-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, XUKBrJsNbICAZJp1B3OyNtvFceNu2fIui118UJmgbgNAiEd8H6T2xVXoTvYT1nWX C/60H18wjfLF9OCEZWNPyA== 0000731939-94-000002.txt : 19940131 0000731939-94-000002.hdr.sgml : 19940131 ACCESSION NUMBER: 0000731939-94-000002 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19931112 ITEM INFORMATION: 7 FILED AS OF DATE: 19940128 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEMPLE INLAND INC CENTRAL INDEX KEY: 0000731939 STANDARD INDUSTRIAL CLASSIFICATION: 2631 IRS NUMBER: 751903917 STATE OF INCORPORATION: DE FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 34 SEC FILE NUMBER: 002-87570 FILM NUMBER: 94503344 BUSINESS ADDRESS: STREET 1: 303 S TEMPLE DR STREET 2: PO DRAWER N CITY: DIBOLL STATE: TX ZIP: 75941 BUSINESS PHONE: 4098292211 MAIL ADDRESS: STREET 1: 303 SOUTH TEMPLE DIRVE CITY: DIBOLL STATE: TX ZIP: 75941 8-K/A 1 TEXT OF FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________ FORM 8-K/A AMENDMENT TO CURRENT REPORT ON FORM 8-K Filed Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported): November 12, 1993 TEMPLE-INLAND INC. (Exact name of registrant as specified in its charter) Delaware 1-8634 75-1903917 (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 303 South Temple Drive, Diboll, Texas 75941 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (409)829-2211 AMENDMENT NO. 1 The Registrant's Current Report on Form 8-K dated November 12, 1993 (the "Form 8-K") is hereby amended and supplemented as follows. Terms used with initial capital letters and not defined herein shall have the meaning ascribed to such terms in the Form 8-K. ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits. ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits. The following financial statements and pro forma financial information are hereby filed as part of this Report. (a) Financial Statements of Business Acquired (1) Audited consolidated financial statements of American Federal Bank, F.S.B. as of December 31, 1992 and 1991. (2) Unaudited financial statements of American Federal Bank, F.S.B. which include a condensed consolidated balance sheet at September 30, 1993, and condensed consolidated statements of income and cash flows for the nine months ended September 30, 1993 and 1992, respectively. (b) Pro Forma Financial Information (Unaudited) Pro forma condensed consolidated balance sheet of Temple- Inland Inc. at October 2, 1993, and pro forma condensed consolidated statements of income for the nine months ended October 2, 1993, and year ended January 2, 1993. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TEMPLE-INLAND INC. By: /s/ David H. Dolben David H. Dolben Vice President and Chief Accounting Officer January 28, 1994 AMERICAN FEDERAL BANK, F.S.B. Consolidated Financial Statements As Of December 31, 1992 And 1991 Together With Auditors' Report AMERICAN FEDERAL BANK, F.S.B. CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1992 AND 1991 TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TABLE OF CONTENTS Page REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 CONSOLIDATED STATEMENTS OF OPERATIONS 2 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION 3 CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY 4 CONSOLIDATED STATEMENTS OF CASH FLOWS 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholder and Board of Directors of American Federal Bank, F.S.B.: We have audited the accompanying consolidated statements of financial condition of American Federal Bank, F.S.B. (a Federal stock savings bank whose common stock is wholly owned by a subsidiary of Lone Star Technologies, Inc.) and subsidiaries as of December 31, 1992 and 1991, and the related consolidated statements of operations, stockholder's equity and cash flows for the years then ended. These financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Federal Bank, F.S.B. and subsidiaries as of December 31, 1992 and 1991, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ Arthur Andersen & Co. Dallas, Texas, February 12, 1993 (except for the matters discussed in Note 17, as to which the date is November 12, 1993) AMERICAN FEDERAL BANK, F.S.B. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991 (All Dollar Amounts in Thousands) 1992 1991 REVENUE ON EARNING ASSETS: Interest income - Short-term assets $ 2,701 $ 10,261 Loans 57,844 24,624 Loans held for sale 227 6,921 Investment securities 12,250 3,717 Securities held for sale 1,436 - Receivables from the Fund - 13,527 Total interest income 74,458 59,050 Net revenue on assets guaranteed by the Fund 59,648 97,649 Total revenue on earning assets 134,106 156,699 INTEREST EXPENSE: Deposits 75,213 112,035 Borrowed funds 3,591 12,740 Total interest expense 78,804 124,775 Net revenue before provision for possible loan losses 55,302 31,924 PROVISION FOR POSSIBLE LOAN LOSSES 4,930 1,704 Net revenue after provision for possible loan losses 50,372 30,220 NON-INTEREST INCOME: Deposit services 2,341 2,104 Gain on sales of assets 509 6,576 Unrealized losses on securities held for sale (192) - Annuity fees and other 5,059 2,545 Total non-interest income 7,717 11,225 NON-INTEREST EXPENSES: Compensation and benefits 18,045 18,423 Occupancy and equipment 4,915 4,461 Marketing and public relations 2,076 1,048 Legal and professional fees 1,949 1,616 Deposit insurance premiums 3,384 3,745 Data processing 4,060 3,031 Amortization of goodwill and intangibles 1,720 1,466 Office and other expenses 3,876 3,117 Total non-interest expenses 40,025 36,907 NET INCOME BEFORE EXTRAORDINARY ITEM 18,064 4,538 EXTRAORDINARY LOSS ON PREPAYMENT OF BORROWED FUNDS - 967 NET INCOME $ 18,064 $ 3,571 See accompanying notes. AMERICAN FEDERAL BANK, F.S.B. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION AS OF DECEMBER 31, 1992 AND 1991 (All Dollar Amounts in Thousands) ASSETS 1992 1991 CASH AND DUE FROM BANKS $ 27,278 $ 18,543 SHORT TERM ASSETS 29,340 137,021 LOANS (including Loans Held for Sale of $1,532 in 1992 and $3,229 in 1991) 803,125 310,060 Less - Allowance for possible loan losses (37,740) (9,374) Net loans 765,385 300,686 SECURITIES HELD FOR SALE 63,359 - INVESTMENT SECURITIES (Estimated fair value of $220,130 in 1992 and $230,035 in 1991) 219,758 228,283 ASSETS GUARANTEED BY THE FUND 529,094 816,267 RECEIVABLES FROM THE FUND 22,258 131,844 REAL ESTATE INVESTMENTS 6,970 - REAL ESTATE OWNED 21,346 1,767 ACCRUED INTEREST RECEIVABLE 10,761 14,809 OTHER ASSETS 18,994 18,607 Total assets $ 1,714,543 $ 1,667,827 LIABILITIES AND STOCKHOLDER'S EQUITY 1992 1991 LIABILITIES: Deposits $ 1,400,291 $ 1,468,332 Borrowed funds 180,071 75,388 Other liabilities and accrued expenses 17,364 15,614 Total liabilities 1,597,726 1,559,334 COMMITMENTS AND CONTINGENCIES - - STOCKHOLDER'S EQUITY: Preferred stock - - Common stock; $.01 par value; 200,000 shares authorized; 80,000 shares issued and outstanding 1 1 Paid-in capital 47,999 47,999 Retained earnings-restricted 68,817 60,493 Total stockholder's equity 116,817 108,493 Total liabilities and stockholder's equity $ 1,714,543 $ 1,667,827 See accompanying notes. AMERICAN FEDERAL BANK, F.S.B. CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991 (All Dollar Amounts in Thousands)
Total Preferred Stock Common Paid-In Retained Stockholder's Class A Class B Class C Stock Capital Earnings Equity December 31, 1990 $ - $ - $ - $ 1 $47,999 $56,922 $104,922 Net income - - - - - 3,571 3,571 December 31, 1991 - - - 1 47,999 60,493 108,493 Net income - - - - - 18,064 18,064 Dividends paid - - - - - (9,740) (9,740) December 31, 1992 $ - $ - $ - $ 1 $47,999 $68,817 $116,817
See accompanying notes. AMERICAN FEDERAL BANK, F.S.B. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991 (All Dollar Amounts in Thousands) 1992 1991 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 18,064 $ 3,571 Adjustments to reconcile net income to net cash provided by operating activities- Provisions for losses 6,192 26,483 Net principal collected on loans held for sale 1,698 11,623 Sales of loans - (3,778) Purchase of securities held for sale, net of re-payments (63,927) - Accrued interest receivable (2,108) (1,566) Accrued Fund assistance 12,326 28,871 Interest credited to deposits 53,813 76,133 Net accretion and amortization (2,999) (4,830) Other liabilities and accrued expenses (10,288) (6,193) Net cash provided by operating activities 12,771 130,314 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of securities (65,692) (236,931) Maturities and collections of securities 159,906 53,456 Loan originations and acquisitions (389,594) (173,351) Loan principal collections 221,395 66,701 Principal collected on guaranteed assets 31,848 30,552 Principal collected on interest-bearing Fund receivables - 603,705 Sales and writedowns of guaranteed assets 360,594 479,249 Purchase of real estate for investment (6,970) - Net cash acquired in acquisitions 116,333 - Other 2,651 2,099 Cash provided by investing activities 430,471 825,480 CASH FLOWS FROM FINANCING ACTIVITIES: Net decrease in deposits (443,313) (360,461) Proceeds from borrowed funds 418,036 473,050 Repayment of borrowed funds (507,171) (1,092,947) Dividends paid (9,740) - Cash used for financing activities (542,188) (980,358) NET DECREASE IN CASH AND EQUIVALENTS ( 98,946) (24,564) CASH AND EQUIVALENTS, BEGINNING BALANCE 155,564 180,128 CASH AND EQUIVALENTS, ENDING BALANCE $ 56,618 $ 155,564 COMPONENTS OF CASH AND EQUIVALENTS AT DECEMBER 31: Cash and due from banks $ 27,278 $ 18,543 Short term assets 29,340 137,021 Total cash and equivalents $ 56,618 $ 155,564 See accompanying notes. AMERICAN FEDERAL BANK, F.S.B. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1992 AND 1991 (All Dollar Amounts in Millions) 1. INITIAL ACQUISITIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Initial Acquisition American Federal Bank, F.S.B. (the "Bank"), a wholly owned subsidiary of LSST Financial Services Corporation ("LSST"), was formed under agreements among the Federal Savings and Loan Insurance Corporation (the "FSLIC", or "FDIC", as successor), the Bank and LSST, a wholly owned subsidiary of Lone Star Technologies, Inc. ("Lone Star"). The Bank acquired substantially all tangible assets, subject to the provisions of an assistance agreement (the "Agreement"), and assumed all deposits and secured liabilities of 12 insolvent institutions ("Closed Associations") from the FSLIC on August 18, 1988. Purchase Method of Accounting The acquisitions of the Closed Associations were recorded under the purchase method of accounting. Resulting premiums and discounts are being amortized over the respective estimated remaining lives of assets acquired and liabilities assumed, and goodwill is being amortized over 10 years, all using the level-yield method. For current year acquisitions see Note 3. Principles of Consolidation and Basis of Presentation Investments in and advances to subsidiaries which are guaranteed assets have been substantially liquidated and, accordingly, are not consolidated with the accounts of the Bank. The accompanying consolidated financial statements include the accounts of the Bank and its nonguaranteed subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Loans Loans originated for sale are carried at the lower of aggregate cost or estimated market value. Non-guaranteed residential mortgage loans totaling $54 million were transferred to held for investment at the lower of cost or market in 1991. Net gains on loans previously sold of $5 million were recognized in 1991. Interest and Fee Income on Loans Interest on loans is recognized when earned. Interest accruals (including discount accretion and premium amortization) are discontinued and accrued interest receivable is reversed when a loan becomes 90 days delinquent, or sooner if management deems collectibility uncertain. Interest income on non- accrual loans is generally recognized as payments are received. Discounts and premiums are recognized using the level-yield method over the expected lives of the portfolios acquired, adjusted for actual prepayments. Yields will differ if the actual lives differ significantly from the estimates. Fee income on loans held for investment is deferred and amortized over the contractual term of the loan by the level-yield method. Fee income on loans held for sale is deferred until the loan is sold. Costs associated with loan originations are expensed as incurred and approximated $0.23 million in 1992. Allowances for Possible Loan Losses and Other Receivables The Bank maintains an allowance for possible loan losses which, in management's opinion, is adequate to absorb losses inherent in the loan portfolio. However, the ultimate adequacy of the allowance is dependent on future economic factors which are beyond management's control. The adequacy of the allowance is evaluated by loan portfolio segment and periodic reviews are made of mortgage and commercial loans in an attempt to identify potential problems. Factors considered in these reviews include general business and economic conditions, specific loan performance status, collateral value and borrower's financial condition. Loans are classified as either satisfactory (pass), special mention, substandard, doubtful or loss based either on specific reviews or on performance status for loans not specifically reviewed. Loans classified as loss are charged-off when identified. The amount of allowance considered adequate is then determined by applying factors, which are based upon management's judgment and experience, to the loan portfolio segments and classifications, including loans classified as satisfactory (pass). For originated loans, a provision is made monthly in amounts necessary to maintain an adequate allowance for possible loan losses. For loan portfolios acquired, allowances for credit losses are established as an allocation of the purchase price for each portfolio. Allowances on purchased portfolios are only available to absorb losses incurred in each purchased portfolio. The performance of acquired portfolios is evaluated periodically and, if necessary, additional provisions are made to maintain an adequate allowance for loan losses. The Bank also provides a valuation allowance for receivables from the Fund based upon management's evaluation of amounts claimed for reimbursement pursuant to the Agreement. The Agreement is subject to interpretation and amounts claimed may differ from amounts ultimately received. Loan Servicing Income on loans serviced for others is based upon a percentage of principal balance and is recognized as payments are received. Loan servicing costs are incurred as a fixed amount per loan under a subservicing agreement and are charged to expense as incurred. The Bank's loan servicing portfolio totaled $97 million (3,418 loans) and $105 million (3,622 loans) at December 31, 1992 and 1991, respectively. Escrow funds held in trust by the Bank totaled $15 million and $9 million at December 31, 1992 and 1991, respectively. Securities Securities are classified as held for investment or held for sale at the time of purchase. Securities held for sale are carried at the lower of amortized cost or market value. Any gains or losses on securities which may be sold are determined by specific identification. Securities held for investment are carried at amortized cost. Amortization is computed under a method which approximates level yield and is adjusted for changes in prepayment estimates. Yields will differ if the actual lives are significantly different than the estimates. Fair value is determined based on quoted market prices or indications of value. The Bank has adequate liquidity and capital, and it is management's intent to hold securities held for investment to maturity. See Note 17. Real Estate Owned Real estate owned includes property acquired through foreclosure, or in- substance foreclosure, and is carried at the lower of cost or fair value, as determined by appraisal, less estimated selling expenses. Property is considered to be in-substance foreclosed when its fair value and other factors indicate that ownership has effectively transferred to the Bank. Net costs of operating real estate owned were $0.66 million and $0.24 million for the years ending December 31, 1992 and 1991, respectively. Real Estate Investments Real estate held for investment is carried at cost, adjusted for accumulated depreciation. Real property is depreciated using the straight line method over the estimated useful life of the asset. Revenue from property operations is recognized using the accrual method of accounting. Income Taxes Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," requires an asset and liability approach for financial reporting purposes. Deferred tax assets and liabilities will be adjusted for changes in income tax rates or statutes. The Bank expects to adopt this standard when it becomes mandatory in 1993 and does not anticipate any material effect on financial condition or results of operations. Shared Loss Limitation The effect of the shared loss limitation provided by the Agreement through August 17, 1991, was estimated quarterly and adjusted to actual in the third quarter of 1991. Cash Flow Information The accompanying consolidated statements of cash flows include cash, due from banks, and short term assets with original maturities of three months or less as cash and equivalents. Interest paid on liabilities during the years ended December 31, 1992 and 1991, was $79 million and $131 million, respectively. Following are significant noncash investing and financing activities for the years ended December 31: 1992 1991 Transfer of loans from held for sale to held for investment $ - $ 54 Foreclosures and repossessions of assets 18 3 Fair Value Estimates "Fair Value" among financial institutions may not be comparable due to the wide range of permitted valuation techniques and numerous estimates which must be made given the absence of active secondary markets for many financial instruments. This lack of uniform valuation methodologies also introduces a greater degree of subjectivity to these estimated fair values. 2. TERMS OF THE ASSISTANCE AGREEMENT WITH THE FSLIC RESOLUTION FUND (The "Fund"): The Agreement expires on August 17, 1998, except for certain tax-sharing and indemnification provisions which may survive. Major assistance provisions of the Agreement include: - Yield maintenance on guaranteed assets; - Shared gains from the liquidation of guaranteed assets; and - Reimbursement for capital losses incurred on the disposition of guaranteed assets and writedowns. During 1992 and 1991, the FDIC took the following actions to reduce the cost of the Agreement: Prepayment of the Fund note receivable in 1991, $583 million; writedowns of guaranteed assets, $78 million and $365 million in 1992 and 1991, respectively; and prepayment of the receivable for fair value adjustments in 1991, $7 million. The Bank also settled disputes with the FDIC regarding the management of certain guaranteed assets and the fair value of nonguaranteed assets. These settlements required charges of $24 million against 1991 net revenue on assets guaranteed by the Fund. Other cost reduction options available to the FDIC include additional writedowns and purchases of covered assets. However, during 1992, the Agreement was amended to preclude any FDIC-directed purchases in 1993. Beginning in 1994, writedowns or purchases of guaranteed assets by the FDIC are limited to $100 million in any six-month period, and any purchases would be eligible for shared gains. The Bank anticipates that guaranteed asset balances and related assistance income will continue to decline in 1993 and subsequent years. 3. CURRENT YEAR ACQUISITIONS: Americity Federal Savings Bank, F.S.B. Effective June 30, 1992, the Bank acquired Americity Federal Savings Bank ("Americity"). In accordance with the purchase method, the Bank recorded at fair value approximately $416 million in assets, primarily mortgage loans and short term investments, and $363 million in liabilities, primarily time deposits and borrowings from the Federal Home Loan Bank of Dallas (the "FHLB"). The resulting premiums and discounts are being amortized over the estimated remaining lives of the assets acquired and liabilities assumed. Although discovery continues, no material amounts of goodwill or other intangibles are expected to be recognized. The purchase price of $53 million is subject to a $6.5 million contingency reserve, all or a portion of which may be returned to the Bank should certain events occur between June 30, 1992 and January 4, 1994. Subsequent to June 30, 1992, $0.13 million was returned to the Bank and $1.37 million was released to the former shareholders of Americity. The remaining balance in the contingency reserve at December 31, 1992, approximated $5 million. Subsequent to the acquisition, the Bank received notification from the United States Department of the Treasury of potential penalties of $3.2 million relating to certain alleged violations of the Bank Secrecy Act by Americity prior to the acquisition. Management intends to vigorously protest any such penalties. However, any penalties assessed would be reimbursed from the contingency reserve to the extent available. Accordingly, no loss accrual has been recorded. Following are the proforma condensed results of operations for the Bank as if the acquisition had occurred on January 1, 1992 and 1991: For the Years Ended December 31, 1992 1991 Net revenue after provision for possible loan losses $ 53 $ 35 Non-interest income 8 6 Non-interest expense 43 42 Gains on sales of assets 2 19 Net income before extraordinary items 20 18 Extraordinary loss on prepayment of borrowed funds - (1) Net income $ 20 $ 17 Banking Center Acquisitions During 1992, the Bank acquired in two separate transactions, 10 banking centers in the Dallas metroplex. Included in the acquisitions were assets of $6 million, primarily consumer loans, and deposits of $175 million. The assumption price of $1.6 million is being amortized over a 16 month period. All other costs were expensed as incurred. 4. NON BANK SUBSIDIARIES: During 1992, the Bank formed and began operating three non bank subsidiaries, Southern Associated Services, Inc. ("SASI"), AFB Group, Inc. and Stanford Equities, Inc. ("SEI"), all of which are non- guaranteed subsidiaries. SASI provides real estate appraisal, appraisal review, and environmental assessment services to the Bank and other third parties, generating gross revenues of approximately $450 thousand during the year ending December 31, 1992. The primary business of AFB Group, Inc., is the sale of mutual fund products, for which it receives a fee. AFB Group, Inc. generated gross revenues of approximately $444 thousand for the year ending December 31, 1992. SEI was formed for the purpose of acquiring and operating multifamily real estate. In December of 1992, SEI acquired a 335 unit apartment complex in Lewisville, Texas. The purchase price of $7 million was financed by the Bank. 5. CASH AND EQUIVALENTS: The Bank is required to maintain nonearning reserves with the Federal Reserve Bank and to maintain assets eligible for liquidity as defined by the Office of Thrift Supervision ("OTS"). These reserves and liquid asset requirements averaged $5 million and $72 million, respectively, for December 1992, and $6 million and $73 million, respectively, for December 1991. The carrying value of cash, due from banks and short term assets of $57 million at December 31, 1992, is a reasonable estimate of fair value. 6. LOANS:
December 31, 1992 Fixed Adjustable Non- December 31, Rate Rate Accrual Total 1991 Residential mortgage principally secured by property in Texas $220 $262 $ 17 $ 499 $209 Commercial mortgage- Single family construction - 27 1 28 9 Multifamily 13 107 2 122 28 Retail 1 25 1 27 21 Office 1 13 - 14 7 Land acquisition and development - 13 3 16 7 Other 1 8 - 9 3 Total commercial mortgage 16 193 7 216 75 Commercial and industrial 2 26 - 28 12 Consumer 88 5 1 94 58 326 486 25 837 354 Undisbursed loan funds - (15) - (15) (10) Deferred loan fees (1) (1) - (2) (1) Unamortized (discounts) and premiums on purchased loans, net (9) (10) - (19) (36) 316 460 25 801 307 Loans held for sale 2 - - 2 3 Total $318 $ 460 $ 25 $ 803 $ 310
Substantially all commercial mortgage loans are secured by property in the Dallas area and the portfolio is well diversified among property types and borrowers. The Bank's lending policy emphasizes loans with significant borrower equity which are secured by property with existing cash flows in excess of repayment requirements. The consumer portfolio consists primarily of automobile loans and loans secured by deposits. Unearned discounts on consumer loans were $0.08 million and $0.23 million at December 31, 1992 and 1991, respectively. The fair value of performing loans is estimated by discounting future cash flows using the current rates at which similar loans would be made by the Bank to borrowers with similar credit ratings and for the same remaining maturities, adjusted for estimated prepayments. Pricing adjustments for demographics and costs of credit enhancements for non-conforming residential mortgage loans have not been made as the Bank intends to hold its loans to maturity. The fair value of nonperforming loans and loans classified doubtful is based on estimated collateral value. The fair value of net loans outstanding approximated $818 million at December 31, 1992, however, changes in the assumptions could have a material effect on the estimate of fair value. Interest lost on non-accrual loans was $1.3 million in 1992 and $0.37 million in 1991. Loan Commitments and Letters of Credit Residential mortgage $ 2 Commercial mortgage 16 Commercial and industrial 12 Consumer 16 Total $ 46 Loan commitments are generally issued with either fixed expiration dates or other termination terms. Most commitments are expected to be funded and are subject to the same underwriting standards and collateral requirements as loans. The cost to terminate or sell loan commitments and letter of credit obligations is estimated using the Bank's current fee structure and approximated $0.45 million at December 31, 1992. The Bank has arrangements with correspondent lenders whereby residential mortgage loans are originated by the Bank and sold under recourse agreements with terms ranging from 60 days to six months. Loans sold under such agreements approximated $13 million at December 31, 1992. Fee income attributable to loans sold with recourse is recognized at the time of sale and approximated $0.2 million on loans for which a recourse obligation existed at December 31, 1992. 7. CHANGES IN ALLOWANCE FOR POSSIBLE LOAN LOSSES: 1992 1991 Beginning balance $ 9 $ 8 Provision for possible loan losses 5 2 Acquired allowances 31 - Charge-offs, net (7) (1) Ending balance $ 38 $ 9 8. SECURITIES: December 31, 1992 1991 Book Estimated Book Estimated Value Fair Value Value Fair Value Investment Securities- U.S. Government Agency Certificates $ 32 $ 32 $ 39 $ 39 Collateralized mortgage obligations and other 179 179 181 183 FHLB stock - restricted 9 9 8 8 Total $ 220 $ 220 $ 228 $ 230 The weighted average contractual maturity of securities held for sale and investment securities is 269 months; however, the expected maturities will differ significantly because borrowers may have the right to prepay obligations without prepayment penalties. Premiums on securities are amortized over a weighted average life of 3 years. Fair value is estimated using quoted market prices or market indications of value. Gross unrealized gains on securities approximated $0.8 million and $2 million at December 31, 1992, and 1991, respectively. Gross unrealized losses on securities approximated $0.4 million and $0.1 million at December 31, 1992, and 1991, respectively. December 31, 1992 Fixed Adjustable Rate Rate Total Held for Sale: Collateralized mortgage obligations $ 63 $ - $ 63 Held for Investment: GNMA certificates $ - $ 5 $ 5 FHLMC certificates - 5 5 FNMA certificates - 22 22 Collateralized mortgage obligations and other 57 122 179 FHLB stock - restricted - 9 9 Total $ 57 $163 $220 The indices generally used to reprice adjustable rate securities held by the Bank include U.S. Treasury yields, average cost of funds in the 11th Federal Home Loan Bank district, and LIBOR. The repricing of these securities may be limited to both periodic and lifetime caps. Collateralized mortgage obligations represent interests in pools of loans. The Bank's investment policy requires such securities to be investment grade instruments. Credit risk on these investments is minimized by one or more of: the distribution priority of the senior tranches; guarantees of a federal agency or overcollateralization of the respective pools; and other credit enhancements. 9. ASSETS GUARANTEED BY THE FUND: Estimates of Fund assistance for asset valuation guarantees are based on the difference between book values and estimated recovery values. Amounts received from the Fund will depend upon actual liquidation proceeds.
December 31, Estimated Fund Recovery Assistance Book Value Asset Type 1992 1991 1992 1991 1992 1991 Land and land development $104 $185 $ 95 $ 97 $199 $282 Multifamily residential 122 150 9 41 131 191 Other commercial real estate 75 111 12 22 87 133 Retail facilities 41 64 15 29 56 93 Single family residential 39 69 5 19 44 88 Commercial and industrial 1 5 2 6 3 11 Consumer loans and related collateral 2 5 - 2 2 7 Subsidiaries 5 3 - 2 5 5 Other - 2 2 4 2 6 Total $ 389 $ 594 $ 140 $ 222 $ 529 $ 816
The Fund guarantees do not extend to assets owned by other lenders serviced by the Bank which were $27 million and $38 million at December 31, 1992 and 1991, respectively. The Bank had letters of credit outstanding of $1 million and $4 million at December 31, 1992 and 1991, respectively. Amounts funded under these letters of credit would be guaranteed by the Fund. Estimated recovery is judgmental in nature and is based upon various indications of value, including broker opinions, net present value of estimated cash flows, recent marketing efforts and other similar methodologies. Due to the nature of Fund assistance and related guarantees, the book value of assets guaranteed by the Fund of $529 million approximates fair value at December 31, 1992.
Years Ended December 31, 1992 1991 Net Revenue on Actual Assistance Total Actual Assistance Total Guaranteed Assets Yield Income Revenue Yield Income Revenue Loans $19 $ (1) $18 $16 $ 5 $21 Real estate (1) 43 42 - 74 74 Subsidiaries - - - 3 (1) 2 Other - - - - 1 1 Total $ 18 $ 42 $ 60 $ 19 $ 79 $ 98
Capital loss reimbursements received from the Fund approximated $187 million and $443 million, respectively, for the years ending December 31, 1992 and 1991. 10. DEPOSITS:
December 31, 1992 December 31, 1991 Stated Interest Stated Interest Balance Rates Expense Balance Rates Expense Non-interest bearing $ 51 - $ - $ 36 - $ - Savings 33 3.00% 1 21 4.50% 1 Transaction accounts 322 2.83% 10 315 4.42% 15 Certificates of deposit- Less than 3% 30 3 3% - 4% 243 - 4% - 5% 222 66 5% - 6% 142 252 6% - 7% 160 236 7% - 8% 89 189 8% - 9% 67 289 Greater than 9% 41 61 994 5.40% 64 1,096 6.85% 96 Total $1,400 4.56% $ 75 $1,468 6.13% $ 112
Maturities of certificates of deposit at December 31, 1992:
1993 1994 Thereafter Total Less than 4% $260 $ 13 $ - $273 4% to 6% 254 68 42 364 6% and greater 165 56 136 357 Total $ 679 $ 137 $ 178 $ 994
Large certificates of deposit totaled $163 million and $215 million at December 31, 1992 and 1991, respectively. Brokered funds totaled $29 million and $46 million at December 31, 1992 and 1991, respectively. For non-interest bearing, savings and transaction accounts, fair value approximates book value. For certificates of deposit, fair value is estimated based on discounting future cash flows at the Bank's December 31, 1992 offering rates over the estimated remaining contractual maturities of the certificates. The fair value of deposits approximated $1.421 billion at December 31, 1992, however, changes in assumptions could materially effect the estimated fair value. The Bank has entered into interest rate swaps with notional amounts of $190 million to hedge the interest rate risk associated with longer term fixed rate loans funded by short term deposits. For notional amounts of $10 million, the Bank makes LIBOR based semi-annual interest payments which averaged 3.19% at December 31, 1992 and receives semi-annual payments at fixed rates which averaged 7.47% at December 31, 1992. For notional amounts of $180 million, the Bank makes semi-annual interest payments at fixed rates which averaged 7.39% at December 31, 1992 and receives LIBOR based semi-annual interest payments which averaged 3.94% at December 31, 1992. The net cost of these swaps is recorded as a component of interest expense and totaled $2.9 million in 1992. The swaps terminate in 1993 ($10 million), 1997 ($10 million) and 2002 ($170 million). However, $140 million of notional amounts, terminating in 2002, amortizes semi-annually according to changes in certain indices as specified by the contract. Performance by the other parties is unconditionally guaranteed by third party intermediaries and management anticipates full performance. The cost of terminating the swaps is estimated based on market quotations and approximated $5 million at December 31, 1992. 11. BORROWED FUNDS: December 31, 1992 1991 FHLB advances maturing in: 1992 $ - $ 75 1993 16 - 1994 125 - 1997 32 - 1998 3 - 1999 1 - 177 75 Other borrowed funds 3 - Total $ 180 $ 75 Weighted average rate 4.08% 4.44% The Bank's obligations to the FHLB are secured by blanket assignments of assets approximating $1 billion, consisting primarily of single family mortgage loans and securities. The Bank's additional borrowing capacity approximated $295 million at December 31, 1992. As of December 31, 1992, the Bank had committed to borrow an additional $100 million from the FHLB (see Note 17). The fair value of borrowed funds is estimated based on discounted cash flows at current FHLB advance rates over the remaining terms of the advances. Fair value approximated $180 million at December 31, 1992. During 1991, the Bank prepaid FHLB advances totaling $25 million and incurred a prepayment fee of $1 million which was recognized as an extraordinary loss. 12. INCOME TAXES: The Bank files a consolidated federal income tax return with Lone Star and its subsidiaries. Any tax savings realized through the utilization of certain items, as defined in the Agreement, in the consolidated federal income tax return of Lone Star must be paid to the Fund. Years Ended December 31, Reconciliation of Net Income 1992 1991 Net income per financial statements $ 18 $ 4 Tax-exempt income (42) (100) Purchase accounting adjustments and goodwill amortization - 7 Excess tax basis losses (190) (450) Other (1) (11) Net operating loss for federal income tax (215) (550) Tax-exempt assistance 216 549 Nondeductible expense reimbursement - (7) Net operating income (loss) pursuant to the Agreement $ 1 $ (8) The reconciliation of net income for 1991 has been restated to reflect actual tax return amounts. The Bank meets the statutory requirements which provide certain tax benefits to savings and loan associations, principally a special bad debt deduction based on a percentage of taxable income (currently 8%) or on historical loan loss experience formulas. Because Lone Star has consolidated net operating losses available to offset taxable income before application of the tax benefit provisions of the Agreement, no federal income tax benefits are payable to the Fund. The Bank has net operating loss carryforwards incurred since inception of $1.4 billion for federal income tax purposes and $181 million pursuant to the Agreement. Additionally, net operating loss carryforwards acquired at August 18, 1988 total approximately $455 million. The use of these acquired net operating loss carryforwards is subject to significant limitations and considered remote. However, the Bank will reimburse the Fund to the extent that any of these acquired loss carryforwards are eventually used to reduce Lone Star's consolidated federal income taxes. Effective June 30, 1992, Americity was acquired by the Bank. The acquisition and immediate liquidation of Americity into the Bank were nontaxable transactions for Federal and State Income tax purposes. The Bank is responsible for the tax associated with Americity's final June 30, 1992 Federal and State Income tax returns which is estimated to be $3.6 million. 13. CAPITAL AND LIQUIDITY: Reconciliation of Stockholder's Equity at December 31, 1992 Asset Capital Ratio Stockholder's equity $117 Core deposit intangible (2) Investments in and advances to non-includable subsidiaries (7) 108 Core capital to assets ratio 6.32% Supervisory goodwill (5) 103 Tangible capital to tangible assets ratio 6.03% Supervisory goodwill 5 Allowance for losses 11 $ 119 Total capital to risk weighted assets ratio 17.52% The Bank currently exceeds all capital standards promulgated by the OTS. Net income and capital for the years ended December 31, 1992 and 1991 agree with amounts reported to the OTS. During 1992, the Bank paid cash dividends of $9.7 million to its parent, LSST. LSST has made application to the OTS to release the Bank from its capital maintenance agreement. Until approved, dividend payments cannot exceed 50% of current period earnings unless prior OTS approval is obtained. Such approval was obtained for dividends paid in 1992. Liquidity The principal sources of liquidity are the renewal of deposits, loan and securities payments, liquidations of guaranteed assets, reimbursements from the Fund, liquidation of securities held for sale and earnings. The Bank may borrow up to a maximum amount of 50% of total assets or more under certain conditions from the FHLB, subject to collateral restrictions, and has unused lines totaling $401 million from retail deposit brokers. The sources of liquidity are considered by management to be sufficient to fund loan commitments and to meet other obligations of the Bank. 14. PREFERRED STOCK: Authorized preferred stock consists of Class A convertible preferred stock, $1.00 par value, 960,000 shares; Class B convertible preferred stock, $1.00 par value, 960,000 shares; and Class C preferred stock, $5,000 par value, 100,000 shares. No preferred shares were outstanding at December 31, 1992 or 1991. 15. EMPLOYEE BENEFIT PLAN: The Bank sponsors a qualified employee savings plan covering substantially all of its employees. The plan allows participants to make pretax contributions with the Bank contributing up to 3% of the participants' base salaries. All amounts contributed to the plan are deposited in a trust fund administered by a national bank. The total expense in 1992 and 1991 was $0.28 million and $0.29 million, respectively. 16. COMMITMENTS AND CONTINGENCIES: The Bank is a party to various claims and lawsuits. Substantially all litigation and related costs are indemnified and reimbursable under the terms of the Agreement. Unindemnified claims and lawsuits are incidental to the ordinary course of business and are not expected to have a material effect on the consolidated financial statements. The 1992 compliance examination conducted by the OTS identified a limited number of currency transactions in violation of the Bank Secrecy Act, other than the Americity violations discussed in Note 3. It is uncertain at this time whether the OTS and/or the United States Department of the Treasury will assess monetary penalties. Accordingly, no loss contingency has been accrued. Potential losses range from $0 to $3 million. Management believes that it is unlikely that a material amount of penalties will be assessed and would vigorously protest any such assessment. The Bank and OTS are currently discussing whether a Supervisory Agreement will be executed as a result of the aforementioned compliance examination. Management believes that such agreement, if one is executed, would have no material effect on financial condition or results of operations. The Bank has entered into noncancelable operating leases for certain premises and equipment. Minimum future lease payments at December 31, 1992 are $9 million. Rental expense totaled $2.5 million and $2.3 million for the years ended December 31, 1992 and 1991, respectively. The Bank has entered into contracts for data processing and item processing services at estimated annual costs of $2 million with expiration dates of March, 1995, and November, 1996. During 1991, the Plan of Reorganization for Lone Star Steel Company ("LSS"), Lone Star's other major operating unit, was approved by its creditors and confirmed by the Bankruptcy Court. There have been no intercompany transactions between the Bank and LSS, and the Plan had no effect on the financial statements of the Bank. 17. SUBSEQUENT EVENTS: In March and April 1993, the Bank entered into additional interest rate swap arrangements with notional amounts of $215 million. These swap arrangements were terminated in October 1993, resulting in a gain of approximately $1.7 million. Additionally, in March 1993, the Bank prepaid $55 million in FHLB advances resulting in prepayment penalties of $1.4 million. In April 1993, the Bank sold its South Texas banking centers. This sale resulted in a gain of approximately $1.1 million. The Bank funded the sale with advances from the FHLB and proceeds from the sales of securities held for sale. On November 12, 1993, Lone Star sold LSST and the Bank to Guaranty Federal Bank, F.S.B. ("Guaranty") for approximately $156 million. The accompanying financial statements have been prepared on the historical cost basis of accounting and no adjustments have been made to reflect the purchase by Guaranty. CONDENSED CONSOLIDATED BALANCE SHEET AMERICAN FEDERAL BANK, F.S.B. (Unaudited) September 30, 1993 (in millions) ASSETS Cash and cash equivalents $ 89.4 Mortgage-backed and investment securities 20.0 Covered assets 437.2 Loans receivable 725.7 Loans and investments held for sale 150.0 Other assets 54.1 Total assets $ 1,476.4 LIABILITIES AND SHAREHOLDER'S EQUITY Deposits $ 1,036.9 Advances from Federal Home Loan Bank 278.8 Other borrowings 2.7 Other liabilities 27.8 Total liabilities 1,346.2 Shareholder's equity 130.2 Total liabilities and shareholder's equity $ 1,476.4 See Notes to Condensed Consolidated Financial Statements. CONDENSED CONSOLIDATED STATEMENTS OF INCOME AMERICAN FEDERAL BANK, F.S.B. (Unaudited) September 30, For the nine months ended 1993 1992 (in millions) Revenue on earning assets: Interest income: Loans receivable $ 52.2 $ 39.0 Mortgage-backed and investment securities 7.8 10.5 Other earning assets .9 2.6 Total interest income 60.9 52.1 Net revenue on assets guaranteed by the FSLIC Resolution Fund 27.1 49.3 Total revenue on earning assets 88.0 101.4 Interest expense: Deposits 40.0 57.6 Borrowed funds 7.3 2.2 Total interest expense 47.3 59.8 Net revenues before provision for loan losses 40.7 41.6 Provision for loan losses .4 3.7 Net revenue after provision for loan losses 40.3 37.9 Noninterest income 8.7 6.2 Noninterest expense: Compensation and benefits 17.8 13.1 Other 17.8 15.6 Total noninterest expense 35.6 28.7 Net income $ 13.4 $ 15.4 See Notes to Condensed Consolidated Financial Statements. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AMERICAN FEDERAL BANK, F.S.B. (Unaudited) September 30, For the nine months ended 1993 1992 (in millions) Cash provided by (used for) operating activities: Net income $ 13.4 $ 15.4 Adjustments to reconcile net income to net cash: Purchases of securities held for sale, net of repayment 39.4 ( 71.2) Accrued FSLIC Resolution Fund assistance ( .8) 10.0 Other 4.2 ( 5.5) 56.2 ( 51.3) Cash provided by (used for) investing activities: Purchase of securities ( 10.9) ( 52.0) Sales, maturities and collections of securities 82.9 120.9 Loan originations and acquisitions ( 253.4) (259.8) Loan principal collections 278.2 137.8 Principal collected on guaranteed assets 20.6 24.3 Sales and writedowns of guaranteed assets 87.6 322.6 Sales of real estate for investment 8.4 - Cash used for sale of branches ( 181.3) - Net cash acquired in acquisitions - 116.3 Other 18.6 ( 1.3) 50.7 408.8 Cash provided by (used for) financing activities: Net decrease in deposits ( 174.3) (287.3) Proceeds from borrowed funds 1,209.7 342.5 Repayment of borrowed funds (1,109.5) (507.1) Dividends paid - ( 3.6) ( 74.1) (455.5) Net increase (decrease) in cash and cash equivalents 32.8 ( 98.0) Cash and cash equivalents at beginning of period 56.6 155.5 Cash and cash equivalents at end of period $ 89.4 $ 57.5 See Notes to Condensed Consolidated Financial Statements. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AMERICAN FEDERAL BANK, F.S.B. (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. NOTE B - SUBSEQUENT EVENT On November 12, 1993, Guaranty Federal Bank, F.S.B. ("Guaranty") acquired 100 percent (100%) of the outstanding stock of American Federal Bank, F.S.B. for a cash purchase price of approximately $155.7 million. The accompanying financial statements have been prepared on the historical cost basis of accounting and no adjustments have been made to reflect the purchase by Guaranty. PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS TEMPLE-INLAND INC. AND SUBSIDIARIES (Unaudited) The following pro forma condensed consolidated balance sheet at October 2, 1993, and the pro forma condensed consolidated statements of income for the nine months ended October 2, 1993 and year ended January 2, 1993, give effect to the acquisition of one hundred percent (100%) of the outstanding stock of American Federal Bank, F.S.B. ("American Federal Bank") by Guaranty Federal Bank, F.S.B. ("Guaranty"), a wholly-owned indirect subsidiary of Temple-Inland Inc ("Temple-Inland"). The pro forma information is based on the historical financial statements of Temple-Inland and American Federal Bank giving effect to the transaction under the purchase method of accounting and the assumptions and adjustments in the accompanying notes to the pro forma condensed consolidated financial statements. The pro forma financial statements have been prepared based upon the financial statements of American Federal Bank filed with this Report. These pro forma results have been prepared for informational purposes only and do not purport to be indicative of what would have occurred had the combination been in effect on the dates indicated or of the results which may occur in the future. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET TEMPLE-INLAND INC. AND SUBSIDIARIES (Unaudited)
Historical American Pro Forma Pro Forma At October 2, 1993 Temple-Inland Federal Bank Adjustments Consolidated (in millions) Assets Cash $ 975.5 $ 89.4 $(155.7)(a) $ 909.2 Investments 4,724.3 20.0 - 4,744.3 Covered assets 340.7 437.2 5.0 (b) 782.9 Loans receivable 1,828.5 725.7 38.9 (b) 2,593.1 Trade and other receivables 225.0 - - 225.0 Inventories 812.7 150.0 - 962.7 Property and equipment 2,361.2 3.3 ( .6)(b) 2,363.9 Other assets 441.4 50.8 .4 (b) 501.8 9.2 (c) Total assets $11,709.3 $1,476.4 $(102.8) $13,082.9 Liabilities and Shareholders' Equity Deposits $ 5,461.3 $1,036.9 $ 15.5 (b) $ 6,513.7 Securities sold under repurchase agreements and Federal Home Loan Bank advances 2,315.3 278.8 ( .5)(b) 2,593.6 Long-term debt 1,109.9 - - 1,109.9 Deferred income taxes 116.0 - - 116.0 Short-term borrowings 34.4 2.7 - 37.1 Postretirement benefits 128.9 - - 128.9 Other liabilities 839.8 27.8 12.4 (b) 880.0 Total liabilities 10,005.6 1,346.2 27.4 11,379.2 Shareholders' equity 1,703.7 130.2 (155.7)(a) 1,703.7 16.3 (b) 9.2 (c) Total liabilities and shareholders' equity $11,709.3 $1,476.4 $(102.8) $13,082.9
See Notes to Pro Forma Condensed Consolidated Balance Sheet. NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET TEMPLE-INLAND INC. AND SUBSIDIARIES (Unaudited) The following pro forma adjustments have been applied to the pro forma condensed consolidated balance sheet at October 2, 1993. (a) To reflect the cash purchase price of approximately $155.7 million to acquire all of the outstanding stock of American Federal Bank. (b) To reflect the estimated fair value adjustments to American Federal Bank's historical carrying values of its assets and liabilities. Net Assets Increase (Decrease) (in millions) - Covered assets $ 5.0 - Loans receivable 38.9 - Property and equipment ( .6) - Other assets: - Goodwill $( 4.1) - Core deposit intangible 6.6 - Real estate owned ( 1.5) - Other assets ( .6) .4 - Deposits ( 15.5) - FHLB advances .5 - Other liabilities ( 12.4) $ 16.3 (c) To reflect American Federal Bank earnings from September 30, 1993 through the effective purchase date, November 12, 1993. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME TEMPLE-INLAND INC. AND SUBSIDIARIES (Unaudited)
Historical For the nine months ended American Pro Forma Pro Forma October 2, 1993 Temple-Inland Federal Bank Adjustments Consolidated (in millions, except per share data) Revenues Manufacturing net sales $ 1,599.0 $ - $ - $ 1,599.0 Financial services revenues 467.4 96.7 ( 6.3)(a) 551.7 ( 6.1)(b) 2,066.4 96.7 ( 12.4) 2,150.7 Costs and expenses Manufacturing costs and expenses 1,514.9 - - 1,514.9 Financial services expenses 415.4 83.3 ( 3.1)(b) 495.6 1,930.3 83.3 ( 3.1) 2,010.5 Operating income 136.1 13.4 ( 9.3) 140.2 Parent Company Interest - net ( 51.9) - - ( 51.9) Other 1.9 - - 1.9 Income before taxes 86.1 13.4 ( 9.3) 90.2 Taxes on Income 25.8 - 1.3 (c) 27.1 Income from continuing operations $ 60.3 $ 13.4 $( 10.6) $ 63.1 Income per share from continuing operations $1.09 $1.14 Weighted average number of shares outstanding 55.5 55.5
See Notes to Pro Forma Condensed Consolidated Statement of Income. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME TEMPLE-INLAND INC. AND SUBSIDIARIES (Unaudited)
Historical For the year ended American Pro Forma Pro Forma January 2, 1993 Temple-Inland Federal Bank Adjustments Consolidated (in millions, except per share data) Revenues Manufacturing net sales $ 2,075.4 $ - $ - $ 2,075.4 Financial services revenues 637.8 141.8 ( 10.4)(a) 755.9 ( 13.3)(b) 2,713.2 141.8 ( 23.7) 2,831.3 Costs and expenses Manufacturing costs and expenses 1,917.6 - - 1,917.6 Financial services expenses 573.4 123.7 ( 5.8)(b) 691.3 2,491.0 123.7 ( 5.8) 2,608.9 Operating income 222.2 18.1 ( 17.9) 222.4 Parent Company Interest - net ( 47.4) - - ( 47.4) Other 2.2 - - 2.2 Income before taxes 177.0 18.1 ( 17.9) 177.2 Taxes on Income 30.1 - - 30.1 Income from continuing operations $ 146.9 $ 18.1 $( 17.9) $ 147.1 Income per share from continuing operations $2.65 $2.65 Weighted average number of shares outstanding 55.5 55.5
See Notes to Pro Forma Condensed Consolidated Statement of Income. NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME TEMPLE-INLAND INC. AND SUBSIDIARIES (Unaudited) The following pro forma adjustments have been applied to the pro forma condensed consolidated statements of income for the nine months ended October 2, 1993, and the year ended January 2, 1993, to give effect to the acquisition of American Federal Bank, assuming the transaction was consummated December 29, 1991. Increase (Decrease) In Income Nine Months Ended Year Ended October 2, January 2, 1993 1993 (in millions) (a) To reflect the decrease in interest on earning assets resulting from the reduction in funds available for investment due to the cash purchase price of approximately $155.7 million; interest rate assumed equals Guaranty's actual yield on earning assets for the applicable periods. $( 6.3) $(10.4) (b) To reflect accretion (amortization) of purchase accounting adjustments. Financial services revenues: - Covered assets ( .9) ( 2.0) - Loans receivable ( 5.2) (11.3) ( 6.1) (13.3) Financial services expenses: - Property and equipment .1 .2 - Goodwill 1.7 1.7 - Core deposit intangible ( 1.0) ( 1.3) - Deposits 2.4 5.4 - FHLB advances ( .1) ( .2) 3.1 5.8 (c) To adjust taxes for pro forma adjustments. ( 1.3) - $(10.6) $(17.9) INDEX TO EXHIBITS EXHIBIT PAGE NUMBER DESCRIPTION NUMBER 23 Consent of Arthur Andersen & Co. EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated February 12, 1993 included in this Form 8-K, into the following Temple-Inland Inc. registration statements, (i) Post-Effective Amendment Number 3 to Registration Statement Number 2-88202 on Form S-8, (ii) Registration Statement Number 33-20431 on Form S-3, (iii) Registration Statement Number 33-23132 on Form S-8, (iv) Post-Effective Amendment Number 1 to Registration Statement Number 33-25650 on Form S-8, (v) Post-Effective Amendment Number 1 to Registration Statement Number 33-27286 on Form S-8, (vi) Post-Effective Amendment Number 3 to Registration Statement Number 33-31004 on Form S-8, (vii) Post-Effective Amendment Number 2 to Registration Statement Number 33-32124 on Form S-8, (viii) Registration Statement Number 33-36393 on Form S-8, (ix) Registration Statement Number 33-37597 on Form S-8, (x) Registration Statement Number 33-40381 on Form S-8, (xi) Registration Statement Number 33-43801 on Form S-8, (xii) Registration Statement Number 33- 43802 on Form S-8, (xiii) Registration Statement Number 33-43978 on Form S-3, (xiv) Registration Statement Number 33-50880 on Form S-3, (xv) Registration Statement Number 33-48034 on Form S-8, (xvi) Registration Statement Number 33- 54388 on Form S-8, and (xvii) Registration Statement Number 33-63104 on Form S-8. /S/ Arthur Andersen & Co. Dallas, Texas January 27, 1994 -----END PRIVACY-ENHANCED MESSAGE-----