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, 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 -- 1,558,463 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
June 30, December 31,
ASSETS 1998 1997
------ ------------ ------------
Cash and due from banks $9,917,579 $10,111,703
Federal funds sold 13,426,242 6,180,468
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Cash and cash equivalents 23,343,821 16,292,171
Securities available for sale 49,795,149 51,012,300
Securities held to maturity 21,563,169 20,203,342
Net loans and leases 166,314,271 166,133,476
Bank premises and equipment 7,300,148 7,276,129
Accrued interest receivable 3,415,454 3,411,958
Prepayments and other assets 1,379,717 2,170,885
Other real estate owned 78,500 115,450
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TOTAL ASSETS $273,190,229 $266,615,711
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LIABILITIES
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Deposits
Non-interest bearing balances $33,678,751 $32,676,530
Interest bearing balances 198,874,859 194,488,964
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232,553,610 227,165,494
Other borrowed funds 2,113,524 2,196,300
Accrued taxes 170,206 117,286
Accrued interest on deposits 1,973,976 2,009,066
Accrued profit sharing expense 124,230 132,582
Other liabilities 427,688 415,637
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TOTAL LIABILITIES 237,363,234 232,036,365
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STOCKHOLDERS' EQUITY
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Common Stock, $1.00 par; authorized 10,000,000
shares; 1,558,463 and 1,550,994 shares issued
and outstanding, respectively 1,558,463 1,550,994
Capital Surplus 6,629,808 6,413,294
Retained Earnings 27,322,820 26,285,955
Unrealized gains on securities 315,904 329,103
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TOTAL STOCKHOLDERS' EQUITY 35,826,995 34,579,346
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $273,190,229 $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 For Six Months Ended
June 30, June 30,
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1998 1997 1998 1997
---- ---- ---- ----
INTEREST INCOME:
Loans, including
fees $4,606,011 $4,421,416 $9,150,691 $8,644,092
Investment
securities 1,038,354 954,401 2,108,986 1,888,330
Deposits 0 0 0 0
Federal funds sold 195,692 201,463 325,889 338,518
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5,840,057 5,577,280 11,585,566 10,870,940
INTEREST EXPENSE:
Interest on deposits:
NOW accounts 97,365 92,094 194,907 185,961
Savings and MMDA 189,045 179,952 374,961 355,579
Time 2,055,660 1,988,507 4,107,096 3,896,522
Borrowed funds 34,606 32,480 69,858 60,859
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2,376,676 2,293,033 4,746,822 4,498,921
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NET INTEREST INCOME 3,463,381 3,284,247 6,838,744 6,372,019
Provision for credit losses 233,518 105,000 413,518 180,000
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NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES 3,229,863 3,179,247 6,425,226 6,192,019
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OTHER INCOME:
Service charges on
deposit accounts 412,469 409,575 805,286 789,569
Other service
charges and fees 96,782 81,241 198,729 173,917
Security gains
(losses) 0 (24,253) 0 (30,816)
Other 74,896 211,094 130,254 227,476
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584,147 677,657 1,134,269 1,160,146
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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 Six Months Ended
June 30, June 30,
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1998 1997 1998 1997
---- ---- ---- ----
OTHER EXPENSES:
Salaries and
employee benefits 1,135,113 1,084,398 2,220,118 2,121,794
Occupancy, net 193,960 180,463 414,578 366,241
Furniture and
equipment 196,840 174,577 384,377 344,100
Advertising and
public relations 118,610 109,634 245,553 240,208
Other operating 369,473 396,469 744,828 717,179
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2,013,996 1,945,541 4,009,454 3,789,522
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Income before
income taxes $1,800,014 $1,911,363 $3,550,041 $3,562,643
Applicable income
taxes 650,652 640,369 1,299,561 1,241,054
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NET INCOME $1,149,362 $1,270,994 $2,250,480 $2,321,589
========== ========== ========== ==========
PER SHARE DATA:
Net income per
share $0.74 $0.83 $1.45 $1.51
Dividends per share $0.40 $0.36 $0.78 $0.72
Number of shares 1,555,437 1,533,328 1,554,311 1,532,798
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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 Six Months Ended June 30, 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 2,250,480 2,250,480
Cash Dividends
($0.78 per share) (1,213,615) (1,213,615)
Common Stock Issued 7,469 216,514 223,983
Change in unrealized
gains <losses> on
securities, net of tax (13,199) (13,199)
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Balance,
June 30, 1998 $1,558,463 $6,629,808 $27,322,820 $315,904 $35,826,995
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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 Six Months Ended
June 30,
1998 1997
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Cash Flows From Operating Activities:
Net Income $2,250,480 $2,321,589
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:
Provision for loan losses 413,518 180,000
Depreciation of premises and equipment 384,377 349,197
Amortization and accretion of investment
securities, net 53,030 104,892
Security (gains) losses, net 0 30,816
losses from sale of other real estate 9,019 (18,947)
(Increase) decrease in interest receivable (3,496) 100,023
(Increase) decrease in prepaid expenses 62,158 (39,629)
Decrease in other assets 723,891 18,716
Increase (decrease)in accrued interest payable (35,090) 272,597
Increase in accrued taxes 52,920 144,750
Increase (decrease) in other liabilities 3,699 (35,906)
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Net Cash From Operating Activities 3,914,506 3,428,098
Cash Flows for Investing Activities:
Proceeds from maturity of investment
securities 5,522,527 18,466,613
Proceeds from sale of investment securities 0 1,500,000
Proceeds from sale of other real estate 27,931 175,372
Purchase of investment securities (5,718,233) (18,753,029)
Net increase in loans (602,394) (7,668,411)
Principal payments received under leases 0 0
Capital expenditures (408,396) (529,079)
Other real estate acquired, net 0 0
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Net Cash Used by Investing Activities (1,178,565) (6,808,534)
Cash Flows From Financing Activities:
Net increase in deposits 5,388,116 12,508,449
Cash dividends paid (1,213,614) (1,104,039)
Proceeds from issuance of common stock 223,983 63,864
Payments to repurchase shares 0 0
Proceeds from borrowings 0 500,000
Borrowings repaid (82,776) (70,284)
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Net Cash From Financing Activities 4,315,709 11,897,990
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Net Increase in Cash and Cash Equivalents 7,051,650 8,517,554
Cash and Cash Equivalents at Beginning of Period 16,292,171 16,903,466
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Cash and Cash Equivalents at End of Period $23,343,821 $25,421,020
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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, 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 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 $7,051.7
thousand as of the end of the second quarter in 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 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 $11,216,579 at June 30,
1998, representing 18.7 percent of the investment securities portfolio
as compared to the 17.8 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 June 30, 1998 and December 31, 1997.
June 30, December 31,
1998 1997
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(in thousands of dollars)
Tier I Capital to Risk-Weighted Assets:
Tier I capital 35,508 34,247
Risk-weighted assets 186,958 184,343
Tier I capital to risk-weighted assets 18.99% 18.58%
Regulatory requirement 4.00% 4.00%
Total Capital to Risk-Weighted Assets:
Total capital (Tier I plus Tier II) 37,851 36,555
Risk-weighted assets 186,958 184,343
Total capital to risk-weighted assets 20.25% 19.83%
Regulatory requirement 8.00% 8.00%
Tier I Capital to Total Assets (Leverage Ratio)
Tier I capital 35,508 34,247
Total assets 273,190 266,616
Tier I capital to total assets 13.00% 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 was $2,250,480 in the first six
months of 1998. This amounted to a decrease of $71,109, or 3.6
percent, compared to the first six months of 1997. Net income was
slightly lower, as compared to the same period last year, largely due to
increased other expenses and applicable income taxes despite the rise
in net interest income. Net interest income increased mainly because
of income earned on loans, including loan fees and income earned on
investment securities. This growth more than offset the increase in
interest expense, which resulted primarily from an increase in
interest paid on time deposits when compared to the six month period
ended June 1997. Total other expenses increased largely because of
the increase in salaries and employee benefits, occupancy expense and
furniture and equipment expense. Other operating expense was higher
over same period last year as well.
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, 1998 increased by $466,725, or 7.3 percent, as
compared to the same period in 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.
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations. (Continued)
Income before taxes decreased by $12,602 or 0.4 percent as
compared to the same period from the prior year. The increase in
applicable income taxes was $58,507, or 4.7 percent.
On a per share basis, net income was $1.45 per share based on
1,554,311 shares for the first six months of 1998 as compared to $1.51
per share on 1,532,798 shares for the first six 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
principal payment. Additionally, there were no restructured loans at
year-end. At June 30, 1998, the corresponding figures were $78.5
thousand in other real estate owned, $1,256.8 thousand in non-accrual
loans, 342.7 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, 1997, the allowance for loan losses totaling
$2,857.3 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 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 30, 1998. 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 30, 1998, the
following Directors were elected to one year terms of membership:
David E. Bagley W. Gary Harrison
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 Bill Yancey
Charles D. Haney
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
election of Mr. R.M. Harwell as Honorary Director. Of the 1,224,423
shares represented in person or by proxy, the vote was 1,213,713 for,
0 against, and 10,710 abstaining.
PART II - OTHER INFORMATION
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Item 4. Submission of Matters to a Vote of Security Holders (Continued)
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 1,202,248 for, 225
against, and 21,950 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 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: August 13, 1998 /s/ William R. Horne
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William R. Horne, President
and Chief Executive Officer
Date: August 13, 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 JUNE 30, 1998
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(11) Statement regarding computation of per share earnings
(27) Financial Data Schedules