-----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, KvBkn3dWa2StP7rXEWooWhjJ+KnU2SSqfwAvKy6TwyPCuPgBuq80Mi/1sPLIwfdj yx0GdCvq8VGL478dvcPTvQ== 0000950144-96-001995.txt : 19960719 0000950144-96-001995.hdr.sgml : 19960719 ACCESSION NUMBER: 0000950144-96-001995 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960509 SROS: CSX SROS: NYSE SROS: PHLX FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNION PLANTERS CORP CENTRAL INDEX KEY: 0000100893 STANDARD INDUSTRIAL CLASSIFICATION: 6021 IRS NUMBER: 620859007 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10160 FILM NUMBER: 96558405 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-Q 1 UNION PLANTER CORPORATION'S 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period ___ 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 ---------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Class Outstanding at April 30, 1996 - - ------------------------- ------------------------------- Common stock $5 par value 45,964,718 2 UNION PLANTERS CORPORATION AND SUBSIDIARIES FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1996 INDEX
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) a) Consolidated Balance Sheet - March 31, 1996, March 31, 1995, and December 31, 1995 3 b) Consolidated Statement of Earnings - Three Months Ended March 31, 1996 and 1995 4 c) Consolidated Statement of Changes in Shareholders' Equity - Three Months Ended March 31, 1996 5 d) Consolidated Statement of Cash Flows - Three Months Ended March 31, 1996 and 1995 6 e) Notes to Unaudited Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings 29 Item 2. Changes in Securities 29 Item 3. Defaults Upon Senior Securities 29 Item 4. Submission of Matters to a Vote of Security Holders 29 Item 5. Other Information 29 Item 6. Exhibits and Reports on Form 8-K 29 Signatures 30
2 3 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, DECEMBER 31, -------------------------------- ------------- 1996 1995 1995 ----------- ----------- ----------- (DOLLARS IN THOUSANDS) ASSETS Cash and due from banks $ 475,211 $ 427,109 $ 432,949 Interest-bearing deposits at financial institutions 3,820 33,090 13,571 Federal funds sold and securities purchased under agreements to resell 182,199 93,408 356,655 Trading account assets 134,926 168,149 121,927 Loans held for resale 91,007 36,472 68,819 Investment securities Available for sale (Amortized cost: $2,919,840, $1,725,056, and $2,740,143, respectively) 2,951,092 1,712,766 2,774,890 Held to maturity (Fair value: $1,129,936 at March 31, 1995) - 1,124,011 - Loans 7,123,637 6,830,549 7,100,051 Less: Unearned income (31,900) (33,186) (30,198) Allowance for losses on loans (136,277) (135,410) (133,487) --------- ----------- ----------- Net loans 6,955,460 6,661,953 6,936,366 Premises and equipment 229,725 225,409 228,272 Accrued interest receivable 100,811 90,973 100,686 Goodwill and other intangibles 62,141 56,860 58,535 Other assets 182,290 154,132 184,446 ----------- ----------- ----------- TOTAL ASSETS $11,368,682 $10,784,332 $11,277,116 =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Noninterest-bearing $ 1,364,399 $ 1,307,662 $ 1,420,358 Certificates of deposit of $100,000 and over 784,327 683,592 754,434 Other interest-bearing 7,374,150 7,141,822 7,272,944 ----------- ----------- ----------- Total deposits 9,522,876 9,133,076 9,447,736 Short-term borrowings 236,220 222,415 241,023 Federal Home Loan Bank advances 256,178 305,859 268,892 Long-term debt 216,288 130,018 216,366 Accrued interest, expenses, and taxes 104,846 87,410 90,754 Other liabilities 39,409 45,066 46,014 ----------- ----------- ----------- TOTAL LIABILITIES 10,375,817 9,923,844 10,310,785 ----------- ----------- ----------- Commitments and contingent liabilities - - - Shareholders' equity Preferred stock Convertible 91,810 87,298 91,810 Nonconvertible - 13,800 - Common stock, $5 par value; 100,000,000 shares authorized; 45,602,329 issued and outstanding (44,339,833 at March 31, 1995 and 45,447,031 at December 31, 1995) 228,012 221,699 227,235 Additional paid-in capital 117,044 91,360 111,348 Net unrealized gain (loss) on available for sale securities 19,145 (7,825) 21,366 Retained earnings 536,854 454,156 514,572 ----------- ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 992,865 860,488 966,331 ----------- ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $11,368,682 $10,784,332 $11,277,116 =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 3 4 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ------------------------- 1996 1995 --------- --------- (Dollars in thousands, except per share data) INTEREST INCOME Interest and fees on loans $164,033 $148,958 Interest on investment securities Taxable 35,735 36,804 Tax-exempt 7,550 8,114 Interest on deposits at financial institutions 57 315 Interest on federal funds sold and securities purchased under agreements to resell 4,818 843 Interest on trading account assets 2,387 2,736 Interest on loans held for resale 1,427 322 -------- -------- Total interest income 216,007 198,092 -------- -------- INTEREST EXPENSE Interest on deposits 89,994 77,946 Interest on short-term borrowings 2,934 4,821 Interest on Federal Home Loan Bank advances and long-term debt 7,606 6,486 -------- -------- Total interest expense 100,534 89,253 -------- -------- NET INTEREST INCOME 115,473 108,839 PROVISION FOR LOSSES ON LOANS 7,981 2,222 -------- -------- NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON LOANS 107,492 106,617 -------- -------- NONINTEREST INCOME Service charges on deposit accounts 16,641 17,198 Bank card income 5,159 4,756 Mortgage servicing income 2,443 2,313 Trust service income 2,290 2,074 Profits and commissions from trading activities 2,207 1,614 Investment securities gains (losses) 60 (21) Other income 11,397 8,145 -------- -------- Total noninterest income 40,197 36,079 -------- -------- NONINTEREST EXPENSE Salaries and employee benefits 43,428 43,257 Net occupancy expense 6,816 6,934 Equipment expense 7,260 7,533 Other expense 31,648 32,941 -------- -------- Total noninterest expense 89,152 90,665 -------- -------- EARNINGS BEFORE INCOME TAXES 58,537 52,031 Applicable income taxes 19,393 16,374 -------- -------- NET EARNINGS $ 39,144 $ 35,657 ======== ======== NET EARNINGS APPLICABLE TO COMMON SHARES $ 37,308 $ 33,555 ======== ======== EARNINGS PER COMMON SHARE Primary $ .82 $ .75 Fully diluted .78 .72 AVERAGE COMMON SHARES OUTSTANDING (IN THOUSANDS) Primary 45,752 44,515 Fully diluted 50,463 48,995
The accompanying notes are an integral part of these financial statements. 4 5 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
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, 1996 $91,810 $227,235 $111,348 $21,366 $514,572 $966,331 Net earnings - - - - 39,144 39,144 Cash dividends Common Stock, $.27 per share - - - - (12,283) (12,283) Series B Preferred Stock, $2.00 per share - - - - (88) (88) Series E Preferred Stock, $.50 per share - - - - (1,748) (1,748) Common shares issued under employee benefit plans and dividend reinvestment plan, net of shares repurchased - 779 5,694 - (2,728) 3,745 Change in net unrealized gain (loss) on available for sale securities, net of taxes - - - (2,221) - (2,221) Other - (2) 2 - (15) (15) ------- -------- -------- ------- -------- -------- BALANCE, MARCH 31, 1996 $91,810 $228,012 $117,044 $19,145 $536,854 $992,865 ======= ======== ======== ======= ======== ========
The accompanying notes are an integral part of these financial statements. 5 6 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, -------------------------------- 1996 1995 ------------ ----------- (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Net earnings $ 39,144 $ 35,657 Reconciliation of net earnings to net cash provided by operating activities: Provision for losses on loans and other real estate 8,060 2,391 Depreciation and amortization 5,733 5,978 Amortization and write-off of intangibles 2,421 2,048 Net (accretion) amortization of investment securities (2,293) 201 Net realized (gains) losses on sales of investment securities (60) 1,706 Deferred income tax expense 350 83 (Increase) decrease in assets Trading account assets and loans held for resale (35,187) (22,789) Accrued interest receivable and other assets 6,476 16,694 Increase in accrued interest, expenses, taxes, and other liabilities 4,426 16,615 Other, net 88 (57) -------- -------- Net cash provided by operating activities 29,158 58,527 -------- -------- INVESTING ACTIVITIES Net decrease (increase) in short-term investments 9,751 (23,033) Proceeds from sales of available for sale securities 11,965 180,305 Proceeds from maturities, calls and prepayments of available for sale securities 506,820 144,977 Purchases of available for sale securities (655,728) (50,584) Proceeds from maturities, calls and prepayments of held to maturity securities - 58,447 Purchases of held to maturity securities - (30,577) Net decrease (increase) in loans 17,978 (52,614) Net cash received from purchases of financial institutions 11,297 10,061 Purchases of premises and equipment, net (4,291) (1,217) -------- -------- Net cash (used) provided by investing activities (102,208) 235,765 -------- -------- FINANCING ACTIVITIES Net decrease in deposits (31,147) (172,278) Net decrease in short-term borrowings (10,803) (232,595) Proceeds from FHLB advances and long-term debt, net 31,241 100,582 Repayment of FHLB advances and long-term debt (38,061) (20,712) Proceeds from issuance of common stock, net 7,383 3,873 Purchase and retirement of common stock, net (3,638) (281) Cash dividends paid (14,119) (11,916) ------- --------- Net cash used by financing activities (59,144) (333,327) -------- -------- Net decrease in cash and cash equivalents (132,194) (39,035) Cash and cash equivalents at the beginning of the period 789,604 553,893 -------- -------- Cash and cash equivalents at the end of the period $657,410 $514,858 ======== ======== SUPPLEMENTAL DISCLOSURES Purchases of other financial institutions: Fair value of assets acquired $129,526 $59,046 Liabilities assumed (109,476) (52,397) Common stock issued - (6,649) -------- -------- Cash paid for the purchases of other financial institutions 20,050 - Cash and cash equivalents acquired (31,347) (10,061) -------- --------- Net cash received from purchases of financial institutions $(11,297) $(10,061) ======== ========= Cash paid (received) for: Interest $102,085 $ 85,198 Taxes 2,519 (9,113) Unrealized gain (loss) on available for sale securities 31,252 (12,290)
The accompanying notes are an integral part of these financial statements. 6 7 UNION PLANTERS CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. PRINCIPLES OF ACCOUNTING The consolidated financial statements have been prepared in accordance with generally accepted accounting principles. The foregoing financial statements are unaudited, however, in the opinion of management, all adjustments, including normal recurring adjustments, necessary for a fair presentation of the consolidated financial statements have been included. The accounting policies followed by Union Planters Corporation and its subsidiaries (the Corporation) for interim financial reporting are consistent with the accounting policies followed for annual financial reporting except as noted below. The notes included herein should be read in conjunction with the notes to the consolidated financial statements included in the Corporation's 1995 Annual Report to Shareholders, a copy of which is Exhibit 13 to the Corporation's Annual Report on Form 10-K for the year ended December 31, 1995 (1995 10-K). Certain 1995 amounts have been reclassified to be consistent with the 1996 financial reporting presentation. NOTE 2. ACQUISITIONS CONSUMMATED ACQUISITIONS The Corporation acquired on January 2, 1996, First Bancshares of Eastern Arkansas, Inc., and First Bancshares of N.E. Arkansas, Inc., for a total cash consideration of $20.1 million, resulting in total intangibles of $5.6 million. Total assets of the institutions at the date of acquisition were $122 million. Reference is made to Note 2 of the consolidated financial statements on pages 41 through 43 of the Corporation's Annual Report to Shareholders for information regarding acquisitions completed in 1995. 7 8 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. Reference is made to the Corporation's Current Reports on Form 8-K dated March 8, 1996, April 1, 1996, and April 2, 1996 for additional information regarding these acquisitions.
ANTICIPATED TYPE OF METHOD OF APPROXIMATE INSTITUTION CONSIDERATION ACCOUNTING TOTAL ASSETS - - -------------------------- ----------------- -------------- ---------------- (DOLLARS IN MILLIONS) Eastern National Bank, in Cash, Notes, and Purchase $ 286 Miami, Florida Stock (1) Valley Federal Savings Bank in 435,000 shares of Pooling of Interests 122 Sheffield, Alabama Common Stock Franklin Financial Group, Inc. 670,000 shares of Pooling of Interests 137 in Morristown, Tennessee and Common Stock its subsidiary, Franklin Federal Savings Bank Leader Financial Corporation Approximately Pooling of Interests 3,178 in Memphis, Tennessee and its 16,600,000 shares subsidiary Leader Federal Bank of Common Stock for Savings BancAlabama, Inc. in Huntsville, Approximately Pooling of Interests 98 ------ Alabama and its subsidiary 415,000 shares BankAlabama-Huntsville of Common Stock Total $3,821 ====== ____________________
(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. NOTE 3. LOANS Loans are summarized by type as follows:
MARCH 31, DECEMBER 31, ------------------------- 1996 1995 1995 --------- ----------- ----------- (DOLLARS IN THOUSANDS) Commercial, financial, and agricultural $1,421,679 $1,445,765 $1,450,050 Real estate - construction 333,315 299,820 322,701 Real estate - mortgage Secured by 1-4 family residential 2,319,937 2,265,118 2,320,168 Other mortgage loans 1,316,098 1,276,965 1,283,937 Home equity 165,469 149,678 167,223 Consumer Credit cards and related plans 376,489 346,858 387,445 Other consumer 1,130,573 1,003,057 1,108,127 Direct lease financing 60,077 43,288 60,400 ---------- ---------- ---------- Total loans $7,123,637 $6,830,549 $7,100,051 ========== ========== ==========
8 9
Nonperforming loans are summarized as follows: MARCH 31, DECEMBER 31, 1996 1995 --------- ----------- (DOLLARS IN THOUSANDS) Nonaccrual loans $33,759 $32,847 Restructured loans 1,495 1,330 ------- ------- Total nonperforming loans $35,254 $34,177 ======= =======
NOTE 4. ALLOWANCE FOR LOSSES ON LOANS The changes in the allowance for losses on loans for the three months ended March 31, 1996, are summarized as follows (dollars in thousands): Balance, January 1, 1996 $133,487 Increases due to acquisitions 615 Provision for losses on loans 7,981 Recoveries of loans previously charged off 3,477 Loans charged off (9,283) -------- Balance, March 31, 1996 $136,277 ========
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 March 31, 1996, the amount of the Corporation's impaired loans and the disclosures related thereto were not significant. 9 10 NOTE 5. INVESTMENT SECURITIES The amortized cost and fair value of investment securities are summarized as follows:
MARCH 31, 1996 ------------------------------------------------------------------ UNREALIZED AMORTIZED ----------------------------- FAIR COST GAINS LOSSES VALUE -------------- ------------- ---------- ----------- (DOLLARS IN THOUSANDS) AVAILABLE FOR SALE SECURITIES U.S. Government obligations U.S. Treasury $ 909,145 $ 5,534 $ 1,531 $ 913,148 U.S. Government agencies Collateralized mortgage obligations 173,512 788 945 173,355 Mortgage-backed 607,525 7,791 1,817 613,499 Other 634,620 1,509 1,597 634,532 ------------- ------------- ----------- ------------ Total U.S. Government obligations 2,324,802 15,622 5,890 2,334,534 Obligations of states and political subdivisions 488,936 23,819 2,386 510,369 Other stocks and securities 106,102 152 65 106,189 ------------- -------------- ----------- ------------ TOTAL AVAILABLE FOR SALE SECURITIES $ 2,919,840 $ 39,593 $ 8,341 $ 2,951,092 ============= ============= =========== ============
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 ============== ============= ============ ============
Investment securities having a carrying value of approximately $1.1 billion at both March 31, 1996 and December 31, 1995 were pledged to secure public and trust funds on deposit and securities sold under agreements to repurchase. The following table presents the gross realized gains and losses on investment securities for the three-month periods ended March 31, 1996 and 1995. The gains on held to maturity securities resulted from calls of securities.
REALIZED GAINS REALIZED LOSSES -------------------- --------------------- 1996 1995 1996 1995 ------- -------- -------- --------- (DOLLARS IN THOUSANDS) Available for sale securities $ 66 $ 1,343 $ (6) $ (3,075) Held to maturity securities - 26 - - ------- -------- -------- --------- Total $ 66 $ 1,369 $ (6) $ (3,075) ======= ========= ======== =========
10 11 NOTE 6. OTHER NONINTEREST INCOME AND EXPENSE
THREE MONTHS ENDED MARCH 31, ------------------------- 1996 1995 ---------- --------- (DOLLARS IN THOUSANDS) OTHER NONINTEREST INCOME Credit life insurance commissions $ 1,188 $ 1,213 Customer ATM usage fees 776 765 Sale of servicing 362 97 VSIBG partnership earnings 1,163 141 Brokerage fee income 633 358 Other 7,275 5,571 --------- --------- TOTAL OTHER NONINTEREST INCOME $ 11,397 $ 8,145 ========= ========= OTHER NONINTEREST EXPENSE FDIC insurance assessments $ 1,079 $ 4,902 Stationery and supplies 3,247 2,683 Advertising and promotion 2,553 2,459 Postage and other carrier 2,817 2,763 Other contracted services 2,333 1,843 Communications 2,312 1,698 Amortization of goodwill and other intangibles 2,064 1,825 Brokerage and clearing fees 1,277 865 Other personnel services 1,620 1,226 Miscellaneous charge-offs 1,383 491 Merchant credit card charges 1,058 899 Legal fees 838 869 Dues, subscriptions, and contributions 792 979 Taxes other than income taxes 906 952 Travel 739 678 Audit fees 465 775 Insurance 491 501 Consultant fees 406 598 Federal Reserve fees 569 399 Amortization of mortgage servicing rights 356 272 Other real estate expense 144 287 Other 4,199 4,977 -------- --------- TOTAL OTHER NONINTEREST EXPENSE $ 31,648 $ 32,941 ======== =========
NOTE 7. INCOME TAXES Applicable income taxes for the three months ended March 31, 1996, were $19.4 million, resulting in an effective tax rate of 33.1%. Applicable income taxes for the same period in 1995 were $16.4 million, resulting in an effective tax rate of 31.5%. The tax expense (benefit) applicable to investment securities gains (losses) for the three months ended March 31, 1996 and 1995 was $23,000 and $(642,000), respectively. At March 31, 1996, the Corporation had a net deferred tax asset of $40.1 million compared to $39.1 million at December 31, 1995. The net deferred tax asset for the two periods included a deferred liability related to the net unrealized gain on available for sale securities of $12.1 million and $13.4 million, respectively, which accounted for most of the change in the net deferred tax asset. Management continues to believe that, based upon historical earnings, normal operations will continue to generate sufficient taxable income to realize the portion of the deferred tax asset that is dependent upon the generation of future taxable income. 11 12 NOTE 8. 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 obligations to the FHLB aggregating $256.2 million at March 31, 1996 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 March 31, 1996, $189.0 million were at variable rates and $67.2 million were at fixed rates with interest rates ranging from 3.25% to 9.0% and maturities ranging from 1996 to 2025. At March 31, 1996, FHLB advances that have remaining maturities within one year, one to five years, and after five years were $51.4 million, $172.1 million, and $32.7 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 March 31, 1996, the Corporation had an adequate amount of mortgage-backed securities and loans to satisfy the collateral requirements. NOTE 9. SHAREHOLDERS' EQUITY PREFERRED STOCK The Corporation's outstanding preferred stock, all of which is convertible into shares of the Corporation's Common Stock, is summarized as follows:
MARCH 31, DECEMBER 31, 1996 1995 ------------ ------------- (DOLLARS IN THOUSANDS) Preferred stock, without par value, 10,000,000 shares authorized Series A Preferred Stock, 250,000 shares authorized, none issued $ - $ - Series B, $8 Nonredeemable, Cumulative, Convertible Preferred Stock (stated at liquidation value of $100 per share), 44,000 shares issued and outstanding 4,400 4,400 Series E, 8% Cumulative, Convertible, Preferred Stock (stated at liquidation value of $25 per share), 3,496,419 shares issued and outstanding 87,410 87,410 ------------ ------------- Total preferred stock $ 91,810 $ 91,810 ============ ============
On April 30, 1996, all of the Series B Preferred Stock was converted into 339,765 shares of the Corporation's Common Stock. NOTE 10. CONTINGENT LIABILITIES The Corporation and/or various subsidiaries are parties to certain pending or threatened civil actions which are described in Item 3, Part I of the Corporation's 1995 10-K and in Note 19 to the Corporation's consolidated financial statements on pages 62 and 63 of the 1995 Annual Report to Shareholders (1995 Annual Report) which is included in the 1995 10-K as Exhibit 13. Various other legal proceedings pending against the Corporation and/or its subsidiaries have arisen in the ordinary course of business. Based upon present information, including evaluations of certain actions by outside counsel, management believes that neither the Corporation's financial position, results of operations, nor liquidity will be materially affected by the ultimate resolution of pending or threatened legal proceedings. There were no significant developments during the first quarter of 1996 in any pending or threatened actions which affected such opinion. 12 13 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following provides a narrative discussion and analysis of significant changes in the Corporation's results of operations and financial condition. This discussion should be read in conjunction with the consolidated financial statements and related financial analysis set forth in the Corporation's 1995 Annual Report, the interim unaudited consolidated financial statements and notes for the three months ended March 31, 1996 included in Part I hereof, and the other supplemental financial data included in this discussion. The following table presents selected financial highlights for the three-month periods ended March 31, 1996 and 1995.
THREE MONTHS ENDED MARCH 31, ----------------------- PERCENTAGE 1996 1995 CHANGE ---------- --------- ----------------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Net earnings $ 39,144 $ 35,657 10% Primary earnings per common share .82 .75 9 Fully diluted earnings per common share .78 .72 8 Return on average assets 1.40% 1.33% Return on average common equity 17.35 18.16 Dividends per common share $ .27 $.23 17 Net interest margin (FTE) 4.61% 4.57% Interest rate spread (FTE) 3.91 3.94 Expense ratio 1.75 2.04 Efficiency ratio 55.85 60.72 Book value per common share $ 19.76 $ 17.13 15 Leverage ratio 8.22% 7.61%
Net interest margin = Net interest income as a percentage of earning assets Interest rate spread = Difference in the yield on average earning assets and the rate on average interest-bearing liabilities Expense ratio = Operating net noninterest expense [noninterest expense minus noninterest income, excluding significant nonrecurring revenues/expenses and investment securities gains (losses)] divided by average assets Efficiency ratio = Operating noninterest expense (excluding significant nonrecurring expenses) divided by net interest income (FTE) plus noninterest income, excluding significant nonrecurring revenues and investment securities gains (losses) FTE = Fully taxable-equivalent basis 13 14 OPERATING RESULTS - THREE MONTHS ENDED MARCH 31, 1996 The table which follows presents the contributions to fully diluted earnings per common share. A discussion of the operating results follows this table. UNION PLANTERS CORPORATION CONTRIBUTIONS TO FULLY DILUTED EARNINGS PER COMMON SHARE
THREE MONTHS ENDED MARCH 31, EPS ------------------------------ INCREASE 1996 1995 (DECREASE) --------- --------- ----------- Net interest income-FTE $ 2.37 $ 2.31 $ .06 Provision for losses on loans (.16) (.05) (.11) --------- --------- ---------- Net interest income after provision for losses on loans-FTE 2.21 2.26 (.05) --------- --------- ---------- Noninterest income Service charges on deposits .33 .35 (.02) Bank card income .10 .10 - Mortgage servicing income .05 .05 - Trust service income .05 .04 .01 Profits and commissions from trading activities .04 .03 .01 Investment securities gains (losses) - - - Other income .23 .16 .07 --------- --------- ---------- Total noninterest income .80 .73 .07 --------- --------- ---------- Noninterest expense Salaries and employee benefits .86 .88 .02 Net occupancy expense .14 .14 - Equipment expense .14 .15 .01 Other expense .63 .67 .04 --------- --------- ---------- Total noninterest expense 1.77 1.84 .07 --------- --------- ---------- Earnings before income taxes-FTE 1.24 1.15 .09 Applicable income taxes-FTE .46 .42 (.04) --------- --------- ---------- Net earnings .78 .73 .05 Less preferred stock dividends - (.01) .01 --------- --------- ---------- Fully diluted earnings per share $ .78 $ .72 $ .06 ========= ========= ========== Change in net earnings applicable to common shares using previous year average shares outstanding $.08 Change in average shares outstanding (.02) ---------- Change in net earnings $.06 ==========
FTE = Fully taxable-equivalent 14 15 FIRST QUARTER EARNINGS OVERVIEW For the first quarter of 1996, the Corporation reported record earnings of $39.1 million, or $.78 per fully diluted common share. This compares to net earnings for the same period in 1995 of $35.7 million, or $.72 per fully diluted common share. The record earnings level resulted in a return on average assets of 1.40% and a return on average common equity of 17.35% for the first quarter of 1996 which compares to 1.33% and 18.16% for the same period in 1995. The improvement in net earnings in 1996 is attributable to increases in net interest income of $6.6 million and noninterest income of $4.1 million, while noninterest expense decreased $1.5 million. Partially offsetting these items was an increase in the provision for losses on loans of $5.8 million. The following is a more complete discussion and analysis of the first quarter of 1996 operating results compared to the same period in 1995. EARNINGS ANALYSIS NET INTEREST INCOME Net interest income (FTE) for the first quarter of 1996 was $119.5 million, a 6% increase over the first quarter of 1995 which was $113.2 million, and up 1% from the fourth quarter of 1995 which was $118.5 million. The improvement for the first quarter of 1996 compared to 1995 resulted from growth of average earning assets, primarily loans, and higher yields from loans and investment securities, partially offset by higher rates paid on interest-bearing liabilities. The improvement from the fourth quarter of 1995 relates primarily to an increase in average earning assets partially offset by a higher level of average interest-bearing liabilities. Reference is made to the Corporation's average balance sheet and analysis of volume and rate changes which follow this discussion for additional information regarding the changes in net interest income. The net interest margin for the first quarter of 1996 was 4.61% which compares to 4.57% for both the first quarter and fourth quarter of 1995. The interest-rate spread decreased to 3.91% for the first quarter of 1996 from 3.94% for the same period in 1995 and compares to 3.85% for the fourth quarter of 1995. INTEREST INCOME The following table presents a breakdown of average earning assets for the first quarter of 1996 and 1995.
1996 1995 -------- --------- Average earning assets (Dollars in billions) $ 10.4 $ 10.1 Comprised of: Loans 69% 68% Investment securities 27 30 Other earning assets 4 2 - - ----------------- Fully taxable-equivalent yield on average earning assets 8.49% 8.17%
Fully taxable-equivalent interest income increased 9% for the first quarter of 1996 compared to the first quarter of 1995. The increase is attributable primarily to a 32 basis point increase in the yield on average earning assets which accounted for approximately $9.1 million of the increase in interest income. Also contributing to the increase was a $373 million increase in average earning assets, primarily loans, which accounted for $8.5 million of the interest income increase. The mix of average earning assets has remained constant with a slight drop in investment securities as these funds are used to fund loan growth. 15 16 INTEREST EXPENSE The following table presents a breakdown of average interest-bearing liabilities for the first quarter of 1996 and 1995. 1996 1995 ----- ---- Average interest-bearing liabilities (Dollars in billions) $8.8 $8.6 Comprised of: Deposits 92% 91% Short-term borrowings 3 4 FHLB advances and long-term debt 5 5 - - ------------------ Rate paid on average interest-bearing liabilities 4.58% 4.23%
Interest expense increased 13% in the first quarter of 1996 compared to the same period in 1995. The increase is due primarily to an increase of 35 basis points in rates paid on interest-bearing liabilities which accounted for $8.1 million of the increase. Most of the increase relates to deposits, the largest category of interest-bearing liabilities. The increase is also attributable to a $278 million increase in average interest-bearing liabilities which accounted for approximately $3.2 million of the increase in interest expense. The Corporation's interest-rate swaps decreased net interest income by approximately $354,000 in the first quarter of 1996, which compared to a decrease of $600,000 for the first quarter of 1995. In April, the Corporation's remaining index-amortizing swaps related to loans matured, leaving only one interest-rate swap outstanding. The future impact of the remaining swap will not be significant to the Corporation's net interest income. PROVISION FOR LOSSES ON LOANS The provision for losses on loans for the first quarter of 1996 was $8.0 million, or .45% of average loans on an annualized basis, compared to $2.2 million, or .13% of average loans, for the same period in 1995. This also compares to a provision for losses on loans of $12.4 million for the fourth quarter of 1995, which included approximately $5.8 million related to the Capital Bancorporation acquisition at the end of 1995. The increase in the provision is related primarily to the Corporation's credit card portfolio which has increased approximately $245 million over the last two years in connection with the consumer loan marketing efforts. Management expects the provision for losses on loans to remain at the current level for the remainder of 1996; however, there can be no assurance this will be the case. NONINTEREST INCOME Noninterest income for the first quarter of 1996 was $40.2 million, an increase of 11% over the same period in 1995 and a decrease of approximately $977,000 from the fourth quarter of 1995. The major components of noninterst income are presented on the face of the consolidated statement of earnings and in Note 6 to the unaudited interim consolidated financial statements. The increase in noninterest income between the first quarter of 1996 and 1995 is attributable primarily to increases in broker/dealer-related revenues. Earnings from the Corporation's limited partnership investment in VSIBG increased $1.0 million, profits and commissions from SBA trading activities increased $593,000, and brokerage fee income from the Corporation's discount brokerage operations increased $275,000. Favorable market conditions were the primary reasons for the increases in these areas. Also contributing to the increase in noninterest income was continued growth of bank card income, mortgage servicing income, and trust income which, together, accounted for $749,000 of the increase. Partially offsetting these increases was a decrease in service charges on deposit accounts of approximately $557,000. The decrease in these fees is attributable primarily to NSF (not sufficient funds) fees which have declined. 16 17 NONINTEREST EXPENSE Noninterest expense for the first quarter of 1996 decreased $1.5 million to $89.2 million which compares to $90.7 million for the first quarter of 1995 and $103.9 million for the fourth quarter of 1995. The major components of noninterest expense are detailed on the face of the consolidated statement of earnings and in Note 6 to the unaudited interim consolidated financial statements. The decrease in noninterest expenses for the first quarter of 1996 compared to the same period in 1995 relates primarily to a $3.8 million decrease in FDIC insurance assessments. The decline in expenses from the fourth quarter of 1995 relates primarily to merger-related expenses of approximately $11.9 million which did not recur in the first quarter of 1996. Salaries and employee benefit expense increased less than one percent between the first quarter of 1995 and 1994. The lack of significant growth reflects the reductions in the number of employees as a result of the Corporation's 1994 restructuring plan. The reductions are partially offset by increases related to acquisitions and growth in certain operations of the Corporation, primarily credit cards. At March 31, 1996, the Corporation had 5,107 full-time equivalent employees which compares to 5,104 at December 31, 1995 and 5,407 at March 31, 1995. EARNINGS CONSIDERATIONS RELATED TO PENDING ACQUISITIONS It is expected that the Corporation or the institutions in process of being acquired by it (Note 2 to the unaudited interim consolidated financial statements) will incur charges related to such acquisitions and to the assimilation of those institutions into the Corporation's organization. The majority of the charges are expected to relate to the Leader Financial Corporation (Leader Federal) acquisition. Charges are expected to arise from matters such as, but not limited to, legal and accounting fees, financial advisory fees, consulting fees, payment of contractual benefits triggered by a change of control, early retirement and involuntary separation and related benefits, costs associated with elimination of duplicate facilities and branch closings, data processing charges, cancellation of vendor contracts, the potential for additional provisions for losses on loans and similar costs which normally arise from the consolidation of operational activities. Aggregate charges expected to arise from the pending acquisitions have been preliminarily estimated to be in the range of $17 million to $22 million after taxes, which does not include a potential after tax charge of approximately $6.0 million for the recapture of Leader Federal's thrift bad debt reserve which, under existing law, would be triggered by the assimilation of Leader Federal's branches into Union Planters National Bank, the Corporation's principal subsidiary, and certain other banking subsidiaries. Legislation has been passed by both the House and Senate and a conference committee is being formed to resolve any differences. If enacted by the Congress, pending legislation would eliminate this recapture. The range of anticipated charges does not take into account any special regulatory assessments discussed below. To the extent that any of these charges should be contingent upon consummation of a particular transaction, those charges would be recognized in the period in which such transaction closes. This range of potential charges is based on currently available information as well as preliminary estimates and is subject to change. The range is provided as a preliminary estimate of the significant charges which may in the aggregate be required and should be viewed accordingly. SPECIAL REGULATORY ASSESSMENT The Corporation's 1995 Annual Report, on page 10, provides a discussion of several bills that were under consideration by the Congress which would have resulted in a one-time regulatory assessment. The proposed legislation, as of April 30, 1996, has not passed, and based on currently available information, management does not expect it to pass in 1996. Should the legislation be adopted, the Corporation would be required to recognize as an expense the aggregate assessment at the time the legislation is passed. There has been no significant change in the level of deposits that might be subject to this special assessment or the estimate of the impact from what was disclosed in the Corporation's 1995 Annual Report. 17 18 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND INTEREST RATES
THREE MONTHS ENDED MARCH 31, --------------------------------------------------------------------------------------- 1996 1995 --------------------------------------------------------------------------------------- INTEREST INTEREST AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ BALANCE EXPENSE RATE BALANCE EXPENSE RATE ----------- ---------- ------ ---------- ----------- ------- (DOLLARS IN THOUSANDS) ASSETS Interest-bearing deposits at financial institutions $ 3,672 $ 57 6.24% $ 19,940 $ 315 6.41% Federal funds sold and securities purchased under agreements to resell 342,288 4,818 5.66 57,298 843 5.97 Trading account assets 120,952 2,387 7.94 164,390 2,736 6.75 Investment securities (1) and (2) Taxable 2,306,577 35,735 6.23 2,486,232 36,804 6.00 Tax-exempt 486,216 11,068 9.16 522,613 12,028 9.33 ----------- ---------- ----------- ----------- Total investment securities 2,792,793 46,803 6.74 3,008,845 48,832 6.58 Loans, net of unearned income (1) 7,167,990 165,972 9.31 6,804,632 149,755 8.93 ----------- ---------- ----------- ----------- TOTAL EARNING ASSETS (1) AND (2) 10,427,695 220,037 8.49 10,055,105 202,481 8.17 ---------- ----------- Cash and due from banks 420,051 429,056 Premises and equipment 231,262 229,308 Allowance for losses on loans (136,896) (137,099) Other assets 333,640 277,563 ----------- ----------- TOTAL ASSETS $11,275,752 $10,853,933 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Money market accounts $ 1,468,737 11,597 3.18% $ 1,483,088 11,383 3.11% Savings deposits 1,830,468 11,548 2.54 1,824,901 11,835 2.63 Certificates of deposit of $100,000 and over 761,060 10,924 5.77 664,120 8,102 4.95 Other time deposits 4,073,991 55,925 5.52 3,838,320 46,626 4.93 Short-term borrowings 226,974 2,934 5.20 362,817 4,821 5.39 Federal Home Loan Bank advances 259,666 3,548 5.50 255,412 3,863 6.13 Long-term debt Subordinated capital notes 214,421 4,018 7.54 115,001 2,306 8.13 Other 1,905 40 8.45 15,622 317 8.23 ----------- ---------- ----------- ----------- TOTAL INTEREST-BEARING LIABILITIES 8,837,222 100,534 4.58 8,559,281 89,253 4.23 Noninterest-bearing demand deposits 1,343,150 1,334,968 ----------- ----------- TOTAL SOURCES OF FUNDS 10,180,372 9,894,249 Other liabilities 138,881 109,018 Shareholders' equity 956,499 850,666 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $11,275,752 $10,853,933 =========== =========== NET INTEREST INCOME (FTE) $ 119,503 $ 113,228 ========== =========== INTEREST-RATE SPREAD (FTE) 3.91% 3.94% ===== ===== NET INTEREST MARGIN (FTE) 4.61% 4.57% ===== ===== - - ---------------------------- (1) Taxable-equivalent adjustments: Loans $ 512 $ 475 Investment securities 3,518 3,914 ---------- ----------- $ 4,030 $ 4,389 ========== ===========
(2) Yields are calculated on historical cost and exclude the impact of the net unrealized gain (loss) on available for sale securities. 18 19 UNION PLANTERS CORPORATION AND SUBSIDIARIES ANALYSIS OF VOLUME AND RATE CHANGES
THREE MONTHS ENDED MARCH 31, 1996 VERSUS 1995 -------------------------------------- INCREASE (DECREASE) DUE TO CHANGE IN: (1) -------------------------------------- TOTAL AVERAGE AVERAGE INCREASE VOLUME(2) RATE(2) (DECREASE) ------------ ---------- -------------- (DOLLARS IN THOUSANDS) INTEREST INCOME Interest-bearing deposits at financial institutions $ (250) $ (8) $ (258) Federal funds sold and securities purchased under agreements to resell 4,021 (46) 3,975 Trading account assets (792) 443 (349) Investment securities (FTE) (3,295) 1,266 (2,029) Loans, net of unearned income (FTE) 8,947 7,270 16,217 ------------- TOTAL INTEREST INCOME 8,477 9,079 17,556 ------------- INTEREST EXPENSE Money market accounts (81) 295 214 Savings deposits 44 (331) (287) Certificates of deposit of $100,000 and over 1,317 1,505 2,822 Other time deposits 3,135 6,164 9,299 Short-term borrowings (1,725) (162) (1,887) Long-term debt 1,676 (556) 1,120 ------------- TOTAL INTEREST EXPENSE 3,202 8,079 11,281 ------------- CHANGE IN NET INTEREST INCOME (FTE) $ 6,275 ============= PERCENTAGE INCREASE IN NET INTEREST INCOME OVER PRIOR PERIOD 5.54% ==========
- - -------------------- 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 computed on a line-by-line basis and are nonadditive. 19 20 FINANCIAL CONDITION The Corporation's total assets were $11.4 billion at March 31, 1996 compared to $10.8 billion at March 31, 1995, and $11.3 billion at December 31, 1995. Average assets were $11.3 billion for the first quarter of 1996 compared to $10.9 billion for the first quarter of 1995. The growth of total assets is primarily related to acquisitions. INVESTMENT SECURITIES The Corporation's investment securities portfolio of $3.0 billion at March 31, 1996 consisted entirely of available for sale securities which are carried on the balance sheet at fair value. This compares to investment securities of $2.8 billion at December 31, 1995. At March 31, 1996 and December 31, 1995, these securities had net unrealized gains of $31.3 million and $34.7 million, respectively. Reference is made to Note 5 to the unaudited interim consolidated financial statements which provides the composition of the investment portfolio at March 31, 1996 and December 31, 1995. U. S. Treasury and U.S. Government agency obligations represented approximately 79% of the investment securities portfolio at March 31, 1996. The Corporation has some credit risk in the investment portfolio, however, management does not consider that risk to be significant. The REMIC and CMO issues in the investment portfolio are 97% U.S. Government agency issues; the remaining 3% are readily marketable, nonagency collateralized mortgage obligations backed by agency-pooled collateral or whole-loan collateral. All nonagency issues currently held are rated "AAA" by either Standard & Poors or Moodys. The REMIC and CMO portions of the investment securities portfolio include approximately 58% 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 on unexpected prepayments. The limited credit risk in the investment portfolio consists of the holdings of (i) municipal securities; (ii) nonagency CMOs and mortgage-backed securities; and (iii) corporate stocks, notes, debentures, and mutual funds which accounted for 17%, 1%, and 4%, respectively, of the investment securities portfolio at March 31, 1996. At March 31, 1996, the Corporation had approximately $38 million of structured notes, which constitutes approximately 1% 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 U.S. Government agency issues (primarily Federal Home Loan Bank and Federal National Mortgage Association). The structured notes vary in type but primarily include step-up bonds and index-amortizing notes. These securities are carried in the Corporation's available for sale securities portfolio at fair value. The unrealized loss in these securities at March 31, 1996 was approximately $367,000. The market risk associated with the structured notes is not considered material to the Corporation's financial position, results of operations, or liquidity and involves no credit risk. LOANS Loans at March 31, 1996 were $7.1 billion compared to $6.8 billion and $7.1 billion at March 31, 1995 and December 31, 1995, respectively. Average loans for the first quarter of 1996 were $7.2 billion, a 5% increase over $6.8 billion for the first quarter of 1995. Note 3 to the unaudited interim consolidated financial statements presents the composition of the loan portfolio. Acquisitions accounted for approximately $180 million of the increase between the first quarter of 1996 and 1995 and accounted for approximately $47 million of the increase between the first quarter of 1996 and the fourth quarter of 1995. The growth in loans between March 31, 1996 and 1995 is attributable to consumer loans which increased approximately $157 million (approximately $30 million related to credit card loans), loans secured by 1-4 family residential mortgage loans which increased approximately $55 million, real estate construction loans which increased approximately $33 million, and other loans which had a net increase of approximately $48 million. Growth of residential real estate loans has slowed due to lower refinancing activity in the current interest rate environment. Additionally, credit card loans declined approximately $11 million from year end and the growth of these loans is expected to be at a slower rate in the future than was the case in 1994 and 1995. Commercial, 20 21 financial, and agricultural loans declined approximately $24 million and $28 million, respectively, from March 31, 1995 to 1996 and from December 31, 1995 to March 31, 1996. ALLOWANCE FOR LOSSES ON LOANS The following table provides a reconciliation of the allowance for losses on loans (the allowance) at the dates indicated and certain key ratios for the three-month periods ended March 31, 1996 and 1995 and for the year ended December 31, 1995.
THREE MONTHS ENDED MARCH 31, ------------------------------ FOR THE YEAR ENDED 1996 1995 DECEMBER 31, 1995 ----------- ---------- ------------------ (DOLLARS IN THOUSANDS) Balance at the beginning of the period $ 133,487 $ 133,966 $ 133,966 Recoveries on loans previously charged off Credit cards and related plans 312 72 526 Other consumer loans 1,204 1,020 4,060 Loans secured by real estate 766 638 2,416 Commercial, financial, and agricultural 1,195 2,250 5,188 ---------- ---------- ---------- Total recoveries 3,477 3,980 12,190 ---------- ---------- ---------- Loans charged off Credit cards and related plans 3,869 561 12,088 Other consumer loans 3,430 2,065 11,742 Loans secured by real estate 585 523 5,598 Commercial, financial, and agricultural 1,399 2,096 8,234 ---------- ---------- ---------- Total charge-offs 9,283 5,245 37,662 ---------- ---------- ---------- Net charge-offs (5,806) (1,265) (25,472) Provision charged to expense 7,981 2,222 22,231 Allowance of banks acquired (1) 615 487 2,762 ---------- ---------- ---------- Balance at end of period $ 136,277 $ 135,410 $ 133,487 ========== ========== ========== Loans, net of unearned income, at end of period $7,091,737 $6,797,363 $7,069,853 ========== ========== ========== Average loans, net of unearned income, during period $7,167,990 $6,804,632 $6,990,400 ========== ========== ========== Ratios: Allowance at end of period to loans, net of unearned income 1.92% 1.99% 1.89% Charge-offs to average loans, net of unearned income (2) .52 .31 .54 Recoveries to average loans, net of unearned income (2) .19 .23 .18 Net charge-offs to average loans, net of unearned income (2) .33 .08 .36 Provision to average loans, net of unearned income(2) .45 .13 .32
- - ---------------------- (1) At date of acquisition for acquisitions accounted for using the purchase method of accounting and as of January 1 for acquisitions accounted for using the pooling of interests method of accounting. (2) Amounts annualized for March 31, 1996 and 1995 The allowance at March 31, 1996, was $136.3 million, an increase of $2.8 million over December 31, 1995, and compared to $135.4 million at March 31, 1995. The provision for losses on loans exceeded net charge-offs for the first quarter by $2.2 million which accounted for most of 21 22 the increase, while allowances of banks acquired accounted for the remainder. Management believes that the allowance is sufficient to absorb estimated losses inherent in the loan portfolio at quarter end. Credit card charge-offs were $3.9 million for the first quarter of 1996 but are expected to increase to a range of approximately $5.5 million to $6.5 million. No other significant increases in charge-offs are expected. NONPERFORMING ASSETS NONACCRUAL, RESTRUCTURED, AND PAST DUE LOANS AND FORECLOSED PROPERTIES
MARCH 31, ------------------------- DECEMBER 31, 1996 1995 1995 -------- ------- ------------- (DOLLARS IN THOUSANDS) Nonaccrual loans $ 33,759 $ 23,711 $ 32,847 Restructured loans 1,495 2,259 1,330 -------- -------- ------------- Total nonperforming loans 35,254 25,970 34,177 -------- -------- ------------- Foreclosed property Other real estate owned, net 5,908 6,199 6,561 Other foreclosed properties 806 463 1,138 -------- -------- ------------- Total foreclosed properties 6,714 6,662 7,699 -------- -------- ------------- Total nonperforming assets $ 41,968 $ 32,632 $ 41,876 ======== ======== ============= Loans 90 days or more past due and not on nonaccrual status $ 19,903 $ 9,662 $ 18,317 ======== ======== ============= ------------------ Nonperforming loans as a percentage of loans .50% .38% .48% Nonperforming assets as a percentage of loans plus foreclosed properties .59 .48 .59 Allowance for losses on loans as a percentage of nonperforming loans 387 521 391 Loans 90 days or more past due and not on nonaccrual status as a percentage of loans .28 .14 .26
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 -------------------------- ------------------------- MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, LOAN TYPE 1996 1995 1996 1995 ------------ --------- ------------- ---------- ------------ (DOLLARS IN THOUSANDS) Secured by single family residential $ 12,630 $ 12,149 $ 4,703 $ 5,084 Secured by nonfarm nonresidential 6,153 5,037 410 383 Other real estate 2,872 4,578 487 560 Commercial, financial, and agricultural, including direct lease financing 8,874 7,848 1,967 2,468 Credit cards and related plans - 15 7,495 5,269 Other consumer 3,230 3,220 4,841 4,553 --------- --------- ---------- -------- Total $ 33,759 $ 32,847 $ 19,903 $ 18,317 ========= ========= ========== ========
22 23 The Corporation's asset quality indicators are currently at acceptable levels, in management's opinion. Nonperforming assets were level with the amounts at December 31, 1995. Loans 90 days or more past due and still accruing interest increased $1.6 million over December 31, 1995 and $10.2 million over the first quarter of 1995. The increase relates primarily to credit card loans. Some future increases are expected as the loan portfolio grows but not as significant an increase as occurred between the first quarter of 1996 and 1995. POTENTIAL PROBLEM ASSETS Potential problem assets consist of assets which are generally secured and not currently considered nonperforming, but where information about possible credit problems has caused management to have serious doubts as to the ability of such borrowers to comply in the future with present repayment terms. Historically, these assets have been loans which have become nonperforming. At March 31, 1996, the Corporation had potential problem assets (all of which were loans) of $16.9 million. OFF-BALANCE-SHEET INSTRUMENTS The Corporation, on a limited basis, uses off-balance-sheet financial instruments to manage interest-rate risk. Since December 31, 1995, there has been no significant change in off-balance-sheet instruments other than the maturity of certain interest-rate swaps as shown below. Reference is made to Note 17 to the audited consolidated financial statements in the Corporation's 1995 Annual Report to Shareholders for additional information regarding these instruments. A summary of the Corporation's interest-rate swaps follows. Net Interest Income Impact Current Rates (1) ------------------ Unrealized Notional Amount -------------------- Three Months Ended Loss ------------------------ Variable Fixed March 31, March 31, March 31, December 31, Rate Rate Maturity ------------------ ----------- Balance Sheet Instruments 1996 1995 Paid Received Date 1996 1995 1996 - - ------------------------- ---- ---- ---- -------- ---- ---- ---- ---- (In millions) (In millions) Loans (2) $41 $150 5.63% 5.22% 4/5/96 $(.2) $(.5) $(.4) Long-term debt-debentures 50 50 5.81 4.46 5/96 (.2) (.2) - Long-term debt-FHLB advances - - - - - - .1 - --- ---- ---- ---- ---- Total $91 $200 $(.4) $(.6) $(.4) === ==== ===== ===== ====
- - ------------------------------ (1) The variable rates paid are tied to the three-month LIBOR rate for the loan swap and the six-month LIBOR rate for the debentures swap. (2) This interest-rate swaps matured on April 5, 1996. ASSET LIABILITY MANAGEMENT The following table presents the Corporation's interest-rate sensitivity (GAP) analysis at March 31, 1996. The analysis is made as of that point-in-time and could change significantly on a daily basis. This analysis alone cannot be relied upon to predict how the Corporation is positioned to react to changing interest rates. Other 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 impact the Corporation's net interest income. This discussion should be read in connection with the discussion in the 1995 Annual Report on page 16. 23 24 At March 31, 1996, the GAP analysis indicated that the Corporation was asset sensitive with $263 million more assets than liabilities repricing within one year. At 2% 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 March 31, 1996 to determine the impact on net interest income for the coming twelve months under several interest-rate scenarios. One such scenario uses rates at March 31, 1996, and holds the rates and volumes constant for simulation. When this projection is subjected to immediate and parallel shifts in interest rates (rate shocks) of 200 basis points, first rising and then falling, the annual impact on the Corporation's net interest income was a positive $26 million and a negative $31 million pretax, respectively. Another simulation uses a "most likely" scenario of rates falling 25 basis points resulting in a $5 million pretax decrease in net interest income from the constant rate/volume projection. The results under these scenarios are within the Corporation's policy limit of 5% of shareholders' equity. 24 25 UNION PLANTERS CORPORATION AND SUBSIDIARIES RATE SENSITIVITY ANALYSIS AT MARCH 31, 1996
INTEREST-SENSITIVE WITHIN (1) AND (6) --------------------------------------------------------------------------------- NON- 0-30 31-90 91-180 181-365 1-2 2-5 OVER INTEREST- DAYS DAYS DAYS DAYS YEARS YEARS 5 YEARS BEARING TOTAL -------- ------- ------- ------- ------ ------ ------- ------- ----- (DOLLARS IN MILLIONS) ASSETS Loans and leases (2) and (3) $1,931 $ 474 $ 517 $1,013 $ 576 $1,857 $ 722 $ 34 $ 7,124 Investment securities (4) and (5) 450 360 275 469 541 478 378 - 2,951 Other earning assets 321 90 - 1 - - - - 412 Other assets - - - - - - - 882 882 ------ ------ ------ ------ ------ ------ ------ ------- ------- Total assets $2,702 $ 924 $ 792 $1,483 $1,117 $2,335 $1,100 $ 916 $11,369 ====== ====== ====== ====== ====== ====== ====== ======= ======= SOURCES OF FUNDS Money market deposits (6) and (7) $ - $ 490 $ - $ 417 $ - $ 605 $ - $ - $ 1,512 Other savings and time deposits 636 1,209 945 841 533 1,675 24 - 5,863 Certificates of deposit of $100,000 and over 145 203 155 160 69 52 - - 784 Short-term borrowings 228 1 7 - - - - - 236 Federal Home Loan Bank advances 176 14 3 8 14 29 12 - 256 Long-term debt - - - - 1 1 214 - 216 Noninterest-bearing deposits - - - - - - - 1,364 1,364 Other liabilities - - - - - - - 145 145 Shareholders' equity - - - - - - - 993 993 ------ ------ ------ ------ ------ ------ ------ ------- ------- Total sources of funds $1,185 $1,917 $1,110 $1,426 $ 617 $2,362 $ 250 $ 2,502 $11,369 ====== ====== ====== ====== ====== ====== ====== ======= ======= Interest-rate swaps (8) $ - $ - $ - $ - $ - $ - $ - $ - Interest-rate sensitivity gap $1,517 $ (993) $ (318) $ 57 $ 500 $ (27) $ 850 $(1,586) Cumulative interest rate sensitivity gap $1,517 $ 524 $ 206 $ 263 $ 763 $ 736 $1,586 $ - Cumulative gap as a percentage of total assets (7) 13% 5% 2% 2% 7% 6% 14% -%
- - ------------------- 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 maturities. (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, including REMICs 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%), (16%), (18%), (14%), and (10%), and positive 6% and 14%, 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 March 31, 1996. (8) The notional value of interest-rate swaps at March 31, 1996 is $91 million. Of these amounts, $41 million matures in 0-30 days and $50 million matures in 31-90 days. There are no mismatched amounts in the outstanding contracts. 25 26 LIQUIDITY The Corporation's core deposit base is its most important and stable funding source and consists of deposits from the communities served by the Corporation. Core deposits, along with available for sale securities and other marketable earning assets, provide liquidity for the Corporation.
AVERAGE DEPOSITS ---------------------------------------------- THREE MONTHS ENDED THREE MONTHS ENDED MARCH 31, DECEMBER 31, -------------------------- ------------------ 1996 1995 1995 ------------ ----------- ------------------ (DOLLARS IN THOUSANDS) Demand deposits $1,343,150 $1,334,968 $1,352,611 Money market accounts (1) 1,468,737 1,483,088 1,416,897 Savings deposits (2) 1,830,468 1,824,901 1,806,525 Other time deposits (3) 4,073,991 3,838,320 4,030,892 ---------- ---------- ---------- Total core deposits 8,716,346 8,481,277 8,606,925 Certificates of deposit of $100,000 and over 761,060 664,120 757,917 ---------- ---------- ---------- Total average deposits $9,477,406 $9,145,397 $9,364,842 ========== ========== ==========
- - --------------------- (1) Includes money market savings accounts, High Yield accounts, and super NOW accounts. (2) Includes regular and premium savings accounts and NOW accounts. (3) Includes certificates of deposit under $100,000, investment savings accounts, and other time deposits. Average deposits for the first quarter of 1996 were $9.5 billion, which represents increases of $332.0 million and $112.6 million, respectively, from the averages for the first quarter of 1995 and the fourth quarter of 1995. The increases relate primarily to acquired banks. The parent company's source of liquidity is management fees and dividends received from subsidiaries, interest on advances to subsidiaries, and interest on its available for sale investment securities. 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 March 31, 1996, the parent company had cash and cash equivalents totaling $53.4 million. The parent company's net working capital at March 31, 1996 was $162.5 million. The parent company expects to receive dividends from its subsidiary banks totaling $30.9 million during the second quarter of 1996. Additional dividends will be dependent on the future earnings of the subsidiary banks. SHAREHOLDERS' EQUITY The Corporation's total shareholders' equity increased by $26.5 million from December 31, 1995 to $992.9 million at March 31, 1996. The increase was due to retained net earnings of $25.0 million and Common Stock issued in connection with benefit plans of $3.7 million partially offset by the net change in the unrealized gain (loss) on available for sale securities which reduced shareholders' equity $2.2 million. 26 27 CAPITAL ADEQUACY The following table presents capital adequacy information for the Corporation and the table on the following page presents the calculation of the Corporation's risk-based capital.
THREE MONTHS ENDED MARCH 31, -------------------- DECEMBER 31, 1996 1995 1995 --------- --------- ------------- CAPITAL ADEQUACY DATA Total shareholders' equity/total assets (at period end) 8.73% 7.98% 8.57% Average shareholders' equity/average total assets 8.48 7.84 8.21 Tier 1 capital/unweighted assets (leverage ratio) (1) 8.22 7.61 8.09 Parent company long-term debt/equity 21.63 13.34 22.22 Dividend payout ratio 36.07 30.44 37.55
- - ------------------- (1) Based on period-end capital and quarterly adjusted average assets. At March 31, 1996, total shareholders' equity was 8.73% of total assets and the leverage ratio was 8.22% compared to 8.57% and 8.09%, respectively, at December 31, 1995. The improvement in these ratios relates primarily to the Corporation's retained net earnings. 27 28 The following table presents the Corporation's risk-based capital and capital adequacy ratios. The Corporation's regulatory capital ratios qualify the Corporation for the "well-capitalized" regulatory classification. The Corporation's risk-based capital increased from year end due primarily to retained net earnings. Risk-weighted assets increased during the quarter as a result of loan growth, since loans are typically 100% risk-weighted, and also increased as a result of acquisitions during the quarter. RISK-BASED CAPITAL
THREE MONTHS ENDED MARCH 31, -------------------------- DECEMBER 31, 1996 1995 1995 ------------ ------------ --------------- (DOLLARS IN THOUSANDS) Tier 1 capital Shareholders' equity $ 992,865 $ 860,488 $ 966,331 Minority interest in consolidated subsidiaries 1,088 1,088 1,088 Less goodwill, other intangibles, and one-half of investment in unconsolidated subsidiaries (50,090) (44,145) (46,913) Less deferred tax asset not qualifying for regulatory capital (2,530) (2,384) (2,237) Unrealized (gain) loss on available for sale securities (19,145) 7,825 (21,366) ---------- ---------- ---------- Total Tier 1 capital 922,188 822,872 896,903 Tier 2 capital Allowance for losses on loans (1) 89,990 83,228 89,230 Qualifying long-term debt 174,037 74,553 174,166 Less one-half of investment in unconsolidated subsidiaries (110) (102) (107) ---------- ---------- ---------- Total capital $1,186,105 $ 980,551 $1,160,192 ========== ========== ========== Risk-weighted assets (2) $7,153,029 $6,605,944 $7,094,254 ========== ========== ========== Ratios as a percent of end of period risk-weighted assets Tier 1 capital 12.89% 12.46% 12.64% Total capital 16.58 14.84 16.35
- - ------------------- (1) Limited as required by regulatory guidelines. (2) Based on "risk-weighted assets" as defined by regulatory guidelines. 28 29 PART II -- OTHER INFORMATION ITEM 1 -- LEGAL PROCEEDINGS The information called for by this item is incorporated by reference to Item 3, Part I of the Corporation's 1995 Form 10-K , Note 19 to the Corporation's consolidated financial statements on pages 62 and 63 of the 1995 Annual Report, and Note 10 to the Corporation's unaudited interim consolidated financial statements included herein. ITEM 2 -- CHANGES IN SECURITIES None. ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES None. ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5 -- OTHER INFORMATION None ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: 11 -- Computation of Per Share Earnings 27 -- Financial Data Schedule (for SEC use only) b) Reports on Form 8-K:
Date of Current Report Subject ---------------------- ------------------------------------- 1. January 6, 1996 Acquisition of Capital Bancorporation Inc. on December 31, 1995 2. March 8, 1996 Union Planters Corporation signed a definitive agreement to acquire Leader Financial Corporation 3. April 1, 1996 Audited financial statements of Leader Financial Corporation for 1995, a pending probable acquisition 4. April 2, 1996 Unaudited pro forma consolidated financial statements dated December 31, 1995 for certain pending probable acquisitions 5. April 18, 1996 Press release announcing first quarter of 1996 net earnings
29 30 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UNION PLANTERS CORPORATION -------------------------- (Registrant) Date: May 8, 1996 -------------------- By: /s/ Benjamin W. Rawlins, Jr. --------------------------------- Benjamin W. Rawlins, Jr. Chairman of the Board and Chief Executive Officer By: /s/ John W. Parker --------------------------------- John W. Parker Executive Vice President and Chief Financial Officer By: /s/ M. Kirk Walters --------------------------------- M. Kirk Walters Senior Vice President, Treasurer, and Chief Accounting Officer 30 EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 PAGE 1 OF 2 UNION PLANTERS CORPORATION AND SUBSIDIARIES COMPUTATION OF PRIMARY EARNINGS PER COMMON SHARE
THREE MONTHS ENDED MARCH 31, -------------------------- 1996 1995 ---------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) PRIMARY EARNINGS PER COMMON SHARE Average shares outstanding 45,522,312 44,250,273 Assumed exercise of options outstanding 230,137 264,790 ----------- ----------- Primary average shares outstanding 45,752,449 44,515,063 =========== =========== Net earnings $ 39,144 $ 35,657 Less: Preferred stock dividends Series B (88) (88) Series D - (123) Series E (1,748) (1,554) Preferred stock of an acquired entity - (337) ----------- ----------- Net earnings applicable to common shares $ 37,308 $ 33,555 =========== =========== Primary net earnings per common share $ .82 $ .75
2 EXHIBIT 11 PAGE 2 OF 2 UNION PLANTERS CORPORATION AND SUBSIDIARIES COMPUTATION OF FULLY DILUTED EARNINGS PER COMMON SHARE
THREE MONTHS ENDED MARCH 31, --------------------------- 1996 1995 ------------- ------------ (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) FULLY DILUTED EARNINGS PER COMMON SHARE Average shares outstanding 45,522,312 44,250,273 Assumed exercise of options outstanding 230,151 266,091 Assumed conversion of preferred stock outstanding: Series B 339,768 339,768 Series D - 253,655 Series E 4,370,524 3,884,902 ----------- ----------- Fully diluted average shares outstanding 50,462,755 48,994,689 =========== =========== Net earnings $ 39,144 $ 35,657 Less: Preferred stock dividends of an acquired entity - (337) ----------- ----------- Net earnings applicable to common shares $ 39,144 $ 35,320 =========== =========== Fully diluted net earnings per common share $ .78 $ .72
EX-27 3 FINANCIAL DATA SCHEDULE
9 1,000 U.S. DOLLARS 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 1 475,211 3,820 182,199 134,926 2,951,092 0 0 7,091,737 136,277 11,368,682 9,522,876 236,220 144,255 472,466 0 91,810 228,012 673,043 11,368,682 164,033 43,285 8,689 216,007 89,994 100,534 115,473 7,981 60 89,152 58,537 39,144 0 0 39,144 .82 .78 4.61 33,759 20,327 1,495 16,921 133,487 9,283 3,477 136,277 136,277 0 0
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