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, 1997
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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: 931-363-2585
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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 -- 1,545,751 Shares Outstanding
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
September 30, December 31,
ASSETS 1997 1996
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Cash and due from banks $10,126,309 $8,411,810
Federal funds sold 14,806,459 8,491,655
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Cash and cash equivalents 24,932,768 16,903,465
Securities available for sale 46,697,472 43,757,815
Securities held to maturity 17,974,828 19,689,343
Net loans and leases 164,819,250 155,522,625
Bank premises and equipment 7,321,343 7,151,876
Accrued interest receivable 3,449,746 3,401,339
Prepayments and other assets 1,319,248 2,147,073
Other real estate owned 115,964 218,901
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TOTAL ASSETS $266,630,619 $248,792,437
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LIABILITIES
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Deposits
Non-interest bearing balances $32,576,630 $30,479,710
Interest bearing balances 195,021,405 182,206,625
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227,598,035 212,686,335
Other borrowed funds 2,236,728 1,846,814
Accrued taxes 196,926 113,041
Accrued interest on deposits 1,953,616 1,684,906
Accrued profit sharing expense 129,847 158,699
Other liabilities 422,313 415,240
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TOTAL LIABILITIES 232,537,465 216,905,035
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STOCKHOLDERS' EQUITY
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Common Stock, $1.00 par; authorized 10,000,000
shares; 1,545,751 and 1,532,220 shares issued
and outstanding, respectively 1,545,751 1,532,220
Capital Surplus 6,279,616 5,895,046
Retained Earnings 25,975,985 24,278,237
Unrealized gains on securities 291,802 181,899
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TOTAL STOCKHOLDERS' EQUITY 34,093,154 31,887,402
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $266,630,619 $248,792,437
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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,
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1997 1996 1997 1996
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INTEREST INCOME:
Loans, including
fees $4,496,260 $4,399,907 $13,140,352 $12,915,834
Investment
securities 966,637 922,573 2,854,967 2,704,926
Deposits 0 0 0 1,823
Federal funds sold 192,577 97,158 531,095 384,729
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5,655,474 5,419,638 16,526,414 16,007,312
INTEREST EXPENSE:
Interest on deposits:
NOW accounts 88,739 93,797 274,700 301,390
Savings and MMDA 180,019 185,627 535,598 564,548
Time 2,076,636 1,845,602 5,973,158 5,630,515
Borrowed funds 36,516 29,404 97,375 81,882
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2,381,910 2,154,430 6,880,831 6,578,335
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NET INTEREST INCOME 3,273,564 3,265,208 9,645,583 9,428,977
Loan loss provision 136,500 300,000 316,500 553,000
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NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES 3,137,064 2,965,208 9,329,083 8,875,977
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OTHER INCOME:
Service charges on
deposit accounts 393,699 387,297 1,183,269 1,107,984
Other service
charges and fees 90,241 108,459 264,157 277,047
Security gains
(losses) 0 0 (30,816) (100,616)
Other 14,877 25,407 242,353 196,082
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498,817 521,163 1,658,963 1,480,497
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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 Nine Months Ended
September 30, September 30,
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1997 1996 1997 1996
---- ---- ---- ----
OTHER EXPENSES:
Salaries and
employee benefits 1,125,086 1,038,860 3,246,880 3,097,598
Occupancy, net 200,547 195,080 566,788 613,336
Furniture and
equipment 194,257 197,876 538,357 556,949
Advertising and
public relations 128,629 99,864 368,837 291,442
Other operating 393,617 322,659 1,110,795 988,777
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2,042,136 1,854,339 5,831,657 5,548,102
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Income before
income taxes $1,593,745 $1,632,032 $5,156,389 $4,808,372
Applicable income
taxes 557,076 567,112 1,798,131 1,715,389
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NET INCOME $1,036,669 $1,064,920 $3,358,258 $3,092,983
========== ========== ========== ==========
PER SHARE DATA:
Net income per
share $0.67 $0.70 $2.19 $2.04
Dividends per share $0.36 $0.35 $1.08 $0.99
Number of shares 1,545,041 1,519,484 1,536,924 1,519,393
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements. (Continued)
STATEMENT OF STOCKHOLDER'S EQUITY
FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY (UNAUDITED)
For the Nine Months Ended September 30, 1997
Unrealized
Gains/<Losses>
Common Capital Retained on Securities Total
Stock Surplus Earnings Net of Taxes
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Balance, December 31,
1996 $1,532,220 $5,895,046 $24,278,237 $181,899 $31,887,402
Net Income 3,358,258 3,358,258
Cash Dividends
($1.08 per share) (1,660,510) (1,660,510)
Common Stock Issued 13,531 384,570 398,101
Change in unrealized
gains <losses> on
securities, net of tax 109,903 109,903
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Balance,
September 30, 1997 $1,545,751 $6,279,616 $25,975,985 $291,802 $34,093,154
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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,
1997 1996
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Cash Flows From Operating Activities:
Net Income $3,358,258 $3,092,983
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:
Provision for loan losses 316,500 553,000
Depreciation of premises and equipment 540,775 544,277
Amortization and accretion of investment
securities, net 134,876 171,508
Deferred income taxes (benefits) 0 (98,604)
Security losses, net 30,816 100,616
Gains from sale of other real estate (18,947) (3,166)
Increase in interest receivable (48,459) (126,630)
Increase in prepaid expenses (45,752) (84,135)
Increase in other assets (60,889) (51,383)
Increase (decrease) in accrued interest payable 268,709 (155,727)
Increase in accrued taxes 92,663 203,824
Decrease in other liabilities (189,406) (218,021)
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Net Cash From Operating Activities 4,379,144 3,928,542
Cash Flows From Investing Activities:
Proceeds from maturity of investment
securities 22,969,743 9,191,602
Proceeds from sale of investment securities 1,500,000 11,967,501
Proceeds from sale of other real estate 177,806 17,166
Purchase of investment securities (24,816,157) (24,121,039)
Decrease in interest bearing deposits 0 100,000
Net increase in loans (9,454,277) (6,357,279)
Capital expenditures (710,243) (479,000)
Other real estate acquired, net (55,920) 4,000
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Net Cash Used by Investing Activities (10,389,048) (9,677,049)
Cash Flows From Financing Activities:
Net increase in deposits 14,911,701 5,277,699
Cash dividends paid (1,660,510) (1,502,717)
Proceeds from issuance of common stock 398,101 210,532
Payments to repurchase shares 0 (761,484)
Proceeds from borrowings 500,000 670,810
Borrowings repaid (110,085) (103,181)
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Net Cash From Financing Activities 14,039,207 3,791,659
Net Increase (Decrease) in Cash and Cash Equivalents 8,029,303 (1,956,848)
Cash and Cash Equivalents at Beginning of Period 16,903,465 18,999,167
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Cash and Cash Equivalents at End of Period $24,932,768 $17,042,319
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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 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, 1996, which report was filed with the
Securities and Exchange Commission on or about March 30, 1997.
(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. Cash and cash equivalents increased $8,029.3
thousand as of the end of the third quarter in 1997 due to an excess
of deposit growth over loan demand and management's decision to delay
investment activity due to the current interest rate environment.
PART I - FINANCIAL INFORMATION
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Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
Marketable investment securities, particularly those of short
maturities, are the principal source of asset liquidity. Securities
maturing in one year or less amounted to $11,790,974 at September 30,
1997, representing 18.2 percent of the investment securities portfolio
as compared to the 29.9 percent level of one year earlier. Management
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.
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 frame-
work that is sensitive to differences in risk profiles among banks.
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
PART I - FINANCIAL INFORMATION
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Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
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 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, 1997 and December 31, 1996.
September 30, December 31,
1997 1996
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(in thousands of dollars)
Tier I Capital to Risk-Weighted Assets:
Tier I capital 33,799 31,703
Risk-weighted assets 182,776 172,614
Tier I capital to risk-weighted assets 18.49% 18.37%
Regulatory requirement 4.00% 4.00%
Total Capital to Risk-Weighted Assets:
Total capital (Tier I plus Tier II) 36,087 33,863
Risk-weighted assets 182,776 172,614
Total capital to risk-weighted assets 19.74% 19.62%
Regulatory requirement 8.00% 8.00%
Tier I Capital to Total Assets (Leverage Ratio)
Tier I capital 33,799 31,703
Total assets 266,631 248,792
Tier I capital to total assets 12.68% 12.74%
Regulatory requirement 3.00% 3.00%
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 was $3,358,258 in the first nine
months of 1997. This amounted to an increase of $265,275, or 8.6
percent, compared to the first nine months of 1996. Net income was
higher, as compared to the same period last year, largely due to
increased net interest income and reduction in the required loan loss
provision. 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 over the nine months ended September 1996. Other income for
the first nine months showed an increase from the same period last
year primarily due to an increase in service charges on deposit
accounts and miscellaneous income. However, this was offset by the
increase in total other expenses which was primarily the result of
increased advertising and public relations and other operating costs.
Salaries and employee benefits increased slightly over the period ended
September 1996.
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, 1997 increased by $216,606, or 2.3 percent, as
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
compared to the same period in 1996, 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 $348,017 or 7.2 percent as
compared to the same period from the prior year. The increase in
applicable income taxes was $82,742, or 4.8 percent.
On a per share basis, net income was $2.19 per share based on
1,536,924 shares for the first nine months of 1997 as compared to $2.04
per share on 1,519,393 shares for the first nine months of 1996.
Non-performing assets at December 31, 1996 included $218.9 thousand
in other real estate owned, $449.5 thousand in non-accrual loans, and
$190.7 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 September 30, 1997, the corresponding figures were $116.0
thousand in other real estate owned, $634.3 thousand in non-accrual
loans, 240.8 thousand in loans past due ninety days or more, and no loans
restructured. 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. Although there was an increase in
nonaccrual loans from December 31, 1996, the allowance for loan losses
totaling $2,587.7 thousand is deemed sufficient by management to cover
potential losses in the loan portfolio.
In the opinion of management, the registrant maintains a strong
PART I - FINANCIAL INFORMATION
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Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
financial position and is optimistic that trends as reflected in the
Form 10-Q will be sustained.
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 1997.
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 13, 1997 /s/ Robert M. Curry
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Robert M. Curry, Chairman of the Board
and Chief Executive Officer
Date: November 13, 1997 /s/ Glen Lamar
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Glen Lamar, Secretary/Treasurer
INDEX TO EXHIBITS FOR THE FIRST PULASKI NATIONAL CORPORATION
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FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997
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(11) Statement regarding computation of per share earnings
(27) Financial Data Schedules