The Series E Preferred Stock shall have a stated value of $25.00 per share (the "Stated Value"). 2. Dividends and Distributions. Page 11 of Union Planters Corporation Charter 12 (a) The holders of shares of Series E Preferred Stock, in preference to the holders of the $5.00 par value common stock of the Corporation (the "UPC Common Stock") shall be entitled to receive when, as and if declared by the Board of Directors, out of funds legally available for the purpose, cumulative cash dividends payable quarterly at the annual rate of 8% of the Stated Value thereof on the fifteenth day (or, if such fifteenth day should not be a Business Day, on the next Business Day) of February, May, August and November in each year (a "Quarterly Dividend Payment Date"), in respect of the Quarterly Dividend Period next preceding such fifteenth day, and no other dividend or dividends. Such dividends shall be payable to holders of record of the Series E Preferred Stock on such date as may be fixed by the Board of Directors which date shall not be more than 30 nor less than 10 days prior to the applicable Quarterly Dividend Payment Date. As used herein, a "Quarterly Dividend Period" means a period of three calendar months ending on the last day of January, April, July and October. Subject to the provisions of paragraph (c) of Article Sixth of the Charter, dividends on account of arrears for any past Quarterly Dividend Period(s) may be declared and paid at any time designated by the Board of Directors, without reference to any regular Quarterly Dividend Payment Date, to holders of record on such date as may be fixed by the Board of Directors, which date shall not be more than 30 nor less than 10 days preceding the designated payment date. The amount of dividend per share payable for any Quarterly Dividend Period less than a full Quarterly Dividend Period shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in the period with respect to which it is payable. (b) Preferred dividends upon shares of Series E Preferred Stock shall commence to accrue and be cumulative from the day upon which the original issuance of shares of Series E Preferred Stock shall occur. (c) No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments which may be in arrears. (d) For purposes hereof, a "Business Day" shall mean any day on which commercial banks in the City of Memphis, Tennessee, are required to be open for the transaction of their general banking businesses. 3. No Preemptive Rights. The holders of shares of Series E Preferred Stock shall not be entitled, as of right, to purchase or subscribe for any part of the unissued Series E Preferred Stock, any UPC Common Stock, or any other capital stock of the Corporation, or to purchase or subscribe for any bonds, certificates of indebtedness, debentures, or other securities convertible into, or carrying options, warrants or rights to purchase, any stock or other securities of the Corporation, or to purchase or subscribe for any stock or any securities of the Corporation purchased by the Corporation or by its nominee or nominees, or to have any other preemptive rights now or hereafter defined by the laws of the State of Tennessee. 4. Liquidation. In the event of the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of Series E Preferred Stock shall be entitled to receive, after payment or provision for payment of all debts but before any distribution of assets may be made to the holders of UPC Common Stock or any other stock of the Corporation ranking junior to the Series E Preferred Stock as to the distribution of assets on liquidation, dissolution or winding up of the Corporation, out of assets of the Corporation available for distributions to its shareholders, $25.00 per share (the "Liquidation Value"), plus, in each case, accrued and unpaid dividends thereon from (but not including) the day of original issuance to the date of payment thereof. After such payment has been made in full to the holders of the outstanding shares of Series E Preferred Stock (or funds necessary for such payment have been set aside in trust for the account of such holders so as to be and to continue to be available therefor), the holders of Series E Preferred Stock shall be entitled to no further distributions, and the remaining assets of the Corporation shall be divided and distributed among the holders of UPC Common Stock (subject to any senior rights of any holders of any other capital stock of the Corporation entitled to participate with the UPC Common Stock as to the distribution of assets) then outstanding according to their respective rights as shareholders. If, upon any liquidation, dissolution or winding up of the Corporation, the net assets of the Corporation, or proceeds thereof available for distribution among the holders of Series E Preferred Stock should be insufficient to permit payment in full of the preferential amount aforesaid and liquidating payments on any other Preferred Stock ranking, as to liquidation, dissolution or winding up, on a parity with the Series E Preferred Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of Series E Preferred Stock and the holders of any such other Preferred Stock ranking on a parity with the Series E Preferred Stock ratably in accordance with the respective amounts which would be payable on such shares of Series E Preferred Stock and on any such other Preferred Stock ranking on a parity with the Series E Preferred Stock if all amounts payable thereon were paid in full. Neither the consolidation or merger of the Corporation with or into any other corporation or corporations, nor a reorganization of the Corporation alone, nor the sale or transfer by the Corporation of all or substantially all of its assets shall be deemed a "liquidation, dissolution or winding up of the Corporation" within the meaning of this paragraph 4. 5. Right of Holders of Series E Shares to Vote. (a) Except as hereinafter provided for and as otherwise from time to time required by law, the Series E Preferred Stock shall have no voting rights except for those which may be required by the laws of the State of Tennessee. (b) So long as any shares of Series E Preferred Stock remain outstanding, the consents of the holders of at least two-thirds (2/3ds) of the shares of Series E Preferred Stock outstanding at the time (voting separately as a class together with all other series of Preferred Stock of the Corporation ranking on a parity with the Series E Preferred Stock either as to dividends or the distribution of assets upon liquidation, dissolution or winding up and upon which like voting rights have been conferred and are exercisable) given in person or by proxy, either in writing or at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following actions: (i) the authorization, creation or issuance of a new class or series of shares of capital stock of the Corporation having rights, preferences or privileges senior to the Series E Preferred Stock, or any increase in the number of authorized shares of any class or series having rights, preferences or privileges senior to the Series E Preferred Stock; or (ii) the amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Corporation's Charter which would materially and adversely affect any right, preference, privilege or voting power of the Series E Preferred Stock or of the holders thereof; provided, however, that any increase in the amount of authorized UPC Common Stock or Preferred Stock or the authorization, creation or issuance of any other series of UPC Common Stock or Preferred Stock, in each case ranking on a parity with, or junior to the Series E Preferred Stock with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to "materially and adversely affect" such rights, preferences, privileges or voting powers of the Series E Preferred Stock. (c) The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected (i) all outstanding shares of Series E Preferred Stock shall have been redeemed or called for redemption and (ii) funds shall have been deposited in trust in an amount sufficient to effect such redemption as provided herein. 6. Redemption. Page 12 of Union Planters Corporation Charter 13 (a) The shares of Series E Preferred Stock shall be redeemable, in whole or in part, only at the option of the Corporation by resolution of its Board of Directors but only with the prior consent of the Board of Governors of the Federal Reserve System, or of the appropriate Federal Reserve Bank acting under delegated authority, or their successors, at any time and from time to time on or after March 1, 1997, at a price "Redemption Price" of $25.00 per share, plus all dividends accrued and unpaid on such Series E Preferred Stock from (but not including) the day of original issuance up to the Redemption Date (as defined below). Notwithstanding the foregoing sentence of this Section, the Corporation may acquire Series E Preferred Stock in any other lawful manner permitted by its Charter or Bylaws. (b) In the event that less than the entire amount of Series E Preferred Stock outstanding is to be redeemed at any one time, the shares to be redeemed shall be selected by lot or pro rata (as nearly as may be) or by any other method determined by the Board of Directors of the Corporation in its sole discretion to be equitable. (c) Notice of any redemption, whether whole or partial, shall be given by United States first class mail, postage prepaid, deposited in the mail not less than 30 nor more than 60 days prior to the Redemption Date, addressed to each holder of record of the shares selected for redemption at such holders' respective addresses as the same shall appear on the stock register of the Corporation. Each such notice shall state: (1) the date designated by the Board of Directors as the "Redemption Date"; (2) the number of shares of Series E Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the Redemption Price and the manner in which the Redemption Price is to be paid and delivered; (4) the place or places where certificates representing and evidencing such shares are to be surrendered for payment of the Redemption Price; and (5) that dividends on the shares to be redeemed will cease to accrue on such Redemption Date. No failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for redemption. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the holder receives the notice. On the Redemption Date, or on such earlier date as the Board of Directors shall designate for payment of the Redemption Price (unless the Corporation shall default in the payment of the Redemption Price as set forth in such notice), the holders of shares of Series E Preferred Stock selected for redemption and to whom notice has been duly given shall cease to be shareholders with respect to such shares of Series E Preferred Stock and shall have no interest in, or claim against the Corporation by virtue thereof and shall have no dividend, voting or other rights with respect to such shares except the right to receive the moneys payable upon such redemption from the Corporation or otherwise, without interest thereon, upon surrender (and proper endorsement, if required by the Corporation) of the certificates, and the shares represented thereby shall no longer be deemed to be outstanding. The Corporation's obligation to provide funds for redemption shall be deemed fulfilled if, on or before the Redemption Date, the Corporation shall have deposited with a bank or trust company (which may be an affiliate of the Corporation), having an office or agency in Memphis, Tennessee, having a capital and surplus of at least $50,000,000, or with any other such bank or trust company located in the continental United States as may be designated from time to time by the Corporation, funds necessary for such redemption, in trust, with irrevocable instructions that such funds be applied to the redemption of the shares of Series E Preferred Stock so called for redemption. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any funds so deposited and unclaimed at the end of six years from such Redemption Date shall be repaid or released to the Corporation, after which the holder or holders of such shares of Series E Preferred Stock so called for redemption shall look only to the Corporation for payment of the Redemption Price. Upon redemption of Series E Preferred Stock in the manner set out herein, or upon the purchase of Series E Preferred Stock by the Corporation, the Series E Preferred Stock so acquired by the Corporation shall be retired and canceled and shall be restored to the status of authorized but unissued shares of Preferred Stock, without designation as to series, and may thereafter be issued, but not as shares of Series E Preferred Stock. 7. Ranking. (a) Any class or series of stock of the Corporation shall be deemed to rank: (i) "senior to" the Series E Preferred Stock if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Series E Preferred Stock; and (ii) "on a parity with" the Series E Preferred Stock if the holders of such class or series of stock and the holders of the Series E Preferred Stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority one over the other whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share of such other class or series of stock are different from those of the Series E Preferred Stock. (b) The Series E Preferred Stock shall rank on a parity with the Corporation's Series B Preferred Stock, the Corporation's Series C Preferred Stock, the Corporation's Series D Preferred Stock and the Corporation's Series A Preferred Stock, if and when shares of such Series A Preferred Stock should be issued. 8. Conversion of Series E Preferred Stock. The registered holders of shares of Series E Preferred Stock shall have the right, at their option, to convert such shares into shares of UPC Common Stock (and, upon the occurrence of a certain type of merger, into other assets) on the following terms and conditions: (a) The registered holders of the Series E Preferred Stock shall have the right at any time after the date of its original issuance but prior to the Redemption Date designated in the notice of redemption given to such holders in accordance with the provisions of Section 6, to convert each share of the Corporation's Series E Preferred Stock registered in the name of such holders into 1.25 shares of the Corporation's Common Stock having a par value of $5.00 per share. The Series E Preferred Stock shall not be convertible into any other class or classes or any other series of any class or classes of capital stock (or any other equity or debt security) of the Corporation. (b) On presentation and surrender to the Corporation at any office or agency maintained for the transfer of the Series E Preferred Stock (the "Transfer Agent") of the certificates representing and evidencing Series E Preferred Stock so to be converted, duly endorsed for conversion, the holder of such Series E Preferred Stock shall be entitled, subject to the limitations herein contained, to receive in exchange therefor a certificate or certificates for fully paid and nonassessable shares, and cash for fractional shares (if any) of UPC Common Stock or other securities pursuant to subsection (d) below on the basis set forth. The Series E Preferred Stock shall be deemed to have been converted and the person converting the same shall be deemed to have become the holder of record of UPC Common Stock, for the purpose of receiving dividends and for all other purposes whatsoever as of the date when the certificate or certificates representing and evidencing such Series E Preferred Stock shall have been surrendered to the Transfer Agent as aforesaid. The holder of Series E Preferred Stock shall be responsible for selection of the method of delivery to the Transfer Agent of any share certificates intended to be surrendered for conversion and the Corporation shall have no risk or liability for the loss or late delivery of certificates for conversion. Properly endorsed certificates must be physically received by the Transfer Agent no later than the close of business on the Business Day next preceding the designated Redemption Date in order for the conversion to become effective. The Corporation shall not be required to make any such conversion, and no surrender of the Series E Preferred Stock shall be effective for such purposes, while the books for the transfer of either class of stock are closed for any purpose, but the surrender of such shares of Series E Preferred Stock for conversion during any period while Page 13 of Union Planters Corporation Charter 14 such books are closed shall become effective for all purposes of conversion immediately upon the reopening of such books, as if the conversion had been made on the date such shares of Series E Preferred Stock were surrendered. (c) If at any time, or from time to time, the Corporation should (i) declare and pay on, or in respect of, the UPC Common Stock any dividend payable in shares of UPC Common Stock; or (ii) subdivide the outstanding shares of UPC Common Stock into a greater number of shares, or contract the number of outstanding shares of Series E Preferred Stock by combining such shares into a smaller number of shares; or (iii) contract the number of outstanding shares of the UPC Common Stock by combining such shares into a smaller number of shares, or (iv) subdivide the outstanding shares of Series E Preferred Stock into a greater number of shares of Series E Preferred Stock, the Conversion Ratio shall be proportionately adjusted as of such time. (d) If the Corporation should consolidate with, or merge into any corporation or reclassify outstanding shares of UPC Common Stock (other than by way of subdivision or contraction of such shares), each share of Series E Preferred Stock shall thereafter be convertible into the number of shares of stock or other securities or property of the Corporation, or of the entity resulting from such consolidation or merger, to which a holder of the number of shares of UPC Common Stock deliverable upon conversion of such share of Series E Preferred Stock would have been entitled upon such consolidation, merger or reclassification, had the holder of such share of Series E Preferred Stock exercised his right of conversion and had such shares been issued and outstanding and had such holder been the holder of record of such UPC Common Stock at the time of such consolidation, merger or reclassification and the Corporation shall make lawful provision therefor as a part of such consolidation, merger or reclassification. (e) Whenever the conversion ratio or the type of consideration other than UPC Common Stock receivable by the holder upon conversion of the Series E Preferred Stock is required to be adjusted, as herein provided, the Corporation shall promptly file with the transfer agent for the UPC Common Stock and simultaneously provide to each holder of record of Series E Preferred Stock a statement signed by the President or a Vice President or the Secretary or the Treasurer setting forth the adjusted conversion ratio and, if applicable, a description of the consideration receivable upon consummation, determined as so provided. Such statement shall set forth in reasonable detail such facts as may be necessary to show the reason for and the manner of computing such adjustments. (f) The Corporation shall pay any and all taxes which may be imposed upon it with respect to the issuance and delivery of UPC Common Stock upon the conversion of the Series E Preferred Stock as herein provided. The Corporation shall not be required in any event to pay any transfer or other taxes by reason of the issuance of such UPC Common Stock in names other than those in which the Series E Preferred Stock surrendered for conversion may stand, and no such conversion or issuance of UPC Common Stock shall be made unless and until the person requesting such issuance has paid to the Corporation the amount of any such tax, or has established to the satisfaction of the Corporation and its transfer agent, if any, that such tax has been paid or is not required. Upon any conversion of Series E Preferred Stock as herein provided, no adjustment or allowance shall be made for dividends on the Series E Preferred Stock so converted, and all rights to dividends, if any, shall cease and be deemed satisfied; provided, however, that nothing in this section shall be deemed to relieve the Corporation from its obligation to pay any dividends which shall have been declared and shall be payable to holders of Series E Preferred Stock of record as of a date prior to such conversion even though the payment date for such dividend may be subsequent to the date of conversion. (g) If any shares of Series E Preferred Stock should be converted into UPC Common Stock at a time when the UPC Common Stock into which such Series E Preferred Stock is convertible has attached or attributable thereto Rights issued pursuant to the UPC Share Purchase Rights Agreement, the surrender of such Series E Preferred Stock shall effectively cancel all Rights attached or attributable to the share(s) of Series E Preferred Stock so converted. 9. Reservation of UPC Common Stock. The Corporation shall, so long as any of the Series E Preferred Stock shall remain outstanding, reserve and keep available out of its authorized and unissued UPC Common Stock, solely for the purpose of effecting the conversion of the Series E Preferred Stock, such number of shares of UPC Common Stock as shall, from time to time, be sufficient to effect the conversion of all shares of the Series E Preferred Stock then outstanding. The Corporation shall, from time to time, increase its authorized UPC Common Stock and take such other actions as may be necessary to permit the issuance from time to time of the shares of the UPC Common Stock, as fully paid and nonassessable shares, upon the conversion of the Series E Preferred Stock in the manner herein provided. 10. Debt Obligations. The Corporation, at any time and from time to time, may authorize the issuance of debt obligations, whether or not subordinated, without the approval of any of its shareholders. 11. Definitions. For purposes of subparagraph (j) of Article Sixth of the Charter: (a) The term "outstanding", when used in reference to shares of stock, shall mean shares which are authorized and issued, excluding shares held by the Corporation or by a subsidiary of the Corporation (other than in a fiduciary capacity), and excluding shares called for redemption, funds for the redemption of which shall have been set aside by the Corporation or deposited in trust in the manner provided herein; (b) The amount of dividends "accrued" on any share of Series E Preferred Stock as of the last day of the applicable Quarterly Dividend Period (the "Quarterly Dividend Date") shall be deemed to be the amount of any unpaid dividends accumulated thereon to and including such Quarterly Dividend Date, whether or not earned or declared, and the amount of dividends "accrued" on any shares of Series E Preferred Stock as at any date other than a Quarterly Dividend Date shall be deemed to be (i) the amount of any unpaid dividends accumulated thereon to and including the last preceding Quarterly Dividend Date, whether or not earned or declared, plus (ii) an amount calculated on the basis of the annual dividend rate fixed for the shares of Series E Preferred Stock (8%) for the period subsequent to such last preceding Quarterly Dividend Date to and including the date as of which the calculation is made, based on a 360-day year of 12 consecutive 30-day months and the actual number of days elapsed in the latter period. COMMON STOCK (a) Shares of Common Stock may be issued at such time or times and for such consideration or considerations (not less than the par value thereof) as the Board of Directors may deem advisable subject to such limitations as may be set forth in the laws of the State of Tennessee or the Charter or the Bylaws of the Corporation. (b) Except as provided by law or this Charter, each holder of Common Stock shall have one vote in respect of each share of stock held by him of record on the books of the Corporation on all matters voted upon by the shareholders. Page 14 of Union Planters Corporation Charter 15 (c) Subject to the preferential dividend rights, if any, applicable to shares of Preferred Stock and subject to applicable requirements, if any, with respect to the setting aside of sums for purchase, retirement or sinking funds for Preferred Stock, the holders of Common Stock shall be entitled to receive, to the extent permitted by law, such dividends as may be declared from time to time by the Board of Directors. (d) In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Corporation, after distribution in full of the preferential amounts, if any, to be distributed to the holders of shares of Preferred Stock, holders of Common Stock shall be entitled to receive all of the remaining assets of the Corporation of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively. The Board of Directors may distribute in kind to the holders of Common Stock such remaining assets of the Corporation or may sell, transfer or otherwise dispose of all or any part of such remaining assets to any other person, corporation, trust, or other entity and receive payment therefor in cash, stock or obligations of such other corporation, trust or entity, or any combination thereof, and may sell all or any part of the consideration so received and distribute any balance thereof in kind to holders of Common Stock. Neither the merger or consolidation of the Corporation into or with any other corporation, nor the merger of any other corporation into it, nor any purchase or redemption of shares of stock of the Corporation of any class, shall be deemed to be a dissolution, liquidation or winding up of the Corporation for the purposes of this paragraph. (e) Such numbers of shares of Common Stock as may from time to time be required for such purpose shall be reserved for issuance (i) upon conversion of any shares of Preferred Stock or any other obligation of the Corporation convertible into shares of Common Stock which is at the time outstanding or issuable upon exercise of any options or warrants at the time outstanding, and (ii) upon exercise of any options or warrants at the time outstanding to purchase shares of Common Stock. SEVENTH: MINIMUM CAPITAL TO COMMENCE BUSINESS: The Corporation will not commence business until consideration of one thousand dollars ($1,000) has been received for the issuance of shares. EIGHTH: NO PREEMPTIVE RIGHTS: Neither the holders of Common Stock, nor the holders of Preferred Stock nor the holders of any securities convertible into, exchangeable for or carrying any rights to subscribe to any class of capital stock of the Corporation shall, as such holders, have any right to acquire, purchase or subscribe for any shares of the Common Stock or Preferred Stock of the Corporation or any class of capital stock or any securities convertible into, exchangeable for, or carrying any rights to subscribe to, shares of Common Stock or any such other class of capital stock of the Corporation, which it may hereafter issue or sell (whether out of the number of shares now or hereafter authorized by this Charter, or out of any shares of the Common Stock or other capital stock of the Corporation acquired by it after the issuance thereof, or otherwise), other than such right, if any, as the Board of Directors of the Corporation in its discretion may determine. NINTH: DIRECTORS: The number of directors of the Corporation shall be such number, not less than seven (7) nor more than twenty-five (25), as shall be provided from time to time in the Bylaws, provided that no amendment to the Bylaws decreasing the number of directors shall have the effect of shortening the term of any incumbent director, and provided further that no action shall be taken by the directors (whether through amendment of the Bylaws or otherwise) to increase the number of directors as provided in the Bylaws from time to time unless at least sixty-six and two-thirds percent (66-2/3%) of the directors then in office shall concur in said action. Directors need not be shareholders of the Corporation nor need they be residents of Tennessee. The Board of Directors shall be divided into three classes of directors which shall be designated Class I, Class II and Class III. Such classes shall be as nearly equal in number as the then total number of directors constituting the entire board shall permit, with the terms of office of all members of one class expiring each year. Should the number of directors fixed by the Bylaws not be equally divisible by three, the excess director or directors shall be assigned to Classes III or II as follows: (i) if there shall be an excess of one directorship over a number equally divisible by three, such extra directorship shall be classified in Class III; and (ii) if there be an excess of two directorships over a number equally divisible by three, one shall be classified in Class II and the other in Class III. At the annual meeting of shareholders in 1981: directors of Class I shall be elected to hold office for a term expiring at the next succeeding annual meeting; directors of Class II shall be elected to hold office for a term expiring at the second succeeding annual meeting; and directors of Class III shall be elected to hold office for a term expiring at the third succeeding annual meeting. At each annual meeting of shareholders after 1981, the successors to the members of the class of directors whose terms shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting, except that the successor to any director who shall have been elected by the directors to fill a vacancy whose term shall expire at such meeting shall be elected by the shareholders for a term expiring at the same time as the terms of other members of the same class. Any director elected by the Board of Directors to fill a vacancy (whether or not such vacancy shall have been created by an increase in the number of directors) shall serve only until the next annual meeting of the shareholders. 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. Should the number of members of the Corporation's Board as fixed by the Bylaws be reduced by amendment thereof, the Board shall designate, by the name of the incumbent(s), the position(s) to be abolished, the first being selected from Class II should the number of members of that Class exceed the number of members of Class I, the second being selected from Class III should the number of its members exceed the number of members of Class I, and others, in sequence from Classes I, II, III, I, II, III, etc. in that order. Should additional directorships be created pursuant to amendment of the Bylaws, they shall be allocated first to Class II and then to Class I as may be required to make equal the number of directorships in each class. Should the number of directorships be equal as among the three classes, newly created positions shall be assigned first to Class III, then to Class II, then to Class I, etc. Notwithstanding any other provisions of this Charter or the Bylaws (and notwithstanding the fact that some lesser percentage may be specified by law, the Charter or the Bylaws of this Corporation), the affirmative vote of the holders of sixty-six and two-thirds percent (66 2/3%) or more of the outstanding shares of capital stock of this Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) shall be required (a) to amend, alter, change or repeal this ARTICLE NINTH of the Charter or (b) to remove from office any director of this Corporation whether with or without cause. TENTH: NO CUMULATIVE VOTING FOR DIRECTORS: Directors shall be elected by a plurality of the votes cast in the election. No cumulative voting shall be permitted with respect to the election of directors. ELEVENTH: CERTAIN POWERS DEFINED: Page 15 of Union Planters Corporation Charter 16 The following provisions are hereby adopted for the purpose of defining, limiting and regulating the powers of the Corporation and of its directors and shareholders: (a) All corporate powers of the Corporation shall be exercised by its Board of Directors except as otherwise provided by law, provided, however, that the Board of Directors, by a resolution adopted by a majority of the entire Board, may designate an Executive Committee consisting of five (5) or more directors, and other committees, consisting of five (5) or more directors, and may delegate to such committee or committees all such authority of the Board that it deems desirable, except that no such committee or committees, unless specifically so authorized by the Board, shall have and exercise the authority of the Board to: (1) adopt, amend or repeal the Bylaws; (2) submit to the shareholders of the Corporation any action requiring shareholders' authorization under the Tennessee Business Corporation Act; (3) fill vacancies in the Board or in any committee; (4) declare dividends or make other corporate distributions; nor (5) issue or reissue any Common Stock, or Preferred Stock, or any 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. The Board may designate one or more directors as alternate members of any such committee, who may replace any absent member or members at any meeting of such committee. Each such committee shall serve at the pleasure of the Board. The designation of any such committee shall serve at the pleasure of the Board. The designation of any such committee and the delegation thereto of authority shall not relieve any director of any responsibility imposed by law. To the extent consistent with law, this Charter and the Bylaws of the Corporation relating to the conduct of meetings of the Board shall govern meetings of the Executive and other committees. (b) Whenever under the Tennessee Business Corporation Act 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. Directors may take any action which they are required or permitted to take under the Tennessee Business Corporation Act without a meeting in the same manner. (c) The Board of Directors shall have the power to adopt, amend or repeal the Bylaws of the Corporation by a majority vote of the entire Board, but any Bylaw so adopted by the Board may be further amended or repealed by action of the shareholders of the Corporation. The Bylaws may contain any provision for the regulation and management of the business or affairs of the Corporation not inconsistent with law and this Charter. (d) The Board of Directors shall have power from time to time to set apart out of any funds of the Corporation available for dividends a reserve or reserves for any proper purpose, and to abolish any such reserve. (e) The Board of Directors from time to time shall determine whether and to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the shareholders, and no shareholder shall have any right to inspect any account, book or document of the Corporation except as conferred by statute, the Bylaws or as authorized by resolution of the Board of Directors. (f) The Board of Directors of the Corporation, without the vote of the shareholders, may distribute to its shareholders out of its capital surplus a portion of its assets, in cash or in property, in accordance with and subject to the limitations imposed by Section 48-16-401 of the Tennessee Business Corporation Act, provided however, that no such distribution shall be made to the holders of any class of shares until adequate provision shall be made for any sinking fund requirements applicable to the retirement of Preferred Stock of the Corporation. (g) The Corporation shall have the right to purchase or otherwise acquire its own shares in accordance with Section 48-16-302 of the Tennessee Business Corporation Act to the extent of unreserved and unrestricted earned surplus available therefor, or, if such unreserved and unrestricted earned surplus is not available, to the extent of unreserved and unrestricted capital surplus available therefor. TWELFTH: INDEMNIFICATION OF CERTAIN PERSONS: To the fullest extent permitted by Tennessee law, the Corporation may indemnify or purchase and maintain insurance to indemnify any of its directors, officers, employees or agents and any persons who may serve at the request of the Corporation as directors, officers, employees, trustees or agents of any other corporation, firm, association, national banking association, state-chartered bank, trust company, business trust, organization or any other type of entity whether or not the Corporation shall have any ownership interest in such entity. Such indemnification(s) may be provided for in the Bylaws, or by resolution of the Board of Directors or by appropriate contract with the person involved. THIRTEENTH: CHARTER AMENDMENTS: The Corporation reserves the right to amend, alter, change or repeal any provision made in this Charter, in the manner now or hereafter prescribed by the laws of the State of Tennessee, and all rights conferred herein upon shareholders and the Board of Directors are granted subject to this reservation. FOURTEENTH: SPECIAL VOTE IN CERTAIN CASES: (a) Except as otherwise expressly provided in Paragraph 4 of this ARTICLE FOURTEENTH, the affirmative vote of the holders of sixty-six and two-thirds percent (66 2/3%) or more of the outstanding shares of capital stock of this Corporation entitled to vote generally in the election of directors, considered for the purposes of this ARTICLE FOURTEENTH as one class, shall be required to authorize: (1) any merger or consolidation of this Corporation with or into any other corporation, or other entity; or (2) any sale, lease, exchange, or other disposition of all or substantially all of the assets of this Corporation to or with any other corporation, person, or other entity, if, as of the "Date of Determination" as defined in this ARTICLE FOURTEENTH, such other corporation, person, or entity is the "Beneficial Owner," directly or indirectly, of ten percent (10%) or more of the outstanding shares of capital stock of this Corporation entitled to vote generally in the Page 16 of Union Planters Corporation Charter 17 election of directors, considered for the purposes of this ARTICLE FOURTEENTH as one class. Such affirmative vote shall be required notwithstanding the fact that some lesser percentage may be specified in law or any agreement with any national securities exchange. (b) For purposes of this ARTICLE FOURTEENTH, any corporation, person, or other entity shall be deemed to be the "Beneficial Owner" of any shares of capital stock of this Corporation (i) which it or any "Affiliate" or "Associate" of it (as defined in this ARTICLE FOURTEENTH) has the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants, or options, or otherwise, or (ii) which are "Beneficially Owned," directly or indirectly (including shares being owned through application of clause (i) above), by any other corporation, person or entity which is its "Affiliate" or "Associate" (as defined in this ARTICLE FOURTEENTH) or with which it or any "Affiliate" or "Associate" or it has any agreement, arrangement, or understanding for the purpose of acquiring, holding, voting, or disposing of the capital stock of this Corporation. For the purposes of this ARTICLE FOURTEENTH, the outstanding shares of any class of capital stock of this Corporation shall include shares deemed owned through the application of clauses (i) and (ii) above but shall not include any other shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants, or options, or otherwise. (c) The Board of Directors of this Corporation shall have the power and duty to determine for the purposes of this ARTICLE FOURTEENTH, on the basis of information then known to it, whether any corporation, person, or other entity "Beneficially Owns" ten percent (10%) or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, or is an "Affiliate" or an "Associate" (as defined in this ARTICLE FOURTEENTH) or another. Any such determination by the Board of Directors made in good faith shall be conclusive and binding for all purposes of this ARTICLE FOURTEENTH. (d) The provisions of this ARTICLE FOURTEENTH shall not apply to any merger or consolidation of this Corporation with or into, or any sale, lease, exchange, or other disposition of any assets of this Corporation to, any corporation or entity of which a majority of the outstanding shares of all classes of capital stock entitled to vote generally in the election of directors, considered for this purpose as one class, is owned of record or beneficially by this Corporation and its subsidiaries. (e) As used in this ARTICLE FOURTEENTH, the following terms shall have the following meanings: (1) Affiliate. An "Affiliate" of, or a person "affiliated" with, a specific person, means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. (2) Associate. The term "Associate" used to indicate a relationship with any person, means (i) any corporation or organization (other than this Corporation or a majority-owned subsidiary of this Corporation) of which such person is an officer or partner or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of equity securities, (ii) any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity, (iii) any relative or spouse of such person, or any relative of such spouse, who has the same home as such person, or (iv) any investment company registered under the Investment Company Act of 1940 for which such person or any affiliate of such person serves as investment adviser. (3) Date of Determination. The term "Date of Determination" means (i) the date on which a binding agreement (except for the fulfillment of conditions precedent, including, without limitation, votes of shareholders to approve such transaction) is entered into by this Corporation, as authorized by its Board of Directors, and another corporation, person or other entity providing for any merger or consolidation of this Corporation or any sale, lease, exchange or disposition of all or substantially all of the assets of this Corporation, as referred to in Paragraph 1 in this ARTICLE FOURTEENTH; or, (ii) if such an agreement as referred to in item (i) is amended so as to make it less favorable to this Corporation and its shareholders, the date on which such amendment is approved by the Board of Directors of this Corporation, or, (iii) in cases where neither item (i) nor item (ii) shall be applicable, the record date for the determination of shareholders of this Corporation entitled to notice of and to vote upon the transaction in question. The Board of Directors of this Corporation shall have the power and duty to determine for the purposes of this ARTICLE FOURTEENTH the Date of Determination as to any transaction. Any such determination by the Board of Directors made in good faith shall be conclusive and binding for all purposes of this ARTICLE FOURTEENTH. (f) The provisions of this ARTICLE FOURTEENTH as to the vote required for any action described herein, shall apply in addition to any other provision for a vote required with respect to such action by law or otherwise. Notwithstanding any other provisions of this Charter or the Bylaws (and notwithstanding the fact that some lesser percentage may be specified in law, the Charter, or the Bylaws), the affirmative vote of the holders of sixty-six and two-thirds percent (66 2/3%) or more of the outstanding shares of capital stock of this Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) shall be required to amend, alter, or repeal this ARTICLE FOURTEENTH. Revised 07/21/95 Page 17 of Union Planters Corporation Charter EX-10.J 3 DEFERRED COMPENSATION CHART 1 Exhibit 10(j) 1996 Deferred Compensation Plan for Executives 2 TABLE OF CONTENTS RECITALS................................................................. -1- Section 1 DEFINITIONS................................................. -1- Section 2 ELIGIBILITY AND PARTICIPATION 2.1 Eligibility................................................. -5- 2.2 Participation............................................... -5- Section 3 ADMINISTRATION 3.1 General Powers of Administration............................ -6- 3.2 Company as Fiduciary........................................ -6- 3.3 Indemnification............................................. -6- Section 4 DEFERRAL MATCHING AND SUPPLEMENTAL CONTRIBUTIONS 4.1 Deferred Compensation......................................... -7- A. Deferral Election B. Timing of Election C. Content of Deferral Elections 4.2 Matching Contributions...................................... -8- 4.3 Supplemental Contributions.................................. -8- Section 5 DEFERRAL PLAN ACCOUNTS 5.1 Establishment of Deferral Plan Accounts..................... -8- 5.2 Deferred Compensation Subaccount............................ -8- A. Initial Credit to Subaccount B. Earnings Credit to Subaccount 5.3 Matching Contribution Subaccount............................ -9- A. Initial Credit to Subaccount B. Earnings Credit to Subaccount 5.4 Supplemental Contribution Subaccount........................ -10- A. Initial Credit to Subaccount B. Earnings Credit to Subaccount 5.5 Transfer of Prior Plan Deferral Amounts to DPAs............. -10- Section 6 VESTING OF DPA SUBACCOUNTS 6.1 Vesting..................................................... -11- A. Deferred Compensation Subaccount B. Matching Contribution Subaccount C. Supplemental Contribution Subaccount
3 Section 7 PAYMENT TO PARTICIPANTS 7.1 Payment Upon Termination of Employment.................... -12- A. Lump Sum Distribution B. Death Before Payment of Benefits 7.2 Distributions in Cases of Hardship........................ -13- Section 8 PARTICIPANT STATEMENTS 8.1 Participant Statements.................................... -13- A. Annual Participant Statements B. Statement Upon Termination of Employment Section 9 AMENDMENT OR TERMINATION PLAN 9.1 Amendment or Termination of Plan.......................... -15- Section 10 GENERAL PROVISIONS 10.1 Participant's Rights Unfunded............................. -15- 10.2 Independence of Other Benefit Arrangements................ -16- 10.3 No Secured Guarantee of Benefits.......................... -16- 10.4 No Enlargement of Employee Rights......................... -16- 10.5 Spendthrift Provision..................................... -16- 10.6 Applicable Law............................................ -16- 10.7 Severability.............................................. -16- 10.8 Incapacity of Recipient................................... -16- 10.9 Successors................................................ -16- 10.10 Unclaimed Benefits........................................ -17- 10.11 Limitations of Liability.................................. -17- 10.12 Forfeiture of Benefits ................................... -17- 10.13 Payment of Attorney's Fees, Court Costs, and Interest on Loss of Benefits.......................................... -17- 10.14 Payment of Taxes.......................................... -17- 10.15 Withholding............................................... -18- 10.16 Participants Bound by Terms of the Plan................... -18- 10.17 Effective Date of the Plan................................ -18- EXHIBIT A: PARTICIPATION AGREEMENT EXHIBIT B: DEFERRED COMPENSATION ELECTION FORM EXHIBIT C: TRUST UNDER DEFERRED COMPENSATION PLAN
4 UNION PLANTERS CORPORATION DEFERRED COMPENSATION PLAN FOR EXECUTIVES RECITALS WHEREAS, Union Planters Corporation ("Company") desires to assist selected Company executives in their ability to better provide for their own financial future by permitting such executives to defer of a portion of their current annual salary and any bonus compensation; WHEREAS, the Company desires that such deferrals are to be made without restrictions imposed by those Internal Revenue Code provisions which apply to tax-qualified retirement plans; WHEREAS, Company has in the past periodically entered into individual income deferral arrangements with selected Company executives whereby such executives were provided the opportunity to elect to defer a portion of their base compensation and/or bonus received during a calendar year; and WHEREAS, as to future deferral by such executives, Company desires to set forth the terms and conditions of any such future deferral arrangements through this Deferred Compensation Plan. SECTION 1 DEFINITIONS 1.1 "APPLICABLE FEDERAL RATE" shall mean 120 percent of the applicable federal rate (as calculated on a mid-term basis, compounded monthly) pursuant to Code Section 1274(d), as amended. 1.2 "BENEFICIARY" shall mean the person or persons Participant has designated in writing to Company to receive benefits under the Agreement in the event of the Participant's death. If the Participant has not specifically designated any Beneficiary for purposes of the Agreement, then the Beneficiary shall become the Participant's estate. In the case of the death of the Beneficiary before completion of payments under the Agreement to the Beneficiary, then the Beneficiary's estate shall become entitled to any remaining payments. 1.3 "BONUS" shall mean any special and/or discretionary compensation amounts in excess of Salary determined by the Company to be payable to a Participant with respect to services rendered. 1.4 "CHANGE OF CONTROL" shall mean the occurrence of the earliest of any of the following events: A. The acquisition by any entity, person, or group (excluding any entity, person, or group owning Voting Stock at the effective date of this Plan) of beneficial ownership, as 1 5 that term is defined in Rule 13d-3 of the Securities Exchange Act of 1934, of twenty-five percent (25%) or more of the Voting Stock of Company; B. The commencement and consummation by any entity, person, or group (other than Company) of a tender offer or an exchange offer for more than twenty-five percent (25%) or more of the Voting Stock of Company; or C. The effective date of a (i) merger or consolidation of Company with one or more other corporations as a result of which the holders of the Voting Stock of Company immediately prior to such merger or consolidation hold less than eighty percent (80%) of the Voting Stock of the surviving or resulting corporation, or (ii) a sale or transfer of a majority of the property of Company, other than to an entity of which Company controls 80% or more of the Voting Stock. 1.5 "CODE" shall mean the Internal Revenue Code of 1986, as amended. 1.6 "COMMITTEE" shall mean the Salary and Benefits Committee of the Company's Board of Directors, or such committee charged with oversight of the Company's salary and benefits programs. 1.7 "COMPANY" shall mean Union Planters Corporation. 1.8 "CURRENT EARNINGS RATE" shall mean an interest rate determined as of each December 31. Such interest rate shall be equal to a 12-month average of 120 percent of the applicable mid-term federal rate under Code Section 1274 (d), as amended; provided, however, that in no event shall such Current Earnings Rate exceed that interest rate which would require disclosure under Securities and Exchange Commission annual proxy statement reporting guidelines as additional reportable earnings. Interest compounding shall be on an annual basis based upon the period of deferral. 1.9 "DEFERRED COMPENSATION" shall mean the sum of Salary and/or Bonus that is the subject of an elective deferral under Section 4.1 of the Plan. 1.10 "DEFERRED COMPENSATION SUBACCOUNT" shall mean the bookkeeping account established for a Participant under the Plan to which Deferred Compensation amounts with respect to such Participant are credited from time to time, as provided in Section 5.2 of the Plan. For purposes of this definition, unless otherwise indicated by the Plan, Deferred Compensation Subaccount shall refer to both the Deferred Compensation Cash and Stock Subparts. 1.11 "DEFERRED COMPENSATION ELECTION FORM" shall mean the form which Participants use to defer Salary and/or Bonus pursuant to Section 4.1 of the Plan. 1.12 "DISABILITY" shall mean mental or physical disability as determined by the Committee in accordance with standards and procedures similar to those under the Company's employee long- 2 6 term disability plan, if any. At any time that the Company does not maintain such a long-term disability plan, Disability shall mean the inability of a Participant, as determined by the Committee, to substantially perform such Participant's regular duties and responsibilities due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six (6) consecutive months. 1.13 "DIVIDEND PAYMENT DATE" shall mean the date upon which cash dividends are paid to Company shareholders. 1.14 "ELIGIBLE EXECUTIVE" shall mean any employee of the Company being paid Salary at a rate in excess of $125,000 annually and who is selected by the Committee to participate in the Plan. 1.15 "GOOD REASON" shall mean a termination of employment by the Participant with the Company if, without the Participant's express written consent: (i) Company shall assign to Participant duties of a nonexecutive nature or for which Participant is not reasonably equipped by his or her skills and experience; or (ii) Company shall reduce the salary of the Participant, or materially reduce the amount of paid vacations to which he or she is entitled, or materially reduce his or her fringe benefits and perquisites; or (iii) Company shall fail to provide office facilities, secretarial services, and other administrative services to the Participant which are substantially equivalent to the facilities and services provided to the Participant at the initial date of the Participant's participation in the Plan; or (iv) Company shall terminate incentive and/or benefit plans or arrangements, or reduce or limit the Participant's participation therein, relative to the level of participation of other executives of similar rank, to such an extent as to materially reduce the aggregate value of the Participant's incentive compensation and/or benefits below their aggregate value as of the initial date of the Participant's participation in the Plan. 1.16 "MATCHING CONTRIBUTIONS SUBACCOUNT" shall mean the bookkeeping account established for a Participant under Section 5.3 of the Plan to which the Company's Matching Contributions under Section 4.2 of the Plan are credited from time to time. For purposes of this definition, unless otherwise indicated by the Plan, Matching Contribution Subaccount shall refer to both the Matching Contribution Cash and Stock Subparts. 1.17 "PARTICIPANT" shall mean an Eligible Executive who has been selected by the Committee to participate in the Plan. 1.18 "PARTICIPATION AGREEMENT" shall mean that Agreement entered into by a Participant (as set forth in Exhibit A to the Plan) prior to participation in the Plan. 3 7 1.19 "PLAN" shall mean the Union Planters Corporation 1996 Deferred Compensation Plan for Executives, as set forth herein and as amended from time to time. 1.20 "PRIOR PLAN" shall mean a nonqualified deferred compensation plan or similar arrangement in which a Participant participated prior to the Plan and through which the Participant reduced and deferred a portion on his or her current taxable Salary and/or Bonus. 1.21 "SALARY" shall mean the regular annual base compensation paid by the Company to a Participant (without regard to any reduction thereof pursuant to the Plan, any 401(k) plan or Code Section 125 flexible benefits plan maintained by the Company), exclusive of Bonus and any other incentive payments made by the Company to such Participant. 1.22 "STOCK" shall mean common stock of the Company quoted on the New York Stock Exchange, as identified by the symbol UPC. 1.23 "STOCK UNITS" shall mean the number of shares of Stock (carried to four decimal places) credited to a Participant's Deferred Compensation, Matching Contribution or Supplemental Contribution Subaccounts in accordance with the provisions of Sections 5.2, 5.3 and 5.4 of the Plan. Such credit shall be for bookkeeping purposes only, with the number of Stock Units automatically converted to cash prior to payment to a Participant. Under no circumstances shall any shares of Stock be payable or distributable to a Participant under the terms of the Plan, nor shall any Participant have any rights as a shareholder of the Company based on those Stock Units allocated to his or her Subaccounts. In the event of a Change in Capital Stock, the Stock Units then credited to a Participant's Deferred Compensation, Matching Contribution or Supplemental Contribution Subaccounts shall be appropriately adjusted, based on the Committee's directions, to account for the change in number of issued and outstanding shares of Stock. For these purposes a Change in Capital Stock shall mean any increase or decrease in the number of shares of issued Stock resulting from a subdivision or consolidation of shares, whether through reorganization, recapitalization, stock split-up, stock distribution or combination of shares, or the payment of a share dividend or other increase or decrease in the number of such shares outstanding effected without receipt of consideration by the Company. 1.24 "SUBACCOUNT" means the Deferred Compensation Cash and Stock Subparts, the Matching Contributions Cash and Stock Subparts and/or the Supplemental Contributions Cash and Stock Subparts, as the context requires. 1.25 "SUPPLEMENTAL CONTRIBUTIONS SUBACCOUNT" shall mean the bookkeeping account established for the Participant under Section 5.4 of the Plan and to which the Company's Supplemental Contributions under Section 4.3 of the Plan are credited. For purposes of this definition, unless otherwise indicated by the Plan, Supplemental Contributions Subaccount shall refer to both the Supplemental Contributions Cash and Stock Subparts. 4 8 1.26 "UNFORESEEABLE EMERGENCY" shall mean any of the following: (i) a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of or with respect to the Participant or a dependent of the Participant, (ii) a loss of the Participant's property due to casualty, or (iii) some other similar extraordinary unforeseeable circumstances arising as a result of events beyond the control of the Participant. 1.27 "VOTING STOCK" shall mean that class (or classes) of common stock of the Company entitled to vote in the election of the Company's directors. 1.28 "WEIGHTED AVERAGE CLOSING PRICE" shall mean the weighted closing price of the Stock during the thirty-day period preceding the date of valuation. The Weighted Average Closing Price shall be the result of (i) divided by (ii), where: (i) shall equal the sum of the closing prices of Stock on each trading day during the thirty-day period preceding the date of valuation, and (ii) shall equal the actual number of trading days during the thirty-day period preceding the date of valuation. 1.29 "YEAR OF SERVICE" shall mean any calendar year of employment by the Participant with Company (prior to and after the effective date of the Plan) during which the Participant accumulates at least 1000 hours of service. For these purposes, the provisions of Department of Labor Regulations 2530.200-2(b) and (c) are incorporated herein by reference as they relate to the determination of "hour of service." SECTION 2 ELIGIBILITY AND PARTICIPATION 2.1 ELIGIBILITY. Individuals eligible to participate in the Plan shall consist of the Eligible Executives of the Company. 2.2 PARTICIPATION. Participation in the Plan by Eligible Executives shall be determined by the Committee in its sole discretion, and shall be subject to the terms and conditions of the Plan. All Participants in the Plan shall, prior to participation, execute a Participation Agreement as set forth in Exhibit A to the Plan. Once becoming a Participant in the Plan, an Eligible Executive shall continue to participate in the Plan until such time as: (i) the Participant ceases to be an Eligible Executive, or (ii) the Committee takes action to terminate the Eligible Executive's right to continued participation in the Plan. Should an individual cease to be a Participant under the provisions of (i) or (ii) above while still employed by Company, any payment to Participant will be made in accordance with the provisions of Section 7.1 upon the termination of employment by the individual with Company. 5 9 SECTION 3 ADMINISTRATION 3.1 GENERAL POWERS OF ADMINISTRATION. The Plan shall be administered by the Committee. The Committee is authorized to construe and interpret the Plan and promulgate, amend, and rescind rules and regulations relating to the implementation, administration, and maintenance of the Plan. Subject to the terms and conditions of the Plan, the Committee shall make all determinations necessary or advisable for the implementation, administration, and maintenance of the Plan including, without limitation, determining the Eligible Executives and correcting any technical defect(s) or technical omission(s), or reconciling any technical inconsistencies, in the Plan. The Committee may designate persons other than members of the Committee to carry out the day-to-day ministerial administration of the Plan under such conditions and limitations as it may prescribe; provided, however, that the Committee shall not delegate its authority with regard to the determination of Eligible Executives. The Committee's determinations under the Plan need not be uniform and may be made selectively among Participants, whether or not such Participants are similarly situated. Any determination, decision, or action of the Committee in connection with the construction, interpretation, administration, implementation, or maintenance of the Plan shall be final, conclusive, and binding upon all Participants and any person(s) claiming any Plan benefits under or through any Participants. 3.2 COMPANY AS FIDUCIARY. Company is hereby designated as a fiduciary under the Plan. Any decision by Company or the Committee denying a claim by Participant or a Beneficiary for benefits under the Agreement shall be stated in writing and shall be delivered or mailed to the Participant or Beneficiary. Such statement shall set forth the specific reasons for the denial, written to the best of the Company's ability in a manner that may be understood without legal counsel. In addition, Company shall afford a reasonable opportunity to the Participant or Beneficiary for a full and fair review of the decision denying such claim. Notwithstanding the above provisions of Section 3.2, to the extent that the Employee Retirement Income Security Act ("ERISA") may require specific procedures to be followed in the event of a denial of a claim, such provisions of ERISA will be followed. 3.3 INDEMNIFICATION. The Company will indemnify and hold harmless the Committee and each member thereof against any cost or expense (including, without limitation, attorney's fees) or liability (including, without limitation, any sum paid with the approval of the Company in settlement of a claim) arising out of any act or omission to act, except in the case of willful gross misconduct or gross negligence. 6 10 SECTION 4 DEFERRAL, MATCHING AND SUPPLEMENTAL CONTRIBUTIONS 4.1 DEFERRED COMPENSATION. Participants may defer all or a portion of their Salary and/or Bonus earned during any calendar year, in accordance with the following provisions. A. DEFERRAL ELECTION. To defer compensation during any particular year, those Eligible Executives participating in the Plan must execute a Deferred Compensation Election Form ("Form") and file such Form with the Committee (or its designee). B. TIMING OF ELECTION. In the year in which the Plan is first implemented (and in each succeeding calendar year), those Eligible Executives selected by the Committee to participate in the Plan must make an election to defer Salary and/or Bonus within 30 days after the later of: (i) the date the Eligible Executive is selected by the Committee to participate in the Plan, or (ii) the effective date of the Plan. Such election will only be effective for Salary and/or Bonus earned subsequent to such election. Once participating in the Plan, deferral elections by Participants during subsequent years shall be completed and filed with the Committee (or its designee) prior to the January 1 of the year to which such deferral election applies. C. CONTENT OF DEFERRAL ELECTIONS. The following shall apply to all deferral elections: (i) All deferral elections shall contain a statement that the Participant elects to defer a portion of the Participant's Salary and/or Bonus for a specified calendar year and that is earned and becomes payable to the Participant after the filing of such deferral election; (ii) Except for the provisions of subsection (iii) below, any deferral election shall only apply to the Salary and/or Bonus that is attributable to the Participant's services rendered to the Company during the calendar year for which such election is made (whether or not such compensation is actually paid and received in such calendar year); (iii) If a Participant is currently deferring Salary and/or Bonus and fails to complete and return a Form prior to the January 1 of the calendar year to which such Form is to be effective, then the deferral election made by the Participant on the most recently filed Form shall be considered effective for the new calendar year; and (iv) A Participant may terminate a deferral election for the remaining portion of any calendar year by filing with the Committee (or its designee) written notice that any deferrals are to cease during such calendar year. Such notice shall be effective with respect to all Salary or Bonus earned and paid after the filing of such notice. Once any such notice is filed, the Participant must file a new Form with the Committee (or 7 11 its designee) to recommence any deferral and may not resume any deferral of Salary and/or Bonus until the following year. 4.2 MATCHING CONTRIBUTIONS. Provided the Participant is employed by the Company, on the first business day of each month the Company shall credit to the Participant's Matching Contribution Subaccount a matching contribution equal to 25% of Salary and/or Bonus actually deferred under the Plan by the Participant during the preceding month. Notwithstanding the above, no Matching Contribution shall be made on any transfer to the Plan of Prior Plan deferred amounts pursuant to Section 5.5 of the Plan. 4.3 SUPPLEMENTAL CONTRIBUTIONS. In its sole discretion, provided the Participant is employed by the Company, the Company may, on the first business day of any month, credit additional sums to the Participant's Supplemental Contribution Subaccount. The amount of any such contributions shall be determined by the Company in its sole discretion. SECTION 5 DEFERRAL PLAN ACCOUNTS 5.1 ESTABLISHMENT OF DEFERRAL PLAN ACCOUNTS. The Company shall establish a Deferral Plan Account ("DPA") for each Participant. Each Participant's DPA shall be comprised of Deferred Compensation Cash and Stock Subparts, Matching Contribution Cash and Stock Subparts, and Supplemental Contribution Cash and Stock Subparts. 5.2 DEFERRED COMPENSATION SUBACCOUNT. Deferred Compensation Cash and Deferred Compensation Stock Subparts shall be created under each Participant's Deferred Compensation Subaccount to which shall be credited all Salary and/or Bonus amounts deferred by a Participant in accordance with Section 4.1 of the Plan. A. INITIAL CREDIT TO SUBACCOUNT. Each Participant's Deferred Compensation Cash and Stock Subparts shall be credited no less frequently than the first business day of each month with an amount equal to the sum of the Salary and/or Bonus deferred by the Participant during the preceding month in accordance with Section 4.1 of the Plan. (I) CREDIT TO STOCK SUBPART. The dollar amount of Salary and/or Bonus deferred shall be converted into Stock Units by dividing such dollar amount by the Weighted Average Closing Price of the Company's Stock which exists on the date such Salary and/or Bonus is credited to the Participant's Stock Subpart. (II) CREDIT TO CASH SUBPART. The actual dollar amount of Salary and/or Bonus deferred shall be credited as cash to the Participant's Cash Subpart. 8 12 B. EARNINGS CREDIT TO SUBACCOUNT. Each Participant's Deferred Compensation Stock and Cash Subparts shall be credited with earnings amounts equal to the following. (I) EARNINGS CREDIT TO STOCK SUBPART. On each Dividend Payment Date, an amount equal to the sum of the cash dividends potentially payable on all Stock Units then allocated to the Participant's Deferred Compensation Stock Subpart shall be credited to such Subpart. The dollar amount of such cash dividends shall be converted into Stock Units by dividing such dollar amount by the Weighted Average Closing Price of the Company's Stock which exists on such Dividend Payment Date. (II) EARNINGS CREDIT TO CASH SUBPART. On each December 31, the Current Earnings Rate (appropriately compounded) shall be multiplied by the dollar sum then allocated to the Participant's Deferred Compensation Cash Subpart. The resulting amount shall be credited to such Subpart. 5.3 MATCHING CONTRIBUTION SUBACCOUNT. Matching Contribution Cash and Matching Contribution Stock Subparts shall be created under each Participant's Matching Contribution Subaccount to which shall be credited all Matching Contributions made in accordance with Section 4.2 of the Plan. A. INITIAL CREDIT TO SUBACCOUNT. Each Participant's Matching Contribution Cash and Stock Subparts shall be credited no less frequently than the first business day of each month with an amount equal to the Matching Contributions made in accordance with Section 4.2 of the Plan . (I) CREDIT TO STOCK SUBPART. The dollar amount of Matching Contribution shall be converted into Stock Units by dividing such dollar amount by the Weighted Average Closing Price of the Company's Stock which exists on the date such Salary and/or Bonus is credited to the Participant's Stock Subpart. (II) CREDIT TO CASH SUBPART. The actual dollar amount of Matching Contribution shall be credited as cash to the Participant's Cash Subpart. B. EARNINGS CREDIT TO SUBACCOUNT. Each Participant's Matching Contribution Stock and Cash Subparts shall be credited with earnings amounts equal to the following. (I) EARNINGS CREDIT TO STOCK SUBPART. On each Dividend Payment Date, an amount equal to the sum of the cash dividends potentially payable on all Stock Units then allocated to the Participant's Matching Contribution Stock Subpart shall be credited to such Stock Subpart. The dollar amount of such cash dividends shall be converted into Stock Units by dividing such dollar amount by the Weighted Average Closing Price of the Company's Stock which exists on such Dividend Payment Date. 9 13 (II) EARNINGS CREDIT TO CASH SUBPART. On each December 31, the Current Earnings Rate (appropriately compounded) shall be multiplied by the dollar sum then allocated to the Participant's Matching Contribution Cash Subpart. The resulting amount shall be credited to such Cash Subpart. 5.4 SUPPLEMENTAL CONTRIBUTION SUBACCOUNT. Supplemental Contribution Cash and Supplemental Contribution Stock Subparts shall be created under each Participant's Supplemental Contribution Subaccount to which shall be credited all Supplemental Contributions made in accordance with Section 4.3 of the Plan. A. INITIAL CREDIT TO SUBACCOUNT. Each Participant's Supplemental Contribution Cash and Stock Subparts shall be credited no less frequently than the first business day of each month with an amount equal to any Supplemental Contributions made in accordance with Section 4.3 of the Plan. (I) CREDIT TO STOCK SUBPART. The dollar amount of Supplemental Contribution shall be converted into Stock Units by dividing such dollar amount by the Weighted Average Closing Price of the Company's Stock which exists on the date such Salary and/or Bonus is credited to the Participant's Stock Subpart. (II) CREDIT TO CASH SUBPART. The actual dollar amount of Supplemental Contribution shall be credited as cash to the Participant's Cash Subpart. B. EARNINGS CREDIT TO SUBACCOUNT. Each Participant's Supplemental Contribution Stock and Cash Subparts shall be credited with earnings amounts equal to the following. (I) EARNINGS CREDIT TO STOCK SUBPART. On each Dividend Payment Date, an amount equal to the sum of the cash dividends potentially payable on all Stock Units then allocated to the Participant's Supplemental Contribution Stock Subpart shall be credited to such Stock Subpart. The dollar amount of such cash dividends shall be converted into Stock Units by dividing such dollar amount by the Weighted Average Closing Price of the Company's Stock which exists on such Dividend Payment Date. (II) EARNINGS CREDIT TO CASH SUBPART. On each December 31, the Current Earnings Rate (appropriately compounded) shall be multiplied by the dollar sum then allocated to the Participant's Supplemental Contribution Cash Subpart. The resulting amount shall be credited to such Cash Subpart. 5.5 TRANSFER OF PRIOR PLAN DEFERRAL AMOUNTS TO DPAS. Should a Participant have previously deferred a portion of his or her Salary and/or Bonus compensation under a Prior Plan, then any amounts credited to a Participant's deferred compensation account (or similar bookkeeping account) under the Prior Plan as of the date of commencement of participation in the Plan by the Participant shall be transferred to the Plan's Deferred Compensation Subaccount. From such date of transfer, the deferred compensation account (or similar bookkeeping account) under the Prior Plan 10 14 shall cease to exist for purposes of paying any benefits under the provisions of the Prior Plan and any benefits payable under the Prior Plan shall henceforth be payable subject to the terms and conditions of the Plan. SECTION 6 VESTING OF DPA SUBACCOUNTS 6.1 VESTING. A Participant's Subaccounts shall vest in accordance with the following. A. DEFERRED COMPENSATION SUBACCOUNT. A Participant's Deferred Compensation Subaccount shall at all times be 100% Vested. B. MATCHING CONTRIBUTION SUBACCOUNT. A Participant's Matching Contribution Subaccount shall vest in accordance with the following schedule:
Participant's Years of Service Vested Percentage ---------------------- ----------------- 1 0% 2 0% 3 0% 4 0% 5 100%
Notwithstanding the above vesting schedule under Section 6.1 (B), upon the following events, a Participant's Matching Contribution Subaccount shall become 100% vested: (i) the death or Disability of the Participant, (ii) a Change in Control of the Company, or (iii) the termination of employment by a Participant for Good Reason. C. SUPPLEMENTAL CONTRIBUTION SUBACCOUNT. A Participant's Supplemental Contribution Subaccounts shall vest in accordance with the following schedule:
Participant's Years of Service Vested Percentage ---------------------- ----------------- 1 0% 2 0% 3 0% 4 0% 5 100%
Notwithstanding the above vesting schedule under Section 6.1 (C), upon the following events, a Participant's Supplemental Contribution Subaccount shall become 100% vested: (i) the death or Disability of the Participant, (ii) a Change in Control of the Company, or (iii) the termination of employment by a Participant for Good Reason. 11 15 SECTION 7 PAYMENT TO PARTICIPANTS 7.1 PAYMENT UPON TERMINATION OF EMPLOYMENT. Once a Participant terminates service with the Company (for whatever reason), the Participant (or, if appropriate, his or her Beneficiary) will be entitled to payment of the vested value of such Participant's Deferred Compensation, Matching Contribution and Supplemental Contribution Subaccounts as follows: A. LUMP SUM DISTRIBUTION. An amount equal to the vested value of the Participant's Deferred Compensation, Matching Contribution, and Supplemental Contribution Subaccounts shall be paid to the Participant: (1) in one lump sum distribution on the first business day of the second month following the Participant's termination of employment, or (2) in such manner as the Company and Participant mutually agree to in writing. (I) VALUATION OF DEFERRED COMPENSATION SUBACCOUNT. For purposes of determining the payment from the Participant's Deferred Compensation Subaccount, the greater of the cash value of the Deferred Compensation Cash or Deferred Compensation Stock Subpart will be used for purposes of determining the amount of payment. To determine the cash value of the Participant's Deferred Compensation Stock Subpart, the number of Stock Units credited on the date of termination of employment shall be multiplied by the Weighted Average Closing Price of the Stock on such date. To determine the value of the Participant's Deferred Compensation Cash Subpart, the cash amount credited to such Subpart on the date of termination of employment shall be utilized. (II) VALUATION OF MATCHING CONTRIBUTION SUBACCOUNT. For purposes of determining the payment from the Participant's Matching Contribution Subaccount, the greater of the cash value of the Matching Contribution Cash or Matching Contribution Stock Subpart will be used for purposes of determining the amount of payment. To determine the cash value of the Participant's Matching Contribution Stock Subpart, the number of Stock Units credited on the date of termination of employment shall be multiplied by the Weighted Average Closing Price of the Stock on such date. To determine the value of the Participant's Matching Contribution Cash Account, the cash amount credited to such Subpart on the date of termination of employment shall be utilized. (III) VALUATION OF SUPPLEMENTAL CONTRIBUTION SUBACCOUNT. For purposes of determining the payment from the Participant's Supplemental Contribution Subaccount, the greater of the cash value of the Supplemental Contribution Cash or 12 16 Supplemental Contribution Stock Subpart will be used for purposes of determining the amount of payment. To determine the cash value of the Participant's Supplemental Contribution Stock Subpart, the number of Stock Units credited on the date of termination of employment shall be multiplied by the Weighted Average Closing Price of the Stock on such date. To determine the value of the Participant's Supplemental Contribution Cash Account, the cash amount credited to such Subpart on the date of termination of employment shall be utilized. B. DEATH BEFORE PAYMENT OF BENEFITS. Should Participant die before the balance of the Participant's Deferred Compensation, Matching Contribution and Supplemental Contribution Subaccounts have been paid to the Participant, then any remaining payments will be made to the Participant's Beneficiary in the same form and manner as they would have been made to the Participant under the provisions of Section 7.1(A) of the Plan. 7.2. DISTRIBUTIONS IN CASES OF HARDSHIP. Notwithstanding the provisions of Section 7.1 of the Plan, the Committee may, in its sole discretion, choose to permit a Participant to withdraw amounts from his or her Deferred Compensation Subaccount upon a showing by such Participant that an Unforeseeable Emergency has occurred. Such distributions shall be limited to the amount shown to be necessary to meet the Unforeseeable Emergency, and no more than one withdrawal will be permitted from a Participant's Deferred Compensation Subaccount during each calendar year. The dollar amount of any withdrawal shall reduce the value of both the Participant's Deferred Compensation Cash and Stock Subparts. To determine the cash value of the Participant's Deferred Compensation Stock Subpart on the date of withdrawal of funds, the number of Stock Units credited on the date of withdrawal of funds shall be multiplied by the Weighted Average Closing Price of the Stock on such date. To determine the value of the Participant's Deferred Compensation Cash Subpart on the date of withdrawal of funds, the cash amount credited to such Subpart on such date shall be utilized. Any amounts distributed to a Participant pursuant to a hardship withdrawal shall be considered to be taxable wages to the Participant in the calendar year of withdrawal. SECTION 8 PARTICIPANT STATEMENTS 8.1 PARTICIPANT STATEMENTS Each Participant shall be provided with the following statements. A. ANNUAL PARTICIPANT STATEMENTS. At or within a reasonable period of time following the end of each calendar year, each Participant shall be provided with a statement showing the balances (vested and nonvested) in the Participant's Deferred Compensation, Matching Contribution, and Supplemental Contributions Subaccounts, as follows. 13 17 (I) DEFERRED COMPENSATION SUBACCOUNT. The end of year balance in a Participant's Deferred Compensation Stock Subpart shall consist of the number of Stock Units allocated to the Participant's Stock Subpart at year end, multiplied by the Weighted Average Closing Price of the Stock on such date. The end-of-year balance in a Participant's Deferred Compensation Cash Subpart shall consist of the dollar amount of cash allocated to the Participant's Cash Subpart at year end. (II) MATCHING CONTRIBUTION SUBACCOUNT. The end-of-year balance in a Participant's Matching Contribution Stock Subpart shall consist of the number of Stock Units allocated to the Participant's Stock Subpart at year end, multiplied by the Weighted Average Closing Price of the Stock on such date. The end-of-year balance in a Participant's Matching Contribution Cash Subpart shall consist of the dollar amount of cash allocated to the Participant's Cash Subpart at year end. (III) SUPPLEMENTAL CONTRIBUTION SUBACCOUNT. The end-of-year balance in a Participant's Supplemental Contribution Stock Subpart shall consist of the number of Stock Units allocated to the Participant's Subpart at year end, multiplied by the Weighted Average Closing Price of the Stock on such date. The end of year balance in a Participant's Supplemental Contribution Cash Subpart shall consist of the dollar amount of cash allocated to the Participant's Cash Subpart at year end. B. STATEMENT UPON TERMINATION OF EMPLOYMENT. Within 30 days following the date of termination of employment by a Participant (for any reason), the Participant shall be provided with a statement showing the vested balances in the Participant's Deferred Compensation, Matching Contribution, and Supplemental Contributions Subaccounts, as follows. (I) DEFERRED COMPENSATION SUBACCOUNT. The balance in a Participant's Deferred Compensation Subaccount shall consist of the greater of the cash value of the Deferred Compensation Cash or Deferred Compensation Stock Subpart. To determine the cash value of the Participant's Deferred Compensation Stock Account, the number of Stock Units credited on the date of termination of employment shall be multiplied by the Weighted Average Closing Price of the Stock on such date. To determine the value of the Participant's Deferred Compensation Cash Subpart, the cash amount credited to such Subpart on the date of termination of employment shall be utilized. (II) MATCHING CONTRIBUTION SUBACCOUNT. The balance in a Participant's Matching Contribution Subaccount shall consist of the greater of the cash value of the Matching Contribution Cash or Matching Contribution Stock Subpart. 14 18 To determine the cash value of the Participant's Matching Contribution Stock Subpart, the number of Stock Units credited on the date of termination of employment shall be multiplied by the Weighted Average Closing Price of the Stock on such date. To determine the value of the Participant's Matching Contribution Cash Subpart, the cash amount credited to such Subpart on the date of termination of employment shall be utilized. (III) SUPPLEMENTAL CONTRIBUTION SUBACCOUNT. The balance in a Participant's Supplemental Contribution Subaccount shall consist of the greater of the cash value of the Supplemental Contribution Cash or Supplemental Contribution Stock Subpart. To determine the cash value of the Participant's Supplemental ContributionStock Subpart, the number of Stock Units credited on the date of termination of employment shall be multiplied by the Weighted Average Closing Price of the Stock on such date. To determine the value of the Participant's Supplemental Contribution Cash Account, the cash amount credited to such Subpart on the date of termination of employment shall be utilized. SECTION 9 AMENDMENT OR TERMINATION OF PLAN 9.1. AMENDMENT OR TERMINATION OF PLAN. Any amendment to this Plan shall be made pursuant to a resolution of the Board; provided, however, that if such amendment directly or indirectly affects the benefits payable under the Plan, such amendment must be mutually agreed to in writing by Participant (or, in the event that the Participant is deceased at the date of amendment, the Beneficiary). SECTION 10 GENERAL PROVISIONS 10.1 PARTICIPANT'S RIGHTS UNFUNDED. The Plan at all times shall be unfunded as defined under provisions of the Code. The right of Participant or any Beneficiary to receive a distribution hereunder shall be an uninsured claim against the general assets of Company in the event of the Company's insolvency or bankruptcy. Company shall implement a form of trust arrangement (known generally as a "rabbi trust") to hold Company assets which will be used to make payments to the Participant (or any Beneficiary) under the terms of the Plan. Such trust arrangement will not be a "funded" arrangement under the provisions of the Code, and a copy of such trust arrangement shall be included with this Plan as Exhibit C. 15 19 10.2 INDEPENDENCE OF OTHER BENEFIT ARRANGEMENTS. Participation in the Plan shall in no way restrict or otherwise impact Participant's participation in any other welfare benefit plan, employment or other contract, deferred compensation arrangement, equity participation plan or any other form of retirement benefit arrangement sponsored by Company. 10.3 NO SECURED GUARANTEE OF BENEFITS. In the event of the insolvency or bankruptcy of Company, Participant shall remain a general creditor of the Company with respect to any benefits payable under the Plan and nothing contained in the Plan shall constitute a secured guaranty by Company or any other person or entity that the assets of Company will be sufficient to pay any benefit hereunder in the event of the Company's insolvency or bankruptcy. 10.4 NO ENLARGEMENT OF EMPLOYEE RIGHTS. No Participant shall have any right to receive a distribution of any benefits under the Plan except in accordance with the terms of the Plan. Establishment of the Plan shall not be construed to give any Participant the right to be retained in the service of Company. 10.5 SPENDTHRIFT PROVISION. No interest of any person or entity in, or right to receive a distribution under, the Plan shall be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind; nor may such interest or right to receive a distribution be taken, either voluntarily or involuntarily for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including claims for alimony, support, separate maintenance and claims in bankruptcy proceedings. 10.6 APPLICABLE LAW. The Plan shall be construed and administered under the laws of the State of Tennessee. 10.7 SEVERABILITY. In the event that any of the provisions of the Plan are held to be inoperative or invalid by any court of competent jurisdiction, then: (i) insofar as is reasonable, effect will be given to the intent manifested in the provision held invalid or inoperative, and (ii) the validity and enforceability of the remaining provisions of the Plan will not be affected thereby. 10.8 INCAPACITY OF RECIPIENT. If any person entitled to a distribution under the Plan is deemed by Company to be incapable (physically or mentally) of personally receiving and giving a valid receipt for any payment pursuant to the Plan, then, unless and until claim therefore shall have been made by a duly appointed guardian or other legal representative of such person, Company may provide for such payment or any part thereof to be made to any other person or institution then contributing toward or providing for the care and maintenance of such person. Any such payment shall be a payment for the account of such person and a complete discharge of any liability of Company and the Plan with respect to such payment. 10.9 SUCCESSORS. The terms and conditions of the Plan will be binding on the Company's and Participant's successors, heirs and assigns (herein, "Participant Successors" and "Company Successors"). 16 20 10.10 UNCLAIMED BENEFITS. Participant shall keep Company informed of his or her current address and the current address of his or her Beneficiary. Company shall not be obligated to search for the whereabouts of any person. If the location of Participant is not made known to Company within a one (1) year period after the date on which payment is to be made under the provisions of Section 7.1, then payment may be made by the Company to the Beneficiary instead. If, within one (1) additional year after such initial one (1) year period, Company is unable to locate any designated Beneficiary of the Participant, then Company shall have no further obligation to pay any benefit under the Plan to such Participant or designated Beneficiary and any such benefit shall be irrevocably forfeited. 10.11 LIMITATIONS ON LIABILITY. Participant and any other person claiming benefits under the Plan shall be entitled under this Plan only to those payments provided in accordance with the provisions of the Plan ("Payment Claims"). With the exception of the provisions of Section 10.13 of the Plan, neither Company, Company Successor nor any individual acting as employee or agent of Company or Company Successor shall be liable to Participant or any other person for any other claim, loss, liability or expense under this Plan not directly related to a Payment Claim. 10.12 FORFEITURE OF BENEFITS. Notwithstanding any other provision of the Plan, should Participant engage in theft, fraud or embezzlement causing significant property damage to Company, then any benefits payable to such Participant under the Plan will automatically be forfeited. The determination of theft or embezzlement will be made by the Board in good faith, but such determination does not require an actual criminal indictment or conviction prior to or after such decision. In any determination of forfeiture pursuant to this Section 10.12, Participant will be given the opportunity to refute any such decision by the Board, but the Board's decision on the matter will be considered final and binding on Participant and all other parties. 10.13 PAYMENT OF ATTORNEY'S FEES, COURT COSTS, AND INTEREST ON LOSS OF BENEFITS. Should either the Company or Company Successor (for these purposes, "Company") or Participant bring an action at law (or through arbitration) in order that the Plan's terms be enforced, then the party prevailing in the action at law (or through arbitration) shall be entitled to reimbursement from the losing party for reasonable attorney's fees, court costs and other similar amounts expended in the enforcement of the Plan. In addition, should the prevailing party be Participant, he or she shall also be entitled to interest on any delayed payments, with such interest computed at the Applicable Rate. 10.14 PAYMENT OF TAXES. Should the payment of any benefits under this Plan be classified as payment of an excess parachute payment under the provisions of Code Sections 280G and 4999, then an additional payment will be made to the Participant based on the amount of excise tax or penalty payable by the Participant because of such classification. Such payment will be made within two (2) months following Participant's termination of employment, once a good faith determination is made by either Company or Participant that the payment of any benefit under the Plan will constitute an excess parachute payment. The amount payable to the Participant will be calculated as follows: (amount of excise tax or penalty payable by Participant) divided by (one (1) minus the highest marginal income tax rate under the Code for individuals). 17 21 10.15 WITHHOLDING. There shall be deducted from all payments under the Plan the amount of any taxes required to be withheld by any federal, state, or local government. The Participants, any Beneficiaries, and personal representatives shall bear any and all federal, foreign, state, local, income, or other taxes imposed on amounts paid under the Plan. 10.16 PARTICIPANTS BOUND BY TERMS OF THE PLAN. Each Participant shall be deemed conclusively to have accepted and consented to all terms of the Plan and all actions or decisions made by the Company with regard to the Plan. Such terms and consent shall also apply to and be binding upon any Beneficiaries, personal representatives, and other Participant Successors of each Participant. Each Participant shall receive a copy of the Plan. 10.17 EFFECTIVE DATE OF THE PLAN. The Plan shall be effective as of January 1, 1996. IN WITNESS WHEREOF, the Plan is hereby adopted by the Company on this 23rd day of February, 1995. UNION PLANTERS CORPORATION By: /s/ Benjamin W. Rawlins, Jr. ----------------------------- Title: Chairman and Chief Executive Officer 18 EX-11 4 COMPUTATION OF EARNINGS 1 EXHIBIT 11 PAGE 1 OF 2 UNION PLANTERS CORPORATION COMPUTATION OF EARNINGS PER SHARE
YEARS ENDED DECEMBER 31, -------------------------------------------------------------- 1995 1994 1993 ------------ ------------ ------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Primary Earnings Per Share - -------------------------- Computation for Statement of Earnings - ------------------------------------- Reconciliation of net earnings to amount used for primary earnings per share: Net earnings $ 135,402 $ 65,861 $ 99,603 Less: Preferred stock dividends Series B (352) (352) (352) Series C (1,491) (1,790) Series D (165) (494) (494) Series E (6,734) (6,216) (5,832) Preferred Stock of acquired entity (1,361) (1,345) (1,345) ----------- ----------- ----------- Net earnings applicable to primary earnings per share $ 126,790 $ 55,963 $ 89,790 =========== =========== =========== Reconciliation of weighted average number of shares to amount used in primary earnings per share computation: Average shares outstanding $44,696,327 $43,475,322 $38,665,590 Average common equivalent shares: Assumed exercise of options 312,125 265,277 248,496 ----------- ----------- ----------- Primary average shares outstanding 45,008,452 43,740,599 38,914,086 ----------- ----------- ----------- Primary earnings per share $ 2.82 $ 1.28 $ 2.31 =========== =========== ===========
2 EXHIBIT 11 PAGE 2 OF 2 UNION PLANTERS CORPORATION COMPUTATION OF EARNINGS PER SHARE
YEARS ENDED DECEMBER 31, ---------------------------------------------------------------- 1995 1994 1993 --------------- --------------- ------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Fully Diluted Earnings Per Share - -------------------------------- Computation for Statement of Earnings - ------------------------------------- Reconciliation of net earnings to amounts used for fully diluted earnings per share: Net earnings $ 135,402 $ 65,861 $ 99,603 Less: Preferred stock dividends Series C - (1,491) (1,790) Series D - (494) - Series E - (6,216) - Preferred stock of acquired entity (1,361) (1,345) (1,345) ----------- ----------- ----------- Net earnings applicable to fully diluted earnings per share $ 134,041 $ 56,315 $ 96,468 =========== =========== =========== Reconciliation of weighted average number of shares to amount used in fully diluted earnings per share computation: Average shares outstanding 44,696,327 43,475,322 38,665,590 Average common equivalent shares: Assumed exercise of options 326,498 267,554 266,575 Assumed conversion of preferred stock: Series B 339,768 339,768 339,768 Series D 125,785 - 253,655 Series E 4,129,709 - 3,618,515 ----------- ----------- ----------- Fully diluted average shares outstanding 49,618,087 44,082,644 43,144,103 =========== =========== =========== Fully diluted earnings per share $ 2.70 $ 1.28 $ 2.24 =========== =========== ===========
EX-13 5 ANNUAL REPORT 1 EXHIBIT 13 1995 ANNUAL REPORT [UNION PLANTERS CORPORATION LOGO] 2 UNION PLANTERS CORPORATION (Logo) MARKET AREAS SERVED TENNESSEE, MISSISSIPPI, MISSOURI, ARKANSAS, LOUISIANA, ALABAMA, AND KENTUCKY (Figure 1 - The inside front cover of Exhibit 13 (Union Planters Corporation's Annual Report to Shareholders for 1995) contains a map of the states of Tennessee, Mississippi, Missouri, Arkansas, Louisiana, Alabama, and Kentucky showing the counties and a parish where Union Planters Corporation affiliates have banking locations and the headquarters for Union Planters Corporation. 3 UNION PLANTERS CORPORATION AND SUBSIDIARIES FINANCIAL HIGHLIGHTS
====================================================================================================== DECEMBER 31, 1995 1994 % CHANGE - ------------------------------------------------------------------------------------------------------ (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) FOR THE YEAR Net earnings $ 135,402 $ 65,861 105.59% PER COMMON SHARE Net earnings Primary $ 2.82 $ 1.28 120.31% Fully diluted 2.70 1.28 110.94 Cash dividends .98 .88 11.36 Book value 19.24 16.08 19.65 AT YEAR END Assets $11,277,116 $10,985,020 2.66% Earning assets 10,405,715 10,032,591 3.72 Loans, net of unearned income 7,069,853 6,721,597 5.18 Allowance for losses on loans 133,487 133,966 (.36) Deposits 9,447,736 9,253,165 2.10 Shareholders' equity 966,331 805,147 20.02 Common shares outstanding (in thousands) 45,447 43,774 3.82 KEY RATIOS Return on average assets 1.24% .60% Return on average common equity 15.92 7.61 Net interest income (taxable-equivalent) as a percentage of average earning assets 4.59 4.36 Expense ratio 1.94 2.29 Efficiency ratio 59.51 65.93 Allowance for losses on loans as a percentage of loans 1.89 1.99 Nonperforming loans as a percentage of loans .48 .32 Nonperforming assets as a percentage of loans and foreclosed properties .59 .43 Allowance for losses on loans as a percentage of nonperforming loans 391 614 Shareholders' equity to total assets 8.57 7.33 Leverage ratio 8.09 7.15 Tier 1 capital to risk-weighted assets 12.64 11.88 Total capital to risk-weighted assets 16.35 14.27 ======================================================================================================
CONTENTS
PAGE ---- Letter to Shareholders..................................................................... 2 Selected Financial Data.................................................................... 4 Management's Discussion and Analysis of Results of Operations and Financial Condition...... 5 Financial Tables........................................................................... 19 Selected Quarterly Data.................................................................... 28 Banks and Communities Served............................................................... 31 Report of Management....................................................................... 32 Report of Independent Accountants.......................................................... 33 Consolidated Financial Statements.......................................................... 34 Notes to Consolidated Financial Statements................................................. 38 Executive Officers and Directors........................................................... 64
1 4 TO OUR SHAREHOLDERS FINANCIAL RESULTS We are pleased to report record annual net earnings for 1995 of $135.4 million, or $2.70 per fully diluted common share, compared to net earnings of $65.9 million, or $1.28 per fully diluted common share for 1994. These results include Capital Bancorporation, Inc. ("Capital"), a $1.1 billion Missouri bank holding company, which was acquired on December 31, 1995 and was accounted for as a pooling of interests. Return on average assets for the year was 1.24% and return on average common equity was 15.92%. Excluding the Capital acquisition, return on average assets and return on average common equity would have been 1.40% and 17.96%, respectively, placing Union Planters in the top quartile of its peer group. Economic conditions remained favorable nationally and in the Mid-South. For the full year 1995, net interest income was $447.4 million compared to $423.1 million in 1994. The increase is attributable to both loan growth and a higher net interest margin. Average loans increased 14% for the year and the margin was 4.59% compared to 4.36% in 1994. In recent years the organization has enjoyed excellent credit quality and an unusually low level of charge-offs and provisions. While 1995 charge-offs and provisions were up from 1994, reflecting loan growth, acquisitions, a continuing reduction in recoveries of prior year's charge-offs, and a slight shift in the portfolio toward consumer lending, credit quality remains excellent and charges are low compared to historical standards. The provision for losses on loans was $22.2 million, or .32% of average loans, compared to a provision for losses on loans of $4.9 million, or .08% of average loans for 1994. Net charge-offs for the year were $25.5 million compared to $5.7 million in 1994. At December 31, 1995, the allowance for losses on loans was $133.5 million, or 1.89% of loans. Nonperforming assets at December 31, 1995 were $41.9 million, or .59% of loans and foreclosed properties, compared to $29.2 million, or .43% of loans and foreclosed properties at year end 1994. For the year, noninterest income, excluding investment securities gains and losses, increased 30% to $157.2 million. The increase was from service charges on deposit accounts, bank card income, and profits and commissions from our Small Business Administration loan packaging trading operations. Noninterest expenses for the year were $382.2 million, down $45.5 million from 1994. The decrease was due to a decline in FDIC insurance expenses and merger-related expenses. Also, 1994 included significant restructuring and other charges which did not occur in 1995. Total assets at year end were $11.3 billion, total loans were $7.1 billion, and total deposits were $9.4 billion. Shareholders' equity was $966 million and equity to total assets and leverage ratios were 8.57% and 8.09%, respectively. CAPITAL ACQUISITION We completed the acquisition of Capital at year end. Capital is headquartered in Cape Girardeau, Missouri, which is approximately 170 miles from Union Planters' headquarters in Memphis, Tennessee. Capital has adopted the Union Planters name and operates six banks with 30 locations. The banks are headquartered in Cape Girardeau, Sikeston, Perryville, Columbia, Clayton, and Springfield, Missouri. Capital's Arkansas thrift was merged into Union Planters Bank of Northeast Arkansas. This was an excellent opportunity for Union Planters to extend its banking franchise into Missouri. Capital's geography is very complimentary to our existing banking locations in Northwest Tennessee and Northeast Arkansas. Over one-half of Capital's assets are in nearby Southeast Missouri. There was also an excellent match with our community banking philosophy. Capital's subsidiary banks are generally community banks which emphasize serving the needs of their local communities and whose boards of directors consist of individuals who reside in those communities. As a result of the Capital acquisition, we now serve customers with 405 banking locations in a 7 state area. The following is a breakdown of our loans and deposits by state:
LOANS DEPOSITS STATE (000'S) (000'S) ---------------------- ------ -------- Tennessee............. $3,445 $4,901 Mississippi........... 1,660 2,119 Missouri.............. 787 934 Arkansas.............. 552 734 Louisiana............. 366 484 Alabama............... 182 230 Kentucky.............. 78 101
2 5 DIVIDEND INCREASE Our philosophy has been to maintain a dividend payout ratio of 30% to 40% of earnings. The Board of Directors declared on January 18, 1996, a quarterly dividend of $0.27 per share on Union Planters Corporation Common Stock. We are pleased to announce this 8% increase in the quarterly dividend from $0.25 to $0.27 reflecting our strong capital position, higher core earnings, and our confidence in future earnings. OUTLOOK We are pleased with the Corporation's results for 1995. They exceeded our internal budgets and met the expectations of management and the Board of Directors. Each of our affiliate banks and all of our employees have worked very hard to improve profitability and better serve our customers. Our restructuring efforts which began approximately 18 months ago have produced significant benefits and each of our banks has adopted a set of "best banking practices" to help us maintain high efficiency and customer service levels. The banking industry is continuing to undergo significant change and consolidation. Greater investor expectations have forced the industry to place far more emphasis on efficiency, productivity, and return on equity than was formerly the case. We want Union Planters to become the premier financial institution within the Mid-South region as we continue to expand our customer base through both internal growth and acquisitions. With size, we will be able to afford the technology and systems necessary to allow us to remain current and competitive in the evolving financial payment systems industry and to achieve economies of scale in various services and product lines not available to smaller institutions. We will continue to strive to become an efficient and effective organization from the smallest branch within the system to the back office of the Corporation. We welcome our new shareholders and invite you to participate in our automatic dividend reinvestment program which offers a 5% discount and no brokerage fees on share purchases. Thank you for your continued support. Yours very truly, /s/ BENJAMIN W. RAWLINS, JR. Benjamin W. Rawlins, Jr. Chairman and Chief Executive Officer 3 6 UNION PLANTERS CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL DATA
YEARS ENDED DECEMBER 31, (1) ---------------------------------------------------------------- 1995 1994 1993 1992 1991 ----------- ----------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA Net interest income....................................... $ 447,431 $ 423,114 $ 375,033 $ 305,211 $ 256,537 Provision for losses on loans............................. 22,231 4,894 17,950 29,071 35,960 Investment securities gains (losses)...................... 476 (20,298) 4,506 14,019 2,633 Other noninterest income.................................. 157,176 121,103 123,056 103,506 95,415 Noninterest expense....................................... 382,164 427,697 346,450 297,665 255,906 ----------- ----------- ---------- ---------- ---------- Earnings before income taxes, extraordinary item, and accounting changes...................................... 200,688 91,328 138,195 96,000 62,719 Applicable income taxes................................... 65,286 25,467 41,168 27,048 14,443 ----------- ----------- ---------- ---------- ---------- Earnings before extraordinary item and accounting changes................................................. 135,402 65,861 97,027 68,952 48,276 Extraordinary item -- defeasance of debt, net of taxes.... -- -- (3,206) -- -- Accounting changes, net of taxes.......................... -- -- 5,782 -- -- ----------- ----------- ---------- ---------- ---------- Net earnings.............................................. $ 135,402 $ 65,861 $ 99,603 $ 68,952 $ 48,276 ========== ========== ========= ========= ========= PER COMMON SHARE DATA(2) Primary Earnings before extraordinary item and accounting changes............................................... $ 2.82 $ 1.28 $ 2.24 $ 1.75 $ 1.35 Extraordinary item -- defeasance of debt, net of taxes................................................. -- -- (.08) -- -- Accounting changes, net of taxes........................ -- -- .15 -- -- Net earnings............................................ 2.82 1.28 2.31 1.75 1.35 Fully diluted Earnings before extraordinary item and accounting changes............................................... 2.70 1.28 2.18 1.73 1.35 Extraordinary item -- defeasance of debt, net of taxes................................................. -- -- (.07) -- -- Accounting changes, net of taxes........................ -- -- .13 -- -- Net earnings............................................ 2.70 1.28 2.24 1.73 1.35 Cash dividends............................................ .98 .88 .72 .60 .48 Book value................................................ 19.24 16.08 16.25 14.08 12.88 BALANCE SHEET DATA (AT PERIOD END) Total assets.............................................. $11,277,116 $10,985,020 $9,919,944 $8,331,073 $6,566,973 Loans, net of unearned income............................. 7,069,853 6,721,597 5,293,850 4,193,149 3,613,945 Allowance for losses on loans............................. 133,487 133,966 125,499 100,282 74,739 Investment securities..................................... 2,774,890 3,084,110 3,431,081 2,935,665 1,864,871 Deposits.................................................. 9,447,736 9,253,165 8,445,760 7,171,191 5,698,062 Short-term borrowings..................................... 241,023 455,010 300,414 343,452 244,513 Long-term debt(3) Parent company.......................................... 214,758 114,790 114,729 74,292 38,163 Subsidiary banks........................................ 270,500 241,218 212,149 38,463 18,790 Total shareholders' equity................................ 966,331 805,147 751,844 595,106 475,128 Average assets.............................................. 10,954,895 10,948,979 9,706,356 7,586,827 6,555,009 Average shareholders' equity................................ 899,615 850,934 707,788 551,650 442,756 Average shares outstanding (in thousands) Primary................................................. 45,008 43,741 38,914 35,463 34,569 Fully diluted........................................... 49,618 44,083 43,144 38,307 34,922 PROFITABILITY AND CAPITAL RATIOS Return on average assets.................................. 1.24% .60% 1.03% .91% .74% Return on average common equity........................... 15.92 7.61 15.10 13.11 10.95 Net interest income (taxable-equivalent) to average earning assets (4)...................................... 4.59 4.36 4.40 4.57 4.48 Loans/deposits............................................ 74.83 72.64 62.68 58.47 63.42 Common and preferred dividend payout ratio................ 37.55 62.50 32.64 36.12 34.51 Equity/assets (period end)................................ 8.57 7.33 7.58 7.14 7.24 Average shareholders' equity/average total assets......... 8.21 7.77 7.29 7.27 6.75 Leverage ratio(5)......................................... 8.09 7.15 7.21 7.07 7.06 Tier 1 capital to risk-weighted assets(5)................. 12.64 11.88 13.10 12.85 11.66 Total capital to risk-weighted assets(5).................. 16.35 14.27 15.74 14.83 13.80 ASSET QUALITY RATIOS Allowance/period end loans................................ 1.89 1.99 2.37 2.39 2.07 Nonperforming loans/total loans........................... .48 .32 .58 1.22 1.01 Allowance/nonperforming loans............................. 391 614 411 196 205 Nonperforming assets/loans and foreclosed properties...... .59 .43 .78 1.58 1.60 Provision/average loans................................... .32 .08 .35 .72 .95 Net charge-offs/average loans............................. .36 .09 .28 .55 .92
- --------------- (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 significant 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 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 to 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). 4 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION This section of the Annual Report provides a narrative discussion and analysis of the Corporation's results of operations and financial condition. The discussion should be read with the consolidated financial statements and accompanying notes and the financial tables at the end of this section. Note 1 to the consolidated financial statements provides a brief overview of the nature of the Corporation's operations. The map on the inside front cover of this report, Table 15, and the listing of Communities Served on page 31 provides additional information regarding the size, locations, and markets served by the Corporation's subsidiaries. The financial information contained in this discussion reflects the December 31, 1995 acquisition of Capital Bancorporation, Inc. ("Capital"), a $1.1 billion Missouri-headquartered bank holding company, in a transaction accounted for as a pooling of interests. Accordingly, the financial information included in this discussion and analysis of results of operations and financial condition presents combined information of the two entities as if the acquisition had been in effect for all periods. EARNINGS OVERVIEW The Corporation reported record annual earnings for 1995 of $135.4 million, or $2.70 per fully diluted common share, compared to net earnings of $65.9 million, or $1.28 per fully diluted common share for 1994, and $99.6 million, or $2.24 per fully diluted common share in 1993. The record earnings level in 1995 resulted in a return on average assets of 1.24%, up from .60% and 1.03% in 1994 and 1993, respectively. The return on average common equity was 15.92% in 1995, 7.61% in 1994 and 15.10% in 1993. The results for 1995 were impacted by merger-related expenses incidental to the Capital acquisition of $9.5 million after taxes (see Note 13 to the consolidated financial statements). Excluding the impact of the merger-related expenses, earnings for 1995 would have been $144.9 million. The improvement in operating results in 1995 as compared to 1994 relates to the following: (i) a continued improvement in net interest income; (ii) a decline in noninterest expenses related primarily to restructuring and other charges in 1994 which did not recur in 1995, (iii) a reduction in merger-related expenses of $3.0 million; (iv) a reduction of salaries and employee benefits expense, as a result of implementation of the Corporation's 1994 restructuring plan; (v) net investment securities losses of $20.3 million in 1994 compared to $476,000 of net gains in 1995; and (vi) growth of noninterest income due primarily to growth in service charges on deposit accounts, bank card income, and profits and commissions from the Corporation's Small Business Administration ("SBA") trading operations. Partially offsetting these improvements was an increase in the provision for losses on loans of $17.3 million to $22.2 million, or .32% of average loans. The increase related primarily to loan growth, acquisitions, and increasing charge-offs in the consumer loan portfolio, primarily credit cards. Reported results for 1994 were reduced by approximately $52.0 million due to the following items (after tax impact): (i) restructuring charges and merger-related expenses of $29.2 million (see Note 13 to the consolidated financial statements); (ii) investment securities losses of $13.1 million; and (iii) consumer loan marketing program totaling $9.7 million. A favorable litigation settlement of $1.3 million partially offset these items. Excluding the impact of these items, earnings for 1994 would have been $116.6 million. Net earnings for 1993 included a net benefit of $2.6 million, or $.06 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. Before these items, earnings would have been $97.0 million. The following sections more fully describe the changes in the Corporation's results of operations. Table 1 which follows this discussion presents a five-year summary of the Corporation's consolidated results separately disclosing certain operating items discussed above. Additionally, Table 2 presents for the past five years the contribution to fully diluted earnings per common share of the various components of net earnings. 5 8 ACQUISITIONS Acquisitions have been and are expected to continue to be a significant part of the Corporation's overall business strategy. Over the past three years, the Corporation has completed twenty-eight acquisitions adding approximately $6.3 billion in total assets. The largest acquisitions, Grenada Sunburst System Corporation ("Grenada"), a $2.5 billion bank holding company acquired December 31, 1994, and Capital, a $1.1 billion bank holding company, have enhanced the Corporation's franchise by expanding the Corporation's operations in Mississippi and into Missouri and Louisiana. Table 3 presents condensed balance sheet information for the acquisitions completed in the last three years and Note 2 to the consolidated financial statements provides additional information regarding those acquisitions. Management's philosophy has been to provide additional diversification of the revenue sources and earnings of the Corporation through the acquisition of well-managed financial institutions. The strategy generally targets in-market institutions, institutions in contiguous markets, and institutions with significant local market share. Where practicable, the Corporation permits an acquired institution to remain a separate entity and to retain its local board of directors and officers. Local independence in their day-to-day operations is encouraged to allow the institutions to grow commensurate with their local markets. Certain functions, such as data processing, investment management, payroll and benefits administration, loan review, and audit, are centralized to allow the institutions to focus on serving their customers. This strategy has made the Corporation an attractive acquiror of financial institutions. 1994 RESTRUCTURING PLAN In connection with the acquisition of Grenada in 1994, 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. The plan included a review of branch operations 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 consolidated, 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 Grenada to identify consolidation opportunities and efficiencies to be gained from combining the two companies. Note 13 to the consolidated financial statements provides additional information regarding this plan. Implementation of this plan resulted in the following pretax charges in 1994: (i) an early retirement and voluntary separation plan in which 388 employees elected to participate resulted in a charge of $12.5 million; (ii) an involuntary separation plan was also developed which identified approximately 600 positions to be eliminated and resulted in a charge of $3.8 million; and (iii) approximately 38 branches were identified for closure or divestiture resulting in a charge of $10.5 million. No additional charges were incurred in 1995. The staff-reduction portion of this plan has resulted in the separation, through December 31, 1995, of approximately 690 employees which is expected to produce annual pretax expense savings of approximately $16 million. Some additional reductions are expected in 1996, but they are not significant. At December 31, 1995, the Corporation had employee severance reserves of $603,000 which are considered adequate by management to complete the remaining reductions under the plan. In addition to the 38 branches identified for closure or divestiture, during 1995 an additional seven branches were identified. Through December 31, 1995, 33 branches had been closed or divested and an additional 12 branches are expected to be closed or divested under the plan subject to receiving regulatory approval. At December 31, 1995, the reserve for branch closings was approximately $2.7 million which is considered adequate by management to complete the planned closings or divestitures. In addition to the above savings, implementation of this plan resulted in an increase in noninterest income, primarily service charges on deposit accounts, of approximately $16.1 million. See the "Noninterest Income" discussion which follows. 6 9 The changes implemented under this plan will be monitored by management on an ongoing basis. Staffing levels will be monitored monthly and "best" practice changes will be implemented as additional institutions are acquired. Management is committed to maintaining the improved profitability that has resulted from the changes that have been implemented. REORGANIZATION OF BANKING SUBSIDIARIES In 1995 management implemented plans to internally merge and reorganize certain of its banking subsidiaries and at the same time, change the names of the institutions to Union Planters. At December 31, 1994, the Corporation had 47 banking subsidiaries. During 1995 and through February 29, 1996, the Corporation acquired six banks in Missouri, one in Tennessee and four in Arkansas. Additionally, in 1995 management effected a division of the principal subsidiary of Grenada, Sunburst Bank, Mississippi, into five separate banks (three existing and two new banks). As of February 29, 1996, the Corporation had 38 banking subsidiaries, a net reduction of 22 entities. It is expected that the merger of these subsidiaries with other subsidiaries in contiguous markets together with the name changes made at the same time will produce operating efficiencies as the banks capitalize on common advertising efforts and elimination of certain duplicate operations. EARNINGS ANALYSIS NET INTEREST INCOME Net interest income is the principal source of earnings for the Corporation. Net interest income is comprised of interest income and loan-related fees less interest expense. Net interest income is affected by a number of factors including the level, pricing, mix, and maturity of earning assets and interest-bearing liabilities; interest-rate fluctuations; and asset quality. For purposes of this discussion, net interest income is presented on a taxable-equivalent basis, which restates tax-exempt income to an amount that would yield the same after-tax income had the income been subject to taxation at the Federal statutory income tax rate. 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, 1995. Net interest income for 1995 was $464.8 million, a 5% increase over 1994. Net interest income was $441.5 million and $392.4 million, respectively, in 1994 and 1993. The improvement in 1995 is attributable to loan growth, higher yields from loans and investment securities, and a higher net interest margin. The increase between 1993 and 1994 was attributable to a higher volume of earning assets, predominately growth from acquisitions. The net interest margin (net interest income as a percentage of average earning assets) for 1995 was 4.59%, an increase of 23 basis points over 4.36% for 1994. For 1993, the net interest margin was 4.40%. The interest rate spread improved 4 basis points in 1995 to 3.90% following a decline of 9 basis points between 1993 and 1994. The Corporation has used, to a limited extent, interest-rate swaps to manage certain elements of its interest-rate risk. Note 17 to the consolidated financial statements provides details of the Corporation's interest-rate swaps. The impact of these interest-rate swaps on net interest income was to reduce net interest income $2.4 million in 1995 as compared to an increase in net interest income of $1.4 million in 1994. The impact of the interest-rate swaps has been substantially offset by corresponding changes in interest rates and yields related to the underlying assets and liabilities. These interest-rate swaps are not expected to have a significant impact on net interest income in 1996, since the major portion of these swaps matured in January, 1996 and the remainder are expected to mature by May, 1996. 7 10 INTEREST INCOME A breakdown of the components of average earning assets is as follows:
1995 1994 1993 ------ ------ ----- Average earning assets (in billions).............................. $ 10.1 $ 10.1 $ 8.9 Comprised of: Loans........................................................... 69% 61% 57% Investment securities........................................... 27 36 38 Other earning assets............................................ 4 3 5 - --------------- Yield earned on average earning assets............................ 8.43% 7.38% 7.32%
Taxable-equivalent interest income increased $107.8 million in 1995 to $854.1 million. The increase is attributable primarily to the 14% growth in average loans for the year and the higher yields on earning assets, primarily loans and investment securities. Overall, the yield on average earning assets increased 105 basis points to 8.43% due to the rising interest-rate environment. Average investment securities declined in 1995 as funds from the sales and maturities of these securities were used to fund a portion of the loan growth. In 1994, the $93.4 million increase in interest income was attributable to an overall increase in average earning assets, primarily investment securities and loans, due to acquisitions. Partially offsetting the increase in earning assets in 1994 was a decline in the yields on loans and investment securities. INTEREST EXPENSE A breakdown of the components of average interest-bearing liabilities is as follows:
1995 1994 1993 ----- ----- ----- Average interest-bearing liabilities (in billions).................. $ 8.6 $ 8.7 $ 7.7 Comprised of: Deposits.......................................................... 92% 90% 93% Short-term borrowings............................................. 3 6 4 FHLB advances and long-term debt.................................. 5 4 3 - --------------- Rate on average interest-bearing liabilities........................ 4.53% 3.52% 3.37%
Interest expense increased 28% in 1995 to $389.3 million. The increase is attributable to increased interest rates in all categories of interest-bearing liabilities and is reflective of the interest-rate environment. Average interest-bearing liabilities declined slightly between 1994 and 1995, short-term borrowings having accounted for most of the decline. Loan growth was funded with investment securities sales and maturities instead of growth of interest-bearing liabilities. The reduction of interest-bearing liabilities discussed above was partially offset by an increase in long-term debt attributable to a $100 million subordinated debt offering effected in 1995 (see Note 9 to the consolidated financial statements) and to growth of interest-bearing deposits. The increase in interest expense between 1993 and 1994 was attributable to growth of average interest-bearing liabilities due primarily to acquisitions and to increased interest rates in almost all categories. PROVISION FOR LOSSES ON LOANS The Corporation's asset-quality indicators remained at acceptable levels in 1995. Loan growth, acquisitions, and an increasing level of charge-offs in the consumer loan portfolio resulted in an increase in the provision for losses on loans of $17.3 million to $22.2 million, or .32% of average loans, in 1995. This compares to a provision for losses on loans of $4.9 million, or .08% of average loans, in 1994, and $18.0 million, or .35% of average loans, in 1993. Approximately $6.3 million of the increase in the provision for losses on loans in 1995 related to Capital. Net charge-offs for 1995 of $25.5 million were $3.3 million higher than the provision for losses on loans. See the "Allowance for Losses on Loans" discussion for additional information regarding the provision for losses on loans. 8 11 NONINTEREST INCOME Investment Securities Gains and Losses In 1995, net investment securities gains were insignificant. The Corporation recognized net investment securities losses in 1994 of $20.3 million and had net investment securities gains of $4.5 million in 1993. The significant level of losses in 1994 related to a partial restructuring of the available for sale portfolio in response to rising interest rates and to fund current and anticipated loan growth. Other Noninterest Income Noninterest income, excluding investment securities gains and losses, was $157.2 million in 1995 compared to $121.1 million in 1994, an increase of 30%. The improvement related to three primary areas: (i) service charges on deposit accounts increased $16.1 million to $71.6 million; (ii) bank card income increased $9.2 million to $20.1 million; and (iii) profits and commissions from SBA broker/dealer activities increased $3.8 million to $10.4 million. The components of noninterest income are presented in the consolidated statement of earnings and in Note 14 to the consolidated financial statements. The improvement in service charges on deposit accounts resulted from the Corporation's 1994 restructuring plan in which an evaluation of banking services was made with a view to implementing "best" practices in all areas. As a result, the Corporation's banking subsidiaries evaluated their practices related to service charges on deposit accounts and increased certain fees (primarily overdraft fees), implemented new fees, and reduced the number of fees being waived. A small portion of the increase arose from acquisitions. The level of these fees in the future is expected to stabilize and future increases, if any, are not expected to be as large as in 1995. Between 1993 and 1994 these fees increased $6.1 million due primarily to acquisitions, lower credit rates on corporate demand deposit accounts, and to a lesser extent, an increase in fees. The growth in bank card income in 1995 related to the increased volume of credit cards outstanding as a result of a 1994 consumer loan marketing program. In 1994 and 1995, this program added approximately $264 million of credit card receivables. Additional marketing efforts are planned over the next twelve months which are expected to add approximately 100,000 accounts and increase the amount of loans outstanding by approximately $80 to $120 million. If these levels should be achieved, additional increases in bank card income will occur; however, the increases are not expected to be as great as in 1995. Future revenue levels are dependent on the credit card usage levels and the number of cards outstanding. The increase in profits and commissions from trading activities is related primarily to the SBA broker/dealer operations. This operation purchases, pools, and securitizes the government-guaranteed portions of SBA loans. Revenues from these operations are volatile and future levels cannot be predicted with any certainty. During 1995, favorable market conditions provided the opportunity for higher volumes of activity and a significant increase in revenues. The decrease in these revenues between 1993 and 1994 was due primarily to a decrease in activity in the SBA trading operation and partially to a decline in the broker/dealer operations of an acquired subsidiary. NONINTEREST EXPENSE Noninterest expense in 1995 was $382.2 million, a decrease of $45.5 million from $427.7 million in 1994. Noninterest expense in 1993 was $346.4 million. As discussed previously, noninterest expense in 1994 was significantly impacted by $58.2 million of charges related to the 1994 restructuring plan, merger-related expenses, and a consumer loan marketing program. The restructuring charges and the consumer loan marketing program did not recur in 1995. Merger-related expenses totaled $11.9 million in 1995, a decline of $3.0 million from 1994. Noninterest expense in 1993 included charges totaling $10.1 million attributable to provisions for data processing systems conversions, accelerated amortization and write-off of intangibles, provisions for litigation settlements, and merger-related expenses. These operating expenses are separately identified in Table 1. 9 12 Excluding the above-described operating expenses, noninterest expenses in 1995 increased $793,000 to $370.3 million, an increase of less than 1%. Noninterest expenses in 1994 and 1993 would have been $369.5 and $336.3 million, respectively. The largest component of noninterest expense, salaries and employee benefits expense, declined $3.9 million in 1995 to $171.3 million. The decrease is attributable to the 1994 restructuring plan which resulted in a net reduction in 1995 of approximately 690 employees. At December 31, 1995, the Corporation had 5,104 full-time-equivalent employees compared to 5,516 at December 31, 1994 (restated for the Capital acquisition). The decline in the number of employees was partially offset by acquisitions in 1995 and growth of existing operations, primarily in the credit card operations. From 1993 to 1994, salaries and employee benefit expense increased $11.5 million to $175.2 million. The increase was attributable primarily to employees added as a result of acquisitions. Equipment expense was $30.2 million in 1995, a 5% increase from 1994's total of $28.7 million, and compared to $26.0 million in 1993. Occupancy expense decreased $849,000 in 1995 to $27.2 million. This compares to $28.0 million and $25.4 million, respectively, in 1994 and 1993. FDIC insurance expense declined $7.9 million in 1995 to $12.3 million, which compares to $20.2 million and $19.6 million, respectively, in 1994 and 1993. The decline in FDIC insurance expense relates to a decrease in the assessment on Bank Insurance Fund ("BIF") deposits from $.23 per $100 of deposits per year to $.04, effective June 1, 1995. FDIC insurance expense is expected to be reduced further in 1996, since the FDIC has reduced the current assessment for BIF-insured, well-capitalized banks to $2,000 annually per bank. Institutions with Savings Association Insurance Fund ("SAIF") deposits will continue to be assessed at $.23 per $100 of deposits per year for well-capitalized institutions. All of the Corporation's subsidiaries are currently considered well-capitalized institutions. See the "Special Regulatory Assessment" discussion which follows. Management is committed to controlling the growth of noninterest expenses as demonstrated by its implementation of the 1994 restructuring plan. The reductions that have been achieved in 1995 are being monitored monthly. SPECIAL REGULATORY ASSESSMENT There are several bills currently under consideration by Congress the purpose of which is to provide additional financing for the SAIF and to provide interest payments on Financing Corporation ("FICO") bonds issued in connection with earlier efforts to support the then failing thrift industry. A common feature of the proposed bills is a one-time special assessment ranging from 85 to 90 basis points on all deposits insured by the SAIF ($.85 to $.90 per $100 of covered deposits). The special assessment may be less for SAIF-insured deposits held by banks (sometimes referred to as "Oakar Deposits"). In addition to the special assessment on SAIF deposits, the bills also contemplate a special assessment on deposits which are insured by the BIF. This assessment on BIF-insured deposits presumably would be to provide financial support to pay interest on FICO bonds. At December 31, 1995, the Corporation's subsidiaries held approximately $1.4 billion in SAIF-insured deposits, approximately $1.0 billion of which were Oakar Deposits. Should the proposed legislation be adopted at the levels indicated, the Corporation would be required to recognize as an expense aggregate SAIF assessments at the time the legislation is passed. Assuming a one-time assessment of $.90 per $100 of SAIF-insured deposits, the estimated impact would be approximately $7 million after taxes. This impact would be reduced if Oakar Deposits should be assessed at a lower rate. TAXES Applicable income taxes consist of provisions for Federal and state income taxes totaling $65.3 million in 1995, an effective rate of 32.5%. This compares to applicable income taxes of $25.5 million in 1994 and $41.2 million in 1993 (in the case of 1993, before an extraordinary item and the cumulative effect of accounting changes). These amounts equate to effective tax rates of 27.9% and 29.8%, respectively, in 1994 and 1993. The variances from statutory rates (35% for all three years) are attributable to tax-exempt income from investment securities and loans and the effect of state income taxes. For additional information regarding the Corporation's effective tax rates for all periods, see Note 16 to the consolidated financial statements. 10 13 The realization of approximately $7.3 million of the net deferred tax asset of $39.1 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. Therefore, no extraordinary strategies are deemed necessary by management to generate sufficient income for purposes of realizing the net deferred tax asset. The criteria for recognition of net deferred tax assets for regulatory capital purposes are more stringent than for financial statement purposes and allow only limited anticipation of future taxable income. Accordingly, $2.2 million of the Corporation's net deferred tax asset does not qualify as capital for regulatory purposes. FINANCIAL CONDITION ANALYSIS At December 31, 1995, the Corporation reported $11.3 billion of total assets compared to $11.0 billion ($10.0 billion prior to restatement for the Capital acquisition) at the end of 1994. At year end Union Planters Corporation was the second-largest independent bank holding company headquartered in Tennessee. Average assets were $11.0 billion in 1995, compared to $10.9 billion and $9.7 billion, respectively, in 1994 and 1993. INVESTMENT SECURITIES The Corporation's investment securities portfolio of $2.8 billion at December 31, 1995, consisted entirely of available for sale securities which are carried on the consolidated balance sheet at fair value. These securities had net unrealized gains at year end of $34.7 million. At December 31, 1994, the investment portfolio was $3.1 billion comprised of $1.9 billion of available for sale securities and $1.2 billion of held to maturity securities which were carried on the consolidated balance sheet at amortized cost. The decrease in the amount of investment securities in 1995 was due to the additional funding required to support loan growth during the year. Note 4 to the consolidated financial statements provides the composition of the portfolio and a breakdown of the maturities of the portfolio at year end. Effective September 30, 1995, the Corporation transferred approximately $1.0 billion of held to maturity securities to the available for sale securities portfolio. The transfer included all of the Corporation's held to maturity securities portfolio and management is unable at this time to predict if or when the Corporation will again maintain a held to maturity securities portfolio. The transfer had no impact on earnings. The transfer was made in response to the following specific factors which arose during the third quarter of 1995 and led management and the Board of Directors to change its intent to hold these securities to maturity: (i) The success of the Corporation's 1994 credit card solicitation became apparent in the third quarter of 1995 as the introductory rate stage ended. This growth was funded primarily by available for sale securities. (ii) A decision was made during the third quarter to engage in an additional credit card solicitation which is expected to increase loans by approximately $80 to $120 million. Funding will be provided from securities sales. (iii) The Corporation is engaged in an internal reorganization of its banking subsidiaries and requires flexibility to restructure the balance sheets of these subsidiaries. (iv) The Corporation's acquisition of Capital became probable in the third quarter of 1995 (consummated at year end). Funding of loan opportunities in the Missouri markets served by Capital can be provided by sales of available for sale securities. Overall this transfer will provide the additional funding sources necessary to manage specific interest-rate and liquidity considerations which all of these factors present. During December, 1995, Capital moved all of the securities in its held to maturity securities portfolio to the available for sale securities portfolio. Management anticipates that as additional financial institutions are acquired, their held to maturity securities, if any, will be transferred to the available for sale securities portfolio to conform to the Corporation's accounting policies and management's lack of intent to hold securities to maturity. U.S. Treasury and U.S. Government agency obligations represented approximately 78% of the investment securities portfolio at December 31, 1995. The Corporation has some credit risk in the 11 14 investment securities portfolio, however, management does not consider that risk to be significant and does not believe that cash flows will be significantly impacted. The REMIC and CMO issues held in the investment securities portfolio are 96% U.S. Government agencies issues; the remaining 4% are readily marketable, collateralized mortgage obligations backed by agency-pooled collateral or whole loan collateral. All nonagency issues held are currently rated "AAA" by either Standard & Poors or Moodys. Approximately 62% of the REMIC and CMO portions of the portfolio is 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 risk of premium write-offs resulting from unexpected prepayments. The limited credit risk in the investment securities portfolio consists of the holdings of municipal obligations; nonagency CMOs and mortgage-backed securities; and corporate stocks, notes, debentures and mutual funds which accounted for 18.4%, 1.0%, and 2.6%, respectively, of the investment securities portfolio at December 31, 1995. At December 31, 1995, the Corporation had approximately $44.4 million of structured notes (as currently defined by regulatory agencies), which constitutes approximately 1.6% of the 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 had an unrealized loss of $376,000 at December 31, 1995. The market risk of these securities is not considered material to the Corporation's financial position, results of operations, or liquidity. LOANS At December 31, 1995, loans were $7.1 billion which compares to $6.7 billion at year end 1994. Average loans for 1995 were $7.0 billion compared to $6.1 billion and $5.1 billion, respectively, for 1994 and 1993. The Corporation's loan to deposit ratio was 75% at December 31, 1995, compared to 73% at the end of 1994. For 1995, loans were 69% of the Corporation's average earning assets compared to 61% and 57%, respectively, for 1994 and 1993. Table 7 provides the composition of the loan portfolio for each of the last five years. The largest component of the portfolio is loans secured by single family residential mortgages which totaled $2.3 billion at December 31, 1995, or 33% of the loan portfolio. Consumer loans were the second-largest component and included home equity loans of $167 million, or 2% of the loan portfolio; credit cards and related plans of $387 million, or 5% of the loan portfolio; and other consumer loans which totaled $1.1 billion, or 16% of the portfolio. Commercial, financial, and agricultural loans and other real estate loans (primarily commercial real estate loans), represented $1.5 billion and $1.3 billion, respectively, of the portfolio at year end which constituted 20% and 18%, respectively, of the portfolio. Real estate construction loans were $323 million at December 31, 1995, or 5% of the portfolio. Direct lease financing represented 1% of the portfolio at December 31, 1995, or $60 million. The growth in 1995 related primarily to consumer loans, and in particular credit card loans, and was directly related to a consumer loan marketing program. Loans outstanding arising from the 1994 marketing program were $264 million and $145 million, respectively, at December 31, 1995 and 1994, and accounted for almost all of the increase in this category of loans. All other consumer loans increased $120.5 million. Commercial, financial, and agricultural loans declined $61.0 million year to year due primarily to a decline in commodity loans. Between 1994 and 1995, real estate construction loans and direct lease financing increased $31.0 million and $19.9 million, respectively. Management expects slower loan growth in 1996. Additional consumer loan marketing efforts are planned which are projected to further increase consumer loans by approximately $80 to $120 million. Loan growth and loan quality will continue to be emphasized by all of the Corporation's subsidiary banks. Loan growth opportunities will be dependent on the local economies in which the banks operate. 12 15 ALLOWANCE FOR LOSSES ON LOANS The allowance for losses on loans (the "allowance") at December 31, 1995 was $133.5 million, or 1.89% of loans, which compares to $134.0 million, or 1.99% of loans, at December 31, 1994. 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 provide detailed information regarding the allowance for each of the last five years. Net charge-offs for 1995 were $25.5 million, or .36% of average loans, which was an increase of $19.8 million from 1994. Net charge-offs as a percentage of average loans were .09% and .28%, respectively, in 1994 and 1993. The increase related predominately to consumer loans which increased $14.0 million ($10.2 million credit card related and $3.8 million other consumer loans). The increase in credit card charge-offs is consistent with the growth in the portfolio discussed earlier and the increase in other consumer loans is consistent with industry trends. Commercial, financial, and agricultural net charge-offs increased $3.9 million. Further increases in credit card charge-offs in 1996 are expected and this will likely result in an increase in the provision for losses on loans. Management expects that the newly acquired credit card portfolio will begin to season and mature as the balances phase out of the introductory rate. Losses are expected to stabilize about 18 months after the issuance of the cards, which will be mid-1996 for the loans arising from the 1994 marketing program. Additional marketing efforts were initiated in 1995 and will continue in 1996 which will also impact the level of losses. The level of charge-offs in the other segments of the loan portfolio are dependent upon economic conditions in the markets in which these loans are made which makes it difficult to predict the level of the charge-offs. The provision for losses on loans is expected to increase commensurate with loan growth in addition to the factors discussed above. LOAN CONCENTRATIONS Management believes that the loan portfolio is adequately diversified. The loan portfolio is spread over seven states (Tennessee, Mississippi, Missouri, Arkansas, Louisiana, Alabama, and Kentucky). Reference is made to Table 15 which provides total loans by subsidiary and by state at December 31, 1995. At December 31, 1995, the Corporation had no concentrations of loans to a single industry equaling 10% or more of total loans. The largest concentration of loans is in single family residential loans, comprising 33% of the loan portfolio, which historically have had low loss experience. Management has emphasized diversification between large and smaller-sized loans in an effort to lessen risk in the portfolio. At December 31, 1995, the Corporation's largest loan relationship was $23.2 million and there were only 28 relationships of $10 million or more, which constituted in the aggregate less than 5% of the total loan portfolio. NONPERFORMING ASSETS Nonperforming assets are comprised of nonaccrual loans, restructured loans, other real estate owned, and other foreclosed properties. At December 31, 1995, nonperforming assets were $41.9 million, or .59% of loans and foreclosed properties. This compares to $29.2 million, or .43% of loans and foreclosed properties, at December 31, 1994. Table 9 presents a summary of nonperforming assets for each of the last five years. Nonperforming loans (consisting of nonaccrual loans and restructured loans) were $34.2 million, or .48% of loans, at December 31, 1995 which compares to $21.8 million, or .32% of loans, at December 31, 1994. The increase relates to nonaccrual loans which increased $13.3 million. Loans 90 days or more past due increased $12.0 million to $18.3 million, or .26% of loans, at December 31, 1995. This compares to $6.3 million, or .09% of loans at December 31, 1994. Credit card loans and other consumer loans accounted for approximately 70% of the increase. 13 16 A breakdown of nonaccrual loans and loans 90 days or more past due and not on nonaccrual status is as follows:
LOANS 90 DAYS NONACCRUAL LOANS OR MORE PAST DUE ------------------ ------------------ DECEMBER 31, DECEMBER 31, ------------------ ------------------ LOAN TYPE 1995 1994 1995 1994 - ----------------------------------------------------- ------- ------- ------- ------- (DOLLARS IN THOUSANDS) Secured by single family residential................. $12,149 $ 6,806 $ 5,084 $ 2,786 Secured by nonfarm nonresidential.................... 5,037 3,182 383 314 Other real estate.................................... 4,578 944 560 320 Commercial, financial, and agricultural, including direct lease financing............................. 7,848 7,039 2,468 1,138 Credit card and related plans........................ 15 65 5,269 277 Other consumer....................................... 3,220 1,496 4,553 1,437 ------- ------- ------- ------- Total...................................... $32,847 $19,532 $18,317 $ 6,272 ======= ======= ======= =======
Asset quality indicators are currently at acceptable levels although there has been an increase in nonperforming and past due loans. There may be some additional increase in nonperforming asset levels, however, no significant increases are anticipated. POTENTIAL PROBLEM ASSETS Potential problem assets consist of assets which are generally secured and are 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 the borrowers to comply with present repayment terms. Historically, such assets have been loans which have ultimately become nonperforming. At December 31, 1995, the Corporation had potential problem assets (all loans) aggregating $15.6 million, comprised of 30 loans, the largest being $5.8 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 assets, and loans held for resale. At December 31, 1995, these assets totaled $561 million, 5.39% of the Corporation's earning assets. This compares to $227 million, or 2.26% of earning assets at December 31, 1994. The increase over 1994 is attributable to an increase in federal funds sold as a temporary investment of the Corporation's excess liquidity. The other significant component of this category was trading account assets which represents the government-guaranteed portions of SBA loans. Management considers the interest-rate and credit risk related to all of these assets to be minimal. DEPOSITS The Corporation's deposit base is its primary source of liquidity and consists of deposits from the communities served by the Corporation. At December 31, 1995, the Corporation had the largest deposit base of any independent bank holding company headquartered in Tennessee. Tables 4 and 6 present the components of the Corporation's average deposits. At December 31, 1995, the Corporation had total deposits of $9.4 billion, an increase of 2% over December 31, 1994. Average deposits were $9.3 billion in 1995 compared to $9.1 billion and $8.4 billion, respectively, in 1994 and 1993. The growth has been primarily in noninterest bearing deposits, other time deposits, and certificates of deposit of $100,000 and over and is attributable primarily to acquisitions. Excluding acquisitions, total deposits have declined in each of the last three years. Approximately $90 million of the decline relates to the sale of certain branches required as a condition to receiving prior regulatory approval to consummate the acquisition of Grenada. As shown below there has been no significant shift in the mix of deposits. 14 17 The composition of average deposits over the last three years was as follows:
TYPE OF DEPOSITS 1995 1994 1993 - -------------------------------------------------------------------- ---- ---- ---- Noninterest-bearing deposits........................................ 14% 14% 14% Money market deposits............................................... 15 17 22 Savings deposits.................................................... 20 21 16 Other time deposits................................................. 43 41 40 Certificates of deposit of $100,000 and over........................ 8 7 8
CAPITAL AND DIVIDENDS Shareholders' equity increased $161.2 million in 1995 to $966.3 million, or 8.57% of total assets at December 31, 1995. This compares to shareholders' equity of $805.1 million, or 7.33% of total assets at December 31, 1994. The primary sources of growth in shareholders' equity in 1995 were the retention of net earnings of $84.6 million, the positive impact of the net change in the unrealized gain (loss) on available for sale securities of $50.1 million, and net stock transactions in connection with acquisitions, the dividend reinvestment plan, and employee benefit plans of $26.5 million. The consolidated statement of changes in shareholders' equity details the changes in equity for the last three years. The fair-value adjustment of the Corporation's available for sale securities portfolio, which is recorded net of taxes as a component of shareholders' equity, may change significantly as market conditions change. At December 31, 1994, the adjustment resulted in a reduction of shareholders' equity of $28.7 million compared to an increase of $21.4 million at December 31, 1995, a net change of $50.1 million. Further volatility in shareholders' equity may occur in the future as market conditions change. This adjustment is excluded from the calculation of regulatory capital. The Corporation and its subsidiaries must comply with the capital guidelines established by the regulatory agencies that supervise their operations. These agencies have adopted a system to monitor the capital adequacy of all insured financial institutions. The system includes ratios based on the risk-weighting of on- and off-balance-sheet transactions. If an institution's ratios should fall below certain levels, it would become subject to regulatory actions. The system the agencies have adopted classifies institutions into five capital categories ranging from well-capitalized to critically undercapitalized. The well-capitalized category requires a leverage ratio of at least 5%, a Tier 1 capital to risk-weighted assets ratio of at least 6%, and a total capital to risk-weighted assets ratio of at least 10%. Table 13 presents the Corporation's regulatory capital ratios for the last three years. At December 31, 1995, the Corporation and all of its insured financial institutions qualified as well-capitalized institutions. At December 31, 1995, the Corporation's leverage ratio was 8.09% and its Tier 1 and total capital to risk-weighted assets capital ratios were 12.64% and 16.35%, respectively, which are well above the regulatory minimums. These ratios compare to 7.15%, 11.88%, and 14.27%, respectively, at December 31, 1994. The improvement in these ratios is attributable to the continued profitability of the Corporation. The total capital to risk-weighted assets ratio increased significantly due to the issuance of $100 million of subordinated capital notes in the fourth quarter of 1995 which qualified as Tier 2 capital. Reference is made to Note 9 to the consolidated financial statements for additional information regarding these notes. The Corporation declared dividends on its Common Stock of $39.9 million in 1995 and $20.1 million in 1994. On a per share basis, this represented an 11% increase to $.98 per share for 1995 compared to $.88 per share in 1994. Effective January 18, 1996, the regular quarterly dividend on the Corporation's Common Stock was increased by the Board of Directors by 8% to $.27 per share ($1.08 per share annually). Dividends declared on the Corporation's Preferred Stocks outstanding in 1995 totaled $7.3 million compared to $8.6 million in 1994. The reduction was due to the redemption of one series of preferred stock and the conversion of another series of preferred stock to common stock. Various institutions acquired by the Corporation paid common and preferred dividends prior to acquisition, which are detailed in the consolidated statement of changes in shareholders' equity. The primary sources of dividends paid by the Corporation to its shareholders are dividends and management fees received from its subsidiaries, interest on investment securities, and interest on loans to subsidiaries. Payment of dividends by the Corporation's banking subsidiaries is subject to various statutory limitations which are described in Note 12 to the consolidated financial statements. 15 18 Reference is made to the "Liquidity" discussion for additional information regarding the parent company's liquidity. ASSET/LIABILITY MANAGEMENT The Corporation's assets and liabilities are principally financial in nature and the resultant earnings thereon, primarily net interest income, are subject to changes as a result of changes in interest rates and the mix of the various assets and liabilities. Interest rates in the financial markets impact the Corporation's decisions on pricing its assets and liabilities which impacts net interest income, the Corporation's primary cash flow stream. As a result, the substantial part of the Corporation's risk management activities are devoted to managing interest-rate risk. Interest-Rate Risk One of the most important aspects of management's efforts to sustain long-term profitability for the Corporation is the management of interest-rate risk. 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. The Committee reviews the asset/liability structure and interest-rate risk of each subsidiary and the consolidated Corporation at least quarterly. Each subsidiary is granted autonomy in managing its balance sheet, however, the Corporation requires each subsidiary to establish policies for proper conduct of its balance sheet management. These policies must contain, at a minimum, limits on interest-rate sensitivity, guidelines for liquidity management, and capital-level guidelines. The Corporation uses interest-rate sensitivity ("GAP") analysis to monitor the amount and timing of balances exposed to changes in interest rates, as shown in Table 11. The analysis has been made at a point-in-time and could change significantly on a daily basis. The GAP report alone cannot be used to evaluate the impact of or predict how the Corporation is positioned to react to changing interest rates. Other methods such as simulation analysis are used to measure interest-rate risk. At December 31, 1995, the GAP report indicated that the Corporation was asset sensitive with $539 million more assets than liabilities repricing within one year. At 5% of total assets, this position was within management's guidelines of 10% of total assets. Generally, this position would indicate that over the course of one year a downward trend in interest rates will negatively impact net interest income. Balance sheet simulation analysis has been conducted at year end 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, 1995, and holds the rates and volumes constant for simulation. When this position is subjected to immediate and parallel shifts in interest rates ("rate shock") of 200 basis points rising and 200 basis points falling, the annual impact on the Corporation's net interest income was a positive $29.5 million and a negative $33.9 million pretax, respectively. Another simulation uses a "most likely" scenario of rates falling 50 basis points resulting in a $6.0 million pretax decrease in net interest income from the constant rate/volume projection. These scenarios are within the Corporation's policy limit of 5% of shareholders' equity. The actual impact of changing interest rates on net interest income is dependent on a number of factors such as the growth of earning assets, the mix of earning assets and interest-bearing liabilities, the magnitude of the interest-rate changes, the timing of the repricing of assets and liabilities, interest-rate spreads, and the asset/liability strategies implemented by management. Liquidity Liquidity for the Corporation is its ability to meet cash flow requirements for deposit withdrawals, to make new loans and satisfy loan commitments, to take advantage of attractive investment opportunities, and to repay borrowings when they mature. As discussed previously, the Corporation's primary source of liquidity is its deposit base, available for sale securities and other earning assets (as 16 19 previously defined). Liquidity is also achieved through short-term borrowings, borrowing under available lines of credit, and issuance of securities and debt instruments in the marketplace. Parent company liquidity is maintained by dividends from subsidiaries, interest on advances to subsidiaries, interest on the available for sale securities portfolio, and management fees charged to subsidiaries. The number of financial institutions owned by the Corporation provides a diversified base for the payment of dividends should one or more of the subsidiaries have capital needs and be unable to pay dividends to the parent company. At December 31, 1995, the parent company had cash and short-term investments totaling $78.2 million. The parent company's net working capital position at December 31, 1995 was $252.1 million. At January 1, 1996, the parent company could have received dividends from subsidiaries of $35.0 million without prior regulatory approval. The payment of additional dividends will be dependent on the future earnings of the subsidiaries. Management believes that the parent company has adequate liquidity to meet its cash needs, including the payment of its regular dividends, servicing of its long-term debt and cash needed for acquisitions. At December 31, 1995, the parent company had no outstanding lines of credit and had no commercial paper outstanding. In November 1995, the parent company issued $100 million of 6 3/4% Subordinated Capital Notes (see Note 9 to the consolidated financial statements). The notes qualify as Tier 2 capital. The proceeds are available for general corporate purposes, including the acquisition of other financial institutions. 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 detailed information regarding 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 swap related to loans, the interest-rate swaps are straightforward and noncomplex. The Corporation's total notional amount outstanding at December 31, 1995 was $200 million. In 1995, management terminated certain outstanding FHLB advances and the related interest-rate swap in connection with the reorganization of one of the Corporation's subsidiaries. The impact of termination was not significant. On January 5, 1996, $109 million of the $150 million loan swap outstanding at year end matured. Management does not consider its remaining interest-rate swaps ($91 million notional amount at January 5, 1996) significant and it is considered likely that these swaps will mature by May of 1996. FAIR VALUE OF FINANCIAL INSTRUMENTS The disclosures regarding the fair value 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 fair value. The differences between the fair values and book values are caused primarily by differences between contractual and market interest rates. Fluctuations in the fair values will occur from period-to-period due to changes in the composition of the balance sheet and changes in interest rates. Management does not use the fair-value information disclosed in Note 18 to manage the Corporation. Other methods, including the asset/liability management philosophy discussed previously, are used. Comparisons of the fair-value information with other financial institutions may not be meaningful due to the different assumptions used in determining fair value. FOURTH QUARTER RESULTS The Corporation reported net earnings of $25.3 million, or $.50 per fully diluted common share, for the fourth quarter of 1995 compared to a net loss of $14.6 million, or $.39 per fully diluted common share, in 1994. Reference is made to Table 14 for a summary of the Corporation's quarterly operating results for the past two years. As discussed earlier, the fourth quarter 1995 results included the acquisition of Capital and the merger-related expenses of $9.5 million after-tax incurred in connection with the acquisition. Results 17 20 for the fourth quarter of 1994 included a $27.2 million after-tax charge related to the Grenada merger and the restructuring of operations of the Corporation and a $9.7 million after-tax expense related to a consumer loan marketing program. Fourth quarter 1994 results also included an after-tax loss of $8.4 million on available for sale securities sold. Earnings before these charges would have been $34.8 million in 1995 compared to $30.7 million for the fourth quarter of 1994. Net interest income was $114.0 million for the fourth quarter of 1995, 3.7% higher than the fourth quarter of 1994. The net interest margin was 4.57%, 12 basis points higher than 1994. The interest-rate spread was 3.85%, a decrease of three basis points from the fourth quarter of 1994. The improvement resulted from loan growth and a higher net interest margin. Average loans increased 10.4% compared to the fourth quarter of 1994. Noninterest income, excluding investment securities transactions, increased $11.7 million to $40.9 million for the fourth quarter of 1995 compared to the same period in 1994. The increase was from service charges on deposit accounts, bank card income, and profits and commissions from the SBA trading operations. The fourth quarter of 1995 included investment securities gains of $320,000 which compares to investment securities losses of $12.5 million for the same period in 1994. Noninterest expense for the quarter was $103.9 million compared to $150.3 million for the fourth quarter of 1994. The decrease relates to a decline in FDIC deposit insurance expense and merger-related expenses in 1995. Also, 1994 included significant restructuring and other charges which did not recur in 1995. IMPACT OF PROPOSED ACCOUNTING STANDARDS In March 1995, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of " which is effective for fiscal years beginning after December 15, 1995. This statement addresses situations where information indicates that a company might be unable to recover, through future operations or sales, the carrying amount of long-lived assets, identifiable intangibles, and goodwill related to those assets. A company must first determine whether existing conditions indicate an impairment might exist. If an indicator of impairment should exist, the company must determine if impairment exists using undiscounted cash flow analysis. If impairment exists, the company must determine the amount of impairment using discounted cash flow analysis. The Corporation adopted this standard prospectively on January 1, 1996. The adoption of SFAS No. 121 is not expected to have a material impact on the Corporation, since the Corporation's existing policies for determining impairment of assets are similar to the new standard. In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation" which is effective for fiscal years beginning after December 15, 1995. This statement defines a fair-value based method of accounting for employee stock options or similar equity instruments and encourages all entities to adopt that method of accounting for all of their employee stock compensation plans. However, it also allows an entity to continue to measure compensation for those plans using the intrinsic value based method currently prescribed by Accounting Principles Board Opinion No. 25 provided certain pro forma disclosures are made that disclose what the impact on net earnings would have been had the company adopted the accounting provisions of SFAS No. 123. The Corporation plans to continue the current accounting and make the disclosures required by SFAS No. 123. Therefore, there will be no impact on the Corporation from adopting this standard. 18 21 TABLE 1. SUMMARY OF CONSOLIDATED RESULTS
YEARS ENDED DECEMBER 31, --------------------------------------------------------- 1995 1994 1993 1992 1991 --------- --------- --------- --------- --------- (DOLLARS IN THOUSANDS) Interest income.................................. $ 836,682 $ 727,965 $ 635,546 $ 554,209 $ 570,245 Interest expense................................. (389,251) (304,851) (260,513) (248,998) (313,708) --------- --------- --------- --------- --------- NET INTEREST INCOME.............................. 447,431 423,114 375,033 305,211 256,537 PROVISION FOR LOSSES ON LOANS.................... (22,231) (4,894) (17,950) (29,071) (35,960) --------- --------- --------- --------- --------- NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON LOANS.......................................... 425,200 418,220 357,083 276,140 220,577 NONINTEREST INCOME Service charges on deposit accounts............ 71,611 55,551 49,490 37,750 35,931 Bank card income............................... 20,103 10,953 10,393 8,787 7,808 Mortgage servicing income...................... 9,835 9,621 9,595 9,753 8,337 Trust service income........................... 8,010 7,990 7,643 6,921 6,944 Profits and commissions from trading activities................................... 10,441 6,639 13,787 13,417 15,875 Other income................................... 37,176 28,149 31,247 23,365 20,520 --------- --------- --------- --------- --------- Total noninterest income................ 157,176 118,903 122,155 99,993 95,415 --------- --------- --------- --------- --------- NONINTEREST EXPENSE Salaries and employee benefits................. 171,325 175,218 163,711 125,769 116,576 Net occupancy expense.......................... 27,192 28,041 25,393 20,793 18,196 Equipment expense.............................. 30,156 28,698 25,989 20,331 18,209 Other expense.................................. 141,580 137,503 121,226 106,273 90,304 --------- --------- --------- --------- --------- Total noninterest expense............... 370,253 369,460 336,319 273,166 243,285 --------- --------- --------- --------- --------- EARNINGS BEFORE OTHER OPERATING ITEMS, INCOME TAXES, EXTRAORDINARY ITEM, AND ACCOUNTING CHANGES.................... 212,123 167,663 142,919 102,967 72,707 OTHER OPERATING ITEMS Investment securities gains (losses)........... 476 (20,298) 4,506 14,019 2,633 Restructuring charges.......................... -- (28,929) -- -- -- Merger-related expenses........................ (11,911) (14,862) (2,113) -- -- Consumer loan marketing program expenses....... -- (14,446) -- -- -- Gain on sale of collateral related to a troubled debt restructuring.................. -- -- 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) Provisions for litigation settlements.......... -- -- (500) (9,450) (9,925) Favorable litigation settlement................ -- 2,200 -- -- -- --------- --------- --------- --------- --------- EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM, AND ACCOUNTING CHANGES............................... 200,688 91,328 138,195 96,000 62,719 Applicable income taxes.......................... (65,286) (25,467) (41,168) (27,048) (14,443) --------- --------- --------- --------- --------- EARNINGS BEFORE EXTRAORDINARY ITEM AND ACCOUNTING CHANGES.................... 135,402 65,861 97,027 68,952 48,276 Extraordinary item -- defeasance of debt, net of taxes.......................................... -- -- (3,206) -- -- Accounting changes Postretirement/postemployment benefits......... -- -- (5,907) -- -- Income taxes................................... -- -- 11,689 -- -- --------- --------- --------- --------- --------- NET EARNINGS............................ $ 135,402 $ 65,861 $ 99,603 $ 68,952 $ 48,276 ========== ========== ========== ========== ==========
19 22 TABLE 2. CONTRIBUTION TO FULLY DILUTED EARNINGS PER SHARE
YEARS ENDED DECEMBER 31, ----------------------------------------------- 1995 1994 1993 1992 1991 ------- ------- ------- ------- ------- Net interest income -- FTE....................... $ 9.37 $ 10.01 $ 9.10 $ 8.31 $ 7.68 Provision for losses on loans.................... (0.45) (0.11) (0.42) (0.76) (1.03) ------- ------- ------- ------- ------- Net interest income after provision for losses on loans -- FTE................................... 8.92 9.90 8.68 7.55 6.65 Noninterest income Service charges on deposit accounts............ 1.44 1.26 1.15 0.99 1.03 Bank card income............................... 0.41 0.25 0.24 0.23 0.22 Mortgage servicing income...................... 0.20 0.22 0.22 0.25 0.24 Trust service income........................... 0.16 0.18 0.18 0.18 0.20 Profits and commissions from trading activities.................................. 0.21 0.15 0.32 0.35 0.45 Investment securities gains (losses)........... 0.01 (0.46) 0.10 0.37 0.08 Other income................................... 0.75 0.69 0.75 0.70 0.58 ------- ------- ------- ------- ------- Total noninterest income............... 3.18 2.29 2.96 3.07 2.80 ------- ------- ------- ------- ------- Noninterest expense Salaries and employee benefits................. (3.45) (3.97) (3.79) (3.28) (3.34) Net occupancy expense.......................... (0.55) (0.64) (0.59) (0.54) (0.52) Equipment expense.............................. (0.61) (0.65) (0.60) (0.53) (0.52) Other expense.................................. (3.09) (4.44) (3.05) (3.42) (2.95) ------- ------- ------- ------- ------- Total noninterest expense.............. (7.70) (9.70) (8.03) (7.77) (7.33) ------- ------- ------- ------- ------- Earnings before income taxes -- FTE, extraordinary item, and accounting changes.............................. 4.40 2.49 3.61 2.85 2.12 Applicable income taxes -- FTE................... (1.67) (0.99) (1.36) (1.05) (0.74) ------- ------- ------- ------- ------- Earnings before extraordinary item and accounting changes................... 2.73 1.50 2.25 1.80 1.38 Extraordinary item and accounting changes, net of taxes.......................................... -- -- 0.06 -- -- Preferred stock dividends........................ (0.03) (0.22) (0.07) (0.07) (0.03) ------- ------- ------- ------- ------- Net earnings........................... $ 2.70 $ 1.28 $ 2.24 $ 1.73 $ 1.35 ======= ======= ======= ======= ======= Change in net earnings applicable to fully diluted earnings per share using previous year average shares outstanding..................... $ 1.76 $ (0.93) $ 0.78 $ 0.55 $ 0.24 Change in average shares outstanding............. (0.34) (0.03) (0.27) (0.17) 0.05 ------- ------- ------- ------- ------- Change in net earnings................. $ 1.42 $ (0.96) $ 0.51 $ 0.38 $ 0.29 ======= ======= ======= ======= ======= Average fully diluted shares (in thousands)...... 49,618 44,083 43,144 38,307 34,922 ======= ======= ======= ======= =======
- --------------- FTE -- Fully taxable-equivalent 20 23 TABLE 3. ACQUISITIONS -- BALANCES AT RESPECTIVE DATES OF ACQUISITION
1995 1994 1993 ---------------------------------- ------------------------------------ ---------- CAPITAL OTHERS TOTAL GRENADA OTHERS TOTAL TOTAL ---------- -------- ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) ASSETS Interest-bearing deposits at financial institutions.......... $ 2,199 $ 168 $ 2,367 $ 996 $ 31,712 $ 32,708 $ 16,998 Loans, net of unearned income................ 829,162 94,516 923,678 1,737,970 712,597 2,450,567 649,153 Allowance for losses on loans................. (18,356) (1,361) (19,717) (33,068) (11,120) (44,188) (16,607) ---------- -------- ---------- ---------- ---------- ---------- ---------- Net loans........ 810,806 93,155 903,961 1,704,902 701,477 2,406,379 632,546 Investment securities... 118,518 50,855 169,373 518,506 366,677 885,183 422,187 Intangible assets....... 9,075 6,533 15,608 7,960 11,897 19,857 18,188 Cash and cash equivalents........... 120,273 18,252 138,525 166,123 95,010 261,133 119,424 Other real estate owned, net................... 2,494 96 2,590 2,945 1,554 4,499 3,371 Premises and equipment.. 25,864 3,309 29,173 42,247 23,603 65,850 27,797 Other assets............ 15,840 2,896 18,736 74,292 21,237 95,529 19,178 ---------- -------- ---------- ---------- ---------- ---------- ---------- TOTAL ASSETS..... $1,105,069 $175,264 $1,280,333 $2,517,971 $1,253,167 $3,771,138 $1,259,689 ========== ========= ========== ========== ========== ========== ========== LIABILITIES Deposits................ $ 987,564 $151,080 $1,138,644 $2,259,813 $1,086,155 $3,345,968 $1,111,644 Other interest-bearing liabilities........... 30,682 -- 30,682 56,286 35,677 91,963 18,903 Other liabilities....... 12,004 4,032 16,036 28,150 16,686 44,836 17,575 ---------- -------- ---------- ---------- ---------- ---------- ---------- TOTAL LIABILITIES.... $1,030,250 $155,112 $1,185,362 $2,344,249 $1,138,518 $3,482,767 $1,148,122 ========== ========= ========== ========== ========== ========== ========== PURCHASE PRICE/CAPITAL CONTRIBUTION/EQUITY AT RESPECTIVE DATES OF ACQUISITION FOR POOLINGS................ $ 74,819 $ 20,152 $ 94,971 $ 173,722 $ 114,649 $ 288,371 $ 111,567 ========== ========= ========== ========== ========== ========== ==========
- --------------- Amounts are balances of the institutions acquired at their respective dates of acquisition except for certain poolings of interest which were not considered significant and whose balances are as of January 1 of the year in which they were acquired. (See Note 2 to the consolidated financial statements for additional information.) 21 24 TABLE 4. AVERAGE BALANCE SHEET AND AVERAGE INTEREST RATES
YEARS ENDED DECEMBER 31, -------------------------------------------------------------------------------------------- 1995 1994 1993 ----------------------------- ----------------------------- ---------------------------- 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.......... $ 25,172 $ 1,910 7.59% $ 13,631 $ 734 5.38% $ 49,715 $ 1,862 3.75% Federal funds sold and securities purchased under agreements to resell.......................... 210,405 12,095 5.75 108,611 4,472 4.12 196,855 6,175 3.14 Trading account assets............ 165,677 12,774 7.71 161,634 9,143 5.66 121,412 6,194 5.10 Investment securities (1) and (2) Taxable securities.............. 2,227,868 137,453 6.17 3,153,331 162,012 5.14 2,950,136 157,896 5.35 Tax-exempt securities........... 507,460 47,190 9.30 533,456 49,629 9.30 476,301 45,815 9.62 ----------- -------- ----------- -------- ---------- -------- Total investment securities................ 2,735,328 184,643 6.75 3,686,787 211,641 5.74 3,426,437 203,711 5.95 Loans, net of unearned income (1), (3), and (4).................... 6,990,400 642,650 9.19 6,143,761 520,329 8.47 5,122,490 435,020 8.49 ----------- -------- ----------- -------- ---------- -------- Total earning assets (1), (2), (3), and (4)......... 10,126,982 854,072 8.43 10,114,424 746,319 7.38 8,916,909 652,962 7.32 -------- -------- -------- Cash and due from banks........... 442,308 433,705 410,335 Premises and equipment............ 229,573 235,879 204,447 Allowance for losses on loans..... (135,451) (135,846) (123,635) Other assets...................... 291,483 300,817 298,300 ----------- ----------- ---------- Total assets................ $10,954,895 $10,948,979 $9,706,356 ========== ========== ========= LIABILITIES AND SHAREHOLDERS' EQUITY Money market accounts............. $ 1,422,443 $ 44,539 3.13% $ 1,561,226 $ 38,434 2.46% $1,847,202 $ 43,372 2.35% Savings deposits.................. 1,806,409 48,795 2.70 1,913,837 44,906 2.35 1,330,731 32,602 2.45 Certificates of deposit of $100,000 and over............... 706,998 41,889 5.92 627,273 25,449 4.06 672,715 25,170 3.74 Other time deposits............... 3,981,746 212,636 5.34 3,705,467 153,783 4.15 3,361,729 136,875 4.07 Short-term borrowings............. 233,950 12,825 5.48 503,731 21,300 4.23 286,146 8,203 2.87 Federal Home Loan Bank advances... 282,847 16,672 5.89 217,587 10,847 4.99 131,246 5,363 4.09 Long-term debt Subordinated capital notes...... 129,995 10,337 7.95 116,272 8,547 7.35 81,126 7,447 9.18 Other........................... 19,688 1,558 7.91 20,061 1,585 7.90 21,478 1,481 6.90 ----------- -------- ----------- -------- ---------- -------- Total interest-bearing liabilities............... 8,584,076 389,251 4.53 8,665,454 304,851 3.52 7,732,373 260,513 3.37 Noninterest-bearing demand deposits........................ 1,338,300 -- 1,322,040 -- 1,153,003 -- ----------- -------- ----------- -------- ---------- -------- Total sources of funds...... 9,922,376 389,251 9,987,494 304,851 8,885,376 260,513 -------- -------- -------- Other liabilities................. 132,904 110,551 113,192 Shareholders' equity.............. 899,615 850,934 707,788 ----------- ----------- ---------- Total liabilities and shareholders' equity...... $10,954,895 $10,948,979 $9,706,356 ========== ========== ========= Net interest income (1)........... $464,821 $441,468 $392,449 ======== ======== ======== Interest rate spread (1).......... 3.90% 3.86% 3.95% ===== ===== ===== Net interest margin (1)........... 4.59% 4.36% 4.40% ===== ===== ===== Taxable-equivalent adjustments Loans........................... $ 2,016 $ 1,724 $ 1,615 Securities...................... 15,374 16,630 15,801 -------- -------- -------- Total....................... $ 17,390 $ 18,354 $ 17,416 ======== ======== ========
- --------------- (1) Taxable-equivalent yields are calculated assuming a 35% Federal income tax rate. (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) Includes loans on nonaccrual status. 22 25 TABLE 5. ANALYSIS OF VOLUME AND RATE CHANGES
1995 VERSUS 1994 1994 VERSUS 1993 --------------------------------- -------------------------------- INCREASE INCREASE (DECREASE) (DECREASE) DUE TO CHANGE IN:(1) DUE TO CHANGE IN:(1) -------------------- TOTAL ------------------- TOTAL AVERAGE AVERAGE INCREASE AVERAGE AVERAGE INCREASE VOLUME(2) RATE(2) (DECREASE) VOLUME(2) RATE(2) (DECREASE) --------- -------- ---------- --------- ------- ---------- (DOLLARS IN THOUSANDS) INTEREST INCOME Interest-bearing deposits at financial institutions............................... $ 793 $ 383 $ 1,176 $(1,720) $ 592 $ (1,128) Federal funds sold and securities purchased under agreements to resell................. 5,359 2,264 7,623 (3,278) 1,575 (1,703) Trading account assets....................... 234 3,397 3,631 2,220 729 2,949 Investment securities -- FTE................. (60,332 ) 33,334 (26,998) 15,111 (7,181 ) 7,930 Loans -- FTE................................. 75,487 46,834 122,321 86,497 (1,188 ) 85,309 ---------- ---------- TOTAL INTEREST INCOME.................... 928 106,825 107,753 88,326 5,031 93,357 ---------- ---------- INTEREST EXPENSE Money market accounts........................ (3,646 ) 9,751 6,105 (6,963) 2,025 (4,938) Savings deposits............................. (2,624 ) 6,513 3,889 13,735 (1,431 ) 12,304 Certificates of deposit of $100,000 and over....................................... 3,557 12,883 16,440 (1,765) 2,044 279 Other time deposits.......................... 12,144 46,709 58,853 14,223 2,685 16,908 Short-term borrowings........................ (13,584 ) 5,109 (8,475) 8,061 5,036 13,097 Long-term debt............................... 4,650 2,938 7,588 6,795 (107 ) 6,688 ---------- ---------- TOTAL INTEREST EXPENSE................... (2,889 ) 87,289 84,400 32,454 11,884 44,338 ---------- ---------- CHANGE IN NET INTEREST INCOME.................. $ 23,353 $ 49,019 ========== ========== PERCENTAGE INCREASE IN NET INTEREST INCOME OVER PRIOR PERIOD................................. 5.29% 12.49% ========== ==========
- --------------- FTE -- Fully taxable-equivalent (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. (2) Variances are compiled on a line by line basis and are non-additive. TABLE 6. AVERAGE DEPOSITS(1)
YEARS ENDED DECEMBER 31, -------------------------------------------------------------- 1995 1994 1993 1992 1991 ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) Noninterest-bearing demand................................. $1,338,300 $1,322,040 $1,153,003 $ 843,306 $ 717,587 Money market(2)............................................ 1,422,443 1,561,226 1,847,202 1,501,291 1,211,701 Savings(3)................................................. 1,806,409 1,913,837 1,330,731 863,482 663,866 Other time(4).............................................. 3,981,746 3,705,467 3,361,729 2,806,832 2,441,960 ---------- ---------- ---------- ---------- ---------- TOTAL AVERAGE CORE DEPOSITS............................ 8,548,898 8,502,570 7,692,665 6,014,911 5,035,114 Certificates of deposit of $100,000 and over............... 706,998 627,273 672,715 575,583 625,746 ---------- ---------- ---------- ---------- ---------- TOTAL AVERAGE DEPOSITS................................. $9,255,896 $9,129,843 $8,365,380 $6,590,494 $5,660,860 ========= ========= ========= ========= =========
- --------------- (1) Table 4 presents the average rate paid on the above deposit categories for the three years ended December 31, 1995. (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. 23 26 TABLE 7. COMPOSITION OF THE LOAN PORTFOLIO
DECEMBER 31, -------------------------------------------------------------- 1995 1994 1993 1992 1991 ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) Commercial, financial, and agricultural.................... $1,450,050 $1,511,096 $1,278,879 $1,083,326 $1,071,148 Real estate -- construction................................ 322,701 291,719 203,207 138,392 104,591 Real estate -- mortgage Secured by 1-4 family residential........................ 2,320,168 2,247,659 1,675,372 1,337,481 1,010,830 Other mortgage loans..................................... 1,283,937 1,244,773 1,084,884 820,103 650,761 Home equity................................................ 167,223 150,524 125,921 117,024 81,902 Consumer Credit cards and related plans........................... 387,445 264,600 106,012 77,122 69,237 Other consumer loans..................................... 1,108,127 1,004,367 821,620 628,041 624,879 Direct lease financing..................................... 60,400 40,523 26,054 16,512 32,849 ---------- ---------- ---------- ---------- ---------- TOTAL LOANS........................................ 7,100,051 6,755,261 5,321,949 4,218,001 3,646,197 Less: Unearned income...................................... 30,198 33,664 28,099 24,852 32,252 ---------- ---------- ---------- ---------- ---------- TOTAL LOANS, NET OF UNEARNED INCOME................ $7,069,853 $6,721,597 $5,293,850 $4,193,149 $3,613,945 ========== ========== ========== ========== ==========
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, ---------------------------------------------------------------------------------------------------------------- 1995 1994 1993 1992 1991 --------------------- --------------------- --------------------- --------------------- -------------------- 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... $ 34,030 20% $ 42,579 22% $ 53,858 24% $ 43,950 26% $31,811 29% Real estate -- construction... 7,165 5 5,801 4 3,593 4 2,277 3 3,662 3 Real estate -- mortgage...... 47,122 51 51,467 52 47,761 52 37,527 51 22,977 46 Consumer........ 43,979 23 33,591 21 19,762 20 16,198 20 15,734 21 Direct lease financing..... 1,191 1 528 1 525 -- 330 -- 555 1 -------- --- -------- --- -------- --- -------- --- ------- --- Total... $133,487 100% $133,966 100% $125,499 100% $100,282 100% $74,739 100% ======== === ======== === ======== === ======== === ======= ===
- --------------- 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, --------------------------------------------------- 1995 1994 1993 1992 1991 ------- ------- ------- ------- ------- (DOLLARS IN THOUSANDS) Nonaccrual loans........................................ $32,847 $19,532 $20,894 $47,458 $32,403 Restructured loans...................................... 1,330 2,279 9,670 3,587 4,039 ------- ------- ------- ------- ------- Total nonperforming loans...................... 34,177 21,811 30,564 51,045 36,442 ------- ------- ------- ------- ------- Foreclosed properties Other real estate owned, net.......................... 6,561 6,717 10,195 14,896 21,237 Other foreclosed properties........................... 1,138 669 883 551 561 ------- ------- ------- ------- ------- Total foreclosed properties.................... 7,699 7,386 11,078 15,447 21,798 ------- ------- ------- ------- ------- Total nonperforming assets..................... $41,876 $29,197 $41,642 $66,492 $58,240 ======== ======== ======== ======== ======== Loans 90 days or more past due and not on nonaccrual status................................................ $18,317 $ 6,272 $ 9,932 $ 7,379 $ 8,179 ======== ======== ======== ======== ======== Nonperforming loans as a percentage of loans............ .48% .32% .58% 1.22% 1.01% Nonperforming assets as a percentage of loans plus foreclosed properties................................. .59 .43 .78 1.58 1.60 Allowance for losses on loans as a percentage of nonperforming loans................................... 391 614 411 196 205 Loans 90 days or more past due and not on nonaccrual status as a percentage of loans....................... .26 .09 .19 .18 .23
24 27 TABLE 10. ALLOWANCE FOR LOSSES ON LOANS
YEARS ENDED DECEMBER 31, -------------------------------------------------------------- 1995 1994 1993 1992 1991 ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) Balance at beginning of period....... $ 133,966 $ 125,499 $ 100,282 $ 74,739 $ 73,365 Loans charged off Commercial, financial, and agricultural.................... 8,230 5,812 12,427 23,175 23,892 Real estate -- construction........ 120 248 65 411 759 Real estate -- mortgage............ 5,478 3,952 3,292 4,917 4,499 Consumer........................... 11,742 7,583 7,505 7,776 12,905 Credit cards and related plans..... 12,088 1,797 1,732 1,819 2,344 Direct lease financing............. 4 1 9 20 75 ---------- ---------- ---------- ---------- ---------- Total charge-offs.......... 37,662 19,393 25,030 38,118 44,474 ---------- ---------- ---------- ---------- ---------- Recoveries on loans previously charged off Commercial, financial, and agricultural.................... 5,137 6,640 5,268 10,789 5,716 Real estate -- construction........ 427 72 59 109 63 Real estate -- mortgage............ 1,989 2,802 875 518 655 Consumer........................... 4,060 3,691 4,111 4,068 3,007 Credit cards and related plans..... 526 386 376 342 293 Direct lease financing............. 51 123 39 86 154 ---------- ---------- ---------- ---------- ---------- Total recoveries........... 12,190 13,714 10,728 15,912 9,888 ---------- ---------- ---------- ---------- ---------- Net charge-offs...................... 25,472 5,679 14,302 22,206 34,586 Provision charged to expense......... 22,231 4,894 17,950 29,071 35,960 Increase due to acquisitions......... 2,762 9,252 21,569 18,678 -- ---------- ---------- ---------- ---------- ---------- Balance at end of period............. $ 133,487 $ 133,966 $ 125,499 $ 100,282 $ 74,739 ========= ========= ========= ========= ========= Loans, net of unearned income, at end of period.......................... $7,069,853 $6,721,597 $5,293,850 $4,193,149 $3,613,945 ========= ========= ========= ========= ========= Average loans, net of unearned income, during period.............. $6,990,400 $6,143,761 $5,122,490 $4,028,090 $3,771,225 ========= ========= ========= ========= ========= Ratios: Allowance at end of period to loans, net of unearned income... 1.89% 1.99% 2.37% 2.39% 2.07% Allowance at end of period to average loans, net of unearned income.......................... 1.91 2.18 2.45 2.49 1.98 Net charge-offs to average loans, net of unearned income.......... .36 .09 .28 .55 .92
25 28 TABLE 11. RATE SENSITIVITY ANALYSIS AT DECEMBER 31, 1995
INTEREST-SENSITIVE WITHIN (1) AND (6) ------------------------------------------------------------------------------- 0-30 31-90 91-180 181-365 1-2 2-5 OVER NONINTEREST- DAYS DAYS DAYS DAYS YEARS YEARS 5 YEARS BEARING TOTAL ------ ------ ------ ------- ------ ------ ------- ------------ ------- (DOLLARS IN MILLIONS) ASSETS Loans and leases (2) and (3)............. $1,875 $ 553 $ 558 $ 934 $ 609 $1,820 $ 718 $ 33 $ 7,100 Investment securities (4) and (5)......... 347 402 335 385 516 315 475 -- 2,775 Other earning assets... 478 81 1 -- 1 -- -- -- 561 Other assets........... -- -- -- -- -- -- -- 841 841 ------ ------ ------ ------- ------ ------ ------- -------- ------- TOTAL ASSETS... $2,700 $1,036 $ 894 $ 1,319 $1,126 $2,135 $ 1,193 $ 874 $11,277 ====== ====== ====== ======= ====== ====== ======= ======== ======= SOURCES OF FUNDS Money market deposits (6) and (7)......... $ 66 $ 396 $ -- $ 396 $ -- $ 572 $ -- $ -- $ 1,430 Other savings and time deposits............ 618 1,226 773 865 621 1,716 24 -- 5,843 Certificates of deposit of $100,000 and over................ 147 145 182 142 80 59 -- -- 755 Short-term borrowings.......... 237 3 -- 1 -- -- -- -- 241 Federal Home Loan Bank advances............ 206 1 2 4 13 27 16 -- 269 Long-term debt......... -- -- -- -- 1 1 214 -- 216 Noninterest-bearing deposits............ -- -- -- -- -- -- -- 1,420 1,420 Other liabilities...... -- -- -- -- -- -- -- 137 137 Shareholders' equity... -- -- -- -- -- -- -- 966 966 ------ ------ ------ ------- ------ ------ ------- -------- ------- TOTAL SOURCES OF FUNDS..... $1,274 $1,771 $ 957 $ 1,408 $ 715 $2,375 $ 254 $ 2,523 $11,277 ====== ====== ====== ======= ====== ====== ======= ======== ======= INTEREST-RATE SWAPS(8)... $ (41) $ -- $ 41 $ -- $ -- $ -- $ -- $ -- INTEREST-RATE SENSITIVITY GAP.................... 1,385 (735) (22) (89) 411 (240) 939 (1,649) CUMULATIVE INTEREST RATE SENSITIVITY GAP.................... 1,385 650 628 539 950 710 1,649 -- CUMULATIVE GAP AS A PERCENTAGE OF TOTAL ASSETS(7).............. 12% 6% 6% 5% 8% 6% 15% --%
- --------------- MANAGEMENT HAS MADE THE FOLLOWING ASSUMPTIONS IN THE ABOVE ANALYSIS: (1) Assets and liabilities are generally scheduled according to their earliest repricing dates regardless of their contractual maturity. (2) Nonaccrual loans are included in the noninterest-bearing category. (3) Fixed-rate mortgage loan maturities are estimated based on the currently prevailing principal-prepayment patterns of comparable mortgage-backed securities. (4) The scheduled maturities of mortgage-backed securities and CMOs assume principal prepayment of these securities on dates estimated by management, relying primarily upon current and consensus interest-rate forecasts in conjunction with the latest three-month historical prepayment schedules. (5) Securities are scheduled according to their call dates when valued at a premium to par. (6) Money market deposits and savings deposits that have no contractual maturities are scheduled according to management's best estimate of their repricing in response to changes in market rates. The impact of changes in market rates would vary by product type and market. (7) 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 (16%), (14%), (14%), (12%), (8%), and positive 6% and 15%, respectively, for the 0-30 Days, 31-90 Days, 91-180 Days, 181-365 Days, 1-2 Years, 2-5 Years, and over 5 Years categories at December 31, 1995. (8) The notional value of interest-rate swaps at December 31, 1995 is $200 million. Of these amounts, $109 million matures in 0-30 Days and $91 million matures in 91-180 Days. The amounts presented represent the mismatched notional amounts of the outstanding contracts. 26 29 TABLE 12. INVESTMENT SECURITIES AND OTHER EARNING ASSETS
DECEMBER 31, ------------------------------------ 1995 1994 1993 ---------- ---------- ---------- (DOLLARS IN THOUSANDS) U.S. Government obligations U.S. Treasury............................................ $ 833,061 $ 975,221 $ 968,195 U.S. Government agencies................................. 1,327,974 1,435,141 1,769,583 ---------- ---------- ---------- Total U.S. Government obligations................ 2,161,035 2,410,362 2,737,778 Obligations of states and political subdivisions........... 511,028 528,615 531,143 Other investment securities................................ 102,827 145,133 162,160 ---------- ---------- ---------- Total investment securities...................... 2,774,890 3,084,110 3,431,081 Interest-bearing deposits at financial institutions........ 13,571 10,874 28,547 Federal funds sold and securities purchased under agreements to resell..................................... 356,655 34,178 122,174 Trading account assets..................................... 121,927 155,951 153,482 Loans held for resale...................................... 68,819 25,881 143,348 ---------- ---------- ---------- Total investment securities and other earning assets......................................... $3,335,862 $3,310,994 $3,878,632 ========= ========= =========
TABLE 13. RISK-BASED CAPITAL
DECEMBER 31, ------------------------------------ 1995 1994 1993 ---------- ---------- ---------- (DOLLARS IN THOUSANDS) TIER 1 CAPITAL Shareholders' equity..................................... $ 966,331 $ 805,147 $ 751,844 Minority interest in consolidated subsidiaries........... 1,088 1,088 1,588 Less goodwill and one-half of investment in unconsolidated subsidiaries........................... (46,913) (46,541) (42,300) Less disallowed deferred tax asset....................... (2,237) (2,494) (1,861) Less unrealized (gain) loss on available for sale securities............................................ (21,366) 28,685 -- ---------- ---------- ---------- TOTAL TIER 1 CAPITAL............................. 896,903 785,885 709,271 TIER 2 CAPITAL Allowance for losses on loans............................ 89,230 83,291 68,329 Qualifying long-term debt................................ 174,166 74,747 74,686 Less one-half of investment in unconsolidated subsidiaries.......................................... (107) (18) (136) ---------- ---------- ---------- TOTAL CAPITAL.................................... $1,160,192 $ 943,905 $ 852,150 ========= ========= ========= RISK-WEIGHTED ASSETS....................................... $7,094,254 $6,615,300 $5,412,755 ========= ========= ========= RATIOS Equity to assets......................................... 8.57% 7.33% 7.58% Leverage ratio........................................... 8.09 7.15 7.21 Tier 1 capital to risk-weighted assets................... 12.64 11.88 13.10 Total capital to risk-weighted assets.................... 16.35 14.27 15.74
- --------------- 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, 1995, all of the Corporation's banking subsidiaries were considered "well-capitalized" for purposes of FDIC deposit insurance assessments. 27 30 TABLE 14. SELECTED QUARTERLY DATA
1995 QUARTERS ENDED(1) -------------------------------------------------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL ----------- ----------- ------------ ----------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Net interest income........... $ 108,839 $ 110,725 $ 113,859 $ 114,008 $ 447,431 Provision for losses on loans....................... (2,222) (2,316) (5,280 ) (12,413 ) (22,231) Investment securities gains (losses).................... (21) 18 159 320 476 Noninterest income............ 36,100 39,607 40,615 40,854 157,176 Noninterest expense........... (90,665) (93,706) (93,903 ) (103,890 ) (382,164) ----------- ----------- ------------ ----------- ----------- Earnings before income taxes....................... 52,031 54,328 55,450 38,879 200,688 Applicable income taxes....... 16,374 17,877 17,436 13,599 65,286 ----------- ----------- ------------ ----------- ----------- Net earnings.................. $ 35,657 $ 36,451 $ 38,014 $ 25,280 $ 135,402 ========== ========== =========== =========== ========== PER COMMON SHARE DATA Net earnings Primary.................. $ .75 $ .77 $ .79 $ .51 $ 2.82 Fully diluted............ .72 .73 .75 .50 2.70 Dividends................... .23 .25 .25 .25 .98 UPC COMMON STOCK DATA(2) High trading price.......... $ 24.50 $ 28.13 $ 30.75 $ 32.25 $ 32.25 Low trading price........... 20.88 23.13 26.13 29.63 20.88 Closing price............... 23.13 26.75 29.63 31.88 31.88 Trading volume (in thousands)(3)............ 3,731 2,877 6,153 4,082 16,843 KEY FINANCIAL DATA Return on average assets.... 1.33% 1.35% 1.37 % .90 % 1.24% Return on average common equity................... 18.16 17.88 17.35 10.84 15.92 Expense ratio............... 2.04 2.01 1.92 1.82 1.94 Efficiency ratio............ 60.72 60.61 59.16 57.64 59.51 Equity/assets (period end)..................... 7.98 8.21 8.67 8.57 8.57 Average earning assets...... $10,055,105 $10,023,215 $10,147,171 $10,279,747 $10,126,982 Interest income -- FTE...... 202,481 211,741 218,936 220,914 854,072 Yield on average earning assets -- FTE............ 8.17% 8.47% 8.56 % 8.53 % 8.43% Average interest-bearing liabilities.............. $ 8,559,281 $ 8,499,084 $ 8,597,017 $8,679,462 $ 8,584,076 Total interest expense...... 89,253 96,752 100,821 102,425 389,251 Rate on average interest- bearing liabilities...... 4.23% 4.57% 4.65 % 4.68 % 4.53% Net interest income -- FTE............ $ 113,228 $ 114,989 $ 118,115 $ 118,489 $ 464,821 Net interest margin -- FTE............ 4.57% 4.60% 4.62 % 4.57 % 4.59%
28 31 TABLE 14. SELECTED QUARTERLY DATA -- (CONTINUED)
1994 QUARTERS ENDED(1) -------------------------------------------------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL ----------- ----------- ------------ ----------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Net interest income........... $ 99,286 $ 105,677 $ 108,243 $ 109,908 $ 423,114 Provision for losses on loans....................... (990) (1,113) (1,534 ) (1,257 ) (4,894) Investment securities gains (losses).................... 103 171 (8,112 ) (12,460 ) (20,298) Noninterest income............ 30,263 29,791 31,923 29,126 121,103 Noninterest expense........... (89,565) (93,326) (94,475 ) (150,331 ) (427,697) ----------- ----------- ------------ ----------- ----------- Earnings (loss) before income taxes....................... 39,097 41,200 36,045 (25,014 ) 91,328 Applicable income taxes (benefit)................... 11,950 13,101 10,855 (10,439 ) 25,467 ----------- ----------- ------------ ----------- ----------- Net earnings (loss)........... $ 27,147 $ 28,099 $ 25,190 $ (14,575 ) $ 65,861 ========== ========== =========== =========== ========== PER COMMON SHARE DATA Net earnings (loss) Primary.................. $ .56 $ .58 $ .52 $ (.39 ) $ 1.28 Fully diluted............ .55 .57 .51 (.39 ) 1.28 Dividends................... .21 .21 .23 .23 .88 UPC COMMON STOCK DATA(2) 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)(3)............ 1,878 1,791 2,565 2,886 9,120 KEY FINANCIAL DATA Return on average assets.... 1.02% 1.03% .90 % NM .60% Return on average common equity................... 13.90 14.12 12.05 NM 7.61 Expense ratio............... 2.24 2.32 2.21 2.38 2.29 Efficiency ratio............ 66.85 66.34 64.19 66.40 65.93 Equity/assets (period end)..................... 7.73 7.63 7.72 7.33 7.33 Average earning assets...... $ 9,883,512 $10,137,553 $10,244,891 $10,186,973 $10,114,424 Interest income -- FTE...... 172,305 183,557 191,779 198,678 746,319 Yield on average earning assets -- FTE............ 7.07% 7.26% 7.43 % 7.74 % 7.38% Average interest-bearing liabilities.............. $ 8,515,458 $ 8,702,648 $ 8,773,599 $8,667,260 $ 8,665,454 Total interest expense...... 68,587 72,662 79,299 84,303 304,851 Rate on average interest- bearing liabilities...... 3.27% 3.35% 3.59 % 3.86 % 3.52% Net interest income -- FTE............ $ 103,718 $ 110,895 $ 112,480 $ 114,375 $ 441,468 Net interest margin -- FTE............ 4.26% 4.39% 4.36 % 4.45 % 4.36%
- --------------- FTE -- Fully taxable-equivalent basis NM -- Not meaningful (1) Quarterly amounts have been restated for all 1995 acquisitions accounted for using the pooling of interests method of accounting. In addition, quarterly amounts for 1994 have been restated only for the 1995 acquisition of Capital. (2) 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 14,600 holders of the Corporation's Common Stock as of December 31, 1995. (3) Trading volume represents total volume for the period shown as reported by the NYSE. 29 32 TABLE 15. UNION PLANTERS CORPORATION'S BANKING SUBSIDIARIES
DECEMBER 31, 1995(1) ------------------------------------- ASSETS LOANS(2) DEPOSITS EQUITY ------ -------- -------- ------ (DOLLARS IN MILLIONS) TENNESSEE Union Planters National Bank (Memphis)...................... $2,244 $1,193 $1,351 $206.1 Union Planters Bank of Middle Tennessee, N.A. (Nashville)... 929 489 848 72.2 Union Planters Bank of West Tennessee (Humboldt)............ 478 264 415 43.2 Union Planters Bank of East Tennessee, N.A. (Knoxville)..... 463 311 396 39.2 Union Planters Bank of Jackson, N.A......................... 306 174 285 20.3 Union Planters Bank of the Cumberlands (Cookeville)......... 248 147 227 18.9 Union Planters Bank of the Tennessee Valley (Harriman)...... 190 117 172 13.9 First National Bank of Shelbyville.......................... 183 98 165 14.2 The First National Bank of Crossville....................... 174 75 158 12.2 Union Planters Bank of Northwest Tennessee FSB (Paris)...... 170 121 150 11.5 Bank of Goodlettsville...................................... 168 93 156 10.9 Union Planters Bank of Chattanooga, N.A..................... 128 75 115 12.7 Bank of East Tennessee (Morristown)......................... 108 47 95 9.3 Central State Bank (Lexington).............................. 108 68 98 7.1 The First State Bank (Brownsville).......................... 89 44 77 5.6 Bank of Commerce (Woodbury)................................. 78 50 70 6.9 First Citizens Bank of Hohenwald............................ 57 34 48 4.5 Union Planters Bank of North Central Tennessee (Erin)....... 56 29 48 6.0 First State Bank of Fayette County (Somerville)............. 29 16 27 2.1 ------ ------- ------- ------ Total Tennessee................................... $6,206 $3,445 $4,901 $516.8 ====== ====== ====== ====== MISSISSIPPI Union Planters Bank of Mississippi (Grenada)................ $ 619 $ 426 $ 500 $ 44.8 Union Planters Bank of Central Mississippi (Jackson)........ 588 427 538 40.9 Union Planters Bank of Northwest Mississippi (Clarksdale)... 580 350 520 42.8 Union Planters Bank of Southern Mississippi (Hattiesburg)... 380 264 333 24.6 Union Planters Bank of Northeast Mississippi, N.A. (New Albany)................................................... 273 193 228 18.2 ------ ------ ------ ------ Total Mississippi................................. $2,440 $1,660 $2,119 $171.3 ====== ====== ====== ====== MISSOURI Union Planters Bank of Cape Girardeau County................ $ 461 $ 348 $ 399 $ 32.9 Union Planters Bank of Southwest Missouri (Springfield)..... 209 161 189 18.2 Union Planters Bank of Missouri (Clayton)................... 150 100 134 13.7 Union Planters Bank of Mid Missouri (Columbia).............. 86 70 77 5.8 Union Planters Bank of Perryville, N.A...................... 80 60 72 6.8 Union Planters Bank of Sikeston............................. 69 48 63 4.9 ------ ------ ------ ------ Total Missouri.................................... $1,055 $ 787 $ 934 $ 82.3 ====== ====== ====== ====== ARKANSAS Union Planters Bank of Northeast Arkansas (Jonesboro)....... $ 496 $ 367 $ 440 $ 44.5 Security Bank (Paragould)(3)................................ 117 74 107 8.2 Union Planters Bank of East Arkansas (Earle)................ 96 42 88 6.9 Union Planters Bank of Central Arkansas (Clinton)........... 89 59 82 6.6 Farmers & Merchants Bank (Pocahontas) (3)................... 19 10 17 1.4 ------ ------ ------ ------ Total Arkansas.................................... $ 817 $ 552 $ 734 $ 67.6 ====== ====== ====== ====== LOUISIANA Union Planters Bank of Louisiana (Baton Rouge).............. $ 540 $ 366 $ 484 $ 37.8 ====== ====== ====== ====== ALABAMA BANKFIRST, a federal savings bank (Decatur)................. $ 253 $ 182 $ 230 $ 17.4 ====== ====== ====== ====== KENTUCKY Simpson County Bank (Franklin).............................. $ 109 $ 78 $ 101 $ 6.9 ====== ====== ====== ======
- --------------- (1) Individual amounts do not total to consolidated amounts due to intercompany eliminations. (2) Excludes intercompany loans. (3) Merged with Union Planters Bank of Northeast Arkansas February 1, 1996. 30 33 UNION PLANTERS CORPORATION BANKS AND COMMUNITIES SERVED
OFFICES ------- TENNESSEE UNION PLANTERS NATIONAL BANK Bartlett, Collierville, Cordova, Germantown, and Memphis............................................ 36 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...... 29 UNION PLANTERS BANK OF WEST TENNESSEE Dyersburg, Elbridge, Gibson, Humboldt, Martin, Newbern, Obion, Ridgely, Ripley, Rutherford, Tiptonville, Trenton, Union City, and Yorkville.... 28 UNION PLANTERS BANK OF EAST TENNESSEE, N.A. Alcoa, Clinton, Greenback, Knoxville, Maryville, and Oak Ridge...................................... 14 UNION PLANTERS BANK OF JACKSON, N.A. Jackson and Milan.................................. 10 UNION PLANTERS BANK OF THE CUMBERLANDS Alexandria, Algood, Baxter, Byrdstown, Celina, Cookeville, Dowelltown, Monterey, and Smithville... 12 UNION PLANTERS BANK OF THE TENNESSEE VALLEY Harriman, Kingston, Lenoir City, Oliver Springs, Rockwood, Sunbright, and Wartburg.................. 7 FIRST NATIONAL BANK OF SHELBYVILLE Fayetteville, Monteagle, Shelbyville, and Tracy City............................................... 7 THE FIRST NATIONAL BANK OF CROSSVILLE Crossville and Fairfield Glade..................... 5 UNION PLANTERS BANK OF NORTHWEST TENNESSEE FSB Camden, Huntingdon, McKenzie, Paris, and Waverly... 6 BANK OF GOODLETTSVILLE Goodlettsville, Springfield, and White House....... 4 UNION PLANTERS BANK OF CHATTANOOGA, N.A. Chattanooga, Cleveland, and East Ridge............. 8 BANK OF EAST TENNESSEE Greenville, Morristown, and Talbott................ 5 CENTRAL STATE BANK Jackson and Lexington.............................. 4 THE FIRST STATE BANK Brownsville and Stanton............................ 4 BANK OF COMMERCE Auburntown and Woodbury............................ 3 FIRST CITIZENS BANK OF HOHENWALD....................... 3 UNION PLANTERS BANK OF NORTH CENTRAL TENNESSEE Cumberland City and Erin........................... 2 FIRST STATE BANK OF FAYETTE COUNTY IN SOMERVILLE....... 1 MISSISSIPPI UNION PLANTERS BANK OF MISSISSIPPI Ackerman, Calhoun City, Columbus, Derma, Eupora, Grenada, Houston, Kosciusko, Louisville, Southaven, Water Valley, West Point, and Winona............... 26 UNION PLANTERS BANK OF CENTRAL MISSISSIPPI Byram, Clinton, Collinsville, Crystal Springs, Decatur, Forest, Hazlehurst, Jackson, Meridian, Newton, Pearl, Philadelphia, Ridgeland, Terry, and Union.............................................. 26 OFFICES ------- UNION PLANTERS BANK OF NORTHWEST MISSISSIPPI Batesville, Charleston, Clarksdale, Cleveland, Drew, Friars Point, Greenville, Greenwood, Itta Bena, Lambert, Leland, Lula, Moorhead, Olive Branch, Pope, Shaw, Sledge, and Sumner............. 31 UNION PLANTERS BANK OF SOUTHERN MISSISSIPPI Bassfield, Bay St. Louis, Biloxi, Collins, Ellisville, Gulfport, Hattiesburg, Laurel, Moss Point, Mount Olive, Ocean Springs, Pascagoula, Petal, and Prentiss........................................... 20 UNION PLANTERS BANK OF NORTHEAST MISSISSIPPI, N.A. Ashland, Baldwyn, New Albany, Oxford, Ripley, and Tupelo............................................. 13 MISSOURI UNION PLANTERS BANK OF CAPE GIRARDEAU COUNTY Cape Girardeau, Jackson, Marble Hill, Poplar Bluff, and Ste. Genevieve................................. 9 UNION PLANTERS BANK OF SOUTHWEST MISSOURI Branson, Ozark, and Springfield.................... 10 UNION PLANTERS BANK OF MISSOURI Affton and Clayton................................. 2 UNION PLANTERS BANK OF MID MISSOURI Ashland and Columbia............................... 5 UNION PLANTERS BANK OF PERRYVILLE, N.A................. 2 UNION PLANTERS BANK OF SIKESTON........................ 2 ARKANSAS UNION PLANTERS BANK OF NORTHEAST ARKANSAS Bono, Brookland, Cherokee Village, Hardy, Jonesboro, Mammoth Spring, Marmaduke, Maynard, Newport, Paragould, Pocahontas, Rector, Reyno, Sidney, and Weiner................................. 23 UNION PLANTERS BANK OF EAST ARKANSAS Cotton Plant, Crawfordsville, DeValls Bluff, Earle, Forrest City, and Marion........................... 7 UNION PLANTERS BANK OF CENTRAL ARKANSAS Bee Branch, Clinton, Fairfield Bay, Leslie, Marshall, and Mountain View........................ 6 FIRST NATIONAL BANK Marion and West Memphis............................ 4 FIRST NATIONAL BANK Joiner, Luxora, and Osceola........................ 4 LOUISIANA UNION PLANTERS BANK OF LOUISIANA Baton Rouge........................................ 15 ALABAMA BANKFIRST, A FEDERAL SAVINGS BANK Athens, Decatur, Hartselle, and Moulton............ 7 KENTUCKY SIMPSON COUNTY BANK Adairville and Franklin............................ 5 ------- TOTAL BRANCH OFFICES................................... 405 =======
- --------------- The above section reflects banks merged and names changed through March 1, 1996. 31 34 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 controls 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, the general auditor of the Corporation, and management to review accounting policies, control procedures, and audit and regulatory examination reports. The independent accountants and the general auditor of the Corporation 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
32 35 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, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, 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 18, 1996 33 36 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
DECEMBER 31, -------------------------- 1995 1994 ----------- ----------- (DOLLARS IN THOUSANDS) ASSETS Cash and due from banks.................................................... $ 432,949 $ 524,458 Interest-bearing deposits at financial institutions........................ 13,571 10,874 Federal funds sold and securities purchased under agreements to resell..... 356,655 34,178 Trading account assets..................................................... 121,927 155,951 Loans held for resale...................................................... 68,819 25,881 Investment securities Available for sale (Amortized cost: $2,740,143 in 1995 and $1,985,093 in 1994).................................................................... 2,774,890 1,937,942 Held to maturity (Fair value: $1,121,117 in 1994)........................ -- 1,146,168 Loans...................................................................... 7,100,051 6,755,261 Less: Unearned income.................................................... (30,198) (33,664) Allowance for losses on loans....................................... (133,487) (133,966) ----------- ----------- Net loans........................................................... 6,936,366 6,587,631 Premises and equipment..................................................... 228,272 229,897 Accrued interest receivable................................................ 100,686 94,040 Goodwill and other intangibles............................................. 58,535 58,639 Other assets............................................................... 184,446 179,361 ----------- ----------- TOTAL ASSETS........................................................ $11,277,116 $10,985,020 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Noninterest-bearing...................................................... $ 1,420,358 $ 1,484,939 Certificates of deposit of $100,000 and over............................. 754,434 653,101 Other interest-bearing................................................... 7,272,944 7,115,125 ----------- ----------- Total deposits...................................................... 9,447,736 9,253,165 Short-term borrowings...................................................... 241,023 455,010 Federal Home Loan Bank advances............................................ 268,892 224,103 Long-term debt............................................................. 216,366 131,905 Accrued interest, expenses, and taxes...................................... 90,754 77,013 Other liabilities.......................................................... 46,014 38,677 ----------- ----------- TOTAL LIABILITIES................................................... 10,310,785 10,179,873 ----------- ----------- Commitments and contingent liabilities (Notes 7, 15, 17, and 19)........... -- -- Shareholders' equity Preferred stock (Note 10) Convertible............................................................ 91,810 87,298 Nonconvertible......................................................... -- 13,800 Common stock, $5 par value; 100,000,000 shares authorized; 45,447,031 issued and outstanding (43,774,371 in 1994)............................. 227,235 218,872 Additional paid-in capital............................................... 111,348 86,917 Net unrealized gain (loss) on available for sale securities.............. 21,366 (28,685) Retained earnings........................................................ 514,572 426,945 ----------- ----------- TOTAL SHAREHOLDERS' EQUITY.......................................... 966,331 805,147 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.......................... $11,277,116 $10,985,020 ============ ============
The accompanying notes are an integral part of these financial statements. 34 37 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS
YEARS ENDED DECEMBER 31, -------------------------------------------- 1995 1994 1993 ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) INTEREST INCOME Interest and fees on loans................................ $ 636,769 $ 517,032 $ 425,967 Interest on investment securities Taxable................................................. 137,453 162,012 157,403 Tax-exempt.............................................. 31,816 32,999 30,507 Interest on deposits at financial institutions............ 1,910 734 1,862 Interest on federal funds sold and securities purchased under agreements to resell.............................. 12,095 4,472 6,175 Interest on trading account assets........................ 12,774 9,143 6,194 Interest on loans held for resale......................... 3,865 1,573 7,438 ---------- ---------- ---------- Total interest income.............................. 836,682 727,965 635,546 ---------- ---------- ---------- INTEREST EXPENSE Interest on deposits...................................... 347,859 262,572 238,019 Interest on short-term borrowings......................... 12,825 21,300 8,203 Interest on Federal Home Loan Bank advances and long-term debt.................................................... 28,567 20,979 14,291 ---------- ---------- ---------- Total interest expense............................. 389,251 304,851 260,513 ---------- ---------- ---------- NET INTEREST INCOME................................ 447,431 423,114 375,033 PROVISION FOR LOSSES ON LOANS............................... 22,231 4,894 17,950 ---------- ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON LOANS............................................ 425,200 418,220 357,083 NONINTEREST INCOME Service charges on deposit accounts....................... 71,611 55,551 49,490 Bank card income.......................................... 20,103 10,953 10,393 Mortgage servicing income................................. 9,835 9,621 9,595 Trust service income...................................... 8,010 7,990 7,643 Profits and commissions from trading activities........... 10,441 6,639 13,787 Investment securities gains (losses)...................... 476 (20,298) 4,506 Other income.............................................. 37,176 30,349 32,148 ---------- ---------- ---------- Total noninterest income........................... 157,652 100,805 127,562 ---------- ---------- ---------- NONINTEREST EXPENSE Salaries and employee benefits............................ 171,325 175,218 163,711 Net occupancy expense..................................... 27,192 28,041 25,393 Equipment expense......................................... 30,156 28,698 25,989 Other expense............................................. 153,491 195,740 131,357 ---------- ---------- ---------- Total noninterest expense.......................... 382,164 427,697 346,450 ---------- ---------- ---------- EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM, AND ACCOUNTING CHANGES........................... 200,688 91,328 138,195 Applicable income taxes..................................... 65,286 25,467 41,168 ---------- ---------- ---------- EARNINGS BEFORE EXTRAORDINARY ITEM AND ACCOUNTING CHANGES.......................................... 135,402 65,861 97,027 Extraordinary item -- defeasance of debt, net of taxes...... -- -- (3,206) Accounting changes, net of taxes............................ -- -- 5,782 ---------- ---------- ---------- NET EARNINGS....................................... $ 135,402 $ 65,861 $ 99,603 ========== ========== ========== NET EARNINGS APPLICABLE TO COMMON SHARES........... $ 126,790 $ 55,963 $ 89,790 ========== ========== ========== EARNINGS PER COMMON SHARE PRIMARY Earnings before extraordinary item and accounting changes............................................... $ 2.82 $ 1.28 $ 2.24 Extraordinary item -- defeasance of debt, net of taxes................................................. -- -- (.08) Accounting changes, net of taxes........................ -- -- .15 ---------- ---------- ---------- NET EARNINGS....................................... $ 2.82 $ 1.28 $ 2.31 ========== ========== ========== FULLY DILUTED Earnings before extraordinary item and accounting changes............................................... $ 2.70 $ 1.28 $ 2.18 Extraordinary item -- defeasance of debt, net of taxes................................................. -- -- (.07) Accounting changes, net of taxes........................ -- -- .13 ---------- ---------- ---------- NET EARNINGS....................................... $ 2.70 $ 1.28 $ 2.24 ========== ========== ========== AVERAGE SHARES OUTSTANDING Primary................................................... 45,008,452 43,740,599 38,914,086 Fully diluted............................................. 49,618,087 44,082,644 43,144,103
The accompanying notes are an integral part of these financial statements. 35 38 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
NET UNREALIZED GAIN (LOSS) ADDITIONAL ON AVAILABLE PREFERRED COMMON PAID-IN FOR SALE RETAINED STOCK STOCK CAPITAL SECURITIES EARNINGS TOTAL --------- -------- ---------- ------------ -------- -------- (DOLLARS IN THOUSANDS) BALANCE, JANUARY 1, 1993........................ $ 81,850 $159,656 $ 27,970 $ -- $260,020 $529,496 Effect of merger with: Capital Bancorporation, Inc................. 13,800 17,708 17,335 -- 16,767 65,610 Net earnings.................................. -- -- -- -- 99,603 99,603 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........ -- -- -- -- (11,025) (11,025) Common shares issued under employee benefit plans and dividend reinvestment plan, net of shares repurchased.......................... -- 1,260 5,852 -- (1,652) 5,460 Issuance of stock for acquisitions (Note 2)... 22,713 16,318 26,137 -- 18,296 83,464 Net change in unrealized depreciation on marketable equity securities................ -- -- -- -- 656 656 Other......................................... (15) 8 15 -- 55 63 --------- -------- -------- -------- -------- -------- BALANCE, DECEMBER 31, 1993...................... 118,348 194,950 77,309 -- 361,237 751,844 Net earnings.................................. -- -- -- -- 65,861 65,861 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........ -- -- -- -- (12,464) (12,464) Common shares issued under employee benefit plans and dividend reinvestment plan, net of shares repurchased.......................... -- 2,176 9,888 -- (1,944) 10,120 Issuance of stock for acquisitions (Note 2)... -- 21,686 (388) -- 42,952 64,250 Stock transactions of pooled institutions prior to pooling............................ -- 60 108 -- -- 168 Redemption of Series C Preferred Stock........ (17,250) -- -- -- -- (17,250) Cumulative effect of adoption of SFAS No. 115 on January 1, 1994.......................... -- -- -- 11,995 -- 11,995 Change in net unrealized gain (loss) on available for sale securities, net of taxes....................................... -- -- -- (40,680) -- (40,680) --------- -------- -------- -------- -------- -------- BALANCE, DECEMBER 31, 1994...................... 101,098 218,872 86,917 (28,685) 426,945 805,147 Net earnings.................................. -- -- -- -- 135,402 135,402 Cash dividends Common Stock, $.98 per share................ -- -- -- -- (39,925) (39,925) Series B Preferred Stock, $8.00 per share..................................... -- -- -- -- (352) (352) Series D Preferred Stock, $ .65 per share..................................... -- -- -- -- (165) (165) Series E Preferred Stock, $2.00 per share..................................... -- -- -- -- (6,734) (6,734) Pooled institutions prior to pooling........ -- -- -- -- (3,668) (3,668) Common shares issued under employee benefit plans and dividend reinvestment plan, net of shares repurchased.......................... -- 3,082 10,888 -- (550) 13,420 Issuance of stock for acquisitions (Note 2)... 9,712 1,740 5,551 (436) 3,585 20,152 Stock transactions of pooled institutions prior to pooling............................ -- 2,273 4,060 -- -- 6,333 Conversion of Series D Preferred Stock........ (5,200) 1,268 3,932 -- -- -- Redemption of Preferred Stock of acquired entity...................................... (13,800) -- -- -- -- (13,800) Change in net unrealized gain (loss) on available for sale securities, net of taxes....................................... -- -- -- 50,487 -- 50,487 Other......................................... -- -- -- -- 34 34 -------- -------- -------- -------- -------- -------- BALANCE, DECEMBER 31, 1995...................... $ 91,810 $227,235 $111,348 $ 21,366 $514,572 $966,331 ======== ======== ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements. 36 39 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, ----------------------------------- 1995 1994 1993 --------- --------- ----------- (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Net earnings....................................................... $ 135,402 $ 65,861 $ 99,603 Reconciliation of net earnings to net cash provided by operating activities: Cumulative effect of accounting changes, net of taxes............ -- -- (5,782) Provision for losses on loans and other real estate.............. 22,789 5,724 20,611 Depreciation and amortization.................................... 23,546 22,347 19,602 Amortization and write-off of intangibles........................ 9,220 9,663 12,559 Provision for restructuring charges.............................. -- 24,264 -- Provisions for merger-related expenses........................... 10,182 14,012 -- Write-down of available for sale securities...................... -- 2,800 -- Net (accretion) amortization of investment securities............ (2,589) 4,541 6,970 Net realized (gains) losses on sales of investment securities..................................................... 2,324 17,498 (4,506) Provision for deferred income tax expense (benefit).............. 674 4,991 (342) (Increase) decrease in assets Trading account securities and loans held for resale........... (8,914) 108,965 (23,854) Accrued interest receivable and other assets................... (32,925) (26,422) 43,901 Increase (decrease) in accrued interest, expenses, taxes, and other liabilities.............................................. 9,113 (22,979) (45,809) Other, net....................................................... (2,113) 2,657 730 --------- --------- ----------- Net cash provided by operating activities...................... 166,709 233,922 123,683 --------- --------- ----------- INVESTING ACTIVITIES Net decrease in short-term investments............................. 6,132 44,582 95,687 Proceeds from sales of available for sale securities............... 532,998 869,723 463,000 Proceeds from maturities and calls of available for sale securities....................................................... 599,485 917,167 357,503 Purchases of available for sale securities......................... (731,695) (866,720) (680,053) Proceeds from sales of held to maturity securities................. -- 225 28,742 Proceeds from maturities and calls of held to maturity securities....................................................... 158,977 282,131 1,377,365 Purchases of held to maturity securities........................... (107,598) (654,017) (1,500,893) Net increase in loans.............................................. (224,244) (892,854) (239,543) Net cash received from purchases of financial institutions......... 10,759 72,084 108,043 Purchases of premises and equipment, net........................... (14,215) (29,634) (30,818) --------- --------- ----------- Net cash provided (used) by investing activities............... 230,599 (257,313) (20,967) --------- --------- ----------- FINANCING ACTIVITIES Net decrease in deposits........................................... (22,496) (50,269) (233,282) Net (decrease) increase in short-term borrowings................... (215,987) 152,559 (55,326) Proceeds from FHLB advances and long-term debt, net................ 233,990 76,059 241,061 Repayment and defeasance of FHLB advances and long-term debt....... (112,211) (65,567) (43,591) Redemption of preferred stock...................................... (13,800) (17,250) -- Proceeds from issuance of common stock, net........................ 20,457 13,333 19,729 Purchase and retirement of common stock, net....................... (754) (3,163) (1,786) Cash dividends paid................................................ (50,796) (41,460) (32,205) --------- --------- ----------- Net cash (used) provided by financing activities............... (161,597) 64,242 (105,400) --------- --------- ----------- Net increase (decrease) in cash and cash equivalents................. 235,711 40,851 (2,684) Cash and cash equivalents at the beginning of the period............. 553,893 513,042 515,726 --------- --------- ----------- Cash and cash equivalents at the end of the period................... $ 789,604 $ 553,893 $ 513,042 ========== ========== ============ SUPPLEMENTAL DISCLOSURES Cash paid for Interest......................................................... $ 371,860 $ 298,394 $ 258,827 Taxes............................................................ 41,172 61,718 42,823 Unrealized gain (loss) on available for sale securities............ 34,747 (47,151) --
The accompanying notes are an integral part of these financial statements. 37 40 UNION PLANTERS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS. Union Planters Corporation ("the Corporation") is a bank holding company and savings and loan holding company headquartered in Memphis, Tennessee. The Corporation operates 38 banking subsidiaries in Tennessee, Mississippi, Missouri, Arkansas, Louisiana, Alabama, and Kentucky and has 405 banking offices. 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. Additional services offered include mortgage servicing; investment management and trust services; the issuance of credit and debit cards; and the origination, packaging, and securitization of loans, primarily the government-guaranteed portions of Small Business Administration ("SBA") loans. The accounting and reporting policies of the Corporation and its subsidiaries conform with generally accepted accounting principles and general practices within the financial services industry. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The most significant estimate relates to the adequacy of the allowance for losses on loans. Actual results could differ from those estimates. 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 have been restated to include the accounts of significant acquisitions accounted for using the pooling of interests method of accounting. Insignificant acquisitions accounted for as poolings of interests are included from the beginning of the year of acquisition. 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 their dates of acquisition. Certain 1993 and 1994 amounts have been reclassified to conform with the 1995 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 $356,655,000, $29,435,000, and $122,134,000 at December 31, 1995, 1994, and 1993, respectively, are included in cash and cash equivalents. Noncash transfers to foreclosed properties from loans for the years ended December 31, 1995, 1994, and 1993 were $7,545,000, $6,073,000, and $11,359,000, respectively. Other noncash transactions are detailed in Notes 2, 4, and 10. SECURITIES AND TRADING ACCOUNT ASSETS. Effective January 1, 1994, the Corporation adopted Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." This statement generally requires equity securities that have readily determinable fair values and all debt securities to be classified and accounted for in one of three categories: held to maturity securities, trading account assets, and available for sale securities. Debt securities that the Corporation has the positive intent and ability to hold to maturity are classified as held to maturity securities and carried at cost, adjusted for the amortization of premium and accretion of discount using the level-yield method. At December 31, 1995, the Corporation had no securities classified as held to maturity. Debt and equity securities that are bought and principally held for the purpose of selling them in the near term are classified as trading account assets. For the Corporation, these consist primarily of loans backed by the government-guaranteed portions of SBA loans. Gains and losses on sales and fair- value adjustments related to these securities are included in profits and commissions from trading activities. 38 41 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Debt and equity securities which the Corporation has not classified as held to maturity securities or trading account assets are classified as available for sale securities and, as such, are reported at fair value, with unrealized gains and losses, net of deferred taxes, reported as a component of shareholders' equity. Gains or losses from sales of available for sale securities are computed using the specific identification method and are included in investment securities gains (losses). 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 carried at the principal amount outstanding. Interest income on loans is recognized 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 restructured loans. Loans, other than installment loans, are generally placed on nonaccrual status and interest is not recorded if, in management's 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 the loan is both well-secured and in the process of collection. Upon the occurrence of an adverse change in the account status (e.g., filing of bankruptcy, repossession of collateral, foreclosure, or death of the borrower), installment 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. 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. On January 1, 1995, the Corporation adopted SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -- Income Recognition and Disclosures." As of December 31, 1995, the amount of impaired loans and disclosures related thereto were not material. 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. Depreciation expense has been computed principally using estimated lives of five to forty years for premises and three to seven years for furniture and equipment. 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. 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 10 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 internal management reports for respective business units show 39 42 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) a net loss before amortization of intangibles. The recoverability of the asset is then evaluated using undiscounted cash flow 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. Effective July 1, 1995, the Corporation adopted prospectively the provisions of SFAS No. 122, "Accounting for Mortgage Servicing Rights, an Amendment to FASB No. 65." This statement requires entities to recognize as separate assets, rights to service mortgage loans for others, regardless of whether originated in-house or purchased from others. SFAS No. 122 also requires that capitalized mortgage servicing rights be assessed for impairment based on the fair value of those rights. The Corporation's policy for evaluating mortgage servicing rights for impairment is to stratify the mortgage servicing rights by age of the loan and term to maturity, rate of interest, and loan type. Fair value is determined based on discounted cash flows using incremental direct and indirect costs and forecasted consensus prepayment rates. Prior period amounts are recorded using the previous practice of capitalizing only the servicing purchased from others. Mortgage servicing rights are amortized in proportion to, and over the period of, estimated net servicing income based on the historical and projected prepayments of the underlying loans. The adoption of SFAS No. 122 did not have a material effect on the Corporation's earnings, liquidity, or capital resources. At December 31, 1995, the carrying value and fair value of the Corporation's mortgage servicing rights were $5.9 million and $7.3 million, respectively. OTHER REAL ESTATE. Property acquired through foreclosure is stated at the lower of the recorded amount of the loan or the property's estimated net realizable value, reduced by estimated selling costs. Writedowns of the assets at, or prior to, the date of foreclosure are charged to the allowance for losses on loans. Subsequent writedowns, income and expense incurred in connection with holding such assets, and gains and losses resulting from the sales of such assets are included in noninterest income and expense. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS. Effective January 1, 1993, the Corporation adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and SFAS No. 112, "Employers' Accounting for Postemployment Benefits" which require that postretirement and postemployment benefits be charged to expense during the years in which an employee renders service. The Corporation elected to recognize the accumulated benefit obligations in 1993 which approximated $9.6 million ($5.9 million after tax). INCOME TAXES. Effective January 1, 1993, the Corporation prospectively adopted the provisions of SFAS No. 109, "Accounting for Income Taxes" and recorded the cumulative effect of the accounting change of $11.7 million. The Corporation files a consolidated Federal income tax return with its subsidiaries, with the exception of two credit life insurance companies that file separate returns. The provision for income taxes is based on income reported for consolidated financial statement purposes and includes deferred taxes resulting from the recognition of certain revenues and expenses in different periods for tax reporting purposes. 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 number of common shares outstanding and common stock equivalents arising 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 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. 40 43 NOTE 2. ACQUISITIONS CONSUMMATED ACQUISITIONS POOLINGS OF INTERESTS The Corporation consummated the following acquisitions which were accounted for using the pooling of interests method of accounting. Financial information for all periods was restated for the Capital, Grenada, and BNF acquisitions. The remaining acquisitions were not significant, therefore, prior period amounts were not restated. 1995 ACQUISITIONS
COMMON DATE SHARES ACQUIRED ISSUED TOTAL ASSETS TOTAL EQUITY --------- ---------- ------------ ------------ (DOLLARS IN MILLIONS) Planters Bank and Trust Company.................. 9/1/95 348,029 $ 59.0 $ 6.6 Capital Bancorporation, Inc. ("Capital")......... 12/31/95 4,087,124 1,105.1 74.8 --------- ---------- ----- Total.................................. 4,435,153 $ 1,164.1 $81.4 ========= ========== =====
1994 ACQUISITIONS
COMMON DATE SHARES ACQUIRED ISSUED TOTAL ASSETS TOTAL EQUITY --------- ---------- ------------ ------------ (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 BNF Bancorp, Inc. ("BNF")........................ 9/1/94 2,000,329 276.4 29.6 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 Grenada Sunburst System Corporation ("Grenada").................................... 12/31/94 13,776,357 2,518.0 173.7 ---------- -------- ------ Total.................................. 20,113,853 $3,576.6 $267.5 ========== ======== ======
1993 ACQUISITIONS
COMMON DATE SHARES ACQUIRED ISSUED TOTAL ASSETS TOTAL EQUITY --------- ---------- ------------ ------------ (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 ========= ====== =====
41 44 NOTE 2. ACQUISITIONS (CONTINUED) The following table summarizes the impact of the Capital acquisition on the Corporation's net interest income, noninterest income, and earnings before extraordinary item and accounting changes.
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM AND NET INTEREST NONINTEREST ACCOUNTING INCOME INCOME CHANGES ------------ ----------- --------------- (DOLLARS IN THOUSANDS) 1995 Union Planters........................................ $408,295 $148,965 $138,752 Capital............................................... 39,136 8,687 (3,350) -------- -------- -------- Union Planters pooled.............................. $447,431 $157,652 $135,402 ======== ======== ======== 1994 Union Planters........................................ $388,278 $ 93,562 $ 58,608 Capital............................................... 34,836 7,243 7,253 -------- -------- -------- Union Planters pooled.............................. $423,114 $100,805 $ 65,861 ======== ======== ======== 1993 Union Planters........................................ $343,710 $119,925 $ 89,976 Capital............................................... 31,323 7,637 7,051 -------- -------- -------- Union Planters pooled.............................. $375,033 $127,562 $ 97,027 ======== ======== ========
PURCHASE ACQUISITIONS The Corporation acquired the following institutions in transactions which were accounted for using the purchase method of accounting.
TOTAL ASSETS DATE PURCHASE RESULTING AT DATE OF INSTITUTION ACQUIRED CONSIDERATION PRICE INTANGIBLES ACQUISITION - --------------------------------- --------- ----------------- -------- ----------- ------------ (DOLLARS IN MILLIONS) Bank of East Tennessee........... 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....... 2/26/93 625,000 Shares of NM -- 187 Common Stock First State Bancorporation, Inc............................ 7/1/95 388,497 Shares of 13.5 6.5 116 Series E Preferred Stock Other Acquisitions............... 1993/1994 Cash, Common 42.7 18.1 370 Stock and Preferred Stock(1) ------ ----- ------ Total.................. $103.5 $34.6 $1,165 ====== ===== ======
- --------------- NM -- Not meaningful (1) Various acquisitions each having under $100 million in total assets. Purchase prices included $32.1 million cash, 90,162 shares of Common Stock, and 259,736 shares of Series E Preferred Stock. Pro forma condensed results of operations as if the purchase acquisitions had been consummated as of the beginning of the period have been omitted due to the immaterial effect on operations. Subsequent to December 31, 1995, the Corporation consummated on January 2, 1996, the acquisitions of First Bancshares of Eastern Arkansas, Inc., the parent of First National Bank in West 42 45 NOTE 2. ACQUISITIONS (CONTINUED) Memphis, Arkansas, and First Bancshares of N.E. Arkansas, Inc., the parent of First National Bank in Osceola, Arkansas. Both acquisitions were accounted for as purchases. The cash purchase prices of these two acquisitions were $10.9 million and $9.2 million, respectively. Total assets at date of acquisition were $60 million and $62 million, respectively. PENDING ACQUISITIONS The Corporation has signed definitive agreements pursuant to which it would acquire the following institutions. Consideration and method of accounting are based on currently available information and are subject to change based on the terms of the definitive agreements. The closing of each of these transactions is subject to obtaining shareholder and regulatory approvals and the satisfaction of a number of other contractual conditions.
ANTICIPATED TYPE OF METHOD OF APPROXIMATE TOTAL INSTITUTION CONSIDERATION ACCOUNTING ASSETS - ------------------------------------ ------------------ ------------------ --------------------- (DOLLARS IN MILLIONS) Eastern National Bank, Miami, Florida........................... Cash, Notes, and Purchase $ 266 Stock(1) Valley Federal Savings Bank in Sheffield, Alabama................ 480,000 shares of Pooling of 126 Common Stock Interests Franklin Financial Group, Inc. Morristown, Tennessee............. 670,000 shares of Pooling of 137 Common Stock Interests ----- Total..................... $ 529 =====
- --------------- (1) Includes cash in the amount of $4.5 million, UPC Promissory Notes in the face amount of $14.5 million, and up to 317,458 shares of Series E Preferred Stock. STATEMENT OF CASH FLOWS The following table details the net cash received from acquisitions of financial institutions which were accounted for using the purchase method of accounting and from insignificant acquisitions which were accounted for as poolings of interests.
YEARS ENDED DECEMBER 31, ----------------------------------- 1995 1994 1993 --------- --------- ----------- (DOLLARS IN THOUSANDS) Purchases of other financial institutions Fair value of assets acquired............................ $ 256,026 $ 976,775 $ 1,663,791 Liabilities assumed...................................... (229,017) (891,761) (1,557,038) Common stock issued...................................... (6,649) (64,250) (39,791) Preferred stock issued................................... (13,503) -- (30,127) Less previous investment in entities acquired............ -- -- (3,387) --------- --------- ----------- Cash paid for the purchases of other financial institutions.......................................... 6,857 20,764 33,448 Cash and cash equivalents acquired....................... (17,616) (92,848) (141,491) --------- --------- ----------- Net cash received from purchases of financial institutions................................... $ (10,759) $ (72,084) $ (108,043) ========= ========= ==========
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 1995 and 1994 were $73 million and $81 million, respectively. 43 46 NOTE 4. INVESTMENT SECURITIES The amortized cost and fair value of investment securities are summarized as follows:
DECEMBER 31, 1995 ------------------------------------------- UNREALIZED AMORTIZED ----------------- FAIR COST GAINS LOSSES VALUE ---------- ------- ------- ---------- (DOLLARS IN THOUSANDS) AVAILABLE FOR SALE SECURITIES U.S. Government obligations U.S. Treasury...................................... $ 825,107 $ 8,300 $ 346 $ 833,061 U.S. Government agencies Collateralized mortgage obligations............. 166,109 578 782 165,905 Mortgage-backed................................. 582,310 6,746 1,436 587,620 Other........................................... 573,250 2,159 960 574,449 ---------- ------- ------- ---------- Total U.S. Government obligations............. 2,146,776 17,783 3,524 2,161,035 Obligations of states and political subdivisions..... 490,676 22,833 2,481 511,028 Other stocks and securities.......................... 102,691 225 89 102,827 ---------- ------- ------- ---------- Total available for sale securities........... $2,740,143 $40,841 $ 6,094 $2,774,890 ========= ======= ======= =========
DECEMBER 31, 1994 ------------------------------------------- UNREALIZED AMORTIZED ----------------- FAIR COST GAINS LOSSES VALUE ---------- ------- ------- ---------- (DOLLARS IN THOUSANDS) AVAILABLE FOR SALE SECURITIES U.S. Government obligations U.S. Treasury...................................... $ 484,614 $ 745 $ 9,305 $ 476,054 U.S. Government agencies Collateralized mortgage obligations............. 328,142 50 11,312 316,880 Mortgage-backed................................. 816,683 1,061 22,669 795,075 Other........................................... 215,527 189 4,586 211,130 ---------- ------- ------- ---------- Total U.S. Government obligations............. 1,844,966 2,045 47,872 1,799,139 Obligations of states and political subdivisions..... 220 1 2 219 Other stocks and securities.......................... 139,907 1,018 2,341 138,584 ---------- ------- ------- ---------- Total available for sale securities........... $1,985,093 $ 3,064 $50,215 $1,937,942 ========= ======= ======= ========= HELD TO MATURITY SECURITIES U.S. Government obligations U.S. Treasury...................................... $ 499,167 $ 41 $13,949 $ 485,259 U.S. Government agencies........................... 112,056 195 4,944 107,307 ---------- ------- ------- ---------- Total U.S. Government obligations............. 611,223 236 18,893 592,566 Obligations of states and political subdivisions..... 528,396 9,116 15,385 522,127 Other stocks and securities.......................... 6,549 1 126 6,424 ---------- ------- ------- ---------- Total held to maturity securities............. $1,146,168 $ 9,353 $34,404 $1,121,117 ========= ======= ======= =========
The following table presents the gross realized gains and losses on investment securities for the years ended December 31, 1995 and 1994.
REALIZED GAINS REALIZED LOSSES ----------------- -------------------- 1995 1994 1995 1994 ------ ------ ------- -------- (DOLLARS IN THOUSANDS) Available for sale securities........................ $3,727 $1,158 $(6,120) $(18,767) Held to maturity securities.......................... 70 132 (1) (21) ------ ------ ------- -------- Total......................................... $3,797 $1,290 $(6,121) $(18,788) ====== ====== ======= ========
In 1993, the Corporation had gross realized gains of $6,090,000 and gross realized losses of $1,584,000 on all investment securities. Investment securities having a carrying value of approximately $1.1 billion at both December 31, 1995 and 1994 were pledged to secure public and trust funds on deposit, securities sold under agreements to repurchase, and FHLB advances. 44 47 NOTE 4. INVESTMENT SECURITIES (CONTINUED) 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. Effective September 30, 1995, the Corporation transferred approximately $1.0 billion of held to maturity securities to the available for sale securities portfolio. This transfer constituted the Corporation's entire held to maturity securities portfolio. The transfer was made in response to specific conditions which arose during the third quarter of 1995 and led management and the Board of Directors to change its intent to hold these securities to maturity. The changes included a need to provide additional funding sources for current and anticipated loan growth and the need to manage interest-rate risk and liquidity considerations which arose during the quarter in connection with certain acquisitions of the Corporation and the internal reorganizations of its banking subsidiaries. The transfer had no impact on earnings and the fair-value adjustment related to these securities was $24.7 million, resulting in a net increase in shareholders' equity of $15.1 million, net of taxes. The fair values, contractual maturities, and weighted average yields of investment securities as of December 31, 1995 are as follows:
MATURING ---------------------------------------------------------------------------- AFTER ONE BUT WITHIN ONE WITHIN FIVE AFTER FIVE BUT YEAR YEARS WITHIN TEN YEARS AFTER TEN YEARS TOTAL ---------------- ---------------- ---------------- ---------------- ------------------ AMOUNT YIELD 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............... $436,948 5.73% $382,705 6.41% $ -- --% $ 5,454 6.08% $ 825,107 6.05% U.S. Government agencies Collaterized mortgage obligations............. 1,481 6.09 20,627 6.27 23,595 6.03 120,406 6.46 166,109 6.37 Mortgage-backed........... 11,545 5.96 50,732 6.75 74,065 7.32 445,968 7.10 582,310 7.07 Other..................... 280,127 6.06 206,357 5.83 32,574 6.30 54,192 7.07 573,250 6.09 -------- -------- -------- -------- ---------- Total U.S. Government obligations......... 730,101 5.86 660,421 6.25 130,234 6.83 626,020 6.97 2,146,776 6.36 Obligations of states and political subdivisions...... 27,831 7.95 111,312 9.57 80,227 9.54 271,306 9.62 490,676 9.50 Other stocks and securities Federal Reserve Bank and Federal Home Loan Bank stock....................... -- -- -- -- -- -- 61,787 6.73 61,787 6.73 Bonds, notes, and debentures................ 2,321 5.95 1,289 6.53 231 6.34 -- -- 3,841 6.17 Collaterized mortgage obligations............... -- -- 23,788 6.39 1,015 7.49 2,848 6.41 27,651 6.43 Mortgage-backed............. -- -- 3 9.00 -- -- 235 9.69 238 9.68 Other....................... -- -- 231 6.09 -- -- 8,943 4.54 9,174 4.58 -------- -------- -------- -------- ---------- Total other stocks and securities.......... 2,321 5.95 25,311 6.39 1,246 7.28 73,813 6.46 102,691 6.44 -------- -------- -------- -------- ---------- Total amortized cost of available for sale securities..... $760,253 5.94% $797,044 6.72% $211,707 7.86% $971,139 7.67% $2,740,143 6.93% ======== ======== ======== ======== ========== Total fair value...... $761,954 $808,238 $217,074 $987,624 $2,774,890 ======== ======== ======== ======== ==========
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 weighted average yield for obligations of states and political subdivisions is adjusted to a taxable-equivalent yield, using a Federal income tax rate of 35%. Expected maturities of securities will differ from contractual maturities because some borrowers have the right to call or prepay obligations with or without call or prepayment penalties. The investment securities portfolio is expected to have a principal weighted average life of approximately 3.1 years. 45 48 NOTE 5. LOANS Loans are summarized as follows:
DECEMBER 31, ----------------------- 1995 1994 ---------- ---------- (DOLLARS IN THOUSANDS) Commercial, financial, and agricultural............................... $1,450,050 $1,511,096 Real estate -- construction........................................... 322,701 291,719 Real estate -- mortgage Secured by 1-4 family residential................................... 2,320,168 2,247,659 Other mortgage...................................................... 1,283,937 1,244,773 Home equity........................................................... 167,223 150,524 Consumer Credit cards and related plans...................................... 387,445 264,600 Other consumer...................................................... 1,108,127 1,004,367 Direct lease financing................................................ 60,400 40,523 ---------- ---------- Total loans...................................................... $7,100,051 $6,755,261 ========== ==========
Nonperforming loans are summarized as follows:
DECEMBER 31, ------------------- 1995 1994 ------- ------- (DOLLARS IN THOUSANDS) Nonaccrual loans......................................................... $32,847 $19,532 Restructured loans....................................................... 1,330 2,279 ------- ------- Total.......................................................... $34,177 $21,811 ======= =======
The impact on net interest income of the above nonperforming loans was not material in either 1995 or 1994. Also, there were no significant outstanding commitments to lend additional funds at December 31, 1995. Certain of the Corporation's bank subsidiaries, principally Union Planters National Bank ("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 transactions with unrelated persons and do not involve more than normal risks of collectability. The aggregate dollar amount of these loans was $41.8 million and $39.2 million at December 31, 1995 and 1994, respectively. During 1995, $112.0 million of new loans and advances under credit lines were made to directors, executive officers, and their affiliates; repayments totaled approximately $109.4 million. 46 49 NOTE 6. ALLOWANCE FOR LOSSES ON LOANS The changes in the allowance for losses on loans are summarized as follows:
1995 1994 1993 -------- -------- -------- (DOLLARS IN THOUSANDS) Balance, January 1......................................... $133,966 $125,499 $100,282 Increases due to acquisitions............................ 2,762 9,252 21,569 Provision for losses on loans............................ 22,231 4,894 17,950 Recoveries of loans previously charged off............... 12,190 13,714 10,728 Loans charged off........................................ (37,662) (19,393) (25,030) -------- -------- -------- Balance, December 31....................................... $133,487 $133,966 $125,499 ======== ======== ========
NOTE 7. PREMISES AND EQUIPMENT, LEASED ASSETS, AND LEASE COMMITMENTS Premises and equipment are summarized as follows:
DECEMBER 31, --------------------- 1995 1994 -------- -------- (DOLLARS IN THOUSANDS) Land................................................................... $ 46,591 $ 46,591 Buildings and improvements............................................. 174,897 173,618 Leasehold improvements................................................. 11,369 10,242 Equipment.............................................................. 139,534 143,941 Construction in progress............................................... 9,011 3,316 -------- -------- 381,402 377,708 Less accumulated depreciation and amortization......................... 153,130 147,811 -------- -------- Total premises and equipment................................. $228,272 $229,897 ======== ========
Rental expense, net of sublease rental income under all operating leases totaled $9.3 million in 1995, $8.6 million in 1994, and $9.7 million in 1993. At December 31, 1995, minimum future rental commitments under noncancelable operating leases were as follows:
OPERATING LEASES ---------------------- (DOLLARS IN THOUSANDS) 1996..................................................................... $ 5,326 1997..................................................................... 4,502 1998..................................................................... 3,890 1999..................................................................... 2,721 2000..................................................................... 2,285 Later years.............................................................. 8,570 -------- Total minimum lease payments................................... $ 27,294 ========
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 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. 47 50 NOTE 8. SHORT-TERM BORROWINGS (CONTINUED) Short-term borrowings are summarized as follows:
DECEMBER 31, ---------------------------------- 1995 1994 1993 -------- -------- -------- (DOLLARS IN THOUSANDS) Year-end balances Federal funds purchased and securities sold under agreements to repurchase.............................. $240,929 $446,628 $289,450 Commercial paper......................................... -- 2,951 10,941 Other short-term borrowings.............................. 94 5,431 23 -------- -------- -------- Total short-term borrowings........................... $241,023 $455,010 $300,414 ======== ======== ======== Federal funds purchased and securities sold under agreements to repurchase Daily average balance.................................... $229,815 $496,280 $276,915 Weighted average interest rate........................... 5.29% 4.24% 2.86% Maximum outstanding at any month end..................... $447,003 $745,490 $374,391 Weighted average interest rate at December 31............ 5.21% 5.39% 2.86%
NOTE 9. FEDERAL HOME LOAN BANK ADVANCES AND LONG-TERM DEBT FEDERAL HOME LOAN BANK ("FHLB") ADVANCES Certain of the Corporation's banking and thrift subsidiaries had outstanding advances from the FHLB of $268.9 million and $224.1 million at December 31, 1995 and 1994, respectively, under Blanket Agreements for Advances and Security Agreements (the "Agreements"). The Agreements entitle these subsidiaries to borrow funds from the FHLB to fund mortgage loan programs and to satisfy certain other funding needs. Of the amounts outstanding at December 31, 1995, $201.0 million were at variable rates and $67.9 million were at fixed rates with interest rates ranging from 3.25% to 9.0% and maturities ranging from 1996 to 2025. At December 31, 1995, FHLB advances that have remaining maturities within one year, one to five years, and after five years were $21.9 million, $206.5 million, and $40.5 million, respectively. The value of the mortgage-backed securities and mortgage loans pledged under the Agreements generally must be maintained at not less than 115% and 150%, respectively, of the advances outstanding. At December 31, 1995, the Corporation had an adequate amount of mortgage-backed securities and loans to satisfy the collateral requirement. LONG-TERM DEBT The Corporation's long-term debt is summarized as follows:
DECEMBER 31, --------------------- 1995 1994 -------- -------- (DOLLARS IN THOUSANDS) 8 1/2% Subordinated Notes due 2002..................................... $ 40,245 $ 40,250 6.25% Subordinated Notes due 2003...................................... 74,592 74,540 6 3/4% Subordinated Notes due 2005..................................... 99,418 -- Other long-term debt................................................... 2,111 17,115 -------- -------- Total long-term debt......................................... $216,366 $131,905 ======== ========
In November 1993, the Corporation issued in a public offering $75 million of 6.25% Subordinated Capital Notes due 2003 at 99.305%. In November 1995, the Corporation issued in another public offering $100 million of 6 3/4% Subordinated Capital Notes due 2005 at 99.408%. Interest is payable on both issues semiannually on May 1 and November 1. The Notes are not redeemable prior to maturity and will mature on November 1, 2003 and 2005, respectively. The Notes are subordinated to all present and future senior indebtedness of the Corporation and payment may be accelerated only in the case of bankruptcy of the Corporation. The Notes qualify as Tier 2 capital under regulatory risk-based capital guidelines. The Corporation entered into an interest-rate swap agreement related to the 48 51 NOTE 9. FEDERAL HOME LOAN BANK ADVANCES AND LONG-TERM DEBT (CONTINUED) November 1993 offering with a notional amount of $50 million which converted a portion of the fixed-rate debt to a floating LIBOR rate for two and one-half years. During 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 as 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% Subordinated Notes offering 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 and 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 both December 31, 1995 and 1994, 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 1996 through 2000 are $389,000, $560,000, $778,000, $250,000, and $66,000, 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 and management fees to the Corporation (see Note 12). NOTE 10. SHAREHOLDERS' EQUITY DIVIDENDS The payment of dividends is determined by the Board of Directors taking into account the earnings, capital levels, cash requirements and the financial condition of the Corporation and its subsidiaries, applicable government regulations and policies, and other factors deemed relevant by the Board of Directors, including the amount of dividends payable to the Corporation by its subsidiary banks. Various federal laws, regulations and policies limit the ability of the Corporation's subsidiary banks to pay dividends. See Note 12, "Restrictions on Dividends and Loans from Subsidiaries." PREFERRED STOCK The Corporation's preferred stock is summarized as follows:
DECEMBER 31, -------------------- 1995 1994 ------- -------- (DOLLARS IN THOUSANDS) PREFERRED STOCK, WITHOUT PAR VALUE, 10,000,000 SHARES AUTHORIZED FOR ALL ISSUES: CONVERTIBLE Series A Preferred Stock....................................... $ -- $ -- Series B Preferred Stock....................................... 4,400 4,400 Series D Preferred Stock....................................... -- 5,200 Series E Preferred Stock....................................... 87,410 77,698 ------- -------- Total convertible preferred stock......................... 91,810 87,298 NONCONVERTIBLE.................................................... -- 13,800 ------- -------- Total preferred stock..................................... $91,810 $101,098 ======= ========
49 52 NOTE 10. SHAREHOLDERS' EQUITY (CONTINUED) 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 to be 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 a 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, to convert each share into 7.722 shares (339,768 shares in total) of the Corporation's Common Stock. As of December 31, 1995, no shares had been converted. The Series B Preferred Stock is stated at a liquidation value of $100 per share, 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 1992, in connection with an acquisition, 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 had no par value but had a stated value of $20.50 per share on which dividends accrued at 9.5% per annum. Dividends were cumulative and payable quarterly. On July 1, 1995, all Series D Preferred Stock was converted into 253,655 shares of the Corporation's Common Stock. SERIES E PREFERRED STOCK. In 1992, the Corporation completed a public offering of 2,200,000 shares of 8% Cumulative, Convertible Preferred Stock, Series E ("Series E Preferred Stock"). Additional shares (1,297,019) were issued in connection with acquisitions in 1995 and 1993 (see Note 2). One of the Corporation's pending acquisitions is expected to involve the issuance of Series E Preferred Stock. Such shares have a stated value of $25 per share on which dividends accrue at the 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 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. Through December 31, 1995, 600 shares had been converted into 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. At December 31, 1995 and 1994, 3,496,419 and 3,107,922 shares, respectively, were issued and outstanding. NONCONVERTIBLE PREFERRED STOCK. In 1992, Capital Bancorporation, Inc. (acquired by the Corporation on December 31, 1995 in a pooling of interests transaction) issued 27,600 shares of its 9.75% Increasing Rate, Redeemable, Cumulative Preferred Stock, Series C. In connection with the Corporation's acquisition, the Series C Preferred Stock was redeemed on December 31, 1995 at its stated value of $500 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 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 189,921, 116,678, and 68,188 shares in 1995, 1994, and 1993, respectively. 50 53 NOTE 11. UNION PLANTERS CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION CONDENSED BALANCE SHEET
DECEMBER 31, ----------------------- 1995 1994 ---------- -------- (DOLLARS IN THOUSANDS) ASSETS Noninterest-bearing cash in subsidiary bank........................ $ 1,512 $ 990 Interest-bearing deposits at financial institutions................ 10,000 -- Demand note receivable from subsidiary bank........................ 66,683 84,932 Advances to and receivables from subsidiaries...................... 24,785 5,981 Investment securities available for sale........................... 171,102 1,854 Investment in bank subsidiaries.................................... 861,928 761,238 Investment in savings and loan subsidiaries........................ 29,609 59,007 Investment in nonbank subsidiaries................................. 9,732 7,139 Premises and equipment............................................. 8,976 4,955 Other assets....................................................... 14,892 23,476 ---------- -------- TOTAL ASSETS............................................... $1,199,219 $949,572 ========= ======== LIABILITIES AND SHAREHOLDERS' EQUITY Commercial paper................................................... $ -- $ 2,951 Long-term debt..................................................... 214,255 114,790 Loans from and payables to subsidiaries............................ 3,426 13,695 Other liabilities.................................................. 15,207 12,989 Shareholders' equity............................................... 966,331 805,147 ---------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................. $1,199,219 $949,572 ========= ========
CONDENSED STATEMENT OF EARNINGS
YEARS ENDED DECEMBER 31, ---------------------------------- 1995 1994 1993 -------- -------- -------- (DOLLARS IN THOUSANDS) INCOME Dividends from bank subsidiaries......................... $146,406 $145,950 $ 25,893 Dividends from savings and loan subsidiaries............. 16,404 18,594 2,199 Dividends from nonbank subsidiaries...................... 500 -- -- Management fees from subsidiaries........................ 29,000 18,508 7,198 Interest from subsidiaries............................... 3,219 3,913 1,358 Interest and dividends on investments, loans, and interest-bearing deposits at financial institutions... 4,611 29 62 Investment securities gains (losses)..................... 23 (71) -- Other income............................................. 455 1,634 1,283 -------- -------- -------- Total income..................................... 200,618 188,557 37,993 -------- -------- -------- EXPENSES Interest expense Short-term borrowings................................. 80 159 235 Long-term debt........................................ 10,320 8,503 7,447 Salaries and employee benefits........................... 16,190 11,185 6,029 Occupancy and equipment expense.......................... 6,669 4,947 924 Other expense............................................ 16,938 12,247 4,760 -------- -------- -------- Total expenses................................... 50,197 37,041 19,395 -------- -------- -------- EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM, ACCOUNTING CHANGES, AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES....................... 150,421 151,516 18,598 Tax benefit................................................ (7,576) (4,847) (4,092) -------- -------- -------- EARNINGS BEFORE EXTRAORDINARY ITEM, ACCOUNTING CHANGES, AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES................................ 157,997 156,363 22,690 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................................ 157,997 156,363 21,963 Equity in undistributed earnings of subsidiaries........... (22,595) (90,502) 77,640 -------- -------- -------- NET EARNINGS..................................... $135,402 $ 65,861 $ 99,603 ======== ======== ========
51 54 NOTE 11. UNION PLANTERS CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION (CONTINUED) CONDENSED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, ---------------------------------- 1995 1994 1993 -------- -------- -------- (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Net earnings............................................. $135,402 $ 65,861 $ 99,603 Equity in undistributed (earnings) of subsidiaries....... 22,595 90,502 (77,640) Cumulative effect of accounting changes, net of taxes.... -- -- (2,479) Deferred income taxes (benefit).......................... 425 239 (1,898) Other, net............................................... 9,409 (15,133) 3,908 -------- -------- -------- Net cash provided by operating activities............. 167,831 141,469 21,494 -------- -------- -------- INVESTING ACTIVITIES Net increase in short-term investments................... (10,000) -- -- Purchases of available for sale securities............... (389,624) -- -- Proceeds from sales of available for sale securities..... 221,532 197 123 Net increase in investment in and receivables from subsidiaries.......................................... (55,261) (119,921) (16,916) Purchases of premises and equipment, net................. (5,279) (5,156) -- -------- -------- -------- Net cash used in investing activities................. (238,632) (124,880) (16,793) -------- -------- -------- FINANCING ACTIVITIES Net (decrease) increase in commercial paper.............. (2,971) (7,990) 2,616 Proceeds from issuance of long-term debt, net............ 99,956 -- 73,641 Repayment and defeasance of long-term debt............... (49) -- (34,042) Net proceeds from loans from and payables to subsidiaries.......................................... (9,668) 13,333 -- Redemption of preferred stock............................ -- (17,250) -- Proceeds from issuance of common stock, net.............. 13,688 11,245 19,611 Purchases and retirement of common stock, net............ (754) (3,164) (1,786) Cash dividends paid...................................... (47,128) (28,996) (21,180) -------- -------- -------- Net cash provided (used) by financing activities...... 53,074 (32,822) 38,860 -------- -------- -------- Net (decrease) increase in cash and cash equivalents....... (17,727) (16,233) 43,561 Cash and cash equivalents at the beginning of the year..... 85,922 102,155 58,594 -------- -------- -------- Cash and cash equivalents at the end of the year........... $ 68,195 $ 85,922 $102,155 ======== ======== ========
- --------------- Noncash Activities. See Note 2 and Note 10, respectively, regarding acquisitions in 1995, 1994, and 1993 and the conversion of Series D Preferred Stock. 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 to be 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, Kentucky, Louisiana, Mississippi, Missouri, 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 52 55 NOTE 12. RESTRICTIONS ON DIVIDENDS AND LOANS FROM SUBSIDIARIES (CONTINUED) 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 average quarterly assets instead of period-end assets. Missouri requires a 6% tangible equity capital ratio. The Corporation has not received approval from Louisiana for an internal policy. At January 1, 1996, the banking subsidiaries could have paid dividends to the Corporation aggregating $35 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 of $98 million in connection with the reorganization of UPNB into five separately chartered banks. Additional dividends from UPNB will require 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% nor shall loans to all nonbank affiliates exceed 20% of an individual bank's capital 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 CHARGES AND MERGER-RELATED EXPENSES 1994 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 provided 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 achieved a net reduction in total staff in 1995 of approximately 690 employees, excluding the employees of the institutions acquired in 1995. These reductions came 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 a charge of $12.5 million in the fourth quarter of 1994. Additional reductions were facilitated by an involuntary separation plan which the Corporation communicated to all employees in connection with the offering of the voluntary plans. At December 31, 1994, the Corporation had identified 38 branch locations for consolidation, closure or divestiture. At December 31, 1995, the Corporation had consolidated or otherwise divested 33 branch locations. There were no additional charges for restructuring in 1995. Final completion of the Corporation's plan is expected in the first half of 1996. In connection therewith, the Corporation expects to consolidate or divest itself of 12 additional branch locations, contingent upon receipt of regulatory approvals. The remaining reserves for these branch closings and employee terminations are considered adequate. 53 56 NOTE 13. RESTRUCTURING CHARGES AND MERGER-RELATED EXPENSES (CONTINUED) The following table provides a reconciliation of the restructuring charges and the reserves at December 31, 1995 and 1994:
RESTRUCTURING RESERVES -------------------------------------------------- EMPLOYEE ASSET SEVERANCE IMPAIRMENTS OTHER TOTAL --------- ----------- ------- -------- (DOLLARS IN THOUSANDS) Restructuring charges in 1994.................. $ 16,262 $10,478 $ 2,189 $ 28,929 Less: Cash payments in 1994.................... (3,830) -- (835) (4,665) Noncash items............................ -- (1,144) -- (1,144) --------- ------- ------- -------- Reserve balance at December 31, 1994........... 12,432 9,334 1,354 23,120 Less: Cash payments in 1995.................... (11,829) -- (1,354) (13,183) Noncash items............................ -- (6,591)(1) -- (6,591) --------- ------- ------- -------- Reserve balance at December 31, 1995........... $ 603 $ 2,743 $ -- $ 3,346 ========= ======= ======= ========
- --------------- (1) Relates to the disposition of branch buildings, furniture and equipment in 1995. MERGER-RELATED EXPENSES Incidental to the acquisition of Capital in 1995, the Corporation incurred certain expenses related to the merger totaling approximately $11.9 million. These expenses included legal, accounting and financial advisory services of $1.4 million; employment contract payments, severance and postretirement benefit expenses of $4.8 million; writedowns and impairments of assets held for sale or disposal and cancellation of vendor contracts of $4.7 million; and other merger-related expenses of $1.0 million. All of the merger-related expenses, except for those for asset impairments, will be settled in cash. In 1994, incidental to the acquisition of Grenada and several other institutions, the Corporation incurred certain expenses related to the mergers of approximately $14.9 million. These expenses included legal, accounting and financial advisory services of $2.5 million; employment contract payments, severance and postemployment and postretirement benefit expenses of $3.8 million; termination of a pension plan of $1.4 million; impairments of assets held for sale or disposal and cancellation of vendor contracts of $3.6 million; and other merger-related expenses of $3.6 million. 54 57 NOTE 14. OTHER NONINTEREST INCOME AND EXPENSE The major components of other noninterest income and expense are summarized as follows:
YEARS ENDED DECEMBER 31, ---------------------------------- 1995 1994 1993 -------- -------- -------- (DOLLARS IN THOUSANDS) OTHER NONINTEREST INCOME Credit life insurance commissions........................ $ 4,895 $ 4,319 $ 4,004 Customer ATM usage fees.................................. 3,201 2,830 1,602 Sale of servicing........................................ 2,282 854 1,035 VSIBG partnership earnings............................... 1,992 1,819 3,652 Brokerage fee income..................................... 1,849 1,457 1,662 Litigation settlement.................................... -- 2,200 -- Other.................................................... 22,957 16,870 20,193 -------- -------- -------- Total other noninterest income........................ $ 37,176 $ 30,349 $ 32,148 ======== ======== ======== OTHER NONINTEREST EXPENSE Restructuring charges (Note 13).......................... $ -- $ 28,929 $ -- Merger-related expenses (Note 13)........................ 11,911 14,862 2,113 FDIC insurance assessments............................... 12,320 20,203 19,579 Stationery and supplies.................................. 11,939 10,755 8,685 Advertising and promotion................................ 11,550 11,677 9,363 Postage and carrier...................................... 11,544 9,829 8,500 Other contracted services................................ 8,126 6,687 6,787 Communications........................................... 7,856 6,827 6,276 Amortization of goodwill and other intangibles........... 7,666 7,559 9,192 Brokerage and clearing fees.............................. 5,887 2,969 4,414 Other personnel services................................. 5,753 4,081 2,504 Miscellaneous charge-offs................................ 4,882 2,637 1,545 Merchant credit card charges............................. 4,468 4,136 5,073 Legal fees............................................... 4,407 5,450 3,634 Dues, subscriptions, and contributions................... 3,836 4,124 3,957 Taxes other than income taxes............................ 3,481 3,604 3,424 Travel................................................... 3,215 2,659 2,791 Audit fees............................................... 3,208 3,761 2,645 Insurance................................................ 2,108 2,859 2,287 Consultant fees.......................................... 2,093 1,358 1,248 Federal Reserve fees..................................... 1,775 1,671 2,088 Amortization and write-offs of mortgage servicing rights................................................ 1,554 2,104 3,367 Other real estate expense................................ 1,197 874 3,839 Consumer loan marketing program.......................... -- 14,446 -- Provisions for conversion of data processing systems..... -- -- 4,424 Other.................................................... 22,715 21,679 13,622 -------- -------- -------- Total other noninterest expense....................... $153,491 $195,740 $131,357 ======== ======== ========
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 and who work in excess of 1,000 hours per 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 1995 and the Corporation makes a matching contribution of 50 to 100 percent of the amounts contributed by the employee (up to 6% of compensation) depending upon his or her eligible years of service. The Corporation's contributions to the 401(k) Plan for 1995, 1994, and 1993 were $2.9 million, $2.0 million, and $1.8 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 and who work 55 58 NOTE 15. EMPLOYEE BENEFIT PLANS (CONTINUED) in excess of 1,000 hours per year. The amounts of contributions to the ESOP are determined annually at the discretion of the Board of Directors and were $3 million, $2 million, and $2 million for 1995, 1994, and 1993, respectively. At December 31, 1995, the ESOP held 1,057,331 shares of the Corporation's Common Stock, all of which were allocated to participants. STOCK OPTION 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. 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 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. Additional options under a former plan and options assumed in connection with various acquisitions remain outstanding, however, no further options will be granted under such plans. Additional information with respect to the number of shares of the Corporation's Common Stock which are subject to stock options is as follows:
YEARS ENDED DECEMBER 31, --------------------- 1995 1994 -------- -------- Options Outstanding, beginning of year...................................... 874,042 700,227 Granted............................................................. 225,040 397,665 Exercised........................................................... (198,975) (193,728) Canceled or surrendered............................................. (53,583) (30,122) -------- -------- Outstanding, end of year............................................ 846,524 874,042 ======== ======== Options becoming exercisable during the year.......................... 137,836 284,697 ======== ======== Options exercisable at end of year.................................... 537,562 624,012 ======== ========
Exercise prices ranged from $5.55 to $32.25 in 1995 and from $5.55 to $28.13 in 1994. RETIREE HEALTHCARE AND LIFE INSURANCE. The Corporation provides certain healthcare 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. Healthcare benefits are provided partially through an insurance company (for retirees age 65 and above) and partially through direct payment of claims. The following table reflects the Corporation's net periodic postretirement benefit costs for 1995 and 1994 which were determined assuming a discount rate of 8% for 1995 and 7% for 1994 and an expected return on Plan assets of 5%:
YEARS ENDED DECEMBER 31, -------------------- 1995 1994 ------ ----- (DOLLARS IN THOUSANDS) Service cost........................................................... $ 203 $ 198 Interest cost of accumulated postretirement benefit obligation......... 1,005 713 Amortization of unrecognized net (gain) loss........................... (5) 84 Return on Plan assets.................................................. (363) (286) ------- ------- Total.................................................................. $ 840 $ 709 ======== ========
56 59 NOTE 15. EMPLOYEE BENEFIT PLANS (CONTINUED) The following table sets forth the Plans' funded status and the amounts reported in the Corporation's consolidated balance sheet:
DECEMBER 31, ------------------- 1995 1994 ------- ------- (DOLLARS IN THOUSANDS) Fair value of Plan assets............................................... $10,058 $ 9,114 Accumulated postretirement benefit obligation ("APBO"): Retirees.............................................................. 9,833 10,524 Fully eligible Plan participants...................................... 230 160 Other active Plan participants........................................ 3,946 2,810 -------- -------- Total APBO.................................................... 14,009 13,494 -------- -------- APBO in excess of Plan assets................................. $(3,951) $(4,380) ======== ======== Reconciliation of fund's status to reported amounts: Accrued liability included in consolidated balance sheet, including unfunded portion of transition obligation.......................... $(4,736) $(4,477) Unrecognized net gain................................................. 785 97 -------- -------- APBO in excess of Plan assets................................. $(3,951) $(4,380) ======== ========
The assumed discount rate used to measure the APBO was 7% at December 31, 1995 and 8% at December 31, 1994. The weighted average healthcare cost trend rate in 1995 was 11%, gradually declining to an ultimate projected rate in 2001 of 5%. A one percent increase in the assumed healthcare cost trend rates for each future year would have increased the aggregate of the service and interest cost components of the 1995 net periodic postretirement benefit cost by $121,000 and would have increased the APBO as of December 31, 1995 by $1 million. The Corporation has established a Voluntary Employees' Beneficiary Association Trust ("VEBA") and through December 31, 1995, had made contributions into the VEBA of $11.6 million, the maximum amount deductible for federal income tax purposes. Additional contributions will be made to the VEBA by the Corporation annually which will be the source of funding for future postretirement benefits. ACQUIRED INSTITUTIONS. Certain of the acquired institutions have sponsored various employee benefit and retirement plans. Such plans have been or are in the process of being terminated and the employees now participate in the Corporation's benefit and retirement plans. At December 31, 1995, certain institutions acquired in 1995 had outstanding plans including defined benefit pension plans, 401(k) plans and ESOPs. The liabilities, if any, for such terminations have been recorded as of December 31, 1995. NOTE 16. INCOME TAXES The components of income tax expense are as follows:
YEARS ENDED DECEMBER 31, -------------------------------- 1995 1994 1993 ------- ------- -------- (DOLLARS IN THOUSANDS) Current tax expense Federal.................................................... $57,811 $17,428 $ 34,845 State...................................................... 6,801 3,048 6,665 ------- ------- -------- Total current tax expense............................... 64,612 20,476 41,510 ------- ------- -------- Deferred tax expense (benefit) Federal.................................................... (1,277) 4,078 (13,250) State...................................................... 1,951 913 (4,465) ------- ------- -------- Total deferred tax expense (benefit).................... 674 4,991 (17,715) ------- ------- -------- Total income tax expense........................... $65,286 $25,467 $ 23,795 ======= ======= ========
57 60 NOTE 16. INCOME TAXES (CONTINUED) For 1993, income taxes included in the financial statements is summarized as follows (Dollars in thousands): Applicable income taxes........................................................... $ 41,168 Tax benefit related to extraordinary item......................................... (2,040) Tax benefit related to the cumulative effect of accounting changes................ (15,333) -------- Total income tax expense................................................ $ 23,795 ========
Deferred tax assets/liabilities are comprised of the following:
DECEMBER 31, ------------------- 1995 1994 ------- ------- (DOLLARS IN THOUSANDS) Deferred tax assets Losses on loans and other real estate.................................. $44,326 $45,623 Postretirement and postemployment benefits............................. 1,745 1,329 Amortization of intangibles............................................ 1,859 1,797 Deferred compensation plans............................................ 4,416 5,074 Unrealized loss on securities.......................................... -- 18,466 Restructuring and merger-related charges............................... 4,249 4,932 Other deferred items................................................... 14,524 16,713 ------- ------- Total deferred tax assets...................................... 71,119 93,934 ------- ------- Deferred tax liabilities Book over tax basis in purchased loans................................. 9,010 6,849 Stock basis difference................................................. 3,301 1,969 Unrealized gain on securities.......................................... 13,381 -- Other deferred items................................................... 6,363 13,726 ------- ------- Total deferred tax liabilities................................. 32,055 22,544 ------- ------- Net deferred tax asset......................................... $39,064 $71,390 ======= =======
The change in the net deferred tax asset during the year is a result of the addition of deferred tax assets of acquired companies, the net change in unrealized gain (loss) on available for sale securities and current period deferred tax expense of $674,000. 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. Income tax expense as a percentage of earnings before income taxes, extraordinary item, and accounting changes is reconciled with the statutory federal income tax rate of 35% as follows:
YEARS ENDED DECEMBER 31, ---------------------------------- 1995 1994 1993 -------- -------- -------- (DOLLARS IN THOUSANDS) Computed "expected" tax.................................... $ 70,241 $ 31,965 $ 48,369 State income taxes, net of federal tax benefit............. 5,689 2,616 4,459 Tax-exempt interest, net................................... (11,311) (11,709) (11,759) Amortization of goodwill................................... 2,030 1,838 1,789 Other, net................................................. (1,363) 757 (1,690) -------- -------- -------- Applicable income tax............................ $ 65,286 $ 25,467 $ 41,168 ======== ======== ========
Income tax (benefit) expense applicable to securities transactions was ($.9) million for 1995, ($7.1) million for 1994, and $1.8 million for 1993. Retained earnings at both December 31, 1995 and 1994 includes approximately $7.7 million for which no deferred tax liability has been provided. This amount represents deductions for loan loss reserves of thrift subsidiaries which have been taken for tax purposes only. Reduction of such retained earnings for purposes other than tax losses or adjustments arising from the carryback of net operating 58 61 NOTE 16. INCOME TAXES (CONTINUED) losses would generate an immediate income tax liability. The unrecorded deferred income tax liability for this item was approximately $3.0 million at both December 31, 1995 and 1994. NOTE 17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK In the normal course of business, the Corporation is 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 and 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. In addition, controls for these instruments related to approval, monetary limits, and monitoring procedures are established by the Corporation's Directors' Loan Committee. The following table presents the contractual amounts of these types of instruments.
CONTRACT AMOUNT DECEMBER 31, ----------------------- 1995 1994 ------ ------ (DOLLARS IN MILLIONS) FINANCIAL INSTRUMENTS WHOSE CONTRACT AMOUNTS REPRESENT CREDIT RISK Commitments to extend credit (excluding credit card plans)...... $1,131 $1,006 Commitments to extend credit under credit card plans............ 1,158 975 Standby, commercial, and similar letters of credit.............. 75 73
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 with an original maturity of one year or less or which are unconditionally cancelable totaled $2.0 billion and loan commitments with a maturity over one year which are not unconditionally cancelable totaled $277 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 1996 and 2010. Other outstanding off-balance-sheet instruments 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, ------------------- 1995 1994 (DOLLARS IN MILLIONS) FINANCIAL INSTRUMENTS WHOSE NOTIONAL CONTRACT AMOUNTS EXCEED THE AMOUNTS OF ACTUAL CREDIT RISK Forward contracts.................................................. $ 52 $ 28 Interest-rate swap agreements...................................... 200 310 When-issued securities Commitments to sell.............................................. 97 41 Commitments to purchase.......................................... 94 33
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 59 62 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-rate 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 requires that individual positions for derivative products shall not 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, 1995, there were no positions which would be regarded as an exception under the Corporation's policy. The Corporation entered into the following interest-rate swap agreements which are used to manage its interest-rate risk related to certain on-balance-sheet assets and liabilities. The Corporation receives fixed-rate payments and pays variable-rate payments. The interest-rate swaps have the economic effect of converting specific assets (loans and investment securities) from floating-rate to fixed-rate instruments and converting 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, 1995 and 1994 follows:
NET INTEREST INCOME IMPACT UNREALIZED ------------ GAIN (LOSS) CURRENT RATES (A) -------------- NOTIONAL ------------------- YEARS ENDED AMOUNT VARIABLE FIXED DECEMBER 31, DECEMBER 31, ----------- RATE RATE MATURITY ------------ -------------- BALANCE SHEET INSTRUMENTS 1995 1994 PAID RECEIVED DATE 1995 1994 1995 1994 - -------------------------- ---- ---- -------- -------- -------- ----- ---- ----- ------ (IN (IN MILLIONS) MILLIONS) Loans (b)................. $150 $150 5.63% 5.22% 1/96-99 (c) $(1.6) $1.1 $ (.4) $(14.2) Securities (d)............ -- 100 -- -- -- -- (.1) -- -- Long-term debt-debentures......... 50 50 5.81 4.46 5/96 (.9) (.1) (.3) (2.1) Long-term debt- FHLB advances................ -- 10 -- -- -- .1 .5 -- .3 ---- ---- ----- ---- ----- ------ Total........... $200 $310 $(2.4) $1.4 $ (.7) $(16.0) ==== ==== ===== ==== ===== ======
- --------------- (a) The variable rates paid are tied to the three- and six-month LIBOR rates, respectively, for the loans and debenture swaps. The next repricing dates for the loans swap is January 1996 and the debenture swap does not reprice prior to maturity. (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 changes quarterly based on changes in the underlying index rate. On January 5, 1996, the variable rate for this swap was 5.63% and $109 million of this swap matured, leaving a balance of $41 million as of that date. If the index rate should remain at this rate, the swap would mature on April 5, 1996. (d) Management sold the securities related to this interest-rate swap in January 1995. At December 31, 1994, the Corporation recognized a $1.1 million unrealized 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. CONCENTRATIONS OF CREDIT RISK. Through its subsidiary banks in Tennessee, Mississippi, Missouri, Arkansas, Louisiana, Alabama, and Kentucky, the Corporation grants commercial, agricultural, 60 63 NOTE 17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED) 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, 1995 were as follows: Tennessee $3.4 billion (48%), Mississippi $1.7 billion (24%), Missouri $787 million (11%), Arkansas $552 million (8%), Louisiana $366 million (5%), Alabama $182 million (3%), and Kentucky $78 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 prevailing 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, 1995 DECEMBER 31, 1994 ----------------------- ----------------------- CARRYING FAIR CARRYING FAIR VALUE VALUE VALUE VALUE ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) FINANCIAL ASSETS Cash and short-term investments............... $ 803,175 $ 803,175 $ 569,510 $ 569,510 Trading account assets........................ 121,927 121,927 155,951 155,951 Loans held for resale......................... 68,819 68,819 25,881 25,881 Investment securities -- available for sale... 2,774,890 2,774,890 1,937,942 1,937,942 Investment securities -- held to maturity..... -- -- 1,146,168 1,121,117 Net loans..................................... 6,936,366 7,113,907 6,587,631 6,424,698 FINANCIAL LIABILITIES Demand deposits............................... 4,666,324 4,666,324 4,867,693 4,867,693 Time deposits................................. 4,781,412 4,803,287 4,385,472 4,367,728 Short-term borrowings......................... 241,023 241,023 455,010 455,010 Federal Home Loan Bank advances............... 268,892 269,141 224,103 218,353 Long-term debt, excluding capital lease obligations................................ 214,484 217,155 130,087 117,260 OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS Forward contracts............................. -- (665) -- (37) Interest-rate swaps........................... (333) (720) (1,455) (17,127)
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. TRADING ACCOUNT ASSETS. 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. 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. 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. 61 64 NOTE 18. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) 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 FINANCIAL INSTRUMENTS. Fair values of off-balance-sheet instruments are based on current settlement values for forward contracts and when-issued securities and quoted market prices for interest-rate swaps. The fair value of interest-rate swaps represents the gross unrealized gain (loss) in these contracts. At both December 31, 1995 and 1994, there were no gains or losses related to when-issued securities. The fair value of commitments to extend credit and letters of credit (see Note 17) is 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 upon 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 pending or threatened legal proceedings. Certain of the Corporation's Mississippi banks ("UPC Banks") are defendants in various lawsuits pending in state and Federal courts in Mississippi related to the collateral protection insurance ("CPI") program in effect in the UPC Banks in the 1980s and early 1990s. Three of the Federal actions purport to have been brought as class actions and include allegations that premiums were excessive and improperly calculated; coverages were improper and not disclosed; and improper payments were paid to the UPC Banks by the insurance companies, allegedly constituting violations of various state and Federal statutes and the common laws. The CPI programs appear to have been substantially similar in many respects to CPI programs of other Mississippi banks, often with the same insurance carriers. Consequently, there are now approximately thirteen similar putative class actions pending against at least five Mississippi banks (including those against the UPC Banks), various insurance agencies and carriers based upon their CPI programs. The relief sought in the purported class actions includes actual damages, treble damages under certain statutes, other statutory damages, and unspecified punitive damages, while one of the individual suits seeks actual damages of $5 million and another seeks $25 million in punitive damages. Certain of the Corporation's broker/dealer subsidiaries (now inactive) were among the numerous defendants in various individual and class actions pending in the United States District Court for the Eastern District of Louisiana involving the issuance and sale of eight taxable municipal bond issues. During the fourth quarter of 1995, the court approved settlement of these actions (which settlement was without material loss to the Corporation) and dismissed the actions with prejudice as they related to the Corporation and its subsidiaries. 62 65 NOTE 19. CONTINGENT LIABILITIES (CONTINUED) Certain subsidiaries of the Corporation were threatened in 1989 with a civil action by the FDIC for the estate of a closed savings association, which action would reportedly seek compensatory damages of at least $37 million and other relief resulting from the sale of covered call options to such association. A tolling and forbearance agreement, entered into by all parties to the threatened action in 1989, continues in effect. During the fourth quarter of 1995, counsel for the FDIC indicated that the FDIC does not intend to pursue this matter. NOTE 20. SUBSEQUENT EVENT (UNAUDITED) On March 8, 1996, the Corporation entered into an agreement and plan of merger to acquire all of the outstanding stock of Leader Financial Corporation ("LFC"), a publicly traded Tennessee thrift holding company, in a tax-free acquisition to be accounted for as a pooling of interests. Pursuant to the merger agreement, the Corporation will exchange 1.525 shares of its Common Stock, or approximately 16.6 million shares, for each outstanding common share of LFC. The merger is subject to satisfaction of certain contractual conditions to closing, regulatory and shareholder approvals and is expected to be consummated in the fourth quarter of 1996. At December 31, 1995, LFC reported approximately $3.1 billion in total assets, $1.6 billion in total deposits, $247 million in shareholders' equity and 1995 net earnings of approximately $37 million. 63 66 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. MILTON J. WOMACK President Milton J. Womack, Inc. Chairman of the Board Union Planters Bank of Louisiana 64 67 [UNION PLANTERS CORPORATION LOGO] CORPORATE INFORMATION ANNUAL MEETING Thursday, April 25, 1996 at 10 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 [LOGO UPC LISTED NYSE] 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 Corporate Marketing Division at (901) 383-6604. 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. 68 UNION PLANTERS CORPORATION P.O. BOX 387 MEMPHIS, TENNESSEE 38147 EX-21 6 NAME OF REGISTRANT 1 EXHIBIT 21 UNION PLANTERS CORPORATION, Registrant, A registered bank holding company and a savings and loan holding company
STATE OR PERCENTAGE JURISDICTION OF VOTING UNDER LAWS OF SECURITIES NAME OF REGISTRANT AND SUBSIDIARIES WHICH ORGANIZED OWNED - ----------------------------------- -------------------- ---------------- Union Planters Corporation (Registrant) Tennessee Union Planters National Bank (a) United States 100.00% Investment Group Mortgage Corporation (b and g) Tennessee 100.00% Union Planters Bank of Jackson, National Association (a) Tennessee 100.00% Union Planters Bank of Middle Tennessee, National Association (a) Tennessee 100.00% Union Planters Bank of East Tennessee, National Association (a) Tennessee 100.00% Foothills Financial Services (c) Tennessee 100.00% Union Planters Bank of Chattanooga, National Association (a)Tennessee 100.00% Union Planters Bank of the Tennessee Valley (a) Tennessee 100.00% Union Planters Bank of the Cumberlands (a) Tennessee 100.00% First National Bank of Crossville (a) United States 100.00% First Citizens Bank of Hohenwald (a) Tennessee 100.00% Union Planters Bancshares, Inc. (a) Arkansas 100.00% Union Planters Bank of Northeast Arkansas, (d) Arkansas 100.00% Union Planters Bank of Central Arkansas, National Association (d) United States 100.00% First North Central Insurance, Inc. (e and g) Arkansas 100.00% Union Planters Bank of East Arkansas (a) Arkansas 100.00% Bank of East Tennessee (a) Tennessee 100.00% Southeastern Credit Life Insurance Company (f) Arizona 100.00% First State Bank of Fayette County (a) Tennessee 100.00% Bank of Goodlettsville (a) Tennessee 100.00% Union Planters Bank of North Central Tennessee (a) Tennessee 100.00% The First State Bank (a) Tennessee 100.00% Bank of Commerce (a) Tennessee 100.00% Bancom Services, Inc. (h and g) Tennessee 100.00% Central State Bank (a) Tennessee 100.00% Mid-South Bancorp, Inc. (a and g) Kentucky 100.00% Simpson County Bank (i) Kentucky 100.00% General Trust Company (i and g) Tennessee 100.00% First National Bancorp of Shelbyville (a and g) Tennessee 100.00% First National Bank of Shelbyville (j) Tennessee 100.00% Liberty Bancshares, Inc. (a and g) Tennessee 100.00% Union Planters Bank of Northwest Tennessee FSB (k) United States 100.00% Northwest Tennessee Service Corporation (l) Tennessee 100.00% BNF Bancorp, Inc. (a) Delaware 100.00% BANKFIRST, a federal savings bank (m) United States 100.00% Commercial Bancorp, Inc. (a and g) Tennessee 100.00% Union Planters Bank of West Tennessee (n) Tennessee 100.00% Summit Insurance, Inc. (o) Tennessee 100.00% Exchange Credit Corporation (o) Tennessee 100.00% Union Planters Bank of Mississippi (a) Mississippi 100.00% Sunburst Mortgage Corporation (p) Mississippi 100.00% System Properties, Inc. (p and g) Mississippi 100.00% Sunburst Building, Inc. (p and g) Mississippi 100.00% Union Planters Bank of Southern Mississippi (a) Mississippi 100.00% Union Planters Bank of Central Mississippi (a) Mississippi 100.00% Sunburst Financial Services, Inc. d/b/a Rapid Finance (q) Mississippi 100.00% Union Planters Bank of Northwest Mississippi (a) Mississippi 100.00% Union Planters Bank of Northeast Mississippi, National Association (a) United States 100.00% Union Planters Bank of Louisiana (a) Louisiana 100.00% Capbanc Leasing Corporation (r and g) Louisiana 100.00% Capital Equity Corporation (r) Louisiana 100.00% Collection Accounts (r and g) Louisiana 100.00% Mainstreet Development Corporation (r) Louisiana 100.00%
2 Union Planters Brokerage Services, Inc. (a) Delaware 100.00% Union Planters Investment Bankers Corporation (a and g) Tennessee 100.00% Union Planters Investment Bankers Group, Inc. (s and g) Tennessee 100.00% UMIC, Inc. (s and g) Tennessee 100.00% UMIC Securities Corporation (s and g) Tennessee 100.00% Southwestern Investment Company (a) Tennessee 100.00% Planters Life Insurance Company (a) Arizona 100.00% Tennessee Equity Mortgage Corporation (a and g) Tennessee 100.00% Guardian Realty Company (a and g) Alabama 100.00% Capital Bancorporation, Inc. (a) Tennessee 100.00% Century State Bancshares, Inc. (t) Missouri 100.00% Union Planters Bank of Mid Missouri (u) Missouri 100.00% Maryland Avenue Bancorporation, Inc. (t) Missouri 100.00% Union Planters Bank of Missouri(v) Missouri 100.00% Union Planters Bank of Cape Girardeau County (t) Missouri 100.00% Union Planters Bank of Southwest Missouri (t) Missouri 100.00% Union Planters Bank of Sikeston (t) Missouri 100.00% Union Planters Bank of Perryville, National Association (t) United States 100.00% Capital Services Corporation (t) Missouri 100.00% First Bancshares of Eastern Arkansas, Inc.(a) Arkansas 100.00% First National Bank in West Memphis (w) United States 100.00% First Bancshares of N.E. Arkansas, Inc. (a) Arkansas 100.00% First National Bank in Osceola (x) United States 100.00%
(a) Subsidiary of Union Planters Corporation (b) Subsidiary of Union Planters National Bank (c) Subsidiary of Union Planters Bank of East Tennessee, National Association (d) Subsidiary of Union Planters Bancshares, Inc. (e) Subsidiary of Union Planters Bank of Central Arkansas, National Association (f) Subsidiary of Bank of East Tennessee (g) Inactive subsidiary (h) Subsidiary of Bank of Commerce (i) Subsidiary of Mid-South Bancorp, Inc. (j) Subsidiary of First National Bancorp of Shelbyville (k) Subsidiary of Liberty Bancshares, Inc. (l) Subsidiary of Union Planters Bank of Northwest Tennessee FSB (m) Subsidiary of BNF Bancorp, Inc. (n) Subsidiary of Commercial Bancorp, Inc. (o) Subsidiary of Union Planters Bank of West Tennessee (p) Subsidiary of Union Planters Bank of Mississippi (q) Subsidiary of Union Planters Bank of Central Mississippi (r) Subsidiary of Union Planters Bank of Louisiana (s) Subsidiary of Union Planters Investment Bankers Corporation (t) Subsidiary of Capital Bancorporation, Inc. (u) Subsidiary of Century State Bancshares, Inc. (v) Subsidiary of Maryland Avenue Bancorporation, Inc. (w) Subsidiary of First Bancshares of Eastern Arkansas, Inc. (x) Subsidiary of First Bancshares of N.E. Arkansas,Inc. EX-23 7 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the previously filed Registration Statement on Form S-3 (No. 33-27814) and Form S-8 (Nos. 2-87392, 33-23306, 33-35928, 33-53454, 33-55257, 33-56269, and 33-65467) of Union Planters Corporation of our report dated January 18, 1996 appearing on page 33 of the Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. /s/PRICE WATERHOUSE LLP Memphis, Tennessee March 18, 1996 EX-27 8 FINANCIAL DATA SCHEDULE
9 1,000 U.S. DOLLARS YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 432,949 13,571 356,655 121,927 2,774,890 0 0 7,069,853 133,487 11,277,116 9,447,736 241,023 136,768 485,258 0 91,810 227,235 647,286 11,277,116 640,634 169,269 26,779 836,682 347,859 389,251 447,431 22,231 476 382,164 200,688 135,402 0 0 135,402 2.82 2.70 4.59 32,847 18,317 1,330 15,600 133,966 37,662 12,190 133,487 133,487 0 0
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