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 March 31, 1998
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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 -- 1,553,233 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
March 31, December 31,
1998 1997
ASSETS ------------ ------------
Cash and due from banks $ 9,507,857 $10,111,703
Federal funds sold 10,006,235 6,180,468
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Cash and cash equivalents 19,514,092 16,292,171
Securities available for sale 50,019,924 51,012,300
Securities held to maturity 21,540,796 20,203,342
Net loans and leases 166,923,856 166,133,476
Bank premises and equipment 7,264,330 7,276,129
Accrued interest receivable 3,363,229 3,411,958
Prepayments and other assets 1,266,340 2,170,885
Other real estate owned 114,500 115,450
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TOTAL ASSETS $270,007,068 $266,615,711
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LIABILITIES
Deposits
Non-interest bearing balances $31,181,908 $32,676,530
Interest bearing balances 198,433,800 194,488,964
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229,615,708 227,165,494
Other borrowed funds 2,155,236 2,196,300
Accrued taxes 650,138 117,286
Accrued interest on deposits 1,881,058 2,009,066
Accrued profit sharing expense 112,779 132,582
Other liabilities 397,565 415,637
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TOTAL LIABILITIES 234,812,484 232,036,365
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STOCKHOLDERS' EQUITY
Common Stock, $1.00 par; authorized 10,000,000
shares; 1,532,290 and 1,532,220 shares
issued and outstanding, respectively 1,553,233 1,550,994
Capital Surplus 6,471,388 6,413,294
Retained Earnings 26,796,844 26,285,955
Unrealized gains (losses) on securities 373,120 329,103
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TOTAL STOCKHOLDERS' EQUITY 35,194,584 34,579,346
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $270,007,068 $266,615,711
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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
March 31,
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1998 1997
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INTEREST INCOME:
Loans, including fees $4,544,681 4,222,676
Securities 1,070,632 933,929
Deposits 0 0
Federal funds sold 130,197 137,055
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TOTAL INTEREST INCOME 5,745,509 5,293,660
INTEREST EXPENSE:
Deposits:
NOW accounts 97,542 93,867
Savings and MMDAs 185,916 175,627
Time 2,051,436 1,908,015
Borrowed funds 35,252 28,379
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TOTAL INTEREST EXPENSE 2,370,146 2,205,888
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NET INTEREST INCOME 3,375,363 3,087,772
Provision for credit losses 180,000 75,000
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NET INTEREST INCOME AFTER PROVISION
PROVISION FOR CREDIT LOSSES 3,195,363 3,012,772
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OTHER INCOME:
Service charges on deosit accounts 392,817 379,994
Other service charges and fees 101,947 92,676
Security losses, net 0 (6,563)
Other miscellaneous income 55,358 16,382
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TOTAL OTHER INCOME 550,122 482,489
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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
March 31,
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1998 1997
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OTHER EXPENSES:
Salaries and employee benefits 1,085,005 1,037,396
Occupancy, net 220,618 185,778
Furniture and equipment 187,537 169,523
Advertising and public relations 126,943 130,574
Other operating 375,355 320,710
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TOTAL OTHER EXPENSES 1,995,458 1,843,981
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Income before income taxes $1,750,027 $1,651,280
Applicable income taxes 648,909 600,685
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NET INCOME $1,101,118 $1,050,595
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PER SHARE DATA:
Net income per
share $0.71 $0.69
Dividends per share $0.38 $0.36
Number of shares 1,553,173 1,532,263
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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 Three Months Ended March 31, 1998
Unrealized
Gains/<Losses>
Common Capital Retained on Securities Total
Stock Surplus Earnings Net of Taxes
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Balance, December 31,
1997 $1,550,994 $6,413,294 $26,285,955 $329,103 $34,579,346
Net Income 1,101,118 1,101,118
Cash Dividends
($0.38 per share) (590,229) (590,229)
Common Stock Issued 2,239 58,093 60,332
Change in unrealized
gains on securities,
net of tax 44,017 44,017
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Balance,
March 31, 1998 $1,553,233 $6,471,387 $26,796,844 $373,120 $35,194,584
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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 Three Months Ended
March 31,
1998 1997
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Cash Flows From Operating Activities:
Net Income $1,050,595 $987,782
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:
Provision for loan losses 75,000 100,000
Depreciation of premises and equipment 171,780 169,848
Amortization and accretion of securities, net 58,581 64,534
Security (gains) losses, net 6,563 323
Gains on sale of other assets (5,982) 0
Increase in interest receivable (61,410) (145,854)
Increase in prepaid expenses (30,728) (54,815)
(Increase) decrease in other assets 27,745 (11,601)
Increase (decrease) in accrued interest payable 81,175 (122,717)
Increase in accrued taxes 439,422 449,681
Decrease in other liabilities (19,738) (44,605)
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Net Cash From Operating Activities 1,793,003 1,392,576
Cash Flows for Investing Activities:
Proceeds from maturity of securities 4,531,883 5,880,857
Proceeds from sale of securities 1,500,000 0
Proceeds from sale of other real estate 63,532 1,600
Purchase of investment securities (6,197,081) (7,571,322)
Decrease in interest bearing deposits 0 100,000
Net increase in loans (3,415,127) (2,758,714)
Capital expenditures (224,967) (65,957)
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Net Cash Used by Investing Activities (3,741,760) (4,413,536)
Cash Flows From Financing Activities:
Net increase in deposits 9,283,238 6,246,593
Cash dividends paid (551,624) (484,509)
Proceeds from issuance of common stock 1,792 10,350
Payments to repurchase shares 0 (761,484)
Proceeds from borrowings 0 660,000
Borrowings repaid (34,118) (26,686)
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Net Cash From Financing Activities 8,699,288 5,644,264
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Net Increase in Cash and Cash Equivalents 6,750,531 2,623,304
Cash and Cash Equivalents at Beginning of Period 16,903,466 18,999,167
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Cash and Cash Equivalents at End of Period $23,653,997 $21,622,471
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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 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, 1997, which report was filed with the
Securities and Exchange Commission on or about March 30, 1998.
(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. Cash and
cash equivalents increased $3,221.9 thousand in the first quarter of 1998
due to an excess of deposit growth over loan demand and management's
decision to delay investment activity due to the current interest rate
PART I - FINANCIAL INFORMATION
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Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
environment.
Marketable investment securities, particularly those of short
maturities, are the principal source of asset liquidity. Securities
maturing in one year or less amounted to $15,594,321 at March 31,
1998, representing 21.8 percent of the investment securities portfolio
as compared to the 25.2 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 no anticipate the sale of a material amount of investment
securities classified as available-for-sale in the forseeable future.
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
PART I - FINANCIAL INFORMATION
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Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
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 March 31, 1998 and December 31, 1997.
March 31, December 31,
1998 1997
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(in thousands of dollars)
Tier I Capital to Risk-Weighted Assets:
Tier I capital 34,834 34,247
Risk-weighted assets 186,331 184,343
Tier I capital to risk-weighted assets 18.69% 18.58%
Regulatory requirement 4.00% 4.00%
Total Capital to Risk-Weighted Assets:
Total capital (Tier I plus Tier II) 37,168 36,555
Risk-weighted assets 186,331 184,343
Total capital to risk-weighted assets 19.95% 19.83%
Regulatory requirement 8.00% 8.00%
Tier I Capital to Total Assets (Leverage Ratio)
Tier I capital 34,834 34,247
Total assets 270,007 266,616
Tier I capital to total assets 12.91% 12.85%
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 amounted to $1,101,118 in the first
three months of 1998. This amounted to an increase of $50,523, or
4.8 percent, compared to the first three months of 1997. 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 loans, including
loan fees and interest income on securities. This more than offset
the rise in interest expense, which resulted primarily from increases
in interest paid on time deposit accounts as compared to first quarter
last year. Other income for the first three months showed an increase
from same period last year mainly due to the rise in service charges
on deposit accounts and miscellaneous income. However, this increase
was more than offset by the increase in total other expenses, which
was the result of net occupancy expense and other operating costs.
Salaries and employee benefits were also slightly higher as compared
to the first quarter of 1997.
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 three month period
ending March 31, 1998 increased by $287,591, or 9.3 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 of 1997, 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.
The loan loss provision for the three months ended March 31,
1998, decreased $105,000 over the same period in 1997.
Income before taxes increased by $98,747, or 6.0 percent as
compared to the same period from prior year. The increase in
applicable income taxes was $48,224, or 8.0 percent.
On a per share basis, income was $0.71 per share based on 1,553,173
shares for the first three months of 1998 as compared to $0.69 per share
on 1,532,263 shares for the first three months of 1997.
Non-performing assets at December 31, 1997 included $115.4 thousand
in other real estate owned, $701.9 thousand in non-accrual loans, and
$176.0 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 March 31, 1998, the corresponding figures were $114.5
thousand in other real estate owned, $537.8 thousand in non-accrual
loans, $128.3 thousand in loans past due ninety days or more, and no
PART I - FINANCIAL INFORMATION
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Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
loans restructured. The allowance for loan losses totaling $2,685.9
thousand is deemed sufficient by management to cover potential losses
in the loan portfolio.
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.
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
first quarter of 1998.
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: May 15, 1998 /s/ Robert M. Curry
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Robert M. Curry, Chairman of the Board
and Chief Executive Officer
Date: May 15, 1998 /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 MARCH 31, 1998
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(11) Statement re computation of per share earnings
(27) Financial Data Schedules