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 September 30, 1996
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-10974
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FIRST PULASKI NATIONAL CORPORATION
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(Exact name of registrant as specified in its charter)
Tennessee 62-1110294
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(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
206 South First Street, Pulaski, Tennessee 38478
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: 615-363-2585
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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 .
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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 -- 1,521,655 Shares Outstanding
PAGE 1 OF 16 PAGES
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
September 30, December 31,
1996 1995
ASSETS ------------ ------------
Cash and due from banks $10,702,158 $8,767,525
Federal funds sold 6,340,161 10,231,642
------------ ------------
Cash and cash equivalents 17,042,319 18,999,167
Interest bearing balances with banks 0 100,000
Securities available for sale 41,930,795 41,533,475
Securities held to maturity 19,153,396 17,389,119
Net loans and leases 156,960,301 150,934,127
Bank premises and equipment 7,174,659 7,239,935
Accrued interest receivable 3,510,372 3,383,798
Prepayments and other assets 2,275,816 1,862,047
Other real estate owned 92,058 110,058
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TOTAL ASSETS $248,139,716 $241,551,726
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LIABILITIES
Deposits
Non-interest bearing balances $31,829,625 $27,784,716
Interest bearing balances 180,857,613 179,624,823
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212,687,238 207,409,539
Other borrowed funds 1,880,416 1,312,788
Accrued taxes 315,537 111,713
Accrued interest on deposits 1,636,833 1,792,560
Accrued profit sharing expense 127,879 131,341
Other liabilities 469,326 461,990
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TOTAL LIABILITIES 217,117,229 211,219,931
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STOCKHOLDERS' EQUITY
Common Stock, $1.00 par; authorized 10,000,000
shares; 1,521,655 and 1,541,305 shares
issued and outstanding, respectively 1,521,655 1,541,305
Capital Surplus 5,614,667 6,145,969
Retained Earnings 23,936,832 22,346,566
Unrealized gains (losses) on securities (50,667) 297,955
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TOTAL STOCKHOLDERS' EQUITY 31,022,487 30,331,795
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $248,139,716 $241,551,726
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PAGE 2 OF 16 PAGES
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements. (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
For Three Months Ended For Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1996 1995 1996 1995
---- ---- ---- ----
INTEREST INCOME:
Loans, including
fees $4,399,907 $4,092,552 $12,915,834 $11,550,148
Investment
securities 922,573 796,902 2,704,926 2,471,657
Deposits 0 0 1,823 0
Federal funds sold 97,158 230,388 384,729 618,690
---------- ---------- ---------- ----------
5,419,638 5,119,842 16,007,312 14,640,495
INTEREST EXPENSE:
Deposits:
NOW accounts 93,797 122,707 301,390 442,092
Savings and MMDA 185,627 193,467 564,548 573,383
Time 1,845,602 1,882,150 5,630,515 5,114,972
Notes payable 29,404 16,523 81,882 50,526
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2,154,430 2,214,847 6,578,335 6,180,973
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NET INTEREST INCOME 3,265,208 2,904,995 9,428,977 8,459,522
Loan loss provision 300,000 64,027 553,000 143,649
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NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES 2,965,208 2,840,968 8,875,977 8,315,873
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OTHER INCOME:
Service charges on
deposit accounts 387,297 324,806 1,107,984 1,013,609
Other service
charges and fees 108,459 107,339 277,047 322,306
Security gains
(losses) 0 (50,543) (100,616) (46,243)
Other 25,407 83,817 196,082 303,183
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521,163 465,419 1,480,497 1,592,855
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PAGE 3 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 Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1996 1995 1996 1995
---- ---- ---- ----
OTHER EXPENSES:
Salaries and
employee benefits 1,038,860 973,078 3,097,598 2,928,660
Occupancy, net 195,080 201,890 613,336 602,760
Furniture and
equipment 197,876 200,176 556,949 556,982
Advertising and
public relations 99,864 108,375 291,442 370,476
Other operating 322,659 288,747 988,777 1,204,687
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1,854,339 1,772,266 5,548,102 5,663,565
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Income before
income taxes $1,632,032 $1,534,121 $4,808,372 $4,245,163
Applicable income
taxes 567,112 535,118 1,715,389 1,479,469
---------- ---------- ---------- ----------
NET INCOME $1,064,920 $999,003 $3,092,983 $2,765,694
========== ========== ========== ==========
PER SHARE DATA:
Net income per
share $0.70 $0.65 $2.04 $1.81
Dividends per share $0.35 $0.30 $0.99 $0.85
Number of shares 1,519,484 1,538,570 1,519,393 1,529,847
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PAGE 4 OF 16 PAGES
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements. (Continued)
STOCKHOLDER'S EQUITY
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY (UNAUDITED)
For the Nine Months Ended September 30, 1996
Unrealized
Gains/<Losses>
Common Capital Retained on Securities Total
Stock Surplus Earnings Net of Taxes
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Balance, December 31,
1995 $1,541,305 $6,145,969 $22,346,566 $297,955 $30,331,795
Net Income 3,092,983 3,092,983
Cash Dividends
($0.99 per share) (1,502,717) (1,502,717)
Common Stock Issued 7,940 202,592 210,532
Common Stock Repurchased (27,590) (733,894) (761,484)
Change in unrealized gains
<losses> on securities,
net of tax (348,622) (348,622)
--------- ---------- ----------- ----------- -----------
Balance,
September 30, 1996 $1,521,655 $5,614,667 $23,936,832 ($50,667) $31,022,487
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PAGE 5 OF 16 PAGES
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements. (Continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY (UNAUDITED)
For Nine Months Ended
September 30,
1996 1995
---- ----
Cash Flows From Operating Activities:
Net Income $3,092,983 $2,765,694
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:
Provision for loan losses 553,000 143,649
Depreciation of premises and equipment 544,277 579,338
Amortization and accretion of investment
securities, net 171,508 306,183
Deferred income taxes (benefits) (98,604) 0
Security losses, net 100,616 46,243
Gains from sale of other real estate (3,166) 0
Increase in interest receivable (126,630) (939,932)
Increase in prepaid expenses (84,135) (79,113)
Increase in other assets (51,383) (97,319)
Increase (decrease) in accrued interest payable (155,727) 692,691
Increase in accrued taxes 203,824 188,710
Increase (decrease) in other liabilities (218,021) 179,637
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Net Cash From Operating Activities 3,928,542 3,785,781
Cash Flows for Investing Activities:
Proceeds from maturity of investment
securities 9,191,602 28,134,362
Proceeds from sale of investment securities 11,967,501 0
Proceeds from sale of other real estate 17,166 0
Purchase of investment securities (24,121,039) (18,996,136)
Decrease in interest bearing deposits 100,000 149,975
Net increase in loans (6,357,279) (12,794,156)
Capital expenditures (479,000) (814,147)
Other real estate acquired, net 4,000 70,044
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Net Cash Used by Investing Activities (9,677,049) (4,250,058)
Cash Flows From Financing Activities:
Net increase in deposits 5,277,699 16,209,569
Cash dividends paid (1,502,717) (1,301,282)
Proceeds from issuance of common stock 210,532 361,600
Payments to repurchase shares (761,484) 0
Proceeds from borrowings 670,810 0
Borrowings repaid (103,181) (64,307)
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Net Cash From Financing Activities 3,791,659 15,205,580
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Net Increase in Cash and Cash Equivalents (1,956,848) 14,741,303
Cash and Cash Equivalents at Beginning of Period 18,999,167 10,058,949
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Cash and Cash Equivalents at End of Period $17,042,319 $24,800,252
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PAGE 6 OF 16 PAGES
PART I - FINANCIAL INFORMATION
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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 financial condition and 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 essential in
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 $18,239,704 at September 30,
PAGE 7 OF 16 PAGES
PART I - FINANCIAL INFORMATION
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Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
1996, representing 29.9 percent of the investment securities portfolio
as compared to the 16.0 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
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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 September 30, 1996 and December 31, 1995.
September 30, December 31,
1996 1995
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(in thousands of dollars)
Tier I Capital to Risk-Weighted Assets:
Tier I capital 31,070 30,034
Risk-weighted assets 172,642 164,697
Tier I capital to risk-weighted assets 18.00% 18.24%
Regulatory requirement 4.00% 4.00%
Total Capital to Risk-Weighted Assets:
Total capital (Tier I plus Tier II) 33,230 32,092
Risk-weighted assets 172,642 164,697
Total capital to risk-weighted assets 19.25% 19.49%
Regulatory requirement 8.00% 8.00%
Tier I Capital to Total Assets (Leverage Ratio)
Tier I capital 31,070 30,034
Total assets 248,140 241,552
Tier I capital to total assets 12.52% 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 commom stock effected in the form of a stock
dividend to shareholders of record on July 1, 1996. The aggregate par
value of the addional shares ($1,214,072) was transferred from
retained earnings to the common stock account. Information in the
financial statements as to the number of shares and per share amounts
have been adjusted to reflect the stock split on a retroactive basis.
PAGE 9 OF 16 PAGES
PART I - FINANCIAL INFORMATION
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Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
(c) Results of Operations
Net income of the registrant amounted to $3,092,983 in the first
nine months of 1996. This amounted to an increase of $327,289, or
11.8 percent, compared to the first nine months of 1995. Net income
was higher, as compared to the same period last year, largely due to
increased 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 September 1995. Other income for
the first nine 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
reductions in advertising, public relations and other operation costs
with occupancy expense, salaries and employee benefits slightly higher
than in September 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 nine month period
ending September 30, 1996 increased by $969,455, or 11.5 percent, as
compared to the same period of 1995, reflecting the fact that an
PAGE 10 OF 16 PAGES
PART I - FINANCIAL INFORMATION
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Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
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.
The loan loss provision for the nine months ended September 30,
1996, increased $409,351 over same period in 1995. This increase was
deemed necessary due to increased past due and nonaccrual loans,
analysis of the loan portfolio and management's desire to be aggressive
in providing, on a timely basis, a reserve sufficient to cover any
potential losses.
Income before taxes increased by $563,209, or 13.3 percent as
compared to the same period from prior year. The increase in
applicable income taxes was $235,920, or 15.9 percent.
On a per share basis, income was $2.04 per share based on 1,519,393
shares for the first nine months of 1996 as compared to $1.81 per share
on 1,529,847 shares for the first nine 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
effective 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
principle payment. Additionally, there were no restructured loans at
year-end. At September 30, 1996, the corresponding figures were $92
thousand in other real estate owned, $475 thousand in non-accrual loans,
PAGE 11 OF 16 PAGES
PART I - FINANCIAL INFORMATION
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Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
$418 thousand in loans past due ninety days or more, and no loans
restructured. Although there was an increase in nonaccrual and past due
loans from December 31, 1995, the allowance for loan losses totaling
$2,321 thousand is deemed sufficient by management to cover potential
losses in the loan portfolio.
On January 1, 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
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 third 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.
PAGE 12 OF 16 PAGES
PART I - FINANCIAL INFORMATION
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Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
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 13 OF 16 PAGES
PART II - OTHER INFORMATION
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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 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
third quarter of 1996.
PAGE 14 OF 16 PAGES
SIGNATURES
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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: November 14, 1996 /s/ Robert M. Curry
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Robert M. Curry, Chairman of the Board
and Chief Executive Officer
Date: November 14, 1996 /s/ Glen Lamar
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Glen Lamar, Secretary/Treasurer
PAGE 15 OF 16 PAGES
INDEX TO EXHIBITS FOR THE FIRST PULASKI NATIONAL CORPORATION
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FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
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(11) Statement re computation of per share earnings
(27) Financial Data Schedules
PAGE 16 OF 16 PAGES