-----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, JSvmflzxbozgTPXx7f/RewviIyIyNOXnkuftPRfIhPo2CMcD7uYJHLOF/9dL7bbi 7/PgvlB0o2/lOT3AlKztEA== 0000950144-97-002494.txt : 19970319 0000950144-97-002494.hdr.sgml : 19970319 ACCESSION NUMBER: 0000950144-97-002494 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970318 SROS: CSX SROS: NYSE SROS: PHLX FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNION PLANTERS CORP CENTRAL INDEX KEY: 0000100893 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 620859007 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-06919 FILM NUMBER: 97558199 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-K 1 UNION PLANTERS CORPORATION 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 (NO FEE REQUIRED) For the fiscal year ended December 31, 1996 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ________ to ________ Commission File No. 1-10160 UNION PLANTERS CORPORATION (Exact name of registrant as specified in its charter) Tennessee 62-0859007 (State of incorporation) (IRS Employer Identification No.) 7130 Goodlett Farms Parkway, Memphis, Tennessee 38018 (Address of principal executive offices) (ZIP Code) Registrant's telephone number, including area code: (901) 580-6000 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. [ ] The aggregate market value of the voting stock held by nonaffiliates of the registrant at February 28, 1997 was approximately $2,816,173,000. INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON STOCK CLASS OUSTANDING AT FEBRUARY 28, 1997 Common Stock having a par 65,591,029 value of $5 per share (title of class) DOCUMENTS INCORPORATED BY REFERENCE Part of Form 10-K Documents Incorporated into which incorporated 1. Certain parts of the Annual Report to Shareholders Parts I and II, Items 1, 2, 5, for the year ended December 31, 1996 6, 7, and 8 2. Certain parts of the Definitive Proxy Statement for Part III the Annual Shareholders Meeting to be held April 17, 1997
2 Form 10-K Cross-Reference Index
Page Part I Item 1. Business 3 Item 1a. Executive Officers of the Registrant 13 Item 2. Properties 13 Item 3. Legal Proceedings 14 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 15 Item 6. Selected Financial Data 15 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Item 8. Financial Statements and Supplementary Data 15 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure * Part III Item 10. Directors and Executive Officers of the Registrant 15 Item 11. Executive Compensation 15 Item 12. Security Ownership of Certain Beneficial Owners and Management 15 Item 13. Certain Relationships and Related Transactions 16 Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 17 Signatures 18 * Not Applicable
2 3 Part I Item 1. BUSINESS General Union Planters Corporation (the Corporation) is a $15.2-billion multi-state bank holding company whose primary business is banking. The Corporation is the largest bank holding company headquatered in Tennessee and is one of the fifty largest bank holding companies in the United States. Union Planters National Bank (UPNB), a $6.0-billion bank headquartered in Memphis, Tennessee, is the Corporation's largest subsidiary. The principal markets of the Corporation are in Tennessee, Mississippi, Missouri, Arkansas, Louisiana, Alabama, and Kentucky. These areas are served by the Corporation's 37 banking subsidiaries and through 438 banking offices and 544 ATMs. Reference is made to the 1996 Annual Report to Shareholders for a map on the inside front cover of the report showing the areas served by the Corporation; Table 15 on page 34 which presents the Corporation's banking subsidiaries by state showing total assets, loans, deposits, and shareholders' equity; and the listing of Communities Served. As part of the Corporation's banking services, its subsidiaries are engaged in mortgage origination and servicing; investment management and trust services; the issuance of credit and debit cards; the origination, packaging, and securitization of loans, primarily the government guaranteed portions of Small Business Administration (SBA) loans; purchasing and servicing delinquent FHA/VA government-insured/guaranteed loans from third parties and GNMA pools serviced for others; full-service and discount brokerage services; and the sale of bank-eligible insurance products and services. 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"). Each of the Corporation's banking subsidiaries, including its savings bank subsidiary, 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 subsidiary is subject to supervision and examination by the Office of Thrift Supervision (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 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, 3 4 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 located 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 "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 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% (up to 5% in the case of institutions effecting acquisitions and other activities resulting in expansion). 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 4 5 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. Banks are 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 regulatory 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, 1996, the Corporation's Total Risk-Based Capital Ratio was 18.32%; its Tier I Risk-Based Capital Ratio (i.e., its ratio of Tier I Capital to risk-weighted assets) was 15.29%; and its Leverage Ratio was 9.61%. 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 provision discussed below. Each of the Corporation's 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, 1996, the Total and Tier I Risk-Based Capital and Leverage Ratios of UPNB, the Corporation's largest bank subsidiary, were 12.26%, 11.01%, and 6.95%, 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 "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 unsatisfatory 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 5 6 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 persons controlling the institution could 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. 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 had 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 criticism 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 6 7 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 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. 7 8 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, 1997, approximately $86.0 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 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, amount 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 8 9 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 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 DEPOSIT INSURANCE Currently, certain deposits of financial institutions are separately insured under two deposit-insurance funds, both administered by the FDIC. They are the Bank Insurance Fund (the BIF) for deposits originated by banks and the Savings Association Insurance Fund (the SAIF) for deposits originated by savings associations. The targeted designated reserve ratio (DRR), i.e, the ratio of the net worth of each of the two funds to the aggregate amount of deposits insured by it, is 1.25%. Significant claims made against the two funds, especially the SAIF, have been paid over recent years due to failures of banks and savings associations. Through deposit-insurance assessments made by the FDIC, the BIF's DRR was restored to 1.25% of insured deposits in 1995; however, at September 30, 1996, approximately $4.5 billion was required to restore the SAIF's DRR to that level. On that date the Deposit Insurance Funds Act of 1996 (the Funds Act) became law. The Funds Act required the FDIC to impose a one-time assessment on SAIF-assessable deposits (including 80% of those which had been acquired by banks, i.e., so-called "Oakar" Deposits) sufficient to capitalize the SAIF at its targeted DRR of 1.25%. In response, the FDIC imposed an assessment of 65.7 basis points ($6.57 per $1,000) on SAIF-assessable deposits deemed to have been held as of March 31, 1995. Since certain of its banking subsidiaries held SAIF-assessable (including "Oakar") deposits, the Corporation incurred a SAIF-assessment expense of $22.3 million at September 30, 1996. Since the recapitalization of both the BIF and SAIF has increased their DRR's to 1.25% and since financial institution failures have dramatically decreased, in the near future financial institutions, including the Corporation, are expected to have significantly lower deposit insurance assessments than have been imposed in the recent past. Moreover, the FDIC establishes deposit insurance assessment rates based primarily upon an institution's risk to the deposit insurance funds such that the Corporation's banking subsidiaries, all of which are deemed to be "well capitalized" for regulatory purposes, should enjoy favorable rates in the event that further assessments should be necessary. Under the Funds Act, the BIF and the SAIF would be merged on the date as of which the last savings association shall cease to exist. The SAIF was initially funded by issuance of Financing Corporation bonds (the FICO Bonds). The Funds Act provides that 20% of the interest payable on the FICO Bonds shall be assessed against BIF-assessable deposits and the remaining 80% against SAIF-assessable deposits prior to the merger of the BIF and SAIF to form the Deposit Insurance Fund (the DIF). After the merger, DIF-assessable deposits would be assessed for 100% of the FICO Bond interest, since the separate existence of the BIF and SAIF would have ceased. 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, 1996, 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 9 10 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 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 di recting 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 28, 1997, the Corporation, including all subsidiaries, had 5,236 employees (including 1,259 part-time employees). 10 11 Statistical Disclosures The statistical information required by Item 1 may be found in the 1996 Annual Report to Shareholders (Exhibit 13 hereto) which, to the extent indicated, is hereby incorporated herein by reference, as follows:
Page in the Corporation's 1996 Annual Report to Guide 3 Disclosure Shareholders* ------------------ ------------- I. Distribution of Assets, Liabilities, and Shareholders' Equity; Interest Rates and Interest Differential A. Average Balance Sheet 26 B. Net Interest Earnings Analysis 26 C. Rate/Volume Analysis 27 II. Investment Portfolio A. Book Value of Investment Securities 31, 46, 47, and 48 B. Maturities of Investment Securities 48 C. Investment Securities Concentrations Not applicable III. Loan Portfolio A. Types of Loans 28 and 49 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 28 and 29 2. Potential Problem Loans 17 3. Foreign Outstandings Not significant 4. Loan Concentrations 16 D. Other Interest-Bearing Assets Not significant IV. Summary of Loan Loss Experience A. Analysis of Allowance for Loan Losses 29 B. Allocation of the Allowance for Loan Losses 28 V. Deposits A. Average Balances 26 and 27 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 51
*Unless otherwise noted 11 12 The following table presents the maturities and sensitivities of the Corporation's loans to changes in interest rates at December 31, 1996:
Due Due After One Due After Within But Within Five One Year Five Years Years ---------- --------------- --------- (Dollars in thousands) Commercial, Financial, and Agricultural $ 926,700 $481,386 $129,449 Real Estate - Construction 351,349 70,253 25,344 ---------- -------- -------- Total $1,278,049 $551,639 $154,793 ========== ======== ======== Fixed Rate $416,613 $102,579 ======== ======== Variable Rate $135,026 $ 52,214 ======== ========
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, 1996 ------------------- (Dollars in thousands) Under 3 Months $ 409,874 3 to 6 Months 249,995 6 to 12 Months 261,412 Over 12 Months 235,997 ---------- Total $1,157,278 ==========
12 13 Item 1a. Executive Officers of the Registrant The following lists the executive officers of the Corporation. Information regarding the executive officers, their present positions held with the Corporation and its subsidiaries, their ages, 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 59 Chief Executive Officer of the Corporation; Vice Chairman and Chief Executive Officer of UPNB Jackson W. Moore President and Chief Operating Officer 48 of the Corporation Jack W. Parker Executive Vice President and 50 Chief Financial Officer of the Corporation; Executive Vice President and Chief Financial Officer of UPNB M. Kirk Walters Senior Vice President, Treasurer, and 56 Chief Accounting Officer of the Corporation; Senior Vice President of UPNB James A. Gurley Executive Vice President of the Corporation; 63 Executive Vice President of UPNB
Mr. Rawlins has been Chairman of the Board of the Corporation since April 1989, and Chairman of the Board of UPNB from January 1986 until December 1996 when he was elected Vice Chairman. 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. A 126,000-square-foot addition is being made to the Administrative Center to accommodate the growth related to the recent acquisitions, primarily the Leader Financial Corporation (Leader) acquisition. The 13 14 total estimated cost of this addition, including site improvements, is $12.3 million. Certain space occupied previously by Leader will be vacated and its occupants will be moved to the new building which is expected to be more efficient than the existing space. Savings are expected from this move but the amount thereof cannot be quantified at this time. 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, 1997, the Corporation operated 198 banking offices in Tennessee, 115 in Mississippi, 45 in Missouri, 42 in Arkansas, 16 in Louisiana, 17 in Alabama, and 5 locations in Kentucky. The majority of these locations are owned. The subsidiaries also operate 544 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. The Corporation's five banks located in Mississippi: Union Planters Bank of Mississippi, Union Planters Bank of Southern Mississippi, Union Planters Bank of Central Mississippi, Union Planters Bank of Northeast Mississippi,N.A., and Union Planters Bank of Northwest Mississippi (UPC Banks) are defendants in various suits related to the placement of collateral protection insurance(CPI) by the UPC Banks in the 1980s and early 1990s. On September 28,1995 and October 18,1995, two purported class actions were filed in the U. S. District Court for the Southern District of Mississippi. Both actions were consolidated and identified Vivian McCaskill as the representative of a class of persons who financed personal property through the UPC Banks and were force placed with Prudential Property and Casualty Insurance Company's (Prudential) collateral protection insurance. The consolidated action names as defendants the UPC Banks, Prudential, National Underwriters of Delaware, Inc., and several Ross & Yerger entities and includes 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 laws and the common law. The relief sought in the purported class actions includes actual damages, treble damages under certain statutes, other statutory damages, and unspecified punitive damages. The CPI programs appear to have been substantially similar in many respects to CPI programs of other Mississippi banks, often with the same insurance companies. Consequently, there are at least twelve similar putative class actions pending against numerous Mississippi banks (including those against the UPC Banks), various insurance agencies and companies arising from their CPI programs. Nine individual actions filed in state and federal courts against the UPC Banks, with similar allegations, and seeking compensatory and punitive damages, are pendi ng. Other subsidiaries of the Corporation are involved in similar litigation relating to CPI on mobile home loans to Alabama borrowers. On June 8,1995, a suit was filed in Greene County, Alabama, by Jeri Lynn Plowman and other individuals against American Bankers Insurance Company of Florida, Inc., Leader Federal Savings and Loan Association of Memphis and seventeen other defendants requesting $200 million in punitive damages against each defendant (Plowman). On June 14, 1995, a counterclaim to a foreclosure suit was filed by the defendants in Leader Federal Bank v. Brown, et al (Brown) in the Circuit Court of Tuscaloosa County, Alabama, demanding judgment for compensatory damages and punitive damages of $10 million for alleged wrongdoing with respect to the CPI related to the defendant's loan. An agreement to settle Plowman and Brown was reached, and approval of the Circuit Court of Tuscaloosa County, Alabama, obtained (certifying as a class all Alabama residents whose mobile home loans were originated or assigned to Leader Federal and were charged for CPI from January 1, 1986 through October 1, 1996), in the fourth quarter of 1996, within amounts previously established. In January 1996, two individual suits were filed by Queen Ford (who was excepted from the class described above) in the Circuit Court of Greene, County Alabama, against Leader Federal Bank for Savings, a subsidiary, and an unrelated insurance company alleging wrongful placement of insurance on plaintiff's mobile home. One such case demands compensatory damages of $5,000 and punitive damages of $20 million, while the other seeks $10,000 in compensatory damages and $50 million in punitive damages. These suits remain pending. 14 15 In July 1991, UPNB was joined with nine other banks( including Leader Federal) 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 and sought recovery for fees charged for deposited third-party checks which were returned uncollected. In March 1992, the state court proceeding was dismissed, which dismissal the Tennessee Court of Appeals affirmed. In 1995, the Tennessee Supreme Court reversed its earlier decision declining to review the state court action and agreed to hear plaintiffs' appeal. During the first quarter of 1997, the Tennessee Supreme Court denied plaintiff's petition and petition to rehear, thus terminating this action. A related federal court action was terminated during the first quarter of 1996. 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 1996 Annual Report to Shareholders on pages 32 and 33, which information 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 1996 Annual Report to Shareholders on page 4, which information 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 1996 Annual Report to Shareholders on pages 5 - 35, which information is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by Item 8 is included in the Corporation's 1996 Annual Report to Shareholders on pages 36 - 67, and in Table 14 captioned "Selected Quarterly Data" on pages 32 and 33, which pages 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 6 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 17, 1997 ("Proxy Statement"), which information 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 12 - 20 of the Proxy Statement, which information 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 information is incorporated herein by reference. 15 16 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by Item 13 as to transactions and relationships with certain directors and executive officers of the Corporation and their associates is included under the heading "Certain Relationships and Transactions" on page 20 of the Proxy Statement, which information is incorporated herein by reference. 16 17 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 1996 Annual Report to Shareholders, are incorporated herein by reference in response to Part II, Item 8:
Page in Annual Report Report of Management 36 Report of Independent Accountants 37 Consolidated Balance Sheet - December 31, 1996 and 1995 38 Consolidated Statement of Earnings - Years ended December 31, 1996, 1995, and 1994 39 Consolidated Statement of Changes in Shareholders' Equity - Years ended December 31, 1996, 1995, and 1994 40 Consolidated Statement of Cash Flows - Years ended December 31, 1996, 1995, and 1994 41 Notes to Consolidated Financial Statements 42
(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 7, 1996 Announcing consummation of Leader Financial Corporation acquisition and completion of three other acquisitions October 17, 1996 Press Release announcing Third Quarter 1996 January 16, 1997 Press Release announcing Fourth Quarter 1996 and annual operating results 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 6, 1997 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 6th day of March, 1997. /s/ Benjamin W. Rawlins, Jr. /s/ Jack W. Parker - -------------------------------------- ------------------------------ Benjamin W. Rawlins, Jr. Jack W. Parker Chairman of the Board, Executive Vice President and Chief Executive Officer, Chief Financial Officer and Director /s/ Jackson W. Moore /s/ M. Kirk Wallers - -------------------------------------- ------------------------------ Jackson W. Moore M. Kirk Walters President, Chief Operating Officer, Senior Vice President, and Director Treasurer and Chief Accounting Officer /s/ Stanley D. Overton - -------------------------------------- ------------------------------- Albert M. Austin Stanley D. Overton Director Director /s/ Edgar H. Bailey /s/ Dr. V. Lane Rawlins - -------------------------------------- ------------------------------- Edgar H. Bailey Dr. V. Lane Rawlins Vice Chairman of the Board and Director Director /s/ Donald F. Schuppe - -------------------------------------- ------------------------------- Marvin E. Bruce Donald F. Schuppe 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/ James E. Harwood /s/ Spence L. Wilson - -------------------------------------- ------------------------------- James E. Harwood Spence L. Wilson Director Director /s/ Parnell S. Lewis, Jr. - -------------------------------------- ------------------------------- Parnell S. Lewis, Jr. Milton J. Womack Director Director /s/ C.J. Lowrance III - -------------------------------------- C.J. Lowrance III Director 18 19 Exhibit Index 3(a) Restated Charter of Incorporation, as most recently amended on February 20, 1997, of Union Planters Corporation (filed herewith) 3(b) Amended and Restated Bylaws, as most recently amended on February 20, 1997, of Union Planters Corporation (filed herewith) 4(a) Rights Agreement, dated January 19, 1989 between Union Planters Corporation and Union Planters National Bank, including Form of Rights Certificate (Exhibit A), and a Form Summary of Rights (Exhibit B) (incorporated by reference to Exhibit 1 to Union Planters Corporation's Registration Statement on Form 8-A dated as of January 19, 1989 and on Form 8-K filed February 1, 1989, Commission File No. 0-6919) 4(b) 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 (2) 4(c) Subordinated Indenture dated as of October 15, 1993 between the Corporation and The First National Bank of Chicago as Trustee (3) 4(d) Form of Subordinated Debt Security (6.25% Subordinated Notes due 2003) (4) 4(e) Form of Subordinated Debt Security (6 3/4% Subordinated Notes due 2005) (5) 4(f) All instruments defining the rights of the holders of the "Corporation-obligated Mandatorily Redeemable Capital Pass-through Securities of Subsidiary Trust holding solely a Corporation Guaranteed Related Subordinated Note issued by Union Planters Corporation," including the Indenture dated as of December 12, 1996, the First Supplemental Indenture, the Amended and Restated Declaration of Trust, the Capital Securities Guarantee Agreement and the Global Securities representing the interests of such holders, which instruments are not being filed herewith in reliance upon Item 601(b)(4)(iii)(A) of Regulation S-K and the related AGREEMENT PURSUANT TO ITEM 601(b)(4)(iii)(A) OF REGULATION S-K dated March 16, 1997 of Union Planters Corporation filed with the Commission, a copy of which is Exhibit 4(g) hereto 4(g) Copy of Registrant's AGREEMENT PURSUANT TO ITEM 601(b)(4)(iii)(A) OF REGULATION S-K dated March 16, 1997 (filed herewith) 10(a) Employment Agreement between Union Planters Corporation and Benjamin W. Rawlins, Jr., dated December 21, 1989 (incorporated by reference to Exhibit 10(a) to the Annual Report on Form 10-K dated December 31, 1992, Commission File No. 0-6919) 10(b) Employment Agreement between Union Planters Corporation and Jackson W. Moore dated December 21, 1989 (incorporated by reference to Exhibit 10(c) to the Annual Report on Form 10-K dated December 31, 1992, Commission File No. 0-6919) 10(c) Deferred Compensation Agreements between Union Planters Corporation and certain highly compensated officers (specimen copy) (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 as amended January 18, 1990 and approved by shareholders on April 20, 1990 (1) 10(e) 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, 1992 filed on March 26, 1993, (Commission File No. 0-6919) 10(f) 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) i 20 Exhibit Index (continued) 10(g) 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(h) 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, Commission File No. 1-10160) 10(i) Union Planters Corporation Executive Deferred Compensation Plan for Executives dated February 23, 1996 (incorporated by reference to Exhibit 10(j) to the Annual Report on Form 10-K dated December 31, 1995 filed on March 19, 1996, Commission File No. 1-10160) 10(j) 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 13, 1996, Commission File No. 1-10160) 10(k) 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 13, 1996, Commission File No. 1-10160) 11 Computation of Per Share Earnings (filed herewith) 13 1996 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) ____________________ (1) Incorporated by reference to Exhibit 4(a) filed as part of Registration Statement No. 33-35928, filed July 23, 1990 (2) Incorporated by reference to Exhibit 4 filed as part of Registration Statement No. 33-52434, filed October 19, 1992 (3) Incorporated by reference to Exhibit 4(a) filed as part of Registration Statement No. 33-50655, filed October 21, 1993 (4) Incorporated by reference to Exhibit 4(b) filed as part of Registration Statement No. 33-50655, filed October 21, 1993 (5) 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 OF INCORPORATION 1 AMENDED AND RESTATED CHARTER EXHIBIT 3(a) 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 E. James House, Jr., 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 Page 1 of Union Planters Corporation Charter 2 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 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. Page 2 of Union Planters Corporation Charter 3 (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 750,000. 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 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) Page 3 of Union Planters Corporation Charter 4 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 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. Page 4 of Union Planters Corporation Charter 5 (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 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. Page 5 of Union Planters Corporation Charter 6 (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. Page 6 of Union Planters Corporation Charter 7 (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. (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. Page 7 of Union Planters Corporation Charter 8 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. 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. Page 8 of Union Planters Corporation Charter 9 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. (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 Page 9 of Union Planters Corporation Charter 10 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 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 Page 10 of Union Planters Corporation Charter 11 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 Page 11 of Union Planters Corporation Charter 12 (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. (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 Page 12 of Union Planters Corporation Charter 13 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. (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 Page 13 of Union Planters Corporation Charter 14 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. (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. Page 14 of Union Planters Corporation Charter 15 (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. Page 15 of Union Planters Corporation Charter 16 6. Redemption. (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 31, 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: Page 16 of Union Planters Corporation Charter 17 (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 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 Page 17 of Union Planters Corporation Charter 18 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. (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 Page 18 of Union Planters Corporation Charter 19 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: 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; Page 19 of Union Planters Corporation Charter 20 (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: Page 20 of Union Planters Corporation Charter 21 (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 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. Restated January 16, 1997 Amended February 20, 1997 Page 21 of Union Planters Corporation Charter EX-3.B 3 AMENDED AND RESTATED BYLAWS 1 EXHIBIT 3(b) AMENDED AND RESTATED BYLAWS OF UNION PLANTERS CORPORATION (A TENNESSEE CORPORATION) _______________________________________ ARTICLE I MEETINGS OF SHAREHOLDERS Section 1. Annual Meeting. The annual meeting of the shareholders of the Corporation for the election of Directors and for the transaction of such other business as may come before the meeting shall be held on the third Thursday in April of each year if not a legal holiday, and if a legal holiday, at such time as shall be designated by the Board. If the annual meeting shall not be held on the day hereinabove provided for, the Board shall call a special meeting for the election of Directors as soon thereafter as convenient, and in any event not later than 30 days after said day. Section 2. Special Meetings. Special meetings of the shareholders, unless otherwise prescribed by law, may be called for any purpose or purposes whatsoever at any time by the Chairman of the Board, the President, the Secretary or the holders of not less than one tenth (1/10) of the shares entitled to vote at such meeting. Section 3. Notice of Meeting; Waiver of Notice. Written or printed notice stating the place, day, hour, purpose or purposes for which the meeting is called and the person or persons calling the meeting shall be delivered either personally or by mail or at the direction of the Chairman of the Board, the President, the Secretary or other person or persons calling the meeting to each shareholder entitled to vote at the meeting. If mailed, such notice shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting and shall be deemed to be delivered when deposited in the United States Mail addressed to the shareholder at his address as it appears on the stock transfer records of the Corporation, with postage thereon prepaid. If delivered personally, such notice shall be delivered not less than five (5) nor more than sixty (60) days before the date of the meeting and shall be deemed delivered when actually received by the shareholder. A certificate of the Secretary or other person giving the notice, or of a transfer agent of the Corporation, that the notice required by this Section has been given, in the absence of fraud, shall be prima facie evidence of the facts therein stated. Whenever the shareholders of this Corporation are authorized to take any action after notice or after the lapse of a prescribed period of time, such action may be taken without notice and without the lapse of such period of time, if at any time before or after such action is completed each shareholder entitled to such notice or 1 2 entitled to participate in the action to be taken, (or his attorney-in-fact or proxy holder), shall submit a signed waiver of notice of such requirement. When a meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted that might have been transacted on the original date of the meeting. However, if after the adjournment the Board shall fix a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record on the new record date entitled to vote at the meeting. Section 4. Place of Meetings. Meetings of the shareholders may be held at such place, either within or without the State of Tennessee, as may be set by the Board. If the Board shall fail to set the place of the meeting, the meeting shall be held at the principal office of the Corporation. Section 5. Quorum. At all meetings of the shareholders, the holders of a majority of the shares of stock of the Corporation entitled to vote, present in person or by proxy, shall constitute a quorum for the transaction of any business, except as otherwise provided by statute or by the Charter or these Bylaws. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any of those present. A meeting may be adjourned despite the absence of a quorum. The absence from any meeting of holders of the number of shares of stock of the Corporation in excess of a majority thereof which may be required by the laws of the State of Tennessee or other applicable statute, the Charter, or these Bylaws, for action upon any given matter, shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if there shall be present thereat, in person or by proxy, holders of the number of shares of stock of the Corporation required for action in respect of such other matter or matters. Section 6. Organization. At each meeting of the shareholders, the Chairman of the Board or in his absence or inability to act, the Vice chairman, or in the absence or inability to act of the Chairman of the Board and the Vice Chairman, the President, shall act as Chairman of the meeting. The Secretary, or in his absence or inability to act, any person appointed by the Chairman of the meeting shall act as Secretary of the meeting and keep the minutes thereof. Section 7. Order of Business. The order of business at all meetings of the shareholders shall be as determined by the Chairman of the meeting. Section 8. Voting; Consent of Shareholders in lieu of Meeting. Except as otherwise provided by statute or the Charter, each holder of record of shares of stock of the Corporation having voting power shall be entitled at each meeting of the shareholders to one vote upon each matter submitted to a vote for every share of such stock standing in his name on the record of shareholders of the Corporation: 2 3 a. On the date fixed by the Board in accordance with Section 6 of Article VI hereof as the record date for the determination of the shareholders who shall be entitled to notice of and to vote at such meeting; or b. If such record date shall not have been fixed for the determination of shareholders entitled to notice of or entitled to vote at a meeting of shareholders, the date on which notice of the meeting is mailed shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section, such determination shall apply to any adjournment thereof. Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent without a meeting may authorize another person or persons to act for him by proxy. Every proxy must be signed by the shareholder or his attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable prior to its use at the pleasure of the shareholder executing it, except as otherwise provided in this Section or by law. The authority of the holder of a proxy to act shall not be revoked by the incompetence or the death of the shareholder who executed the proxy unless, before the authority is exercised, written notice of an adjudication of such incompetence or the death of the shareholder who executed the proxy unless, before the authority is exercised, written notice of an adjudication of such incompetence or written notice of such death is received by the corporate officer responsible for maintaining the list of shareholders. A proxy authorized by a shareholder which is entitled "irrevocable proxy" and which states it is irrevocable is irrevocable when it is held by one of the following or a nominee of any of the following: (a) a pledge; (b) a person who has purchased or agreed to purchase the shares; (c) a person designated by or under an agreement comporting with the law. Notwithstanding a provision in a proxy stating that it is irrevocable, the proxy becomes revocable after the pledge is redeemed or such agreement has terminated. A proxy may be revoked notwithstanding a provision making it irrevocable, by a purchaser of shares without knowledge of the existence of the provision unless the existence of the proxy and its irrevocability is noted conspicuously on the face or back of the certificate representing such shares. Whenever shareholders are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by all of the persons or entities entitled to vote thereon. 3 4 If a vote shall be taken on any question, then unless required by statute, or determined by the Chairman of the meeting to be advisable, any such vote need not be by ballot. On a vote by ballot, each ballot shall be signed by the shareholder voting, or by his proxy, if there be such proxy, and shall state the number of shares voted. Section 9. List of Shareholders. A list of shareholders of the Corporation as of the record date, certified by the officer responsible for the preparation or by the Corporation's transfer agent, shall be open for inspection at any meeting of the shareholders. If the right to vote at any meeting is challenged, the Chairman of the meeting may rely on such list as evidence of the right of the persons challenged to vote at such meeting. Section 10. Inspectors of Election. The Board may, in advance of any meeting of shareholders, appoint two or more inspectors to act at such meeting or at any adjournment thereof. If the inspectors shall not be so appointed, or if any of them shall fail to appear or act, the Chairman of the meeting may, and on request of any shareholder entitled to vote thereat shall, appoint inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the results, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. On request of the Chairman of the meeting or any shareholder entitled to vote thereat, the inspectors shall make a report in writing of any challenge, request or matter determined by them, and shall execute a certificate of the facts found by them. No director or candidate for the office of director shall act as inspector of an election of directors. Inspectors need not be shareholders of the Corporation. Section 11. Examination of Corporate Records by Shareholders. Any person who shall have been a shareholder of record for at least six (6) months immediately preceding his demand, or who shall be the holder of record of at least five percent (5%) of all of the outstanding shares of the Corporation, upon written demand stating the purpose thereof, shall have the right to examine, in person, or by agent or attorney, at any reasonable time or times, for any proper purpose, the Corporation's books and records of account and the minutes and records of meetings of shareholders, the Board and the Committees of the Board, and to make extracts therefrom. Notwithstanding the foregoing, upon proof of proper purpose by a shareholder of the Corporation, irrespective of the period of time during which such shareholder shall have been a shareholder of record and irrespective of the percentage of outstanding shares held by him, a court having equity jurisdiction in Shelby County, Tennessee, may compel the production for examination by such shareholder of the books, documents and records of the Corporation. By resolution, the Board may adopt further policies in respect of 4 5 the right of the shareholders of the Corporation to inspect said books and records provided that said policies shall not be more restrictive than the provisions of applicable law at the time. ARTICLE II BOARD OF DIRECTORS Section 1. General Powers. Except as otherwise provided by law or by the Charter, the business and affairs of the Corporation shall be managed by the Board of Directors. The Board may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by statute or the charter directed or required to be exercised or done by the shareholders. Section 2. Number, Classification, Election, etc. The number of directors of the corporation shall not be more than eighteen (18) and, pursuant to Article NINTH of the Amended and Restated Charter of the Corporation, shall be divided into three classes as equally as possible and designated Class I, Class II and Class III as follows: Class I shall consist of directors elected to hold office for a term expiring at the 1997 Annual Meeting of Shareholders at which their respective successors are to be elected for a term expiring at the 2000 Annual Meeting; and Class II shall consist of directors elected to hold office for a term expiring at the 1998 Annual Meeting of Shareholders at which their respective successors are to be elected for a term expiring at the 2001 Annual Meeting; and Class III shall consist of directors elected to hold office for a term expiring at the 1999 Annual Meeting of Shareholders at which their respective successors are to be elected for a term expiring at the 2002 Annual Meeting. Thereafter, each class of directors shall be elected to hold office for terms expiring on the third annual meeting succeeding the annual meeting at which they were last elected. The successor to any director who shall have been elected by the directors to fill a vacancy on the Board shall serve only until the next annual meeting of shareholders for a term expiring at the same time as the terms of the other members of the same class. Notwithstanding the foregoing, any director whose term shall expire at any annual meeting shall continue to serve until such time as his successor shall have been duly elected and shall have qualified unless his position on the Board shall have been abolished by action taken to reduce the size of the Board prior to said meeting. No amendment of the Bylaws decreasing the number of directors shall have the effect of shortening the term of any director. All directors shall be at least 21 years of age. Except as to persons who were Directors on February 21, 1985, mandatory retirement is established at age 70, to be effective at the regular Annual Shareholders Meeting following the 70th birthday; provided, however, a Director who is elected to the Board 5 6 in connection with an acquisition by the Corporation and is 70 years of age or reaches his 70th birthday during said initial term as a member of the Board shall serve until the expiration of the term of the Class in which he was elected. Directors need not be shareholders of the Corporation nor need they be residents of Tennessee. Except as otherwise provided by law or by Charter, the directors shall be elected by written ballot at annual meetings of shareholders. Article NINTH of the Corporation's Charter, as amended by the shareholders on April 16, 1981, provides that the number of directors of the Corporation shall be as provided in these Bylaws from time to time but shall not be less that 7 nor more than 25 and establishes guidelines for increasing the number of directors by amendment of the Bylaws by two-thirds vote of the directors then in office. Section 3. Place of Meeting. Regular meetings of the Board shall be held at such place within or without the State of Tennessee as the Board may from time to time determine. Special meetings may be held at such place in Shelby County, Tennessee, as may be determined by the person calling said meeting. In all cases the place of the meeting shall be specified in the notice thereof. Section 4. Organization Meeting. The Board of Directors shall meet for the purpose of organization, the election of officers, and the transaction of other business as soon as practicable after each annual meeting of the shareholders, on the same day and at the same place where such annual meeting shall be held. Notice of such meeting need not be given if held at said time and place. Such meeting may be held at any other time or place (within or without the State of Tennessee) which shall be specified in a notice thereof given as hereinafter provided in Section 7 of this ARTICLE II. Section 5. Regular Meetings. Regular meetings of the Board of Directors of this Corporation shall be held on the third Thursday of each month at 9:30 a.m., in the Fourth Floor Executive Conference Room, Union Planters Administrative Center, 7130 Goodlett Farms Parkway, Memphis, Tennessee. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which otherwise would be held on that day shall be held at the same hour on the next succeeding business day. Notice of regular meetings of the Board need not be given except as otherwise required by law. Section 6. Special Meetings. Special meetings of the Board may be called by the Chairman of the Board, the President, Executive Vice President, the Secretary or any three or more Directors of the Corporation. Section 7. Notice of Meetings. Notice of each special meeting of the Board (and of each regular meeting for which notice shall be required) shall be given by the Secretary or by or under the supervision of the persons calling the meeting as hereinafter provided in this Section 7, in which notice shall be stated the time and place of the meeting. Notice of each such meeting shall be delivered to each director, either personally 6 7 or by telephone, telegraph, cable or other method of communication, at least 24 hours before the time at which such meeting is to be held, or by first-class mail, postage prepaid, addressed to him at his residence or usual place of business, and deposited in the mail at least two days before the day on which the meeting is to be held. Notice of any such meeting need not be given to any director who shall, either before or after the meeting, submit a signed waiver of notice or who shall attend such meeting (other than for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened). Neither the business to be transacted at, nor the purpose of any regular or special meeting of the Board, need be specified in the notice or waiver of notice of such meeting unless otherwise required by law of the Bylaws. Section 8. Quorum and Manner of Acting. A majority of the entire Board shall be present in person at any meeting of the Board in order to constitute a quorum for the transaction of business at such meeting, and except as otherwise expressly required by the Charter, these Bylaws or any applicable statute, the act of a majority of the directors present at any meeting at which a quorum is present shall be act of the Board. In the absence of a quorum at any meeting of the Board, a majority of the directors present thereat may adjourn such meeting to another time and place until a quorum shall be present thereat. Notice of the time and place of any such adjourned meeting shall be given to the directors who were not present at the time of the adjournment and, unless such time and place were announced at the meeting at which the adjournment was taken, to the other directors. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. Section 9. Organization. At each meeting of the Board, the Chairman of the Board, or, in his absence or inability to act, the Vice Chairman, or, in his absence or inability to act, the President, or in his absence or inability to act, another director chosen by a majority of the directors present shall act as Chairman of the meeting and preside thereat. The Secretary or, in his absence or inability to act, any person appointed by the Chairman shall act as Secretary of the meeting and keep the minutes thereof. Section 10. Resignations. Any director of the Corporation may resign at any time by giving written notice of his resignation to the Board or to the Chairman of the Board, the Vice Chairman or to the President or to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 11. Vacancies. Newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board for any reason, without cause or for cause, may be filled by the shareholders or by the Board of Directors. If the number of Directors remaining in office constitutes fewer than a quorum, then 7 8 the vacancy may be filled by a vote of the majority of those Directors then in office. No person who has attained the age of seventy (70) years shall be appointed to fill any vacancy. Section 12. Removal of Directors. Any or all of the directors of the Corporation may be removed with or without cause by vote of the holders of sixty-six and two-thirds percent (66 2/3%) or more of the outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors. Section 13. Action by Written Consent. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting on written consent, setting forth the action so taken, signed by all of the directors entitled to vote thereon. The instrument of consent shall be filed with the minutes of the proceedings of the Board of Directors. ARTICLE III EXECUTIVE AND OTHER COMMITTEES Section 1. Executive Committee. The Board may, by resolution adopted by a majority of the entire Board, designate an Executive Committee consisting of five (5) or more of the directors of the Corporation, which Committee shall have and may exercise all of the authority of the Board of Directors with respect to all matters other than: (a) The adoption, amendment or repeal of any Bylaw; (b) The submission to shareholders of any action requiring shareholders' authorization; (c) The filling of vacancies in the Board of Directors or in any committee thereof; (d) The declaration of dividends or making of other corporate distributions; (e) The issuance of Common Stock, Preferred Stock or any other obligation of the Corporation exchangeable for or convertible into its capital stock of any class or any warrant, right or option to acquire the same; or (f) The removal or replacement of any officer elected by the Board or appointed by the Chairman of the Board or President pursuant to authority conferred upon them or either of them by the Board. 8 9 The Board may designate one or more directors as alternate members of the Executive Committee, who may replace any absent member or members at any meeting of such committee. The Executive Committee shall serve at the pleasure of the Board. The Executive Committee shall keep written minutes of its proceedings and shall report such minutes to the Board. All such proceedings shall be subject to revision or alteration by the Board; provided, however, that third parties shall not be prejudiced by such revision or alteration. Section 2. Other Committees. The Board may, by resolution adopted by a majority of the entire Board, designate other Committees, each consisting of three or more of the directors of the Corporation, which Committees, except as otherwise proscribed by statute, shall have and may exercise the authority of the Board to the extent that such authority shall be conferred by resolutions designating such Committee or Committees adopted by vote of a majority of the entire Board. Section 3. General. A majority of any committee may determine its action and fix the time and place of its meetings, unless the Board shall otherwise provide. In the absence or disqualification of any member of any committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place and stead of any such absent or disqualified member. In determining the existence of a quorum, the Secretary of the Corporation shall not be counted unless he shall be a director of the Corporation and shall have been duly appointed as a member of such committee. The Board shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternate members to replace any absent or disqualified member, or to dissolve any such committee. Nothing herein shall be deemed to prevent the Board from appointing one or more committees consisting in whole or in part of persons who are not directors of the Corporation; provided, however, that no such committee shall have or may exercise any authority or power of the Board in the management of the business or affairs of the Corporation. ARTICLE IV OFFICERS Section 1. Number and Qualifications. The officers of the Corporation shall include the Chairman of the Board, the Vice Chairman, the President, one or more Executive Vice Presidents, one or more Vice Presidents, the Treasurer and the Secretary. Any two or more offices may be held by the same person, except the offices of President and Secretary. Such officers shall be elected by the Board of Directors each year at the organizational meeting held after the Annual Meeting of shareholders, each to hold office until the meeting of the Board following the next Annual Meeting of the shareholders and until his successor shall have been duly elected and shall have qualified, or until his death, or until he shall have resigned or have been removed in the manner provided 9 10 by law and these Bylaws. The Board may from time to time elect, or delegate to the Chairman of the Board the power to appoint such other officers (including one or more Assistant Vice Presidents, one or more Assistant Treasurers, and one or more Assistant Secretaries) and such agents, as may be necessary or desirable to carry on the business of the Corporation. Such other officers and agents shall have such duties and shall hold their offices for such terms as may be prescribed by the Board or by the appointing authority. Section 2. Resignations. Any officer of the Corporation may resign at any time by giving written notice of his resignation to the Board, the Chairman of the Board, the Vice Chairman, the President or the Secretary. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 3. Removal. Any officer or agent of the Corporation may be removed, either with or without cause, at any time, by the vote of the majority of the entire Board at any meeting of the Board, or, except in the case of an officer or agent elected or appointed by the Board, by the Chairman of the Board or the President. Section 4. Vacancies. A vacancy in any office, whether arising from death, resignation, removal or any other cause, may be filled by the Board at any regular or special meeting for the unexpired portion of the term of the office which shall be vacant, in the manner prescribed in these Bylaws for the regular election or appointment to such office. Section 5. The Chairman. The Chairman of the Board shall be the Chief Executive Officer of the Corporation and shall have the general and active management of the business of the Corporation and shall have general and active supervision and direction over the business and affairs of the Corporation and over its several officers, agents and employees, subject, however, to the control of the Board. He shall, if present, preside at each meeting of the Shareholders and of the Board. He shall perform all duties incident to the office of the Chairman of the Board and such other duties as may, from time to time, be assigned to him by the Board. The Chairman of the Board shall be authorized to do or cause to be done all things appropriate, including preparation, execution and filing of any Registration Statements or other documents to effectuate the registration of the Corporation's securities (when necessary or desirable) with the Securities and Exchange Commission pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, and to effectuate the registration of the Corporation's securities as may be necessary or desirable pursuant to the securities laws of any state. The Chairman is also authorized to execute and cause to be filed on behalf of the Corporation any reports which may be required by the securities laws or other laws of the United States or of any state pursuant to any regulations adopted with respect thereto. 10 11 Section 5(a). The Vice Chairman. The Vice Chairman shall have those duties assigned to him by the Chairman or the Board. In the case of the absence of the Chairman or his inability to act, the Vice Chairman shall perform the duties of the Chairman, and when so acting shall have all of the powers of, and be subject to all the restrictions upon, the Chairman. Section 6. The President. The President shall have general and active supervision and direction over the other officers, agents and employees and shall see that their duties are properly performed, subject, however, to the control of the Board. Concurrently with the Chairman of the Board, the President is hereby authorized to do or cause to be done all things appropriate, including preparation, execution and filing of the registration of the Corporation's securities (when necessary or desirable) with the Securities and Exchange Commission pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, and to effectuate registration of the Corporation's Securities as may be necessary or desirable pursuant to the securities laws of any state. The President is also authorized to execute and cause to be filed on behalf of the Corporation any reports which may be required by the securities laws or other laws of the United States or any state or pursuant to any regulations adopted with respect thereto. In the case of the absence of the Chairman of the Board and the Vice Chairman or their inability to act, the President shall perform the duties of the Chairman of the Board, and when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Chairman of the Board. He shall perform all duties incident to the office of the Chairman of the Board and such other duties as, from time to time, may be assigned to him by the Board or these Bylaws. Section 7. Executive Vice-President. At the request of the Chairman of the Board, the Vice Chairman and the President, or in the case of their absence or inability to act, the Executive Vice-President shall perform the duties of the Chairman of the Board, the Vice Chairman and the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the Chairman of the Board, the Vice Chairman and the President. The Executive Vice-President shall perform all duties incident to the office of Executive Vice-President and such other duties as from time to time may be assigned to him by the Board, the Chairman of the Board, the Vice Chairman, the President, or by these Bylaws. One Executive Vice-President shall be the chief financial officer of the Corporation. Section 8. Vice Presidents. Each Vice-President shall perform all such duties as from time to time may be assigned to him by the Board, the Chairman of the Board, the Vice Chairman or the President. Vice-Presidents shall have seniority based upon length of service as Vice-President. Unless the Board shall otherwise provide, the Senior Vice-President shall perform the duties of the Executive Vice-President in case of his absence or inability to act, or if an Executive Vice-President shall not have been appointed by the Board. Section 9. The Treasurer. The Treasurer shall: 11 12 (a) Have charge and custody of, and be responsible for, all the funds and securities of the Corporation; (b) Keep full and accurate records of receipts and disbursements in books belonging to the Corporation. (c) Cause all monies and other valuables to be deposited to the credit of the Corporation; (d) Receive, and give receipts for, monies due and payable to the Corporation from any source whatsoever; (e) Disburse the funds of the Corporation and supervise the investment of its funds as ordered or authorized by the proper vouchers therefor; and (f) In general, perform all the duties incident to the office of Treasurer, and such other duties as from time to time may be assigned to him by the Board, the President, the Vice Chairman or the Chairman of the Board. Section 10. The Secretary. The Secretary shall: (a) Keep or cause to be kept in one or more books provided for the purpose, the minutes of all meetings of the Board, the committees of the Board and the shareholders; (b) See that all notices are duly given in accordance with the provisions of these Bylaws and as required by law; (c) Be custodian of the records and the seal of the Corporation and affix and attest the seal to all stock certificates of the Corporation (unless the seal of the Corporation on such certificates shall be facsimile as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal; (d) See that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; (e) In general, perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board, the Chairman of the Board, the Vice Chairman or the President. Section 11. Officers' Bond or Other Security. If required by the Board, any officer of the Corporation shall give a bond or other security for the faithful performance of his duties, in such amount and with such surety or sureties as the Board may require. 12 13 ARTICLE V INDEMNIFICATION The Corporation does hereby indemnify its directors and officers to the fullest extent permitted by the laws of the State of Tennessee and by Article TWELVE of its Charter. The Corporation may indemnify any other person to the extent permitted by the Charter and by applicable law. ARTICLE VI SHARES, ETC. Section 1. Stock Certificates. Each shareholder of the Corporation shall be entitled upon request to have a certificate in such form conforming to law as shall be approved by the Board, representing the number of shares of stock of the Corporation owned by him. The certificates representing shares of stock shall be signed in the name of the Corporation by the Chairman of the Board or the President or a Vice-President or an Assistant Vice-President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and sealed with the seal of the Corporation (which seal may be a facsimile engraved or printed); provided, however, that where any such certificate is countersigned by a transfer agent and/or a registrar (other than the Corporation or one of its employees), the signatures of the Chairman of the Board, President, Vice-President, Secretary, or Treasurer upon such certificates may be facsimiles, engraved or printed. In case any officer who shall have signed such certificate shall have ceased to be such officer before such certificates shall be issued, they may nevertheless be issued by the Corporation with the same effect as if such officer were still in office at the date of their issue. Section 2. Books of Account and Record of Shareholders. There shall be kept correct and complete books and records of account, minutes of the proceedings of its shareholders, Board of Directors and the committees of the Board, and of all the business and transactions of the Corporation. There shall also be kept at the office of its transfer agent or at both, a record containing the names and addresses of all shareholders of the Corporation, the number of shares of stock held by each, and the dates when they became the owners of record thereof. Such shareholder records may be in written form, on magnetic tape, disk pack storage, or in any other form capable of being converted into written form within a reasonable time for visual inspection. Section 3. Transfers of Shares. Transfers of shares of stock of the Corporation shall be made on the stock records of the Corporation only upon authorization by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with a transfer agent or transfer clerk, and on surrender of the certificate or certificates for such shares properly endorsed or accompanied by a duly executed stock transfer power and the payment of all applicable 13 14 taxes with respect to the transfer. Except as otherwise provided by law, the Corporation shall be entitled to recognize the exclusive right of a person in whose name any share or shares stand on the record of shareholders as the owner of such shares or shares for all purposes, including, without limitation, the right to receive dividends or other distributions, and to vote as such owner, and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in any such share or shares on the part of any other person. Whenever any transfers of shares shall be made for collateral security and not absolutely, and written notice thereof shall be given to the Secretary or to such transfer agent or transfer clerk, such facts shall be stated in the entry of the transfer. Section 4. Regulations. The Board may make such additional rules and regulations, not inconsistent with applicable law, the Charter or these Bylaws, as it may deem expedient concerning the issue, transfer, and registration of certificates for shares of stock of the Corporation. It may appoint one or more transfer agents or one or more transfer clerks and one or more registrars, and may require all certificates for shares of stock to bear the signature or signatures of any of them. Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any certificate(s) representing shares of the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of such certificate(s), and the corporation may issue a new certificate or certificates of stock in the place of any certificate theretofore issued by it which the owner thereof shall allege to have been lost or destroyed or which shall have been mutilated. As a condition precedent to the issuance of replacement certificates, such owner or his legal representative as principal shall give to the Corporation a bond with "open" (unlimited) penalty and in such form and with such surety or sureties as the person designated by the Board in his absolute discretion shall determine to be sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or destruction of any such certificate, or the issuance of a new certificate. Any transfer agent which may be appointed by the Corporation shall be and is hereby designated as the person to make the determination whether the bond furnished meets the requirements of this Section 5 unless the Board, by resolution, shall designate some other person to do so. Anything herein to the contrary notwithstanding, the Board, in its absolute discretion, may refuse to issue any such new certificate, except pursuant to legal proceedings under the laws of the State of Tennessee. Section 6. Fixing of Record Dates. The Board may fix, in advance, a date not less than ten (10) days prior to the date then fixed for the holding of any meeting of the shareholders as the time as of which the shareholders entitled to notice of and to vote at such meeting or whose consent or dissent is required or may be expressed for any purpose, as the case may be, shall be determined, and all persons who as holders or record of voting stock at such time, and no others, shall be entitled to such notice of, and to vote at such meeting or to express their consent or dissent, as the case may be. The Board may fix in advance a date not more than sixty (60) days and 14 15 not less than ten (10) days prior to the date fixed for the payment of any dividends; or for the making of any distribution; or for the allotment of rights to subscribe for securities of the Corporation; or for the delivery of evidences of rights or evidence of interests arising out of any change, conversion or exchange of capital stock or other securities; as the record date for the determination of shareholders entitled to receive any such dividend, distribution, allotment, rights or interests, and in such case only the shareholders of record at the time so fixed shall be entitled to receive such dividend, distribution, allotment, rights or interests. ARTICLE VII OFFICES Section 1. Principal Office. The principal office of the Corporation shall be at 7130 Goodlett Farms Parkway, Memphis, Tennessee 38018, County of Shelby, or at such other address as may be fixed by the Board. Section 2. Other Offices. The Corporation may also have an office or offices other than said principal office at such place or places, either within or without the State of Tennessee, as the Board shall from time to time determine or the business of the Corporation may require. ARTICLE VIII FISCAL YEAR The fiscal year of the Corporation shall be the calendar year. ARTICLE IX SEAL The form of seal of the Corporation shall be determined by the Board of Directors. ARTICLE X MISCELLANEOUS Section 1. Reports to Shareholders. The books of account of the Corporation shall be examined by an independent firm of public accountants at the close of each annual period of the Corporation and at such other times, if any, as may be directed by the Board. A report to the shareholders based upon such examination shall be mailed to each shareholder of the Corporation of record on such date with respect to each report as may be determined by the Board, at his address as the same appears on the stock transfer records of the Corporation. Each such report shall show the assets 15 16 and liabilities of the Corporation as of the close of the annual or other period covered by the report. This report shall also show the Corporation's income and expenses from the period from the end of the Corporation's preceding fiscal year to the close of the annual or other period covered by the report, any other information which may be required by law or regulation lawfully adopted and shall set forth such other matters as the Board or such independent firm of public accountants shall determine. Section 2. Selection and Termination of Firm of Independent Public Accountants. The independent auditors and accountants for the Corporation shall be selected by the Board at a meeting held within thirty (30) days before the beginning of the fiscal year and before the Annual Meeting of Shareholders except that any vacancy occurring between Annual Meetings as a result of the resignation of the accountants may be filled by the vote of a majority of those members of the entire Board who are not salaried officers or employees of the Corporation or of any affiliate of the Corporation. Such selection shall be submitted for ratification or rejection at the next succeeding Annual Meeting of Shareholders if such meeting be held, or at the next succeeding Special Meeting of Shareholders in said fiscal year if the Annual Meeting shall not be held on the date designated in the Bylaws therefor; provided, however, that a Special Meeting of Shareholders need not be called to ratify or reject the selection by the Board of independent auditors and accountants in the above manner to fill a vacancy occurring between Annual Meeting as a result of the resignation of said auditors and accountants. The employment of such accountants shall be conditioned upon the right of the Corporation, either by the unanimous vote of the entire Board of Directors or by vote of a majority of the outstanding voting securities at any meeting called for the purpose, to terminate such employment without penalty. If the selection of accountants shall be rejected by the Shareholders or their employment be terminated by the Shareholders in the manner provided above, the vacancy so occurring may be filled by the vote of a majority of the outstanding voting securities either at the meeting at which the rejection or termination by the Shareholders occurred or, if not so filled, at a subsequent meeting which shall be called for the purpose. ARTICLE XI AMENDMENTS These Bylaws may be amended or repealed, in whole or in part, or new Bylaws may be adopted, by the Board of Directors at any meeting thereof by vote of a majority of the entire Board, unless a greater affirmative vote is required by the Charter; provided, however, that notice of such meeting shall have been given as provided in these Bylaws, which notice shall mention that amendment or repeal of the Bylaws, or the adoption of new Bylaws, is one of the purposes of the meeting. Any such Bylaws adopted by the Board may be amended or repealed, or new Bylaws may be adopted by vote of the shareholders of the Corporation, at any annual or special meeting thereof; provided, however, that notice of such meeting shall have been given as provided in these Bylaws, 16 17 which notice shall mention that amendment or repeal of these Bylaws, or the adoption of new Bylaws, is one of the purposes of such meeting. ARTICLE XII SHAREHOLDER PROPOSALS TO BE PRESENTED AT ANNUAL MEETINGS Any proposal of a shareholder which is to be presented at any annual meeting of shareholders shall be sent so as to be received by the Corporation at its principal offices not less than one hundred twenty (120) days in advance of the date of the Corporation's proxy statement issued in connection with the previous year's annual meeting of shareholders. February 20, 1997 17 EX-4.G 4 AGREEMENT PURSUANT TO ITEM 601(B)(4)(III) 1 Exhibit 4(g) AGREEMENT PURSUANT TO ITEM 601(b)(4)(iii) OF REGULATION S-K The Registrant hereby undertakes and agrees to furnish to the Securities and Exchange Commission upon request a copy of any instrument relating to, or defining the rights of the holders of, any long-term debt of the Registrant and/or its subsidiaries, a copy of which has not been filed in reliance upon Item 601(b)(4)(iii)(A) of Regulation S-K or which, although previously filed, shall have become stale in the sense of Item 10(d) of Regulation S-K or which shall have been disposed of by the Commission pursuant to its Record Control Schedule. This Agreement and undertaking is intended to be effective with respect to Registrant's Long-term Debt instruments whether securities have been issued thereunder or are yet to be issued thereunder. Date: March 14, 1997 By: /s/ Benjamin W. Rawlins, Jr. _____________________________________ Benjamin W. Rawlins, Jr. Chairman and Chief Executive Officer EX-11 5 COMPUTATION OF PER SHARE EARNINGS 1 Exhibit 11 Page 1 of 2 Union Planters Corporation Computation of Primary Earnings per Share
Years Ended December 31, ------------------------------------------------- 1996 1995 1994 ------------ ------------ ----------- (Dollars in thousands, except per share data) Computation for Statement of Earnings Reconciliation of net earnings to amounts used for primary earnings per share: Net earnings $ 133,738 $ 172,756 $ 100,423 Less: Preferred stock dividends Series B (45) (352) (352) Series C - - (1,491) Series D - (165) (494) Series E (6,899) (6,734) (6,216) Preferred stock of acquired entity - (1,361) (1,345) Net earnings applicable to primary ----------- ----------- ----------- earnings per share $ 126,794 $ 164,144 $ 90,525 =========== =========== =========== Reconciliation of weighted average number of shares to amount used in primary earnings per share computation: Average shares outstanding 63,728,753 59,146,826 58,487,901 Average common equivalent shares: Assumed exercise of options 1,258,270 1,238,535 1,099,360 ----------- ----------- ----------- Primary average shares outstanding 64,987,023 60,385,361 59,587,261 =========== =========== =========== Primary earnings per share $ 1.95 $ 2.72 $ 1.52 =========== =========== ===========
2 EXHIBIT 11 Page 2 of 2 Union Planters Corporation Computation of Fully Diluted Earnings per Share Years Ended December 31, ----------------------------------------------------------- 1996 1995 1994 ------------ ------------ ------------ (Dollars in thousands, except per share data) Computation for Statement of Earnings Reconciliation of net earnings to amounts used for fully diluted earnings per share: Net earnings $ 133,738 $ 172,756 $ 100,423 Less: Preferred stock dividends Series C - - (1,491) Series D - - (494) Series E - - (6,216) Preferred stock of acquired entity - (1,361) (1,345) ----------- ----------- ----------- Net earnings applicable to fully diluted earnings per share $ 133,738 $ 171,395 $ 90,877 =========== =========== =========== Reconciliation of weighted average number of shares to amount used in fully diluted earnings per share computation: Average shares outstanding 63,728,753 59,146,826 58,487,901 Average common equivalent shares: Assumed exercise of options 1,350,738 1,252,908 1,101,637 Assumed conversion of preferred stock: Series B 111,399 339,768 339,768 Series D - 125,785 - Series E 4,327,433 4,129,709 - ----------- ----------- ----------- Fully diluted average shares outstanding 69,518,323 64,994,996 59,929,306 =========== =========== =========== Fully diluted earnings per share $ 1.92 $ 2.64 $ 1.52 =========== =========== ===========
EX-13 6 UNION PLANTERS CORPORATION 1996 ANNUAL REPORT 1 EXHIBIT 13 1996 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 1996) 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, 1996 1995 % Change - ---------------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) FOR THE YEAR Net earnings $ 133,738 $ 172,756 (22.59)% PER COMMON SHARE Net earnings Primary $ 1.95 $ 2.72 (28.31)% Fully diluted 1.92 2.64 (27.27) Cash dividends 1.08 .98 10.20 Book value 19.55 18.52 5.56 AT YEAR END Assets $15,222,563 $14,383,222 5.84% Earning assets 13,836,011 13,284,698 4.15 Loans, net of unearned income 10,434,070 9,041,059 15.41 Allowance for losses on loans 166,853 156,388 6.69 Deposits 11,490,262 11,074,722 3.75 Shareholders' equity 1,352,874 1,213,162 11.52 Common shares outstanding (in thousands) 64,927 60,536 7.25 KEY RATIOS Return on average assets .88% 1.26% Return on average common equity 10.61 16.16 Net interest income (taxable-equivalent) as a percentage of average earning assets 4.41 4.38 Expense ratio 1.58 1.74 Efficiency ratio 55.43 58.24 Allowance for losses on loans as a percentage of loans 1.86 1.92 Nonperforming loans as a percentage of loans .74 .56 Nonperforming assets as a percentage of loans and foreclosed properties .92 .67 Allowance for losses on loans as a percentage of nonperforming loans 253 344 Shareholders' equity to total assets 8.89 8.43 Leverage ratio 9.61 8.08 Tier 1 capital to risk-weighted assets 15.29 13.39 Total capital to risk-weighted assets 18.32 16.68 - ----------------------------------------------------------------------------------------------------
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............................................ 23 Selected Quarterly Data..................................... 32 Banks and Communities Served................................ 35 Report of Management........................................ 36 Report of Independent Accountants........................... 37 Consolidated Financial Statements........................... 38 Notes to Consolidated Financial Statements.................. 42 Executive Officers and Directors............................ 68
1 4 TO OUR SHAREHOLDERS Last year was an exciting and productive year for your company. The banking industry is continuing to undergo significant change and consolidation. Investor expectations have forced the entire industry to place far more emphasis on efficiency, productivity, and return on equity than was previously the case. Union Planters has been an active participant in these changes. The restructuring efforts begun in the third quarter of 1994 continue to produce significant benefits. Best practices adopted throughout the Corporation's subsidiary banks have helped us maintain good efficiency and customer service trends. Growth through acquisitions has also permitted us to achieve economies of scale in various services and product lines not available to smaller institutions. As a result, we ended 1996 with the strongest balance sheet and earnings potential in Union Planters' history. We are pleased to present our 1996 annual report and encourage you to review the financial statements and management's discussion and analysis for details on our results. FINANCIAL RESULTS Through the first nine months of 1996, we had reported operating earnings of $120.5 million (excluding the one-time SAIF assessment), or $2.38 per fully diluted common share. This represented a record return on assets of 1.42% and a return on common equity of 17.2% for the period and placed the Corporation at or near the top quartile of its peer group on profitability. Full year 1996 results include pooling of interests accounting on five fourth quarter acquisitions, and include merger-related and other charges of approximately $66 million after taxes. As a result, reported net earnings for 1996 were $133.7 million, or $1.92 per fully diluted common share, compared to net earnings of $172.8 million, or $2.64 per fully diluted common share in 1995. Before these charges, our return on assets and return on common equity were 1.31% and 16.2%, respectively. Net interest income was $606 million for the year compared to $536 million in 1995. Average loans increased 11% from $8.9 billion to $9.9 billion and the net interest margin was 4.41% compared to 4.38% in 1995. Noninterest income, excluding investment securities gains, increased to $222 million compared to $203 million in 1995. Mortgage servicing and bank card income accounted for a large part of the increase. Noninterest expense increased from $453 million to $571 million primarily because of merger-related and other charges, including the one-time SAIF assessment. The provision for losses on loans for 1996 was $57.4 million compared to $27.4 million for 1995. The increase relates both to the acquisitions and the level of charge-offs in the credit card and consumer portfolio that has been adversely impacted by the record number of nationwide bankruptcy filings. At year end the allowance for losses on loans was $166.9 million or 1.86% of loans and 253% of nonperforming loans. Nonperforming assets at December 31, 1996, were $82.4 million or .92% of loans and foreclosed properties, compared to $54.6 million or .67% of loans and foreclosed properties at December 31, 1995. FRANCHISE GROWTH Union Planters Corporation ended the year with $15.2 billion in total assets, an increase of 35% over the originally reported year end 1995 total of $11.3 billion. We now serve customers in seven states with 438 banking locations and 544 automated teller machines. Our acquisition program focused on classic in-market mergers significantly increasing our market share in Memphis and a number of other local markets in the region. For the first time, the Corporation now ranks among the nation's 50 largest bank holding companies. Our breakdown of loans and deposits by state is as follows:
STATE LOANS DEPOSITS - --------------------- ------ -------- (DOLLARS IN MILLIONS) Tennessee............ $6,712 $6,897 Mississippi.......... 1,474 1,980 Missouri............. 932 1,125 Arkansas............. 492 588 Louisiana............ 417 495 Alabama.............. 344 419 Kentucky............. 80 108
Our most significant acquisition in 1996 was Memphis-based Leader Financial Corporation that added approximately $1.6 billion deposits and doubled our deposit market share in Memphis to 26%. The combined mortgage banking operations of Leader and Union Planters originated approximately $850 million of loans during 1996 and serviced $10.5 billion of loans at year end. SHAREHOLDERS' EQUITY Shareholders' equity at year end was a record $1.4 billion and represented 8.9% of total 2 5 assets. Tier 1 regulatory capital, reflecting our recent Trust Preferred Securities issuance, was $1.5 billion at year end giving us a leverage ratio of 9.6%, a tier 1 risk-based capital ratio of 15.3%, and a total risk-based capital ratio of 18.3%. These ratios are substantially in excess of required regulatory minimums. With 68.3 million common and convertible preferred shares outstanding, our year end market capitalization was $2.7 billion compared with $1.6 billion at year end 1995. QUARTERLY DIVIDEND INCREASE Reflecting our strong capital position and confidence in core earnings, our quarterly common stock dividend was recently increased 18.5% from $.27 per share to $.32 per share or an annual rate of $1.28 per share. DIRECTORS During the year we were pleased to add five new directors to the Union Planters Corporation Board. Edgar H. Bailey, James E. Harwood, and Spence L. Wilson were former directors of Leader Financial Corporation and we welcome their valuable experience. Parnell S. Lewis, Jr. and Donald F. Schuppe also joined the corporate board, having previously served as directors of Union Planters National Bank of Memphis. We will miss the leadership and contributions of Robert B. Colbert, Jr. who will be retiring from the Board this year. Bob has served as a director for either Union Planters National Bank or Union Planters Corporation since 1968 and as Chairman of the Corporation's Directors Audit Committee since 1984. We will also miss Milton J. Womack, who joined our Board through our Grenada Sunburst affiliation in 1994, and who has contributed greatly to the integration of Sunburst with Union Planters. Milton will be retiring in April from the Corporation's Board but will continue as Chairman of Union Planters Bank of Louisiana. OUTLOOK We are very proud of the quality and involvement of our bank leadership at the community level. Our affiliate banks have continued to produce record profitability. As we ended 1996 the economy in all of our markets remained strong. Absent a renewal of inflation or a significant increase in interest rates, our expectation is for continued economic growth in the region during 1997. We anticipate good loan growth again this year and will be targeting our long term goal of being in the top quartile of our peer group on both return on assets and return on shareholders' equity. We will continue to focus on the complete integration of our recent acquisitions and the achievement of budgeted cost savings. At the same time, we will also continue to focus on sales training and the sale of more financial products through our extensive retail branch network. We welcome our new shareholders and invite you to participate in our automatic dividend reinvestment program that 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) ------------------------------------------------------------------- 1996 1995 1994 1993 1992 ----------- ----------- ----------- ----------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA Net interest income.................................... $ 605,962 $ 535,997 $ 504,500 $ 439,290 $ 357,365 Provision for losses on loans.......................... 57,395 27,381 9,661 22,660 37,367 Investment securities gains (losses)................... 4,081 409 (22,515) 3,508 11,880 Other noninterest income............................... 222,250 203,014 160,109 154,254 136,162 Noninterest expense.................................... 570,634 452,635 486,836 408,888 362,028 ----------- ----------- ----------- ----------- ----------- Earnings before income taxes, extraordinary item, and accounting changes................................... 204,264 259,404 145,597 165,504 106,012 Applicable income taxes................................ 70,526 86,648 45,174 51,864 30,219 ----------- ----------- ----------- ----------- ----------- Earnings before extraordinary item and accounting changes.............................................. 133,738 172,756 100,423 113,640 75,793 Extraordinary item and accounting changes, net of taxes................................................ -- -- -- 637 2,847 ----------- ----------- ----------- ----------- ----------- Net earnings........................................... $ 133,738 $ 172,756 $ 100,423 $ 114,277 $ 78,640 =========== =========== =========== =========== =========== PER COMMON SHARE DATA(2) & (5) Primary Earnings before extraordinary item and accounting changes............................................ $ 1.95 $ 2.72 $ 1.52 $ 2.19 $ 1.75 Net earnings......................................... 1.95 2.72 1.52 2.20 1.75 Fully diluted Earnings before extraordinary item and accounting changes............................................ 1.92 2.64 1.52 2.14 1.73 Net earnings......................................... 1.92 2.64 1.52 2.15 1.73 Cash dividends......................................... 1.08 .98 .88 .72 .60 Book value............................................. 19.55 18.52 15.42 14.80 14.08 BALANCE SHEET DATA (AT PERIOD END) Total assets........................................... $15,222,563 $14,383,222 $13,425,063 $11,866,609 $10,180,375 Loans, net of unearned income.......................... 10,434,070 9,041,059 8,436,650 6,615,884 5,364,377 Allowance for losses on loans.......................... 166,853 156,388 154,131 141,999 114,130 Investment securities.................................. 2,956,234 3,573,054 3,592,482 3,854,767 3,370,321 Deposits............................................... 11,490,262 11,074,722 10,702,569 9,879,780 8,714,306 Short-term borrowings.................................. 449,146 838,283 699,838 300,414 343,452 Short- and medium-term subsidiary bank notes........... 400,000 -- -- -- -- Long-term debt(3) Parent company....................................... 373,459 214,758 114,790 114,729 74,292 Subsidiary banks..................................... 900,257 811,819 693,002 463,055 202,847 Total shareholders' equity............................. 1,352,874 1,213,162 1,008,594 935,730 670,267 Average assets......................................... 15,274,782 13,661,748 13,105,179 11,565,505 9,475,049 Average shareholders' equity........................... 1,283,575 1,119,232 1,042,990 813,140 623,869 Average shares outstanding (in thousands) Primary.............................................. 64,987 60,385 59,587 43,192 35,463 Fully Diluted........................................ 69,518 64,995 59,929 47,422 38,307 PROFITABILITY AND CAPITAL RATIOS Return on average assets............................... .88% 1.26% .77% .99% .83% Return on average common equity........................ 10.61 16.16 9.76 14.92 13.15 Net interest income (taxable-equivalent)/average earning assets(4).................................... 4.41 4.38 4.31 4.29 4.26 Loans/deposits......................................... 90.81 81.64 78.83 66.96 61.56 Common and preferred dividend payout ratio............. 50.64 32.74 40.99 28.34 32.95 Equity/assets (period end)............................. 8.89 8.43 7.51 7.89 6.58 Average shareholders' equity/average total assets...... 8.40 8.19 7.96 7.03 6.58 Leverage ratio......................................... 9.61 8.08 7.53 7.62 6.36 Tier 1 capital/risk-weighted assets.................... 15.29 13.39 12.75 14.07 11.70 Total capital/risk-weighted assets..................... 18.32 16.68 14.97 16.51 13.64 ASSET QUALITY RATIOS(6) Allowance/period end loans............................. 1.86 1.92 1.98 2.27 2.20 Nonperforming loans/total loans........................ .74 .56 .44 .65 1.16 Allowance/nonperforming loans.......................... 253 344 444 346 189 Nonperforming assets/loans and foreclosed properties... .92 .67 .58 .96 1.83 Provision/average loans................................ .66 .34 .14 .37 .74 Net charge-offs/average loans.......................... .60 .34 .09 .27 .52
- --------------- (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. (See Note 2 to the consolidated financial statements). (3) Long-term debt includes Medium-Term Bank Notes, Federal Home Loan Bank (FHLB) advances, subordinated notes and debentures, obligations under capital leases, mortgage indebtedness, Trust Preferred Securities, and notes payable with maturities greater than one year. (4) Average balances and calculations do not include the impact of the net unrealized gain or loss on available for sale securities. (5) Leader Financial Corporation was organized as a holding company on March 18, 1993 in connection with the conversion of its principal subsidiary, Leader Federal Bank for Savings, from a federal mutual savings bank to a federally-chartered capital stock savings bank. (See Note 2 to the consolidated financial statements). Accordingly, earnings per share for the year ended December 31, 1992 is calculated using only the Corporation's historical net earnings and the calculation of earnings per share for the year ended December 31, 1993 is based on the Corporation's historical net earnings for 1993 plus Leader's fourth quarter net earnings, since the stock conversion occurred on September 30, 1993. (6) FHA/VA government-insured/guaranteed loans have been excluded, since they represent minimal credit risk to the Corporation. See Tables 9 and 10 and the "Loans" discussion which follow. 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 Union Planters Corporation's (the Corporation) 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. Certain of the information included in this discussion contains forward-looking statements and information that are based on management's belief as well as certain assumptions made by, and information currently available to management. When used in this discussion, the words "anticipate," "project," "expect," and similar expressions are intended to identify forward-looking statements. Although management of the Corporation believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations and projections will prove to have been correct. Such forward-looking statements are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks materialize, or should any such underlying assumptions prove to be incorrect, actual results may vary materially from those anticipated, estimated, projected or expected. Among key factors that may have a direct bearing on the Corporation's operating results are fluctuations in the economy; the actions taken by the Federal Reserve for the purpose of influencing the economy; the Corporation's ability to realize anticipated cost savings related to both recently completed and pending acquisitions; the ability of the Corporation to achieve anticipated revenue enhancements; its success in assimilating acquired operations into the Corporation's culture, including its ability to instill the Corporation's credit culture and approach to operating efficiencies into acquired operations; the continued growth of the markets in which the Corporation operates consistent with recent historical experience; the absence of undisclosed material contingencies inherent in acquired operations including asset quality and litigation contingencies; the enactment of federal legislation impacting the operations of the Corporation; and the Corporation's ability to expand into new markets and to maintain profit margins in the face of pricing pressure. THE COMPANY Union Planters Corporation is a $15.2-billion, multi-state bank holding company whose primary business is banking. The Corporation is the largest bank holding company headquartered in Tennessee and is one of the fifty largest bank holding companies headquartered in the United States. Union Planters National Bank (UPNB), a $6.0-billion bank headquartered in Memphis, Tennessee, is the Corporation's largest subsidiary. The principal markets of the Corporation are in Tennessee, Mississippi, Missouri, Arkansas, Louisiana, Alabama, and Kentucky. These areas are served by the Corporation's 37 banking subsidiaries and their 438 banking offices and 544 ATMs. The map on the inside front cover of this report, Table 15, and the listing of Communities Served on page 35 provide information regarding the size, locations, and markets served by the Corporation's banking subsidiaries. As part of the Corporation's banking services, its subsidiaries are engaged in mortgage origination and servicing; investment management and trust services; the issuance of credit and debit cards; the origination, packaging, and securitization of loans, primarily the government-guaranteed portions of Small Business Administration (SBA) loans; the purchase of delinquent FHA/VA government-insured/guaranteed loans from third parties and GNMA pools serviced for others; full-service and discount brokerage services; and the sale of bank-eligible insurance products and services. 1996 EARNINGS OVERVIEW The Corporation reported net earnings for 1996 of $133.7 million, versus $172.8 million and $100.4 million, respectively, in 1995 and 1994. On a fully diluted basis, earnings per common share were $1.92 in 1996 compared to $2.64 in 1995 and $1.52 in 1994. Results for 1996 were reduced $101.7 million (approximately $66.4 million after taxes) by merger-related and other significant net charges. Similarly, 1995 results were reduced by merger-related charges, net of investment securities gains, of $11.5 million (approximately $9.5 million after taxes). Results in 1994 were reduced by merger-related, restructuring, and other significant charges of approximately $78.5 million (approximately $51.4 million after taxes). The "Noninterest Income" and "Noninterest Expense" discussions which follow provide details of the components of these charges. 5 8 Excluding the impact of the above described net charges on the Corporation's results, earnings would have been approximately $200.1 million, $182.3 million, and $151.8 million, respectively for 1996, 1995, and 1994. Presenting the Corporation's results before these significant net charges provides, in management's opinion, a better indication of the Corporation's core earnings performance over the past three years. However, there can be no assurance that similar charges will not occur in the future as the Corporation continues its acquisition program which is described below. Reference is made to Table 1 which provides a summary of the Corporation's operating results for the past five years. The growth in 1996 earnings before the above charges was due to the continued growth of net interest income, which increased 13% between 1996 and 1995, and the continued growth of noninterest income which increased 5%. Partially offsetting this growth was a higher provision for losses on loans which increased $30 million between 1996 and 1995. The increase in the provision for losses on loans resulted from the level of charge-offs in the credit card portfolio and from provisions for losses on loans taken by institutions the Corporation acquired in 1996. Noninterest expenses excluding the above charges increased only 3.5% in 1996. The following sections provide a more detailed discussion of the Corporation's financial condition and results of operations. During 1996, the Corporation acquired seven financial institutions which are identified in the table below. All but two of the acquisitions were accounted for using the pooling of interests method of accounting. Current year results have been restated for all of the acquisitions and prior year results have been restated only for the Leader Financial Corporation (Leader) acquisition, since the other pooling transactions were not considered material in the aggregate to the Corporation's financial condition or results of operations. ACQUISITIONS Acquisitions have been, and are expected to continue to be a significant part of the Corporation's growth and have enhanced the market positions of the Corporation in the various states it serves. The Corporation completed four acquisitions in 1992, twelve in 1993, thirteen in 1994, three in 1995, and seven in 1996 adding approximately $1.6 billion in total assets in 1992, $1.7 billion in 1993, $3.8 billion in 1994, $1.3 billion in 1995, and $4.2 billion in 1996. The table below provides a summary of the acquisitions completed over the last three years and their impact on the Corporation's total assets. The Corporation completed the acquisition of a third-party marketer of non-traditional bank products after December 31, 1996 and currently has two acquisitions of financial institutions pending with aggregate total assets of approximately $150 million. No significant charges against earnings are expected in 1997 related to the pending acquisitions. Additional significant charges of the types discussed in the "1996 Earnings Overview" above would be expected only if a significant in-market acquisition or other significant acquisition were to be consummated. 6 9 UNION PLANTERS CORPORATION ACQUISITIONS COMPLETED IN 1994, 1995, AND 1996
ACCOUNTING INSTITUTION ACQUIRED DATE STATE ASSETS CONSIDERATION METHOD - ------------------------------- ----- ------------ ---------- -------------------------------------------- ---------- (MILLIONS) Mid-South Bancorp, Inc. 1/94 Kentucky/ $ 184.7 .8 million shares of Common Stock Pooling Tennessee Anderson County Bank 3/94 Tennessee 22.5 $ 2.5 million cash Purchase First National Bancorp of 3/94 Tennessee 170.0 1.0 million shares of Common Stock Pooling Shelbyville, Inc. Clin-Ark Bancshares, Inc. 4/94 Arkansas 50.3 .2 million shares of Common Stock Pooling Security Federal Savings and 4/94 Tennessee 14.6 $ .4 million cash Purchase Loan Association Tennessee Bancorp, Inc. 5/94 Tennessee 99.0 $13.5 million cash Purchase Liberty Bancshares, Inc. 7/94 Tennessee 180.1 1.2 million shares of Common Stock Pooling Earle Bankshares, Inc. 8/94 Arkansas 42.5 .3 million shares of Common Stock Pooling BNF Bancorp, Inc. 9/94 Alabama 276.4 2.0 million shares of Common Stock Pooling Cherokee Valley Federal 9/94 Tennessee 58.5 $ 4.4 million cash Purchase Savings Association Commercial Bancorp, Inc. 11/94 Tennessee 28.6 .2 million shares of Common Stock Pooling Mid South Bancshares, Inc. 12/94 Arkansas 126.0 .6 million shares of Common Stock Pooling Grenada Sunburst System 12/94 Mississippi/ 2,518.0 13.8 million shares of Common Stock Pooling Corporation Louisiana First State Bancorporation, 7/95 Tennessee 116.2 .4 million shares of Series E Preferred Purchase Inc. Planters Bank and Trust Company 9/95 Arkansas 59.0 .3 million shares of Common Stock Pooling Capital Bancorporation, Inc. 12/95 Missouri 1,105.1 4.1 million shares of Common Stock Pooling First Bancshares of Eastern 1/96 Arkansas 64.1 $10.9 million cash Purchase Arkansas, Inc. First Bancshares of N. E. 1/96 Arkansas 65.4 $ 9.2 million cash Purchase Arkansas, Inc. Leader Financial Corporation 10/96 Tennessee 3,410.9 15.3 million shares of Common Stock Pooling Franklin Financial Group, Inc. 10/96 Tennessee 137.1 .7 million shares of Common Stock Pooling Valley Federal Savings Bank 10/96 Alabama 122.1 .4 million shares of Common Stock Pooling BancAlabama, Inc. 10/96 Alabama 97.9 .4 million shares of Common Stock Pooling Financial Bancshares, Inc. 12/96 Missouri 325.9 1.2 million shares of Common Stock Pooling -------- Total assets of completed acquisitions $9,274.9 ========
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 having significant local market share. Historically and where practical, 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 acquired institutions to grow loans and deposits commensurately with their local markets. Certain functions, such as data processing, investment management, payroll and benefits administration, loan review, and audit are centralized to achieve operating efficiencies and risk management objectives. This strategy has made the Corporation an attractive potential acquirer of financial institutions. With the changing environment in the banking industry regarding interstate banking and branching, management envisions being able to continue its separate bank charter strategy with respect to acquired institutions. However, the strategy will continue only if the institutions, in management's opinion, continue to perform at higher levels than would a single charter organization. During the past two years, a number of the Corporation's smaller banking subsidiaries located in contiguous markets have been merged to effect efficiencies in their operations and to eliminate duplicate efforts. Additionally, a majority of the Corporation's banking subsidiaries have changed their names to include "Union Planters" to increase the effectiveness of advertising efforts. 7 10 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 fully-taxable-equivalent basis (FTE), 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 Table 4 and Table 5 which present the Corporation's average balance sheet and rate/volume analysis for each of the three years ended December 31, 1996. Net interest income (FTE) was $622.7 million in 1996, an increase of $69.2 million, or 12.5% over 1995. Net interest income in 1994 was $523.0 million. The growth over the three year period is attributable primarily to the growth of average earning assets, higher yields on earning assets, and a higher percentage of loans in earning assets. The net interest margin (net interest income as a percentage of average earning assets) for 1996 was 4.41% compared to 4.38% and 4.31%, respectively, for 1995 and 1994. The interest-rate spread between earning assets and interest-bearing liabilities increased two basis points between 1995 and 1996 to 3.71% following an eleven-basis-point decrease between 1994 and 1995 from 3.80% to 3.69%. The Corporation has used, to a limited extent, interest-rate swaps and caps to manage certain elements of its interest-rate risk. At December 31, 1996, there were no such instruments outstanding. Note 17 to the consolidated financial statements provides a reconciliation of the changes in these instruments for the past two years. The impact of interest-rate swaps and caps on net interest income was to reduce net interest income $1.5 million and $2.9 million, respectively, in 1996 and 1995 and to increase net interest income $600,000 in 1994. INTEREST INCOME A breakdown of the components of average earning assets is as follows:
1996 1995 1994 ----- ----- ----- Average earning assets (in billions)........................ $14.1 $12.6 $12.1 Comprised of: Loans..................................................... 70% 70% 63% Investment securities..................................... 27 26 34 Other earning assets...................................... 3 4 3 - --------------- Yield earned on average earning assets...................... 8.48% 8.45% 7.49%
Fully-taxable-equivalent interest income increased $128.5 million in 1996 to $1.2 billion. The increase is attributable to the growth of average earning assets which increased interest income by approximately $125.0 million in 1996. Average earning assets in 1996 were $14.1 billion, an increase of $1.5 billion over 1995. Also contributing to the increase were higher yields on average earning assets which increased interest income approximately $3.5 million. Higher loan volumes and yields accounted for 75% of the increase while investment securities, net of declines in the other earning asset categories, accounted for the balance of the growth. The mix of average earning assets has remained constant over the past two years with a 7% increase in the percentage of loans to total earning assets occurring between 1994 and 1995. The growth of loans, which accounted for most of the increase, is due primarily to acquisitions and to an increase in the purchase of delinquent FHA/VA government-insured/guaranteed loans. The average yield on loans increased two basis points between 1995 and 1996 to 9.18%. Between 1995 and 1996, average investment securities increased $543 million to $3.8 billion and the average yield increased eight basis points to 6.90%. The $160.9-million increase in interest income from 1994 to 1995 was attributable to higher yields on earning assets, primarily loans, which accounted for approximately $98.1 million of the increase and 8 11 to the growth of average earning assets which increased interest income approximately $62.8 million. Average loans increased $1.2 billion between 1994 and 1995 and the average yield increased 68 basis points to 9.16%. Management expects some growth in interest income in 1997 assuming interest rates remain level during the first part of the year and gradually rise over the latter half of 1997 and if the level of nonperforming loans does not increase significantly. Another key factor that will affect interest income is the economy. A moderately growing economy should favorably impact interest income over the next twelve months. Reference is made to the "Asset/Liability" discussion for information regarding how the Corporation was positioned at December 31, 1996 to react to changing interest rates. INTEREST EXPENSE A breakdown of the components of average interest-bearing liabilities is as follows:
1996 1995 1994 ----- ----- ----- Average interest-bearing liabilities (in billions).......... $12.0 $10.8 $10.4 Comprised of: Deposits.................................................. 82% 86% 87% Short-term borrowings..................................... 8 5 6 FHLB advances, short- and medium-term bank notes and other long-term debt......................................... 10 9 7 - --------------- Rate on average interest-bearing liabilities................ 4.77% 4.76% 3.69%
Interest expense increased 11.5% in 1996 to $574.6 million. The increase is attributable to an increase in interest-bearing liabilities which accounted for $64.0 million of the increase, partially offset by a negative rate variance of $4.7 million. Interest-bearing liabilities increased $1.2 billion during 1996 to $12.0 billion. The growth of these liabilities was required to fund the growth of average earning assets. The average rate on interest-bearing liabilities increased one basis point. During 1996, the Corporation experienced continued growth of interest-bearing deposits, primarily through acquisitions. Certain short-term borrowings under repurchase agreements were repaid during the fourth quarter of 1996 in connection with the sale of certain investment securities to reduce the Corporation's interest-rate risk. The Corporation also enhanced its short- and medium-term borrowing capacity with a $1 billion bank note program through UPNB. The Corporation issued approximately $200 million liquidating amount of 8.20% Capital Pass-through Securities(SM) (Trust Preferred Securities) to enhance the Corporation's liquidity and increase Tier 1 regulatory capital. Note 9 to the consolidated financial statements provides details regarding these programs. During the fourth quarter of 1996, the Corporation in-substance defeased the $37 million outstanding of one of its subordinated note issues. The increase in interest expense between 1994 and 1995 was attributable to a 107-basis-point increase in the rates paid on interest-bearing liabilities to 4.76% from 3.69%, which accounted for approximately $105.1 million of the increase. This increase related primarily to interest-bearing deposits and occurred during a period of rising interest rates. Average interest-bearing liabilities also increased and accounted for approximately $25.2 million of the increase. Management expects interest expense to increase in 1997 in line with the growth of interest-bearing liabilities which are expected to increase to fund anticipated earning asset growth. Rates paid on interest-bearing liabilities are expected to remain fairly stable during 1997 assuming no significant increase in interest rates. The Corporation's primary funding source is its base of core deposits. PROVISION FOR LOSSES ON LOANS The provision for losses on loans increased $30.0 million in 1996 to $57.4 million as compared to $27.4 million and $9.7 million, respectively, in 1995 and 1994. The increase related primarily to the level of charge-offs in the credit card portfolio and other consumer loans which had been adversely impacted by a record level of bankruptcies. The level of the provision was also impacted by acquisitions which accounted for approximately $14.0 million of the increase. For a discussion of the 9 12 allowance for losses on loans, net charge-offs, and nonperforming assets, refer to the "Allowance for Losses on Loans" and "Nonperforming Assets" sections which follow. The increase in the provision for losses on loans between 1994 and 1995 related primarily to loan growth, acquisitions, and an increasing level of charge-offs in the consumer loan portfolio. Approximately $6.3 million of the increase related to 1995 acquisitions. Management does not expect the provision for losses on loans to increase at the same rate in 1997 as it did in 1996. In 1996, the provision for losses on loans was 66 basis points of average loans compared to 34 basis points and 14 basis points, respectively, in 1995 and 1994. There are a number of factors that impact the level of the provision for losses on loans, some of which are beyond management's control, such as current and anticipated economic conditions and the related impact on specific borrowers, the level of personal bankruptcies, the level of nonperforming assets, and changes in the nature of the loan portfolio. NONINTEREST INCOME Investment Securities Gains and Losses Investment securities gains in 1996 were $4.1 million compared to $409,000 in 1995 and investment securities losses of $22.5 million in 1994. The investment securities gains realized in 1996 arose from the sale of approximately $760 million of investment securities to reduce the interest-rate risk of the Corporation after its fourth quarter acquisitions. The sale consisted of longer maturity mortgage-backed pools, as well as lower yield, relatively long-term agency securities. The proceeds were used to pay off short-term borrowings under repurchase agreements. The investment securities losses in 1994 related to a partial restructuring of the investment securities portfolio in response to rising interest rates and to fund anticipated loan growth. Other Noninterest Income Noninterest income, excluding investment securities gains and losses, was $222.3 million in 1996, an increase of 9.5% over $203.0 million for 1995. Noninterest income, excluding investment securities gains and losses, was $160.1 million in 1994. The major components of noninterest income are presented on the face of the consolidated income statement and in Note 14 to the consolidated financial statements. Noninterest income in 1996 included gains of approximately $7.2 million related to the sales of certain branches and other selected assets in connection with acquisitions and to a $1.3 million one-time trust fee related to a court award. These gains were netted against the charges discussed in the earnings overview. Excluding these gains, the increase in noninterest income was 5.3%. In 1996, there were improvements in almost all categories of noninterest income with mortgage servicing income and bank card income experiencing the largest growth. Mortgage servicing income in 1996 increased $8.7 million to $46.1 million. The growth relates to the larger servicing portfolio as a result of servicing portfolio acquisitions in late 1995 and 1996. Bank card income increased $4.2 million in 1996 due primarily to a higher volume of transactions. The increased volume of transactions was augmented by the increased level of credit cards outstanding over the past three years. Partially offsetting the growth in 1996 was a $4.8 million decrease in profits and commissions from trading activities to $5.6 million which related to the SBA broker/dealer operation. Between 1994 and 1995 the profits and commissions increased $3.8 million to $10.4 million. This operation purchases, pools, and securitizes the government-guaranteed portions of SBA loans. As is demonstrated from the change in these revenues over the past three years, revenues are volatile and future levels cannot be predicted. Favorable market conditions in 1995 resulted in the significant increase in that year and the decline in 1996 was due to a shortage of government funding which impacted the trading operations. The significant items increasing noninterest income between 1994 and 1995 were service charges on deposit accounts, bank card income, and mortgage servicing income. At the end of 1994, a review was made of banking services with a view to implementing "best" practices in all areas. As a result, the Corporation's banking subsidiaries evaluated their practice related to service charges on deposit accounts and increased certain fees, implemented new fees, and reduced the number of fees being 10 13 waived. These changes, along with growth due to acquisitions, increased service charges on deposit accounts $15.7 million. The $9.4-million growth in bank card income during 1995 resulted from an increase in the number of transactions augmented by an increase in the level of credit card loans outstanding. The $6.4-million increase in mortgage servicing income between 1994 and 1995 was attributable to the growth of the servicing portfolio. Management is continuing to place emphasis on seeking additional sources of noninterest income. It is planned that in the future, additional emphasis will be placed on sale of bank-eligible insurance products, primarily annuities and credit life insurance, as well as new products. Mortgage servicing revenues are not expected to continue to grow at the same rate in 1997. Bank card income revenues should continue to grow but at a slower rate. NONINTEREST EXPENSE Noninterest expense was $570.6 million in 1996, an increase of $118.0 million from 1995. Noninterest expense for 1994 was $486.8 million. The major components of noninterest expense are detailed on the face of the consolidated income statement and in Note 14 to the consolidated financial statements. In 1996, the largest components of the increase were merger-related and other significant charges (mentioned in the "1996 Earnings Overview" above) which impacted noninterest expense approximately $114.3 million and salaries and employee benefits which increased $12.1 million, or 6%. In 1996 the merger-related charges of $52.8 million included the following: $18.3 million for salaries, employee benefits and other employment-related charges (e.g. employment contract payments, severance, postretirement benefits, and pension expenses); $15.8 million for write-downs of office buildings and equipment (e.g. assets sold, lease buyouts, obsolete assets or assets no longer of use, and equipment not compatible or being changed as a result of the acquisition); $4.7 million for professional fees related to the acquisitions; $1.4 million of other real estate expenses related to the acquisitions; and $12.6 million for miscellaneous merger-related expenses. The other significant charges in 1996 were as follows: $22.3 million for a one-time regulatory assessment related to the recapitalization of the Savings Association Insurance Fund (SAIF); $19.8 million for provisions for losses on the servicing of delinquent FHA/VA loans; and $19.4 million for the write-down of mortgage servicing rights, goodwill, and other intangibles, including purchased credit card premiums. In 1995, merger-related charges of $11.9 million included the following: (i) employment contract payments, severance, and postretirement benefit expenses of $4.8 million; (ii) write-downs and impairments of assets held for sale or disposal and cancellation of vendor contracts of $4.7 million; (iii) legal, accounting, and financial advisory services of $1.4 million; and (iv) other merger-related expenses of $1.0 million. Noninterest expense in 1994 included merger-related, restructuring, and other significant charges totaling $58.2 million. Merger-related charges were comprised of the following: (i) employment contract payments, severance payments, and other benefit related charges of $5.2 million; (ii) legal, accounting, and financial advisory fees of $2.5 million; (iii) impairment of assets held for sale or disposal and cancellation of vendor contracts of $3.6 million; and (iv) other merger-related expenses of $3.6 million. Restructuring charges included the following: (i) expense for employee severance of $16.3 million; (ii) charges for asset impairments of $10.4 million; and (iii) other restructuring-related charges of $2.2 million. The other significant charges of $14.4 million related to a consumer loan marketing program. Excluding the above-described operating expenses, noninterest expense in 1996 increased $15.6 million, a 3.5% increase. Noninterest expenses in 1995 and 1994 would have been $440.7 million and $428.6 million, respectively. Regulatory Assessment The one-time SAIF-assessment resulted from the enactment of the Deposit Insurance Funds Act of 1996 (Funds Act) which is expected to substantially reduce the assessments that will be made on 11 14 banks and thrifts in 1997 and future years to fund the SAIF and Bank Insurance Fund (BIF). The Funds Act also provides for the SAIF and BIF to be merged on January 1, 1999, provided there are no SAIF-insured savings associations on that date. Additionally, the Funds Act imposes assessments for the payment of interest on Financing Corporation (FICO) bonds issued in connection with earlier Congressional efforts to support the then-failing thrift industry. Total FDIC assessments, including the one-time assessment for 1996, 1995, and 1994 were $30.2 million, $15.8 million, and $23.5 million, respectively. The decrease in FDIC assessments during 1995 was due to a reduction of the assessment on BIF-insured deposits. This reduction also partially offset the one-time assessment made in 1996. The following per annum assessments will be made in the future upon deposits of SAIF-insured institutions and SAIF-insured deposits held by banks ("Oakar" deposits): (i) the assessment will range from zero for well-capitalized banks to 27 basis points for the weakest institutions and (ii) the assessable deposits of SAIF-insured institutions will be assessed 6.4 basis points to service the interest on the FICO bonds. For BIF-insured deposits the following per annum assessment will be made in the future: (i) the BIF assessment on deposits will range from zero for well-capitalized banks to 27 basis points for the weakest institutions; and (ii) all institutions will be assessed 1.3 basis points to service the interest on FICO bonds. For three years, the assessment for the FICO bonds will be set so that SAIF-insured institutions will pay 80% of the interest and BIF-insured institutions will pay 20% of the interest. Thereafter, until the bonds mature in 2017, the assessment will be the same, regardless of which fund insures an institution's deposits. Going forward the FDIC will continue to set a risk-based assessment rate for each fund to maintain that fund at its designated reserve ratio of 1.25% of insured deposits. Since each fund now meets that ratio, assessment rates should remain at zero for well-capitalized institutions unless such fund experiences future losses from failed institutions. Based on the Corporation's current levels of SAIF-insured and BIF-insured deposits and with all of the Corporation's institutions deemed to be well-capitalized, it is estimated that the changes discussed will reduce the Corporation's 1997 annual assessment, excluding the one-time SAIF-assessment, approximately $4.8 million ($2.9 million after taxes or approximately $.04 per fully diluted common share). At December 31, 1996, the Corporation had $3.4 billion of SAIF-insured deposits ($875 million of which qualify for the 20% "Oakar" deposit discount) and $8.1 billion of BIF-insured deposits. Provisions for Losses on FHA/VA Foreclosure Claims The provisions for losses on FHA/VA foreclosure claims arise from the Corporation's mortgage servicing operations. In its capacity as servicer of loans, including FHA/VA government-insured/ guaranteed loans, the Corporation collects and processes payments made by borrowers; remits funds to investors, taxing authorities, and insurers; and coordinates foreclosure and disposition of collateral properties. In connection with its responsibilities, the Corporation advances funds which are repaid through foreclosure-sale proceeds and through claims made against the Federal Housing Authority and/or Veterans Administration (FHA/VA claims). Under certain circumstances, the FHA/VA claims are sometimes rejected or otherwise cannot be collected in full. The provisions for FHA/VA foreclosure claims represent management's estimate of losses attributable to these current and future FHA/VA claims inherent in the servicing portfolio at each reporting date. The significant increase in the provisions for these claims in 1996 is attributable to the rapid growth of the FHA/VA government- insured/guaranteed loans and the growth of the servicing portfolio, incidental to one of the Corporation's recent acquisitions. The level of the provisions for FHA/VA foreclosure claims is expected to decline significantly in 1997, as management does not anticipate the same level of growth. For an additional discussion of the FHA/VA government-insured/guaranteed loans, see the "Loans" section which follows. Write-off of Mortgage Servicing Rights, Goodwill, and Other Intangibles The write-off of mortgage servicing rights, goodwill, and other intangibles related primarily to purchased credit card relationships. In evaluating these intangibles at year end, management determined that the assets were impaired and wrote-off approximately $12.2 million. The remaining amount 12 15 of write-offs of intangibles related to goodwill of acquired institutions and mortgage servicing intangibles in accordance with the Corporation's policies for recognizing impairment. Salaries and Employee Benefits Salaries and employee benefits expense represents the largest component of noninterest expense. In 1996, salaries and employee benefits expense increased $12.1 million, or 6.1%, to $209.6 million. This compared to $197.5 million in 1995 and $201.5 million in 1994. The decrease in salaries and employee benefits between 1994 and 1995 arose primarily from implementation of the Corporation's restructuring plan (discussed in the following paragraph) which resulted in a reduction of approximately 690 employees. The reduction was partially offset by growth due to the 1995 acquisitions and growth of existing operations, primarily the credit card operations. The increase in 1996 relates primarily to acquisitions, incentive pay, and normal annual merit increases. At December 31, 1996, the Corporation had 5,914 full-time-equivalent employees compared to 5,847 at December 31, 1995, restated for the Leader acquisition. The Corporation's other 1996 acquisitions added approximately 300 full-time-equivalent employees. 1994 Restructuring Plan In connection with the acquisition of Grenada Sunburst System Corporation (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 or divested. Additionally, all sources of fee income were reviewed to identify opportunities to increase noninterest income. The net interest margin was also evaluated to identify potential items for improvement. A review was also made of the operations of the Corporation and Grenada to identify consolidation opportunities and efficiencies to be achieved from combining the two companies. The Corporation incurred fees and expenses of approximately $2.2 million in 1994 related to the services provided by a consulting firm assisting in implementing 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 consolidation or divestiture resulting in a charge of $10.5 million. No additional charges were incurred in 1995 or 1996. The Corporation achieved a net reduction of total staff in 1994 and 1995 of approximately 690 employees, excluding the impact of acquisitions consummated in 1995, which has resulted in estimated annual savings of approximately $16 million. At December 31, 1996, the Corporation had consolidated or otherwise closed 44 branch locations in connection with this plan, excluding the impact of subsequent acquisitions. In addition to achieving the above savings, implementation of this plan resulted in an increase in noninterest income, primarily service charges on deposit accounts, of approximately $15.7 million in 1995. See the "Noninterest Income" discussion above. The changes implemented under this plan continue to be monitored by management. Management of the Corporation considers the restructuring plan to have been completed at December 31, 1996. Expense and Efficiency Ratios The Corporation monitors its expense levels using the expense ratio and utilizes the efficiency ratio as a measure of its success in increasing revenues, while controlling expenses. The expense ratio (noninterest expense minus noninterest income, excluding significant nonrecurring revenues and expenses and investment securities gains and losses divided by average assets) was 1.58% in 1996 compared to 1.74% for 1995. The efficiency ratio which is calculated excluding the same items divides noninterest expenses by net interest income (FTE) plus noninterest income. The efficiency ratio was 55.43% in 1996 compared to 58.24% in 1995. 13 16 Management will continue to monitor closely the level of noninterest expenses as part of its effort to continue to improve the profitability of the Corporation. Significant cost savings are expected by management related to the five acquisitions completed in the fourth quarter of 1996, since all of those acquisitions were in-market mergers. Some of the savings will not be realized until later in the year, as the consolidation of certain of the entities with other entities will not occur until late 1997. TAXES Applicable income taxes consist of provisions for federal and state income taxes totaling $70.5 million in 1996, an effective rate of 34.5%. This compares to applicable income taxes of $86.6 million in 1995 and $45.2 million in 1994. These amounts equate to effective tax rates of 33.4% and 31.0%, respectively, in 1995 and 1994. 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. The realization of approximately $11.3 million of the net deferred tax asset of $80.0 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, $1.9 million of the Corporation's net deferred tax asset does not qualify as capital for regulatory purposes. FINANCIAL CONDITION ANALYSIS At December 31, 1996, the Corporation reported $15.2 billion of total assets compared to $14.4 billion ($11.3 billion prior to the restatement for the Leader acquisition) at December 31, 1995. During 1996, the Corporation acquired institutions with total assets of $4.2 billion. Average assets were $15.3 billion for 1996, compared to $13.7 billion and $13.1 billion, respectively, for 1995 and 1994. Table 3, which follows this discussion, presents the balance sheet impact of acquired institutions for the last three years. INVESTMENT SECURITIES The Corporation's investment securities portfolio of $3.0 billion at December 31, 1996, consisted entirely of securities "available for sale" which are carried on the consolidated balance sheet at fair value. These securities had net unrealized gains at year end of $40.2 million. At December 31, 1995, the investment portfolio was $3.6 billion and consisted of $3.4 billion of available for sale securities and $186.3 million of held to maturity securities (securities related to the Leader acquisition) which were carried on the consolidated balance sheet at amortized cost. The decrease in the amount of investment securities in 1996 was due to the additional funding required to support significant 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 December 31, 1996. U.S. Treasury and U.S. Government agency obligations represented approximately 78% of the investment securities portfolio at December 31, 1996. The Corporation has some credit risk in the 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 98% U.S. Government agency issues; the remaining 2% 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 & Poor's or Moody's. Approximately 59% of the REMIC and CMO portions of the portfolio are in floating-rate issues, the majority being indexed to LIBOR or PRIME. The Corporation's normal practice is to purchase investment securities at or near par value to reduce risk of premium 14 17 write-offs resulting from unexpected prepayments. The limited credit risk in the investment securities portfolio at December 31, 1996 consisted of the holdings of municipal obligations (17.1%), nonagency CMOs and mortgage-backed securities (.6%), and corporate stocks, notes, debentures, and mutual funds (4.5%). At December 31, 1996, the Corporation had approximately $40.2 million of structured notes (as currently defined by regulatory agencies), which constituted approximately 1.3% 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 Banks 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 $175,000 at December 31, 1996. 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, 1996, loans, net of unearned income, were $10.4 billion compared to $9.0 billion at year end 1995. Average loans for 1996 were $9.9 billion compared to $8.9 billion and $7.6 billion, respectively, for 1995 and 1994. The Corporation's loan to deposit ratio was 91% at December 31, 1996, compared to 82% at the end of 1995. For 1996, loans were 70% of the Corporation's average earning assets compared to 70% and 63%, respectively, for 1995 and 1994. Table 7 provides the composition of the loan portfolio for each of the last five years. The largest segment of the Corporation's loan portfolio is single family residential mortgage loans (excluding the FHA/VA government-insured/guaranteed loans which are also single family residential loans), which totaled $3.2 billion, or 31% of the loan portfolio at December 31, 1996, an increase of $242 million over December 31, 1995. The growth is attributable to the Corporation's acquisitions during the year. The Corporation's acquisitions, primarily the Leader acquisition, increased this segment of the portfolio approximately $900 million from the originally reported amounts. This segment is expected to continue to be the largest segment and is expected to grow gradually unless economic conditions change significantly. Consumer loans, which constituted 21% of the loan portfolio at December 31, 1996, and are the second largest component of the loan portfolio, include loans to individuals, home equity loans, and credit card loans. Credit card loans increased $201 million to $627 million, other consumer loans increased $117 million to $1.3 billion, and home equity loans increased approximately $18 million to $229 million at December 31, 1996. The growth of credit card loans is attributable to continued marketing efforts that were instituted in 1994 and to the purchase of approximately $90 million of credit card receivables in 1996. Commercial loans, which include commercial, financial, and agricultural loans, and direct lease financing, and constituted 15% of the loan portfolio at December 31, 1996, decreased approximately 2% between 1995 and 1996. The decrease is due to the very competitive market for these loans and the Corporation's reduction of its exposure to certain large relationships. The Corporation's FHA/VA government-insured/guaranteed loans relate primarily to the continuation of a program of Leader which was acquired October 1, 1996 and constituted 14% of the loan portfolio at December 31, 1996. These loans totaled $1.5 billion at December 31, 1996, an increase of $561 million from $917 million at December 31, 1995. As a loan servicer, the Corporation is obligated to pass through to the holders of a GNMA mortgage-backed security, the coupon rate, whether or not the interest due on the underlying loans has been paid by the borrower. When an FHA/VA government-insured/guaranteed single-family loan which carries an above-market rate of interest has been in default for more than 90 days, it is the Corporation's current policy to buy the delinquent FHA/VA loans out of the GNMA pools serviced by the Corporation. This action eliminates the Corporation's obligation to pay the coupon rate. The Corporation thereby gains the benefit of the net interest rate differential between the coupon rate which it would otherwise be obligated to pay to the GNMA holder and the Corporation's lower cost of funds. Furthermore, management has purchased, on a negotiated basis, delinquent FHA/VA government-insured/guaranteed loans from other GNMA 15 18 servicers to leverage the operating costs of this operation. Management expects that the volume of these loans will remain at the current levels or will decrease. Since all of these loans are FHA/VA government-guaranteed loans, the Corporation's investment is expected to be recoverable through claims made against FHA or VA. Management believes the credit risk and the risk of principal loss is minimal. For this reason, management has excluded these loans from the credit quality data and resulting ratios. Any losses incurred would be no greater or less than if the Corporation had continued solely as servicer of the FHA/VA loans. The risk inherent in these loans arises from failure to comply timely with FHA's and VA's foreclosure process and certain unreimbursable foreclosure costs. The Corporation, by purchasing the delinquent FHA/VA loans assumes only the interest-rate risk associated with funding a loan if timely foreclosure should not occur. Risk also exists, under certain circumstances, that claims might be rejected by FHA or VA or otherwise not be able to be collected in full. Provisions for these types of losses are provided through noninterest expense (provisions for losses on FHA/VA foreclosure claims -- see previous discussion) and the corresponding liability is carried in other liabilities. At December 31, 1996, the Corporation had reserves for these losses of $35.6 million. The remaining segments constituting 15% and 4%, respectively, of the loan portfolio at December 31, 1996, consists of other mortgage loans (loans secured by commercial properties, multifamily residential properties, and farmland) and real estate construction loans. Other mortgage loans totaled $1.5 billion at December 31, 1996, an increase of $246 million from $1.3 billion at December 31, 1995. Real estate construction loans totaled $447 million at December 31, 1996, which compared to $403 million at year end 1995. ALLOWANCE FOR LOSSES ON LOANS The allowance for losses on loans (the allowance) at December 31, 1996 was $166.9 million, or 1.86% of loans, compared to $156.4 million, or 1.92% of loans, at December 31, 1995. For this calculation, FHA/VA government-insured/guaranteed loans have been excluded from loans. 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 in accordance with 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 increased $23.9 million to $51.8 million, or .60% of average loans, for 1996. The increase in net charge-offs related primarily to credit card loans and other consumer loans. Credit card net charge-offs increased $13.2 million in 1996 to $25.7 million. Other consumer loan net charge-offs increased $6.7 million to $15.4 million. The increase in both of these categories of loans is due to the record level of personal bankruptcies and to the increase in the volume of loans outstanding. Net charge-offs for commercial, financial, and agricultural loans were $7.6 million in 1996, an increase of $4.5 million. The level of charge-offs in this segment of the portfolio is dependent upon economic conditions in the markets served by the Corporation. 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 discloses total loans by subsidiary and by state at December 31, 1996. At December 31, 1996, 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 31% of the loan portfolio, which historically has had low loss experience. The Corporation also holds $1.5 billion of delinquent FHA/VA government-insured/guaranteed loans which account for an additional 14% of the loan portfolio. These loans are also single family residential loans. As discussed previously, the risk of principal loss for delinquent FHA/VA loans is believed by management to be minimal because of government-insurance/guarantee. Management has emphasized diversification between large and smaller-sized loans in an effort to lessen risk in the portfolio. At December 31, 1996, the Corporation's largest loan relationship was $25.8 16 19 million and there were only 20 relationships of $10 million or more, which constituted in the aggregate less than 3% of the total loan portfolio. NONPERFORMING ASSETS Nonperforming assets consist of nonaccrual loans, restructured loans, and foreclosed properties. As shown in Table 9, nonperforming assets totaled $82.4 million at year end 1996, compared to $54.6 million at December 31, 1995. The year end 1996 total is comprised of $63.3 million of nonaccrual loans, which increased $20.0 million from December 31, 1995, restructured loans of $2.5 million and foreclosed properties of $16.5 million. As a percentage of loans, excluding FHA/VA government-insured/guaranteed loans, nonperforming assets were .92% of loans and foreclosed properties at December 31, 1996, compared to .67% at December 31, 1995. In management's opinion, asset-quality ratios remain at acceptable levels, although an unfavorable trend has occurred from 1994's historically low levels. Loans 90 days or more past due and still accruing interest are comprised of FHA/VA government-insured/guaranteed loans and all other loans 90 days past due. As discussed in the "Loans" section of this report, the FHA/VA loans do not, in management's opinion, have traditional credit risks similar to the rest of the loan portfolio and risk of loss of principal is considered minimal. FHA/VA government-insured/guaranteed loans 90 days or more past due totaled $709.4 million at December 31, 1996 compared to $534.6 million at year end 1995. The increase is directly related to the increased volume of these loans. Other loans 90 days or more past due totaled $22.7 million at year end 1996 compared to $18.6 million at December 31, 1995. 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 1996 1995 1996 1995 - -------------------------------------------------------- ------- ------- -------- -------- (DOLLARS IN THOUSANDS) Secured by single family residential FHA/VA government-insured/guaranteed loans............ $ -- $ -- $709,424 $534,633 Other loans........................................... 34,464 20,830 1,727 4,767 Secured by nonfarm nonresidential....................... 8,272 6,350 1,716 452 Other real estate....................................... 3,929 4,578 1,492 560 Commercial, financial, and agricultural, including direct lease financing................................ 12,115 7,848 1,841 2,468 Credit card and related plans........................... 39 15 11,520 5,269 Other consumer.......................................... 4,531 3,678 4,411 5,093 ------- ------- -------- -------- Total......................................... $63,350 $43,299 $732,131 $553,242 ======= ======= ======== ========
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 raised 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, 1996, the Corporation had potential problem assets (all loans) aggregating $11.4 million, comprised of 17 loans, the largest being $3.9 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, 1996, these assets totaled $446 million, 3.22% of the Corporation's earning assets. This compares to $671 million, or 5.05% of earning assets at December 31, 1995. 17 20 The decline in other earning assets from 1995 is attributable to a $294 million decrease in federal funds sold. This decrease was due to excess liquidity being used to fund other earning assets, primarily loans. The other significant component of this category was trading account assets which represents the government-guaranteed portions of SBA loans. Trading assets totaled $225 million at December 31, 1996, an increase of $103 million from year end 1995. 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, 1996, the Corporation had the largest deposit base of any bank holding company headquartered in Tennessee. Tables 4 and 6 present the components of the Corporation's average deposits. Deposits were $11.5 billion at December 31, 1996 and averaged the same amount for the year. The increase in deposits is attributable primarily to acquisitions. As shown in Table 6, average core deposits have increased for each of the past five years which has provided the Corporation a stable funding source. The composition of average deposits over the last three years was as follows:
TYPE OF DEPOSITS 1996 1995 1994 - ------------------------------------------------------------ ----- ----- ----- Noninterest-bearing deposits................................ 14% 14% 14% Money market deposits....................................... 16 15 17 Savings deposits............................................ 18 18 19 Other time deposits......................................... 44 45 43 Certificates of deposit of $100,000 and over................ 8 8 7
CAPITAL AND DIVIDENDS Shareholders' equity increased $139.7 million in 1996 to $1.4 billion, or 8.89% of total assets at December 31, 1996. This compares to shareholders' equity of $1.2 billion, or 8.43% of total assets at December 31, 1995. The primary sources of growth in shareholders' equity in 1996 were the retention of net earnings of $66.0 million, issuance of stock in connection with acquisitions of $53.8 million, and net stock transactions in connection with the dividend reinvestment plan and employee benefit plans of $26.8 million. Partially offsetting these increases was the impact of the net change in unrealized gains (losses) on available for sale securities of $6.9 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 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 $29.0 million compared to an increase of $31.1 million at December 31, 1995 and an increase of $24.6 million at December 31, 1996. 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 action. The system adopted by the agencies 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 regulatory capital to risk-weighted assets ratio of at least 6%, and a total regulatory capital to risk-weighted assets ratio of at least 10%. Table 13 presents the Corporation's regulatory capital ratios for the last three years and Note 12 to the consolidated financial statements presents a comparison of the Corporation's and UPNB's capital levels and ratios to the minimums for an institution to be considered well-capitalized and adequately capitalized. At December 31, 1996, the Corporation and all of its insured financial institutions met the requirements for well-capitalized institutions. 18 21 At December 31, 1996, the Corporation's leverage ratio was 9.61% and its Tier 1 and total regulatory capital to risk-weighted assets capital ratios were 15.29% and 18.32%, respectively, which are well above the regulatory minimums. These ratios compare to 8.08%, 13.39%, and 16.68%, respectively, at December 31, 1995. The improvement in these ratios is attributable to the continued profitability of the Corporation and the issuance of $200 million of Trust Preferred Securities which qualified as Tier 1 regulatory capital. The ratio of total capital to risk-weighted assets increased significantly in 1995 due to the issuance of $100 million of subordinated capital notes in the fourth quarter of 1995 which qualified as Tier 2 regulatory capital. Reference is made to Note 9 to the consolidated financial statements for additional information regarding these notes. The Corporation declared cash dividends on its Common Stock of $54.3 million in 1996 and $39.9 million in 1995. On a per share basis, this represented a 10% increase to $1.08 per share for 1996 compared to $.98 per share in 1995. Effective January 16, 1997, the regular quarterly cash dividend on the Corporation's Common Stock was increased by the Board of Directors by 18.5% to $.32 per share ($1.28 per share annually). Cash dividends declared on the Corporation's Preferred Stocks outstanding in 1996 totaled $6.9 million compared to $7.3 million in 1995. 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 cash dividends on common and preferred stock prior to acquisition, which are detailed in the consolidated statement of changes in shareholders' equity. The primary sources for payment of dividends by the Corporation to its shareholders are management fees and dividends received from its subsidiaries, interest on loans to subsidiaries, and interest on its available for sale investment securities. 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. 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 resulting earnings thereon, primarily net interest income, are subject to changes as a result of changes in market interest rates and the mix of the various assets and liabilities. Interest rates in the financial markets affect 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, a 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 date, rate of return, and degree of risk. The Corporation's Funds Management Committee oversees the conduct of corporate-wide 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 amounts and timing of balances exposed to changes in interest rates, as shown in Table 11. The analysis presented in Table 11 has been made at a point in time and could change significantly on a daily basis. The GAP report is not relied upon exclusively 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 also considered in evaluating the Corporation's interest-rate risk. 19 22 At December 31, 1996, the GAP report indicated that the Corporation was liability sensitive with $643 million more liabilities than assets repricing within one year. At 4% of total assets, this position was within management's policy limit of 10% of total assets. 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, 1996, 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 $8.8 million and a negative $17.4 million pretax, respectively. Another simulation uses a "most likely" scenario of interest rates increasing 50 basis points resulting in a $7.9 million pretax increase 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 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. The Corporation's primary sources of liquidity are its deposit base, available for sale securities, and money market investments. Liquidity is also achieved through short-term borrowings, borrowing under available lines of credit, and issuance of securities and debt instruments in the marketplace. In 1996, the Corporation's principal subsidiary, UPNB, established a $1-billion short- and medium-term bank note program to supplement UPNB's funding sources. Note 9 to the consolidated financial statements provides additional details regarding this program. At December 31, 1996, there were $265 million of Short-Term Bank Notes and $135 million of Medium-Term Bank Notes outstanding under this program. Parent company liquidity is achieved and maintained by dividends received from subsidiaries, interest on advances to subsidiaries, interest on the available for sale investment 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, 1996, the parent company had cash and cash equivalents totaling $274.6 million. The parent company's net working capital position at December 31, 1996 was $389.2 million. At January 1, 1997, the parent company could have received dividends from subsidiaries of $86.0 million without prior regulatory approval. The payment of additional dividends by the Corporation's subsidiaries 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 debt, and cash needed for acquisitions. At December 31, 1996, the parent company had no outstanding lines of credit and had no commercial paper outstanding. In the fourth quarter of 1996, the Corporation issued $200 million of Trust Preferred Securities (see Note 9 to the consolidated financial statements) which enhanced the Corporation's liquidity. These securities are carried on the balance sheet in long-term debt and qualify as Tier 1 regulatory capital. In 1995, the Corporation issued $100 million of 6 3/4% Subordinated Capital Notes which qualified as Tier 2 regulatory capital. The proceeds of these issues are available for general corporate purposes, including the acquisition of other financial institutions. Additionally, during 1996 the Corporation in-substance defeased all of its outstanding 8 1/2% subordinated capital notes. These notes did not qualify for Tier 2 regulatory capital. The defeasance resulted in an immaterial loss which was recorded in noninterest expense. 20 23 OFF-BALANCE-SHEET INSTRUMENTS The Corporation, on a limited basis, has used off-balance-sheet financial instruments to manage interest-rate risk. At December 31, 1996, the Corporation had no such instruments outstanding. Note 17 to the consolidated financial statements provides a reconciliation of the Corporation's interest-rate swap information for the past two years. 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 result primarily from 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's net income for the fourth quarter of 1996 was $11.4 million, or $.15 per fully diluted common share, compared to $35.3 million, or $.53 per fully diluted common share, for the same period in 1995. Results for both periods reflected significant charges which have been discussed and quantified in the "1996 Earnings Overview" and "Noninterest Expense" discussions. Net earnings for the fourth quarter of 1996 were reduced $58.8 million ($39.0 million after taxes) by merger-related and other significant net charges. The fourth quarter of 1995 results were reduced by merger-related charges of $12.4 million ($9.5 million after taxes). Fourth quarter of 1996 charges included the following: (i) charges for merger-related employment matters of approximately $18.1 million ($12.0 million after taxes); (ii) provisions for losses on servicing FHA/VA government-insured/guaranteed loans of approximately $5.2 million ($3.0 million after taxes); (iii) write-off of intangibles of approximately $13.7 million ($9.0 million after taxes); write-downs of buildings, property, and equipment of approximately $16.3 million ($10.0 million after taxes); professional fees of approximately $4.0 million ($4.0 million after taxes); and other charges of approximately $5.8 million ($3.9 million after taxes). These charges were offset by investment securities gains of $4.3 million ($2.9 million after taxes). Net interest income for the fourth quarter of 1996 was $154.8 million which represented a 12% increase over the $138.2 million for the same period in 1995. The increase is attributable to growth of average earning assets which increased 9% to $14.2 billion. Moreover, the net interest margin for the fourth quarter of 1996 was 4.44% compared to 4.35% for the same period in 1995. Investment securities gains of $4.3 million were realized from the fourth quarter sale of approximately $760 million of U.S. Government agency securities and long-term mortgage-backed securities to reduce interest-rate risk and pay off short-term wholesale borrowings. The provision for losses on loans for the fourth quarter of 1996 was $15.7 million compared to $13.6 million for the same period in 1995. The provision for losses on loans was higher in both years due to acquisitions and in 1996 due to the increased level of charge-offs in the credit card portfolio. Noninterest income for the last quarter of 1996 was $55.3 million compared to $54.2 million in 1995, before investment securities gains. Noninterest expense for the fourth quarter of 1996 was $181.2 million compared to $125.1 million for the fourth quarter of 1995. Excluding the significant charges described above, noninterest expenses in 1996 were $118.1 million compared to $112.7 million in 1995. Table 14, Selected Quarterly Data, presents certain quarterly financial data for 1996 and 1995. IMPACT OF PROPOSED ACCOUNTING STANDARDS In June 1996, the Financial Accounting Standards Board issued SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". The Statement 21 24 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings based on a control-oriented "financial-components" approach. Under this approach, after a transfer of financial assets, an entity recognizes the financial and servicing assets it controls and liabilities it has incurred, derecognizes financial assets when control has been surrendered, and derecognizes liabilities when extinguished. The provisions of SFAS No. 125 are effective for transactions occurring after December 31, 1996, except those provisions relating to repurchase agreements, securities lending, and other similar transactions and pledged collateral, which have been delayed until after December 31, 1997 by SFAS No. 127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125, an amendment of FASB Statement No. 125". The adoption of these statements is not expected to have a material impact on the Corporation's financial position or results of operations. 22 25 TABLE 1. SUMMARY OF CONSOLIDATED RESULTS
YEARS ENDED DECEMBER 31, ----------------------------------------------------------- 1996 1995 1994 1993 1992 ---------- ---------- --------- --------- --------- (DOLLARS IN THOUSANDS) Interest income....................... $1,180,609 $1,051,283 $ 889,425 $ 773,789 $ 702,830 Interest expense...................... (574,647) (515,286) (384,925) (334,499) (345,465) ---------- ---------- --------- --------- --------- NET INTEREST INCOME......... 605,962 535,997 504,500 439,290 357,365 PROVISION FOR LOSSES ON LOANS......... (57,395) (27,381) (9,661) (22,660) (37,367) ---------- ---------- --------- --------- --------- NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON LOANS..................... 548,567 508,616 494,839 416,630 319,998 NONINTEREST INCOME Service charges on deposit accounts......................... 76,527 75,261 59,564 53,723 41,687 Mortgage servicing income........... 46,098 37,427 31,060 28,266 31,237 Bank card income.................... 24,975 20,758 11,386 10,884 9,452 Trust service income................ 8,511 8,010 7,990 7,643 6,921 Profits and commissions from trading activities....................... 5,636 10,441 6,639 13,787 13,417 Other income........................ 51,990 51,117 41,270 39,050 29,935 ---------- ---------- --------- --------- --------- Total noninterest income.... 213,737 203,014 157,909 153,353 132,649 ---------- ---------- --------- --------- --------- NONINTEREST EXPENSE Salaries and employee benefits...... 209,604 197,526 201,532 186,703 145,849 Net occupancy expense............... 32,957 30,653 31,638 28,476 24,007 Equipment expense................... 35,175 33,672 32,618 30,345 24,874 Other expense....................... 178,573 178,873 162,811 153,233 142,799 ---------- ---------- --------- --------- --------- Total noninterest expense... 456,309 440,724 428,599 398,757 337,529 ---------- ---------- --------- --------- --------- EARNINGS BEFORE OTHER OPERATING ITEMS, INCOME TAXES, EXTRAORDINARY ITEM, AND ACCOUNTING CHANGES.... 305,995 270,906 224,149 171,226 115,118 OTHER OPERATING ITEMS Investment securities gains (losses)......................... 4,081 409 (22,515) 3,508 11,880 Restructuring charges............... -- -- (28,929) -- -- Merger-related expenses............. (52,786) (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 Gain on sales of branches and other selected assets.................. 7,245 -- -- -- -- One-time trust fees related to a court award...................... 1,268 -- -- -- -- Special regulatory assessment to recapitalize the SAIF............ (22,332) -- -- -- -- Write-off of mortgage servicing rights, goodwill, and other intangibles...................... (19,407) -- -- (3,094) (9,849) Additional provisions for losses on FHA/VA foreclosure claims of acquired entity.................. (19,800) -- -- -- -- Provisions for data processing systems conversions and abandonment of property.......... -- -- -- (4,424) (5,200) Litigation settlements.............. -- -- 2,200 (500) (9,450) ---------- ---------- --------- --------- --------- EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM, AND ACCOUNTING CHANGES.... 204,264 259,404 145,597 165,504 106,012 Applicable income taxes............... (70,526) (86,648) (45,174) (51,864) (30,219) ---------- ---------- --------- --------- --------- EARNINGS BEFORE EXTRAORDINARY ITEM AND ACCOUNTING CHANGES........ 133,738 172,756 100,423 113,640 75,793 Extraordinary item and accounting changes, net of taxes............... -- -- -- 637 2,847 ---------- ---------- --------- --------- --------- NET EARNINGS................ $ 133,738 $ 172,756 $ 100,423 $ 114,277 $ 78,640 ========== ========== ========= ========= =========
23 26 TABLE 2. CONTRIBUTION TO FULLY DILUTED EARNINGS PER SHARE
YEARS ENDED DECEMBER 31, ----------------------------------------------- 1996 1995 1994 1993(1) 1992(1) ------- ------- ------- ------- ------- Net interest income -- FTE....................... $ 8.96 $ 8.51 $ 8.73 $ 8.66 $ 8.31 Provision for losses on loans.................... (0.83) (0.42) (0.16) (0.40) (0.76) ------- ------- ------- ------- ------- NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON LOANS -- FTE............... 8.13 8.09 8.57 8.26 7.55 NONINTEREST INCOME Service charges on deposit accounts............ 1.10 1.16 0.99 1.07 0.99 Mortgage servicing income...................... 0.66 0.58 0.52 0.72 0.25 Bank card income............................... 0.36 0.32 0.19 0.22 0.23 Trust service income........................... 0.14 0.12 0.13 0.16 0.18 Profits and commissions from trading activities.................................. 0.08 0.16 0.11 0.29 0.35 Investment securities gains (losses)........... 0.06 0.01 (0.38) 0.10 0.37 Other income................................... 0.86 0.78 0.73 0.73 0.70 ------- ------- ------- ------- ------- Total noninterest income............... 3.26 3.13 2.29 3.29 3.07 ------- ------- ------- ------- ------- NONINTEREST EXPENSE Salaries and employee benefits................. (3.02) (3.04) (3.36) (3.58) (3.28) Net occupancy expense.......................... (0.47) (0.47) (0.53) (0.55) (0.54) Equipment expense.............................. (0.51) (0.52) (0.54) (0.57) (0.53) Other expense.................................. (4.21) (2.93) (3.69) (3.32) (3.42) ------- ------- ------- ------- ------- Total noninterest expense.............. (8.21) (6.96) (8.12) (8.02) (7.77) ------- ------- ------- ------- ------- EARNINGS BEFORE INCOME TAXES -- FTE, EXTRAORDINARY ITEM, AND ACCOUNTING CHANGES.............................. 3.18 4.26 2.74 3.53 2.85 Applicable income taxes -- FTE................... (1.26) (1.60) (1.06) (1.32) (1.05) ------- ------- ------- ------- ------- EARNINGS BEFORE EXTRAORDINARY ITEM AND ACCOUNTING CHANGES................... 1.92 2.66 1.68 2.21 1.80 Extraordinary item and accounting changes, net of taxes.......................................... -- -- -- 0.01 -- Preferred stock dividends........................ -- (0.02) (0.16) (0.07) (0.07) ------- ------- ------- ------- ------- NET EARNINGS........................... $ 1.92 $ 2.64 $ 1.52 $ 2.15 $ 1.73 ======= ======= ======= ======= ======= Change in net earnings applicable to fully diluted earnings per share using previous year average shares outstanding..................... $ (0.58) $ 1.34 $ (0.24) $ 0.93 $ 0.55 Change in average shares outstanding............. (0.14) (0.22) (0.39) (0.51) (0.17) ------- ------- ------- ------- ------- Change in net earnings................. $ (0.72) $ 1.12 $ (0.63) $ 0.42 $ 0.38 ======= ======= ======= ======= ======= AVERAGE FULLY DILUTED SHARES (IN THOUSANDS)...... 69,518 64,995 59,929 47,422 38,307 ======= ======= ======= ======= =======
- --------------- FTE -- Fully taxable-equivalent (1) Leader Financial Corporation was organized as a holding company on March 18, 1993 in connection with the conversion of its principal subsidiary, Leader Federal Bank for Savings, from a federal mutual savings bank to a federally-chartered capital stock savings bank. (See Note 2 to the consolidated financial statements). Accordingly, earnings per share for the year ended December 31, 1992 is calculated using only the Corporation's historical net earnings and the calculation of earnings per share for the year ended December 31, 1993 is based on the Corporation's historical net earnings for 1993 plus Leader's fourth quarter net earnings, since the stock conversion occurred on September 30, 1993. 24 27 TABLE 3. BALANCE SHEET IMPACT OF ACQUISITIONS
1996 1995 1994 ---------------------------------- ------------------------------------ ---------- LEADER OTHERS TOTAL CAPITAL OTHERS TOTAL TOTAL ---------- -------- ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) ASSETS Interest-bearing deposits at financial institutions.......... $ 241 $ 2,540 $ 2,781 $ 2,199 $ 168 $ 2,367 $ 32,708 Loans, net of unearned income................ 2,248,213 487,274 2,735,487 829,162 94,516 923,678 2,450,567 Allowance for losses on loans................. (31,645) (6,479) (38,124) (18,356) (1,361) (19,717) (44,188) ---------- -------- ---------- ---------- ---------- ---------- ---------- Net loans........ 2,216,568 480,795 2,697,363 810,806 93,155 903,961 2,406,379 Investment securities... 836,583 212,303 1,048,886 118,518 50,855 169,373 885,183 Intangible assets....... 52,985 9,356 62,341 9,075 6,533 15,608 19,857 Cash and cash equivalents........... 36,802 73,628 110,430 120,273 18,252 138,525 261,133 Other real estate, net................... 1,070 1,414 2,484 2,494 96 2,590 4,499 Premises and equipment.. 19,013 20,293 39,306 25,864 3,309 29,173 65,850 Other assets............ 247,659 12,295 259,954 15,840 2,896 18,736 95,529 ---------- -------- ---------- ---------- ---------- ---------- ---------- TOTAL ASSETS..... $3,410,921 $812,624 $4,223,545 $1,105,069 $ 175,264 $1,280,333 $3,771,138 ========== ======== ========== ========== ========== ========== ========== LIABILITIES Deposits................ $1,697,496 $710,800 $2,408,296 $ 987,564 $ 151,080 $1,138,644 $3,345,968 Other interest-bearing liabilities........... 1,384,610 18,585 1,403,195 30,682 -- 30,682 91,963 Other liabilities....... 72,755 9,319 82,074 12,004 4,032 16,036 44,836 ---------- -------- ---------- ---------- ---------- ---------- ---------- TOTAL LIABILITIES.... $3,154,861 $738,704 $3,893,565 $1,030,250 $ 155,112 $1,185,362 $3,482,767 ========== ======== ========== ========== ========== ========== ========== PURCHASE PRICE/CAPITAL CONTRIBUTION/EQUITY..... $ 256,060 $ 73,920 $ 329,980 $ 74,819 $ 20,152 $ 94,971 $ 288,371 ========== ======== ========== ========== ========== ========== ==========
25 28 TABLE 4. AVERAGE BALANCE SHEET AND AVERAGE INTEREST RATES
YEARS ENDED DECEMBER 31, --------------------------------------------------------------------- 1996 1995 --------------------------------- --------------------------------- INTEREST FTE INTEREST FTE AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ BALANCE EXPENSE RATE BALANCE EXPENSE RATE ----------- ---------- ------ ----------- ---------- ------ (DOLLARS IN THOUSANDS) ASSETS Interest-bearing deposits at financial institutions....... $ 6,583 $ 550 8.35% $ 25,593 $ 2,114 8.26% Federal funds sold and securities purchased under agreements to resell......... 239,887 13,139 5.48 294,457 17,041 5.79 Trading account assets......... 152,535 11,343 7.44 171,372 13,178 7.69 Investment securities(1) and (2).......................... Taxable securities........... 3,323,914 218,748 6.58 2,764,577 175,882 6.36 Tax-exempt securities........ 499,183 45,144 9.04 515,835 47,724 9.25 ----------- ---------- ----------- ---------- Total investment securities............. 3,823,097 263,892 6.90 3,280,412 223,606 6.82 Loans, net of unearned income(1), (3), and (4)...... 9,894,427 908,464 9.18 8,874,417 812,916 9.16 ----------- ---------- ----------- ---------- TOTAL EARNING ASSETS(1), (2), (3), AND (4)...... 14,116,529 1,197,388 8.48 12,646,251 1,068,855 8.45 ---------- ---------- Cash and due from banks........ 475,662 463,357 Premises and equipment......... 266,827 247,885 Allowance for losses on loans........................ (169,513) (157,154) Other assets................... 585,277 461,409 ----------- ----------- TOTAL ASSETS............. $15,274,782 $13,661,748 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Money market accounts.......... $ 1,788,280 $ 59,442 3.32% $ 1,672,738 $ 44,540 2.66% Savings deposits............... 2,023,298 51,496 2.55 1,927,638 51,842 2.69 Certificates of deposit of $100,000 and over............ 986,100 57,961 5.88 858,136 42,397 4.94 Other time deposits............ 5,102,089 280,965 5.51 4,877,532 283,885 5.82 Short-term borrowings.......... 902,764 49,603 5.49 578,547 33,486 5.79 Short-term bank notes.......... 88,361 5,136 5.81 -- -- -- Long-term debt Federal Home Loan Bank advances................... 863,261 49,412 5.72 747,268 46,082 6.17 Subordinated capital notes... 211,866 15,419 7.28 129,995 10,337 7.95 Medium-term bank notes....... 42,637 2,801 6.57 -- -- -- Trust Preferred Securities... 10,871 872 8.02 -- -- -- Other........................ 26,549 1,540 5.80 34,786 2,717 7.81 ----------- ---------- ----------- ---------- TOTAL INTEREST-BEARING LIABILITIES............ 12,046,076 574,647 4.77 10,826,640 515,286 4.76 Noninterest-bearing demand deposits..................... 1,632,648 -- 1,519,185 -- ----------- ---------- ----------- ---------- TOTAL SOURCES OF FUNDS... 13,678,724 574,647 12,345,825 515,286 ---------- ---------- Other liabilities.............. 312,483 196,691 Shareholders' equity........... 1,283,575 1,119,232 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY... $15,274,782 $13,661,748 =========== =========== NET INTEREST INCOME(1)......... $ 622,741 $ 553,569 ========== ========== INTEREST RATE SPREAD(1)........ 3.71% 3.69% ==== ==== NET INTEREST MARGIN(1)......... 4.41% 4.38% ==== ==== TAXABLE-EQUIVALENT ADJUSTMENTS Loans........................ $ 2,268 $ 2,016 Securities................... 14,511 15,556 ---------- ---------- Total.................... $ 16,779 $ 17,572 ========== ========== YEARS ENDED DECEMBER 31, ------------------------------- 1994 ------------------------------- INTEREST FTE AVERAGE INCOME/ YIELD/ BALANCE EXPENSE RATE ----------- -------- ------ ASSETS Interest-bearing deposits at financial institutions....... $ 14,183 $ 748 5.27% Federal funds sold and securities purchased under agreements to resell......... 164,836 6,862 4.16 Trading account assets......... 161,634 9,143 5.66 Investment securities(1) and (2).......................... Taxable securities........... 3,598,249 192,171 5.34 Tax-exempt securities........ 541,491 50,203 9.27 ----------- -------- Total investment securities............. 4,139,740 242,374 5.85 Loans, net of unearned income(1), (3), and (4)...... 7,648,649 648,810 8.48 ----------- -------- TOTAL EARNING ASSETS(1), (2), (3), AND (4)...... 12,129,042 907,937 7.49 -------- Cash and due from banks........ 453,749 Premises and equipment......... 251,001 Allowance for losses on loans........................ (153,180) Other assets................... 424,567 ----------- TOTAL ASSETS............. $13,105,179 =========== LIABILITIES AND SHAREHOLDERS' EQUITY Money market accounts.......... $ 1,792,393 $ 46,293 2.58% Savings deposits............... 2,025,801 48,187 2.38 Certificates of deposit of $100,000 and over............ 766,859 34,020 4.44 Other time deposits............ 4,532,793 189,221 4.17 Short-term borrowings.......... 648,455 28,277 4.36 Short-term bank notes.......... -- -- -- Long-term debt Federal Home Loan Bank advances................... 518,112 27,258 5.26 Subordinated capital notes... 116,272 8,547 7.35 Medium-term bank notes....... -- -- -- Trust Preferred Securities... -- -- -- Other........................ 36,072 3,122 8.65 ----------- -------- TOTAL INTEREST-BEARING LIABILITIES............ 10,436,757 384,925 3.69 Noninterest-bearing demand deposits..................... 1,489,100 -- ----------- -------- TOTAL SOURCES OF FUNDS... 11,925,857 384,925 -------- Other liabilities.............. 136,332 Shareholders' equity........... 1,042,990 ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY... $13,105,179 =========== NET INTEREST INCOME(1)......... $523,012 ======== INTEREST RATE SPREAD(1)........ 3.80% ==== NET INTEREST MARGIN(1)......... 4.31% ==== TAXABLE-EQUIVALENT ADJUSTMENTS Loans........................ $ 1,724 Securities................... 16,788 -------- Total.................... $ 18,512 ========
- --------------- (1) Fully 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. 26 29 TABLE 5. ANALYSIS OF VOLUME AND RATE CHANGES
1996 VERSUS 1995 1995 VERSUS 1994 -------------------------------- -------------------------------- INCREASE INCREASE (DECREASE) (DECREASE) DUE TO CHANGE DUE TO CHANGE IN:(1) IN:(1) ------------------- TOTAL ------------------- TOTAL AVERAGE AVERAGE INCREASE AVERAGE AVERAGE INCREASE VOLUME RATE (DECREASE) VOLUME RATE (DECREASE) -------- -------- ---------- -------- -------- ---------- (DOLLARS IN THOUSANDS) INTEREST INCOME Interest-bearing deposits at financial institutions.................................... $ (1,588) $ 24 $ (1,564) $ 801 $ 565 $ 1,366 Federal funds sold and securities purchased under agreements to resell............................ (3,027) (875) (3,902) 6,804 3,375 10,179 Trading account assets............................ (1,412) (423) (1,835) 579 3,456 4,035 Investment securities -- FTE...................... 37,426 2,860 40,286 (54,925) 36,157 (18,768) Loans, net of unearned income -- FTE.............. 93,649 1,899 95,548 109,521 54,585 164,106 -------- -------- -------- -------- -------- -------- TOTAL INTEREST INCOME....................... 125,048 3,485 128,533 62,780 98,138 160,918 -------- -------- -------- -------- -------- -------- INTEREST EXPENSE Money market accounts............................. 3,243 11,659 14,902 (3,156) 1,403 (1,753) Savings deposits.................................. 2,507 (2,853) (346) (2,418) 6,073 3,655 Certificates of deposit of $100,000 and over...... 6,850 8,714 15,564 4,285 4,092 8,377 Other time deposits............................... 12,746 (15,666) (2,920) 15,309 79,355 94,664 Short-term borrowings............................. 22,852 (1,599) 21,253 (3,295) 8,504 5,209 Long-term debt.................................... 15,840 (4,932) 10,908 14,499 5,710 20,209 -------- -------- -------- -------- -------- -------- TOTAL INTEREST EXPENSE...................... 64,038 (4,677) 59,361 25,224 105,137 130,361 -------- -------- -------- -------- -------- -------- CHANGE IN NET INTEREST INCOME....................... $ 61,010 $ 8,162 $ 69,172 $ 37,556 $ (6,999) $ 30,557 ======== ======== ======== ======== ======== ======== PERCENTAGE INCREASE IN NET INTEREST INCOME OVER PRIOR PERIOD...................................... 12.50% 5.84% ======== ========
- --------------- 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. TABLE 6. AVERAGE DEPOSITS(1)
YEARS ENDED DECEMBER 31, ----------------------------------------------------------------- 1996 1995 1994 1993 1992 ----------- ----------- ----------- ---------- ---------- (DOLLARS IN THOUSANDS) Noninterest-bearing demand.............................. $ 1,632,648 $ 1,519,185 $ 1,489,100 $1,308,248 $1,017,927 Money market(2)......................................... 1,788,280 1,672,738 1,792,393 2,062,019 1,742,919 Savings(3).............................................. 2,023,298 1,927,638 2,025,801 1,434,777 980,514 Other time(4)........................................... 5,102,089 4,877,532 4,532,793 4,130,540 3,671,600 ----------- ----------- ----------- ---------- ---------- TOTAL AVERAGE CORE DEPOSITS..................... 10,546,315 9,997,093 9,840,087 8,935,584 7,412,960 Certificates of deposit of $100,000 and over............ 986,100 858,136 766,859 802,429 721,486 ----------- ----------- ----------- ---------- ---------- TOTAL AVERAGE DEPOSITS.......................... $11,532,415 $10,855,229 $10,606,946 $9,738,013 $8,134,446 =========== =========== =========== ========== ==========
- --------------- (1) Table 4 presents the average rate paid on the above deposit categories for each of the three years ended December 31, 1996. (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, IRAs, and Club accounts. 27 30 TABLE 7. COMPOSITION OF THE LOAN PORTFOLIO
DECEMBER 31, --------------------------------------------------------------- 1996 1995 1994 1993 1992 ----------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) Commercial, financial, and agricultural....... $ 1,537,535 $1,573,790 $1,599,374 $1,379,430 $1,192,655 Real estate -- construction................... 446,946 403,492 351,711 249,314 183,806 Real estate -- mortgage Secured by 1-4 family residential........... 3,218,651 2,976,180 2,999,835 2,328,313 1,961,634 FHA/VA government-insured/guaranteed........ 1,477,459 916,681 639,216 346,622 184,556 Other mortgage.............................. 1,530,110 1,283,937 1,244,773 1,084,884 820,103 Home equity................................... 228,511 210,834 192,052 169,731 172,894 Consumer Credit cards and related plans.............. 627,406 426,241 296,158 131,478 106,005 Other consumer.............................. 1,324,252 1,207,666 1,100,695 923,589 744,285 Direct lease financing........................ 73,306 74,551 50,479 34,717 26,097 ----------- ---------- ---------- ---------- ---------- TOTAL LOANS.......................... 10,464,176 9,073,372 8,474,293 6,648,078 5,392,035 Less: Unearned income......................... 30,106 32,313 37,643 32,194 27,658 ----------- ---------- ---------- ---------- ---------- TOTAL LOANS, NET OF UNEARNED INCOME............................. $10,434,070 $9,041,059 $8,436,650 $6,615,884 $5,364,377 =========== ========== ========== ========== ==========
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, ------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 ---------------------- ---------------------- ---------------------- ---------------------- PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE OF LOANS TO OF LOANS TO OF LOANS TO OF LOANS TO AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS -------- ----------- -------- ----------- -------- ----------- -------- ----------- (DOLLARS IN THOUSANDS) Commercial, financial, and agricultural....... $ 30,741 17% $ 40,105 19% $ 47,811 20% $ 58,434 22% Real estate -- construction....... 7,090 5 8,626 5 7,188 5 4,531 4 Real estate -- mortgage........... 69,647 53 54,412 52 58,409 54 53,040 54 Consumer............. 58,387 24 52,054 23 40,195 20 25,469 19 Direct lease financing.......... 988 1 1,191 1 528 1 525 1 -------- --- -------- --- -------- --- -------- --- Total........ $166,853 100% $156,388 100% $154,131 100% $141,999 100% ======== === ======== === ======== === ======== === DECEMBER 31, ---------------------- 1992 ---------------------- PERCENTAGE OF LOANS TO AMOUNT TOTAL LOANS -------- ----------- Commercial, financial, and agricultural....... $ 47,484 23% Real estate -- construction....... 2,795 3 Real estate -- mortgage........... 43,247 53 Consumer............. 20,274 20 Direct lease financing.......... 330 1 -------- --- Total........ $114,130 100% ======== ===
- --------------- 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. No portion of the allowance for losses on loans has been allocated to FHA/VA government-insured/guaranteed loans since they represent minimal credit risk. FHA/VA government-insured/guaranteed loans have been excluded from total loans for the above calculations. See the "Loans" discussion for additional details regarding these loans. TABLE 9. NONACCRUAL, RESTRUCTURED, AND PAST DUE LOANS AND FORECLOSED PROPERTIES
DECEMBER 31, --------------------------------------------------- 1996 1995 1994 1993 1992 -------- -------- -------- -------- ------- (DOLLARS IN THOUSANDS) Nonaccrual loans....................................... $ 63,346 $ 43,299 $ 28,615 $ 28,038 $53,302 Restructured loans..................................... 2,546 2,135 6,082 12,986 6,936 -------- -------- -------- -------- ------- TOTAL NONPERFORMING LOANS..................... 65,892 45,434 34,697 41,024 60,238 -------- -------- -------- -------- ------- Foreclosed properties Other real estate, net............................... 15,531 8,057 9,737 18,414 34,619 Other foreclosed properties.......................... 989 1,138 669 883 551 -------- -------- -------- -------- ------- TOTAL FORECLOSED PROPERTIES................... 16,520 9,195 10,406 19,297 35,170 -------- -------- -------- -------- ------- TOTAL NONPERFORMING ASSETS.................... $ 82,412 $ 54,629 $ 45,103 $ 60,321 $95,408 ======== ======== ======== ======== ======= Loans 90 days or more past due and not on nonaccrual status FHA/VA government-insured/guaranteed loans........... $709,424 $534,633 $252,575 $105,682 $59,275 All other loans...................................... 22,707 18,609 7,344 11,663 17,107 -------- -------- -------- -------- ------- TOTAL LOANS 90 DAYS OR MORE PAST DUE.......... $732,131 $553,242 $259,919 $117,345 $76,382 ======== ======== ======== ======== =======
28 31 TABLE 10. ALLOWANCE FOR LOSSES ON LOANS
YEARS ENDED DECEMBER 31, --------------------------------------------------------------- 1996 1995 1994 1993 1992 ----------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) BALANCE AT BEGINNING OF PERIOD........... $ 156,388 $ 154,131 $ 141,999 $ 114,130 $ 84,312 LOANS CHARGED OFF Commercial, financial, and agricultural......................... 10,808 8,234 5,822 12,427 23,523 Real estate -- construction............ 367 318 312 105 411 Real estate -- mortgage................ 4,863 5,732 4,216 3,772 5,940 Consumer............................... 20,346 13,213 8,690 9,511 10,168 Credit cards and related plans......... 27,657 13,422 2,676 2,649 2,867 Direct lease financing................. 48 52 6 52 399 ----------- ---------- ---------- ---------- ---------- Total charge-offs............... 64,089 40,971 21,722 28,516 43,308 ----------- ---------- ---------- ---------- ---------- RECOVERIES ON LOANS PREVIOUSLY CHARGEDOFF Commercial, financial, and agricultural........................... 3,247 5,138 6,692 5,750 10,801 Real estate -- construction............ 16 429 468 59 161 Real estate -- mortgage................ 2,190 2,143 2,845 926 562 Consumer............................... 4,940 4,475 4,010 4,557 4,553 Credit cards and related plans......... 1,912 848 793 810 869 Direct lease financing................. 4 52 133 54 135 ----------- ---------- ---------- ---------- ---------- Total recoveries................ 12,309 13,085 14,941 12,156 17,081 ----------- ---------- ---------- ---------- ---------- Net charge-offs.......................... 51,780 27,886 6,781 16,360 26,227 Provision charged to expense............. 57,395 27,381 9,661 22,660 37,367 Allowance related to the sale of certain loans.................................. (1,628) -- -- -- -- Increase due to acquisitions............. 6,478 2,762 9,252 21,569 18,678 ----------- ---------- ---------- ---------- ---------- BALANCE AT END OF PERIOD................. $ 166,853 $ 156,388 $ 154,131 $ 141,999 $ 114,130 =========== ========== ========== ========== ========== Total loans, net of unearned income, at end of period.......................... $10,434,070 $9,041,059 $8,436,650 $6,615,884 $5,364,377 Less: FHA/VA government- insured/guaranteed loans............... 1,477,459 916,681 639,216 346,622 184,556 ----------- ---------- ---------- ---------- ---------- LOANS USED TO CALCULATE RATIOS......... $ 8,956,611 $8,124,378 $7,797,434 $6,269,262 $5,179,821 =========== ========== ========== ========== ========== Average total loans, net of unearned income, during period.................. $ 9,894,427 $8,874,417 $7,648,649 $6,375,900 $5,217,025 Less: Average FHA/VA government- insured/guaranteed loans............... 1,197,070 777,949 492,919 265,589 145,243 ----------- ---------- ---------- ---------- ---------- AVERAGE LOANS USED TO CALCULATE RATIOS............................... $ 8,697,357 $8,096,468 $7,155,730 $6,110,311 $5,071,782 =========== ========== ========== ========== ========== CREDIT QUALITY RATIOS(1) Allowance at end of period to loans, net of unearned income............... 1.86% 1.92% 1.98% 2.27% 2.20% Allowance at end of period to average loans, net of unearned income........ 1.92 1.93 2.15 2.32 2.25 Allowance for losses on loans as a percentage of nonperforming loans.... 253 344 444 346 189 Net charge-offs to average loans, net of unearned income................... .60 .34 .09 .27 .52 Nonperforming loans as a percentage of loans................................ .74 .56 .44 .65 1.16 Nonperforming assets as a percentage of loans plus foreclosed properties..... .92 .67 .58 .96 1.83 Loans 90 days or more past due and not on nonaccrual status as a percentage of loans............................. .25 .23 .09 .19 .33
- --------------- (1) Ratio calculations exclude FHA/VA government-insured/guaranteed loans since they represent minimal credit risk to the Corporation. See the "Loans" discussion for additional information regarding the FHA/VA government-insured/guaranteed loans and Table 9 for the detail of nonperforming assets. 29 32 TABLE 11. RATE SENSITIVITY ANALYSIS AT DECEMBER 31, 1996
INTEREST-SENSITIVE WITHIN (1) AND (7) ---------------------------------------------------------------------------------------- 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), (3), and (4)................. $2,439 $ 639 $ 729 $1,342 $1,025 $2,881 $1,343 $ 66 $10,464 Investment securities (5) and (6)................. 380 251 384 487 419 450 585 -- 2,956 Other earning assets...... 293 151 2 -- -- -- -- -- 446 Other assets.............. -- -- -- -- -- -- -- 1,357 1,357 ------ ------- ------ ------ ------ ------ ------ ------- ------- TOTAL ASSETS....... $3,112 $ 1,041 $1,115 $1,829 $1,444 $3,331 $1,928 $ 1,423 $15,223 ====== ======= ====== ====== ====== ====== ====== ======= ======= SOURCES OF FUNDS Money market deposits (7) and (8)................. $ -- $ 554 $ -- $ 554 $ -- $ 739 $ -- $ -- $ 1,847 Other savings and time deposits................ 837 1,517 978 1,057 674 1,808 30 -- 6,901 Certificates of deposit of $100,000 and over....... 222 202 199 205 131 51 1 -- 1,011 Short-term borrowings..... 447 -- 2 -- -- -- -- -- 449 Short and medium-term bank notes................... 100 100 65 -- 30 105 -- -- 400 Federal Home Loan Bank advances................ 137 555 2 4 10 37 145 -- 890 Other long-term debt...... -- 1 1 1 3 3 375 -- 384 Noninterest-bearing deposits................ -- -- -- -- -- -- -- 1,731 1,731 Other liabilities......... -- -- -- -- -- -- -- 257 257 Shareholders' equity...... -- -- -- -- -- -- -- 1,353 1,353 ------ ------- ------ ------ ------ ------ ------ ------- ------- TOTAL SOURCES OF FUNDS............ $1,743 $ 2,929 $1,247 $1,821 $ 848 $2,743 $ 551 $ 3,341 $15,223 ====== ======= ====== ====== ====== ====== ====== ======= ======= INTEREST-RATE SENSITIVITY GAP....................... $1,369 $(1,888) $ (132) $ 8 $ 596 $ 588 $1,377 $(1,918) CUMULATIVE INTEREST RATE SENSITIVITY GAP........... 1,369 (519) (651) (643) (47) 541 1,918 -- CUMULATIVE GAP AS A PERCENTAGE OF TOTAL ASSETS(8)................. 9% (3)% (4)% (4)% --% 4% 13% --%
- --------------- 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) Delinquent FHA/VA loans are scheduled based on foreclosure and repayment patterns. (5) 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. (6) Securities are scheduled according to their call dates when valued at a premium to par. (7) 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. (8) 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%), (21%), (22%), (18%), (14%), and positive 4% and 13%, 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, 1996. 30 33 TABLE 12. INVESTMENT SECURITIES AND OTHER EARNING ASSETS
DECEMBER 31, ------------------------------------ 1996 1995 1994 ---------- ---------- ---------- (DOLLARS IN THOUSANDS) U.S. Government obligations U.S. Treasury............................................ $ 837,386 $ 833,061 $ 975,221 U.S. Government agencies................................. 1,462,670 2,101,717 1,919,302 ---------- ---------- ---------- Total U.S. Government obligations................ 2,300,056 2,934,778 2,894,523 Obligations of states and political subdivisions........... 505,970 519,134 537,193 Other investment securities................................ 150,208 119,142 160,766 ---------- ---------- ---------- Total investment securities...................... 2,956,234 3,573,054 3,592,482 Interest-bearing deposits at financial institutions........ 9,082 14,114 11,132 Federal funds sold and securities purchased under agreements to resell..................................... 152,667 446,655 54,178 Trading account assets..................................... 225,336 121,927 155,951 Loans held for resale...................................... 58,622 87,889 33,812 ---------- ---------- ---------- Total investment securities and other earning assets......................................... $3,401,941 $4,243,639 $3,847,555 ========== ========== ==========
TABLE 13. RISK-BASED CAPITAL
DECEMBER 31, ------------------------------------ 1996 1995 1994 ---------- ---------- ---------- (DOLLARS IN THOUSANDS) TIER 1 CAPITAL Shareholders' equity..................................... $1,352,874 $1,213,162 $1,008,594 Trust Preferred Securities and minority interest in consolidated subsidiary............................... 200,026 1,088 1,088 Less: Goodwill.......................................... (46,129) (46,913) (46,541) Disallowed deferred tax asset..................... (1,867) (2,237) (2,494) Unrealized (gain) loss on available for sale securities............................................... (24,592) (31,068) 29,001 ---------- ---------- ---------- TOTAL TIER 1 CAPITAL............................. 1,480,312 1,134,032 989,648 TIER 2 CAPITAL Allowance for losses on loans............................ 121,623 104,393 97,666 Qualifying long-term debt................................ 174,121 174,166 74,747 ---------- ---------- ---------- TOTAL CAPITAL BEFORE DEDUCTIONS.................. 1,776,056 1,412,591 1,162,061 Less investment in unconsolidated subsidiaries........... (1,743) (214) (36) ---------- ---------- ---------- TOTAL CAPITAL.................................... $1,774,313 $1,412,377 $1,162,025 ========== ========== ========== RISK-WEIGHTED ASSETS....................................... $9,684,621 $8,467,922 $7,762,084 ========== ========== ========== RATIOS Equity to assets......................................... 8.89% 8.43% 7.51% Leverage ratio(1)........................................ 9.61 8.08 7.53 Tier 1 capital to risk-weighted assets(1)................ 15.29 13.39 12.75 Total capital to risk-weighted assets(1)................. 18.32 16.68 14.97
- --------------- (1) 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, 1996, all of the Corporation's banking subsidiaries were considered "well-capitalized." See Note 12 to the consolidated financial statements for a comparison of the Corporation's capital levels and ratios to the regulatory minimums for "adequately capitalized" and "well capitalized." 31 34 TABLE 14. SELECTED QUARTERLY DATA
1996 QUARTERS ENDED(1) -------------------------------------------------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL ----------- ----------- ------------ ----------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Net interest income............. $ 147,742 $ 151,800 $ 151,661 $ 154,759 $ 605,962 Provision for losses on loans... (12,949) (12,720) (16,070) (15,656) (57,395) Investment securities gains (losses)...................... 61 (29) (261) 4,310 4,081 Noninterest income.............. 53,696 55,589 57,632 55,333 222,250 Noninterest expense............. (117,971) (120,274) (151,180) (181,209) (570,634) ----------- ----------- ----------- ----------- ----------- Earnings before income taxes.... 70,579 74,366 41,782 17,537 204,264 Applicable income taxes......... 23,427 25,742 15,170 6,187 70,526 ----------- ----------- ----------- ----------- ----------- Net earnings.................... $ 47,152 $ 48,624 $ 26,612 $ 11,350 $ 133,738 =========== =========== =========== =========== =========== PER COMMON SHARE DATA Net earnings Primary.................... $ .70 $ .72 $ .38 $ .15 $ 1.95 Fully diluted.............. .68 .70 .38 .15 1.92 Dividends..................... .27 .27 .27 .27 1.08 UPC COMMON STOCK DATA(2) High trading price............ $ 31.75 $ 31.25 $ 36.25 $ 41.38 $ 41.38 Low trading price............. 29.00 29.63 28.63 34.63 28.63 Closing price................. 30.25 30.38 35.50 39.00 39.00 Trading volume (in thousands) (3)........................ 5,862 5,221 9,506 7,795 28,383 KEY FINANCIAL DATA Return on average assets...... 1.25% 1.29% .69% .29% .88% Return on average common equity..................... 15.86 16.01 8.18 3.10 10.61 Expense ratio................. 1.62 1.59 1.53 1.37 1.58 Efficiency ratio.............. 55.63 55.23 56.11 52.63 55.43 Equity/assets (period end).... 8.52 8.62 8.58 8.89 8.89 Average earning assets........ $13,972,060 $14,047,907 $14,239,275 $14,204,554 $14,116,529 Interest income -- FTE........ 295,358 298,323 300,703 303,004 1,197,388 Yield on average earning assets -- FTE.............. 8.50% 8.54% 8.40% 8.49% 8.48% Average interest-bearing liabilities................ $11,828,347 $12,008,611 $12,245,712 $12,098,858 $12,046,076 Total interest expense........ 143,430 142,188 144,699 144,330 574,647 Rate on average interest- bearing liabilities........ 4.88% 4.76% 4.70% 4.75% 4.77% Net interest income -- FTE.... $ 151,928 $ 156,135 $ 156,004 $ 158,674 $ 622,741 Net interest margin -- FTE.... 4.37% 4.47% 4.36% 4.44% 4.41%
32 35 TABLE 14. SELECTED QUARTERLY DATA (CONTINUED)
1995 QUARTERS ENDED(1) -------------------------------------------------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL ----------- ----------- ------------ ----------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Net interest income............. $ 129,143 $ 132,128 $ 136,565 $ 138,161 $ 535,997 Provision for losses on loans... (3,428) (3,672) (6,662) (13,619) (27,381) Investment securities gains (losses)...................... (21) 18 (478) 890 409 Noninterest income.............. 46,487 50,403 51,935 54,189 203,014 Noninterest expense............. (106,268) (109,816) (111,422) (125,129) (452,635) ----------- ----------- ----------- ----------- ----------- Earnings before income taxes.... 65,913 69,061 69,938 54,492 259,404 Applicable income taxes......... 21,509 23,512 22,470 19,157 86,648 ----------- ----------- ----------- ----------- ----------- Net earnings.................... $ 44,404 $ 45,549 $ 47,468 $ 35,335 $ 172,756 =========== =========== =========== =========== =========== PER COMMON SHARE DATA Net earnings Primary.................... $ .71 $ .72 $ .74 $ .55 $ 2.72 Fully diluted.............. .69 .70 .72 .53 2.64 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...... 1.35% 1.36% 1.37% 1.00% 1.26% Return on average common equity..................... 18.05 17.90 17.59 12.50 16.16 Expense ratio................. 1.82 1.77 1.71 1.66 1.74 Efficiency ratio.............. 59.02 58.78 57.79 57.44 58.24 Equity/assets (period end).... 8.06 8.21 8.59 8.43 8.43 Average earning assets........ $12,384,047 $12,465,001 $12,711,118 $13,017,162 $12,646,251 Interest income -- FTE........ 251,260 263,863 274,208 279,524 1,068,855 Yield on average earning assets -- FTE.............. 8.23% 8.49% 8.56% 8.52% 8.45% Average interest-bearing liabilities................ $10,625,445 $10,623,292 $10,942,627 $11,108,617 $10,826,640 Total interest expense........ 117,682 127,442 133,336 136,826 515,286 Rate on average interest- bearing liabilities........ 4.49% 4.81% 4.83% 4.89% 4.76% Net interest income -- FTE.... $ 133,578 $ 136,421 $ 140,872 $ 142,698 $ 553,569 Net interest margin -- FTE.... 4.37% 4.39% 4.40% 4.35% 4.38%
- --------------- FTE -- Fully taxable-equivalent basis (1) Quarterly amounts have been restated for all 1996 acquisitions accounted for using the pooling of interests method of accounting. In addition, quarterly amounts for 1995 have been restated for the 1996 acquisition of Leader (see Note 2 to the consolidated financial statements). Certain 1996 quarterly amounts for acquired entities have been restated from originally reported amounts due to certain adjustments to conform to the Corporation's reporting policies. (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 17,500 holders of the Corporation's Common Stock as of December 31, 1996. (3) Trading volume represents total volume for the period shown as reported by the NYSE. 33 36 TABLE 15. UNION PLANTERS CORPORATION'S BANKING SUBSIDIARIES
DECEMBER 31, 1996(1) ------------------------------------- ASSETS LOANS DEPOSITS EQUITY ------- ------ -------- ------- (DOLLARS IN MILLIONS) TENNESSEE Union Planters National Bank (Memphis)...................... $ 6,001 $4,030 $3,125 $433.3 Union Planters Bank of Middle Tennessee, N.A. (Nashville)... 1,077 713 984 71.4 Union Planters Bank of West Tennessee (Humboldt)............ 453 275 400 39.6 Union Planters Bank of East Tennessee, N.A. (Knoxville)..... 426 311 381 32.2 Union Planters Bank of Jackson, N.A......................... 319 191 295 21.6 Union Planters Bank of the Lakeway Area (Morristown)........ 247 168 208 20.4 Union Planters Bank of the Cumberlands (Cookeville)......... 242 153 222 18.1 First National Bank of Shelbyville.......................... 190 106 165 15.2 Union Planters Bank of the Tennessee Valley (Harriman)...... 189 117 171 13.4 The First National Bank of Crossville....................... 183 81 164 12.5 Union Planters Bank of Northwest Tennessee FSB (Paris)...... 168 124 147 11.1 Bank of Goodlettsville...................................... 167 106 155 10.9 Union Planters Bank of Chattanooga, N.A..................... 130 75 117 12.6 Central State Bank (Lexington).............................. 110 76 99 7.0 First State Bank of Brownsville............................. 89 49 72 5.2 Bank of Commerce (Woodbury)................................. 81 56 74 7.0 First Citizens Bank of Hohenwald............................ 56 33 47 4.5 Union Planters Bank of North Central Tennessee (Erin)....... 52 30 45 5.5 First State Bank of Fayette County (Somerville)............. 29 18 26 2.1 ------- ------ ------ ------ Total Tennessee................................... $10,209 $6,712 $6,897 $743.6 ======= ====== ====== ====== MISSISSIPPI Union Planters Bank of Central Mississippi (Jackson)........ $ 594 $ 410 $ 516 $ 41.1 Union Planters Bank of Northwest Mississippi (Clarksdale)... 550 299 479 40.6 Union Planters Bank of Mississippi (Grenada)................ 538 345 452 43.8 Union Planters Bank of Southern Mississippi (Hattiesburg)... 363 238 299 26.3 Union Planters Bank of Northeast Mississippi (New Albany)... 274 182 234 18.0 ------- ------ ------ ------ Total Mississippi................................. $ 2,319 $1,474 $1,980 $169.8 ======= ====== ====== ====== MISSOURI Union Planters Bank of Southeast Missouri (Cape Girardeau)................................................ $ 520 $ 422 $ 465 $ 35.1 Union Planters Bank of Southwest Missouri (Springfield)..... 203 151 183 18.6 Union Planters Bank of Missouri (Clayton)(2)................ 128 99 106 14.1 Citizens First Financial Bank (Dexter)(3)................... 96 56 87 7.3 First Financial Bank of Southeast Missouri (Sikeston)(3).... 96 52 88 6.9 Union Planters Bank of Mid-Missouri (Columbia).............. 89 76 75 5.7 First Financial Bank of St. Louis(2)........................ 71 36 64 5.8 First Financial Bank of Mississippi County (East Prairie)(3)............................................... 35 19 32 2.7 First Financial Bank of Ste. Genevieve County(3)............ 27 21 25 2.2 ------- ------ ------ ------ Total Missouri.................................... $ 1,265 $ 932 $1,125 $ 98.4 ======= ====== ====== ====== ARKANSAS Union Planters Bank of Northeast Arkansas (Jonesboro)....... $ 574 $ 431 $ 508 $ 51.4 Union Planters Bank of Central Arkansas, N.A. (Clinton)..... 91 61 80 6.5 ------- ------ ------ ------ Total Arkansas.................................... $ 665 $ 492 $ 588 $ 57.9 ======= ====== ====== ====== LOUISIANA Union Planters Bank of Louisiana (Baton Rouge).............. $ 579 $ 417 $ 495 $ 39.3 ======= ====== ====== ====== ALABAMA Union Planters Bank of Alabama (Decatur).................... $ 451 $ 344 $ 419 $ 28.0 ======= ====== ====== ====== KENTUCKY Simpson County Bank (Franklin).............................. $ 118 $ 80 $ 108 $ 7.4 ======= ====== ====== ======
- --------------- (1) Individual amounts do not total to consolidated amounts due to intercompany eliminations. (2) First Financial Bank of St. Louis was merged with Union Planters Bank of Missouri March 1, 1997. (3) Scheduled to merge with existing Missouri banks in 1997. 34 37 UNION PLANTERS CORPORATION BANKS AND COMMUNITIES SERVED
OFFICES ------- TENNESSEE UNION PLANTERS NATIONAL BANK Bartlett, Bristol, Collierville, Cordova, Germantown, Kingsport, Johnson City, and Memphis.... 47 UNION PLANTERS BANK OF MIDDLE TENNESSEE, N.A. Antioch, Brentwood, Columbia, Dickson, Donelson, Eagleville, Franklin, Gallatin, Goodlettsville, Hendersonville, Lebanon, Madison, Mt. Juliet, Murfreesboro, Nashville, and Smyrna................. 27 UNION PLANTERS BANK OF WEST TENNESSEE Dyersburg, Elbridge, Gibson, Humboldt, Martin, Newbern, Obion, Ridgely, Ripley, Rutherford, Tiptonville, Trenton, Union City, and Yorkville..... 27 UNION PLANTERS BANK OF EAST TENNESSEE, N.A. Alcoa, Clinton, Greenback, Knoxville, Maryville, and Oak Ridge........................................... 13 UNION PLANTERS BANK OF JACKSON, N.A. Jackson and Milan................................... 9 UNION PLANTERS BANK OF THE LAKEWAY AREA Greenville, Jefferson City, Morristown, Newport, and Talbott............................................. 9 UNION PLANTERS BANK OF THE CUMBERLANDS Alexandria, Algood, Baxter, Byrdstown, Celina, Cookeville, Dowelltown, Monterey, and Smithville.... 12 FIRST NATIONAL BANK OF SHELBYVILLE Fayetteville, Monteagle, Shelbyville, and Tracy City................................................ 7 UNION PLANTERS BANK OF THE TENNESSEE VALLEY Harriman, Kingston, Lenoir City, Oliver Springs, Rockwood, Sunbright, and Wartburg................... 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 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 CENTRAL MISSISSIPPI Byram, Clinton, Collinsville, Crystal Springs, Decatur, Forest, Hazlehurst, Jackson, Meridian, Newton, Pearl, Philadelphia, Ridgeland, Terry, and Union............................................... 27 UNION PLANTERS BANK OF NORTHWEST MISSISSIPPI Batesville, Charleston, Clarksdale, Cleveland, Drew, Friars Point, Greenville, Greenwood, Itta Bena, Lambert, Leland, Lula, Moorhead, Pope, Shaw, Sledge, and Sumner.......................................... 29
OFFICES ------- UNION PLANTERS BANK OF MISSISSIPPI Ackerman, Calhoun City, Columbus, Derma, Eupora, Grenada, Houston, Kosciusko, Louisville, Water Valley, West Point, and Winona...................... 21 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............................................ 19 UNION PLANTERS BANK OF NORTHEAST MISSISSIPPI, N.A. Ashland, Baldwyn, New Albany, Oxford, Ripley, and Tupelo.............................................. 13 UNION PLANTERS NATIONAL BANK Olive Branch and Southaven.......................... 6 MISSOURI UNION PLANTERS BANK OF SOUTHEAST MISSOURI Cape Girardeau, Jackson, Marble Hill, Perryville, Poplar Bluff, Ste. Genevieve, and Sikeston.......... 13 UNION PLANTERS BANK OF SOUTHWEST MISSOURI Branson, Ozark, and Springfield..................... 10 UNION PLANTERS BANK OF MISSOURI Affton, Clayton, Rock Hill, and St. Louis........... 6 CITIZEN'S FIRST FINANCIAL BANK* Advance and Dexter.................................. 3 FIRST FINANCIAL BANK OF SOUTHEAST MISSOURI* Benton, Matthews, New Madrid, Oran, Scott City, and Sikeston............................................ 6 UNION PLANTERS BANK OF MID-MISSOURI Ashland and Columbia................................ 4 FIRST FINANCIAL BANK OF MISSISSIPPI COUNTY* Charleston and East Prairie......................... 2 FIRST FINANCIAL BANK OF STE. GENEVIEVE COUNTY*.......... 1 ARKANSAS UNION PLANTERS BANK OF NORTHEAST ARKANSAS Bono, Brookland, Hardy, Jonesboro, Mammoth Spring, Marmaduke, Newport, Paragould, Rector, Sidney, and Weiner.............................................. 21 UNION PLANTERS BANK OF CENTRAL ARKANSAS, N.A. Bee Branch, Clinton, Fairfield Bay, Leslie, Marshall, and Mountain View......................... 6 UNION PLANTERS NATIONAL BANK Cotton Plant, Crawfordsville, DeValls Bluff, Earle, Forrest City, Joiner, Luxora, Marion, Osceola, and West Memphis........................................ 15 LOUISIANA UNION PLANTERS BANK OF LOUISIANA Baton Rouge......................................... 16 ALABAMA UNION PLANTERS BANK OF ALABAMA Athens, Decatur, Florence, Hartselle, Huntsville, Madison, Moulton, Muscle Shoals, Owens Cross Roads, Sheffield, and Tuscumbia............................ 17 KENTUCKY SIMPSON COUNTY BANK Adairville and Franklin............................. 5 --- TOTAL BRANCH OFFICES.................................... 438 ===
- --------------- This listing is as of March 1, 1997. The banks noted with an (*) are scheduled to be merged with existing banks later in 1997. 35 38 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 internal controls. Internal controls 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 internal controls. Management believes the Corporation's internal controls provide 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 corporate audit manager, and management to review accounting policies, control procedures, and audit and regulatory examination reports. The independent accountants and corporate audit manager 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 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 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
36 39 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 (the Corporation) and its subsidiaries at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, 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 method of accounting for investment securities in 1994. /s/PRICE WATERHOUSE LLP - ----------------------- PRICE WATERHOUSE LLP Memphis, Tennessee January 16, 1997 37 40 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
DECEMBER 31, ------------------------- 1996 1995 ----------- ----------- (DOLLARS IN THOUSANDS) ASSETS Cash and due from banks................................... $ 594,535 $ 459,964 Interest-bearing deposits at financial institutions....... 9,082 14,114 Federal funds sold and securities purchased under agreements to resell................................... 152,667 446,655 Trading account assets.................................... 225,336 121,927 Loans held for resale..................................... 58,622 87,889 Investment securities Available for sale (Amortized cost: $2,916,051 and $3,336,390, respectively)............................ 2,956,234 3,386,785 Held to maturity (Fair value: $188,433 in 1995)........ -- 186,269 Loans..................................................... 10,464,176 9,073,372 Less: Unearned income.................................. (30,106) (32,313) Allowance for losses on loans.................... (166,853) (156,388) ----------- ----------- Net loans......................................... 10,267,217 8,884,671 Premises and equipment, net............................... 260,971 246,776 Accrued interest receivable............................... 211,082 172,751 FHA/VA claims receivable.................................. 78,241 46,174 Mortgage servicing rights................................. 57,206 59,631 Goodwill and other intangibles............................ 56,585 58,535 Other assets.............................................. 294,785 211,081 ----------- ----------- TOTAL ASSETS...................................... $15,222,563 $14,383,222 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Noninterest-bearing.................................... $ 1,730,721 $ 1,592,490 Certificates of deposit of $100,000 and over........... 1,011,414 907,879 Other interest-bearing................................. 8,748,127 8,574,353 ----------- ----------- Total deposits.................................... 11,490,262 11,074,722 Short-term borrowings..................................... 449,146 838,283 Short- and medium-term bank notes......................... 400,000 -- Federal Home Loan Bank advances........................... 889,985 798,039 Other long-term debt...................................... 383,731 228,538 Accrued interest, expenses, and taxes..................... 141,455 126,946 Other liabilities......................................... 115,110 103,532 ----------- ----------- TOTAL LIABILITIES................................. 13,869,689 13,170,060 ----------- ----------- Commitments and contingent liabilities (Notes 15, 17, 19).................................................... -- -- Shareholders' equity Convertible preferred stock (Note 10).................. 83,809 91,810 Common stock, $5 par value; 100,000,000 shares authorized; 64,927,320 issued and outstanding (60,535,500 in 1995).................................. 324,637 302,677 Additional paid-in capital............................. 177,372 123,088 Retained earnings...................................... 752,963 670,605 Unearned compensation.................................. (10,499) (6,086) Unrealized gain on available for sale securities....... 24,592 31,068 ----------- ----------- TOTAL SHAREHOLDERS' EQUITY........................ 1,352,874 1,213,162 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $15,222,563 $14,383,222 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 38 41 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS
YEARS ENDED DECEMBER 31, ----------------------------------------- 1996 1995 1994 ----------- ----------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) INTEREST INCOME Interest and fees on loans........................ $ 899,344 $ 806,042 $ 644,690 Interest on investment securities Taxable........................................ 218,748 175,882 192,171 Tax-exempt..................................... 30,633 32,168 33,415 Interest on deposits at financial institutions.... 550 2,114 748 Interest on federal funds sold and securities purchased under agreements to resell........... 13,139 17,041 6,862 Interest on trading account assets................ 11,343 13,178 9,143 Interest on loans held for resale................. 6,852 4,858 2,396 ----------- ----------- ----------- Total interest income..................... 1,180,609 1,051,283 889,425 ----------- ----------- ----------- INTEREST EXPENSE Interest on deposits.............................. 449,864 422,664 317,721 Interest on short-term borrowings................. 54,739 33,486 28,277 Interest on long-term debt........................ 70,044 59,136 38,927 ----------- ----------- ----------- Total interest expense.................... 574,647 515,286 384,925 ----------- ----------- ----------- NET INTEREST INCOME....................... 605,962 535,997 504,500 PROVISION FOR LOSSES ON LOANS....................... 57,395 27,381 9,661 ----------- ----------- ----------- NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON LOANS......................... 548,567 508,616 494,839 NONINTEREST INCOME Service charges on deposit accounts............... 76,527 75,261 59,564 Mortgage servicing income......................... 46,098 37,427 31,060 Bank card income.................................. 24,975 20,758 11,386 Trust service income.............................. 9,779 8,010 7,990 Profits and commissions from trading activities... 5,636 10,441 6,639 Investment securities gains (losses).............. 4,081 409 (22,515) Other income...................................... 59,235 51,117 43,470 ----------- ----------- ----------- Total noninterest income.................. 226,331 203,423 137,594 ----------- ----------- ----------- NONINTEREST EXPENSE Salaries and employee benefits.................... 209,604 197,526 201,532 Net occupancy expense............................. 32,957 30,653 31,638 Equipment expense................................. 35,175 33,672 32,618 Other expense..................................... 292,898 190,784 221,048 ----------- ----------- ----------- Total noninterest expense................. 570,634 452,635 486,836 ----------- ----------- ----------- EARNINGS BEFORE INCOME TAXES.............. 204,264 259,404 145,597 Applicable income taxes............................. 70,526 86,648 45,174 ----------- ----------- ----------- NET EARNINGS.............................. $ 133,738 $ 172,756 $ 100,423 =========== =========== =========== NET EARNINGS APPLICABLE TO COMMON SHARES.................................. $ 126,794 $ 164,144 $ 90,525 =========== =========== =========== EARNINGS PER COMMON SHARE Primary........................................... $ 1.95 $ 2.72 $ 1.52 Fully diluted..................................... 1.92 2.64 1.52 AVERAGE SHARES OUTSTANDING Primary........................................... 64,987,023 60,385,361 59,587,261 Fully diluted..................................... 69,518,323 64,994,996 59,929,306
The accompanying notes are an integral part of these consolidated financial statements. 39 42 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
UNREALIZED GAIN (LOSS) ON ADDITIONAL AVAILABLE PREFERRED COMMON PAID-IN RETAINED UNEARNED FOR SALE STOCK STOCK CAPITAL EARNINGS COMPENSATION SECURITIES TOTAL --------- -------- ---------- --------- ------------ ----------- ---------- (DOLLARS IN THOUSANDS) BALANCE, JANUARY 1, 1994................ $118,348 $276,137 $ 98,520 $451,072 $ (8,766) $ -- $ 935,311 Net earnings.......................... -- -- -- 100,423 -- -- 100,423 Cash dividends Common Stock, $.88 per share........ -- -- -- (20,144) -- -- (20,144) Preferred Stock..................... -- -- -- (8,553) -- -- (8,553) Pooled institutions prior to pooling........................... -- -- -- (12,464) -- -- (12,464) Common stock issued under employee benefit plans and dividend reinvestment plan, net of stock exchanged........................... -- 2,241 10,546 (1,944) 1,340 -- 12,183 Issuance of stock for acquisitions (Note 2)............................ -- 21,686 (388) 42,952 -- -- 64,250 Stock transactions of pooled institutions prior to pooling....... -- (5,811) (10,350) -- -- -- (16,161) Redemption of Series C Preferred Stock............................... (17,250) -- -- -- -- -- (17,250) Cumulative effect of adoption of SFAS No. 115 on January 1, 1994.......... -- -- -- -- -- 12,414 12,414 Change in unrealized gain (loss) on available for sale securities, net of taxes............................ -- -- -- -- -- (41,415) (41,415) -------- -------- -------- -------- -------- -------- ---------- BALANCE, DECEMBER 31, 1994.............. 101,098 294,253 98,328 551,342 (7,426) (29,001) 1,008,594 Net earnings.......................... -- -- -- 172,756 -- -- 172,756 Cash dividends Common Stock, $.98 per share........ -- -- -- (39,925) -- -- (39,925) Preferred Stock..................... -- -- -- (7,251) -- -- (7,251) Pooled institutions prior to pooling........................... -- -- -- (9,386) -- -- (9,386) Common stock issued under employee benefit plans and dividend reinvestment plan, net of stock exchanged........................... -- 3,487 12,049 (516) 1,340 -- 16,360 Issuance of stock for acquisitions (Note 2)............................ 9,712 1,740 5,551 3,585 -- (436) 20,152 Stock transactions of pooled institutions prior to pooling....... -- 1,929 3,228 -- -- -- 5,157 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 unrealized gain (loss) on available for sale securities, net of taxes............................ -- -- -- -- -- 60,505 60,505 -------- -------- -------- -------- -------- -------- ---------- BALANCE, DECEMBER 31, 1995.............. 91,810 302,677 123,088 670,605 (6,086) 31,068 1,213,162 Net earnings.......................... -- -- -- 133,738 -- -- 133,738 Cash dividends Common Stock $1.08 per share........ -- -- -- (54,333) -- -- (54,333) Preferred Stock..................... -- -- -- (6,944) -- -- (6,944) Pooled institutions prior to pooling........................... -- -- -- (6,452) -- -- (6,452) Common stock issued under employee benefit plans and dividend reinvestment plan, net of stock exchanged........................... -- 5,735 32,000 (6,539) (4,413) -- 26,783 Issuance of stock for acquisitions (Note 2)............................ -- 13,626 16,882 22,888 -- 419 53,815 Conversion of Series B Preferred Stock............................... (4,400) 1,699 2,701 -- -- -- -- Conversion of Series E Preferred Stock............................... (3,601) 900 2,701 -- -- -- -- Change in unrealized gain on available for sale securities, net of taxes... -- -- -- -- -- (6,895) (6,895) -------- -------- -------- -------- -------- -------- ---------- BALANCE, DECEMBER 31, 1996.............. $ 83,809 $324,637 $177,372 $752,963 $(10,499) $ 24,592 $1,352,874 ======== ======== ======== ======== ======== ======== ==========
The accompanying notes are an integral part of these consolidated financial statements. 40 43 UNION PLANTERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, ------------------------------------- 1996 1995 1994 ----------- --------- ----------- (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Net earnings.............................................. $ 133,738 $ 172,756 $ 100,423 Reconciliation of net earnings to net cash provided by operating activities: Provision for losses on loans, other real estate, and FHA/VA foreclosure claims............................. 83,239 30,992 10,491 Depreciation and amortization of premises and equipment............................................. 28,597 26,268 25,222 Amortization and write-offs of intangibles.............. 43,083 22,126 21,926 Provision for restructuring charges..................... -- -- 24,264 Provisions for merger-related expenses.................. 36,095 10,182 14,012 Write-down of available for sale securities............. -- -- 2,800 Net (accretion) amortization of investment securities... (8,993) (2,904) 4,075 Net realized (gains) losses on sales of investment securities............................................ (4,081) 2,391 19,715 Deferred income tax (benefit) expense................... (37,573) (817) 2,892 (Increase) decrease in assets Trading account assets and loans held for resale...... (74,142) (21,666) 114,865 Other assets.......................................... (124,681) 17,763 (13,564) (Decrease)increase in accrued interest, expenses, taxes, and other liabilities................................. (36,503) 43,032 (12,577) Other, net.............................................. 575 39 (1,905) ----------- --------- ----------- Net cash provided by operating activities............. 39,354 300,162 312,639 ----------- --------- ----------- INVESTING ACTIVITIES Net decrease in short-term investments.................... 7,572 5,847 44,517 Proceeds from sales of available for sale securities...... 909,539 561,453 874,529 Proceeds from maturities, calls, and prepayments of available for sale securities........................... 1,949,832 614,374 922,541 Purchases of available for sale securities................ (1,868,044) (744,426) (886,485) Proceeds from maturities, calls, and prepayments of held to maturity securities.................................. 130,290 233,903 377,119 Purchases of held to maturity securities.................. (112,384) (107,598) (726,539) Net increase in loans..................................... (1,139,949) (964,644) (1,450,859) Net cash received from acquisitions of financial institutions............................................ 53,579 10,759 72,084 Purchases of premises and equipment, net.................. (23,178) (17,231) (35,267) ----------- --------- ----------- Net cash used by investing activities................. (92,743) (407,563) (808,360) ----------- --------- ----------- FINANCING ACTIVITIES Net (decrease) increase in deposits....................... (295,260) 113,237 (29,167) Net (decrease) increase in short-term borrowings.......... (147,391) 86,394 395,587 Proceeds from long-term debt, net......................... 688,276 507,736 506,349 Repayment and defeasance of long-term debt................ (302,848) (245,928) (293,293) Redemption of preferred stock............................. -- (13,800) (17,250) Proceeds from issuance of common stock.................... 19,000 20,281 10,246 Purchases of common stock by an acquired institution prior to acquisition.......................................... -- (1,176) (16,329) Cash dividends paid....................................... (67,805) (56,514) (41,460) ----------- --------- ----------- Net cash (used) provided by financing activities...... (106,028) 410,230 514,683 ----------- --------- ----------- Net (decrease) increase in cash and cash equivalents........ (159,417) 302,829 18,962 Cash and cash equivalents at the beginning of the period.... 906,619 603,790 584,828 ----------- --------- ----------- Cash and cash equivalents at the end of the period.......... $ 747,202 $ 906,619 $ 603,790 =========== ========= =========== SUPPLEMENTAL DISCLOSURES Cash paid for Interest................................................ $ 575,756 $ 489,857 $ 373,523 Taxes................................................... 101,537 63,725 83,186 Unrealized gain (loss) on available for sale securities... 40,183 50,395 (47,886)
The accompanying notes are an integral part of these consolidated financial statements. 41 44 UNION PLANTERS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS Union Planters Corporation (the Corporation) is a multi-state bank holding company headquartered in Memphis, Tennessee. The Corporation operates 37 banking subsidiaries in Tennessee, Mississippi, Missouri, Arkansas, Louisiana, Alabama, and Kentucky and has 438 banking offices and 544 ATMs. At December 31, 1996, the Corporation had consolidated total assets of $15.2 billion, making it one of the 50 largest bank holding companies based in the United States and the largest headquartered in Tennessee. 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; and other ancillary financial services traditionally furnished by full-service financial institutions. Additional services offered include mortgage origination and servicing; investment management and trust services; the issuance of credit and debit cards; the origination, packaging, and securitization of loans, primarily the government-guaranteed portion of Small Business Administration (SBA) loans; the purchase of delinquent FHA/VA government-insured/guaranteed loans from third parties and from GNMA pools serviced for others; full-service and discount brokerage; and the sale of annuities and bank-eligible insurance products. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES. 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 PRESENTATION. The consolidated financial statements include the accounts of the Corporation and its subsidiaries after elimination of significant intercompany accounts and transactions. 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. Other 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 1994 and 1995 amounts have been reclassified to conform with the 1996 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 $152.7 million, $446.7 million, and $49.4 million at December 31, 1996, 1995, and 1994, respectively, are included in cash and cash equivalents. Noncash transfers to foreclosed properties from loans for the years ended December 31, 1996, 1995, and 1994 were $10.3 million, $9.4 million, and $8.4 million, 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: trading, available for sale, or 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 securities. For the Corporation, these consist primarily of the government-guaranteed portion of SBA loans and SBA participation certificates. Gains and losses on sales and fair-value adjustments related to these securities are included in profits and commissions from trading activities. 42 45 NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Debt and equity securities which the Corporation has not classified as held to maturity or trading 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). 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. Generally, the held to maturity portfolios of acquired entities are reclassified to the available for sale portfolio upon acquisition. At December 31, 1996, the Corporation had no securities classified as held to maturity. LOANS HELD FOR RESALE. Loans held for resale include mortgage and other loans and are carried at the lower of cost or fair value on an aggregate basis. 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. FHA/VA government-insured/guaranteed loans which are 90 days or more past due are not placed on nonaccrual status since they are government-guaranteed. 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 credit card loans is discontinued upon the occurrence of an adverse change in the financial condition of the borrower. Credit card loans are charged-off immediately upon notification of a customer's bankruptcy or death, while all other credit card loans are charged off if no payment has been received for 150 days. 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, 1996 and 1995, the amount of impaired loans and disclosures related thereto were not material. ALLOWANCE FOR LOSSES ON LOANS. The allowance for losses on loans represents management's best 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. 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 ten 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 43 46 NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) premiums on purchased deposits which are amortized on a straight-line method over 10 years, are amortized over the estimated periods benefited. 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. IMPAIRMENT OF LONG-LIVED ASSETS. Effective January 1, 1996, the Corporation adopted the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires impairment losses to be recorded on long-lived assets used in operations and certain related identifiable intangibles when indications of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Additionally, long-lived assets and certain related identifiable intangibles to be disposed of are required to be reported at the lower of carrying amount or fair value, less selling costs. The adoption of this statement did not have a material impact on the Corporation, since existing policies for determining impairment of long-lived assets were similar to the new standard. 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 Statement No. 65." This statement requires entities to recognize as a separate asset, the right 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. OTHER REAL ESTATE. Properties acquired through foreclosure and unused bank premises are stated at the lower of the recorded amount of the loan or the property's estimated net realizable value, reduced by estimated selling costs. Write-downs of the assets at, or prior to, the date of foreclosure are charged to the allowance for losses on loans. Subsequent write-downs, income and expense incurred in connection with holding such assets, and gains and losses realized from the sales of such assets are included in noninterest income and expense. STOCK COMPENSATION. The Corporation has elected not to adopt the recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" which requires a fair-value based method of accounting for stock options and similar equity awards. The Corporation elected to continue applying Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB Opinion 25) and related interpretations in accounting for its stock compensation plans and, accordingly, does not recognize compensation cost, except for stock grants. See Note 15 for a summary of the pro forma effect if the accounting provisions of SFAS No. 123 had been elected. INCOME TAXES. The Corporation files a consolidated Federal income tax return which includes all of its subsidiaries except for credit life insurance companies and certain pass-through entities. Income tax expense is allocated among the parent company and its subsidiaries as if each had filed a separate return. 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. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be realized or settled. Recognition of certain deferred tax assets is based upon management's belief that, based upon historical earnings and anticipated future earnings, normal operations will continue to generate sufficient future taxable income to realize these benefits. A valuation allowance is established for deferred tax assets when, in the opinion of management, it is "more likely than not" that the asset will not be realized. 44 47 NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. 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 has been restated for the Leader, Capital, Grenada, and BNF acquisitions. Prior period amounts have not been restated for the remaining acquisitions which were not considered, in the aggregate, material to the consolidated financial statements.
COMMON DATE SHARES ACQUIRED ISSUED TOTAL ASSETS TOTAL EQUITY -------- ---------- ------------ ------------ (DOLLARS IN MILLIONS) 1996 ACQUISITIONS Leader Financial Corporation (Leader)............ 10/1/96 15,285,575 $3,410.9 $256.1 Other acquisitions (four acquisitions)........... Various 2,779,655 683.1 53.9 ---------- -------- ------ Total.................................. 18,065,230 $4,094.0 $310.0 ========== ======== ====== 1995 ACQUISITIONS Capital Bancorporation, Inc. (Capital)........... 12/31/95 4,087,124 $1,105.1 $ 74.8 Planters Bank and Trust Company.................. 9/1/95 348,029 59.0 6.6 ---------- -------- ------ Total.................................. 4,435,153 $1,164.1 $ 81.4 ========== ======== ====== 1994 ACQUISITIONS Grenada Sunburst System Corporation (Grenada).... 12/31/94 13,776,357 $2,518.0 $173.7 BNF Bancorp, Inc. (BNF).......................... 9/1/94 2,000,329 276.4 29.6 Other acquisitions (seven acquisitions).......... Various 4,337,167 782.2 64.2 ---------- -------- ------ Total.................................. 20,113,853 $3,576.6 $267.5 ========== ======== ======
The following table summarizes the impact of the Leader acquisition on the Corporation's net interest income, noninterest income, and net earnings.
NET INTEREST NONINTEREST NET INCOME INCOME EARNINGS ------------ ----------- -------- (DOLLARS IN THOUSANDS) 1995 Union Planters............................................ $447,431 $157,652 $135,402 Leader.................................................... 88,566 45,771 37,354 -------- -------- -------- Union Planters pooled............................. $535,997 $203,423 $172,756 ======== ======== ======== 1994 Union Planters............................................ $423,114 $100,805 $ 65,861 Leader.................................................... 81,386 36,789 34,562 -------- -------- -------- Union Planters pooled............................. $504,500 $137,594 $100,423 ======== ======== ========
45 48 NOTE 2. ACQUISITIONS (CONTINUED) PURCHASE ACQUISITIONS The Corporation acquired seven institutions in the three years ended December 31, 1996 that were accounted for under the purchase method of accounting. Total assets of the institutions at their respective dates of acquisition were $433 million. Consideration of $54.4 million paid for the institutions included cash totaling $40.9 million and $13.5 million (388,497 shares) of the Corporation's Series E preferred stock, resulting in total intangibles of $23.5 million. Because these purchase acquisitions are not material to the consolidated results of the Corporation, pro forma information has been omitted. After December 31, 1996, the Corporation completed the acquisition of a third-party marketer of non-traditional bank products. PENDING ACQUISITIONS The Corporation through its acquisition program has two acquisitions of financial institutions pending which are considered probable of consummation. The Corporation would acquire aggregate total assets of approximately $150 million in those acquisitions. The Corporation's acquisition of Eastern National Bank (ENB) in Miami, Florida, is no longer considered probable of consummation because of disputes between ENB's shareholders and agencies of the Republic of Venezuela and others which are pending in the United States District Court for the Southern District of Florida. 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 1996 and 1995 were $70 million and $73 million, respectively. NOTE 4. INVESTMENT SECURITIES The following is a summary of investment securities:
DECEMBER 31, 1996 ------------------------------------------ UNREALIZED AMORTIZED ---------------- FAIR COST GAINS LOSSES VALUE ---------- ------- ------ ---------- (DOLLARS IN THOUSANDS) AVAILABLE FOR SALE SECURITIES U.S. Government obligations U.S. Treasury....................................... $ 834,054 $ 4,123 $ 791 $ 837,386 U.S. Government agencies Collateralized mortgage obligations.............. 124,908 617 347 125,178 Mortgage-backed.................................. 806,160 21,106 978 826,288 Other............................................ 511,986 965 1,747 511,204 ---------- ------- ------ ---------- Total U.S. Government obligations........... 2,277,108 26,811 3,863 2,300,056 Obligations of states and political subdivisions...... 487,489 20,746 2,265 505,970 Other stocks and securities........................... 151,454 240 1,486 150,208 ---------- ------- ------ ---------- Total available for sale securities......... $2,916,051 $47,797 $7,614 $2,956,234 ========== ======= ====== ==========
46 49 NOTE 4. INVESTMENT SECURITIES (CONTINUED)
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.............. 197,913 1,033 868 198,078 Mortgage-backed.................................. 1,127,296 21,844 2,307 1,146,833 Other............................................ 577,691 2,252 960 578,983 ---------- ------- ------ ---------- Total U.S. Government obligations........... 2,728,007 33,429 4,481 2,756,955 Obligations of states and political subdivisions...... 498,897 22,848 2,611 519,134 Other stocks and securities........................... 109,486 1,299 89 110,696 ---------- ------- ------ ---------- Total available for sale securities......... $3,336,390 $57,576 $7,181 $3,386,785 ========== ======= ====== ========== HELD TO MATURITY SECURITIES U.S. Government obligations U.S. Government agencies Collateralized mortgage obligations.............. $ 11,872 $ 23 $ 53 $ 11,842 Mortgage-backed.................................. 134,613 2,323 45 136,891 Other............................................ 31,338 -- -- 31,338 ---------- ------- ------ ---------- Total U.S. Government obligations........... 177,823 2,346 98 180,071 Other stocks and securities........................... 8,446 31 115 8,362 ---------- ------- ------ ---------- Total held to maturity securities........... $ 186,269 $ 2,377 $ 213 $ 188,433 ========== ======= ====== ==========
The following table presents the gross realized gains and losses on investment securities for the years ended December 31, 1996, 1995, and 1994.
REALIZED GAINS REALIZED LOSSES ------------------------ ---------------------------- 1996 1995 1994 1996 1995 1994 ------ ------ ------ ------- ------- -------- (DOLLARS IN THOUSANDS) Available for sale securities.............. $8,143 $3,727 $1,159 $(3,969) $(6,187) $(20,985) Held to maturity securities................ -- 70 132 (93) (1) (21) ------ ------ ------ ------- ------- -------- Total............................ $8,143 $3,797 $1,291 $(4,062) $(6,188) $(21,006) ====== ====== ====== ======= ======= ========
Investment securities having a fair value of approximately $1.1 billion and $1.8 billion at December 31, 1996 and 1995, respectively, were pledged to secure public and trust funds on deposit, securities sold under agreements to repurchase, and Federal Home Loan Bank (FHLB) advances. On January 1, 1994, and in connection with the adoption of SFAS No. 115, $1.6 billion of held to maturity securities were transferred to the available for sale securities portfolio. In addition, approximately $446 million, (fair value approximately $436 million), $110 million (fair value approximately $109 million), and $179 million (fair value approximately $181 million) of securities were transferred to the available for sale securities portfolio related to financial institutions acquired in 1994, 1995, and 1996, respectively, in order to achieve and 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 by the Corporation and the internal reorganizations of its banking subsidiaries. 47 50 NOTE 4. INVESTMENT SECURITIES (CONTINUED) 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. In addition, in the fourth quarter of 1995, Leader transferred approximately $201 million of held to maturity securities to its available for sale securities portfolio. This transfer had no impact on earnings and the fair value adjustment related to these securities was $3.7 million. The fair values, contractual maturities, and weighted average yields of investment securities as of December 31, 1996 are as follows:
MATURING ----------------------------------------------------------------------------- WITHIN ONE AFTER ONE BUT AFTER FIVE BUT YEAR WITHIN FIVE YEARS WITHIN TEN YEARS AFTER TEN YEARS TOTAL ---------------- ------------------ ---------------- ------------------ ------------------ AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD -------- ----- --------- ------ -------- ----- ---------- ----- ---------- ----- (FULLY TAXABLE-EQUIVALENT BASIS/DOLLARS IN THOUSANDS) AVAILABLE FOR SALE SECURITIES U.S. Government obligations U.S. Treasury............. $411,946 6.18% $422,108 5.97% $ -- --% $ -- --% $ 834,054 6.07% U.S. Government agencies Collateralized mortgage obligations........... 5,430 5.99 10,757 6.15 12,030 6.39 96,691 6.55 124,908 6.47 Mortgage-backed......... 11,026 7.43 53,010 6.79 58,803 7.59 683,321 7.69 806,160 7.62 Other................... 232,999 5.47 160,000 6.02 66,321 6.85 52,666 6.52 511,986 5.93 -------- -------- -------- ---------- ---------- Total U.S. Government obligations....... 661,401 5.95 645,875 6.05 137,154 7.13 832,678 7.48 2,277,108 6.61 Obligations of states and political subdivisions.... 51,187 10.88 82,331 9.58 140,344 9.36 213,627 8.99 487,489 9.39 Other stocks and securities Federal Reserve Bank and Federal Home Loan Bank stock................... -- -- -- -- -- -- 113,026 6.70 113,026 6.70 Bonds, notes, and debentures.............. 1,348 7.42 2,625 7.33 92 4.75 -- -- 4,065 7.30 Collateralized mortgage obligations............. -- -- 11,672 6.44 127 6.47 7,496 7.67 19,295 6.92 Other..................... -- -- -- -- -- -- 15,068 8.85 15,068 8.85 -------- -------- -------- ---------- ---------- Total other stocks and securities.... 1,348 7.42 14,297 6.60 219 5.74 135,590 7.00 151,454 6.96 -------- -------- -------- ---------- ---------- Total amortized cost of available for sale securities... $713,936 6.31% $742,503 6.45% $277,717 8.25% $1,181,895 7.70% $2,916,051 7.09% ======== ======== ======== ========== ========== Total fair value.... $717,594 $746,781 $284,667 $1,207,192 $2,956,234 ======== ======== ======== ========== ==========
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 without prepayment penalties. The investment securities portfolio is expected to have a principal weighted average life of approximately 4 years. 48 51 NOTE 5. LOANS The composition of loans is summarized as follows:
DECEMBER 31, ------------------------ 1996 1995 ----------- ---------- (DOLLARS IN THOUSANDS) Commercial, financial, and agricultural..................... $ 1,537,535 $1,573,790 Real estate -- construction................................. 446,946 403,492 Real estate -- mortgage Secured by 1-4 family residential......................... 3,218,651 2,976,180 FHA/VA government-insured/guaranteed...................... 1,477,459 916,681 Other mortgage............................................ 1,530,110 1,283,937 Home equity................................................. 228,511 210,834 Consumer Credit cards and related plans............................ 627,406 426,241 Other consumer............................................ 1,324,252 1,207,666 Direct lease financing...................................... 73,306 74,551 ----------- ---------- Total loans............................................ $10,464,176 $9,073,372 =========== ==========
Nonperforming loans are summarized as follows:
DECEMBER 31, -------------------- 1996 1995 ------- ------- (DOLLARS IN THOUSANDS) Nonaccrual loans............................................ $63,346 $43,299 Restructured loans.......................................... 2,546 2,135 ------- ------- Total............................................. $65,892 $45,434 ======= =======
The impact on net interest income of the above nonperforming loans was not material in either 1996 or 1995. Also, there were no significant outstanding commitments to lend additional funds at December 31, 1996. 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 $36.9 million and $41.8 million at December 31, 1996 and 1995, respectively. During 1996, $8.5 million of existing loans were added to related-party loans for individuals elected as directors in 1996; $12.9 million of new loans and advances under credit lines were made to related parties; repayments totaled approximately $24.3 million; and charge-offs of related party loans were $2.0 million. Included in related-party loans is a $5.5 million tax-exempt loan made in 1986 to a partnership in which a director, who is also a brother-in-law of an executive officer, is a partner. At the time the loan was made, neither the borrower nor any of its partners, officers, directors, or beneficial owners was affiliated or associated with the Corporation or any of its subsidiaries. The loan was made in the ordinary course of business on substantially the same terms, including interest rate and collateral requirements, as those prevailing at the time for comparable transactions. The loan has performed as required, however, during 1996 because of significant depreciation in the value of the collateral, the loan was written down by $2.0 million and the remaining $3.4 million was placed on nonaccrual status, although the loan is not in default. Management anticipates that the borrowers will perform on all their personal obligations under the terms and conditions of the loan and other arrangements. 49 52 NOTE 6. ALLOWANCE FOR LOSSES ON LOANS The changes in the allowance for losses on loans are summarized as follows:
1996 1995 1994 -------- -------- -------- (DOLLARS IN THOUSANDS) Balance, January 1......................................... $156,388 $154,131 $141,999 Increase due to acquisitions............................. 6,478 2,762 9,252 Decrease due to the sale of certain loans................ (1,628) -- -- Provision for losses on loans............................ 57,395 27,381 9,661 Recoveries of loans previously charged off............... 12,309 13,085 14,941 Loans charged off........................................ (64,089) (40,971) (21,722) -------- -------- -------- Balance, December 31....................................... $166,853 $156,388 $154,131 ======== ======== ========
NOTE 7. PREMISES AND EQUIPMENT A summary of premises and equipment follows:
DECEMBER 31, -------------------- 1996 1995 -------- -------- (DOLLARS IN THOUSANDS) Land........................................................ $ 55,060 $ 52,057 Buildings and improvements.................................. 197,714 187,183 Leasehold improvements...................................... 18,540 13,925 Equipment................................................... 166,182 149,945 Construction in progress.................................... 16,499 9,011 -------- -------- 453,995 412,121 Less accumulated depreciation and amortization.............. 193,024 165,345 -------- -------- Total premises and equipment...................... $260,971 $246,776 ======== ========
NOTE 8. INTEREST-BEARING DEPOSITS The following table presents the maturities of interest-bearing deposits at December 31, 1996 (Dollars in millions). 1997........................................................ $4,612 1998........................................................ 805 1999........................................................ 264 2000........................................................ 129 2001........................................................ 59 2002 and after.............................................. 32 ------- Total time deposits.................................... 5,901 Interest-bearing deposits with no stated maturity...... 3,858 ------- Total interest-bearing deposits................... $9,759 =======
NOTE 9. BORROWINGS 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 primarily 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. 50 53 NOTE 9. BORROWINGS (CONTINUED) Short-term borrowings are summarized as follows:
DECEMBER 31, ------------------------------------ 1996 1995 1994 ---------- ---------- -------- (DOLLARS IN THOUSANDS) Year-end balances Federal funds purchased and securities sold under agreements to repurchase........................... $ 438,104 $ 838,189 $691,456 Commercial paper...................................... -- -- 2,951 Other short-term borrowings........................... 11,042 94 5,431 ---------- ---------- -------- Total short-term borrowings................... $ 449,146 $ 838,283 $699,838 ========== ========== ======== Federal funds purchased and securities sold under agreements to repurchase Daily average balance................................. $ 889,793 $ 574,412 $641,004 Weighted average interest rate........................ 5.41% 5.80% 4.37% Maximum outstanding at any month end.................. $1,109,939 $1,083,263 $994,083 Weighted average interest rate at December 31......... 5.22% 5.57% 5.58%
SHORT- AND MEDIUM-TERM BANK NOTES In 1996, the Corporation's principal subsidiary, UPNB, established a $1-billion short- and medium-term bank note program to supplement UPNB's funding sources. Under the program UPNB may from time-to-time issue bank notes having maturities ranging from 30 days to one year from their respective issue dates (Short-Term Bank Notes) and bank notes having maturities of more than one year to 30 years from their respective dates of issue (Medium-Term Bank Notes). A summary of the bank notes follows.
DECEMBER 31, 1996 --------------------------- SHORT-TERM MEDIUM-TERM BANK NOTES BANK NOTES ----------- ----------- (DOLLARS IN THOUSANDS) Balances at year end........................................ $ 265,000 $ 135,000 Average balance for the year................................ 88,361 42,637 Weighted average interest rate.............................. 5.81% 6.57% Weighted average interest rate at year end.................. 5.69 6.59 Fixed rate notes............................................ $ 265,000 $ 135,000 Variable rate notes......................................... -- -- Range of maturities......................................... 1/97 - 5/97 8/98 - 10/01
The principal maturities of Medium-Term Bank Notes subsequent to December 31, 1996 are $30 million in 1998, $30 million in 1999, $15 million in 2000, and $60 million in 2001. FEDERAL HOME LOAN BANK (FHLB) ADVANCES Certain of the Corporation's banking and thrift subsidiaries had outstanding advances from the FHLB under Blanket Agreements for Advances and Security Agreements (the Agreements). The Agreements enable these subsidiaries to borrow funds from the FHLB to fund mortgage loan programs and to satisfy certain other funding needs. The value of the mortgage-backed securities and mortgage loans pledged under the Agreements must be maintained at not less than 115% and 150%, respectively, of the advances outstanding. At December 31, 1996, the Corporation had an adequate amount of 51 54 NOTE 9. BORROWINGS (CONTINUED) mortgage-backed securities and loans to satisfy the collateral requirements. A summary of the advances is as follows.
DECEMBER 31, -------------------------- 1996 1995 ----------- ----------- (DOLLARS IN THOUSANDS) Balance at year end......................................... $ 889,985 $ 798,039 Range of interest rates..................................... 3.25% - 9.00% 3.25% - 9.00% Range of maturities......................................... 1997 - 2017 1996 - 2025
The principal maturities of FHLB advances subsequent to December 31, 1996 are $152.6 million in 1997, $44.3 million in 1998, $269.6 million in 1999, $133.7 million in 2000, $66.3 million in 2001, and $223.5 million after 2001. OTHER LONG-TERM DEBT The Corporation's other long-term debt is summarized as follows:
DECEMBER 31, -------------------- 1996 1995 -------- -------- (DOLLARS IN THOUSANDS) Corporation-Obligated Mandatorily Redeemable Capital Pass-through Securities of Subsidiary Trust holding solely a Corporation-Guaranteed Related Subordinated Note (Trust Preferred Securities)..................................... $198,938 $ -- 6 3/4% Subordinated Notes due 2005.......................... 99,477 99,418 6.25% Subordinated Notes due 2003........................... 74,644 74,592 8 1/2% Subordinated Notes due 2002.......................... -- 40,245 Other long-term debt........................................ 10,672 14,283 -------- -------- Total other long-term debt........................ $383,731 $228,538 ======== ========
The Corporation-Obligated Mandatorily Redeemable Capital Pass-through Securities of Subsidiary Trust holding solely a Corporation-Guaranteed Related Subordinated Note represents Capital Securities issued by Union Planters Capital Trust A (the UPC Trust). In 1996, the UPC Trust issued $200 million liquidation amount of 8.20% Capital Trust Pass-through Securities(SM) (Trust Preferred Securities) at 99.468% which represented an undivided beneficial interest in the assets of the UPC Trust, a statutory business trust created under the laws of the state of Delaware. The Corporation owns all of the common securities of the UPC Trust representing an undivided beneficial interest in the assets of the UPC Trust. The sole asset of the UPC Trust is $206.2 million (carrying value of $205.1 million at December 31, 1996) of 8.20% Junior Subordinated Deferrable Interest Debentures of the Corporation issued at 99.468%, which will mature on December 15, 2026. The distributions payable on the Trust Preferred Securities are a fixed rate per annum, 8.20% of the stated liquidation amount, and are cumulative from the date of issuance. The Corporation has the right, at any time, subject to certain conditions, to defer payments of interest on the Subordinated Debentures, in which case distributions on Trust Preferred Securities would likewise be deferred. Upon electing to defer such interest payments, the Corporation will be prohibited from paying dividends on its Common and Preferred Stock and certain outstanding borrowings. The Subordinated Debt and therefore, the Trust Preferred Securities are redeemable by the Corporation at a call price, plus accrued and unpaid interest to the date of redemption, in whole or in part and from time-to-time on or after December 15, 2006, subject to certain conditions. In certain limited circumstances, primarily related to certain tax events, the Subordinated Debt and therefore, the Trust Preferred Securities are redeemable at par, plus accrued interest to date of redemption. The Trust Preferred Securities qualify as Tier 1 regulatory capital and are reported in bank regulatory reports as a minority interest in a consolidated subsidiary. 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%. The Notes qualify as 52 55 NOTE 9. BORROWINGS (CONTINUED) Tier 2 regulatory capital. The Corporation entered into an interest-rate swap agreement related to the 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 and it matured in 1996. In 1992, the Corporation completed a public offering of $40.25 million of 8 1/2% Subordinated Notes (8 1/2% Notes) which mature on October 1, 2002. In 1996, the Corporation in-substance defeased $37 million of the 8 1/2% Notes by placing approximately $39 million of cash in an irrevocable trust which purchased direct obligations of the U. S. Government that will provide cash flows matching the principal and interest debt service requirements and to retire the 8 1/2% Notes on October 1, 1997. The transaction resulted in an immaterial loss to the Corporation. The principal maturities of other long-term debt subsequent to December 31, 1996 are $431,000 in 1997, $811,000 in 1998, $276,000 in 1999, $175,000 in 2000, $32,000 in 2001, and $382.0 million after 2001. 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 subsidiaries. Various federal laws, regulations, and policies limit the ability of the Corporation's subsidiary banks to pay dividends. See Note 12, "Regulatory Capital and Restrictions on Dividends and Loans from Subsidiaries." CONVERTIBLE PREFERRED STOCK The Corporation's preferred stock is summarized as follows:
DECEMBER 31, ---------------------- 1996 1995 -------- -------- (DOLLARS IN THOUSANDS) PREFERRED STOCK, WITHOUT PAR VALUE, 10,000,000 SHARES AUTHORIZED FOR ALL ISSUES: Series A Preferred Stock.................................. $ -- $ -- Series B Preferred Stock.................................. -- 4,400 Series E Preferred Stock.................................. 83,809 87,410 ------- ------- Total preferred stock............................. $83,809 $91,810 ======= =======
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 750,000 shares of Series A Preferred Stock for issuance under the Share Purchase Rights Plan, none of which have been issued. SERIES B PREFERRED STOCK. All 44,000 outstanding shares of Series B Preferred Stock were converted by the holders into 339,765 shares of the Corporation's Common Stock in 1996, such that no Series B Preferred Stock remains outstanding. 53 56 NOTE 10. SHAREHOLDERS' EQUITY (CONTINUED) SERIES E PREFERRED STOCK. At December 31, 1996 and 1995, 3,352,347 and 3,496,419 shares, respectively, of the Corporation's 8% Cumulative, Convertible, Preferred Stock, Series E (Series E Preferred Stock) were issued and outstanding. 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. Holders of Series E Preferred Stock have no voting rights except for those provided by law and in certain other limited circumstances. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN The Dividend Reinvestment and Stock Purchase Plan (the Plan) authorizes the issuance of 2,000,000 shares (916,252 issued through December 31, 1996) of 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 the Plan totaled 241,060, 189,921, and 116,678 shares in 1996, 1995, and 1994, respectively. NOTE 11. UNION PLANTERS CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION CONDENSED BALANCE SHEET
DECEMBER 31, ------------------------ 1996 1995 ---------- ---------- (DOLLARS IN THOUSANDS) ASSETS Cash and cash equivalents at subsidiary banks............. $ 274,622 $ 68,195 Interest-bearing deposits at other financial institutions........................................... -- 10,000 Investment securities available for sale.................. 213,491 171,102 Advances to and receivables from subsidiaries............. 9,535 24,785 Investment in bank and bank holding company subsidiaries........................................... 1,223,435 1,138,368 Investment in nonbank subsidiaries........................ 17,137 9,732 Other assets.............................................. 27,583 23,868 ---------- ---------- TOTAL ASSETS...................................... $1,765,803 $1,446,050 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Long-term debt (Note 9)................................... $ 379,212 $ 214,255 Loans from and payables to subsidiaries................... 8,384 3,426 Other liabilities......................................... 25,333 15,207 Shareholders' equity (Note 10)............................ 1,352,874 1,213,162 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $1,765,803 $1,446,050 ========== ==========
54 57 NOTE 11. UNION PLANTERS CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION (CONTINUED) CONDENSED STATEMENT OF EARNINGS
YEARS ENDED DECEMBER 31, -------------------------------- 1996 1995 1994 -------- -------- -------- (DOLLARS IN THOUSANDS) INCOME Dividends from bank and bank holding company subsidiaries.......................................... $152,534 $162,810 $164,544 Dividends from nonbank subsidiaries...................... 950 500 -- Fees and interest from subsidiaries...................... 46,326 32,219 22,421 Interest and dividends on investments, loans, and interest-bearing deposits at other financial institutions.......................................... 12,888 4,611 29 Other income............................................. 398 478 1,563 -------- -------- -------- Total income..................................... 213,096 200,618 188,557 -------- -------- -------- EXPENSES Interest expense......................................... 16,351 10,400 8,662 Salaries and employee benefits........................... 22,233 16,190 11,185 Other expense............................................ 37,032 23,607 17,194 -------- -------- -------- Total expenses................................... 75,616 50,197 37,041 -------- -------- -------- EARNINGS BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES......... 137,480 150,421 151,516 Tax benefit................................................ (5,701) (7,576) (4,847) -------- -------- -------- EARNINGS BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES................................ 143,181 157,997 156,363 Equity in undistributed earnings of subsidiaries........... (9,443) 14,759 (55,940) -------- -------- -------- NET EARNINGS..................................... $133,738 $172,756 $100,423 ======== ======== ========
55 58 NOTE 11. UNION PLANTERS CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION (CONTINUED) CONDENSED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, ----------------------------------- 1996 1995 1994 --------- --------- --------- (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Net earnings.......................................... $ 133,738 $ 172,756 $ 100,423 Equity in undistributed earnings of subsidiaries...... 9,443 (14,759) 55,940 Deferred income tax (benefit) expense................. (2,770) 425 239 Other, net............................................ 7,472 9,409 (15,133) --------- --------- --------- Net cash provided by operating activities..... 147,883 167,831 141,469 --------- --------- --------- INVESTING ACTIVITIES Net decrease (increase) in short-term investments..... 10,000 (10,000) -- Purchases of available for sale securities............ (437,340) (389,624) -- Proceeds from sales of available for sale securities......................................... 397,931 221,532 197 Net increase in investment in and receivables from subsidiaries....................................... (36,778) (55,261) (119,921) Purchases of premises and equipment, net.............. (126) (5,279) (5,156) --------- --------- --------- Net cash used in investing activities......... (66,313) (238,632) (124,880) --------- --------- --------- FINANCING ACTIVITIES Net decrease in commercial paper...................... -- (2,971) (7,990) Proceeds from issuance of long-term debt, net......... 205,089 99,956 -- Repayment and defeasance of long-term debt............ (40,349) (49) -- Net proceeds from loans from and payables to subsidiaries.................................... 5,133 (9,668) 13,333 Redemption of preferred stock......................... -- -- (17,250) Proceeds from issuance of common stock, net........... 16,336 12,934 8,081 Cash dividends paid................................... (61,352) (47,128) (28,996) --------- --------- --------- Net cash provided (used) by financing activities.................................. 124,857 53,074 (32,822) --------- --------- --------- Net increase (decrease) in cash and cash equivalents.... 206,427 (17,727) (16,233) Cash and cash equivalents at the beginning of the year.................................................. 68,195 85,922 102,155 --------- --------- --------- Cash and cash equivalents at the end of the year........ $ 274,622 $ 68,195 $ 85,922 ========= ========= =========
- --------------- Noncash Activities. See Note 2 and Note 10, respectively, regarding acquisitions in 1996, 1995, and 1994 and the conversions of Series B and E Preferred Stock. NOTE 12. REGULATORY CAPITAL AND RESTRICTIONS ON DIVIDENDS AND LOANS FROM SUBSIDIARIES REGULATORY CAPITAL The Corporation and its banking subsidiaries are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation or its banking subsidiaries' financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and its banking subsidiaries must meet specific capital guidelines that involve quantitative measures of the Corporation and its banking subsidiaries' assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Corporation and its banking subsidiaries' capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Corporation and its banking subsidiaries to maintain minimum amounts and ratios (set forth in the table below for the Corporation and its significant subsidiary, UPNB) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and Tier 1 capital (as defined) to average assets (as defined). As of December 31, 1996, management believes that the Corporation, UPNB, and the 56 59 NOTE 12. REGULATORY CAPITAL AND RESTRICTIONS ON DIVIDENDS AND LOANS FROM SUBSIDIARIES (CONTINUED) Corporation's other banking subsidiaries met all capital adequacy requirements to which they are subject. At December 31, 1996, the most recent notification from the Office of the Comptroller of the Currency (OCC) categorized UPNB as well capitalized under the regulatory framework for prompt corrective action. Additionally, all of the Corporation's other banking subsidiaries were categorized as well capitalized and the Corporation's capital levels and ratios would be considered well capitalized. To be categorized as well capitalized, an institution must maintain Tier 1 leverage, Tier 1 risk-based, and total risk-based capital ratios as set forth in the table below. There are no conditions or events since the latest notification that management believes have changed any of the institutions' categories. The Corporation and UPNB's capital and ratios are also presented in the table below. No amount was deducted from capital for interest-rate risk.
FOR MINIMUM MINIMUM CAPITAL TO BE WELL ACTUAL ADEQUACY CAPITALIZED(2) --------------- --------------- --------------- AMOUNT RATIO ACTUAL RATIO ACTUAL RATIO ------ ----- ------ ----- ------ ----- (DOLLARS IN MILLIONS) AS OF DECEMBER 31, 1996: LEVERAGE (TIER 1 CAPITAL TO AVERAGE ASSETS) Consolidated.................................. $1,480 9.61% $616 4.00% N/A N/A UPNB.......................................... 414 6.95 238 4.00 $298 5.00% TIER 1 CAPITAL (TO RISK-WEIGHTED ASSETS) Consolidated.................................. $1,480 15.29% $387 4.00% N/A N/A UPNB.......................................... 414 11.01 150 4.00 $226 6.00% TOTAL CAPITAL (TO RISK-WEIGHTED ASSETS) Consolidated.................................. $1,774 18.32% $775 8.00% N/A N/A UPNB.......................................... 461 12.26 301 8.00 $376 10.00% AS OF DECEMBER 31, 1995:(1) LEVERAGE (TIER 1 CAPITAL TO AVERAGE ASSETS) Consolidated.................................. $1,134 8.08% $561 4.00% N/A N/A UPNB.......................................... 384 7.25 212 4.00 $265 5.00% TIER 1 CAPITAL (TO RISK-WEIGHTED ASSETS) Consolidated.................................. $1,134 13.39% $339 4.00% N/A N/A UPNB.......................................... 384 13.92 110 4.00 $165 6.00% TOTAL CAPITAL (TO RISK-WEIGHTED ASSETS) Consolidated.................................. $1,412 16.68% $677 8.00% N/A N/A UPNB.......................................... 416 15.11 220 8.00 $275 10.00%
- --------------- (1) UPNB for December 31, 1995 represents the combination of UPNB and Leader Federal Bank for Savings (acquired October 1, 1996) as if they had been combined January 1, 1995. Internal mergers and internal transfers of branches have not been reflected, since their impact was not considered significant to the financial position of UPNB. (2) Not applicable (N/A) for bank holding companies such as the Corporation. 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 57 60 NOTE 12. REGULATORY CAPITAL AND 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, 1997, the banking subsidiaries could have paid dividends to the Corporation aggregating $86.0 million without prior regulatory approval. Future dividends will be dependent on the level of earnings of the subsidiary financial institutions. 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 80%-owned subsidiaries of the Corporation. NOTE 13. 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 Corporation achieved a net reduction in total staff in 1995 of 690 employees, excluding the acquisitions consummated in 1995. Additionally, at December 31, 1995, the Corporation had identified 38 branch locations for consolidation, closure, or divestiture. At December 31, 1996, the Corporation had consolidated or otherwise divested 44 branch locations. There were no additional charges for restructuring in 1995 or 1996. Management of the Corporation considers the restructuring plan to be complete at December 31, 1996. The following table provides a reconciliation of the restructuring charges and the liabilities and reserves at December 31 for each of the past three years.
RESTRUCTURING RESERVES ----------------------------------------------- EMPLOYEE ASSET SEVERANCE IMPAIRMENTS OTHER TOTAL --------- ----------- ------- -------- (DOLLARS IN THOUSANDS) Restructuring charges.......................... $ 16,262 $10,478 $ 2,189 $ 28,929 Less: Cash payments in 1994.................... (3,830) -- (835) (4,665) Noncash items............................ -- (1,144)(1) -- (1,144) -------- ------- ------- -------- 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) -------- ------- ------- -------- Balance at December 31, 1995................... 603 2,743 -- 3,346 Less: Cash payments in 1996.................... (195) -- -- (195) Noncash items............................ -- (1,412)(1) -- (1,412) Other.................................... (408) (1,331) -- (1,739) -------- ------- ------- -------- Balance at December 31, 1996................... $ -- $ -- $ -- $ -- ======== ======= ======= ========
- --------------- (1) Relates to the disposition of branch buildings, furniture, and equipment in 1995 and 1996. 58 61 NOTE 14. OTHER NONINTEREST INCOME AND EXPENSE The major components of other noninterest income and expense are summarized as follows:
YEARS ENDED DECEMBER 31, -------------------------------- 1996 1995 1994 -------- -------- -------- (DOLLARS IN THOUSANDS) OTHER NONINTEREST INCOME Credit life insurance commissions......................... $ 8,925 $ 8,728 $ 5,772 Gain on sale of residential mortgages..................... 6,146 4,837 2,944 Customer ATM usage fee.................................... 5,379 3,520 3,101 VSIBG partnership earnings................................ 2,890 1,992 1,819 Brokerage fee income...................................... 2,760 1,849 1,457 Annuity sales income...................................... 2,242 410 921 Sale of servicing......................................... 976 3,855 854 Litigation settlement..................................... -- -- 2,200 Other income.............................................. 29,917 25,926 24,402 -------- -------- -------- Total other noninterest income..................... $ 59,235 $ 51,117 $ 43,470 ======== ======== ======== OTHER NONINTEREST EXPENSE FDIC insurance............................................ $ 30,250 $ 15,810 $ 23,505 Provision for losses on FHA/VA foreclosure claims (1)..... 23,911 3,429 1,597 Amortization and write-off of goodwill, other intangibles, and mortgage servicing rights: Amortization of mortgage servicing rights............... 13,961 13,158 13,601 Amortization of goodwill and other intangibles.......... 9,716 9,246 7,559 Write-off of mortgage servicing rights, goodwill, and other intangibles.................................... 19,407 -- -- Other contracted services................................. 14,463 9,107 7,875 Postage and carrier....................................... 14,149 12,924 10,819 Advertising and promotion................................. 13,754 13,913 13,728 Stationery and supplies................................... 13,665 12,992 11,559 Communications............................................ 11,485 8,589 7,575 Other personnel services.................................. 7,861 6,321 4,513 Miscellaneous charge-offs................................. 5,852 4,989 2,705 Legal fees................................................ 5,217 4,957 5,758 Merchant credit card charges.............................. 5,152 4,468 4,136 Taxes other than income................................... 4,247 4,330 4,029 Dues, subscriptions, and contributions.................... 3,848 4,256 4,498 Brokerage and clearing fees on trading activities......... 3,819 5,924 2,969 Travel.................................................... 3,749 3,636 2,895 Accounting and audit fees................................. 3,204 3,474 4,072 Insurance................................................. 3,062 3,046 3,997 Consultant fees........................................... 2,207 2,593 1,545 Federal Reserve fees...................................... 2,251 1,775 1,671 Other real estate expense................................. 2,343 1,189 1,099 Consumer loan marketing expenses.......................... -- -- 14,446 Merger-related expenses(2) Salaries, employee benefits and other employment-related charges.............................................. 18,330 4,829 5,138 Write-downs of office buildings and equipment........... 15,782 4,733 3,594 Professional fees....................................... 4,714 1,363 2,525 Other real estate expense............................... 1,364 -- -- Other................................................... 12,596 986 3,605 Restructuring charges (Note 13)........................... -- -- 28,929 Other expense............................................. 22,539 28,747 21,106 -------- -------- -------- Total other noninterest expense.................... $292,898 $190,784 $221,048 ======== ======== ========
- --------------- (1) The amount for 1996 includes $19.8 million of provisions for losses on FHA/VA foreclosure claims related to an acquired entity. (2) Salaries, employee benefits, and other employment-related charges include amounts for employment contract payments, severance, postretirement benefit expenses, and pension expense of acquired entities. Write-downs of office buildings and equipment includes assets to be sold, amounts for lease buyouts, assets determined to be obsolete or no longer of use, and equipment not compatible with the Corporation's equipment. Professional fees include legal fees, accounting fees, and investment banker fees. Other expenses include write-off of assets, charge-offs of prepaid expenses, and miscellaneous merger-related expenses. 59 62 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 $9,500 in 1996 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 1996, 1995, and 1994 were $3.0 million, $2.7 million, and $2.0 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 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 $3.5 million, $3 million, and $2 million for 1996, 1995, and 1994, respectively. At December 31, 1996, the ESOP held 1,044,199 shares of the Corporation's Common Stock, all of which were allocated to participants. STOCK INCENTIVE PLANS. Certain employees and directors of the Corporation and its subsidiaries are eligible to receive options or restricted stock grants under the 1992 Stock Incentive Plan. 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. In October 1996, the Plan was amended to increase the maximum number of shares from 1,600,000 to 6,000,000. The amendment is subject to ratification by shareholders at the April 17, 1997 annual meeting of shareholders. 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, ----------------------------------------------------- 1996 1995 ------------------------- ------------------------- WEIGHTED- WEIGHTED- AVERAGE PRICE NUMBER AVERAGE PRICE NUMBER ------------- --------- ------------- --------- Options Outstanding, beginning of year................ $12.90 2,426,722 $11.85 2,443,152 Granted....................................... 34.14 1,657,968 21.70 339,711 Exercised..................................... 16.48 (723,454) 13.06 (279,901) Canceled or surrendered....................... 16.77 (39,948) 18.00 (76,240) --------- --------- Outstanding, end of year...................... 22.67 3,321,288 12.90 2,426,722 ========= ========= Options becoming exercisable during the year.... $15.21 1,229,161 $10.46 664,018 ====== ========= ====== ========= Options exercisable at end of year.............. $13.41 1,782,753 $13.27 1,240,758 ====== ========= ====== =========
Exercise prices ranged from $5.55 to $39.875 in 1996 and from $5.55 to $32.25 in 1995. The contractual remaining life of all options was 8 years at December 31, 1996. Restricted stock grants aggregating 209,000 shares were awarded in the fourth quarter of 1996 having a fair value of $7.5 million. Restrictions on the grants lapse in annual increments over twelve years. The market value of the restricted stock grants is charged to expense as the restrictions lapse. For the year ended December 31, 1996, $238,000 was expensed and the ending balance at December 31, 1996 was $7.3 million, which is included in unearned compensation in shareholders' equity. Had compensation cost for the Corporation's stock option plans been determined based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed under SFAS No. 123, the Corporation's net income and earnings per share would have been reduced as shown in the table below. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions in 1996 and 1995, respectively: expected dividend yield 3.16% and 4.15%; expected volatility of 25.73% and 30.36%; risk-free interest 60 63 NOTE 15. EMPLOYEE BENEFIT PLANS (CONTINUED) rate of 5.94% and 6.92%; and an expected life of 4.55 years and 4.66 years. Forfeitures are recognized as they occur.
YEARS ENDED DECEMBER 31, -------------------- 1996 1995 ------ ------ (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Net earnings -- as reported................................. $133.7 $172.8 Net earnings -- pro forma................................... 131.3 172.4 Earnings per share -- as reported Primary................................................... 1.95 2.72 Fully diluted............................................. 1.92 2.64 Earnings per share -- pro forma Primary................................................... 1.93 2.71 Fully diluted............................................. 1.90 2.63
Due to the inclusion of only 1995 and 1996 option grants, the effects of applying SFAS No. 123 in 1995 and 1996 may not be representative of the pro forma impact in future years. RETIREE HEALTHCARE AND LIFE INSURANCE. The Corporation provides certain healthcare and life insurance benefits to retired employees who had completed 20 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 1996 and 1995 which were determined assuming a discount rate of 7% for 1996 and 8% for 1995 and an expected return on Plan assets of 5%:
YEARS ENDED DECEMBER 31, ------------------- 1996 1995 ----- ------ (DOLLARS IN THOUSANDS) Service cost................................................ $ 322 $ 203 Interest cost of accumulated postretirement benefit obligation................................................ 938 1,005 Amortization of unrecognized net gain....................... (39) (5) Return on Plan assets....................................... (534) (363) ----- ------ Total............................................. $ 687 $ 840 ===== ======
The following table sets forth the Plans' funded status and the amounts reported in the Corporation's consolidated balance sheet:
YEARS ENDED DECEMBER 31, ------------------------ 1996 1995 -------- -------- (DOLLARS IN THOUSANDS) Fair value of Plan assets................................... $10,927 $10,058 ------- ------- Accumulated postretirement benefit obligation (APBO): Retirees.................................................. 9,326 9,833 Fully eligible Plan participants.......................... 253 230 Other active Plan participants............................ 4,287 3,946 ------- ------- Total APBO........................................ 13,866 14,009 ------- ------- APBO in excess of Plan assets..................... $(2,939) $(3,951) ======= ======= Reconciliation of funded status to reported amounts: Accrued liability included in consolidated balance sheet, including unfunded portion of transition obligation.... $(6,000) $(4,736) Unrecognized net gain..................................... 3,061 785 ------- ------- APBO in excess of Plan assets..................... $(2,939) $(3,951) ======= =======
61 64 NOTE 15. EMPLOYEE BENEFIT PLANS (CONTINUED) The assumed discount rate used to measure the APBO was 7% at both December 31, 1996 and 1995. The weighted average healthcare cost trend rate in 1996 was 10%, 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 1996 net periodic postretirement benefit cost by $121,000 and would have increased the APBO as of December 31, 1996 by $1.1 million. 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, 1996, certain institutions acquired in 1996 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, 1996. Included in unearned compensation in shareholders' equity at December 31, 1996 is $3.2 million for a leveraged ESOP maintained by an acquired institution. At December 31, 1996, the ESOP held 494,100 unallocated shares of the Corporation's Common Stock which will be allocated to the appropriate participants as the related debt is paid. NOTE 16. INCOME TAXES The components of income tax expense are as follows:
YEARS ENDED DECEMBER 31, ---------------------------- 1996 1995 1994 -------- ------- ------- (DOLLARS IN THOUSANDS) CURRENT TAX EXPENSE Federal................................................... $ 93,126 $77,929 $36,692 State..................................................... 14,973 9,536 5,590 -------- ------- ------- Total current tax expense.............................. 108,099 87,465 42,282 -------- ------- ------- DEFERRED TAX (BENEFIT) EXPENSE Federal................................................... (30,838) (2,607) 2,340 State..................................................... (6,735) 1,790 552 -------- ------- ------- Total deferred tax (benefit) expense................... (37,573) (817) 2,892 -------- ------- ------- Total income tax expense.......................... $ 70,526 $86,648 $45,174 ======== ======= =======
Deferred tax assets/liabilities are comprised of the following:
DECEMBER 31, ------------------- 1996 1995 -------- ------- (DOLLARS IN THOUSANDS) DEFERRED TAX ASSETS Losses on loans and other real estate..................... $ 63,413 $51,324 Postretirement and postemployment benefits................ 3,028 2,614 Amortization of intangibles............................... 7,922 1,859 Deferred compensation plans............................... 6,328 5,604 Restructuring and merger-related charges.................. 8,088 4,249 Allowance for losses on FHA/VA foreclosure claims......... 12,325 668 Mortgage servicing rights................................. 4,154 4,141 Other deferred items...................................... 15,218 26,872 -------- ------- Total deferred tax assets......................... 120,476 97,331 -------- ------- DEFERRED TAX LIABILITIES Book over tax basis in purchased loans.................... 4,486 9,010 Stock basis difference.................................... 8,055 6,462 Unrealized gain on available for sale securities.......... 15,591 17,777 Other deferred items...................................... 12,339 23,408 -------- ------- Total deferred tax liabilities.................... 40,471 56,657 -------- ------- Deferred tax asset, net........................... $ 80,005 $40,674 ======== =======
62 65 NOTE 16. INCOME TAXES (CONTINUED) The change in the net deferred tax asset during the year is a result of the addition of net deferred tax assets of acquired companies, the net change in unrealized gain (loss) on available for sale securities, and the current period deferred tax benefit. Income tax expense as a percentage of earnings before income taxes is reconciled with the statutory federal income tax rate of 35% as follows:
YEARS ENDED DECEMBER 31, -------------------------------- 1996 1995 1994 -------- -------- -------- (DOLLARS IN THOUSANDS) Computed "expected" tax.................................... $ 71,492 $ 90,791 $ 50,959 State income taxes, net of federal tax benefit............. 5,354 7,362 4,034 Tax-exempt interest, net................................... (11,014) (11,464) (11,860) Amortization of goodwill and other intangibles............. 2,760 2,030 1,838 Other, net................................................. 1,934 (2,071) 203 -------- -------- -------- Applicable income tax............................ $ 70,526 $ 86,648 $ 45,174 ======== ======== ========
Income tax (benefit) expense applicable to securities transactions was $1.6 million for 1996, ($.9) million for 1995, and ($8.0) million for 1994. NOTE 17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK In the normal course of business, the Corporation becomes a party to various types of financial instruments in order to meet the financing needs of its customers and to reduce its exposure to fluctuations in interest rates. These instruments involve, to varying degrees, elements of credit and interest-rate risk 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, ------------------------ 1996 1995 -------- -------- (DOLLARS IN THOUSANDS) FINANCIAL INSTRUMENTS WHOSE CONTRACT AMOUNTS REPRESENT CREDIT RISK Commitments to extend credit (excluding credit card plans)................................................ $ 1,205 $ 1,240 Commitments to extend credit under credit card plans... 1,704 1,223 Standby, commercial, and similar letters of credit..... 107 90
Commitments to extend credit are legally binding agreements to extend credit 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 $2.5 billion and loan commitments with a maturity over one year which are not unconditionally cancelable totaled $413 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 1997 and 2006. 63 66 NOTE 17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED) 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, ---------------- 1996 1995 ---- ---- (DOLLARS IN MILLIONS) FINANCIAL INSTRUMENTS WHOSE NOTIONAL CONTRACT AMOUNTS EXCEED THE AMOUNTS OF ACTUAL CREDIT RISK Forward contracts...................................... $ 67 $ 52 Interest-rate swap agreements.......................... -- 530 When-issued securities Commitments to sell.................................. 122 97 Commitments to purchase.............................. 88 94
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 as seller utilizes short-term forward commitments to deliver mortgages to protect the Corporation against the risk of 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, including interest-rate swaps, which has been approved and is monitored by the Funds Management Committee and the Board of Directors. The Corporation is not currently trading derivative products. 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 ensure compliance with established policies. At December 31, 1996, the Corporation had no interest-rate swap/cap agreements outstanding. The following table provides a reconciliation of interest-rate swaps/cap between 1995 and 1996.
NOTIONAL AMOUNT DECEMBER 31, ---------------- 1996 1995 ----- ----- (IN MILLIONS) BALANCE AT JANUARY 1........................................ $ 530 $ 340 Maturities................................................ (200) -- Interest-rate swaps entered into by an acquired entity.... -- 300 Interest-rate swaps terminated due to underlying instruments being sold................................. -- (100) Interest-rate swaps/cap of acquired entities terminated at acquisition as the instruments were no longer effective.............................................. (330) (10) ----- ----- BALANCE AT DECEMBER 31...................................... $ -- $ 530 ===== =====
The impact on the Corporation's net interest income of the interest-rate swaps/cap outstanding was a net reduction of approximately $1.5 million in 1996 and $2.9 million in 1995 and had a net positive impact of approximately $600,000 in 1994. The impact of the termination of the interest rate swaps/cap related to an acquired entity was a $1.1 million loss which was recorded in noninterest expense. 64 67 NOTE 17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED) 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. MORTGAGE LOAN SERVICING. The Corporation acts as servicing agent for residential mortgage loans totaling approximately $10.5 billion ($8.6 billion serviced for others) at December 31, 1996 compared to $9.2 billion ($8.6 billion serviced for others) at December 31, 1995. The loans serviced for others are not included in the Corporation's consolidated balance sheet. The following table presents a reconciliation of the changes in mortgage servicing rights for the two years ended December 31, 1996.
YEARS ENDED DECEMBER 31, ------------------------ 1996 1995 -------- -------- (DOLLARS IN THOUSANDS) Beginning balance........................................... $ 59,631 $ 58,179 Additions................................................... 15,552 15,177 Sale of servicing rights.................................... -- (567) Write-off of servicing rights............................... (4,016) -- Amortization of servicing rights............................ (13,961) (13,158) -------- -------- Ending balance.............................................. $ 57,206 $ 59,631 ======== ========
In its capacity as servicer of certain of these loans, the Corporation is responsible for foreclosure and the related costs of foreclosure. These costs are estimated each period based on historical loss experience and are shown as provisions for losses on FHA/VA foreclosure claims in noninterest expense. At December 31, 1996, the Corporation had reserves for these losses of $35.6 million. In the normal course of business, the Corporation sells mortgage loans and makes certain limited representations and warranties to the purchaser. Management does not expect any significant losses to arise from these representations and warranties. CONCENTRATIONS OF CREDIT RISK. Through its subsidiary banks in Tennessee, Mississippi, Missouri, Arkansas, Louisiana, Alabama, and Kentucky, the Corporation grants commercial, agricultural, residential, and consumer loans to customers throughout those states. The amount and percentage of total loans outstanding by the state in which the subsidiaries were headquartered at December 31, 1996 were as follows: Tennessee $6.7 billion (64%), Mississippi $1.5 billion (14%), Missouri $932 million (9%), Arkansas $492 million (5%) , Louisiana $417 million (4%), Alabama $344 million (3%), and Kentucky $80 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. 65 68 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, 1996 DECEMBER 31, 1995 ------------------------- ----------------------- CARRYING FAIR CARRYING FAIR VALUE VALUE VALUE VALUE ----------- ----------- ---------- ---------- (DOLLARS IN THOUSANDS) FINANCIAL ASSETS Cash and short-term investments............. $ 756,284 $ 756,284 $ 920,733 $ 920,733 Trading account assets...................... 225,336 225,336 121,927 121,927 Loans held for resale....................... 58,622 58,622 87,889 87,889 Investment securities -- available for sale..................................... 2,956,234 2,956,234 3,386,785 3,386,785 Investment securities -- held to maturity... -- -- 186,269 188,433 Net loans................................... 10,267,217 10,260,924 8,884,671 9,128,836 Mortgage servicing rights................... 57,206 76,688 59,631 84,841 FINANCIAL LIABILITIES Demand deposits............................. 5,589,409 5,589,409 5,217,442 5,217,442 Time deposits............................... 5,900,853 5,918,072 5,857,280 5,472,157 Short-term borrowings....................... 449,146 449,146 838,283 838,283 Short- and medium-term notes................ 400,000 400,411 -- -- Federal Home Loan Bank advances............. 889,985 892,200 798,039 797,737 Other long-term debt, excluding capital lease obligations........................ 382,122 375,896 225,900 228,978 OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS Forward contracts........................... -- 19 -- (665) Interest-rate swaps......................... -- -- (836) (4,792)
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 fair value. 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. MORTGAGE SERVICING RIGHTS. The fair values of mortgage servicing rights are estimated using discounted cash flow analyses. 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. 66 69 NOTE 18. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) 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. SHORT- AND MEDIUM-TERM BANK NOTES. The fair value of these notes is estimated using discounted cash flow analyses and using current LIBOR-based indices. 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. OTHER LONG-TERM DEBT. The fair value of long-term debt was estimated from dealer quotes. OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS. Fair values of off-balance-sheet instruments are based on current settlement values for forward contracts and interest-rate swaps. The fair value of interest-rate swaps represents the gross unrealized gain (loss) in these contracts. The fair value of commitments to extend credit and letters of credit (see Note 17) is not presented, since management believes the fair value to be insignificant. 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 by 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. The Corporation's five banks (UPC Banks) located in Mississippi are defendants in various related lawsuits pending in state and federal courts in Mississippi related to the placement of collateral protection insurance (CPI) by 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 common law. The CPI programs appear to have been substantially similar in many respects to CPI programs of other Mississippi banks, often with the same insurance companies. Consequently, there are now similar putative class actions pending against numerous Mississippi banks (including those against the UPC Banks), various insurance agencies and companies 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. Other subsidiaries of the Corporation are involved in similar litigation relating to CPI on mobile home loans. One such suit was filed as a putative class action in June 1995 against Leader Federal Bank for Savings (Leader Federal) and eighteen other unrelated defendants, requesting $200 million in punitive damages against each defendant. Another individual suit filed in June 1995 against Leader Federal as a counterclaim to a foreclosure suit demanded judgment for compensatory damages and punitive damages of $10 million. An agreement to settle these cases was reached, and court approval obtained, in the fourth quarter of 1996, within amounts previously established. Two other CPI-related actions were filed against Leader Federal, a subsidiary, and an unrelated insurance company in January 1996 and remain pending. One such case demands compensatory damages of $5,000 and punitive damages of $20 million, while the other seeks $10,000 in compensatory damages and $50 million in punitive damages. 67 70 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 & Cannon, Inc. EDGAR H. BAILEY Vice Chairman of the Board Union Planters Corporation 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. JAMES E. HARWOOD President Sterling Equities PARNELL S. LEWIS, JR. President Anderson-Tully Company C. J. LOWRANCE III President Lowrance Brothers & Company 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 DR. V. LANE RAWLINS President The University of Memphis DONALD F. SCHUPPE DFS Service Company MIKE P. STURDIVANT President Due West Gin Co., Inc. RICHARD A. TRIPPEER, JR. President R. A. Trippeer, Inc. SPENCE L. WILSON President Kemmons Wilson Companies MILTON J. WOMACK President Milton J. Womack, Inc. Chairman of the Board Union Planters Bank of Louisiana 68 71 Union Planters Logo CORPORATE INFORMATION ANNUAL MEETING Thursday, April 17, 1997 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 WEB SITE http://www.unionplanters.com TRANSFER AGENT AND REGISTRAR Union Planters National Bank Corporate Trust Operations 6200 Poplar Avenue, Suite 300 Memphis, Tennessee 38119 (901) 580-5523 DIVIDEND PAYING AGENT Union Planters National Bank Corporate Trust Operations 6200 Poplar Avenue, Suite 300 Memphis, Tennessee 38119 (901) 580-5523 INDEPENDENT ACCOUNTANTS Price Waterhouse LLP STOCK AND OPTION LISTINGS Common NYSE Symbol: UPC Wall Street Journal: UnPlantr Series E Convertible Preferred NASDAQ NMS Symbol: UPCPO Wall Street Journal: UnPlantr pfE Options Philadelphia Stock Exchange FOR FINANCIAL INFORMATION, CONTACT Jack W. Parker Executive Vice President and Chief Financial Officer (901) 580-6781 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) 580-6604. 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) 580-5513 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. THE NEW YORK STOCK EXCHANGE LOGO 72 UNION PLANTERS CORPORATION P.O. BOX 387 MEMPHIS, TENNESSEE 38147 EX-21 7 SUBSIDIARIES OF THE REGISTRANT 1 UNION PLANTERS CORPORATION, Registrant, Exhibit 21 A registered bank holding company Page 1 of 2
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 Holding Corporation (a) Tennessee 100.00% Union Planters National Bank (b) United States 100.00% Investment Group Mortgage Corporation (c and g) Tennessee 100.00% Planters Investment Corporation, Inc. (c) Arkansas 100.00% Leader Enterprises, Inc. (c) Tennessee 100.00% Leader Services, Inc. (c) Tennessee 100.00% Leader Federal Mortgage, Inc. (c) Tennessee 100.00% Southeastern Mortgage of Alabama, LLC (d) Alabama 50.00% ASMI, LLC (d) Indiana 50.00% Leader Leasing, Inc. (c) Delaware 100.00% Leader Funding Corporation I (c) Delaware 100.00% Leader Funding Corporation III (c) Delaware 100.00% Union Planters Brokerage Services, Inc. (c) Delaware 100.00% PFIC Corporation (c) Tennessee 100.00% PFIC Securities Corporation (a) Tennessee 100.00% PFIC Alabama Agency, Inc. (e) Alabama 100.00% PFIC Georgia Agency, Inc. (e) Georgia 100.00% PFIC Agency New Mexico, Inc. (e) New Mexico 100.00% PFIC Corporation of Kentucky (e) Kentucky 100.00% PFIC Agency, Inc. (e) Illinois 100.00% PFIC Arkansas Agency, Inc. (e) Arkansas 100.00% PFIC Mississippi Agency, P.C. (e) Mississippi 100.00% indirectly PFIC Michigan Agency, Inc. (e) Michigan 100.00% PFIC Wisconsin Agency, Inc. (e) Wisconsin 100.00% PFIC Louisiana Agency, Inc. (e) Louisiana 100.00% PFIC Missouri Agency, Inc. (e) Missouri 100.00% PFIC Virginia Agency, Inc. (e) Virginia 100.00% PFIC Oregon Agency, Inc. (e) Oregon 100.00% PFIC Ohio Agency, Inc. (e) Ohio 100.00% Navigator Agency Incorporated (e) Texas 100.00% indirectly Union Planters Bank of Middle Tennessee, National Association (b) United States 100.00% Millcreek Development Partnership, LP (b) Tennessee 49.50% Union Planters Bank of Northeast Arkansas, (b) Arkansas 100.00% Union Planters Bank of Central Arkansas, National Association (b) Arkansas 100.00% First North Central Insurance, Inc. (f and g) Arkansas 100.00% Union Planters Bank of Jackson, National Association (a) Tennessee 100.00% Union Planters Bank of East Tennessee, National Association (a) Tennessee 100.00% Foothills Financial Services (h) Tennessee 100.00% Union Planters Bank of Chattanooga, National Association (a) United States 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% Franklin Financial Group, Inc. (a) Tennessee 100.00% Union Planters Bank of the Lakeway Area (i) Tennessee 100.00% Southeastern Credit Life Insurance Company (j) Arizona 100.00% Colonial Loan Association (j) Tennessee 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% Central State Bank (a) Tennessee 100.00% Simpson County Bank (a) Kentucky 100.00% First National Bancorp of Shelbyville (a) United States 100.00% Union Planters Bank of Northwest Tennessee FSB (a) United States 100.00% BNF Bancorp, Inc. (a) Delaware 100.00% Union Planters Bank of Alabama (k) United States 100.00%
2 Exhibit 21 Page 2 of 2 UNION PLANTERS CORPORATION, Registrant, A registered bank holding company
State or Percentage Jurisdiction of Voting Under Laws of Securities Name of Registrant and Subsidiaries Which Organized Owned - ----------------------------------- ---------------- ----------- Union Planters Community Bancorp, Inc. (a and g) Tennessee 100.00% Union Planters Bank of West Tennessee (l) Tennessee 100.00% Summit Insurance, Inc. (m) Tennessee 100.00% Exchange Credit Corporation (m) Tennessee 100.00% Union Planters Bank of Mississippi (a) Mississippi 100.00% Sunburst Mortgage Corporation (n) 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 (o) 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% Capital Equity Corporation (p) Louisiana 100.00% Union Planters Investment Bankers Corporation (a and g) Tennessee 100.00% UMIC, Inc. (g and q) Tennessee 100.00% UMIC Securities Corporation (g and q) 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% Union Planters Bank of Mid-Missouri (r) Missouri 100.00% Maryland Avenue Bancorporation, Inc. (r) Missouri 100.00% Union Planters Bank of Missouri(s) Missouri 100.00% Union Planters Bank of Southeast Missouri (r) Missouri 100.00% Union Planters Bank of Southwest Missouri (r) Missouri 100.00% Capital Services Corporation (r) Missouri 100.00% First Financial Bank of Southeast Missouri (r) Missouri 99.41% First Financial Bank of Mississippi County (r) Missouri 100.00% First Financial Bank of Ste. Genevieve County (r) Missouri 94.87% Citizens First Financial Bank (r) Missouri 99.92% First Financial Automation (t) Missouri 100.00% Union Planters Capital Trust (a) Delaware 100.00% (a) Subsidiary of Union Planters Corporation (b) Subsidiary of Union Planters Holding Corporation (c) Subsidiary of Union Planters National Bank (d) Subsidiary of Leader Federal Mortgage, Inc. (e) Subsidiary of PFIC Corporation (f) Subsidiary of Union Planters Bank of Central Arkansas, National Association (g) Inactive Subsidiary (h) Subsidiary of Union Planters Bank of East Tennessee, National Association (i) Subsidiary of Franklin Financial Group, Inc. (j) Subsidiary of Union Planters Bank of the Lakeway Area (k) Subsidiary of BNF Bancorp, Inc. (l) Subsidiary of Union Planters Community Bancorp, Inc. (m) Subsidiary of Union Planters Bank of West Tennessee (n) Subsidiary of Union Planters Bank of Mississippi (o) Subsidiary of Union Planters Bank of Central Mississippi (p) Subsidiary of Union Planters Bank of Louisiana (q) Subsidiary of Union Planters Investment Bankers Corporation (r) Subsidiary of Capital Bancorporation, Inc. (s) Subsidiary of Maryland Avenue Bancorporation, Inc. (t) Subsidiary of Union Planters Bank of Missouri, First Financial Bank of Southeast Missouri, First Financial Bank of Mississippi County, First Finanancial Bank of Ste. Genevieve County, and Citizens First Financial Bank
EX-23 8 CONSENT OF INDEPENDENT ACCOUNTANTS 1 Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the previously filed Registration Statements on Form S-3 (Nos. 333-02377, 333-11817, and 33-27814) and Form S-8 (Nos. 333-17363, 333-13207, 333-13205, 333-02363, 2-87392, 33-23306, 33-35928, 33-53454, 33-55257, 33-56269, and 33-65467) of Union Planters Corporation of our report dated January 16, 1997 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 14, 1997 EX-27 9 FINANCIAL DATA SCHEDULE
9 1,000 US DOLLARS YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 1 594,535 9,082 152,667 225,336 2,956,234 0 0 10,434,070 166,853 15,222,563 11,490,262 714,146 256,565 1,408,716 0 83,809 324,637 944,428 15,222,563 899,344 249,381 31,884 1,180,609 449,864 574,647 605,962 57,395 4,081 570,634 204,264 133,738 0 0 133,738 1.95 1.92 4.41 63,346 732,131 2,546 11,400 156,388 64,089 12,309 166,853 166,853 0 0
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