FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------- --------------------
Commission File Number 0-10974
-------
FIRST PULASKI NATIONAL CORPORATION
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 62-1110294
------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
206 South First Street, Pulaski, Tennessee 38478
------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: 615-363-2585
---------------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X . No .
------- -------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by this
report:
Common Stock, $1.00 par value -- 303,518 Shares Outstanding
PAGE 1 OF 16 PAGES
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
June 30, December 31,
1996 1995
ASSETS ------------ ------------
Cash and due from banks $9,086,822 $8,767,525
Federal funds sold 6,513,234 10,231,642
------------ ------------
Cash and cash equivalents 15,600,056 18,999,167
Interest bearing balances with banks 0 100,000
Securities available for sale 41,870,771 41,533,475
Securities held to maturity 20,602,549 17,389,119
Net loans and leases 158,160,450 150,934,127
Bank premises and equipment 7,165,389 7,239,935
Accrued interest receivable 3,481,195 3,383,798
Prepayments and other assets 2,186,219 1,862,047
Other real estate owned 93,258 110,058
------------ ------------
TOTAL ASSETS $249,159,887 $241,551,726
============ ============
LIABILITIES
-----------
Deposits
Non-interest bearing balances $30,582,327 $27,784,716
Interest bearing balances 183,804,497 179,624,823
------------ ------------
214,386,824 207,409,539
Other borrowed funds 1,913,509 1,312,788
Accrued taxes 225,830 111,713
Accrued interest on deposits 1,732,888 1,792,560
Accrued profit sharing expense 113,906 131,341
Other liabilities 466,608 461,990
------------ ------------
TOTAL LIABILITIES 218,839,565 211,219,931
------------ ------------
STOCKHOLDERS' EQUITY
--------------------
Common Stock, $1.00 par; authorized 1,800,000
shares; 303,518 and 308,261 shares issued
and outstanding, respectively 303,518 308,261
Capital Surplus 5,492,678 6,145,969
Retained Earnings 24,637,535 23,579,610
Unrealized gains (losses) on securities (113,409) 297,955
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 30,320,322 30,331,795
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $249,159,887 $241,551,726
============ ============
PAGE 2 OF 16 PAGES
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements. (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
For Three Months Ended For Six Months Ended
June 30, June 30,
---------------------- ----------------------
1996 1995 1996 1995
---- ---- ---- ----
INTEREST INCOME:
Loans, including
fees $4,297,459 $3,935,317 $8,515,927 $7,457,596
Investment
securities 923,600 774,738 1,782,353 1,674,755
Deposits 0 0 1,823 0
Federal funds sold 134,778 245,038 287,571 388,302
---------- ---------- ---------- ----------
5,355,837 4,955,093 10,587,674 9,520,653
INTEREST EXPENSE:
Interest on deposits:
NOW accounts 99,688 199,019 207,593 319,385
Savings and MMDA 183,696 175,747 378,921 379,916
Time 1,891,667 1,751,134 3,784,913 3,232,822
Borrowed funds 29,905 16,844 52,478 34,003
---------- ---------- ---------- ----------
2,204,956 2,142,744 4,423,905 3,966,126
---------- ---------- ---------- ----------
NET INTEREST INCOME 3,150,881 2,812,349 6,163,769 5,554,527
Loan loss provision 153,000 38,185 253,000 79,622
---------- ---------- ---------- ----------
NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES 2,997,881 2,774,164 5,910,769 5,474,905
---------- ---------- ---------- ----------
OTHER INCOME:
Service charges on
deposit accounts 380,374 364,185 720,687 688,803
Other service
charges and fees 77,286 106,903 168,588 214,967
Security gains
(losses) (100,293) 4,300 (100,616) 4,300
Other 142,587 158,500 170,675 219,366
---------- ---------- ---------- ----------
499,954 633,888 959,334 1,127,436
---------- ---------- ---------- ----------
PAGE 3 OF 16 PAGES
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements. (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY (UNAUDITED)
For Three Months Ended For Six Months Ended
June 30, June 30,
---------------------- ----------------------
1996 1995 1996 1995
---- ---- ---- ----
OTHER EXPENSES:
Salaries and
employee benefits 1,039,669 1,012,048 2,058,738 1,955,582
Occupancy, net 204,416 185,256 418,256 400,870
Furniture and
equipment 186,970 183,587 359,073 356,806
Advertising and
public relations 99,158 134,759 191,578 262,101
Other operating 354,553 465,156 666,118 915,940
---------- ---------- ---------- ----------
1,884,766 1,980,806 3,693,763 3,891,299
---------- ---------- ---------- ----------
Income before
income taxes $1,613,069 $1,427,246 $3,176,340 $2,711,042
Applicable income
taxes 572,788 471,178 1,148,277 944,351
---------- ---------- ---------- ----------
NET INCOME $1,040,281 $956,068 $2,028,063 $1,766,691
========== ========== ========== ==========
PER SHARE DATA:
Net income per
share $0.69 $0.63 $1.33 $1.16
Dividends per share $0.32 $0.30 $0.64 $0.55
Number of shares 1,515,845 1,525,985 1,519,350 1,525,415
========== ========== ========== ==========
PAGE 4 OF 16 PAGES
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements. (Continued)
STOCKHOLDER'S EQUITY
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY (UNAUDITED)
For the Six Months Ended June 30, 1996
Unrealized
Gains/<Losses>
Common Capital Retained on Securities Total
Stock Surplus Earnings Net of Taxes
---------------------------------------------------------------
Balance, December 31,
1995 $308,261 $6,145,969 $23,579,610 $297,955 $30,331,795
Net Income 2,028,063 2,028,063
Cash Dividends
($3.20 per share) (970,138) (970,138)
Common Stock Issued 775 102,675 103,450
Common Stock Repurchased (5,518) (755,966) (761,484)
Change in unrealized gains
<losses> on securities,
net of tax (411,364) (411,364)
--------- ---------- ----------- ----------- -----------
Balance,
June 30, 1996 $303,518 $5,492,678 $24,637,535 ($113,409) $30,320,322
========= ========== =========== =========== ===========
PAGE 5 OF 16 PAGES
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements. (Continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY (UNAUDITED)
For Six Months Ended
June 30,
1996 1995
---- ----
Cash Flows From Operating Activities:
Net Income $2,028,063 $1,766,691
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:
Provision for loan losses 253,000 79,622
Depreciation of premises and equipment 354,822 378,274
Amortization and accretion of investment
securities, net 120,657 214,347
Security (gains) losses, net 100,616 (4,300)
Gains from sale of other real estate (3,166) 0
Increase in interest receivable (97,397) (635,099)
Increase in prepaid expenses (80,329) (173,719)
Increase in other assets (31,929) (30,577)
Increase (decrease) in accrued interest payable (59,672) 430,075
Increase in accrued taxes 114,118 98,213
Increase (decrease) in other liabilities (58,828) 377,867
------------ ------------
Net Cash From Operating Activities 2,639,955 2,501,394
Cash Flows for Investing Activities:
Proceeds from maturity of investment
securities 7,734,325 16,808,326
Proceeds from sale of investment securities 11,967,501 0
Proceeds from sale of other real estate 17,166 0
Purchase of investment securities (24,097,106) (6,837,739)
Decrease in interest bearing deposits 100,000 250,075
Net increase in loans (7,433,310) (9,795,586)
Principal payments received under leases 0 23
Capital expenditures (280,276) (653,438)
Other real estate acquired, net 2,800 7,510
------------ ------------
Net Cash Used by Investing Activities (11,988,900) (220,829)
Cash Flows From Financing Activities:
Net increase in deposits 6,977,284 17,873,737
Cash dividends paid (970,137) (839,678)
Proceeds from issuance of common stock 103,450 92,544
Payments to repurchase shares (761,484) 0
Proceeds from borrowings 670,809 0
Borrowings repaid (70,088) (42,553)
------------ ------------
Net Cash From Financing Activities 5,949,834 17,084,050
------------ ------------
Net Increase in Cash and Cash Equivalents (3,399,111) 19,364,615
Cash and Cash Equivalents at Beginning of Period 18,999,167 10,058,949
------------ ------------
Cash and Cash Equivalents at End of Period $15,600,056 $29,423,564
============ ============
PAGE 6 OF 16 PAGES
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements. (Continued)
The interim financial statements furnished under this item reflect
all adjustments which are, in the opinion of management, necessary for
a fair presentation of the results of operations for the interim periods
presented. All such adjustments are of a normal recurring nature.
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations.
The following analysis should be read in conjunction with the
financial statements set forth in Part I, Item 1, immediately preceding
this section.
Reference is made to the report of the registrant on Form 10-K
for the year ending December 31, 1995, which report was filed with the
Securities and Exchange Commission on or about March 30, 1996.
(a) Liquidity
Liquidity has been defined as the ability to fund increases in
loan demand or to compensate for decreases in deposits and other
sources of funds, or both. Maintenance of adequate liquidity is an
essential component of the financial planning process. The objective
of asset/liability management is to provide an optimum balance of
safety, liquidity and earnings. The registrant seeks to generate
adequate cash flows to meet its needs without sacrificing income or
taking undue risks.
Marketable investment securities, particularly those of short
maturities, are the principal source of asset liquidity. Securities
maturing in one year or less amounted to $14,885,388 at June 30,
PAGE 7 OF 16 PAGES
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
1996, representing 23.8 percent of the investment securities portfolio
as compared to the 17.7 percent level of one year earlier. Other
sources of liquidity include maturing loans and federal funds sold.
The registrant knows of no unusual demands, commitments, or
events which could adversely impact the liquidity of the registrant.
(b) Capital Adequacy
The Federal Reserve Board, the Office of the Comptroller of the
Currency and the FDIC have issued risk-based capital guidelines for
U.S. banking organizations. These guidelines provide a uniform capital
framework that is sensitive to differences in risk profiles among
banking companies.
Under these guidelines, total capital consists of Tier I capital
(core capital, primarily stockholders' equity) and Tier II capital
(supplementary capital, including certain qualifying debt instruments
and the loan loss reserve). Assets are assigned risk weights ranging
from 0 percent to 100 percent depending on the level of credit risk
normally associated with such assets. Off-balance sheet items (such as
commitments to make loans) are also included in assets through the use
of conversion factors established by regulators and are assigned risk
weights in the same manner as on-balance sheet items. Banking
institutions are expected to maintain a Tier I capital to risk-weighted
assets ratio of at least 4.00 percent, a total capital (Tier I plus
Tier II) to total risk-weighted assets ratio of at least 8.00 percent,
and a Tier I capital to total assets ratio (leverage ratio) of at
PAGE 8 OF 16 PAGES
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
least 3.00 percent. The following table sets out the appropriate
regulatory standards as well as First Pulaski National Corporation's
actual ratios at June 30, 1996 and December 31, 1995.
June 30, December 31,
1996 1995
------------ ------------
(in thousands of dollars)
Tier I Capital to Risk-Weighted Assets:
Tier I capital 30,431 30,034
Risk-weighted assets 174,279 164,697
Tier I capital to risk-weighted assets 17.46% 18.24%
Regulatory requirement 4.00% 4.00%
Total Capital to Risk-Weighted Assets:
Total capital (Tier I plus Tier II) 32,609 32,092
Risk-weighted assets 174,279 164,697
Total capital to risk-weighted assets 18.71% 19.49%
Regulatory requirement 8.00% 8.00%
Tier I Capital to Total Assets (Leverage Ratio)
Tier I capital 30,431 30,034
Total assets 249,160 241,552
Tier I capital to total assets 12.21% 12.43%
Regulatory requirement 3.00% 3.00%
Effective April 18, 1996, the Board of Directors declared a five-
for-one stock split of the common stock effected in the form of a stock
dividend to shareholders of record on July 1, 1996. The aggregate par
value of the additional shares($1,214,072) was transferred from
retained earnings to the common stock account.
(c) Results of Operations
Net income of the registrant was $2,028,063 in the first six
months of 1996. This amounted to an increase of $261,372, or 14.8
PAGE 9 OF 16 PAGES
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
percent, compared to the first six months of 1995. Net income was
higher, as compared to the same period last year, largely due to net
interest income. Net interest income increased mainly because of
significant growth in income earned on investment securities and loans,
including fees. This growth more than offset the rise in interest
expense, which resulted primarily from an increase in interest paid on
time deposits as compared to June 1995. Other income for the first six
months showed a decrease from the same period last year mainly because
of a reduction in other service charges, fees and miscellaneous income,
as well as a loss on sale of investment securities. However, this
decrease had minimal effect in that total other expenses were down by
a greater degree. This was the result of a reduction in advertising,
public relations and other operating costs with occupancy, salaries and
employee benefits slightly higher than in June 1995.
Net interest income, the largest component of earnings for the
registrant, is the difference between income earned on loans and
investments and interest paid on deposits and other sources of funds.
The net interest income of the registrant for the six month period
ending June 30, 1996 increased by $609,242, or 11.0 percent, as
compared to the same period of 1995, reflecting the fact that an
appropriate balance is being maintained between the company's interest
sensitive assets and interest sensitive liabilities to provide yields
appropriate to the risk and liquidity involved.
Income before taxes increased by $465,298 or 17.2 percent as
PAGE 10 OF 16 PAGES
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
compared to the same period from prior year. The increase in
applicable income taxes was $203,926, or 21.6 percent.
On a per share basis, net income was $1.33 per share based on
1,519,350 shares for the first six months of 1996 as compared to $1.16
per share on 1,525,415 shares for the first six months of 1995. These
per share figures have been restated to reflect the increased number of
common shares resulting from the stock split approved April 18, 1996 and
to take effect July 1, 1996.
Non-performing assets at December 31, 1995 included $110 thousand
in other real estate owned, $208 thousand in non-accrual loans, and
$210 thousand in loans past due ninety days or more as to interest or
principal payment. Additionally, there were no restructured loans at
year-end. At June 30, 1996, the corresponding figures were $93 thousand
in other real estate owned, $449 thousand in non-accrual loans, $395
thousand in loans past due ninety days or more, and no loans
restructured. Although there was a slight increase in nonaccrual loans
from December 31, 1995, the allowance for loan losses totaling $2,189
thousand is deemed sufficient by management to cover potential losses
in the loan portfolio.
On January 1 of 1994, the Company adopted Statement of Financial
Accounting Standards No. 115. As a result of the issuance and
adoption of this statement, management now classifies a majority of the
investment portfolio in the available-for-sale category and reports
PAGE 11 OF 16 PAGES
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
these securities at fair value. Management does not anticipate the sale
of a material amount of investment securities classified as available-
for-sale in the forseeable future. However, these securities may be
sold in response to changes in interest rates, changes in prepayment
risk, the need to increase regulatory capital or asset/liability
strategy.
On January 1, 1995, the Company adopted FASB Statements No. 114 and
No. 118, both of which deal with accounting by creditors for impairment
of loans. Statements No.114 and No.118 provide new rules for measuring
impairment losses on loans. As of the second quarter of 1996, the
Company has identified those loans which it deems to be impaired and has
computed allowances which management believes to be sufficient for those
loans. The adoption of these statements had no material effect on the
earnings or financial condition of the Company.
In the opinion of management, the registrant maintains a strong
financial position and is optimistic that trends as reflected in the
Form 10-Q will be sustained.
PAGE 12 OF 16 PAGES
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings.
The registrant and its subsidiary are involved, from time to time,
in ordinary routine litigation incidental to the banking business.
Neither the registrant nor its subsidiary is involved in any material
pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of the stockholders of the First Pulaski
National Corporation was held on April 18, 1996. All matters subject
to a vote of security holders were furnished to security holders with
sufficient advance notice as required.
(b) At the annual meeting of stockholders on April 18, 1996, the
following Directors were elected to one year terms of membership:
David E. Bagley R. M. Harwell
Johnny Bevill Morris Ed Harwell
James K. Blackburn, IV James Rand Hayes
Wade Boggs William R. Horne
James H. Butler Glen Lamar
Thomas L. Cardin D. Clayton Lee
Joyce F. Chaffin Kenneth R. Lowry
Parmenas Cox Beatrice J. McElroy
Robert M. Curry William A. McNairy
Gregory G. Dugger W. Harwell Murrey
Joe Dunnavant Stephen F. Speer
Charles D. Haney W. E. Walters
W. Gary Harrison Bill Yancey
All Members of the Board are elected to one year terms and the
members listed above constitute the full membership of the Board.
(c) Among matters brought to a vote of stockholders was the
approval of a Charter Ammendment which would increase the authorized
shares of common stock from 1,800,000 to 10,000,000. Of the 257,875
shares represented in person or by proxy, the vote was 252,371 for,
PAGE 13 OF 16 PAGES
PART II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders (Continued)
4,238 against, and 1,266 abstaining.
Also brought to a vote was the election of Putman and Hancock,
Certified Public Accountants, as external auditors for the ensuing
year. This matter was also passed with votes of 253,637 for, 0 against,
and 325 abstaining.
Item 6. Exhibits and Reports on Form 8-K.
(a) Following the signature page of this report on Form 10-Q is
an Index of Exhibits listed according to the numbers assigned to such
exhibits as shown on Table II of Regulation S-K.
(b) No Form 8-K Reports were required to be filed during the
second quarter of 1996.
PAGE 14 OF 16 PAGES
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
FIRST PULASKI NATIONAL CORPORATION
Date: August 13, 1996 /s/ Robert M. Curry
---------------- ---------------------------------------
Robert M. Curry, Chairman of the Board
and Chief Executive Officer
Date: August 13, 1996 /s/ Glen Lamar
---------------- ---------------------------------------
Glen Lamar, Secretary/Treasurer
PAGE 15 OF 16 PAGES
INDEX TO EXHIBITS FOR THE FIRST PULASKI NATIONAL CORPORATION
------------------------------------------------------------
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996
------------------------------------------------
(11) Statement regarding computation of per share earnings
(27) Financial Data Schedules
PAGE 16 OF 16 PAGES