1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20459
FORM 10-K
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED DECEMBERFor the fiscal year ended December 31, 19931994
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ___________For the transition period from to
----------- -----------
COMMISSION FILE NUMBER 0-2610
ZIONS BANCORPORATION
(Exact name of Registrant as specified in its charter)
UTAH 87-0227400
(State of other jurisdiction of (Internal Revenue Service Employer
incorporation or organization) Identification Number)
1380 KENNECOTT BUILDINGKennecott Building
Salt Lake City, Utah 84133
SALT LAKE CITY, UTAH (Zip Code)
(Address of principal executive offices) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:(Zip Code)
Registrant's telephone number, including area code: (801) 524-4787
SECURITIES REGISTERED PURSUANT TO SECTIONSecurities registered pursuant to Section 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTIONof the act: None
Securities registered pursuant to Section 12(g) OF THE ACT:
COMMON STOCKof the act:
Common Stock - WITHOUT PAR VALUEwithout par value
- -------------------------------------------------------------------------------
(Title of Class)
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
___------- ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
____----
Aggregate Market Value of Common Stock Held by Nonaffiliates at
February 28, 1994 . . . . . . . . . . . . . . $434,871,00027, 1995 ..................................................$446,847,000
Number of Common Shares Outstanding at February 28, 1994 . . . . . . . . . .
. . . . . . . . . . . . . . . 14,202,69927, 1995.......14,562,970 Shares
Documents Incorporated by Reference:
Definitive Proxy Statement (See Part III, Item 10, Item 11, Item 12, and
Item 13).
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ZIONS BANCORPORATION
ANNUAL REPORT FOR 19931994 ON FORM 10-K
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business 1
Item 2. Properties 1113
Item 3. Legal Proceedings 1114
Item 4. Submission of Matters to a Vote of Security Holders 1214
Executive Officers of the Registrant 1214
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 1315
Item 6. Selected Consolidated Financial Data 1416
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 1517
Item 8. Financial Statements and Supplementary Data 3941
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 68
PART III
Item 10. Directors and Executive Officers of the Registrant 68
Item 11. Executive Compensation 68
Item 12. Security Ownership of Certain Beneficial Owners and Management 68
Item 13. Certain Relationships and Related Transactions 68
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 68
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PART I
ITEM 1. BUSINESS
Zions Bancorporation (the Parent) is a multibank holding company organized
under the laws of Utah in 1955, registered under the Bank Holding Company Act
of 1956, as amended. Zions Bancorporation and its subsidiaries (the Company),
is the second largest bank holding company headquartered in Utah and provides a
full range of banking and related services primarily in Utah, Nevada, and
Arizona. Its principal subsidiaries are banking subsidiaries which include
Zions First National Bank, the second largest commercial banking organization
in the state of Utah, Nevada State Bank, the sixthfifth largest commercial bank in
Nevada, and Zions First National Bank of Arizona the fifth largest commercial bank in
Arizona.
The Company's business and the businesses of many of its larger borrowers are
primarily concentrated in the state of Utah. Consequently, the Company's
results of operations and financial condition are dependent upon general trends
in the Utah economy and real estate markets.
The Company has focused in recent years on maintaining strong liquidity,
risk-based capital and cash flow positions and on developing strong internal
controls. An increasing focus is currently being placed on strengthening the
Company's retail and consumer banking businesses,business, as well as its small- and medium-sized
business lending, residential mortgage and investment activities, and
increasing the proportion of fee income in its total revenue mix. The
Company's general operating objectives include enhancing the Company's market
position in Utah, Nevada, and Arizona through in-market acquisitions of smaller
depository institutions, and through the containedcontinued development of the Company's
present lines of business.
The Company is committed to improving the communities it serves now and in the
years to come. Employees, as active concerned citizens, perform acts of service
and goodwill to heighten a standard of living and boost community pride and
morale. The Company engages in a variety of loan programs which benefit low to
moderate income individuals; ranging from housing and business loans to
automobile loans.
At December 31, 1993,1994, the Company had assets of $4.3$4.9 billion, loans of $2.2$2.4
billion, deposits of $3.0$3.7 billion, and shareholders' equity of more than $.3
billion. A more detailed discussion concerning the Company's financial
condition is contained in Part II of this report.
THE BANKING SUBSIDIARIES
The BanksBanking Subsidiaries
The banks provide a wide variety of commercial and retail banking and
mortgage-lending financial services. Commercial loans, lease financing, cash
management, lockbox, customized draft processing, and other special financial
services are provided for business and other commercial banking customers. A
wide range of personal banking services are provided to individuals, including
bankcard, student and other installment loans and home equity credit line
loans, checking accounts, savings accounts, time certificates of various types
and maturities, trust services and safe deposit facilities. In addition,
direct deposit of payroll, social security and various other government checks
is offered. Automated teller machines provide 24-hour access and availability
to customers' accounts and to many consumer banking services through statewide,
regional, and nationwide ATM networks.
Zions First National Bank in Utah has developed special packages of financial
services designed to meet the financial needs of particular market niches,
including the Premier Account for those 50 years and older and the Student
Account. The Bank has also established a Private Banking group to service the
financial needs of wealthy individuals; an Executive Banking program to service
the needs of corporate executives of commercial clients, and an Affinity
program which offers discounted financial services to employees of commercial
accounts on a group basis. Zions Bank has also developed a series of products
geared to the lower-income customer, including the Flex Loan (a low-income
personal loan), several low-income housing programs, and the Reddi-Savings
account-- a savings account with unlimited ATM access for those not qualifying
for or desiring a checking account.
Both Zions First National Bank and Nevada State Bank have established trust
divisions which offer clients a variety of fiduciary services ranging from the
administration of estates and trusts to the management of funds held under
pension and profit sharingssharing plans. They also offer custodian, portfolio, and
management services. The Trust Division of Zions First National Bank also acts
as fiscal and payment agent, transfer agent, registrar, and trustee under
corporate and trust indentures for corporations, governmental bodies, and
public authorities.
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Zions First National Bank is a registered dealer in, and underwriter of, general
obligations of state and municipal governments, and a primary dealer in
obligations of the United States government and several federal agencies.
Zions First National Bank also provides correspondent banking services such as
cash letter processing, wire services, federal funds facilities, and loan
participations.
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Zions First National Bank's International Banking Department issues letters of
credit and handles foreign exchange transactions for customers, but it does not
take a trading position in foreign exchange. Zions First National Bank's Grand
Cayman branch accepts Eurodollar deposits from qualified customers, and places
deposits with foreign banks and foreign branches of other U.S. banks. Zions'
banking subsidiaries, however, do not engage in any foreign lending.
The Company's commercial banking operations generated net income of $59,932,000$65,661,000
in 1993,1994, a 29.0%.6% increase over the $46,474,000 produced$65,263,000 earned in 19921993. Results for 1993
have been restated to reflect the pooling-of-interests accounting treatment
afforded the acquisition of National Bancorp of Arizona during the first quarter
of 1994. Income from commercial banking operations was negatively affected in
1994 by rising interest rates and $31,672,000narrowing margins, particularly in 1991. A continuing declinethe
indirect installment contract business. Rising interest rates adversely
affected the sale of fixed income securities, reducing revenues at the recently
acquired Discount Corporation of New York. Rising rates were also manifest in
interest ratethe cost of deposits, as competitors' balance sheets became more fully
loaned-up, creating pressure to generate greater deposit growth. Competitive
conditions were also intense in the indirect automobile receivables business.
Although the volume of such receivables originated increased, margins were
greatly reduced from levels during 1993, combined
withpreviously experienced.
During the year a strong regional economy andmajor effort was initiated to reduce the introduction of new credit products,
produced a strong loan demandcost structure in the
Company's commercial banking operations
during the year. While average net loans and leases on the commercial banks'
balance sheet increased a modest 2.5%operations. A major focus of this initiative is to $1,995,728,000 an additional
$589,000,000 in consumer and small business loans (excluding long-term
residential mortgage loans) were securitized during 1993, in addition to
$159,000,000 in loans securitized in December 1992. A significant increase in
lending activity was fueled by the introduction of the Home Refinance Loan - a
fully amortizing seven or ten-year mortgage - in March 1993. The product,
which was highly successful and imitated by a number of competitors, produced
nearly $400 million in loan originations in Utah, Nevada, Arizona, and Idaho.
The Company's commitment to small business lending was also evident in 1993 as
Zions First National Bank was recognized as "Participating Bank of the Year" by
the Utah Technology Finance Corporation for making more quality loans than any
other financial institution to high-technology companies. Zions First National
Bank was also recognized as the largest originator of loans under the U.S.
Small Business Administration's 7A and 504 programs in Utah during 1993.
Cash generated from the securitization of loans and growtheliminate
redundant operations in the banks'
deposit basethree subsidiary banks, and to centralize functions
which are transparent to customers while at the same time maintaining a great
deal of decision-making capability at the local management level. At year-end
1994, staffing in the lead bank, excluding the mortgage operations, had been
reduced by 57 full-time equivalent employees, or 3.4% below staffing levels a
year earlier. An early retirement program was primarily investedmade available to certain
employees subsequent to year-end 1994, with approximately 40 employees
participating. Further cost-reduction projects are underway in liquid securities during 1993. Taxable
investment securities increased 24.3% to $893,453,000, while tax-exempt
securities averaged $120,631,000, a 14.8% increase over the prior year's level.
Federal1995.
Average federal funds sold and securities purchased under agreements to resell
increased 168.2% to $645,218,00031.4% or $208,136,000 in 1993, while1994, and average securities
held-to-maturity, available-for-sale and in trading accounts increased 27.9% or
$336,701,000. Average interest-bearing deposits held at other institutionsbanks and other
money market investments decreased 43.5% to $103,867,000. Average assets in
trading accounts increased 178.6% to $102,840,000.$108,185,000 or 81.7% during the year. Total
average coreloans and lease receivables, net of unearned discount, increased 16.0%
or $354,310,000, despite the fact that the Company securitized receivables in
the gross amount of $703,013,000 during 1994.
Core deposits continued to experience strong growth, as the total volume of such
accounts rose $339,049,000 or 11.1%. The components of this growth included an
increase of $111,723,000 or 15.3% in average demand deposits, an increase of
$92,161,000 or 14.2% in savings deposits, an increase of $167,103,000 or 14.9%
in average money market account balances, and a decrease of $31,938,000 in time
deposits under $100,000. Total average deposits increased 8.0%12.5% or $398,935,000
to $3,595,409,000 in 1993 to $2,720,828,000.
Noninterest bearing demand deposits increased 25.9% to $610,292,000; savings
and money market deposits increased 12.7% to $1,595,446,000; and certificates
of deposit under $100,000 decreased 16.9% to $515,090,000. Activity in1994.
Average federal funds purchased and securities sold under agreements to
repurchase increased 92.1%40.0% or $309,817,000 in 1993 to $775,386,000, primarily as a result of the purchase of
Discount Corporation of New York. Borrowings1994, while securities sold short
increased 165.6% or $114,963,000. Advances from the Federal Home Loan Bank system alsoof
Seattle and other borrowings decreased 20.0% or $36,016,000. Total
shareholders' equity allocated to commercial banking operations increased 39.8% to support a higher volume of real estate lending
during the year.
Aggressive installation of ATM's continued during the year, particularly18.5%
or $54,467,000 in nonbranch locations. At year end, the1994.
The ATM network was further expanded in 1994, with 40 additional machines being
deployed. The total number of ATM's in service totaled 175,
which includedat year-end 1994 was 215, a 23%
increase over the prior year-end totals. The ATM network includes installations
at branch offices, stores, shopping centers, resort areas, hotels, airports,
and university campuses, and U.S. Postal Service facilities in rural Utah
communities.campuses.
Utah
Zions First National Bank, founded in 1873, has 8486 offices located throughout
the state of Utah, plus one foreign office, for a total of 8587 banking offices.
Zions First National Bank's net income in 1993 was $52,867,000,$48,203,000, a 28.2%
increase overdecline of 8.8% from
the $41,241,000$52,867,000 earned in the previous year. This increase1993. The decline was thea result of a $32,702,000 growth$321,000 decline
in revenues,net revenue, a $25,176,000$6,437,000 increase in noninterest expenses and a $7,474,000 decrease$1,435,000
reduction in thebenefit from 1993 accounting changes, offset by a $926,000 decline
in provision for loan losses and lease losses.
Zions First National Bank'sa $2,603,000 reduction in the income tax
provision increased $4,809,000. The
implementation during 1993provision.
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Several initiatives were launched in 1994 to increase the convenience of Statement of Financial Accounting Standards
(SFAS) No. 106banking
for consumers and SFAS No. 109, relating to accounting for post-retirement
benefits and income taxes, respectively, generated a combined cumulative
benefit of $1,435,000.
In August 1993,businesses. Zions First National Bank completedwas the acquisitionfirst Utah bank
to aggressively promote point-of-sale debit card services throughout Utah. The
bank also expanded its telephone service center to provide access to a wide
variety of Discount
Corporationbanking services via telephone. The Company's Reddi-Response system
now handles approximately 10,000 phone calls per day. Zions Bank also became
the first Utah-based institution to introduce Electronic Data Interchange, a
package of New York, a primary dealer in U.S. government securities.
Discount Corporation operates as a divisiondata transmission services for corporate customers which facilitates
the electronic processing of purchase orders, invoices, and payment information.
Zions First National Bank and
has retained its sales and trading office at 58 Pine Streetsuccessfully completed the first phase of a pilot
program in New York City.
The acquisition significantly augments Zions Bank's existing institutional
investment sales business, and increases its institutional securities sales
capabilities, becoming oneconjunction with the National Association of 39 primary dealers of U.S. government
securities, and a member ofCertified Development
Companies to underwrite SBA 504 loans through selected local CDC's throughout
the selling groups of four agencies of the U.S.
government. The transaction establishes Zions Bank as a leader in
institutional sales and trading in the Intermountain West, and one of only two
primary dealers in government securities headquartered in the western United States. 2
5An initial $43.7 million pool of commercial first mortgage
loans originated under the program was securitized in 1994, and it is
anticipated that the program will be significantly expanded in 1995.
During the third quarter,1994, Zions First National Bank also acquiredorganized a 25%
interest in Bennington Capital Management, an investment advisory firmSmall Business Investment
Corporation to provide early-stage capital, primarily for technology companies
located in Seattle, Washington, which sponsors the AccessorTM familyIntermountain West. The fund, operating as Wasatch Venture Fund,
completed ten investments during its first year of mutual funds.
The acquisition should enableoperation.
In 1994, two new branches were opened in Layton and Eden, Utah, and during the
Company to more fully participate in
capturingfourth quarter, the value generated through the sale of mutual funds to its'
customers.
In October, thepending merger transaction of Zions Bancorporation and Wasatch Bancorp
strengthened Zions Bank's presence inFirst
Western Bancorporation was announced. The transaction is expected to be
consummated during the northern halfsecond quarter of fast-growing Utah
County, Utah, by adding $751995, and will mark the Company's
initial entry into the southeastern area of the state. The acquisition will
provide $37 million in assets and the addition of three banking offices operated
by Wasatch Bancorp'sFirst Western Bancorporation's banking subsidiary, Wasatch Bank. ZionsFirst Western National
Bank, additionally added a new full-service branch in Draper, Utah, a grocery
store banking center in South Jordan, Utah,Moab, Monticello and completed construction of a new
25,000 square foot regional financial center in St. George, Utah, during 1993.Blanding, Utah.
Nevada
Nevada State Bank, a state-chartered Federal Deposit Insurance Corporation
("FDIC")-insured institution, with its main office in downtown Las Vegas, opened
atwo new grocery store banking centercenters in Henderson,Summerlin and Pahrump, Nevada, during
the
year,1994, expanding its retail banking offices to 1921 in Nevada. Net income at Nevada State
Bank,
achieved net income, after the amortization of purchasedpurchase premium, ofincreased 30.9% to $6,140,000
in 1994 as compared to $4,691,000 in 1993-an1993. Nevada State Bank's earnings
increase of 16.1% overwas attributable to a $3,890,000 increase in net revenue, offset by a
$646,000 increase in noninterest expenses, a $410,000 increase in the $4,042,000 earnedloan loss
provision, a $1,032,000 increase in 1992. The bank's
revenues increased $2,055,000 while operating expenses rose $1,586,000. The
provision for loan losses decreased $305,000 and the provision for income taxes and a $353,000 reduction in the
net benefit produced by accounting changes in 1993.
Arizona
During 1994, the Company substantially increased $478,000.its presence in the Arizona
market. The net effectacquisition of National Bancorp of Arizona was completed during the
implementationfirst quarter, and Rio Salado Bancorp was acquired during the second quarter.
The banking operations of SFAS No. 106 and
SFAS No. 109 was a benefit of $353,000.
Arizonathese two companies were merged with Zions First
National Bank of Arizona, at December 31, 1993 had three offices in
the metropolitan Phoenix, Arizona, area. Zions First National Bank of Arizona
experienced a strong increase in net income, net of the amortization of
purchase premium, as earnings rose 99.3% to $2,374,000 from $1,191,000 in 1992.
Revenues increased $547,000 while operating expenses decreased $32,000. The
provision for loan losses decreased $175,000 and the provision for income taxes
increased $65,000. The net effect of the implementation of SFAS No. 106 and
SFAS No. 109 was a benefit in the amount of $494,000.
In August, Zions announced an agreement to acquire National Bancorp of Arizona,
a $435 million organization headquartered in Tucson; and in October, an
agreement was reached to acquire Rio Salado Bancorp, a $107 million banking
company in Tempe, Arizona. These organizations bring talented employees and
well-established reputations to our business in Arizona. The National Bancorp
of Arizona transaction was consummated shortly after year-end 1993, and itresulting bank, with 10 offices, is anticipated that the Rio Salado Bancorp acquisition will be completed in the
second quarter of 1994. When combined with existing Arizona operations, the
resulting organization, which will operateoperating
under the National Bank of Arizona namename. At year-end, the bank had over $700
million in assets, and with that bank's existing management, will have total assets of nearly
$630over $36 million with offices in metropolitan Phoenix, Tucson, and Flagstaff,net revenue, making it approximately the sixthfifth
largest commercial banking organizationbank in Arizona. OTHER SUBSIDIARIESDespite the disruptions caused by the
merger of these three organizations, National Bank of Arizona achieved a 46.9%
increase in net income, with 1994 earnings of $11,318,000 as compared with 1993
net income of $7,705,000. The increase resulted from a net revenue increase of
$11,163,000, a reduction in loan loss provision of $301,000, offset by increases
in noninterest expenses and taxes of $4,758,000 and $2,599,000, respectively,
and a reduction in income from 1993 accounting changes of $494,000. The 1994
net income of National Bank of Arizona produced a strong return on average
shareholders' equity of 24.3%. National Bank of Arizona's results have been
restated to reflect the pooling-of-interest acquisition of that operation in the
first quarter of 1994 and the results also reflect the acquisition of Rio Salado
Bancorp, using the purchase accounting method, during the second quarter of
1994. The two acquisitions also provide a foundation for increased activity on
the part of Zions Bancorporation's nonbank subsidiaries in the Arizona market.
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Other Subsidiaries
The Company conducts various other bank-related business activities through
subsidiaries owned by the Parent and wholly-owned subsidiaries of Zions First
National Bank. Zions Credit Corporation engages in lease origination and
servicing operations in Utah, Nevada, and Arizona. Zions Life Insurance Company
underwrites as reinsurer credit-related life and disability insurance. Zions
Insurance Agency, Inc., operates an insurance brokerage business which
administers various credit-related insurance programs in the Company's
subsidiaries and sells general lines of insurance. The Company's insurance
subsidiaries offer customers a full range of insurance products through licensed
agents. The products include credit life products, collateral protection
products, life policies, homeowners policies, property and casualty policies,
and commercial business owner type policies. Zions Data Service Company
provides data processing services to all subsidiaries of the Company. In October 1993, Zions
Mortgage Company, became a subsidiary of Zions First National Bank, as ownership was transferred to the Bank from the parent company.
Zions Mortgage Company conducts a mortgage
banking operation in Utah, Nevada, and Arizona. In 1993, total loans serviced by Zions Mortgage Company increased
23.7% and $844 million in traditional residential mortgages were closed and
sold in the secondary market. Zions Investment Securities,
Inc., also a subsidiary of the Bank, provides discount investment brokerage
services on a nonadvisory basis to both commercial and consumer customers.
Personal investment officers employed by the discount brokerage subsidiary in
many larger offices provide customers with a wide range of investment products,
including municipal bonds, mutual funds and tax-deferred annuities.
3Zions Credit Corporation generated $63,140,000 in new lease volume in 1994, a
17.1% increase over the 1993 volume. An additional $15,722,000 in leases was
brokered to third parties. Average gross lease receivable and conditional sales
contracts serviced by Zions Credit Corporation decreased 3.7% to $129,134,000 in
1994 from $134,029,000 in 1993.
Zions Insurance Agency, Inc. and Zions Life Insurance Company produced combined
net income of $1,070,000, a 92.4% increase over the $556,000 generated in 1993.
The increased income was largely attributable to increased volume in personal
lines of insurance and improved performance in the sale of mortgage life and
other credit life products.
Zions Data Service Company engaged in a variety of significant projects in 1994.
Most notable was the installation of a new deposit and account analysis system
which will simplify the development of new products and provide greater
flexibility in meeting customer requirements. A new trust system was also
installed, providing state-of-the-art operational capabilities. A loan
management system was developed using relational database technology. The new
system will provide managers with a much greater capability to view the full
range of a customer's account relationships and to easily develop customized
management reports. Zions Data Service Company also began the installation of a
wide area network to support improved data and voice communications between the
Company's various branches and departments. The new network will improve
response times and allow the Company to significantly leverage its substantial
investment in personal computer equipment and software.
Zions Mortgage Company experienced a sharp reduction in mortgage originations as
a result of an adverse interest rate environment in 1994. Total retail mortgage
origination volume decreased 47.4% to $382,800,000 in 1994 from $727,500,000 in
1993. In reaction to the decline in activity, staffing was reduced 27% between
March and December, 1994. Higher interest rates resulted in a loss on loan
sales of $3,445,000, including a downward mark-to-market adjustment of
$1,700,000 in a portfolio of adjustable rate mortgages, as compared to a gain on
loan sales of $2,035,000 in 1993. The loss on loan sales was partially offset
by a gain in the amount of $2,516,000 from the sale of mortgage servicing
rights. Zions Mortgage Company experienced a net loss of $319,000 in 1994, as
compared to net income of $530,000 in 1993. Inasmuch as Zions Mortgage Company
is a direct subsidiary of Zions First National Bank, its results of operations
are included in the banking operations results.
In a very difficult year for securities sales, Zions Investment Securities, Inc.
nevertheless contributed $730,000 in pretax income, rent income and revenue
sharing to the Company's banking operations. Net income, which is included in
the banking operations results, was $193,000, a 37.5% reduction from the
$309,000 earned in 1993.
1994 Economic Trends
The Intermountain region continued to exhibit a healthy economy during 1994,
though the pace of economic growth slowed somewhat in the Company's primary
market area of Utah. Employment growth in Utah totaled 6.2% in 1994, down from
6.9% in 1993, while residential construction slowed 13% between the first and
fourth quarters of 1994. Commercial construction remains strong, driven by low
vacancy rates. Although it appears that Utah may lose approximately 2,000
defense jobs over the next few years as a result of downsizing at Defense Depot
Ogden and Dugway Proving Grounds, the future of the state's largest employer,
Hill Air Force Base, currently appears secure, inasmuch as the Department of
Defense has not recommended the facility's closure to the Base Closure and
Realignment Commission.
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SUPERVISION AND REGULATION7
Nevada's employment growth slowed to 4.2% in 1994 from 7.2% in 1993 as a result
of the completion of several major hotel construction projects. The state's
net gaming revenues - an indicator of tourist activity - rose 16% in the fourth
quarter of 1994 as compared to the year-earlier period.
Employment grew 4.9% in Arizona in 1994 compared to 4.1% in 1993. There has
been a substantial reduction in office vacancy rates in Phoenix and Tucson in
recent months, with the result that suburban office vacancy rates are now well
below national averages.
The Federal Reserve System moved aggressively during 1994 to slow the rate of
growth in the nation's economy. The result was a two- and-a-half percentage
point increase in the prime rate, and commensurate increases in intermediate and
long-term rates, producing the most difficult fixed-income market in several
decades. The increase in rates significantly affected mortgage lending
activity, as retail mortgage originations declined. The rise in interest rates
also slowed retail and institutional investment sales.
Supervision and Regulation
Bank holding companies and banks are extensively regulated under both federal
and state law. The information contained in this section summarizes portions of
the applicable laws and regulations relating to the supervision and regulation
of Zions Bancorporation and its subsidiaries. These summaries do not purport to
be complete, and they are qualified in their entirety by reference to the
particular statutes and regulations described. Any change in applicable law or
regulation may have a material effect on the business and prospects of Zions
Bancorporation and its subsidiaries.
Bank Holding Company Regulation
Zions Bancorporation is a bank holding company within the meaning of the Bank
Holding Company Act and is registered as such with the Federal Reserve Board.
Under the current terms of that Act, activities of Zions Bancorporation, and
those of companies which it controls or in which it holds more than 5% of the
voting stock, are limited to banking or managing or controlling banks or
furnishing services to or performing services for its subsidiaries, or any other
activity which the Federal Reserve Board determines to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto. In
making such determinations, the Federal Reserve Board is required to consider
whether the performance of such activities by a bank holding company or its
subsidiaries can reasonably be expected to produce benefits to the public such
as greater convenience, increased competition or gains in efficiency that
outweigh the possible adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interest or unsound banking
practices.
Bank holding companies, such as Zions Bancorporation, are required to file with
the Federal Reserve Board certain reports and information and are required to
obtain prior approval of the Federal Reserve Board to engage in anyan new activity or to acquire
more than 5% of any class of voting stock of any company. Generally, no
application to acquire shares of a bank located outside that state in which the
operations of the applicant's banking subsidiaries were principally conducted on
the date it became subject to the Act may be approved by the Federal Reserve
Board unless such acquisition is specifically authorized by the laws of the
state in which the bank whose shares are to be acquired is located. Various proposals are currently pending in the U.S. Congress to ease or
eliminate these limitations. It is not possible to predict at the present time
whether any of these proposals will become law. In the
meantime, most statesstate have specifically authorized the acquisition of banks
located in those states by out-of-stateout-out-state companies, in many cases subject to
various restrictions.
The Federal Reserve Board has authorized the acquisition and control by bank
holding companies of savings and loan associations and certain other savings
institutions without regard to geographic restrictions applicable to acquisition
of shares of a bank.
The Riegle-Neal Interstate Branching and Efficiency Act of 1994 ("Riegle-Neal
Act") permits, beginning one year after enactment and subject to approval by the
Federal Reserve Board, bank holding companies to acquire either control of, or
substantial assets of, a bank located outside the bank holding company's home
state. These acquisitions are subject to limitations which are mentioned in the
discussion on "Interstate Banking". The Riegle-Neal Act reaffirms the right of
states to segregate and tax separately incorporated subsidiaries of a bank or
bank holding company. The Riegle-Neal Act also affects interstate branching and
merger.
The Federal Reserve Board is authorized to adopt regulations affecting various
aspects of bank holding companies. Pursuant to the general supervisory
authority of the Bank Holding Company Act and directives set forth in the
International Lending Supervision Act of 1983, the Federal Reserve Board has
adopted capital adequacy guidelines prescribing both risk-based capital and
leverage ratios.
5
8
Regulatory Capital Requirements
Risk-Based Capital Guidelines
The Federal Reserve Board established risk-based capital guidelines for bank
holding companies effective March 15, 1989. The guidelines define Tier I
Capital and Total Capital. Tier I Capital consists of common and qualifying
preferred shareholders' equity and minority interests in equity accounts of
consolidated subsidiaries, less goodwill and 50% (and in some cases up to 100%)
of investment in unconsolidated subsidiaries. Total Capital consists of Tier I
Capital plus qualifying mandatory convertible debt, perpetual debt, certain
hybrid capital instruments, certain preferred stock not qualifying as Tier I
Capital, subordinated and other qualifying term debt up to specified limits, and
a portion of the allowance for credit losses, less investments in unconsolidated
subsidiaries and in other designated subsidiaries or other associated companies
at the discretion of the Federal Reserve Board, certain intangible assets, a
portion of limited-life capital instruments approaching maturity and reciprocal
holdings of banking organizations' capital instruments. The Tier I component
must constitute at least 50% of qualifying Total Capital.
4
7
Risk-based capital ratios are calculated with reference to risk-weighted assets,
which include both on-balance sheet and off-balance sheet exposures. The
risk-based capital framework contains four risk-weighted categories for bank
holding company assets -- 0%, 20%, 50%, and 100%. Zero percent risk-weighted
assets include, inter alia, cash and balances due from Federal Reserve Banks,
and obligations unconditionally guaranteed by the U.S. government or its
agencies. Twenty percent risk-weighted assets include, inter alia, claims on
U.S. Banks and obligations guaranteed by U.S. government sponsored agencies as
well as general obligations of states or other political subdivisions of the
United States. Fifty percent risk-weighted assets include, inter alia, loans
fully secured by first liens on one to-four-family residential properties,
subject to certain conditions. All assets not included in the foregoing
categories are assigned to the 100% risk-weighted category, including loans to
commercial and other borrowers. As of year-end 1992, the minimum required ratio
for qualifying Total Capital became 8%, of which at least 4% must consist of
Tier I Capital. At December 31, 1993,1994, the Company's Tier I and Total Capital
ratios were 11.01%11.81% and 14.34%14.96%, respectively.
The current risk-based capital ratio analysis establishes minimum supervisory
guidelines and standards. It does not evaluate all factors affecting an
organization's financial condition. Factors which are not evaluated include (i)
overall interest rate exposure; (ii) liquidity, funding, and market risks; (iii)
quality and level of earnings; (iv) investment or loan portfolio concentrations;
(v) quality of loans and investments; (vi) the effectiveness of loan and
investment policies; (vii) certain risks arising from nontraditional activities;
and (vii)(viii) management's overall ability to monitor and control other financial
and operating risks.risks, including the risks presented by concentrations of credit
and nontraditional activities. The capital adequacy assessment of federal bank
regulators will, however, continue to include analyses of the foregoing
considerations and in particular, the level and severity of problem and
classified assets.
Minimum Leverage Ratio
On June 20, 1990, the Federal Reserve Board adopted new capital standards and
leverage capital guidelines that include a minimum leverage ratio of 3% Tier I
Capital to total assets (the "leverage ratio"). The leverage ratio is used in
tandem with the final risk-based ratio of 8% that took effect at the end of
1992.
The Federal Reserve Board has emphasized that the leverage ratio constitutes a
minimum requirement for well-run banking organizations having well-diversified
risk, including no undue interest rate exposure, excellent asset quality, high
liquidity, good earnings, and a composite rating of 1 under the Interagency Bank
Rating System. Banking organizations experiencing or anticipating significant
growth, as well as those organizations which do not exhibit the characteristics
of a strong, well-run banking organization described above, will be required to
maintain strong capital positions substantially above the minimum supervisory
levels without significant reliance on intangible assets. Furthermore, the
Federal Reserve Board has indicated that it will consider a "tangible Tier I
Capital Leverage Ratio" (deducting all intangibles) and other indices of capital
strength in evaluating proposals for expansion or new activities. At December
31, 1993,1994, the Company's Tier I leverage ratio was 5.47%6.24%.
On December 21, 1993, the OCC,6
9
The Federal Reserve Board and the FDIC (together,
the "Agencies") announced that they are or will be requesting public comment on
proposedhas adopted amendments to its capital guidelines,
effective as of December 31, 1994, under which bank holding companies and state
member banks must deduct from Tier I Capital in calculating risk-based capital
and leverage ratios net unrealized holding losses on available-for-sale equity
securities (i.e., those securities a bank does not have the regulatorypositive interest
and ability to hold to maturity, but which it has no intent to trade as a part
of a trading account). Implementation of this amendment to the Federal Reserve
Board's capital rulesguidelines has not resulted in a material increase in the
capital requirement applicable to explicitly includeit. The Federal Reserve Board has also
adopted a final rule amending its capital guidelines effective April 1, 1995,
limiting the amount of certain deferred tax assets that may be included by bank
holding companies and member banks in Tier I Capital net unrealized holding gainsfor calculation of
risk-based capital and losses on available-for-sale
securities. Such unrealized gains and lossesleverage ratios. Zions Bancorporation does not
anticipate that implementation of this amendment to the Federal Reserve Board's
capital guidelines will result in a material increase in the capital
requirements applicable to it. The Federal Reserve Board has also recently
published proposed amendments to its risk-based capital guidelines which, if
adopted in their current form, would generally increase the amount of capital
required to be carried against certain long-term derivative contracts; the
proposal also recognizes the effect of certain bilateral netting arrangements in
reducing potential future exposure under these contracts. Until the proposed
amendments are currently reported as a
component of stockholders' equity following a bank's adoption of SFAS No. 115.
As of January 1, 1994, oradopted in final form by the beginning ofFederal Reserve Board, Zions
Bancorporation cannot predict their first fiscal year thereafter,
if later, all banks must have adopted SFAS No. 115 for purposes of preparing
their Reports of Condition and Income (Call Reports). Duringeffect upon the comment
receipt and evaluation process, Tier I capital will be calculated as currently
defined.requirements
applicable to it.
Other Issues and Developments Relating to Regulatory Capital
Pursuant to such authority and directives set forth in the International Lending
Supervision Act of 1983, the Comptroller, the FDIC, and the Federal Reserve
Board have issued regulations establishing the capital requirements for banks
under federal law. The regulations, which apply to Zions Bancorporation's
banking subsidiaries, establish minimum risk-based and leverage ratios which are
substantially similar to those applicable to the Company. As of December 31,
1993,1994, the risk-based and leverage ratios of each of Zions Bancorporation's
banking subsidiaries exceeded the minimum requirements.
5
8
On December 19, 1991, the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA") was signed into law. FDICIA subjects banks to significantly
increased regulation and supervision. Among other things, FDICIA requires
federal bank regulatory authorities to revise, prior to June 19, 1993, their
risk-based capital guidelines to ensure that those standards take account of
interest rate risk, concentrations of credit, and the risk of nontraditional
activities, as well as reflect the actual performance and risk of multifamily
mortgages.
OnPursuant to the Riegle Community Development and Regulatory Improvement Act of
1994 (the "Riegle-Neal Act"), signed into law on September 4, 1993,23, 1994, such
revisions by the federal banking agencies to their risk-based capital guidelines
must also take account of the size and activities of insured institutions and
not cause undue reporting burdens to them. The manner of implementation by the
FDIC of this requirement mandated by FDICIA, as modified by the Riegle Act, is
described below:
(i) In 1993 and 1994, the Federal Reserve Board, the Comptroller and the
FDIC adopted rules which assigned a 50% risk weight for loans that
are fully secured by multifamily residential property and do not
exceed 80% of the property's value. To be eligible for the 50% risk
weight, the property's annual net operating income must be 120% of
the amount to the annual debt service and the loan must be amortized
within 30 years. The principal and interest payments must be made on
a timely basis for one year before the 50% risk weight may be applied
and the loan must provide for principal repayment beginning within
seven years of the date of the loan. Implementation of these rules
have not had a material adverse effect upon the capital requirements
applicable to Zions Bancorporation or upon those applicable to its
bank subsidiaries.
(ii) The federal banking agencies have adopted rules, effective January
17, 1995, under which they will take account of risks from
concentrations of credit (in specific countries, region, industries
and loan types) and from nontraditional activities in their analyses
of capital adequacy of state nonmember banks. Pursuant to the rule,
in such institutions are required to identify, monitor and control,
significant exposures from concentrations of credit and from
nontraditional activities, and hold additional capital above the
regulatory minimums to reflect such risks. The level of such risks,
as well as an institution's ability to identify, monitor and control
them, will be considered by the federal banking agencies in
determining the capital adequacy of the institution. Zions
Bancorporation does not anticipate the implementation of this rule
will result in an increase in the capital requirements applicable to
it or upon those applicable to its bank subsidiaries.
7
10
(iii) On September 14, 1993, the Federal Reserve Board, the Comptroller and
the FDIC published in the Federal Register a proposed measure of
interest rate risk exposure which measures such exposure as the
effect that a specified change in market interest rates would have on
the net economic value of banks. Under this proposal, banks
(excluding certain "low-risk""low risk" institutions as defined therein) would
calculate and report estimated changes in their net economic value
resulting from the effect of specified changes in market interest
rates on their assets, liabilities and off-balance sheet positions,
utilizing either a supervisory model or approved internal models. The
proposal sets forth two alternative methods for utilizing such
results in assessing institutions' capital adequacy for interest rate
risk exposure. One method would require institutions to hold capital
equal to the dollar decline in their net economic value exceeding a
supervisory threshold of one percent of total assets; the other
method provides for an agency assessment of institutions' capital
needs for interest rate risk in light of both the level of measured
interest rate risk exposure and qualitative factors. However, the
proposal is still under consideration. The
federal banking agencies have also proposed revisions to their risk-based
capital rules to ensure that risks arising from concentrations of credit and
nontraditional activities are taken into account when assessing an
institution's capital adequacy. The proposal calls on institutions to take
account of such risks in assessing their capital adequacy rather than imposing
explicit capital requirements with respect to them. Because the final terms of
the regulators' implementation of this requirement of FDICIA are not
yet known, Zions Bancorporation cannot predict the effect the
inclusion of theseinterest rate risk factors in the risk-based capital
rules of the federal banking agencies will have upon its capital
requirements applicable to it or those of its bank subsidiaries.
FDICIA amended Section 38 of the Federal Deposit Insurance Act to require the
federal banking regulators to take "prompt corrective action" in respect of
banks that do not meet minimum capital requirements and imposes certain
restrictions upon banks which meet minimum capital requirements but are not
"well-capitalized" for purposes of FDICIA. FDICIA establishes five capital
tiers: "well"well- capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," and "critically undercapitalized."
Implementing regulations adopted by the federal banking agencies in September
1992 and effective on December 19, 1992 define the capital categories for banks
which will determine the necessity for prompt corrective actions by the federal
banking agencies. A bank may be placed in a capitalization category that is
lower than is indicated by its capital position if it receives an unsatisfactory
examination rating with respect to certain matters.
Under the regulations, a "well-capitalized" institution has a minimum total
capital to total risk-weighted assets ratio of at least 10 percent, a minimum
Tier I capital to total risk-weighted assets ratio of at least 6 percent, a
minimum leverage ratio of at least 5 percent, and is not subject to any written
order, agreement, or directive; an "adequately capitalized" institution has a
total capital to total risk-weighted assets ratio of at least 8 percent, a Tier
I capital to total risk-weighted assets ratio of at least 4 percent, and a
leverage ratio of at least 4 percent (3 percent if given the highest regulatory
rating and not experiencing significant growth), but does not qualify as
"well-capitalized. An "undercapitalized" institution fails to meet any one of
the three minimum capital requirements. A "significantly undercapitalized"
institution has a total capital to total risk-weighted assets ratio of less than
6 percent, a Tier I capital to total risk-weighted assets ratio of less than 3
percent or a Tier I leverage ratio of less than 3 percent. A "critically
undercapitalized" institution has a Tier I leverage ratio of 2 percent or less.
Under certain circumstances, a "well-capitalized," "adequately capitalized," or
"undercapitalized" institution may be required to comply with supervisory
actions as if the institution was in the next lowest capital category.
6
9
Failure to meet capital guidelines could subject a bank to a variety of
restrictions and enforcement remedies. Under FDICIA, all insured banks are
generally prohibited from making any capital distributions and from paying
management fees to persons having control of the bank where such payments would
cause the bank to be undercapitalized. Holding companies of significantly
undercapitalized, critically undercapitalized and certain undercapitalized banks
may be required to obtain the approval of the Federal Reserve Board before
paying capital distributions to their shareholders. Moreover, a bank that is
not well-capitalized is generally subject to various restrictions on "pass
through" insurance coverage for certain of its accounts and is generally
prohibited from accepting brokered deposits and offering interest rates on any
deposits significantly higher than the prevailing rate in its normal market area
or nationally (depending upon where the deposits are solicited). Such banks and
their holding companies are also required to obtain regulatory approval prior to
their retention of senior executive officers. Banks which are classified
undercapitalized, significantly undercapitalized or critically undercapitalized
are required to submit capital restoration plans satisfactory to their federal
banking regulator and guaranteed within stated limits by companies having
control of such banks (i.e., to the extent of the lesser of five percent of the
institution's total assets at the time it became undercapitalized or the amount
necessary to bring the institution into compliance with all applicable capital
standards as of the time the institution fails to comply with its capital
restoration plan, until the institution is adequately capitalized on average
during each of four consecutive calendar quarters), and are subject to
regulatory monitoring and various restrictions on their operations and
activities, including those upon asset growth, acquisitions, branching and entry
into new lines of business and may be required to divest themselves of or
liquidate subsidiaries under certain circumstances. Holding companies of such
institutions may be required to divest themselves of such institutions or divest
themselves of or liquidate nondepository affiliates under certain circumstances.
Critically undercapitalized institutions are also prohibited from making
payments of principal and interest on debt subordinated to the claims of general
creditors and are generally subject to the mandatory appointment of a
conservator or receiver.
8
11
Other Regulations
FDICIA requires the federal banking agencies to adopt by August 1, 1993, regulations prescribing
standards for safety and soundness of insured banks and their holding companies,
including standards relating to internal controls, information systems, internal
audit systems, loan documentation, credit underwriting, interest rate exposure,
asset growth, compensation, fees and benefits, asset quality, earnings and stock
valuation, as well as other operational and managerial standards deemed
appropriate by the agencies. Upon a determination by a federal banking agency
that an insured bank has failed to satisfy any such standard, the bank will be
required to file an acceptable plan to correct the deficiency. If the bank
fails to submit or implement an acceptable plan, the federal banking agency may,
and in some instances must, issue an order requiring the institution to correct
the deficiency, restrict its asset growth, increase its ratio of tangible equity
to assets, or impose other operating restrictions. On November 18, 1993,The Riegle Act modified this
provision of FDICIA to authorize the federal banking agencies issued a notice of proposed rule-making setting forth generalto prescribe
safety and soundness in areas prescribed instandards by regulation or by guidelines for all insured
depository institutions, afford the federal banking agencies flexibility to
establish asset quality, earnings and stock valuation standards that they
determine to be appropriate and eliminate the requirement that such standards
apply to depository institution holding companies. On February 2, 1995, the
Federal Reserve Board agreed to seek (and Zions Bancorporation believes the
other federal banking agencies will soon seek) public comment on proposed
guidelines applicable to state member banks setting forth asset quality,
earnings and stock valuation standards, final guidelines with respect to all
other standards required under FDICIA and solicited comments regarding
the proposeda final rule establishing deadlines
and procedures for submission and review of safety and soundness standards.compliance
plans and issuance of compliance orders. In the view of the federal
banking agencies,Federal Reserve
Board, the proposed and final standards, respectively, do not represent a change
in existing policies but, instead, formalize fundamental standards already
applied by the agencies. In general, the proposed standards establish objectives of
proper operations and management while leaving the specific methods for
achieving those objectives to each institution. However, the proposal establishes a
maximum permissible ratio of classified assets to capital for institutions.
The proposal alsofinal rule implements the
requirements of FDICIA regarding the submission and review of safety and
soundness plans by institutions failing to meet the prescribed standards and the
issuance of orders where institutions have failed to submit acceptable
compliance plans or implement anand accepted plan in any material respect. BecauseZions
Bancorporation does not believe that implementation of the final termsguidelines and
rule will have a material adverse effect upon the operations or earnings of its
bank subsidiaries. Until final guidelines prescribing asset quality, earnings
and stock valuation standards are adopted by the regulators'
implementation of this requirement of FDICIA are not yet known,federal banking agencies, Zions
Bancorporation cannot predict the effect of itstheir application to its operations
or earnings or the operations or earnings of its subsidiaries.
FDICIA also contains provisions which, among other things, restrict investments
and activities as principal by state nonmember banks to those eligible for
national banks, impose limitations on deposit account balance determinations for
the purpose of the calculation of interest, and require the federal banking
regulators to prescribe, implement, or modify standards, respectively, for
extensions of credit secured by liens on interests in real estate or made for
the purpose of financing construction of a building or other improvements to
real estate, loans to bank insiders, regulatory accounting and reports, internal
control reports, independent audits, exposure on interbank liabilities,
contractual arrangements under which institutions receive goods, products or
services, deposit account-related disclosures and advertising, as well as to
impose restrictions on Federal Reserve discount window advances for certain
institutions and to require that insured depository institutions generally be
examined on-site by federal or state personnel at least once every twelve (12)12 months.
7
10
In connection with an institutional failure or FDIC rescue of a financial
institution, the Financial Institutions Reform, Recovery and Enforcement Act of
1989 ("FIRREA") grants to the FDIC the right, in many situations, to charge its
actual or anticipated losses against commonly controlled depository institution
affiliates of the failed or rescued institution (although not against a bank
holding company itself). FIRREA also explicitly allows bank holding companies
to acquire healthy as well as troubled savings associations (including savings
and loan associations and federal savings banks) under Section 4 of the Bank
Holding Company Act. In connection with this authorization, the Federal Reserve
Board has been instructed not to impose so-called "tandem operating
restrictions" which might otherwise limit the joint marketing or joint
operations of affiliated banks and thrifts beyond those restrictions otherwise
embodied in law. FIRREA also relieves bank holding companies that own savings
associations of certain duplicative or intrusive savings and loan holding
company regulations and, in some instances, allows savings associations that
have been acquired by bank holding companies to merge into affiliated banks or
become banks themselves.banks.
On October 28, 1992, the Housing and Community Development Act of 1992 was
enacted which, inter alia, modified prior law regarding the establishment of
compensation standards by the federal banking agencies, deposit account
disclosures, loans to bank insiders and real estate appraisal requirements; made
certain technical corrections to FDICIA; imposed new sanctions upon banks
convicted of money laundering or cash transaction reporting offenses; and
restricted the methods banks may employ to calculate and refund prepaid interest
on mortgage refinancing and consumer loans. In addition, on October 23, 1992,
the Depository Institutions Disaster Relief Act of 1992 was enacted, affording
the federal banking agencies limited discretion to provide relief from certain
regulatory requirements to depository institutions doing business or seeking to
do business in an emergency or major disaster area. Zions Bancorporation does
not currently expect that the implication of these laws will have a material
adverse effect upon its operations and business or upon the operations and
business of its subsidiaries.
9
12
On August 10, 1993, the President signed into law the Omnibus Budget
Reconciliation Act of 1993 which contains provisions that, inter alia, affect
the amortization of intangible assets by banks, require securities dealers
(including banks) to adopt mark-to-market accounting to calculate income taxes,
transfer surplus funds from the Federal Reserve System to the Department of the
Treasury, authorize the United States government to originate student loans and
establish a preference for depositors in liquidations of FDIC-insured banks.
Zions Bancorporation isdoes not currently assessingexpect that the consequencesimplementation of these
laws will have a material adverse effect upon its earnings or capital position
or the earnings or capital position of its subsidiaries.
The Riegle Act, in addition to enacting measures intended to increase credit
available to businesses in distressed communities (by providing incentives to
lenders to provide credit in those communities), remove impediments to the
securitization of small business loans, improve the National Flood Insurance
Program and strengthen enforcement against money laundering, mandates
modifications to federal laws and regulations affecting banks and bank holding
companies in an attempt to reduce regulatory and administrative burdens on these
entities (including the modifications to requirements mandated by FDICIA noted
previously). These changes include, inter alia, requirements that federal
banking agencies consider the burden and benefits which may affect insured
depository institutions and their customers when establishing the effective
dates of certain new regulations or imposing certain new administrative
compliance requirements, that certain new federal regulations affecting
depository institutions and amendments to existing regulations take effect on
the first day of a calendar quarter and that federal banking agencies streamline
regulatory requirements and eliminate duplicative filings and coordinate
examinations of financial institutions. The Riegle Act also provides for
simplified bank holding company formation and bank and bank holding company
merger application procedures, modified insider lending rules and capital rules
applicable to assets transferred with recourse. Because all provisions of the
Riegle Act have not been implemented, Zions Bancorporation cannot predict the
effect of these changes upon its operations earnings and capital position, and thator upon those of its subsidiaries.
The Community Reinvestment Act (CRA) requires banks to help serve the credit
needs in their communities, including credit to low and moderate income
individuals and geographies. Should the Company or its subsidiaries fail to
adequately serve the community, there are penalties which might be given.
Corporate applications to expand branches, relocate, add subsidiaries and
affiliates, and merge with or purchase other financial institutions could be
denied. Community groups are encouraged through the regulation to protest
applications for any bank subject to this regulation if they feel that the bank
is not serving the credit needs of the enactmentcommunity in which it serves. The
Company and its subsidiaries have been deemed by regulators in the past to be
adequately serving its communities. A proposed revision to CRA is now being
considered by the regulators. Zions Bancorporation cannot predict the effect
that proposed changes, if adopted, would have on its operations and upon those
of this legislation. In addition, a numberits subsidiaries.
The nature of the banking and financial services industry, as well as banking
regulation, may be further affected by various legislative and regulatory
measures have been proposedcurrently under consideration. Such measures include, inter alia,
legislation designed to strengthen the federal deposit insurance systempermit increased affiliations between commercial and
to
improve the overall financial stability of the U.S. banking system, including
those to authorize interstate banking for nationalfirms (including securities firms) and federally-insured banks, reduce
regulatory burdens on financial institutions, impose a moratorium on the
application of federal regulations and regulate the saleestablish standards for federal
supervision of securities and
insurance by banks as well as bank involvement in derivative activities.activities of insured institutions. It is impossible
to predict whether or in what form these proposals may be adopted in the future
and, if adopted, what the effect of their effectadoption will be on Zions
Bancorporation andor its subsidiaries.
There are many other regulations requiring detailed compliance procedures which
increase costs and require additional time commitments of employees. Regulators
and the Congress continue to put in place rules and laws to protect consumers,
which have a cumulative additional impact on the cost of doing business. A recent amendment to the Real Estate Settlement Procedures, which
becomes effective August 9, 1994, covers most loans secured by 1-4 family
dwellings, whether secured by first or junior liens, and appears to add
significant new disclosure requirements for banks. Additionally, a recent
proposal, out for comment, to amend Community Reinvestment Act compliance
rules, if adopted as proposed, would have an impact on allocation of credit to
low income areas and could have an overall effect on interest rate margins. At
this point, management cannot completely assess how much earnings might be
reduced from these consumer laws.
Deposit Insurance Assessments
The insured bank subsidiaries of Zions Bancorporation are required to pay
semi-annual deposit insurance assessments to the Bank Insurance Fund ("BIF").
FDICIA requires the FDIC to establish a schedule to increase the reserve ratio
of the BIF to 1.25% of insured deposits (or such higher ratio as the FDIC
determines to be justified for any year by circumstances raising a significant
risk of substantial future losses) over a 15-year period, and to increase the
assessment rate on banks, if necessary, to achieve that ratio. FDICIA also
requires the FDIC to establish by January 1, 1994, by regulation, a risk-based assessment system for deposit
insurance which will take into account the probability that the deposit
insurance fund will incur a loss with respect to an institution, the likely
amount of such loss and the revenue needs of the deposit insurance fund.
810
11
On13
The FDIC revised, effective October 1, 1992, the FDIC published revisions to1993, its deposit insurance regulation to
establish a transitional risk-based assessment system pending
establishment of a permanent risk-based assessment system by January 1, 1994.
Effective January 1, 1993, eachsystem. Each insured bank's
insurance assessment rate is determined by the risk assessment classification
into which it has been placed by the FDIC. The FDIC places each insured bank in
one of nine risk assessment classifications based upon its level of capital and
supervisory evaluations by its regulations:regulators: "well-capitalized" banks, "adequately
capitalized" banks or "less-than-adequately capitalized" banks, with each
category of banks divided into subcategories of banks which are either
"healthy," of "supervisory concern" or of "substantial supervisory concern." An
eight-basis point spread exists between the assessment rate established for the
highest and lowest risk classification, so that banks classified as strongest by
the FDIC are subject to a rate of .23% (the same rate as under the previous
flat-rate assessment system) while those classified as weakest by the FDIC are
subject to a rate of .31% (with intermediate rates of .26%.26,%, .29%, and .30%).
The FDIC staff has
stated that insured banks will pay an average ratiois authorized to increase assessment rates beyond those currently in
effect if, in the judgment of approximately .254%. At
a meeting on June 17, 1993,its Board of Directors, the FDIC's boardcondition of directors approved revisionsthe BIF
so requires. The FDIC also possesses authority to its regulation establishingimpose special assessments
from time to time. Implementation of the transitionalpermanent risk-based deposit insurance
assessment system with
respecthas not had a material adverse impact on the financial
condition or results of operations of Zions Bancorporation or upon those of its
bank subsidiaries.
Premiums paid to the makingFDIC have been an increasing burden on bank earnings. In
recognition of supervisory subgroup assignments and review of such
assignments bythis trend, the FDIC the making of capital group assignments for new
institutions by the FDIC, the payment of disputed assessments by institutions
and other matters. In addition, on May 25, 1993, the FDIC board of directors
voted to amend the current recapitalization schedule formay, when the BIF to reflect the
projected achievement by the BIF ofreaches a reservetarget ratio of
1.25% of insured deposits, reduce insurance premiums. The Board of Directors of
the FDIC is currently considering a proposal under which the assessment rate
payable by 2002 (rather than 2006 under the current schedule)healthiest banks would be reduced from .23% to .04% as such time
as the target ratio is achieved; other assessment rates, depending on an
institution's supervisory risk group, would be .07%, .14%, .21%, .28% and retain.31%.
The proposal would also establish a procedure for adjusting assessment rates
semiannually within a range of up to five basis points without seeking public
comment. The FDIC is also considering whether the currentdeposit assessment base,
against which the applicable assessment rate is multiplied in determining the
deposit insurance assessment ratesto be paid by each insured institution, should be
redefined in light of the adoption of the risk-based assessment system and
certain statutory and other developments effecting insured depository
institutions. Currently, the assessment base is defined to include the total
domestic deposits of each insured institution as adjusted for BIF-member institutions for
semi-annual periods beginning July 1, 1993.certain elements.
Depending upon the nature of the changes, if any, made by the FDIC to the
definition of the assessment base, the aggregate liabilities of each insured
institution subject to assessment could increase or could be reduced, or an
assessment base consisting of other than bank liabilities could be adopted,
thereby potentially affecting the earning of each institution. Until the nature
of the changes to be adopted by the FDIC to the assessment base definition are
known, Zions Bancorporation does not
presently expect that implementation of the transitional risk-based deposit
insurance assessment system, as so revised, will have a material adverse impact
oncannot predict their effect upon its overall
financial condition or results of operations or upon those of its bank
subsidiaries.
It is possible that the FDIC insurance assessments will be increased further in
the future. In addition, the FDIC has authority to impose special assessments
from time to time.
Interstate Banking
Existing laws and various regulatory developments have allowed financial
institutions to conduct significant activities on an interstate basis for a
number of years. During recent years, a number of financial institutions have
expanded their out-of-state activities and various states have enacted
legislation intended to allow certain interstate banking combinations which
otherwise would be prohibited by federal law.
The Banking Holding Company Act generally does not permit the Federal Reserve
Board to approve an acquisition by a bank holding company of voting shares or
assets of a bank located outside the state in which the operations of its
banking subsidiaries are principally conducted unless the acquisition is
specifically authorized by the statutes of the state in which such bank is
located. Under the laws of Utah, Nevada, andan Arizona, respectively, any out-of-state bank
or bank holding company may acquire a Utah, Nevada, or Arizona bank or bank
holding company upon the approval of the bank supervisor of the state. There is
no requirement that the laws of the state in which the out-of-state bank or bank
holding company's operations are principally conducted afford reciprocal
privileges to Utah -,Utah-, Nevada - or Arizona-based acquirers.
The Riegle-Neal Act dramatically affects interstate banking activities. As
discussed previously, the Riegle-Neal Act allows the Federal Reserve Board to
approve the acquisition by a bank holding company of control or substantial
assets of a bank located outside the bank holding company's home state as of
September 29, 1995. Beginning on June 1, 1997, and earlier if permitted by
applicable state law, an insured bank may apply to the appropriate federal
agency for permission to merge with an out-of-state bank and convert its offices
into branches of the resulting bank. States retain the option to prohibit
out-of-state mergers if they enact a statute specifically barring such mergers
before June 1, 1997 and such law applies equally to all out-of-state banks.
Interstate mergers authorized by the Riegle-Neal Act are subject to conditions
and requirements, including, inter alia, adequate capitalization and management
of the acquiring bank or bank holding company, existence of the acquired bank
for up to five years before purchase where required under state law, and
limitations on control by the acquiring bank holding company of not more than
10% of the total amount of deposits in insured depository institutions in the
United States or not more than 30% of the deposits in insured depository
institutions within that state. States may impose lower deposit concentration
limits, so long as those limits apply to all bank holding companies equally.
Additional requirements placed on mergers include conformity with state law
branching requirements and compliance with "host state" merger filing
requirements to the extent that those requirements do not discriminate against
out-of-state banks or out-of-state bank holding companies.
11
14
The Riegle-Neal Act also permits banks to establish and operate a "de novo
branch" in any state that expressly permits all out-of-state banks to establish
de novo branches in such state, if the law applies equally to all banks. (A "de
novo branch" is a branch office of a national bank or state bank that is
originally established as a branch and does not become a branch as a result of
an acquisition, conversion, merger, or consolidation.) Utilization of this
authority is conditioned upon satisfaction of most of the conditions applicable
to interstate mergers under the Riegle-Neal Act, including, inter alia, adequate
capitalization and management of the branching institution, satisfaction with
certain filing and notice requirements imposed under state law and receipt of
federal regulatory approvals.
Because important components of the Riegle-Neal Act have not yet become
effective, Zions Bancorporation cannot predict the effects of the Act's
implementation upon its operations or earnings or upon those of its
subsidiaries.
The commercial banking subsidiaries are supervised and regularly examined by
various federal and state regulatory agencies. Deposits, reserves, investments,
loans, consumer law compliance, issuance of securities, payment of dividends,
mergers and consolidations, electronic funds transfers, management practices,
and other aspects of operations are subject to regulation. In addition,
numerous federal, state, and local regulations set forth specific restrictions
and procedural requirements with respect to the extension of credit, credit
practices, the disclosure of credit terms, and discrimination in credit
transactions. The various regulatory agencies, as an integral part of their
examination process, periodically review the banking subsidiaries' allowances
for loan losses. Such agencies may require the banking subsidiaries to
recognize additions to such allowances based on their judgments using
information available to them at the time of their examinations.
As a consequence of the extensive regulation of the commercial banking business,
the Company cannot yet assess the impact of these legislative and regulatory
mandates on the commercial banking industry which may increase the cost of doing
business that are not required of the industry's nonbank competitors.
9
12
Federal and state legislation affecting the banking industry have played, and
will continue to play, a significant role in shaping the nature of the financial
service industry. Various legislation, including proposals to overhaul the
banking regulatory system and to limit the investments that a depository
institution may make with insured funds, is from time to time introduced. The
Company cannot determine the ultimate effect that FDICIA and the implementing
regulations to be adopted thereunder, or any other potential legislation, if
enacted, would have upon its financial condition or operations.
In addition, there are cases pending before federal and state courts that seek
to expand or restrict interpretations of existing laws and their accompanying
regulations affecting bank holding companies and their subsidiaries. It is not
possible to predict the extent to which Zions Bancorporation and its
subsidiaries may be affected by any of these initiatives.
GOVERNMENT MONETARY POLICIES AND ECONOMIC CONTROLSGovernment Monetary Policies and Economic Controls
The earnings and business of the Company are affected by general economic
conditions. In addition, fiscal or other policies that are adopted by various
regulatory authorities of the United States and by agencies can have important
consequences on the financial performance of the Company. The Company is
particularly affected by the policies of the Federal Reserve Board which
regulate the national supply of bank credit. The instruments of monetary policy
available to the Federal Reserve Board include open-market operations in United
States government securities; changing the discount rates of member bank
borrowings; imposing or changing reserve requirements against member bank
deposits; and imposing or changing reserve requirements against certain
borrowings by banks and their affiliates. These methods are used in varying
combinations to influence the overall growth of bank loans, investments and
deposits, and the interest rates charged on loans or paid for deposits.
The Company has economic, credit, legal and other specialists who monitor
economic conditions, government policies and economic controls. However, in view of changing conditions in the economy and the effect of the
credit policies of monetary authorities, it is difficult to predict future
changes in loan demand, deposit levels and interest rates, or their effect on
the business and earnings of Zions Bancorporation and its subsidiaries.
Federal Reserve Board monetary policies have had a significant effect on the
operating results of commercial banks in the past and are expected to continue
to do so in the future.
COMPETITION12
15
Competition
Zions Bancorporation and its subsidiaries operate in a highly competitive
environment. The banking subsidiaries compete with other banks, thrift
institutions, credit unions and money market, and other mutual funds for
deposits and other sources of funds. In addition, Zions Bancorporation and its
bank and nonbank subsidiaries face increased competition with respect to the
diverse financial services and products they offer. Competitors include not
only other banks, thrift institutions, and mutual funds, but also leasing
companies, finance companies, brokerage firms, investment banking companies, and
a variety of other financial services and advisory companies. Many of these
competitors are not subject to the same regulatory restrictions as are bank
holding companies and banks such as Zions Bancorporation and its banking
subsidiaries.
The Company expects that competitive conditions will continue to intensify as a
result of technological advances. Technological advances have, for example,
made it possible for nondepository institutions to offer customers automatic
transfer systems and other automated-payment systems services that have been
traditional banking products.
EMPLOYEESEmployees
The Company employs approximately 2,8462,754 full- and part-time people with
approximately 2,6512,573 being employed by the banking subsidiaries. The Company had
2,5742,695 full-time equivalent employees at December 31, 1993,1994, compared to 2,3452,761 at
December 31, 1992.1993. Banking subsidiaries had 2,3862,506 full-time equivalent
employees at the end of 1993,1994, compared to 1,9502,573 a year earlier. The Company
believes that it enjoys good employee relations. In addition to competitive
salaries and wages, Zions Bancorporation and its subsidiaries contribute to
group medical plans, group insurance plans, pension, stock ownership and profit
sharing plans.
10
13
SUPPLEMENTARY INFORMATIONSupplementary Information
The following supplementary information, which is required under Guide 3
(Statistical Disclosure by Bank Holding Companies), is found in this report on
the pages indicated below, and should be read in conjunction with the related
financial statements and notes thereto.
Statistical Information Page
I. Distribution of Assets, Liabilities and Shareholders' Equity,
InterestAverage Balance Sheets, Yields and Rates and18-20
Analysis of Interest Differential, and Changes Due to Volume and Rates 17-1921
II. Investment Securities Portfolio 2628
Maturities and Average Yields of Investment Securities 2729
III. Loan Portfolio 2830
Loan Maturities and Sensitivity to Changes in Interest Rates 2931
Loan Risk Elements 30-3232-34
IV. Summary of Loan Loss Experience 33-3435
V. Deposits 3537
VI. Return on Equity and Assets 3638
VII. Short-term Borrowings 3638
VIII. Foreign Operations 3840
ITEM 2. PROPERTIES
In Utah, fifty (50) of Zions First National Bank's eighty-four (84)eighty-six (86) offices are
located in buildings owned by the Company and the other thirty-four (34)thirty-six (36) are on
leased premises. In Nevada, four (4) of Nevada State Bank's nineteen (19)twenty-one (21)
offices are located in buildings owned and the other fifteen (15)seventeen (17) are on
leased premises, and in Arizona, Zions First National Bank of Arizona owns two (2)three (3) offices
and leases one (1) office.seven (7) offices. The annual rentals under long-term leases for
such banking premises are determined under various formulas and include as
various factors, operating costs, maintenance and taxes.
13
16
Zions Bancorporation is lessee under a 25-year lease, of which 2223 years have
expired, of a 14-story building in downtown Salt Lake City, Utah. The Company's
subsidiaries have leased the ground floor and two other floors. The J.C.
Penney Company, Inc., has subleased nine floors for offices. The remaining two
floors are sublet to various tenants.
The Company's subsidiaries conducting lease financing, insurance, mortgage
servicing, and discount brokerage activities operate from leased premises.
For information regarding rental payments, see note 9 of Notes to Consolidated
Financial Statements, which appears in Part II, Item 8, on page 57 of this
report.
ITEM 3. LEGAL PROCEEDINGS
During 1988, a lawsuit was brought in the United States District Court, Utah
District, against Zions First National Bank in connection with its performance
of duties as an indenture trustee for certain investors in real estate and other
syndication projects. In September 1992, a motion was granted allowing an
amended complaint containing allegations that plaintiffs intend to proceed as a
class action to recover approximately $23 million, prejudgment interest,
attorneys' fees, and additional amounts under certain statutory provisions and
common law. No motion to certify the classes has been filed, and the Bank
intends to vigorously oppose such motion and to defend the entire action.
Although no assurances can be given as to the outcome, the Company continues to
believe that it has meritorious defenses to such lawsuit, and that there is
insurance coverage for a substantial portion of the amount claimed.
11
14
The Company is also the defendant in various other legal proceedings arising in
the normal course of business. The Company does not believe that the outcome of
any of such proceedings, including the lawsuit discussed in the preceding
paragraph, will have a material adverse effect on its consolidated financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1993.1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages, positions, and backgrounds of the Company's executive officers
as of February 28, 1994,27, 1995, are set forth as follows:
Positions and Offices Held With Zions Officer
Name Age Bancorporation and Principal Subsidiaries since
---- --- ----------------------------------------- ------------
Roy W. Simmons 7879 Chairman of the Company, and Chairman of the Board of 1961
Directors of Zions 1961
First National Bank
Harris H. Simmons 3940 President & Chief Executive Officer of the Company; 1981
President, Chief 1981
Executive Officer, and Member of the Board of Directors of Zions First
National Bank
Gary L. Anderson 5152 Senior Vice President, Chief Financial Officer and Secretary 1988
of the Company; 1988
Executive Vice President and Secretary of the Board of Directors of Zions
First National Bank. Prior to May 1988, a Partner in the firm of KPMG Peat
Marwick, Salt Lake City, Utah
Gerald J. Dent 5253 Senior Vice President of the Company, and Executive Vice 1987
President of Zions 1987
First National Bank
Clark B. Hinckley 4647 Senior Vice President of the Company. Prior to March 1994, 1994
President of a 1994
Company subsidiary, Zions First National Bank of Arizona.
John J. Gisi 49 Senior Vice President of the Company, and Chairman and Chief Executive 1994
Officer of National Bank of Arizona since 1987
Richard A. Carlson 61 Senior Vice President of the Company, and President and Chief Executive 1994
Officer of Nevada State Bank since 1985 (Retired 2/28/95)
James W. Rail 5960 Senior Vice President of the Company, and President of Zions 1976
Data Service 1976
Company Walter E. Kelly 61 Controller of the Company 1980
Ronald L. Johnson 38 Vice President of the Company. Prior to December 1989, Vice 1989
President of Zions First National Bank
A. Scott Anderson 47 Executive Vice President of Zions First National Bank. Prior 1990
to December 1990, Vice President of Bank of America
John B. D'Arcy 51 Executive Vice President of Zions First National Bank. Prior 1989
to March 1989, Vice President of The First National Bank of
Chicago
Peter K. Ellison 51 Executive Vice President of Zions First National Bank 1968
W. David Hemingway 46 Executive Vice President of Zions First National Bank 1976
Nolan X. Bellon 45 Controller of Zions First National Bank 1987(Retired 2/28/95)
1214
1517
Positions and Offices Held With Zions Officer
Name Age Bancorporation and Principal Subsidiaries since
---- --- ----------------------------------------- -----
Richard A. Carlson 60 President and Chief Executive Officer of Nevada State Bank 1994
since 1985
John J. Gisi 48 Chairman of the Board and Chief Executive Officer of National 1994
Bank of Arizona since 1987
Robert G. Sarver 32 President of National Bank of Arizona since 1992, Vice 1994
Chairman of National Bank of Arizona, 1990-1992;Danne L. Buchanan 37 Senior Vice President of the Company (Effective March 3, 1995); Senior Vice 1995
President and General Manager of Zions Data Service Company
Walter E. Kelly 62 Controller of the Company 1980
Ronald L. Johnson 39 Vice President of the Company. Prior to December 1989, Vice President of 1989
Zions First National Bank
A. Scott Anderson 48 Executive Vice President of Zions First National Bank. Prior to December 1990
1990, Vice President of Bank of America
John B. D'Arcy 52 Executive Vice President of Zions First National Bank. Prior to March 1989, 1989
Vice President of The First National Bank of Arizona, 1986-1990Chicago
Peter K. Ellison 52 Executive Vice President of Zions First National Bank 1968
W. David Hemingway 47 Executive Vice President of Zions First National Bank 1976
Nolan X. Bellon 46 Controller of Zions First National Bank 1987
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Principal market where common stock is traded:
Nasdaq Over the CounterNational Market Symbol "ZION"
High and low bid quotations on quarterly basis for past three years:
1994 1993 1992
1991
------------- ------------- ------------------------------- ------------------- ------------------
HIGH LOW HIGH LOW HIGH LOW
---- --- ---- --- ---- ---------- -------- -------- ------- ------- -------
1st Quarter $ 39.75 $ 36.50 $ 49.00 $ 41.3041.50 $ 24.50 $ 19.75
$ 18.50 $ 14.38
2nd Quarter $ 42.00 $ 37.00 $ 48.75 $ 38.50 $ 28.38 $ 23.75
$ 21.88 $ 18.13
3rd Quarter $ 40.63 $ 38.50 $ 44.25 $ 38.50 $ 30.00 $ 26.88
$ 24.88 $ 20.00
4th Quarter $ 39.25 $ 33.50 $ 45.50 $ 36.00 $ 39.00 $ 28.88 $ 23.75 $ 19.13
Number of common shareholders of record as of latest practicable date:
3,7403,926 common shareholders as of February 28, 199427, 1995
Frequency and amount of dividends paid during three years:
1ST 2ND 3RD 4TH
QTR QTR QTR QTR
--- --- --- -------- ----- ----- -----
1994 $ .28 $ .28 $ .30 $ .30
1993 $ .21 $ .21 $ .28 $ .28
1992 $ .18 $ .18 $ .18 $ .21
1991 $ .18 $ .18 $ .18 $ .18
Description of any restrictions on the issuer's present or future ability to
pay dividends:
Funds for the payment of dividends by Zions Bancorporation have been obtained
primarily from dividends paid by the commercial banking and other subsidiaries.
In addition to certain statutory limitations on the payment of dividends,
approval of federal and/or state banking regulators may be required in some
instances for any dividend to Zions Bancorporation by its banking subsidiaries.
The payment of future dividends therefore is dependent upon earnings and the
financial condition of the Company and its subsidiaries as well as other
factors.
1315
1618
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data is derived from the audited
consolidated financial statements of the Company. It should be read in
conjunction with the Company's consolidated financial statements and the related
notes and with management's discussion and analysis of financial condition and
results of operations and other detailed information included elsewhere herein.
(Dollars in thousands, except per share and ratio data)
Years ended December 31,
----------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
RESULTS OF OPERATIONS
Interest income $ 267,723353,989 $ 258,217293,616 $ 285,547278,225 $ 287,298301,443 $ 277,503302,013
Interest expense 110,906 114,185 154,080 166,114 161,850155,383 118,959 120,943 161,572 173,892
---------- ---------- ---------- ---------- ----------
Net interest income 156,817 144,032 131,467 121,184 115,653198,606 174,657 157,282 139,871 128,121
Provision for loan losses 2,298 10,251 23,549 18,089 28,7972,181 2,993 10,929 25,561 20,083
---------- ---------- ---------- ---------- ----------
Net interest income after provision for loan losses 154,519 133,781 107,918 103,095 86,856
Other operating196,425 171,664 146,353 114,310 108,038
Noninterest income 78,127 61,861 51,488 47,539 38,647
Other operating expenses 156,548 131,040 117,307 112,394 106,46573,202 79,880 62,849 52,456 47,919
Noninterest expense 174,900 167,750 139,069 122,999 116,289
---------- ---------- ---------- ---------- ----------
Income before income taxes and cumulative
effect of changes in accounting principles and extraordinary item 76,098 64,602 42,099 38,240 19,03897,727 83,794 70,133 43,767 39,668
Income taxes 24,718 21,200 12,975 11,600 5,10530,900 27,248 22,924 13,318 11,903
---------- ---------- ---------- ---------- ----------
Income before cumulative effect of changes in
accounting principles and extraordinary item 51,380 43,402 29,124 26,640 13,93363,827 56,546 47,209 30,449 27,765
Cumulative effect of changes in accounting principles - 1,659 - - - -
Extraordinary item-income tax benefit from net operating
loss carryforwards - - - - 3,750
---------- ---------- ---------- ---------- ----------
Net income $ 53,03963,827 $ 43,40258,205 $ 29,12447,209 $ 26,64030,449 $ 17,68327,765
========== ========== ========== ========== ==========
COMMON SHARE DATA
Income before cumulative effect of changes in
accounting principles and extraordinary item $ 4.024.37 $ 3.523.96 $ 2.393.42 $ 2.23 $ 1.172.07
Net income 4.15 3.52 2.394.37 4.08 3.42 2.23 1.492.07
Dividends 1.16 .98 .75 .72 .72
.72
Book value 22.78 19.76 17.01 15.31 13.81
END-OF-PERIOD- year end 25.12 22.01 18.95 16.23 14.63
YEAR END BALANCES
Total assets $4,365,556 $3,779,267 $3,645,835 $3,559,070 $2,975,358$4,934,095 $4,801,054 $4,107,924 $3,883,938 $ 3,720,227
Money market investments 578,771 614,184 688,264 819,126 393,175403,446 597,680 616,180 714,238 831,086
Securities 1,145,034 906,006 788,198 595,202 466,9491,663,433 1,258,939 981,695 852,861 630,800
Net loans and leases 2,230,670 1,921,496 1,861,562 1,767,825 1,641,6312,391,278 2,486,346 2,107,433 1,979,726 1,868,199
Allowance for loan losses 65,267 57,086 56,263 59,015 60,27167,018 68,461 59,807 58,238 60,948
Total deposits 3,024,111 2,764,824 2,658,514 2,537,337 2,326,2193,705,976 3,432,289 3,075,110 2,877,860 2,684,826
Shareholders' equity 290,391 242,547 206,633 183,507 164,328365,770 312,592 260,070 220,753 196,706
RATIOS
Return on average assets 1.17% 1.25% 1.24% 1.22%.86% .87% .87% .62%
Return on average common equity 19.9% 19.3% 14.9% 15.3% 11.1%18.82% 20.33% 19.64% 14.59% 14.87%
Average equity to average assets 6.25% 6.34%6.22% 6.17% 6.31% 5.90% 5.82% 5.69% 5.54%
Tier I risk-based capital 11.01% 10.31% 8.30% 7.93% 7.40%- year end 11.81% 10.85% 10.23% 8.40% 8.11%
Total risk-based capital 14.34% 15.53% 12.13% 12.48% 12.21%- year end 14.96% 14.12% 15.13% 12.09% 12.49%
Tier I leverage 5.47%- year end 6.24% 5.80% 5.70% 5.24%5.44% 6.21% 5.86% 5.72%
Net interest margin 4.11% 4.49% 4.35% 4.51% 4.71%4.07% 4.23% 4.59% 4.39% 4.54%
Nonperforming assets to total assets .67%- year end .38% .64% .77% 1.20% 1.70% 2.87%
Nonperforming assets to net loans and leases,
and other real estate owned 1.32% 1.50% 2.34% 3.39% 5.09%and other nonperforming
assets at year end .79% 1.23% 1.49% 2.35% 3.36%
Net charge-offs (recoveries) to average loans and leases (.27).19% (.23)% .48% 1.49% 1.06% 1.39%44% 1.51% 1.10%
Allowance for loan losses to net loans and
leases outstanding at periodyear end 2.93% 2.97% 3.02% 3.34% 3.67%2.80% 2.75% 2.84% 2.94% 3.26%
Allowance for loan losses to nonperforming loans 247.19% 236.37% 159.88% 132.39% 115.26%at
year end 471.89% 250.13% 234.00% 158.59% 132.54%
1416
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following analysis of the Company's financial condition and results of
operations as of and for the years ended December 31, 1994, 1993, 1992, and 19911992
should be read in conjunction with the consolidated financial statements of the
Company and detailed information presented elsewhere herein.
OPERATING RESULTS
ConsolidatedZions Bancorporation's consolidated net income rose to $63.8 million in 1994 as
compared to net income of $58.2 million in 1993 increased 22.2% to $53,039,000 from $43,402,000and $47.2 million in 1992 and $29,124,000 in 1991, while net1992. Net
income per common share in 1994 was $4.37 as compared to $4.08 in 1993 increased
17.9%and $3.42
in 1992. Financial results have been restated for prior periods to $4.15 from $3.52 in 1992 and $2.39 in 1991.reflect the
pooling-of-interests acquisition of National Bancorp of Arizona during the first
quarter of 1994. Earnings results for 1993 were positively affected in the net
amount of $1,659,000 or $.13$.12 per share due to the cumulative effect of changes
in accounting principles implemented during the first quarter of the year. The
Company's earnings for the year ended December 31, 1993 were also negatively
affected by a one-time expense of $6,022,000 included in noninterest expenses
related to early extinguishment of certain long-term debt.
The earnings results for 19931994 represent a historic high for income before income
taxes and net income. Some of the factors affecting the favorable levelincrease in earnings
(excluding the aforementioned net benefit resulting from the cumulative effect
of earningschanges in accounting principles and the expense relating to the early
extinguishment of debt) were a $12,785,000 (8.9%$23.9 million (13.7%) increase in net interest
income, a $3,222,000 (17.0%$.8 million (27.1%) decrease in the provision for loan losses, a $1.2
million (5.2%) increase in service charges on deposit accounts and a $1,966,000 (10.6%$.6 million
(2.9%) increase in service charges, commissions and fees, a $14,898,000 (226.7%) increase in loan sales and
servicing income, and a $7,953,000 (77.6%) decrease in the provisions for loan
losses.fees. These increased
contributions to income were partially offset by a $13,223,000 (20.0%$1.5 million (63.4%) decrease
in trading account income, a $6.9 million (32.0%) decrease in loan sales and
servicing income, a $7.8 million (9.1%) increase in salaries and benefits, a
$6,263,000 (9.6%$3.2 million (34.8%) increase in furniture and equipment expense, a $2.2 million
(3.2%) increase in all other operatingremaining noninterest expenses, excluding a one-time expense of
$6,022,000, and a $3,518,000 (16.6%$1.3 million (4.6%)
increase in income taxes.
The Company's earnings for the year ended December 31, 1993 were negatively
affected by a one-time expense of $6,022,000 in the first quarter related to
the early extinguishment of debt consisting of floating rate notes and
industrial revenue bonds. The expense is included in other operating expenses.
This expense consisted of marking to market an interest rate exchange agreement
entered into several years ago in conjunction with the issuance of long-term
floating rate notes and writing off deferred costs associated with the notes
and bonds.
The Financial Accounting Standards Board (FASB) issued SFAS No. 109,
"Accounting for Income Taxes," which establishes financial accounting
requirements for the effects of income taxes. The statement requires a change
from the deferred method of accounting for income taxes to the asset and
liability method of accounting for income taxes. Under the asset and liability
method, deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Under SFAS No. 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
Effective January 1, 1993, the Company adopted SFAS No. 109 and reported the
cumulative effect of the change in the method of accounting for income taxes in
the 1993 consolidated statement of income. The cumulative effect of such
change in accounting method increased net income for the year ended December
31, 1993 by $7,419,000.
The FASB issued SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions," in December 1990. Under SFAS No. 106, the cost
of postretirement benefits other than pensions must be recognized on an accrual
basis as employees perform services to earn the benefits. Many of the
provisions and concepts of SFAS No. 106 are similar to current standards on
accounting for pensions. The provisions of SFAS No. 106 are effective for
fiscal years beginning after December 15, 1992. The Company has made it a
practice to provide certain health care benefits for retired employees. The
level of benefits to be paid to employees retiring in the future was also
modified in 1992 to require greater contributions from the employee at
retirement and a cap on the amount of retiree premiums that will be paid by the
Company. Employees hired after December 31, 1992 are not entitled to retiree
health benefits.
Effective January 1, 1993, the Company adopted SFAS No. 106 and reported the
cumulative effect of the change in the method of accounting for postretirement
benefits other than pensions in the 1993 consolidated statement of income. The
cumulative effect (transition obligation) of such change in accounting method
decreased pretax and after-tax net income by $5,760,000 and $3,631,000,
respectively.
The FASB issued SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," in May 1993. Under SFAS No. 115, certain debt securities,
depending on the intention of the holder, and equity securities are designated
as trading securities and are marked to market through income, certain debt
and equity securities are designated as available for sale and are marked to
market through the equity accounts, and certain debt securities are designated
as held to maturity and carried at amortized cost.
15
18
Effective December 31, 1993, the Company adopted SFAS No. 115 and classified
its securities according to the pronouncement. The change in the method of
accounting for securities had no effect on income for 1993 and resulted in an
increase of $432,000 in equity as of December 31, 1993.
EARNINGS PERFORMANCE
NET INTEREST INCOME, MARGIN, AND INTEREST RATE SPREADSNet Interest Income, Margin, and Interest Rate Spreads
Net interest income is the difference between the total interest income
generated by earningsearning assets and the total interest cost of the funds used to
finance assets. Net interest income is the largest component of the Company's
revenue. The Company's taxable-equivalent net interest income increased by 8.9%13.8%
to $160,129,000$203.3 million in 19931994 as compared to $147,060,000$178.6 million in 1992 and
$133,813,0001993. The increased
level of taxable-equivalent net interest income was influenced primarily by the
increase in 1991.average earning assets. The Company attempts to minimize interest
rate movement sensitivity through the management of interest rate maturities,
and to a much
lessorlesser extent, the use of off-balance sheet arrangements such as
interest rate caps, floors, and interest rate exchange contract agreements.
During 1993,1994, the Company had income, net of $291,000expense, of $967,000 from the use of
such off-balance sheet arrangements compared to income to the Company of$291,000 in 1993 and $9,000 in
1992 and a cost to
the Company of $875,000 in 1991.1992. The Company intends to continue to use such off-balance sheet arrangements
to the extent necessary to minimize its exposure to changes in prevailing
interest rates.
Net interest margin is a measure of the Company's ability to generate net
interest income and is computed by expressing net interest income (stated on a
fully taxable-equivalent basis) as a percentage of earning assets. The Company's
net interest margin was 4.11%4.07% for 19931994 as compared to 4.49%4.23% in 1992
and 4.35% in 1991.1993. The
decrease in the margin for 1993 was due primarily to securitizationsecuritized sales of loans and the
expansion of investments in security resell agreements during the second half of 1993. Securitizationagreements. Securitized sales of
loans converts high marginconvert net interest income from loans to other operatingnoninterest income. The security
resell agreements are primarily in U.S. government and U.S. government agency
securities which offer low yields but represent virtually nolow risk to the Company and
require low or norequires lower consolidated "risk-based" capital. The Company has been entering into thedecreased its
activity in security resell arrangements throughduring the new
division in its lead banking subsidiary, Discount Corporationfourth quarter of New York. The
Company has chosen this method of investing in very short-term arrangements to
increase its net interest income while maintaining its liquidity.1994.
The spread on average interest-bearing funds is the difference between the yield
on earning assets and the cost of interest-bearing funds. The Company's spread
on average interest-bearing funds was 3.62%3.49% for 19931994 as compared to 3.89%3.71% in
1992 and 3.56% in 1991.1993. The spread on average interest-bearing funds for 1993 has also been affectedreduced by
securitizationsecuritized sales of loans and investmentsinvestment in security resell arrangements.
Consolidated average balances, the amount of interest earned or paid, the
applicable interest rate for the various categories of earning assets and
interest-bearing funds which represent the components of net interest income for
the year 1994 and the previous four years; and interest differentials on a
taxable-equivalent basis and the effect on net interest income of changes due to
volume and rates for the years 1993, 1992,1994 and 19911993, are shown in tables on pages 17 through 19.which
follow. Income computed on a taxable-equivalent basis is income as reported in the consolidated statements
of income adjusted to make
income and earning yields on assets exempt from income taxes comparable to other
taxable income. Applied to yields on the
obligations of states and political subdivisions thereof and on industrial
revenue bonds, this adjustment facilitates analysis. The incremental tax rate used for calculating the
taxable-equivalent adjustment was approximately30% in 1994 and 32% in 1993 and each of 1993, 1992,the
years prior.
17
20
Distribution of Assets, Liabilities, and 1991.Shareholders' Equity,
Average Balance Sheets, Yields and Rates
1994 1993
----------------------------------- ---------------------------------
Amount Amount
Average of Average Average of Average
(Amounts in thousands) balance interest(1) rate(1) balance interest(1) rate(1)
---------- ----------- ------- ---------- ----------- -------
Assets:
Money market investments:
Interest-bearing deposits $ 24,389 $ 814 3.34% $ 103,982 $ 3,682 3.55%
Federal funds sold and security resell agreements 845,320 34,231 4.05% 656,204 22,918 3.49%
Other money market investments - - -% 28,508 827 2.90%
---------- -------- ---------- --------
Total money market investments 869,709 35,045 4.03% 788,694 27,427 3.48%
---------- -------- ---------- --------
Securities:
Held to maturity:
Taxable 726,925 41,269 5.68% 958,776 56,347 5.88%
Nontaxable 193,810 15,689 8.10% 147,549 12,434 8.43%
Available for sale 334,044 19,916 5.96% - - -%
Trading account 290,925 16,516 5.68% 102,840 7,555 7.35%
---------- -------- ---------- --------
Total securities 1,545,704 93,390 6.04% 1,209,165 76,336 6.31%
---------- -------- ---------- --------
Loans:
Loans held for sale 187,506 12,303 6.56% 185,899 11,273 6.06%
Net loans and leases(2) 2,387,489 217,958 9.13% 2,036,283 182,559 8.97%
---------- -------- ---------- --------
Total loans 2,574,995 230,261 8.94% 2,222,182 193,832 8.72%
---------- -------- ---------- --------
Total interest-earning assets $4,990,408 $358,696 7.19% $4,220,041 $297,595 7.05%
Cash and due from banks 333,290 -------- 315,577 --------
Allowance for loan losses (68,248) (64,911)
Other assets 201,163 173,211
---------- ----------
Total assets $5,456,613 $4,643,918
========== ==========
Liabilities:
Interest-bearing deposits:
Savings deposits $ 740,339 $ 22,262 3.01% $ 648,178 $ 19,222 2.97%
Money market deposits 1,284,697 39,938 3.11% 1,117,016 31,109 2.79%
Time deposits under $100,000 516,877 20,469 3.96% 548,816 23,501 4.28%
Time deposits $100,000 or more 94,680 3,845 4.06% 79,442 3,010 3.79%
Foreign deposits 108,383 4,444 4.10% 55,823 1,484 2.66%
---------- -------- ---------- --------
Total interest-bearing deposits 2,744,976 90,958 3.31% 2,449,275 78,326 3.20%
---------- -------- ---------- --------
Borrowed funds:
Securities sold, not yet purchased 184,405 10,976 5.95% 69,442 3,039 4.38%
Federal funds purchased and security repurchase
agreements 1,057,827 41,089 3.88% 767,309 22,376 2.92%
FHLB advances and other borrowings:
Less than one year 32,557 1,770 5.44% 83,123 3,196 3.84%
Over one year 118,607 5,831 4.92% 111,974 4,599 4.11%
Long-term debt 59,493 4,759 8.00% 75,623 7,423 9.82%
---------- -------- ---------- --------
Total borrowed funds 1,452,889 64,425 4.43% 1,107,471 40,633 3.67%
---------- -------- ---------- --------
Total interest-bearing liabilities $4,197,865 $155,383 3.70% $3,556,746 $118,959 3.34%
Noninterest-bearing deposits 838,118 -------- 729,651 --------
Other liabilities 81,449 71,190
---------- ----------
Total liabilities 5,117,432 4,357,587
Total shareholders' equity 339,181 286,331
---------- ----------
Total liabilities and shareholders' equity $5,456,613 $4,643,918
========== ==========
Spread on average interest-bearing funds 3.49% 3.71%
==== ====
Net interest income and net yield on interest-earning
assets
$203,313 4.07% $178,636 4.23%
======== ==== ======== ====
--------------------------------------------
(1) Taxable-equivalent rates used where applicable.
(2) Net of unearned income and fees, net of related costs. Loans include
nonaccrual and restructured loans.
18
21
Distribution of Assets, Liabilities, and Shareholders' Equity,
Average Balance Sheets, Yields And Rates
1992 1991
---------------------------------- ----------------------------------
Amount Amount
Average of Average Average of Average
(Amounts in thousands) balance interest(1) rate(1) balance interest(1) rate(1)
---------- ----------- ------- ---------- ----------- -------
Assets:
Money market investments:
Interest-bearing deposits $ 184,142 $ 10,529 5.72% $ 234,936 $ 15,210 6.47%
Federal funds sold and security resell agreements 245,866 9,730 3.96% 355,666 23,290 6.55%
Other money market investments 39,054 1,410 3.61% 79,982 4,910 6.14%
---------- -------- ---------- --------
Total money market investments 469,062 21,669 4.62% 670,584 43,410 6.47%
---------- -------- ---------- --------
Securities:
Held to maturity:
Taxable 766,002 48,854 6.38% 604,557 49,171 8.13%
Nontaxable 125,062 11,163 8.93% 74,709 8,571 11.47%
Available for sale - - -% - - -%
Trading account 36,912 5,537 15.00% 22,761 3,122 13.72%
---------- -------- ---------- --------
Total securities 927,976 65,554 7.06% 702,027 60,864 8.67%
---------- -------- ---------- --------
Loans:
Loans held for sale 186,953 13,804 7.38% 106,028 8,970 8.46%
Net loans and leases(2) 1,917,726 180,770 9.43% 1,769,900 190,942 10.79%
---------- -------- ---------- --------
Total loans 2,104,679 194,574 9.24% 1,875,928 199,912 10.66%
---------- -------- ---------- --------
Total interest-earning assets $3,501,717 $281,797 8.05% $3,248,539 $304,186 9.36%
Cash and due from banks 236,116 -------- 214,238 --------
Allowance for loan losses (60,116) (61,650)
Other assets 130,115 135,682
---------- ----------
Total assets $3,807,832 $3,536,809
========== ==========
Liabilities:
Interest-bearing deposits:
Savings deposits $ 494,113 $ 17,396 3.52% $ 535,634 $ 26,154 4.88%
Money market deposits 1,029,499 34,705 3.37% 717,124 36,642 5.11%
Time deposits under $100,000 651,226 33,555 5.15% 771,491 51,692 6.70%
Time deposits $100,000 or more 95,067 4,419 4.65% 132,363 8,317 6.28%
Foreign deposits 86,479 3,635 4.20% 62,729 3,245 5.17%
---------- -------- ---------- --------
Total interest-bearing deposits 2,356,384 93,710 3.98% 2,219,341 126,050 5.68%
---------- -------- ---------- --------
Borrowed funds:
Securities sold, not yet purchased - - -% - - -%
Federal funds purchased and security repurchase
agreements 394,620 12,681 3.21% 331,367 17,031 5.14%
FHLB advances and other borrowings:
less than one year 78,406 3,218 4.10% 119,222 8,213 6.89%
over one year 50,450 1,826 3.62% 35,342 1,943 5.50%
Long-term debt 82,219 9,508 11.56% 86,967 8,335 9.58%
---------- -------- ---------- --------
Total borrowed funds 605,695 27,233 4.50% 572,898 35,522 6.20%
---------- -------- ---------- --------
Total interest-bearing liabilities $2,962,079 $120,943 4.08% $2,792,239 $161,572 5.79%
-------- --------
Noninterest-bearing deposits 556,476 481,790
Other liabilities 48,866 54,051
---------- ----------
Total liabilities 3,567,421 3,328,080
Total shareholders' equity 240,411 208,729
---------- ----------
Total liabilities and shareholders' equity $3,807,832 $3,536,809
========== ==========
Spread on average interest-bearing funds 3.97% 3.57%
==== ====
Net interest income and net yield on
interest-earning assets $160,854 4.59% $142,614 4.39%
-------------------------------------------- ======== ==== ======== ====
(1) Taxable-equivalent rates used where applicable.
(2) Net of unearned income and fees, net of related costs. Loans include
nonaccrual and restructured loans.
19
22
Distribution of Assets, Liabilities, and Shareholders' Equity,
Average Balance Sheets, Yields And Rates
1990
-------------------------------------
Amount
Average of Average
(Amounts in thousands) balance interest(1) rate(1)
---------- ----------- -------
Assets:
Money market investments:
Interest-bearing deposits $ 104,211 $ 8,912 8.55%
Federal funds sold and security resell agreements 443,981 37,394 8.42%
Other money market investments 2,000 170 8.50%
---------- --------
Total money market investments 550,192 46,476 8.45%
---------- --------
Securities:
Held to maturity:
Taxable 444,848 39,267 8.83%
Nontaxable 70,287 9,237 13.14%
Available for sale - - -%
Trading account 14,602 2,882 19.74%
---------- --------
Total securities 529,737 51,386 9.70%
---------- --------
Loans:
Loans held for sale 114,394 10,785 9.43%
Net loans and leases(2) 1,691,794 196,322 11.60%
---------- --------
Total loans 1,806,188 207,107 11.47%
---------- --------
Total interest-earning assets $2,886,117 $304,969 10.57%
Cash and due from banks 221,739 --------
Allowance for loan losses (60,943)
Other assets 162,050
----------
Total assets $3,208,963
==========
Liabilities:
Interest-bearing deposits:
Savings deposits $ 447,412 $ 22,820 5.10%
Money market deposits 671,740 43,385 6.46%
Time deposits under $100,000 762,749 59,861 7.85%
Time deposits $100,000 or more 132,605 9,780 7.38%
Foreign deposits 54,433 3,619 6.65%
---------- --------
Total interest-bearing deposits 2,068,939 139,465 6.74%
---------- --------
Borrowed funds:
Securities sold, not yet purchased - - -%
Federal funds purchased and security repurchase
agreements 297,442 22,132 7.44%
FHLB advances and other borrowings:
less than one year 36,935 2,978 8.06%
over one year - - -%
Long-term debt 94,923 9,317 9.82%
---------- --------
Total borrowed funds 429,300 34,427 8.02%
---------- --------
Total interest-bearing liabilities $2,498,239 $173,892 6.96%
Noninterest-bearing deposits 462,672 --------
Other liabilities 61,337
----------
Total liabilities 3,022,248
Total shareholders' equity 186,715
----------
Total liabilities and shareholders' equity $3,208,963
==========
Spread on average interest-bearing funds 3.61%
====
Net interest income and net yield on $131,077 4.54%
interest-earning assets ======== ====
--------------------------------------------
(1) Taxable-equivalent rates used where applicable.
(2) Net of unearned income and fees, net of related costs. Loans include
nonaccrual and restructured loans.
20
23
Analysis of Interest Changes Due to Volume and Rates
1994 over 1993 1993 over 1992
------------------------------- --------------------------------
Changes due to Changes due to
-------------------- Total -------------------- Total
(Amounts in thousands) Volume Rate(1) Changes Volume Rate(1) Changes
-------- -------- -------- --------- --------- --------
Interest-earning assets:
Money market investments:
Interest-bearing deposits $(2,659) $ (209) $(2,868) $ (2,855) $ (3,992) $ (6,847)
Federal funds sold and security
resell agreements 7,272 4,041 11,313 14,337 (1,149) 13,188
Other money market investments (827) - (827) (306) (277) (583)
------- ------- ------- ------- -------- --------
Total money market investments 3,786 3,832 7,618 11,176 (5,418) 5,758
------- ------- ------- ------- -------- --------
Securities:
Held to maturity:
Taxable (759) 7,976 7,217 11,306 (3,813) 7,493
Nontaxable 3,738 (483) 3,255 1,891 (620) 1,271
Available for sale 7,122 (9,501) (2,379) - - -
Trading account 10,675 (1,714) 8,961 4,842 (2,824) 2,018
------- ------- ------- ------- -------- --------
Total securities 20,776 (3,722) 17,054 18,039 (7,257) 10,782
------- ------- ------- ------- -------- --------
Loans:
Loans held for sale 92 938 1,030 (56) (2,475) (2,531)
Net loans and leases(2) 32,002 3,397 35,399 10,539 (8,750) 1,789
------- ------- ------- ------- -------- --------
Total loans 32,094 4,335 36,429 10,483 (11,225) (742)
------- ------- ------- ------- -------- --------
Total interest-earning assets $56,656 $ 4,445 $61,101 $39,698 $(23,900) $ 15,798
------- ------- ------- ------- -------- --------
Interest-bearing liabilities:
Deposits:
Savings deposits $ 2,753 $ 287 $ 3,040 $ 4,547 $ (2,721) $ 1,826
Money market deposits 4,997 3,832 8,829 2,386 (5,982) (3,596)
Time deposits under $100,000 (1,264) (1,768) (3,032) (4,371) (5,683) (10,054)
Time deposits $100,000 or more 609 226 835 (593) (816) (1,409)
Foreign deposits 1,879 1,081 2,960 (816) (1,335) (2,151)
------- ------- ------- ------- -------- --------
Total interest-bearing deposits 8,974 3,658 12,632 1,153 (16,537) (15,384)
------- ------- ------- ------- -------- --------
Borrowed funds:
Securities sold, not yet purchased 6,522 1,415 7,937 3,039 - 3,039
Federal funds purchased and security
repurchase agreements 10,013 8,700 18,713 10,853 (1,158) 9,695
FHLB advances and other borrowings:
less than one year (1,946) 520 (1,426) 185 (207) (22)
over one year 287 945 1,232 2,496 277 2,773
Long-term debt (1,291) (1,373) (2,664) (651) (1,434) (2,085)
------- ------- ------- ------- -------- --------
Total borrowed funds 13,585 10,207 23,792 15,922 (2,522) 13,400
------- ------- ------- ------- -------- --------
Total interest-bearing liabilities $22,559 $13,865 $36,424 $17,075 $(19,059) $ (1,984)
------- ------- ------- ------- -------- --------
Change in net interest income $34,097 $(9,420) $24,677 $22,623 $ (4,841) $ 17,782
======= ======= ======= ======= ======== ========
--------------------------------------------
(1) Taxable-equivalent rates used where applicable.
(2) Net of unearned income and fees, net of related costs. Loans include
nonaccrual and restructured loans.
In the tables foron the three years,preceeding pages, the principal amounts of nonaccrual and
renegotiated loans have been included in the average loan balances used to
determine the rate earned on loans. Interest income on nonaccrual loans is
included in income only to the extent that cash payments have been received and
not applied to principal and is accrued on restructured loans at the reduced
rates. Certain restructured loan agreements call for additional interest to be
paid on a deferred or contingent basis. Such interest is taken into income only
as collected.
TheIn the analysis in the tables of the effect on net interest income ofchanges due to volume and raterates, the changes the change due to
the volume/rate variance in this analysis hashave been allocated to volume, except whenvolume. When volume and rate
have both increased, then
thisthe variance has been allocated proportionately to both
volume and rate, and when the rate has increased and volume has decreased, then thisthe
variance has been allocated to rate.
1621
19
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY,
INTEREST RATES AND INTEREST DIFFERENTIAL AND CHANGES DUE TO VOLUME AND RATES
1993
-------------------------------------------------------------
Amount Changes Changes
(Average balances in millions: Other dollar Average of Average due to due to Total
amounts in thousands) balance interest1 rate1 volume rate changes
------- --------- ------- -------- --------- --------
Money market investments:
Interest-bearing deposits $ 104.0 $ 5,275 5.07% $ (4,059) $ (1,195) $ (5,254)
Federal funds sold and security resell agreements 637.7 20,779 3.26% 13,190 (1,688) 11,502
Other money market investments 28.5 827 2.90% (307) (276) (583)
------- --------- ------- -------- --------- --------
Total money market investments 770.2 26,881 3.49% 8,824 (3,159) 5,665
------- --------- ------- -------- --------- --------
Securities:
Investment securities-taxable 894.2 53,626 6.00% 10,456 (3,051) 7,405
Investment securities-nontaxable 121.0 10,350 8.55% 1,321 (434) 887
Trading securities 102.8 7,555 7.35% 4,843 (2,825) 2,018
------- --------- ------- -------- --------- --------
Total securities 1,118.0 71,531 6.40% 16,620 (6,310) 10,310
------- --------- ------- -------- --------- --------
Loans:
Loans held for sale 185.9 11,273 6.06% (53) (2,478) (2,531)
Net loans and leases2 1,817.7 161,350 8.88% 4,423 (8,077) (3,654)
------- --------- ------- -------- --------- --------
Total loans 2,003.6 172,623 8.62% 4,370 (10,555) (6,185)
------- --------- ------- -------- --------- --------
Total interest-earning assets $3,891.8 $ 271,035 6.96% $ 29,814 $ (20,024) $ 9,790
--------- ------- -------- --------- --------
Allowance for loan losses (61.9)
Cash and due from banks 272.9
Other assets 159.3
-------
Total assets $4,262.1
=======
Interest-bearing deposits:
Savings deposits $ 625.2 $ 18,558 2.97% $ 4,409 $ (2,627) $ 1,782
Money market deposits 968.3 26,457 2.73% 893 (5,781) (4,888)
Time deposits under $100,000 515.1 22,189 4.31% (4,559) (5,550) (10,109)
Time deposits $100,000 or more 47.1 1,805 3.83% (616) (477) (1,093)
Foreign deposits 55.8 1,484 2.66% (817) (1,334) (2,151)
------- --------- ------- -------- --------- --------
Total interest-bearing deposits 2,211.5 70,493 3.19% (690) (15,769) (16,459)
------- --------- ------- -------- --------- --------
Borrowed funds:
Securities sold, not yet purchased 69.4 3,039 4.38% 3,039 - 3,039
Federal funds purchased and security repurchase
agreements 767.3 22,376 2.92% 10,854 (1,159) 9,695
FHLB advances and other borrowings:
less than one year 83.1 3,196 3.85% 178 (200) (22)
over one year 112.0 4,599 4.11% 2,493 280 2,773
Long-term debt 73.2 7,203 9.84% (885) (1,420) (2,305)
------- --------- ------- -------- --------- --------
Total borrowed funds 1,105.0 40,413 3.66% 15,679 (2,499) 13,180
------- --------- ------- -------- --------- --------
Total interest-bearing liabilities $3,316.5 $ 110,906 3.34% $ 14,989 $ (18,268) $ (3,279)
--------- ------- -------- --------- --------
Noninterest-bearing deposits 609.3
Other liabilities 69.8
-------
Total liabilities 3,995.6
-------
Total shareholders' equity 266.5
-------
Total liabilities and shareholders' equity $4,262.1
=======
Spread on average interest-bearing funds 3.62%
=======
Net interest income and net yield on
interest-earning assets $ 160,129 4.11% $ 14,825 $ (1,756) $ 13,069
========= ======= ======== ========= ========
- --------------------
1 Taxable-equivalent rates used where applicable.
2 Net of unearned income and fees, net of related costs.
Loans include nonaccrual and restructured loans.
17
20
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY,
INTEREST RATES AND INTEREST DIFFERENTIAL AND CHANGES DUE TO VOLUME AND RATES
1992
-------------------------------------------------------------
Amount Changes Changes
(Average balances in millions: Other dollar Average of Average due to due to Total
amounts in thousands) balance interest1 rate1 volume rate changes
------- --------- ------- -------- --------- --------
Money market investments:
Interest-bearing deposits $ 184.1 $ 10,529 5.72% $ (2,907) $ (1,774) $ (4,681)
Federal funds sold and security resell agreements 232.8 9,277 3.98% (4,319) (8,969) (13,288)
Other money market investments 39.1 1,410 3.61% (1,478) (2,022) (3,500)
------- --------- ------- -------- -------- -------
Total money market investments 456.0 21,216 4.65% (8,704) (12,765) (21,469)
------- --------- ------- -------- -------- -------
Securities:
Investment securities-taxable 719.5 46,221 6.42% 9,544 (10,168) (624)
Investment securities-nontaxable 105.6 9,463 8.96% 3,953 (1,822) 2,131
Trading securities 36.9 5,537 15.01% 2,107 308 2,415
------- --------- ------- -------- -------- -------
Total securities 862.0 61,221 7.10% 15,604 (11,682) 3,922
------- --------- ------- -------- -------- -------
Loans:
Loans held for sale 186.9 13,804 7.39% 5,971 (1,137) 4,834
Net loans and leases2 1,767.2 165,004 9.34% 9,829 (23,764) (13,935)
------- --------- ------- -------- -------- -------
Total loans 1,954.1 178,808 9.15% 15,800 (24,901) (9,101)
------- --------- ------- -------- -------- -------
Total interest-earning assets $3,272.1 $ 261,245 7.98% $ 22,700 $ (49,348) $(26,648)
--------- ------- -------- -------- -------
Allowance for loan losses (57.7)
Cash and due from banks 211.4
Other assets 119.4
-------
Total assets $3,545.2
=======
Interest-bearing deposits:
Savings deposits $ 476.4 $ 16,776 3.52% $ (1,686) $ (7,098) $ (8,784)
Money market deposits 936.4 31,345 3.35% 8,746 (11,926) (3,180)
Time deposits under $100,000 620.6 32,298 5.20% (5,964) (11,328) (17,292)
Time deposits $100,000 or more 63.2 2,898 4.59% (1,238) (1,502) (2,740)
Foreign deposits 86.5 3,635 4.20% 997 (607) 390
------- --------- ------- -------- -------- -------
Total interest-bearing deposits 2,183.1 86,952 3.98% 855 (32,461) (31,606)
------- --------- ------- -------- -------- -------
Borrowed funds:
Securities sold, not yet purchased - - % - - -
Federal funds purchased and security repurchase
agreements 394.6 12,681 3.21% 2,043 (6,393) (4,350)
FHLB advances and other borrowings:
less than one year 78.4 3,218 4.10% (1,669) (3,326) (4,995)
over one year 50.5 1,826 3.62% 548 (665) (117)
Long-term debt 82.2 9,508 11.57% (460) 1,633 1,173
------- --------- ------- -------- -------- -------
Total borrowed funds 605.7 27,233 4.49% 462 (8,751) (8,289)
------- --------- ------- -------- -------- -------
Total interest-bearing liabilities $2,788.8 $ 114,185 4.09% $ 1,317 $ (41,212) $(39,895)
--------- ------- -------- -------- -------
Noninterest-bearing deposits 483.6
Other liabilities 48.2
-------
Total liabilities 3,320.6
-------
Total shareholders' equity 224.6
-------
Total liabilities and shareholders' equity $3,545.2
=======
Spread on average interest-bearing funds 3.89%
=======
Net interest income and net yield on
interest-earning assets $ 147,060 4.49% $ 21,383 $ (8,136) $ 13,247
========= ======= ======== ======== =======
- ---------------------
1 Taxable-equivalent rates used where applicable.
2 Net of unearned income and fees, net of related costs.
Loans include nonaccrual and restructured loans.
18
21
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY,
INTEREST RATES AND INTEREST DIFFERENTIAL AND CHANGES DUE TO VOLUME AND RATES
1991
-------------------------------------------------------------
Amount Changes Changes
(Average balances in millions: Other dollar Average of Average due to due to Total
amounts in thousands) balance interest1 rate1 volume rate changes
------- --------- ------- -------- --------- --------
Money market investments:
Interest-bearing deposits $ 234.9 $ 15,210 6.48% $ 8,458 $ (2,160) $ 6,298
Federal funds sold and security resell agreements 341.6 22,565 6.61% (5,594) (7,813) (13,407)
Other money market investments 80.0 4,910 6.14% 4,787 (47) 4,740
------- --------- ------- -------- -------- -------
Total money market investments 656.5 42,685 6.50% 7,651 (10,020) (2,369)
------- --------- ------- -------- -------- -------
Securities:
Investment securities-taxable 571.3 46,845 8.20% 12,249 (2,798) 9,451
Investment securities-nontaxable 61.5 7,332 11.92% 156 (1,106) (950)
Trading securities 22.7 3,122 13.75% 1,114 (874) 240
------- --------- ------- -------- -------- -------
Total securities 655.5 57,299 8.74% 13,519 (4,778) 8,741
------- --------- ------- -------- -------- -------
Loans:
Loans held for sale 106.0 8,970 8.46% (708) (1,107) (1,815)
Net loans and leases2 1,661.4 178,939 10.77% 6,317 (12,929) (6,612)
------- --------- ------- -------- -------- -------
Total loans 1,767.4 187,909 10.63% 5,609 (14,036) (8,427)
------- --------- ------- -------- -------- -------
Total interest-earning assets $3,079.4 $ 287,893 9.35% $ 26,779 $ (28,834) $ (2,055)
--------- ------- -------- -------- -------
Allowance for loan losses (59.5)
Cash and due from banks 202.4
Other assets 131.3
-------
Total assets $3,353.6
=======
Interest-bearing deposits:
Savings deposits $ 524.5 $ 25,560 4.87% $ 4,210 $ (965) $ 3,245
Money market deposits 674.6 34,525 5.12% 1,808 (8,917) (7,109)
Time deposits under $100,000 735.8 49,590 6.74% 71 (8,012) (7,941)
Time deposits $100,000 or more 90.1 5,638 6.26% 54 (1,004) (950)
Foreign deposits 62.8 3,245 5.17% 433 (807) (374)
------- --------- ------- -------- -------- -------
Total interest-bearing deposits 2,087.8 118,558 5.68% 6,576 (19,705) (13,129)
------- --------- ------- -------- -------- -------
Borrowed funds:
Securities sold, not yet purchased - - - % - - -
Federal funds purchased and security repurchase
agreements 331.4 17,031 5.14% 1,739 (6,840) (5,101)
FHLB advances and other borrowings:
less than one year 119.2 8,213 6.89% 5,671 (436) 5,235
over one year 35.3 1,943 5.50% 1,943 1,943
Long-term debt 87.0 8,335 9.58% (756) (226) (982)
------- --------- ------- -------- -------- -------
Total borrowed funds 572.9 35,522 6.20% 8,597 (7,502) 1,095
------- --------- ------- -------- -------- -------
Total interest-bearing liabilities $2,660.7 $ 154,080 5.79% $ 15,173 $ (27,207) $(12,034)
--------- ------- -------- -------- -------
Noninterest-bearing deposits 444.0
Other liabilities 53.8
-------
Total liabilities 3,158.5
-------
Total shareholders' equity 195.1
-------
Total liabilities and shareholders' equity $3,353.6
=======
Spread on average interest-bearing funds 3.56%
=======
Net interest income and net yield on
interest-earning assets $ 133,813 4.35% $ 11,606 $ (1,627) $ 9,979
========= ======= ======== ======== =======
- --------------------
1 Taxable-equivalent rates used where applicable.
2 Net of unearned income and fees, net of related costs.
Loans include nonaccrual and restructured loans.
19
22
PROVISION FOR LOAN LOSSES24
Provision For Loan Losses
The provision for loan losses in 1994 decreased by 27.1% to $2,181,000 in 1994
as compared to $2,993,000 in 1993, decreased 77.6% to $2,298,000 from
$10,251,000and $10,929,000 in 1992, and $23,549,000 in 1991.1992. The decrease in loan
loss provisions resulted from improved credit risk management and an improved
economy which have produced decreases in nonperforming assets and charge offs
and an increase in recoveries.
OTHER OPERATING INCOMEassets.
Noninterest Income
The Company's other operatingnoninterest income increaseddecreased by 26.3%8.4% to $78,127,000$73.2 million in 19931994 as
compared to $61,861,000$79.9 million in 1992,1993 and $51,488,000$62.8 million in 1991.1992. Service charges on
deposits increased by 17.0%5.2% in 19931994 to $22,216,000,$24.1 million, primarily as a result of
price increases and higher volumes in 1993.1994. Other service charges, commissions,
and fees increased by 10.6%2.9% in 19931994 to $20,450,000$22.0 million primarily as a result of
increased fees relating to mortgage and othercommercial loan originations. Such increased fees
were partially offset by a decline in fees generated through sales of investment
products through the Company's discount brokerage operations and personal
investment officers, as well as fees from mortgage loan originations during
1994. Trading account income decreased by 47.0%63.4% to $2,350,000$.9 million in 19931994 as
compared to $4,437,000$2.4 million in 19921993. Loan sales and servicing income decreased
32.0% to $14.6 million in 1994 primarily as a result of a gaindecreased income on the sale of SBA-IO strips
in 1992. Loan sales and servicing income increased 226.7% to $21,471,000 in
1993 primarily as a result of an increased volume of consumer and real
estate loans sold atin 1994 and lower excess servicing fees during 1994 on
securitized loans sold resulting from competitive pressures, particularly in the
end of 1992 and during 1993.indirect consumer loan market. The Company hasdoes not recognizedrecognize an initial gain on
the sale of loans but recognizes the income over the servicing life of the sale.
Other income decreasedincreased by 17.0%6.4% in 19931994 to $7,035,000$7.6 million primarily as a result of
interest receivedgains on federal income tax
refunds in 1992.the sale of mortgage-servicing rights.
The following table presents the components of other operatingnoninterest income for the years
indicated and a year-to-year comparison expressed in terms of percent changes.
OTHER OPERATING INCOMENoninterest Income
Percent Percent Percent Percent
(Thousands of dollars) 1994 change 1993 change 1992 change 1991 change 1990
change 1989
------- --------------- ------- ------ ------- ------ ------- --------------- ------- ------- -------
Service charges on deposit
accounts $22,216 17.0% $18,994 9.5% $17,354 12.1% $15,481 16.7% $13,267$24,058 5.2% $22,875 17.4% $19,484 9.9% $17,736 12.8% $15,723
Other service charges,
commissions, and fees 20,450 10.6 18,484 35.9 13,604 (7.1)22,008 2.9 21,392 13.4 18,871 35.7 13,907 (5.1) 14,648
11.7 13,108
Trust income 4,334 (6.2) 4,622 .2 4,614 10.7 4,169 1.9 4,092
(2.8) 4,210
Investment securities gains
(losses), net (299) (1,658.8) (17) (106.0) 282 (34.7) 432 149.8(105.2) 327 (54.3) 715 182.4 (868) (7,133.3) (12)
Trading account income 860 (63.4) 2,350 (47.0) 4,437 226.5 1,359 (10.7) 1,521
(18.2) 1,859
Loan sales and servicing
income 14,596 (32.0) 21,471 226.7 6,573 (16.5) 7,875 (.7) 7,932
222.7 2,458
Other income 7,035 (17.0) 8,477 26.67,645 6.4 7,187 (15.9) 8,543 27.6 6,695 41.5 4,733 26.0 3,75737.4 4,871
------- ------- ------- ------- -------
Total $78,127 26.3% $61,861 20.1% $51,488 8.3% $47,539 23.0% $38,647$73,202 (8.4)% $79,880 27.1% $62,849 19.8% $52,456 9.5% $47,919
======= ============== ======= =========== ======= ===== ======= ============= =======
OTHER OPERATING EXPENSES
OperatingNoninterest Expenses
Noninterest expenses increased by 19.5%4.3% in 19931994 to $156,548,000$174.9 million as compared to
$131,040,000$167.8 million in 1992,1993, and $117,307,000$139.1 million in 1991. Employee salary1992. Salaries and employee
benefits
costs increased by 20.0%9.1% in 19931994 to $79,245,000,$93.3 million, primarily as a result of
additional salaries and benefits from an acquisition accounted for as a
purchase; increased staffing in retail and investment activities,activities; general salary increasesincreases;
and bonuses, commissions, and profit sharing costs related to increased
profitability. Furniture and equipment expenses increased 34.8% in 1994 to $12.5
million, primarily as a result of the expansion of the ATM network and the
installation of personal computers and local area networks.
The Company benefited by a decrease of 85.5%119.6% in other real estate expense to
$366,000$(.1) million in 19931994 as holding costs declined through the continued sales of
other real estate owned properties during 1993.1994. Also, values received in the
sales of other real estate owned continued to improve in 1993.1994. F.D.I.C. premiums
increased by 13.7%4.0% in 19931994 to $6,541,000$7.5 million as compared to $5,752,000$7.3 million in 19921993
due
primarily to higher assessment rates.deposit levels. Telecommunication costs increased 25.4% to $3.8
million as a result of acquisitions and the expansion of ATM and other networks.
All other expenses increased 5.9% to $27.6 million in 1994 as compared to $26.1
million in 1993 primarily due to increased ATM network service costs,
amortization of investments in community development companies and investment
activity expenses. The Company recognized a loss on early extinguishment of debt
in the amount of $6,022,000$6.0 million during 1993. All other
expenses increased 12.0%This expense consisted of marking to
$24,279,000market an interest rate exchange agreement entered into several years ago in
1993 as compared to $21,781,000 in
1992 primarily due to increases in travel expensesconjunction with the issuance of long term floating rate notes, and other miscellaneous
expenses.
20writing off
deferred costs associated with the notes and industrial revenue bonds redeemed.
22
2325
The following table presents the components of other operatingnoninterest expenses for the
years indicated and a year-to-year comparison expressed in terms of percent
changes.
OTHER OPERATING EXPENSESNoninterest Expenses
Percent Percent Percent Percent
(Thousands of dollars) 1994 change 1993 change 1992 change 1991 change 1990
change 1989-------- ------- ------ -------- ------------- -------- ------ ------- -------------- ------- --------
Salaries and employee
benefits $ 79,245 20.0%93,331 9.1% $ 66,022 12.8%85,549 21.8% $ 58,520 4.0%70,242 14.7% $ 56,278 14.4%61,220 5.3% $ 49,17558,126
Occupancy, net 7,809 11.4 7,010 .2 6,9978,397 2.8 8,168 12.7 7,248 (4.3) 7,570 6.3 6,585 (3.4) 6,8197,119
Furniture and equipment 8,284 13.5 7,299 11.7 6,537 .4 6,511 5.4 6,17712,526 34.8 9,294 21.0 7,681 13.4 6,773 2.1 6,636
Other real estate expense 366 (85.5) 2,523 (20.5) 3,173 (15.5) 3,757 (65.7) 10,963(88) (119.6) 450 (82.4) 2,559 (22.9) 3,318 (15.2) 3,913
Legal and professional services
4,905 40.3 3,497 (9.2) 3,850 (23.3) 5,022 24.8 4,0255,142 .1 5,136 42.0 3,616 (8.0) 3,931 (22.7) 5,087
Supplies 4,281 16.1 3,687 .0 3,688 3.0 3,582 6.6 3,3614,819 6.2 4,537 17.5 3,860 1.1 3,817 4.0 3,669
Postage 4,221 19.2 3,540 (2.7) 3,637 15.2 3,158 11.1 2,8424,723 9.0 4,334 20.0 3,611 (2.4) 3,700 15.6 3,201
F.D.I.C. premiums 6,541 13.7 5,752 13.6 5,063 91.7 2,641 48.8 1,7757,547 4.0 7,257 16.4 6,235 15.9 5,381 92.4 2,797
Amortization of intangible
assets 3,692 (16.7) 4,432 (2.2) 4,530 16.7 3,882 4.2 3,726
9.2 3,411
Loss on early extinguishment of
debt - (100.0) 6,022 100.0 - - - - - - -
Other expenses:
Telecommunications 2,874 26.5 2,272 18.0 1,925 6.9 1,800 (1.7) 1,8313,767 25.4 3,005 26.6 2,373 19.4 1,987 8.2 1,837
Advertising 3,289 5.2 3,127 42.6 2,193 54.4 1,420 (2.7) 1,4593,447 (1.9) 3,515 8.6 3,236 43.3 2,258 55.7 1,450
All other expenses 24,279 11.5 21,781 22.1 17,842 (.4) 17,914 22.5 14,62727,597 5.9 26,051 9.1 23,878 24.6 19,162 2.3 18,728
-------- -------- -------- -------- --------
Total other -------expenses 34,811 6.9 32,571 10.5 29,487 26.0 23,407 6.3 22,015
-------- -------- ------- --------
expenses 30,442 12.0 27,180 23.8 21,960 3.9 21,134 18.0 17,917
------- -------- -------- ------- --------
Total $156,548 19.5% $131,040 11.7% $117,307 4.4% $112,394 5.6% $106,465
======= =====$174,900 4.3% $167,750 20.6% $139,069 13.1% $122,999 5.8% $116,289
======== ====== ======== ===== ======== ===== =============== ===== ========
The following table presents full-time equivalent employees and banking offices
at December 31, for the years indicated:
FULL-TIME EQUIVALENT EMPLOYEESFull-Time Equivalent Employees
1994 1993 1992 1991 1990
1989
------ ------ ------ ------ ----------- ----- ----- ----- -----
Commercial banking 2,386 1,950 1,900 1,793 1,682
Consumer finance - - 2 11 502,506 2,573 2,098 2,008 1,863
Other 189 188 395 339 311 314
------ ------ ------ ------ ------341 322
----- ----- ----- ----- -----
Total 2,574 2,345 2,241 2,115 2,046
====== ====== ====== ====== ======
Offices:2,695 2,761 2,493 2,349 2,185
===== ===== ===== ===== =====
Commercial banking 107 100 98 94 92
Consumer finance - - 1 1 8offices 118 114 106 103 97
INCOME TAXESIncome Taxes
The Company's income taxes increased 17.0%13.4% to $24,718,000$30.9 million in 1994 compared to
$21,200,000$27.2 million in 1992,1993 and $12,975,000$22.9 million in 1991,1992 primarily due to the increase in
income before tax income.income taxes. The Company's effective tax rate decreased slightlywas 32.6% during
1994 as compared to 32.5% in 1993 from 32.8% in 1992 as the increase in tax-exempt income and other lesser
factors offset the 1993 increase in the statutory federal rate.
211993.
23
24
QUARTERLY SUMMARY26
Quarterly Summary
The following table presents a summary of earnings and end-of-period balances by
quarter for the years ended December 31, 1994, 1993, 1992, and 1991:
SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)1992:
Summary of Quarterly Financial Information (Unaudited)
Other
Provi- Income
Gross Net oper-Non- sion for Oper-Non- before
interest interest ating for atinginterest loan interest income Net
(Thousands of dollars) income income income losses expenses taxes income
-------- -------- -------- -------- -------- ------- -------
Quarter:
1994:
First $ 77,213 $ 44,801 $16,396 $ 290 $ 42,491 $18,416 $12,438
Second 86,772 48,741 18,465 467 41,996 24,743 16,418
Third 94,939 51,859 20,109 440 44,739 26,789 17,665
Fourth 95,065 53,205 18,232 984 45,674 24,779 17,306
-------- -------- ------- ------- -------- ------- -------
Total $353,989 $198,606 $73,202 $ 2,181 $174,900 $94,727 $63,827
======== ======== ======= ======= ======== ======= =======
1993:
First $ 67,591 $ 41,092 $15,766 $ 1,365 $ 42,065 $13,428 $10,746
Second 71,091 44,813 19,371 408 39,047 24,729 16,636
Third 76,033 43,795 22,689 482 43,318 22,684 15,397
Fourth 78,901 44,957 22,054 738 43,320 22,953 15,426
-------- -------- ------- ------- -------- ------- -------
Total $293,616 $174,657 $79,880 $ 2,993 $167,750 $83,794 $58,205
======== ======== ======= ======= ======== ======= =======
1992:
First $ 68,117 $ 35,486 $15,344 $ 4,135 $ 35,402 $11,293 $ 8,331
Second 69,952 38,105 13,802 3,181 32,749 15,977 10,282
Third 69,171 40,664 15,280 2,003 34,033 19,908 13,131
Fourth 70,985 43,027 18,423 1,610 36,885 22,955 15,465
-------- -------- ------- ------- -------- ------- -------
Total $278,225 $157,282 $62,849 $10,929 $139,069 $70,133 $47,209
======== ======== ======= ======= ======== ======= =======
Money Net Allow-
market loans ances for Share-
Total invest- and loan Total holders'
assets ments Securities leases losses deposits equity
---------- -------- ---------- ---------- --------- -------- --------- --------- --------- ------------------ --------
Quarter:
1993:
First $ 61,923 $ 37,182 $ 15,424 $ 1,196 $ 39,716 $ 11,694 $ 9,567
Second 64,774 40,461 18,978 263 36,638 22,538 15,180
Third 69,192 39,104 22,322 382 40,683 20,361 13,849
Fourth 71,834 40,070 21,403 457 39,511 21,505 14,443
-------- --------- --------- -------- --------- --------- ---------
Total $267,723 $ 156,817 $ 78,127 $ 2,298 $ 156,548 $ 76,098 $ 53,039
======== ========= ========= ======== ========= ========= =========
1992:
First $ 63,617 $ 32,675 $ 15,158 $ 3,945 $ 33,557 $ 10,331 $ 7,646
Second 65,188 34,991 13,470 2,866 30,885 14,710 9,390
Third 63,980 37,180 15,053 1,933 32,076 18,224 12,009
Fourth 65,432 39,186 18,180 1,507 34,522 21,337 14,357
-------- --------- --------- -------- --------- --------- ---------
Total $258,217 $ 144,032 $ 61,861 $ 10,251 $ 131,040 $ 64,602 $ 43,402
======== ========= ========= ======== ========= ========= =========
1991:
First $ 74,542 $ 32,645 $ 11,669 $ 6,805 $ 27,082 $ 10,427 $ 6,792
Second 69,203 31,650 13,016 4,959 28,633 11,074 7,199
Third 71,455 33,379 12,400 6,427 28,393 10,959 7,139
Fourth 70,347 33,793 14,403 5,358 33,199 9,639 7,994
-------- --------- --------- -------- --------- --------- ---------
Total $285,547 $ 131,467 $ 51,488 $ 23,549 $ 117,307 $ 42,099 $ 29,124
======== ========= ========= ======== ========= ========= =========
Money Net
market loans Share-
Total invest- and Total holders'
assets ments Securities leases deposits equity
End of Quarter:
------------- ----------- ----------- ----------- ----------- ----------
1994:
First $5,232,172 $677,125 $1,626,260 $2,531,806 $67,984 $3,493,502 $318,708
Second 5,452,447 830,288 1,552,256 2,665,104 68,981 3,599,176 341,818
Third 5,228,382 667,013 1,532,726 2,574,644 66,847 3,628,273 354,330
Fourth 4,934,095 403,446 1,663,433 2,391,278 67,018 3,705,976 365,770
1993:
First $ 3,964,784 $ 721,354 $ 1,074,233 $1,904,402 $2,801,945 $255,519$4,334,905 $733,496 $1,148,227 $2,112,865 $61,042 $3,152,960 $273,736
Second 4,008,356 562,205 1,095,277 1,976,680 2,959,920 268,2984,420,841 599,091 1,187,784 2,197,102 67,602 3,347,915 287,985
Third 4,028,049 418,608 1,125,099 2,161,292 2,957,651 279,0634,467,194 463,552 1,225,784 2,395,834 68,334 3,370,553 300,298
Fourth 4,365,556 578,771 1,145,034 2,230,670 3,024,111 290,3914,801,054 597,680 1,258,939 2,486,346 68,461 3,432,289 312,592
1992:
First $3,743,022 $532,789 $ 3,493,012 $ 515,671 $ 808,432 $1,898,588 $2,671,776 $212,874875,856 $2,029,465 $57,489 $2,906,767 $227,255
Second 3,633,192 527,113 859,299 1,977,904 2,677,224 220,5503,893,657 540,755 919,497 2,126,102 60,768 2,921,975 235,843
Third 3,579,560 421,215 871,914 2,019,218 2,693,814 230,5013,879,310 445,095 930,605 2,186,914 61,615 2,976,492 246,916
Fourth 3,779,267 614,184 906,006 1,921,496 2,764,824 242,547
1991:
First $ 3,273,535 $ 662,299 $ 611,030 $1,720,862 $2,461,748 $188,199
Second 3,273,413 603,721 608,468 1,760,896 2,510,646 194,021
Third 3,408,090 621,446 687,962 1,797,742 2,593,660 200,013
Fourth 3,645,835 688,264 788,198 1,861,562 2,658,514 206,6334,107,924 616,180 981,695 2,107,433 59,807 3,075,110 260,070
2224
2527
ANALYSIS OF FINANCIAL CONDITION
LIQUIDITYLiquidity
Liquidity represents the Company's ability to provide adequate funds to meet its
financial obligations, including withdrawals by depositors, debt service
requirements and operating needs. Liquidity is primarily provided by the
regularly scheduled maturities of the Company's investment and loan portfolios.
In addition, the Company's liquidity is enhanced by the fact that cash, money
market securities, and liquid investments, net of "short-term purchased"short-term or "purchased"
liabilities and wholesale deposits, totaled $1,605.8$1,423.6 million or 55.2%41.3% of core
deposits at December 31, 1993, as compared to $1,067.6 million or 40.1% of core
deposits at December 31, 1992.1994.
The Company's core deposits, consisting of demand, savings, and money market
deposits, and small certificates of deposit, constituted 96.2%93.0% of total deposits
at December 31, 1993,1994, as compared to 96.3%95.6% at December 31, 1992.1993.
Maturing balances in loan portfolios provide flexibility in managing cash flows.
Maturity management of those funds is an important source of medium-tomedium- to
long-term liquidity. The Company's ability to raise funds in the capital markets
through the "securitization" process and by debt issuances allows the Company to
take advantage of market opportunities to meet funding needs at reasonable cost.
The Company manages its liquidity position in order to assure its ability to
meet maturing obligations. Through an ongoing review of the Company's levels of
interest-sensitive assets and liabilities, efforts are made to structure
portfolios in such a way as to minimize the effects of fluctuating interest rate
levels on net interest income.
The parent company's cash requirements consist primarily of principal and
interest payments on its borrowings, dividend payments to shareholders, and cash
operating expenses, and payments for income taxes.expenses. The parent company's cash needs are routinely satisfied
through payments by subsidiaries of dividends, proportionate shares of current
income taxes, management and other fees, and principal and interest payments on
subsidiary borrowings from the parent company.
INTEREST RATE SENSITIVITYInterest Rate Sensitivity
Interest rate sensitivity measures the Company's financial exposure to changes
in interest rates. Interest rate sensitivity is, like liquidity, affected by
maturities of assets and liabilities. Unlike liquidity, however, interestInterest rate sensitivity is measured in
terms of "gaps," defined as the difference between volumes of assets and
liabilities whose interest rates are subject to reset within specified periods
of time.time, and "duration," a measure of the weighted average expected lives of the
cash flows from assets and liabilities.
The Company, through the management of interest rate "maturities" and the use of
off-balance sheet arrangements such as "interestinterest rate caps, floors, futures,
options, and interest rate exchange contract agreements," attempts to be reasonably close
to neutral. 23The Company's management exercises its best judgment in making
assumptions with respect to prepayments, early withdrawals and other
noncontrollable events in managing the Company's exposure to changes in interest
rates.
Information as to the Company's sensitivity is presented in a table that
follows. The interest rate gaps reported in the table arise when assets are
funded with liabilities having different repricing intervals, after considering
the effect of off-balance sheet hedging financial instruments. Since these gaps
are actively managed and change daily as the interest rate environment changes,
positions at the end of any period may not be reflective of the Company's
interest rate position in subsequent periods.
25
2628
The following table presents information as to the Company's interest rate
sensitivity at December 31, 1993:
MATURITIES AND INTEREST RATE SENSITIVITY
AT DECEMBER1994:
Maturities and Interest Rate Sensitivity
at December 31, 19931994
Rate sensitive
---------------------------------------------------------------------------------
After After
three one
months year
but but
Within within within After
Not
three oneyear five five Not rate
(Millions of dollars) months yearone years years sensitive Total
-------- ------ ---- ----- ----------- ------ --------- -------------
Uses of Funds
- -------------
Earning assets:
Interest-bearing deposits $ 14.8 $ 10.019.5 $ .2 $ - $ - $ 25.019.7
Federal funds sold and security resell agreements 553.8 - - - - 553.8
Trading account securities 98.3 - - - - 98.3
Investment securities:383.8 383.8
Securities:
Held to maturity 442.1 79.7 196.5 66.8 - 785.1572.6 $145.5 227.2 $ 85.6 1,030.9
Available for sale 79.9 40.2 18.6 184.7 18.1 - 261.6131.9 63.6 315.6
Trading account 316.9 316.9
Loans and leases 1,397.1 84.8 390.0 358.8 - 2,230.71,590.9 298.1 390.6 111.7 2,391.3
Nonearning assets - - - - 411.1 411.1
----------$ 475.9 475.9
-------- --------------- ------ ------ ------- -------- -------- ----------
Total uses of funds $2,963.6 $483.8 $749.9 $260.9 $ 2,546.3 $ 193.1 $ 771.4 $ 443.7 $ 411.1 $ 4,365.6
==========475.9 $4,934.1
======== =============== ====== ====== ======= ======== ======== ==========
Sources of Funds
- ----------------
Interest-bearing deposits and liabilities:
Savings deposits $ 482.292.9 $267.5 $349.8 $ -46.0 $ - $ 206.6 $ - $ 688.8756.2
Money market deposits 700.3 - 300.2 - - 1,000.51,026.6 265.9 1,292.5
Time deposits under $100,000 144.4 211.4 139.1 - - 494.9129.6 232.8 151.5 513.9
Time deposits over $100,000 19.9 20.0 5.6 - - 45.547.3 46.4 29.8 123.5
Foreign 68.6 - - - - 68.6119.0 .1 15.0 134.1
Securities sold, not yet purchased 46.6 - - - - 46.681.4 81.4
Federal funds purchased and security
repurchase agreements 595.2 - - - - 595.2524.5 524.5
FHLB advances and other borrowings:
Less than one year 136.1 - - - - 136.125.7 25.7
Over one year 93.3 50.8 3.7 4.4 - 152.279.3 1.6 7.9 12.8 101.6
Long-term debt .2.3 1.5 3.0 50.9 - 55.65.6 50.8 58.2
Noninterest-bearing deposits 129.1 - - - 596.7 725.8367.1 61.2 37.1 103.5 $ 316.9 885.8
Other liabilities - - - - 65.4 65.470.9 70.9
Shareholders' equity - - - - 290.4 290.4
----------365.8 365.8
-------- --------------- ------ ------ ------- -------- -------- ----------
Total sources of funds $2,493.7 $611.1 $862.6 $213.1 $ 2,415.9 $ 283.7 $ 451.6 $ 261.9 $ 952.5 $ 4,365.6
==========753.6 $4,934.1
======== =============== ====== ====== ======= ======== ======== ==========
Off-balance sheet items affecting interest
rate sensitivity $ 65.0(200.0) $120.0 $ - $ (65.0) $ - $ _80.0
Interest rate sensitivity gap $ 195.4269.9 $ (90.6)(7.3) $(32.7) $ 254.8 $ 181.8 $ (541.4)47.8 $(277.7)
Percent of total assets 4.5% (2.1)5.5% (.2)% 5.8% 4.2% (12.4)(.7)% 1.0% (5.6)%
Cumulative interest rate sensitivity gap $ 195.4 $ 104.8 $ 359.6 $ 541.4269.9 $262.6 $229.9 $277.7
Cumulative as a % of total assets 5.5% 5.3% 4.6% 5.6%
2426
27
EARNING ASSETS29
Earning Assets
Average earning assets of $3,891.8increased 18.3% to $4,990.4 million in 1994 as compared
to the 1993 increased 18.9% fromlevel of $4,220.1 million and the 1992 level of $3,272.1 million and the 1991 level of $3,079.4$3,501.7 million.
Earning assets comprised 91.3%91.5% of total average assets in 19931994 compared with
92.3%90.9% in 1992,1993, with average loans representing 51.5%51.6% of earning assets in 19931994
compared to 59.7%52.7% in 1992.1993.
The volume of liquid money market investments consisting of interest-bearing
deposits, federal funds sold and security resell agreements and other money
market investments, increased 68.9%10.3% to $770.2$869.7 million
in 19931994 from $456.0$788.7 million in 1992. Investment and trading1993. Average securities increased 29.7%27.8% to
$1,118.0$1,545.7 million in 19931994 from $862.0$1,209.2 million in 1992. The increase was reflected
primarily in the taxable securities category.1993. Average loan volume
increased 2.5%15.9% to $2,003.6$2,575.0 million in 19931994 as compared to $1,954.1$2,222.2 million in
1992.1993.
The following table sets forth the composition of average earning assets for the
years indicated:
AVERAGE EARNING ASSETSAverage Earning Assets
(Thousands(Millions of dollars) 1994 1993 1992 1991 1990
1989
------ ------ ------ ------ -------------- -------- -------- -------- --------
Money market investments:
Interest-bearing deposits $ 24.4 $ 104.0 $ 184.1 $ 234.9 $ 104.2
$ 115.0
Federal funds sold and security resell agreements 637.7 232.8 341.6 426.0 301.2845.3 656.2 245.9 355.7 444.0
Other money market investments - 28.5 39.139.0 80.0 2.0 -
-------- -------- -------- -------- --------
Total money market investments 770.2 456.0 656.5 532.2 416.2869.7 788.7 469.0 670.6 550.2
-------- -------- -------- -------- --------
Securities:
Held to maturity:
Taxable securities 894.2 719.5 571.3 421.9 373.5726.9 958.8 766.0 604.5 444.8
Nontaxable securities 121.0 105.6 61.5 60.2 67.2193.8 147.6 125.1 74.7 70.3
Available for sale 334.1 - - - -
Trading securitiesaccount 290.9 102.8 36.9 22.722.8 14.6 4.9
-------- -------- -------- -------- --------
Total securities 1,118.0 862.0 655.5 496.7 445.61,545.7 1,209.2 928.0 702.0 529.7
-------- -------- -------- -------- --------
Loans:
Loans held for sale 187.5 185.9 186.9187.0 106.0 114.4 91.6
Net loans and leases 1,817.7 1,767.2 1,661.4 1,602.8 1,564.62,387.5 2,036.3 1,917.7 1,769.9 1,691.8
-------- -------- -------- -------- --------
Total loans 2,003.6 1,954.1 1,767.4 1,717.2 1,656.22,575.0 2,222.2 2,104.7 1,875.9 1,806.2
-------- -------- -------- -------- --------
Total earning assets $3,891.8 $3,272.1 $3,079.4 $2,746.1 $2,518.0$4,990.4 $4,220.1 $3,501.7 $3,248.5 $2,886.1
======== ======== ======== ======== ========
2527
28
INVESTMENT SECURITIES PORTFOLIO30
Investment Securities Portfolio
Investment securities prior to December 31, 1993 were held to maturity and
carried at amortized cost. At December 31, 1993 the Company adopted SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities"Securities," and
segregated the portfolio for securities held to maturity carried at amortized
cost, and securities available for sale carried at market. The following table
presents the Company's year-end investment securities portfolio.
Investment Securities Portfolio
December 31,
----------------------------------------------------
1993------------------------------------------------------------------
1994 1993 1992
1991------------------------ ------------------------- ---------
(In thousands) Amortized Market Amortized Market Amortized
cost value cost cost
----------- ----------- ----------- -----------Value Cost
---------- ---------- ---------- ---------- ---------
Held to maturity
- ----------------
U.S. treasuryTreasury securities $ - $ - $ 15,267- $ 34,649- $ 57,380
U.S. government agencies and corporations:
Small business administrationBusiness Administration
loan-backed securities 460,163 459,313 399,603 411,846 366,867
300,398
Other agency securities 271,440 262,144 157,098 157,544 93,920 54,929101,949
States and political subdivisions 168,090 168,873 123,048 112,916243,225 242,754 196,241 198,664 148,363
Other debt securities - - - - 10,000 -
---------- ---------- ----------- -----------
724,791 738,263 609,102 502,892---------- ---------- --------
974,828 964,211 752,942 768,054 684,559
Mortgage-backed securities 56,079 54,587 60,318 62,033 162,428 192,199
Equity securities:
Federal Home Loan Bank stock - - - - 62,536 55,526
Other stock - - 33,240 1,494- - 33,472
---------- ---------- ----------- -----------
785,109 800,296 $ 867,306 $ 752,111
---------- ---------- =========== ===========--------
1,030,907 1,018,798 813,260 830,087 $942,995
---------- ---------- ---------- ---------- ========
Available for sale
- ------------------
U.S. treasuryTreasury securities 15,058 15,05848,269 47,177 70,263 70,512
U.S. government agencies 31,099 31,09933,304 33,304 61,107 61,077
---------- ---------- 46,157 46,157---------- ----------
81,573 80,481 131,370 131,589
---------- ---------- ---------- ----------
Mortgage-backed securities 55,560 54,334 49,493 49,363
49,363---------- ---------- ---------- ----------
Equity securities:
Mutual funds:
Accessor Funds, Inc. 91,245118,983 111,529 90,736 91,245
Other 534 534 515 515
Stock:
Federal Home Loan Bank stock65,861 65,861 72,376 72,376
Other stock 1,936 1,9362,785 2,839 2,194 2,258
---------- ---------- 166,072 166,072
---------- ----------
261,592 261,592187,983 180,763 165,821 166,394
---------- ---------- $1,046,701 $1,061,888---------- ----------
325,116 315,578 346,684 347,346
---------- ---------- ---------- ----------
Total $1,356,023 $1,334,376 $1,159,944 $1,177,433
========== ========== ========== ==========
2628
29
MATURITIES AND AVERAGE YIELDS OF INVESTMENT SECURITIES31
Maturities and Average Yields of Investment Securities
The following table presents by maturity range and type of security, the average
yield of the investment portfolio at December 31, 1993.1994. The average yield is
based on effective rates on book balancesamortized cost at the end of the year.
Maturities and Average Yields of Investment Securities
at December 31, 1994
After one After five
Total Within one but within but within After ten
securities year five years --------------------ten years years
----------------- --------------- ----------------
(In millions)--------------- -------------- -------------
(Millions of Dollars) Amt. Yield* Amt. Yield* Amt. Yield* Amt. Yield* Amt. Yield
Amt. Yield Amt. Yield
-------------------------- -------- ------ ------------- ------ ------ ------ ------ ------ ------ -----
------- -----
Held to maturity
at amortized cost- ----------------
U.S. government agencies and corporations:
Small business administration loan-
backedBusiness Administration
loan-backed securities $ 399.6 5.1%460.2 6.6% $ 31.7 5.1% $ 109.4 5.1%42.8 6.6% $140.7 6.6% $122.7 6.6% $153.9 6.7%
Other agency securities 157.1271.4 5.3% 19.8 4.5% 249.3 5.4% 1.0 5.2% 21.8 7.4% 129.7 4.8%1.3 6.6%
States and political subdivisions 168.1243.2 7.9% 36.0 6.9% 114.7 8.0% 77.8 8.4% 14.8 7.4%
22.1 6.2% 72.4 7.5%
---------- ---- ------- ---- ------- ----
724.8 5.6% 75.6 6.1% 311.5 5.5%-------- ------ ------ ------ ------
974.8 6.6% 98.6 6.3% 504.7 6.3% 201.5 7.3% 170.0 6.8%
Mortgage-backed securities 60.3 5.5% 11.9 5.5% 27.9 5.5%
---------- ---- ------- ---- ------- ----
785.1 5.6% 87.5 6.0% 339.4 5.5%
---------- ---- ------- ---- ------- ----56.1 6.2% 9.3 6.4% 27.5 6.2% 12.3 6.3% 7.0 6.3%
-------- ------ ------ ------ ------
1,030.9 6.6% 107.9 6.3% 532.2 6.3% 213.8 7.2% 177.0 6.8%
-------- ------ ------ ------ ------
Available for sale
at market- ------------------
U.S. treasuryTreasury securities 15.1 5.5% 10.8 5.7% 4.0 4.9%48.3 4.5% 32.9 4.5% 15.2 4.5% - -% .2 7.8%
U.S. government agencies 31.1 14.1% 31.1 14.1%33.3 16.9% 33.3 16.9% - -% - ---------- ---- ------- ---- ------- ----
46.2 11.3% 41.9 11.9% 4.0 4.9%
---------- ---- ------- ---- ------- -----% - -%
-------- ------ ------ ------ ------
81.6 9.5% 66.2 10.7% 15.2 4.5% - -% .2 7.8%
-------- ------ ------ ------ ------
Mortgage-backed securities 49.4 5.9% 5.155.5 6.1% 20.8 6.1%
---------- ---- ------- ---- ------- ----3.9 7.1% 14.7 6.8% 16.5 6.4% 20.4 5.0%
-------- ------ ------ ------ ------
Equity securities:
Mutual funds:
Accessor Funds, Inc. 91.2 4.9% - - - -188.8 6.1% 118.8 6.1%
Other .5 3.1% - - - -5.3% .5 5.3%
Stock:
Federal Home Loan Bank 72.4 14.0% - - - -65.9 6.3% 65.9 6.3%
Other 1.9 5.1% - - - -
---------- ---- ------- ---- ------- ----
166.0 9.0%
---------- ---- ------- ---- ------- ----
261.6 8.8% 47.0 11.3% 24.8 6.0%
---------- ---- ------- ---- ------- ----
$ 1,046.72.8 5.5% 2.8 5.5%
-------- ------
188.0 6.2% 188.0 6.2%
-------- ------ ----- ------ ------
325.1 7.0% 70.1 10.5% 29.9 5.7% 16.5 6.4% $ 134.5 7.9% $ 364.2 5.5%
==========208.6 6.1%
-------- ------ ------ ------ ------
Total $1,356.0 6.7% $178.0 8.0% $562.1 6.3% $230.3 7.1% $385.6 6.4%
======== ==== ============= ==== ======= ====
After five
but within After ten
ten years years
-------------- -------------
(In millions) Amt. Yield Amt. Yield
---- ----- ---- -----
Held to maturity at amortized cost
U.S. government agencies and
corporations:
Small business administration loan-
backed securities $ 108.8 5.1% $ 149.7 5.1%
Other agency securities .3 6.9% 5.3 5.7%
States and political subdivisions 64.1 7.8% 9.5 7.1%
-------- --- -------- ----
173.2 6.1% 164.5 5.2%
Mortgage-backed securities 13.5 5.4% 7.0 5.4%
-------- --- -------- ----
186.7 6.1% 171.5 5.2%
-------- --- -------- ----
Available for sale at market
U.S. treasury securities - - .3 8.3%
U.S. government agencies - - - -
-------- --- -------- ----
- - .3 8.3%
-------- --- -------- ----
Mortgage-backed securities 13.9 6.1% 9.6 5.4%
-------- --- -------- ----
Equity securities:
Mutual funds:
Accessor Funds, Inc. - - 91.2 4.9%
Other - - .5 3.1%
Stock:
Federal Home Loan Bank - - 72.4 14.0%
Other - - 1.9 5.1%
-------- --- -------- ----
- - 166.0 9.0%
-------- --- -------- ----
13.9 6.1% 175.9 8.7%
-------- --- -------- ----
$ 200.6 6.1% $ 347.4 7.0%
======== === ============== ==== ====== ==== ====== ====
* An effective tax rate of 30% was used to adjust tax-exempt securities yields
to rates comparable to those on fully taxable securities.
At December 31, 1993,1994, the value of the Accessor Funds Inc. and the Federal Home
Loan Bank of Seattle stock each exceeded ten percent of shareholders' equity.
2729
30
LOAN PORTFOLIO32
Loan Portfolio
During 1993,1994, the Company consummated a revolving consumersecuritized loan securitizationsales of SBA loans, home
equity loans, credit card receivables and automobile loans totaling
approximately $190$703.0 million andleading to a home refinance loan securitization
totaling approximately $159 million.$322.4 million net increase in
securitized receivables outstanding, excluding long-term residential mortgages.
After these sales, loans and leases at December 31, 19931994 totaled $2,250,491,000, an increase$2,416.1
million, a slight decrease of 15.7%3.7% compared to $1,945,223,000$2,508.2 million at December 31,
1992, and $1,890,058,000 at December 31,1991.1993. Loans held for sale, real estatecommercial, financial and agriculture loans, and
lease financing increased 3.8%declined 54.4%, 63.2%3.2%, and 4.8%.7%, respectively, at December 31, 1993 compared to December 31,
1992, while commercial, financial, and agricultural loans decreased 11.3%real estate
and consumer loans decreased 17.0%. In the real estate portfolio, construction
loans increased $66,649,000 or 74.7%3.6% and 3.3%, home equity credit line loans increased
$12,224,000 or 8.5%, and 1-4 family residential loans, which include home
refinance loans, increased $207,885,000 or 147.8%, and all other real estate
secured loans increased $129,894,000 or 45.6%.respectively.
The table below sets forth the amount of loans outstanding by type at December
31 for the years indicated:
LOAN PORTFOLIOLoan Portfolio
December 31,
---------------------------------------------------------------------------------------------------------------------------------
(In thousands) 1994 1993 1992 1991 1990
1989
Types ---- ---- ---- ---- ----
- --------------- ---------- ---------- ---------- ----------
Loans held for sale $ 108,649 $ 238,206 $ 229,465 $ 153,782 $ 117,606 $ 130,896
---------- ---------- ---------- ---------- ----------
Commercial, financial and agricultural 418,600 472,115 413,478 424,175 437,186495,647 511,982 593,248 495,883 492,250
---------- ---------- ---------- ---------- ----------
Real estate:
Construction 155,864 89,215 87,727 66,605 53,691218,244 213,114 118,185 100,922 78,355
Other:
Home equity credit line 156,885 144,661 93,338 63,070 54,84940,007 159,998 148,245 96,059 65,193
1-4 family residential 348,493 140,608 159,364 112,368 132,299452,131 367,001 155,831 164,606 122,382
Other real estate-secured 414,995 285,101 320,903 305,990 243,846570,285 495,889 299,769 332,967 311,749
---------- ---------- ---------- ---------- ----------
1,076,237 659,585 661,332 548,033 484,6851,280,667 1,236,002 722,030 694,554 577,679
---------- ---------- ---------- ---------- ----------
Consumer:
Bankcard 25,218 23,144 72,805 68,825 65,39141,035 27,522 24,293 73,789 70,089
Other 348,923 427,860 456,819 506,001 449,593349,998 351,157 430,123 458,712 507,536
---------- ---------- ---------- ---------- ----------
374,141 451,004 529,624 574,826 514,984391,033 378,679 454,416 532,501 577,625
---------- ---------- ---------- ---------- ----------
Lease financing 129,547 130,450 124,480 122,620 115,974 85,950
---------- ---------- ---------- ---------- ----------
Other receivables 10,509 12,857 8,574 9,222 15,502 8,008
---------- ---------- ---------- ---------- ----------
Total loans $2,250,491 $1,945,223 $1,890,058 $1,796,116 $1,661,709$2,416,052 $2,508,176 $2,132,213 $2,008,562 $1,896,636
========== ========== ========== ========== ==========
The Company has no foreign loans in its loan portfolio.
ASSETS MANAGEDLoans Serviced
In recent years, many banks and other financial institutions have had an
increasing tendency to "securitize" loans by pooling and selling them to
investors, with the servicing responsibilities and residual income in excess of
financing costs, servicing expenses, and loan losses accruing to the originating
institution. The "securitization"securitization of receivables can assist an institution in
maximizingeffectively utilizing its abilitycapital and enhancing its liquidity while at the same
time limiting its exposure to originate loans without large increases in capital,
thereby enhancing the return on shareholders' equity.loss. The Company's participation in the
"securitization"securitization process, as well as its participation in originating and selling
mortgage loans and student loans, has increased in recent years. During 1994,
the Company securitized and sold SBA 504 first mortgage loans totaling $43.7
million, home equity credit line receivables totaling $192.4 million, credit
card receivables totaling $163.1 million, and automobile loans totaling $303.8
million. At December 31, 1993,1994, real estate loans serviced for others amounted to
$1,466.5$1,760.1 million compared to $1,650.4 million at December 31, 1993, and $1,252.8
million at December 31, 1992, and $1,224.3 million
at December 31, 1991. Other1992. Securitized loans serviced for investors at
December 31, 19931994 totaled $373.4$786.6 million compared to $464.2 million at December
31, 1993 and $267.9 million at December 31, 1992,1992.
30
33
Loan Maturities and $158.2 million at December 31, 1991.
28
31
LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATESSensitivity to Changes in Interest Rates
The following table shows maturity distribution and sensitivity to changes in
interest rates of the loan portfolio at December 31, 1993.1994:
Loan Maturities and Sensitivity to Changes in Interest Rates
Maturities
----------------------------------------------------------------------------------------------------
One One year Over
year or through five
(In thousands) less five years years Total
------------------- ---------- -------- ----------
Loans held for sale $238,206$108,649 $ - $ - $ 238,206108,649
-------- -------- -------- ----------
Commercial, financial and agricultural 229,515 158,987 30,098 418,600280,717 153,468 61,462 495,647
-------- -------- -------- ----------
Real estate:
Construction 135,763 20,101186,703 31,541 - 155,864218,244
Other:
Home equity credit line 3,535 15,042 138,308 156,8854,639 16,226 19,142 40,007
1-4 family residential 9,403 24,061 315,029 348,49313,751 29,789 408,591 452,131
Other real estate-secured 52,125 108,595 254,275 414,99555,633 166,265 348,387 570,285
-------- -------- -------- ----------
200,826 167,799 707,612 1,076,237260,726 243,821 776,120 1,280,667
-------- -------- -------- ----------
Consumer:
Bankcard - 25,21841,035 - 25,21841,035
Other 47,947 248,834 52,142 348,92387,696 207,941 54,361 349,998
-------- -------- -------- ----------
47,947 274,052 52,142 374,14187,696 248,976 54,361 391,033
-------- -------- -------- ----------
Lease financing 14,014 106,618 9,818 130,45019,338 99,474 10,735 129,547
-------- -------- -------- ----------
Other receivables 12,857 - - 12,8579,929 399 181 10,509
-------- -------- -------- ----------
Total $743,365 $707,456 $799,670 $2,250,491$767,055 $746,138 $902,859 $2,416,052
======== ======== ======== ==========
Loans maturing in more than one year:
With fixed interest rates $237,754 $389,412 $359,946$350,076 $486,711 $ 987,112836,787
With variable interest rates 505,611 318,044 439,724 1,263,379
--------396,062 416,148 812,210
-------- -------- ----------
Total $743,365 $707,456 $799,670 $2,250,491
========$746,138 $902,859 $1,648,997
======== ======== ==========
CREDIT RISK MANAGEMENTCredit Risk Management
Management of credit risk is a primary objective in maintaining a safe and sound
institution. To accomplish this task, the Company has written and placed in
effect loan policies to govern each of its loan portfolios. Loan policies assist
the Company in providing a framework for consistency in the acceptance of credit
and a basis for sound credit decisions. Generally, the Company makes its credit
decisions based upon debtor cash flow and available collateral. The Company has
structured its organization to separate the lending function from the credit
administration function to strengthen the control and independent evaluation of
credit activities. In addition, the Company has well-defined standards for
grading its loan portfolio, and maintains an internal Credit Examination
Department which periodically conducts examinations of the quality,
documentation, and administration of the Company's lending departments, and
submits reports thereon to a committee of the Board of Directors. Emphasis is
placed on early detection of potential problem credits so that action plans can
be developed on a timely basis to mitigate losses.
2931
32
LOAN RISK ELEMENTS34
Loan Risk Elements
The following table shows the principal amounts of nonaccrual, past due 90 days
or more, restructured loans, and potential problem loans at December 31 for each
year indicated.indicated:
December 31,
------------------------------------------------------------------------------------------------
(In thousands) 1994 1993 1992 1991 1990
1989
------ ------ ------ ------ ------------- ------- ------- ------- -------
Nonaccrual loans $22,398 $20,148 $31,966 $34,396 $40,921$13,635 $23,364 $21,556 $33,497 $35,802
Loans contractually past due 90 days or more (not included in nonaccrual
loans above) 9,955 6,219 5,131 10,156 15,2183,041 10,821 6,409 5,315 10,273
Restructured loans (not included in nonaccrual loans or loans
contractually past due 90 days or more) 567 4,006 4,003 3,225 10,181 11,370
Potential problem loans (loans presently current by their terms, but about
which management has serious doubt as to the future ability of the
borrower to comply with present repayment terms) - 1,114 6,263 5,042 5,194 6,093
Includes loans held for sale.
Impact of Nonperforming Loans on Interest Income
The following table presents the gross interest income on nonaccrual and
restructured loans that would have been recorded if these loans had been current
in accordance with their original terms (interest at original rates), and the
amount of interest income on these loans that was included in income for each
year indicated.indicated:
1994 1993 1992
1991------------------------- ------------------------ ------------------------- ----------------------------------------------
Re- Re- Re-
Non- strucstruc- Non- struc Non- struc
(In thousands) accrual tured Total accrual tured Total accrual tured Total
------- ----- ----------- ------- ----- ------ ------ ----- ------- ----- -----------
Gross amount of interest that would have been
recorded at original rate $ 2,858 $ 193 $ 3,051 $ 2,082 $ 302 $ 2,384 $ 3,771 $ 327 $ 4,098$1,713 $53 $1,766 $2,858 $193 $3,051 $2,082 $302 $2,384
Interest that was included
in income 371 45 416 668 152 820 793 247 1,040
1,745 312 2,057
------- ----- ------- ------- ----- ------- ------- ----- -------------- --- ------ ------ ---- ------ ------ ---- ------
Net impact on interest income $1,342 $ 2,1908 $1,350 $2,190 $ 41 $ 2,231 $ 1,289$2,231 $1,289 $ 55 $ 1,344 $ 2,026 $ 15 $ 2,041
======= ===== ======= ======= ===== ======= ======= ===== ========$1,344
====== === ====== ====== ==== ====== ====== ==== ======
Potential problem loans consist primarily of commercial loans and commercial
real estate loans of $1 million. Management reviews loans graded "special
mention" and monitors the status of such loans for becoming potential problem
loans and their likelihood of becoming nonperforming loans. At December 31,
1993,1994, management identifiedconsidered no loans as potential problem loans compared to two
loans totaling $1,114,000, compared toat December 31, 1993 and three loans totaling
$6,263,000 at December 31, 1992,
and three loans totaling $5,042,000 at December 31, 1991.1992. Management believes that for the near future,
potential problem loans should remain at about the
currenta relatively low level.
Another aspect of the Company's credit risk management strategy is the
diversification of the loan portfolio. At year-end, the Company had 19%4% of its
portfolio in loans held for sale, 21% in commercial loans, 48%53% in real estate
loans, 16% in consumer loans, 11% in loans held for sale, and 6% in lease financing.financing and other. The Company's
real estate portfolio is also diversified. Of the total portfolio, 9% is in real
estate construction loans, 2% is in home equity credit lines, 19% is in 1-4
family residential loans and 23% is in commercial loans secured by real estate.
In addition, the Company attempts to avoid the risk of an undue concentration of
credits in a particular industry or trade group, as indicated by the commercial
loan and lease portfolio being allocated over more than 17 major industry
classifications. At year end,year-end, the largest concentration in the commercial loan
and leasing portfolioportfolios was in the retail industrymanufacturing group which comprised
approximately 17% of the portfolio. The retailmanufacturing group iswas also well
diversified in eightover several subcategories. Agricultural and mining loans comprise
less than 7% of total commercial loans. Segments of the real estate portfolio as a percentage
of total loans included 7% constructions loans, 7% home equity credit line
loans, 16% 1-4 family residential loans and 18% other real estate-secured loans. The Company has no significant exposure
to highly leveraged transactions and has no foreign credits in its loan
portfolio.
3032
33
NONPERFORMING ASSETS35
Nonperforming Assets
Nonperforming assets include nonaccrual loans, restructured loans, and other
real estate owned. Loans are generally placed on nonaccrual status when the loan
is 90 days or more past due as to principal or interest, unless the loan is in
the process of collection and well-secured. Consumer loans are not placed on a
nonaccrual status inasmuch as they are generally charged off when they become
120 days past due. Loans are restructured to provide a reduction or deferral of
interest or principal payments when the financial condition of the borrower
deteriorates and requires that the borrower be given temporary or permanent
relief from the contractual terms of the credit. Other real estate owned is
acquired through or in lieu of foreclosure on credits that are secured by real
estate.
Nonperforming assets totaled $29,425,000$18.9 million as of December 31, 1993, an increase1994, a decrease
of 1.6%38.2% from $28,975,000$30.6 million as of December 31, 1992, but a decrease of 32.7% from
the $43,692,0001993. Nonperforming assets
totaled $31.5 million at December 31, 1991.1992. Nonperforming assets represented
1.32%.79% of net loans and leases, other real estate owned and other nonperforming
assets at December 31, 1994, as compared to 1.23% and 1.49% at December 31, 1993
as compared to
1.50% and 2.34% at December 31, 1992, and 1991, respectively. Nonperforming assets as a percentage of net loans and
leases, other real estate owned, and other nonperforming assets at December 31,
19931994 are at their lowest levels since at least 1985, the period whereduring which
records have been maintained using the present definitions.
Accruing loans past due 90 days or more totaled $9,955,000$3.0 million as of December 31,
1993,1994, as compared to $6,219,000$10.8 million at December 31, 1992 and $5,131,000 of December
31, 1991.1993. These loans equal .45%.13%
of net loans and leases at December 31, 1993,1994, as compared to .32% and .28%.44% at December
31, 1992 and 1991, respectively.1993.
Continuous efforts have been made to reduce nonperforming loans and to liquidate
real estate owned properties in such a manner as to recover the greatest value
possible. Significant steps have been taken during the last few years to
strengthen the Company's credit culture by implementing a number of initiatives
designed to increase internal controls and improve early detection and
resolution of problem loans.
The following table sets forth the composition of nonperforming assets at
December 31 for the years indicated:
Nonperforming Assets
NONPERFORMING ASSETS
(Thousands of dollars) 1994 1993 1992 1991 1990
1989
------ ------ ------ ------ ------------- ------- ------- ------- -------
Nonaccrual Loans:loans:
Commercial, financial and agricultural $ 6,5665,736 $ 1,8476,969 $ 12,771 $ 13,632 $ 14,4572,981 $13,983 $14,978
Real estate 11,714 13,699 12,024 16,680 16,0885,290 12,277 13,973 12,343 16,740
Consumer 862 607 1,377 2,198 2,646
7,503
Lease financing 1,747 3,511 3,225 4,973 1,438
2,873
-------- -------- -------- -------- --------------- ------- ------- ------- -------
Total 22,398 20,148 31,966 34,396 40,921
-------- -------- -------- -------- --------13,635 23,364 21,556 33,497 35,802
------- ------- ------- ------- -------
Restructured loans:
Commercial, financial and agricultural - 8 1,204 480 740
1,440
Real estate 567 3,998 2,799 2,745 9,441
9,930
-------- -------- -------- -------- --------------- ------- ------- ------- -------
Total 567 4,006 4,003 3,225 10,181
11,370
-------- -------- -------- -------- --------------- ------- ------- ------- -------
Other real estate owned:
Commercial, financial and agriculturalagricultural:
Improved 598 1,952 2,763 2,935 14,555415 844 3,099 4,200 4,422
Unimproved 1,018 904 1,844 3,053 6,286
9,231
Residential:
1-4 family 63 1,182 681 874 2,938
5,076
Multi-family - - - 96 483
1,487
Lots 6 163 45 540 1,455
5,203
Recreation property 42 110 238 445 774
1,532
Other 18 64 64 730 1,076
805
Less: reserve------- ------- ------- ------- -------
Total 1,562 3,267 5,971 9,938 17,434
Other nonperforming assets 3,179 - - - -
(4,857)
-------- -------- -------- -------- --------------- ------- ------- ------- -------
Total 3,021 4,824 8,501 15,947 33,032
-------- -------- -------- -------- --------4,741 3,267 5,971 9,938 17,434
------- ------- ------- ------- -------
Total $ 29,425 $ 28,975 $ 43,692 $ 60,524 $ 85,323
======== ======== ======== ======== ========$18,943 $30,637 $31,530 $46,660 $63,417
======= ======= ======= ======= =======
% of net loans,*loans* and leases, and other real estate owned 1.32% 1.50% 2.34% 3.39% 5.09%and
other nonperforming assets .79% 1.23% 1.49% 2.35% 3.36%
3133
3436
Nonperforming Assets (continued)
NONPERFORMING ASSETS (continued)
(Thousands of dollars) 1994 1993 1992 1991 1990
1989------ ------- ------ ------ ------ ------ -------------
Accruing loans past due 90 days or more:
Commercial, financial and agricultural $ 851431 $ 2,7031,612 $2,893 $1,886 $ 1,704 $ 3,139 $ 6,7743,256
Real estate 8,7761,975 8,881 3,044 2,259 4,274
5,684
Consumer 631 327 451 1,1211,123 2,717
2,568
Lease financing 4 1 21 47 26
192------ ------- ------- ------- -------------- ------ -------
Total $ 9,955 $ 6,219 $ 5,131 $ 10,156 $15,218$3,041 $10,821 $6,409 $5,315 $10,273
====== ======= ======= ======= ============== ====== =======
% of net loans* and leases .45% .32% .28% .57% .93%.13% .44% .30% .27% .55%
*Includes loans held for sale.
ALLOWANCE FOR LOAN LOSSESAllowance For Loan Losses
The Company's allowance for loan losses was 2.93%2.80% of net loans and leases at
December 31, 1993,1994, as compared to 2.97%2.75% as of December 31, 19921993 and 3.02%2.84% as of
December 31, 1991.1992. Loan charge-offs decreased 53.7%increased 32.5% and recoveries increased
57.2%decreased
51.7% in 19931994 as compared to 1992,1993, which resulted in a ratio of net charge-offs
to average loans and leases of (.27).19% in 1994, compared to (.23)% in 1993, compared to .48%and
.44% in 1992 and
1.49% in 1991.1992. The allowance for loan and lease losses relative to problem loans
continued to strengthen in 1993. The allowance, as a percentage of
nonperforming loans, at December 31, 1993 was 247.19%, as compared to 236.37%
and 159.88% at December 31, 1992 and 1991, respectively. Nonperforming loans
are defined as loans on which interest is not accrued and restructured loans.1994. The allowance, as a percentage of noncurrent
loans, was 201.73% at December 31,
1993401.9% in 1994 as compared to 216.51%200.3% in 1993, and 151.66% at December 31, 1992 and 1991,
respectively.213.9% in 1992.
Noncurrent loans are defined as loans on which interest is not accrued, plus
loans 90ninety days or more past due on which interest continues to accrue.
In analyzing the adequacy of the allowance for loan and lease losses, management
utilizes a comprehensive loan grading system to determine risk potential in the
portfolio, and considers the results of independent internal and external credit
reviews, historical charge-off experience, and changes in the composition and
volume of the portfolio. Other factors, such as general economic conditions and
collateral values, are also considered. Larger problem credits are individually
evaluated to determine appropriate reserve allocations. Additions to the
allowance are based upon the resulting risk profile of the portfolio developed
through the evaluation of the above factors.
3234
35
SUMMARY OF LOAN LOSS EXPERIENCE37
Summary Of Loan Loss Experience
The following table shows the changes in the allowance for losses for each year
indicated.
(In thousands) 1994 1993 1992 1991 1990
1989
---------- ----------- ----------- ----------- --------------------- ---------- ---------- ----------
Loans* and leases outstanding at December 31 (net of
unearned income) $2,230,670 $1,921,496 $1,861,562 $1,767,825 $1,641,631$2,391,278 $2,486,346 $2,107,433 $1,979,726 $1,868,199
========== ========== ========== ========== ==========
Average loans* and leases outstanding (net of
unearned income) $2,003,548 $1,954,121 $1,767,401 $1,717,202 $1,656,159$2,574,995 $2,222,182 $2,104,679 $1,875,928 $1,806,188
========== ========== ========== ========== ==========
Allowance for possible losses:
Balance at beginning of year $ 57,08668,461 $ 56,26359,807 $ 59,01558,238 $ 60,27160,948 $ 54,55362,001
Allowance of companies (sold) or acquired or (sold)1,308 546 - - (1,224) -
Loans and leases charged-off:
Loans held for sale - - - - -
Commercial, financial, and agricultural (1,428) (5,509) (15,114) (9,886) (13,340)(5,158) (1,804) (6,224) (17,298) (11,841)
Real estate (573) (1,179) (2,544) (4,363) (2,281)
(5,416)
Consumer (4,756) (5,461) (9,527) (13,982) (12,888) (10,287)(9,559) (14,073) (12,918)
Lease financing (1,174) (360) (604) (847) (473) (589)
Other receivables - - - - -
---------- ----------- ----------- ----------- --------------------- ---------- ---------- ----------
Total (8,428) (18,184) (34,306) (25,528) (29,632)(11,661) (8,804) (18,931) (36,581) (27,513)
---------- ----------- ----------- ----------- --------------------- ---------- ---------- ----------
Recoveries:
Loans held for sale - - - - -
Commercial, financial, and agricultural 9,964 4,388 3,156 3,983 4,2912,180 10,117 5,197 3,456 4,177
Real estate 676 611 477 829 516
540
Consumer 3,042 3,788 3,6993,732 3,043 3,794 3,704 2,701 1,565
Lease financing 141 148 103 321 207 157
Other receivables - - - - -
---------- ----------- ----------- ----------- --------------------- ---------- ---------- ----------
Total 13,765 8,756 8,005 7,407 6,5536,729 13,919 9,571 8,310 7,601
---------- ----------- ----------- ----------- --------------------- ---------- ---------- ----------
Net loan and lease (charge-offs) recoveries 5,337 (9,428) (26,301) (18,121) (23,079)(4,932) 5,115 (9,360) (28,271) (19,912)
Provision charged against earnings 2,298 10,251 23,549 18,089 28,7972,181 2,993 10,929 25,561 20,083
---------- ----------- ----------- ----------- --------------------- ---------- ---------- ----------
Balance at end of year $ 65,26767,018 $ 57,08668,461 $ 56,26359,807 $ 59,01558,238 $ 60,27160,948
========== =========== =========== =========== ===========
*Includes loans held for sale.========== ========== ========== ==========
Ratio of net charge-offs (recoveries) to average loans
and leases (.27).19% (.23)% .48% 1.49% 1.06% 1.39%.44% 1.51% 1.10%
Ratio of allowance for possible losses to loans and
leases outstanding at December 31 2.93% 2.97% 3.02% 3.34% 3.67%2.80% 2.75% 2.84% 2.94% 3.26%
Ratio of allowance for possible losses to
nonperforming loans at December 31 247.19% 236.37% 159.88% 132.39% 115.26%471.89% 250.13% 234.00% 158.59% 132.54%
Ratio of allowance for possible losses to nonaccrual
loans and accruing loans contractually
past due 90 days or more at
December 31
201.73% 216.51% 151.66% 132.46% 107.36%401.88% 200.27% 213.86% 150.05% 132.28%
33*Includes loans held for sale.
35
3638
Review of nonperforming loans and evaluation of the quality of the loan
portfolio, as previously mentioned, results in the identification of certain
loans with risk characteristics which warrant specific reserve allocations in
the determination of the amount of the allowance for loan losses. The allowance
is not allocated among all loan categories, and amounts allocated to specific
categories are not necessarily indicative of future charge-offs. An amount in
the allowance not specifically allocated by loan category is necessary in view
of the fact that, while no loans were made with the expectation of loss, some
loan losses inevitably occur. The following is a categorization of the allowance
for loan losses for each year indicated.indicated:
1994 1993
1992
------------------------------------ ------------------
Alloca- Alloca-
% of tion of % of tion of
(In thousands) total allow- total allow-
loans ance loans ance
----- ------- ----- ------- ------ -------
Type of loan
------------
Type of loan
- ------------
Loans held for sale 10.6%4.5% $ - 11.7%9.5% $ -
Commercial, financial and agricultural 18.6 2,632 24.0 4,09620.5 2,920 20.4 3,094
Real estate 47.8 3,398 33.3 3,96653.0 1,594 49.3 4,032
Consumer 16.616.2 946 15.1 2,366 23.0 2,711
Lease financing 5.85.4 981 5.2 1,043 6.3 1,818
Other receivables .6 1.7
------ ------.4 - .5 -
----- -----
Total loans 100.0% 100.0%
====== =========== =====
Off-balance sheet unused commitments
and standby letters of credit 3,674 1,972 3,710
------- -------
Allocated 11,411 16,30110,115 12,507
Unallocated 53,856 40,78556,903 55,954
------- -------
Total allowance for loan losses $ 65,267 $ 57,086$67,018 $68,461
======= =======
1992 1991 1990
1989
------------------- ------------------- -------------------
Alloca Alloca Alloca------------------ ----------------- ------------------
Alloca- Alloca- Alloca-
% of tion of % of tion of % of tion of
(In thousands) total allow- total allow- total allow-
loans ance loans ance loans ance
------ ------- ----- ------- ------ ------- ------- ------- -------
Type of loan
------------
Type of loan
- ------------
Loans held for sale 8.0%10.8% $ - 6.4%7.6% $ - 7.7%6.2% $ -
Commercial, financial and agricultural 21.6 7,943 23.2 10,485 25.8 9,20027.8 4,619 24.7 8,419 26.0 11,103
Real estate 34.3 6,565 29.833.9 4,240 34.6 6,884 30.5 1,722
28.6 987
Consumer 27.721.3 2,711 26.5 3,684 31.530.4 1,814 30.4 3,562
Lease financing 6.45.8 1,818 6.1 2,279 6.36.1 200 5.0 416
Other receivables 2.0.4 - 2.8.5 - 2.5.8 -
------ ------ ----------- ----- -----
Total loans 100.0% 100.0% 100.0%
====== ====== =========== ===== =====
Off-balance sheet unused commitments and
standby letters of credit 3,710 5,567 5,374
4,836
-------- --------------- ------- -------
Allocated 26,038 19,595 19,00117,098 26,833 20,213
Unallocated 30,225 39,420 41,270
-------- -------- --------42,709 31,405 40,735
------- ------- -------
Total allowance for loan losses $ 56,263 $ 59,015 $ 60,271
======== ======== ========$59,807 $58,238 $60,948
======= ======= =======
3436
37
DEPOSITS39
Deposits
Total average deposits increased 5.8%12.7% to $2,820.8$3,583.1 million in 19931994 from $2,666.7$3,178.9
million in 1992 and $2,531.8 million in 1992.1993. Total deposits increased 9.3%8.0% to $3,024,111,000$3,706.0 million at December
31, 19931994 compared to $2,764,824,000$3,432.3 million at December 31, 1992.1993. The Company's base of coredemand
deposits consisting of demand,increased .7% and savings and money market accounts, increased 21.9% and 12.5%, respectively,9.7%
comparing December 31, 19931994 to December 31, 1992,1993, while certificates of deposit
under $100,000 decreased 12.6%4.0%. Domestic deposits over $100,000 decreased 6.8%increased 52.6%
to $123.5 million and foreign deposits increased 29.9% respectively, comparing95.6% to $134.1 million at
December 31, 1993 to
December 31, 1992.1994.
The following table presents the average amount and the average rate paid on
each of the following categories for each year indicated:
AVERAGE DEPOSIT AMOUNTS AND AVERAGE RATESAverage Deposit Amounts and Average Rates
(In millions) 1994 1993 1992
1991
--------- ---------- ----------------- -------- --------
Average amounts:
Noninterest-bearing demand deposits $ 609.3838.1 $ 483.6729.7 $ 444.0556.5
Savings deposits 625.2 476.4 524.5740.3 648.2 494.1
Money market deposits 968.3 936.4 674.61,284.7 1,117.0 1,029.5
Time deposits of less than $100,000 515.1 620.6 735.8516.9 548.8 651.2
Time deposits $100,000 or more 47.1 63.2 90.194.7 79.4 95.1
Foreign deposits 108.4 55.8 86.5
62.8
--------- ---------- ----------------- -------- --------
Total average amounts $ 2,820.8 $ 2,666.7 $ 2,531.8
========= ========== =========$3,583.1 $3,178.9 $2,912.9
======== ======== ========
Average rates:
Noninterest-bearing demand deposits -% -% -%
Savings deposits 3.01% 2.97% 3.52% 4.87%
Money market deposits 2.73% 3.35% 5.12%3.11% 2.79% 3.37%
Time deposits under $100,000 4.31% 5.20% 6.74%3.96% 4.28% 5.15%
Time deposits $100,000 or more 3.83% 4.59% 6.26%4.06% 3.79% 4.65%
Foreign deposits 4.10% 2.66% 4.20%
5.17%
Total 3.19%3.31% 3.20% 3.98% 5.68%
Maturities of time deposits $100,000 or more at December 31, 19931994 (In millions):
Under three months $ 19.947.3
Over three months and less than six months 10.722.0
Over six months and less than twelve months 9.324.4
Over twelve months 5.6
---------29.8
-------
Total time deposits $100,000 or more $ 45.5
=========123.5
=======
Substantially allMost foreign deposits are in denominations of $100,000 or more.
3537
38
SHORT-TERM BORROWINGS40
Short-term Borrowings
The following table sets forth data pertaining to the Company's short-term
borrowings for each year indicated:
(In thousands, except rates)
At December 31,
- ---------------
Weighted
Maximum Average average
Weighted month- balance rate
Category of aggregate average end during during
short-term borrowings Balance rate balance the year the year
- --------------------- ------- -------- ------- -------- ------------------- ---------- --------
Securities sold, not yet purchased
1994 $ 81,437 5.33% $ 464,133 $ 184,405 5.95%
1993 $ 46,640 4.96% $ 278,351 $ 69,442 4.38%
1992 $ - -% $ - $ - -%
1991 $ - -% $ - $ - -%
Federal funds purchased and security repurchase
agreements (a)
1994 $524,538 5.51% $1,165,880 $1,057,827 3.88%
1993 $ 595,200$595,200 2.86% $ 595,200 $ 767,309 2.92%
1992 $ 442,897$422,897 3.12% $ 490,774 $ 394,620 3.21%
1991 $ 442,610 4.24% $ 442,610 $ 331,367 5.14%
Federal Home Loan Bank advances and other borrowings
less than one year(b)
1994 $ 25,748 7.70% $ 73,461 $ 32,557 5.44%
1993 $ 136,140$136,140 3.36% $ 136,140 $ 83,123 3.85%
1992 $ 153,533$153,533 3.43% $ 153,533 $ 78,406 4.10%
1991 $ 153,685 5.08% $ 295,145 $ 119,222 6.39%
(a) Federal funds purchased and security repurchase agreements are primarily
on an overnight or demand basis. Rates on overnight funds reflect current
market rates. Rates on fixed-maturity borrowings are set at the time of
the borrowings.
(b) Federal Home Loan Bank advances less than one year are overnight and
reflect current market rates or reprice monthly based on a one-month LIBOR
as set by the Federal Home Loan Bank of Seattle. Other borrowings are
primarily variable rate and reprice based on changes in the prime rate
which reflect current market.
RETURN ON EQUITY AND ASSETSReturn on Equity and Assets
1994 1993 1992 1991
------ ------ ------
Return on average assets 1.17% 1.25% 1.24% 1.22% .87%
Return on average common shareholders' equity 19.90% 19.30% 14.90%18.82% 20.33% 19.64%
Common dividend payout ratio 23.00% 21.20% 29.90%27.06% 21.81% 20.31%
Average equity to average assets ratio 6.25% 6.34% 5.82%6.22% 6.17% 6.31%
3638
39
CAPITAL RESOURCES
In recent years, regulations with respect to capital and capital adequacy for
commercial banks and bank holding companies have been evolving. At41
Capital Resources
IAt year end, there were two measures of capital adequacy in use for commercial
banks and bank holding companies, as follows:
1. Risk-based Capital
Risk-based capital guidelines require varying amounts of capital to be
maintained against different categories of assets, depending on the general
level of risk inherent in the assets. A capital allocation is also required for
off-balance sheet exposures such as letters of credit, loan commitment, and
interest rate contracts. The risk-based capital guidelines are in full effect
in 1993 and 1992. As reflected in the following table, the Company's total risk-based capital ratio was 14.34%14.96%
at December 31, 19931994 and 15.53%14.12% at December 31, 1992.1993. The minimum regulatory
requirement is an 8% total risk-based capital ratio of which 4% must be
comprised of core capital. The minimum risk-based capital ratio for a bank to be
considered "well-capitalized" under the regulatory definitiondefinitions is 10%.
2. Tier I Leverage
Under the risk-based capital guidelines, a bank holding company could, in
theory, significantly leverage its capital through the investmentby investing in assets with little or
no credit risk. The guidelines place a limit on such leverage through the
establishment of a minimum level of tangible equity as a percentage of average
total assets. The Company's Tier I leverage ratio was 5.47% at
December 31, 1993 and 6.24% at December 31, 1992,1994
and 5.44% at December 31, 1993, compared to the minimum regulatory requirement
of 4% to be considered adequately capitalized.3%.
The following table presents the regulatory risk-based capital at December 31
for the years indicated:
Regulatory Risk-Based Capital at December 31
REGULATORY RISK-BASED CAPITAL AT DECEMBER 31
(Thousands of dollars) 1994 1993 1992
1991---------- ---------- ----------
Under Guidelines Effective 1992 ------------- ------------ ------------
--------------------------------
CAPITAL COMPONENTS:and Subsequent
- ----------------------------------------------
Capital components:
Common shareholders' equity $ 277,957345,919 $ 240,543300,175 $ 206,611258,066
Add:
Minority interest in subsidiary 500 -500 -
Deduct:
Goodwill (18,732) (11,920) (12,321) (12,722)
Nonqualifying amount of purchased mortgage servicing - (280) -
-
------------ ------------ ---------------------- ---------- ----------
Tier I capital: Core capital 266,257 228,222 193,889
------------ ------------ ------------327,687 288,475 245,745
---------- ---------- ----------
Allowance for loan losses* 30,672 28,027 29,54035,085 33,657 30,402
Qualifying unsecured long-term debt** 50,00052,400 53,200 87,450
59,910
------------ ------------ ---------------------- ---------- ----------
Tier II capital: Supplementary capital 80,672 115,477 89,450
------------ ------------ ------------87,485 86,857 117,852
---------- ---------- ----------
Total risk-based capital $ 346,929415,172 $ 343,699375,332 $ 283,339
============ ============ ============
RISK-WEIGHTED ASSETS:363,597
========== ========== ==========
Risk-weighted assets:
Balance sheet $ 2,321,546 $ 2,085,990 $ 2,203,077$2,629,427 $2,558,260 $2,273,763
Off-balance sheet 132,228 156,188 160,133
------------ ------------ ------------177,347 134,315 158,419
---------- ---------- ----------
Gross risk-weighted assets 2,453,774 2,242,178 2,363,2102,806,774 2,692,575 2,432,182
Deduct: Excess allowance for loan losses (34,595) (29,059) (26,723)
------------ ------------ ------------(31,933) (34,804) (29,405)
---------- ---------- ----------
Total adjusted risk-weighted assets $ 2,419,179 $ 2,213,119 $ 2,336,487
============ ============ ============
CAPITAL RATIOS:$2,774,841 $2,657,771 $2,402,777
========== ========== ==========
Capital ratios:
Tier I capital: Core capital 11.01% 10.31% 8.30%11.81% 10.85% 10.23%
Tier II capital: Supplementary capital 3.33 5.22 3.83
------------ ------------ ------------3.15% 3.27% 4.90%
---------- ---------- ----------
Total risk-based capital 14.34% 15.53% 12.13%
============ ============ ============14.96% 14.12% 15.13%
========== ========== ==========
* Limited to 1.25% of risk-weighted assets.
** Limited to 50% of core capital and reduced by 20% per year during an
instrument's last five years before maturity.
3739
40
DIVIDENDS42
Dividends
The Company's quarterly dividend rate was $.28$.30 per share for the third and
fourth quarters of 1994, $.28 per share for the first and second quarters of
1994 and the third and fourth quarters of 1993, $.21 per share for the first and second
quarters of 1993 and the fourth quarter of 1992, and $.18 per share for all
other quarterly periods during 1992 and 1991.1992. The annual dividend rate was $1.16 for
1994, $.98 for 1993, and $.75 for 1992 and $.72 for 1991.1992. During the years 19891990 through 19931994 there
was no preferred stock outstanding.
The following table sets forth dividends paid by the Company of each year
indicated:
Dividends Paid
DIVIDENDS PAID
(Thousands of dollars) 1994 1993 1992 1991 1990
1989
-------- -------- -------- -------- -------------- ------ ------ ------ ------
Net income $ 53,039 $ 43,402 $ 29,124 $ 26,640 $ 17,683$63,827 $58,205 $47,209 $30,449 $27,765
Common dividends paid 12,207 9,183 8,698 8,616 8,54417,271 12,692 9,587 9,102 8,939
Payout/net income 23.0% 21.2%27.1% 21.8% 20.3% 29.9% 32.3% 48.3%32.2%
FOREIGN OPERATIONSForeign Operations
Zions First National Bank opened a foreign office located in Grand Cayman, Grand
Cayman Islands, B.W.I. in 1980. This office has no foreign loans outstanding.
The office accepts Eurodollar deposits from qualified customers of the Bank and
places deposits with foreign banks and foreign branches of other U.S. banks.
Foreign deposits at December 31 totaled $134,132,000 in 1994, $68,563,000 in
1993, and $52,777,000 in 19921992; and $52,993,000 in 1991; and averaged $108,383,000 for 1994, $55,823,000
for 1993, and $86,479,000 for 1992 and $62,729,000 for 1991.
381992.
40
4143
ITEM 8.8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report
The Board of Directors and Shareholders
Zions Bancorporation:
We have audited the accompanying consolidated balance sheets of Zions
Bancorporation and subsidiaries as of December 31, 19931994 and 1992,1993, and the
related consolidated statements of income, retained earnings, and cash flows for
each of the years in the three-year period ended December 31, 1993.1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Zions Bancorporation
and subsidiaries as of December 31, 19931994 and 1992,1993, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1993,1994, in conformity with generally accepted accounting
principles.
As discussed in notes 1 and 12 to the consolidated financial statements, the
Company changed its method of accounting for postretirement benefits other than
pensions in 1993 to adopt the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards (Statement) No. 106,
"Employers'Employers' Accounting for Postretirement Benefits Other than Pensions" on January 1, 1993.Pensions. As
discussed in notes 1 and 6, the Company also changed its method of accounting
for income taxes in 1993 to adopt the provisions of Statement No. 109,
"AccountingAccounting for Income Taxes" on January 1, 1993.Taxes. As discussed in notes 1 and 3, the Company also
changed its method of accounting for investments to adopt the provisions of
Statement No. 115, "AccountingAccounting for Certain Investments in Debt and Equity
Securities"Securities on December 31, 1993.
KPMG Peat Marwick LLP
Salt Lake City, Utah
January 25, 1994
3924, 1995
41
4244
ZIONS BANCORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 19931994 and 19921993
(In thousands, except share amounts)
ASSETS 1994 1993
1992
----------------------- ---------
Cash and due from banks $ 303,751 270,023316,943 338,970
Money market investments:
Interest-bearing deposits 19,704 24,967 205,848
Federal funds sold and security resell agreements 553,804 357,975
Other money market investments - 50,361383,742 572,713
Investment securities:
Held-to-maturity, at cost (approximate market value $800,296$1,018,798 and $877,051) 785,109 867,306$830,087) 1,030,907 813,260
Available-for-sale, at market 261,592 -315,578 347,346
Trading account 316,948 98,333 38,700
Loans:
Loans held for sale at cost, which approximates market 108,649 238,206 229,465
Loans, leases, and other receivables 2,012,285 1,715,758
-------------2,307,403 2,269,970
---------- ---------
2,250,491 1,945,2232,416,052 2,508,176
Less:
Unearned income and fees, net of related costs 19,821 23,72724,774 21,830
Allowance for loan losses 65,267 57,086
-------------67,018 68,461
---------- ---------
2,165,403 1,864,4102,324,260 2,417,885
Premises and equipment 62,127 54,35274,673 72,049
Amounts paid in excess of net assets of acquired businesses 18,732 11,920 12,321
Other real estate owned 3,021 4,8241,562 3,267
Other assets 95,529 53,147
-------------131,046 100,344
---------- ---------
$ 4,365,556 3,779,267
=============$4,934,095 4,801,054
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 725,829 595,505885,833 879,908
Interest-bearing:
Savings and money market 1,689,265 1,501,2862,048,715 1,867,483
Time:
Under $100,000 494,922 566,403513,841 535,456
Over $100,000 45,532 48,853123,455 80,879
Foreign 134,132 68,563
52,777
----------------------- ---------
3,024,111 2,764,8243,705,976 3,432,289
Securities sold, not yet purchased 81,437 46,640 -
Federal funds purchased and security repurchase agreements 524,538 595,200 422,897
Accrued liabilities 65,378 44,55470,873 66,497
Federal Home Loan Bank advances and other borrowings:
Less than one year 25,748 136,140 153,533
Over one year 101,571 152,109 51,689
Long-term debt 55,587 99,223
-------------58,182 59,587
---------- ---------
Total liabilities 4,075,165 3,536,720
-------------4,568,325 4,488,462
---------- ---------
Shareholders' equity:
Capital stock:
Preferred stock, without par value; authorized 3,000,000 shares; issued and outstanding, none - -
Common stock, without par value; authorized 30,000,000 shares; issued and outstanding,
12,744,95914,559,552 shares and 12,272,57614,201,367 shares 56,691 52,52679,193 66,257
Net unrealized holding gains and losses on securities available-for-sale (note 3) 432 -(5,866) 415
Retained earnings 233,268 190,021
-------------292,443 245,920
---------- ---------
Total shareholders' equity 290,391 242,547365,770 312,592
---------- ---------
Commitments and contingent liabilities (notes 7, 8, 9, 10, 12, and 14)
------------- ---------
$ 4,365,556 3,779,267
=============$4,934,095 4,801,054
========== =========
See accompanying notes to consolidated financial statements.
4042
4345
ZIONS BANCORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1994, 1993, 1992, and 19911992
(In thousands, except per share amounts)
1994 1993 1992
1991
------------------- ------- -------
Interest income:
Interest and fees on loans $ 151,711 155,027 169,031$208,414 172,920 170,793
Interest on loans held for sale 12,303 11,273 13,804 8,970
Interest on money market investments 26,881 21,216 42,68535,045 27,427 21,669
Interest on securities:
Held-to-maturity:
Taxable 53,626 46,221 46,84541,269 56,347 48,854
Nontaxable 7,038 6,435 4,98610,982 8,455 7,591
Available-for-sale 19,916 - -
Trading account 16,516 7,555 5,537
3,122
Lease financing 9,544 9,639 9,977
9,908
------------------- ------- -------
Total interest income 267,723 258,217 258,547
-----------353,989 293,616 278,225
-------- ------- -------
Interest expense:
Interest on savings and money market deposits 45,015 48,121 60,08562,200 50,331 52,101
Interest on time deposits 25,478 38,831 58,47328,758 27,995 41,609
Interest on borrowed funds 40,41364,425 40,633 27,233
35,522
------------------- ------- -------
Total interest expense 110,906 114,185 154,080
-----------155,383 118,959 120,943
-------- ------- -------
Net interest income 156,817 144,032 131,467198,606 174,657 157,282
Provision for loan losses 2,298 10,251 23,549
-----------2,181 2,993 10,929
-------- ------- -------
Net interest income after provision for loan losses 154,519 133,781 107,918
-----------196,425 171,664 146,353
-------- ------- -------
Other operatingNoninterest income:
Service charges on deposit accounts 22,216 18,994 17,35424,058 22,875 19,484
Other service charges, commissions, and fees 20,450 18,484 13,60422,008 21,392 18,871
Trust income 4,334 4,622 4,614 4,169
Investment securities gains (losses), net (299) (17) 282 432327
Trading account income 860 2,350 4,437 1,359
Loan sales and servicing income 14,596 21,471 6,573
7,875
Other 7,035 8,477 6,695
-----------7,645 7,187 8,543
-------- ------- -------
78,127 61,861 51,488
-----------73,202 79,880 62,849
-------- ------- -------
Other operatingNoninterest expenses:
Salaries and employee benefits 79,245 66,022 58,52093,331 85,549 70,242
Occupancy, net 7,809 7,010 6,9978,397 8,168 7,248
Furniture and equipment 8,284 7,299 6,53712,526 9,294 7,681
Other real estate expense 366 2,523 3,173(88) 450 2,559
Legal and professional services 4,905 3,497 3,8505,142 5,136 3,616
Supplies 4,281 3,687 3,6884,819 4,537 3,860
Postage 4,221 3,540 3,6374,723 4,334 3,611
FDIC premiums 6,541 5,752 5,0637,547 7,257 6,235
Amortization of intangible assets 3,692 4,432 4,530 3,882
Loss on early extinguishment of debt - 6,022 -
-
Other 30,442 27,180 21,960
-----------34,811 32,571 29,487
-------- ------- -------
156,548 131,040 117,307
-----------174,900 167,750 139,069
-------- ------- -------
Income before income taxes and cumulative effect of changes in accounting
principles 76,098 64,602 42,09994,727 83,794 70,133
Income taxes 24,718 21,200 12,975
-----------30,900 27,248 22,924
-------- ------- -------
Income before cumulative effect of changes in accounting principles 51,380 43,402 29,12463,827 56,546 47,209
Cumulative effect of changes in accounting principles - 1,659 -
-
-----------Interest income: -------- ------- -------
Net income $ 53,039 43,402 29,124
===========63,827 58,205 47,209
======== ======= =======
Weighted average common and common equivalentcommon-equivalent shares outstanding during the year 12,795 12,330 12,174
===========14,601 14,280 13,790
======== ======= =======
Earnings per common share:
Income before cumulative effect of changes in accounting principles $ 4.02 3.52 2.394.37 3.96 3.42
Cumulative effect of changes in accounting principles .13 - .12 -
------------------- ------- -------
Net income per common share $ 4.15 3.52 2.39
===========4.37 4.08 3.42
======== ======= =======
See accompanying notes to consolidated financial statements.
4143
4446
ZIONS BANCORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1994, 1993, 1992, and 19911992
(In thousands)
1994 1993 1992
1991
------------- --------------------- ----------
Cash flows from operating activities:
Net income $ 53,039 43,402 29,12463,827 58,205 47,209
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Provision for loan losses 2,298 10,251 23,5492,181 2,993 10,929
Write-downs of other real estate owned 179 704 1,723 1,952
Depreciation of premises and equipment 6,704 5,624 5,3419,186 7,605 6,140
Amortization of premium on core deposits and other intangibles 3,692 4,432 4,530 3,882
Amortization of net premium/discount on investment securities 5,830 5,694 2,7004,817 6,089 6,241
Accretion of unearned income and fees, net of related costs (3,906) (4,769) 2052,770 (2,950) (4,056)
Proceeds from sales of trading account securities 160,090,330 36,468,421 3,112,879 3,568,236
Increase in trading account securities (160,308,945) (36,383,168) (3,115,492) (3,595,980)
Net loss (gain) on sales of investment securities 299 17 (282) (432)(327)
Proceeds from loans held for sale 774,185 1,094,031 879,977 590,187
Increase in loans held for sale (663,379) (1,088,996) (953,930) (623,667)
Net gain on sales of loans, leases, and other assets (8,968) (16,810) (3,998) (4,444)
Net loss (gain) on sales of other real estate owned (328) (182) 278 335
Change in accrued income taxes 1,628 1,870 6,369 (787)
Change in accrued interest receivable 3,261 5,102 6,263(8,669) 2,794 4,855
Change in accrued interest payable (19,422) (5,267) (3,617)1,368 (1,428) (5,335)
Change in other assets (1,549) (4,271) 1,704(16,790) (20,738) (4,538)
Change in accrued liabilities (4,224) (9,807) 7,65919 (4,074) (13,529)
------------- --------------------- ----------
Net cash provided by (used in) operating activities 122,350 (21,987) 12,210(52,598) 128,815 (20,075)
------------- --------------------- ----------
Cash flows from investing activities:
Net decrease in money market investments 584,164 74,080 130,862196,086 567,251 98,058
Proceeds from sales of investment securities 137,128 74,587 26,029 32,31533,446
Proceeds from maturities of investment securities 206,908 204,481 106,167350,223 258,463 235,368
Purchases of investment securities (464,861) (353,527) (305,735)(646,849) (554,632) (403,271)
Proceeds from sales of loans and leases 353,034703,013 612,552 163,709 -
Net increase in loans and leases (597,146) (160,344) (92,811)(671,665) (927,359) (228,830)
Principal collections on leveraged leases 111 1,375 1,215 2,101
Proceeds from sales of premises and equipment 691 169 88 660
Purchases of premises and equipment (13,703) (9,715) (5,994)(12,389) (15,356) (18,569)
Proceeds from sales of other real estate owned 2,641 8,186 12,6375,608 3,542 8,476
Proceeds from sales of mortgage servicing rights 2,864 608 1,435 1,046
Purchases of mortgage servicing rights (590) (1,731) (1,374) (797)
Proceeds from sales of other assets 830 1,486 877 857
Purchases of other assets - - (675)
Cash paid for acquisition, net of cash received 9,851 (59,833) -
-
------------- --------------------- ----------
Net cash provided by (used in) investing activities 87,698 (44,860) (119,367)74,912 (38,878) (109,372)
------------- --------------------- ----------
Cash flows from financing activities:
Net increase in deposits 198,252 106,310 121,177177,916 296,144 197,250
Net change in short-term funds borrowed (153,285) (419,992) (16,781) (99,513)
Proceeds from FHLB advances over one year 15,340 204,567 1,745 50,000
Payments on FHLB advances over one year (65,878) (104,147) (56) -
Payments on leveraged leases (42) - - (835)
Proceeds from issuance of long-term debt -332 4,000 50,000 -
Payments on long-term debt (1,737) (43,659) (32,585) (10,260)
Proceeds from issuance of common stock 879317 893 1,695 2,700
Dividends paid (12,220) (9,183) (8,698)(17,304) (12,705) (9,587)
------------- --------------------- ----------
Net cash provided by (used in) financing activities (176,320) 101,145 54,571(44,341) (74,899) 191,681
------------- --------------------- ----------
Net increase (decrease) in cash and due from banks 33,728 34,298 (52,586)(22,027) 15,038 62,234
Cash and due from banks at beginning of year 270,023 235,725 288,311338,970 323,932 261,698
------------- --------------------- ----------
Cash and due from banks at end of year $ 303,751 270,023 235,725316,943 338,970 323,932
============= ===================== ==========
See accompanying notes to consolidated financial statements.
4244
4547
ZIONS BANCORPORATION AND SUBSIDIARIES
Consolidated Statements of Retained Earnings
Years ended December 31, 1994, 1993, 1992, and 19911992
(In thousands)
1994 1993 1992
1991
------------------- ------- -------
Balance at beginning of year $ 190,021 155,802 135,376$245,920 197,992 160,370
Retained earnings of acquired company - 2,428 - -
Net income 53,039 43,402 29,12463,827 58,205 47,209
Cash dividends:
Preferred, paid by subsidiary to minority shareholder (33) (13) - -
Common, per share of $1.16 in 1994, $.98 in 1993, and $.75 in 1992 and $.72
in 1991(16,786) (12,207) (9,183)
(8,698)
-----------Dividends of NBA prior to merger (485) (485) (404)
-------- ------- -------
Balance at end of year $ 233,268 190,021 155,802
===========$292,443 245,920 197,992
======== ======= =======
See accompanying notes to consolidated financial statements.
4345
4648
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1994, 1993, 1992, and 19911992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business - Zions Bancorporation (the Parent) is a multibank holding company
organized under the laws of Utah in 1955, which provides a full range of banking
and related services through its subsidiaries located primarily in Utah, Nevada,
and Arizona.
Basis of Financial Statement Presentation - The consolidated financial
statements include the accounts of Zions Bancorporation and its subsidiaries
(the Company). All significant intercompany accounts and transactions have been
eliminated in consolidation. Certain amounts in prior years' consolidated
financial statements have been reclassified to conform to the 19931994 presentation.
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the consolidated
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of the
balance sheet and revenues and expenses for the period. Actual results could
differ from those estimates.
Investment Securities - The Company adopted the provisions of Statement of
Financial Accounting Standards (Statement) No. 115, "AccountingAccounting for Certain
Investments in Debt and Equity Securities"Securities on December 31, 1993. Under Statement
No. 115, the Company classifies its investment securities in one of three
categories: trading, available-for-sale, or held-to-maturity. Trading securities
are bought and held principally for the purpose of selling them in the near
term. Held-to-maturity securities are those securities which the Company has the
ability and intent to hold until maturity. All other securities not included in
trading or held-to-maturity are classified as available-for-sale.
Trading securities (including futures and options used to hedge trading
positions against interest rate risk) and available-for-sale securities are
recorded at fair value. Held-to-maturity securities are recorded at amortized
cost, adjusted for the amortization or accretion of premiums or discounts.
Unrealized holding gains and losses on trading securities are included in
earnings. Unrealized holding gains and losses, net of related tax effect, on
available-for-sale securities are excluded from earnings and are reported as a
separate component of shareholders' equity until realized. Transfers of
securities between categories are recorded at fair value at the date of
transfer. Unrealized holding gains and losses are recognized in earnings for
transfers into trading securities. Unrealized holding gains or losses associated
with transfers of securities from held-to-maturity to available-for-sale are
recorded as a separate component of shareholders' equity. The unrealized holding
gains or losses included in the separate component of equity for securities
transferred from available-for-sale to held-for-maturity are maintained and
amortized into earnings over the remaining life of the security as an adjustment
to yield in a manner consistent with the amortization or accretion of premium or
discount on the associated security.
A decline in the market value of any available-for-sale or held-to-maturity
security below cost that is deemed other than temporary is charged to earnings
resulting in the establishment of a new cost basis for the security.
Premiums and discounts are amortized or accreted over the life of the related
held-to-maturity security as an adjustment to yield using the effective
interesteffective-interest
method. Dividend and interest income are recognized when earned. Realized gains
and losses for securities classified as available-for-sale and held-to-maturity
are included in earnings and are derived using the specific
identificationspecific-identification
method of determining the cost of securities sold.
Loan Fees - Nonrefundable fees and related direct costs associated with the
origination of loans are deferred. The net deferred fees and costs are
recognized in interest income over the loan term using methods that generally
produce a level yield on the unpaid loan balance. Other nonrefundable fees
related to lending activities other than direct loan origination are recognized
as other operating income over the period the related service is provided.
Bankcard discounts and fees charged to merchants for processing transactions
through the Company are shown net of interchange discounts and fees expense, and
are included in other service charges, commissions, and fees.
Mortgage Loan Servicing - Mortgage loan servicing fees are based on a stipulated
percentage of the outstanding loan principal balances being serviced and are
included in income as related loan payments from mortgagors are collected. Costs
associated with the acquisition of loan servicing rights through the purchase of
servicing contracts or bulk loan purchases are deferred and amortized over the
lives of loans being serviced in proportion to the estimated net loan servicing
income.
4446
4749
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992, and 1991
Allowance for Loan Losses - The allowance for loan losses is based on
management's periodic evaluation of the loan portfolio and reflects an amount
that, in management's opinion, is adequate to absorb losses in the existing
portfolio. In evaluating the portfolio, management takes into consideration
numerous factors, including current economic conditions, prior loan loss
experience, the composition of the loan portfolio, and management's estimate of
anticipated credit losses. Management believes that the allowance for loan
losses is adequate. While management uses available information to recognize
losses on loans, future additions to the allowance may be necessary based on
changes in economic conditions. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Company's
allowance for loan losses. Such agencies may require the Company to recognize
additions to the allowance based on their judgments using information available
to them at the time of their examination.
Premises and Equipment - Premises and equipment are stated at cost, net of
accumulated depreciation and amortization. Depreciation, computed on the
straight-line method, is charged to operations over the estimated useful lives
of the properties. Leasehold improvements are amortized over the terms of
respective leases or the estimated useful lives of the improvements, whichever
is shorter. As of December 31, 19931994 and 1992,1993, accumulated depreciation and
amortization totaled $55,416,000$70,520,000 and $50,712,000,$61,932,000, respectively.
Nonperforming Assets - Nonperforming assets are comprised of loans for which the
accrual of interest has been discontinued, loans for which the terms have been
renegotiated to less than market rates due to a weakening of the borrower's
financial condition (restructured loans), and other real estate acquired
primarily through foreclosure that is awaiting disposition.
Loans are generally placed on a nonaccrual status when principal or interest is
past due 90 days or more unless the loan is both well secured and in the process
of collection, or when in the opinion of management, full collection of
principal or interest is unlikely. Generally, consumer loans are not placed on a
nonaccrual status inasmuch as they are generally charged off when they become
120 days past due.
Other real estate owned is carried at the lower of cost or net realizable value.
Real estate may be considered to be in substance foreclosed and included herein
when specific criteria are met. When property is acquired through foreclosure,
or substantially foreclosed, any excess of the related loan balance over net
realizable value is charged to the allowance for loan losses. Subsequent writedownswrite
downs or losses upon sale, if any, are charged to other real estate expense.
Amounts Paid in Excess of Net Assets of Acquired Businesses (Goodwill) - The
Company assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining life can be
recovered through undiscounted future operating cash flows of the acquired
operation. The amount of goodwill impairment, if any, is measured based on
projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds.
Off-Balance Sheet Financial Instruments - In the ordinary course of business,
the Company has entered into off-balance sheet financial instruments consisting
of commitments to extend credit, commercial letters of credit, and standby
letters of credit. Such financial instruments are recorded in the consolidated
financial statements when they become payable.
The credit risk associated with these commitments is considered in management's
determination of the allowance for loan losses.
Interest Rate Exchange Contracts and Cap and Floor Agreements - The Company
enters into interest rate exchange contracts (swaps) and cap and floor
agreements in the management of interest rate risk. The objective of these
financial instruments is to match estimated repricing periods of
interest-sensitive assets and liabilities in order to reduce interest rate
exposure. These instruments are used only to hedge asset and liability
portfolios and are not used for speculative purposes. Therefore, these
instruments are not marked to market. Fees associated with these financial
instruments are accreted into interest income or amortized to interest expense
on a straight-line basis over the lives of the contracts and agreements. Gains
or losses on early termination of a swap are amortized on the remaining term of
the contract when the underlying assets or liabilities still exist. Otherwise,
such gains or losses are fully expensed or recorded as income at the termination
of the contract. The net interest received or paid on these contracts is
reflected on a current basis in the interest expense or income related to the
hedged obligation or asset.
45
48
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992, and 1991
Statements of Cash Flows - For purposes of the statements of cash flows, the
Company considers due from banks to be cash equivalents.
47
50
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company paid interest of $112.6$156.1 million, $118.7$120.8 million, and $156.9$125.5 million,
respectively, and income taxes of $23.3$27.9 million, $14.9$26.3 million, and $13.8$16.9
million, respectively, for the years ended December 31, 1994, 1993, 1992, and 1991.1992.
Loans transferred to other real estate owned totaled $3.3 million, $1.2 million,
$4.9
million, and $3.6$4.9 million, respectively, for the years ended December 31, 1994, 1993, 1992, and
1991.1992.
Income Taxes - Effective January 1, 1993, the Company adopted the provisions of
Statement No. 109, "AccountingAccounting for Income Taxes," and has reported the cumulative
effect of that change in the method of accounting for income taxes in the 1993
consolidated statement of income. Under the asset and liability method of
Statement No. 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement No. 109, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Pension and Other Postretirement Plans - The Company has a defined benefit
pension plan covering substantially all of its employees. The benefits are based
on years of service and employees' compensation levels. The cost of this program
is being funded currently. The Company has other trustee retirement plans
covering all qualified employees who have at least one year of service (see note
12).
The Company sponsors a defined benefit health care plan for substantially all
retirees and employees. Effective January 1, 1993, the Company adopted Statement
No. 106, "Employers'Employers' Accounting for Postretirement Benefits Other than Pensions,"
which establishes a new accounting principle for the cost of retiree health care
and other postretirement benefits (see note 12). Prior to 1993, the Company
recognized these benefits on the pay-as-you-go method (i.e., cash basis). The
cumulative effect of the change in method of accounting for postretirement
benefits other than pensions is reported in the 1993 consolidated statement of
income.
Trust Assets - Assets held by the Company in a fiduciary or agency capacity for
customers are not included in the consolidated financial statements as such
items are not assets of the Company.
Stock Options - Proceeds from the sale of stock issued under options are
credited to common stock. The Company makes no charges against earnings with
respect to stock options issued under its qualified stock option plan. The
Company charges income for the difference between the option price and market
value on the date of grant with respect to stock options issued under its
nonqualified stock option plan.
Net Income Per Common Share - Net income per common share is based on the
weighted average outstanding common shares during each year, including common
stock equivalents, if applicable.
Stock Split - On December 18, 1992, the Company's Board of Directors approved a
two-for-one split of the common stock. This action was effective on January 26,
1993 for shareholders of record as of January 5, 1993. A total of 6,139,227
shares of common stock were issued and recorded in the form of a stock dividend.
All references to the number of common shares and per common share amounts have
been restated to reflect the split.
Accounting Standard Not Adopted - In May 1993, the Financial Accounting
Standards Board issued Statement No. 114, "AccountingAccounting by Creditors for
Impairment of a Loan." Statement No. 114 requires that impaired loans be
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. Statement No. 114 is effective for fiscal years
beginning after December 15, 1994. Management does not expect Statement No. 114
to have a significant impact on the Company's financial position.
46position or results of
operations.
48
4951
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992, and 1991
2. MERGERS AND ACQUISITIONS
On January 14, 1994, the Company and National Bancorp of Arizona Inc. (NBA)
consummated their agreement and plan of reorganization whereby the Company
issued 1,456,408 shares of its common stock for 100 percent of the outstanding
common stock of NBA. The consolidated financial statements of the Company give
effect to the merger, which has been accounted for as a pooling of interests.
Accordingly, the accounts of NBA have been combined with those of the Company
for all periods presented. Separate results of operations of the combining
entities for 1993 and 1992 are as follows (in thousands):
1993
-------------------------------
Historical
--------------------
Company NBA Combined
-------- ------ --------
Net interest income $156,817 17,840 174,657
Net income 53,039 5,166 58,205
Net income per common share 4.15 1.57 4.08
1992
-------------------------------
Historical
--------------------
Company NBA Combined
-------- ------ --------
Net interest income $144,032 13,250 157,282
Net income 43,402 3,807 47,209
Net income per common share 3.52 1.17 3.42
Also during 1994, the Company acquired Rio Salado Bancorp (Rio) for 328,000
shares of common stock. This acquisition was not material to the Company's
consolidated financial position and was accounted for as a purchase. The
difference between the purchase price and the net book value of Rio of $7.6
million is included in goodwill.
On August 11, 1993, the Company acquired all of the capital stock of Discount
Corporation of New York (Discount) for approximately $65.7 million in cash. The
acquisition has been accounted for as a purchase, and accordingly, the net
assets and results of operations are included in the consolidated financial
statements since the date of acquisition.purchase. The difference between the
purchase price and the net book value of Discount of $9.4 million ($8 million as
of December 31, 1994) is included in deferred tax assets (grouped with other
assets) in the accompanying consolidated balance sheet as of December 31, 1993.
The following table presents unaudited pro forma results of operations as if
the acquisition had occurred on January 1, 1992. These pro forma results have
been prepared for comparative purposes only and do not purport to be indicative
of what would have occurred had the acquisition been made at the beginning of
1992 or of results which may occur in the future. Furthermore, no effect has
been given in the pro forma information for operating and synergistic benefits
that are expected to be realized through the combination of the entities
because precise estimates of such benefits cannot be quantified (in thousands,
except per share data).
1993 1992
--------- -------
Net interest income $ 161,814 151,809
Other operating income 73,162 82,784
Other operating expense 176,015 184,109
Net income 39,082 18,919
Net income per common share 3.05 1.53
sheets.
On October 29, 1993, the Company and Wasatch Bancorp (Wasatch) consummated
their agreement and plan of reorganization wherebywas merged into the Company. The
Company issued 373,335 shares of its common stock for 100 percent of the
outstanding common stock of Wasatch. The acquisition has been accounted for as a
pooling of interests. The consolidated financial statements of the Company for
19921993 and 19911992 have not been restated and pro forma information giving effect to this acquisition is
not provided inasmuch as the historical operations of
Wasatch are not significant to the Company. DuringAlso, during 1993, the Company
acquired a 25 percent interest in Bennington Capital Management, Inc., a
Seattle basedSeattle-based investment advisor which manages the Accessor(TM)AccessorTM family of mutual
funds. This acquisition is accounted for on the equity method.
During the two years ended3. INVESTMENT SECURITIES
Investment securities as of December 31, 1992, the Company also acquired certain
assets and certain liabilities of two other financial institutions. These
acquisitions have been treated as purchases for accounting purposes and,
accordingly, the results of operations of these companies have been included in
the consolidated financial statements for periods subsequent to the effective
dates of purchase.
On January 14, 1994, National Bancorp of Arizona Inc. (NBA) was merged into the
Company. Each outstanding share of NBA common stock was converted into .45
shares of the Company's common stock. The Company expects to issue
approximately 1,456,400 shares of its common stock for 100 percent of the
outstanding common stock of NBA. The consolidated financial statements of the
Company do not give effect to this merger, which will be accounted for as a
pooling of interests. There are no material intercompany transactions and no
material differences in accounting policies and procedures. Pro forma combined
financial results that give affect to the merger for the years ended December
31, 1993, 1992, and 1991 are summarized as follows (in
thousands, except per
share data)thousands):
1993
----------------------------------
Historical
--------------------- Pro forma
Company NBA combined
----------Held-to-maturity
------------------------------------------
Gross Gross Esti-
unreal- unreal- mated
Amort- ized ized market
ized cost gains losses value
--------- ------ ---------------- -------
Net interest income
U.S. government agencies and corporations:
Small Business Administration loan-backed securities $ 156,817 18,316 175,133
Net income 53,039 5,166 58,205
Net income per common share 4.15 1.57 4.08460,163 2,479 3,329 459,313
Other agency securities 271,440 73 9,369 262,144
States and political subdivisions 243,225 1,763 2,234 242,754
---------- ----- ------ ---------
974,828 4,315 14,932 964,211
Mortgage-backed securities 56,079 22 1,514 54,587
---------- ----- ------ ---------
$1,030,907 4,337 16,446 1,018,798
========== ===== ====== =========
49
47
5052
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992, and 1991
1992
------------------------------------
Historical
---------------------- Pro forma
Company NBA combined
-----------Available-for-sale
--------------------------------------
Gross Gross Esti-
unreal- unreal- mated
Amort- ized ized market
ized cost gains losses value
--------- ------- ------ ----------------
Net interest income $ 144,032 13,246 157,278
Net income 43,402 3,807 47,209
Net income per common share 3.52 1.17 3.42
U.S. Treasury securities $48,269 51 1,143 47,177
U.S. government agencies 33,304 - - 33,304
--------- ------- ------ -------
81,573 51 1,143 80,481
Mortgage-backed securities 55,560 9 1,235 54,334
Equity securities:
Mutual funds:
Accessor Funds, Inc. 118,803 - 7,274 111,529
Other 534 - - 534
Federal Home Loan Bank stock 65,861 - - 65,861
Other stock 2,785 76 22 2,839
--------- ------- ------ -------
$325,116 136 9,674 315,578
========= ======= ====== =======
1991
---------------------------------
Historical
------------------- Pro forma
Company NBA combined
---------- ----- ---------
Net interest income $ 131,467 8,398 139,865
Net income 29,124 1,325 30,449
Net income per common share 2.39 .41 2.23
3. INVESTMENT SECURITIESThe Company adopted Statement No. 115, Accounting for Certain Investments in
Debt and Equity Securities on December 31, 1993. The Company recognized a net
unrealized holding loss on securities available-for-sale of $5,866,000, after
related tax effect, at December 31, 1994 and an unrealized holding gain on
securities available-for-sale of $415,000, after related tax effect, at December
31, 1993.
Investment securities as of December 31, 1993, are summarized as follows (in
thousands):
Held-to-maturity
---------------------------------------
Gross Gross Esti-
unreal- unreal- mated
Amort- ized ized market
ized cost gains losses value
---------- ------- ------ --------
U.S. government agencies and corporations:
Small Business Administration loan-backed securities $ 399,603 12,640 397 411,846
Other agency securities 157,098 709 263 157,544
States and political subdivisions 196,241 2,660 237 198,664
--------- ------- ------ --------
752,942 16,009 897 768,054
Mortgage-backed securities 60,318 1,715 - 62,033
--------- ------- ------ --------
$ 813,260 17,724 897 830,087
========= ======= ====== ========
Available-for-sale
----------------------------------------
Gross Gross Esti-
Amort- unreal- unreal- mated
ized ized ized market
cost gains losses value
------------------- ------- ------------- -------
U.S. government agencies and corporations:
Small business administration loan-backed $ 399,603 12,640 397 411,846
securities
Other agency securities 157,098 709 263 157,544
States and political subdivisions 168,090 1,019 236 168,873
---------- ------- ------- -------
724,791 14,368 896 738,263
Mortgage-backed securities 60,318 1,715 - 62,033
---------- ------- ------- -------
$ 785,109 16,083 896 800,296
========== ======= ======= =======
48
51
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992, and 1991
Available-for-sale
------------------------------------------
Gross Gross Esti-
Amort- unreal- unreal- mated
ized ized ized market
cost gains losses value
---------- ------- ------- -------
U.S. treasuryTreasury securities $ 14,810 250 2 15,05870,263 314 65 70,512
U.S. government agencies 31,101 - 2 31,099
----------61,107 25 55 61,077
--------- ------- ------ -------
-------
45,911 250 4 46,157131,370 339 120 131,589
Mortgage-backed securities 49,493 53 183 49,363
Equity securities:
Mutual funds:
Accessor Funds, Inc. 90,736 509 - 91,245
Other 515 - - 515
Federal Home Loan Bank stock 72,376 - - 72,376
Other stock 1,8722,194 90 26 1,936
----------2,258
--------- ------- ------------- -------
$ 260,903 902 213 261,592
==========346,684 991 329 347,346
========= ======= ============= =======
The Company adopted Statement No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" on December 31, 1993. The Company recognized a net
unrealized holding gain on securities available for sale of $432,000, after
related tax effect, at December 31, 1993.
Investment securities as of December 31, 1992, are summarized as follows (in
thousands):
Gross Gross Esti-
Amort- unreal- unreal- mated
ized ized ized market
cost gains losses value
--------- ------- ------- --------
U.S. treasury securities $ 15,267 413 6 15,674
U.S. government agencies and corporations:
Small business administration loan-backed 366,867 6,248 183 372,932
securities
Other agency securities 93,920 976 164 94,732
States and political subdivisions 123,048 180 241 122,987
Other debt securities 10,000 - 25 9,975
--------- ------- ------- --------
609,102 7,817 619 616,300
Mortgage-backed securities 162,428 2,626 357 164,697
Equity securities:
Federal Home Loan Bank stock 62,536 - - 62,536
Other stock 33,240 278 - 33,518
--------- ------- ------- --------
$ 867,306 10,721 976 877,051
========= ======= ======= ========
4950
5253
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992, and 1991
The amortized cost and estimated market value of investment securities as of
December 31, 1993,1994, by contractual maturity, excluding mortgage-backed and equity
securities, are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or repay obligations
with or without call or prepayment penalties (in thousands):
Held-to-maturity
---------------------
AmortAmort- Estimated
ized market
cost value
---------- --------
Due in one year or less $ 98,563 98,405
Due after one year through five years 504,733 495,716
Due after five years through ten years 201,487 200,340
Due after ten years 170,045 169,750
---------- --------
$ 974,828 964,211
========== ========
Available-for-sale
--------------------
Amort- Estimated
ized market
cost value
--------- ---------
Due in one year or less $ 75,618 76,83966,160 65,677
Due after one year through five years 311,483 315,37815,188 14,579
Due after five years through ten years 173,184 176,917
Due after ten years 164,506 169,129
--------- ---------
$ 724,791 738,263
========= =========
Available-for-sale
-----------------------
Amort- Estimated
ized market
cost value
--------- --------
$
Due in one year or less 41,698 41,871
Due after one year through five years 3,988 4,029
Due after five years trough ten years - -
Due after ten years 225 257225
--------- -----------------
$ 45,911 46,15781,573 80,481
========= =================
Gross gains of $367,000, $104,000, $423,000, and $760,000$468,000 and gross losses of $666,000,
$121,000, $141,000, and $328,000$141,000 were realized on sales of investment securities for the
years ended December 31, 1994, 1993, 1992, and 1991,1992, respectively. Such amounts
include gains of $102,000, $10,000, $105,000, and $283,000,$105,000, and losses of $66,000,
$32,000, $17,000, and $290,000,$17,000, respectively, for sales of mortgage-backed securities.
As of December 31, 19931994 and 1992,1993, securities with an amortized cost of
$90,915,000$210,149,000 and $56,239,000,$110,262,000, respectively, were pledged to secure public and
trust deposits, advances, and for other purposes as required by law. In
addition, the Federal Home Loan Bank stock is pledged as security on the related
advances (note 7).
4. LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans are summarized as follows (in thousands):
1994 1993
1992
--------------------- ---------
Loans held for sale $ 108,649 238,206 229,465
Commercial, financial, and agricultural 418,600 472,115495,647 511,982
Real estate:
Construction 155,864 89,215218,244 213,114
Other 920,373 570,3701,062,423 1,022,888
Consumer 374,141 451,004391,033 378,679
Lease financing 129,547 130,450 124,480
Other receivables 10,509 12,857
8,574
--------------------- ---------
$ 2,250,491 1,945,223
===========$2,416,052 2,508,176
========== =========
50
53
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992, and 1991
As of December 31, 19931994 and 1992,1993, loans with a carrying value of $302,530,000$121,886,000
and $212,181,000,$302,530,000, respectively, were pledged as security for Federal Home Loan
Bank advances (note 7).
During 1994, 1993, 1992, and 1991,1992, the Company purchased mortgage servicing rights
totaling $590 thousand, $1.7 million, $1.4 million, and $.8$1.4 million, respectively.
Amortization of purchased mortgage servicing rights totaled $2.6$1.7 million, $2.6
million, and $1.8$2.6 million for the years ended December 31, 1994, 1993, and 1992,
and
1991, respectively.
51
54
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
During 1994, 1993, and 1992, consumer and other loan securitizations totaled
$349$703 million, $609 million, and $159 million, respectively (there were no securitizations in 1991).respectively. Loan sales income
related thereto is recognized on the basis of cash flows received from the
securitized assets. Loan sales income, excluding servicing, amounted to $11.7
million in 1994, $14.7 million in 1993, and $1.7 million in 1992, and $3.1 million in
1991.1992.
The allowance for loan losses is summarized as follows (in thousands):
1994 1993 1992
1991
---------- ------- ------ -------
Balance at beginning of year $ 57,086 56,263 59,015$68,461 59,807 58,238
Allowance for loan losses of companies acquired 1,308 546 - -
Additions:
Provision for loan losses 2,298 10,251 23,5492,181 2,993 10,929
Recoveries 13,765 8,756 8,0056,729 13,919 9,571
Deduction, loan charge-offs (8,428) (18,184) (34,306)
----------(11,661) (8,804) (18,931)
------- ------ -------
Balance at end of year $ 65,267 57,086 56,263
==========$67,018 68,461 59,807
======= ====== =======
Included in the allowance for loan losses is an allocation for unused
commitments and letters of credit (note 9) that as of December 31, 19931994 and
1992,1993, amounted to $1,972,000$3,674,000 and $3,708,000,$1,972,000, respectively.
Nonperforming loans, leases, and related interest foregone are summarized as
follows (in thousands):
1994 1993 1992
1991
----------------- ------ ------
Nonaccrual loans and leases $ 22,398 20,148 31,966$13,635 23,364 21,556
Restructured loans and leases 567 4,006 4,003
3,225
----------------- ------ ------
Total $ 26,404 24,151 35,191
========== ====== ======$14,202 27,370 25,559
Contractual interest due ======= ====== ======
$ 1,766 3,051 2,384
4,098
Interest recognized 416 820 1,040 2,057
---------- ------ ------
Net interest foregone ------- ------ ------
$ 1,350 2,231 1,344
2,041
================= ====== ======
5. DEPOSITS
Deposits are summarized as follows (in thousands):
1994 1993
1992
--------------------- ---------
Noninterest-bearing $ 725,829 595,505885,833 879,908
Interest-bearing:
Savings 688,812 518,051756,196 711,806
Money market 1,000,453 983,2351,292,519 1,155,677
Time under $100,000 494,922 566,403513,841 535,456
Time over $100,000 45,532 48,853123,455 80,879
Foreign 134,132 68,563
52,777
--------------------- ---------
$ 3,024,111 2,764,824
===========$3,705,976 3,432,289
========== =========
51
54
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992, and 1991
Interest expense on deposits is summarized as follows (in thousands):
1994 1993 1992
1991
----------------- ------ ------
Savings and money market deposits:
Savings $ 18,558 16,776 25,560$22,262 19,222 17,396
Money market 26,457 31,345 34,525
----------$39,938 31,109 34,705
------- ------ ------
$ 45,015 48,121 60,085$62,200 50,331 52,101
Time deposits: ================= ====== ======
Under $100,000 $ 22,189 32,298 49,590$20,469 23,501 33,555
Over $100,000 1,805 2,898 5,638$ 3,845 3,010 4,419
Foreign $ 4,444 1,484 3,635
3,245
----------------- ------ ------
$ 25,478 38,831 58,473
==========$28,758 27,995 41,609
======= ====== ======
52
55
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
6. INCOME TAXES
The Company adopted Statement No. 109, "AccountingAccounting for Income Taxes," as of
January 1, 1993. The cumulative effect of this adoption was an increase in net
income of $7,419,000.$7,419,000, as reported in 1993.
Income taxes are summarized as follows (in thousands):
1994 1993 1992 1991
-------- ------ ------
Federal:
Current $ 22,992 18,236 8,87723,448 25,144 19,992
Deferred (benefit) (1,744) - 2,3653,486 (1,832) (431)
State 3,470 2,964 1,7333,966 3,936 3,363
-------- ------ ------
$ 24,718 21,200 12,97530,900 27,248 22,924
======== ====== ======
A reconciliation between income tax expense computed using the statutory federal
income tax rate (35 percent in 1994 and 1993, and 34 percent in 1992 and 1991)1992), and
actual income tax expense is as follows (in thousands):
1994 1993 1992
1991
---------- --------------- ------ ------
Income tax expense at statutory federal rate $ 26,634 21,960 14,26633,154 29,328 23,840
State income tax, net 2,119 2,018 1,2722,578 2,414 2,214
Nondeductible expenses 882 174 621
541
Nontaxable interest (2,297) (2,250) (1,842)(3,900) (2,741) (2,606)
Tax credits rate differences(885) (586) - -
Deferred tax assets recognized -realized (972) (1,137) (1,148) (1,291)
Change in tax rates (189) - -
Other items net (1,137) (1) 29
---------- -------43 (204) 3
-------- ------ ------
Income tax expense $ 24,718 21,200 12,975
========== =======30,900 27,248 22,924
======== ====== ======
52
55
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992, and 1991
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities as of December 31, 1994
and 1993, are presented below (in thousands):
1994 1993
------- -------
Gross deferred tax assets:
Book loan loss deduction in excess of tax $ 24,965$25,741 25,103
Postretirement benefits 2,377 2,399
Deferred compensation 1,1303,619 1,626
Deferred loan sales 1,424 -
Present value of interest rate exchange contract 226 1,103
Employee benefits 2,399
Other real estate expenses not allowed for tax purposes 507
Capital leases 700 842
Net capital loss carryforwards - 972
Acquired net operating losses 7,977 9,367
Other 3,083
----------
44,3682,769 3,617
------ ------
44,833 45,029
Less valuation allowance (972)
----------- 972
------ ------
Total deferred tax assets 43,396
----------44,833 44,057
Gross deferred tax liabilities: ------ ------
Premises and equipment, due to differences in
depreciation (4,013)(4,647) (4,033)
FHLB stock dividends (8,713) (8,372)
Leasing operations (10,614) (12,158)
Other (1,957) (134)
----------------- -------
Total deferred tax liabilities (24,677)
----------(25,931) (24,697)
------- -------
Statement No. 115 market equity adjustment (264)
----------3,672 (247)
------- -------
Net deferred tax assets $ 18,455
==========$22,574 19,113
======= =======
53
56
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. TheAs of January 1, 1993,
the Company has established a valuation allowance for the net capital loss
carryforwards as a result of thesome uncertainty of realizing offsetting capital
gains. The net
change inSubsequently, the Company realized capital gains sufficient to reduce the
valuation allowance for 1993 amounted to a decrease of
$1,137,000.
Deferred income taxes provided on timing differences for 1992by $972,000 in 1994 and 1991 are
summarized as follows (in thousands):
1992 1991
-------- -------
Prepaid employee benefits $ (103) (303)
Provision for loan losses (280) 918
Operating method of accounting and deferred investment
credits on leasing operations 440 (24)
Interest rate exchange contract (267) (267)
Loan fees (87) (86)
Depreciation 41 41
Other real estate owned write-down effects 507 1,590
FHLB stock dividends 2,383 1,763
Deferred tax assets recognized (1,148) (1,291)
Other, net (1,486) 24
-------- -------
$ - 2,365
======== =======
53
56
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992,$1,137,000 in 1993.
The Company has net operating loss carryforwards totaling $27,535,000 that
expire in the years 2006 and 19912007.
7. FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS
Federal Home Loan Bank advances and other borrowings as of December 31, 1994 and
1993, include $101,571,000 and 1992, include $252,109,000, and $176,816,000, respectively, borrowed by Zions
First National Bank, a wholly owned subsidiary, (the Bank) under its line of
credit with the Federal Home Loan Bank of Seattle. The line of credit provides
for borrowing of amounts up to ten percent of total assets. The line of credit
is secured under a blanket pledge whereby the Bank maintains unencumbered
security with par value, which has been adjusted using a pledge requirement
percentage based upon the types of securities pledged, equal to at least 100
percent of outstanding advances, and, Federal Home Loan Bank stock. There are no
withdrawal and usage restrictions or compensating balance requirements.
Substantially all Federal Home Loan Bank advances reprice with changes in market
interest rates or have short terms to maturity. The carrying value of such
indebtedness is deemed to approximate market value.value (note 15).
Maturities of outstanding advances in excess of one year are as follows (in
thousands):
Amount
-----------------
19941995 $ 65,289
1995 15,28916,373
1996 15,23616,323
1997 15,16516,255
1998 15,16516,258
1999 16,262
Thereafter 25,965
----------
$ 152,109
==========20,100
--------
$101,571
========
8. LONG-TERM DEBT
Long-term debt is summarized as follows (in thousands):
1994 1993
1992
---------------- ------
Subordinated notes 8-5/8% $ 50,000 50,000
Floating rate notes - 37,450$54,000 54,000
Industrial revenue bonds 800 1,550 6,765
Capitalized real property leases, 9-1/2% to 21%, payable in
aggregate monthly installments of approximately $89,000 2,682 3,378 4,005
Mortgage notes, 7-1/2% to 11-1/8%, due in varying amounts
and periods 185 265 411
Other notes payable 515 394
592
---------------- ------
$ 55,587 99,223
=========$58,182 59,587
======= ======
TheSubordinated notes includes $50,000,000 of 8-5/8 percent subordinated notes that mature in
2002 with interest payable
semiannually. The2002. These notes are not redeemable prior to maturity. The floating rateIn addition, the Company
has $4,000,000 of 9 percent subordinated notes that mature in full on November
1, 1998 and $4.7 millionmay be called, at the option of the industrial revenue bonds were
redeemed during 1993.Company, on or after November 1,
1996 at par. The subordinated notes are unsecured and require semiannual
interest payments.
The industrial revenue bonds require mandatory sinking fund redemption in
various principal amounts through 1995. The bonds bear interest at rates from
7.40 percent toa rate of
7.50 percent. The bonds are secured by an assignment of leasesa lease on a banking
facilities and a data processing center.facility.
54
57
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992, and 1991
Maturities and sinking fund requirements on long-term debt for each of the
succeeding five years are as follows (in thousands):
ConsolidatedConsoli- Parent
dated only
------------ ------------------ ------
1994 $ 1,721 1,358
1995 1,793$1,805 1,469
1996 9831,111 715
1997 186215 5
1998 1044,133 4,000
1999 94 -
9. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers and
to reduce its own exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit, standby letters of credit,
interest rate caps and floors, and interest rate exchange contracts.contracts, and commitments
to purchase and sell securities. Those instruments involve, to varying degrees,
elements of credit, market, and interest rate risk in excess of the amount
recognized in the balance sheets. The Company's exposure to credit loss in the
event of nonperformance by the other party to the financial instrument for
commitments to extend credit and standby letters of credit is represented by the
contractual notional amount of those instruments. The Company uses the same
credit policies in making commitments and conditional obligations as it does for
on balanceon-balance sheet instruments. For interest rate caps, floors, and exchange
contract transactions, the contract or notional amounts do not represent
exposure to credit loss. The Company controls the credit risk of these
transactions through credit approvals, limits, and monitoring procedures.
Unless noted otherwise, the Company does not require collateral or other
security to support financial instruments with credit risk.
Notional values of financial instruments are summarized as follows:
Notional or
carrying amount
----------------------
1994 1993
1992---------- -------- ---------
Financial instruments whose contract amounts represent credit
risk (in thousands):
Unused commitments to extend credit $ 919,303 756,821$1,152,351 1,027,401
Standby letters of credit written:
Performance 46,543 62,55755,951 50,598
Financial 19,621 23,582 9,755
Commercial letters of credit 4,141 2,0713,233 4,436
Commitments to purchase securities 1,124,745 89,208 2,900
Commitments to sell securities 1,275,025 83,902 -
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee.
Commitments totaling $751,035,000$936,671,000 expire in 1994.1995. Since many of the commitments
are expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The Company evaluates each
customer's credit worthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Company upon extension of credit, is based
on management's credit evaluation of the counter party. Collateral held varies
but may include accounts receivable, inventory, property, plant and equipment,
and income-producing commercial properties.
55
58
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992, and 1991
Standby letters of credit written are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing, and similar
transactions. Standby letters of credit include commitments in the amount of
$63,767,000$73,980,000 expiring in 19941995 and $6,358,000$1,592,000 expiring thereafter through 2005.
The credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. The Company generally
holds marketable securities and cash equivalents as collateral supporting those
commitments for which collateral is deemed necessary.
The Company enters into interest rate contracts, including interest rate caps,
floors, futures, options, and interest rate exchange contract agreements in
managing its interest rate exposure. Interest rate caps and floors obligate one
of the parties to the contract to make payments to the other if an interest rate
index exceeds a specified upper "capped" level or if the index falls below a
specified "floor" level. A futures contract is an agreement to buy or sell a
quantity of a financial instrument or commodity at a predetermined future date
and rate or price. An option contract is an agreement that conveys to the
purchaser the right, but not the obligation, to buy or sell a quantity of a
financial instrument or commodity at a predetermined rate or price at a time in
the future. Interest rate exchange contract agreements involve the exchange of
fixed and variable rate interest payments based upon a notional amount and
maturity. Interest rate caps and exchange contracts to which the Company is a
party at December 31, 1994, have remaining terms of 5 to 20 years and 2 to 68
months, respectively. The fair value of interest rate contracts are obtained
from deal quotes, or discounted cash flow analyses. The values represent the
estimated amount the Company would receive or pay for comparable contracts,
taking into account current interest rates. Notional values of interest rate
contracts are summarized as follows (in thousands):
1994 1993
1992-------- -------
Interest rate contracts:
--------- --------
Swaps - fixed $330,000 40,000
Futures 1,100 -
Options 145,000 -
Caps:
Purchased $25,000 28,417
115,113
Written 785,000 261,617 294,613
Exchanged:
Fixed 40,000 40,000
Variable - 25,000
The contract or notional amount of financial instruments indicates a level of
activity associated with a particular class of financial instrument and is not a
reflection of the actual level of risk. As of December 31, 19931994 and 1992,1993, the
regulatory risk weightedrisk-weighted values assigned to all off-balance sheet financial
instruments described herein totaled $132,228,000$177,347,000 and $156,188,000,$134,315,000,
respectively. See note 4 for consideration of financial instruments in
management's determination of the allowance for loan losses.
During 1988, a lawsuit was brought in the United States District Court, Utah
District, against the Bank in connection with its performance of duties as an
indenture trustee for certain investors in real estate and other syndication
projects. In September 1992, a motion was granted allowing an amended complaint
containing allegations that plaintiffs intend to proceed as a class action to
recover approximately $23 million, prejudgment interest, attorneys' fees, and
additional amounts under certain statutory provisions and common law. No motion
to certify the classes has been filed, and the Bank intends to vigorously oppose
such motion and to defend the entire action. Although no assurances can be given
as to the outcome, the Company continues to believe that it has meritorious
defenses to such lawsuit, and that there is insurance coverage for a substantial
portion of the amount claimed.
The Company is also the defendant in various other legal proceedings arising in
the normal course of business. The Company does not believe that the outcome of
any of such proceedings, including the lawsuit discussed in the preceding
paragraph, will have a material adverse effect on its consolidated financial
position.
In connection with loans sold to (or serviced for) others, the Company is
not
subject to significant recourse obligations.obligations on approximately $22.5 million as of December
31, 1994.
56
59
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992, and 1991
The Company has commitments for leasing premises and equipment under the terms
of noncancelable leases expiring from 1994 to 2005. Future aggregate minimum
rental payments under existing noncancelable leases at December 31, 19931994 are as
follows (in thousands):
Real Real property
Realproperty, and property, equipment,
capitalizedequip-
capital- ment,
ized operating
----------- ------------------- -------------
19941995 $ 392 2,482
1995 435 2,129383 4,178
1996 615 1,067571 3,290
1997 282 802278 2,741
1998 222 7032,204
1999 171 1,652
Thereafter 1,583 2,547
-------- ------
$ 3,529 9,730
======== ======1,164 6,367
--------- -------------
$2,789 20,432
========= =============
Future aggregate minimum rental payments have been reduced by noncancelable
subleases as follows: 1994, $695,000; 1995, $636,000;$689,000; 1996, $485,000; and 1996, $442,000.1997, $4,000.
Aggregate rental expense on operating leases amounted to $3,431,000,
$3,017,000,$4,841,000, $3,946,000,
and $2,409,000,$3,335,000 for the years ended December 31, 1994, 1993, 1992, and 1991,1992,
respectively.
10. STOCK OPTIONS
The Company has a qualified stock option plan adopted in 1981, under which stock
options are granted to key employees; and a nonqualified plan under which
options are granted to certain key employees. Under the nonqualified plan,
options expire five to ten years from the date of grant. Under the qualified
plan, 1,012,000506,000 shares of common stock were reserved. Qualified options are
granted at a price not less than 100 percent of the fair market value of the
stock at the date of grant. Options granted are generally exercisable in
increments from one to foursix years after the date of grant and expire foursix years
after the date of grant.
57
60
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992, and 1991
Transactions and other information relating to stock options are summarized as
follows:
Number of Option price
shares per shares share
---------------- ----------------
Options granted during:
1994 104,250 $38.50 to $39.75
1993 2,000 $47.25
1992 180,000216,000 $10.00 to $24.13
1991 4,000 $18.13
Options exercised during:
1994 45,450 $15.00 to $24.13
1993 123,051 $12.50124,491 $10.00 to $24.13
1992 116,328 $10.50 to $24.13
1991 101,006 $11.50 to $15.25
Options canceled during:
1994 6,418 $18.33 to $39.75
1993 7522,912 $10.00 to $24.13
1992 6,000 $13.25
1991 - -
Options expiring during:
1994 - -
1993 22,750 $12.50 to $14.75
1992 34,724 $13.25
1991 - -
Options outstanding at December 31:
1994 393,821 $9.47 to $47.25
1993 205,539 $15.25341,439 $9.47 to $47.25
1992 350,092 $12.50489,592 $9.47 to $24.13
1991 327,144 $10.50Options outstanding at December 31:
1994 393,821 $9.47 to $18.50$47.25
1993 341,439 $9.47 to $47.25
1992 489,592 $9.47 to $24.13
57
60
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
As of December 31, 1993,1994, there are 104,000176,000 options exercisable at prices from
$12.50$9.47 to $24.13$47.25 per share. For the year ended December 31, 1993,1994, shares obtained
through exercise of options had a cumulative average market value of $1,944,000$1,739,000
at the date of exercise.
58
61
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992, and 1991
11. COMMON STOCK
Changes in common stock are summarized as follows (amount in thousands):
Common stock
---------------------------------------------
Shares Amount
---------- --------- --------
Balance at December 31, 1990 11,987,072 $ 48,131
Stock options:
Redeemed and retired (41,810) -
Exercised 101,006 480
Employee stock ownership plan 74,262 1,602
Dividend reinvestments 28,314 618
---------- --------
Balance at December 31, 1991 12,148,844 50,83113,603,812 $60,383
Stock options:
Redeemed and retired (14,820) -
Exercised 116,328 1,221
Employee stock ownership plan 13,242 283
Dividend reinvestments 8,982 191
---------- ---------------
Balance at December 31, 1992 12,272,576 52,52613,727,544 62,078
Stock options:
Redeemed and retired (24,003) -
Exercised 123,051 879124,491 893
Acquisition 373,335 3,286
---------- ---------------
Balance at December 31, 1993 12,744,959 $ 56,69114,201,367 66,257
Stock options:
Redeemed and retired (15,265) -
Exercised 45,450 443
Acquisition 328,000 12,493
---------- -------
Balance at December 31, 1994 14,559,552 $79,193
========== ===============
12. RETIREMENT PLANS
The Company has a noncontributory defined benefit pension plan for eligible
employees. Plan benefits are based on years of service and employees'
compensation levels. Benefits vest under the plan upon completion of five years
of service. Plan assets consist principally of corporate equity and debt
securities, government fixed income securities, and cash investments.
The components of the net pension cost for the years ended December 31, 19931994 and
1992,1993, are as follows (in thousands):
1994 1993
1992
--------------- ------
Service cost - benefits earned during the period $$2,385 1,763 1,474
Interest cost on projected benefit obligation 2,908 2,715 2,531
Actual return on assets (794) (2,293) (1,890)
Net amortization and deferrals (2,640) (922)
(1,560)
--------------- ------
Net pension cost $$1,859 1,263
555
=============== ======
58
61
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Primary actuarial assumptions used in determining the net pension cost are as
follows:
1993 1992
------ -------------- --------
Assumed discount rate 8.00% 8.00
Assumed rate of increase in compensation levels 5.50 5.50
Expected long-term rate of return on assets 9.50 9.50
59
62
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992, and 1991
The funded status of the plan as of December 31, 1993 and 1992, is as follows
(in thousands):
1993 1992
-------- -------
Actuarial present value of benefit obligations:
Vested benefit obligation $ 31,225 27,424
======== =======
Accumulated benefit obligation $ 35,703 30,721
======== =======
Projected benefit obligation $(39,676) (33,738)
Plan assets at fair value 35,790 31,676
-------- -------
Unfunded projected benefit obligation (3,886) (2,062)
Unrecognized net loss 10,830 7,285
Unrecognized prior service cost (1,120) (1,211)
Unrecognized net transition asset (3,556) (4,181)
-------- -------
Prepaid (accrued) pension cost $ 2,268 (169)
======== =======
Primary actuarial assumptions (future periods):
Assumed discount rate 7.50% 8.00
Assumed rate of increase in compensation levels 5.00 5.50
Expected long-term rate of return on assets 9.50 9.50
The funded status of the plan as of December 31, 1994 and 1993, is as follows
(in thousands):
1994 1993
--------- --------
Actuarial present value of benefit obligations:
Vested benefit obligation $(31,092) (31,225)
========= ========
Accumulated benefit obligation $(33,972) (35,703)
========= ========
Projected benefit obligation $(38,269) (39,676)
Plan assets at fair value 36,208 35,790
--------- --------
Unfunded projected benefit obligation (2,061) (3,886)
Unrecognized net loss 8,391 10,830
Unrecognized prior service cost (1,290) (1,120)
Unrecognized net transition asset (2,931) (3,556)
--------- --------
Prepaid pension cost 2,109 2,268
Primary actuarial assumptions (future periods): ========= ========
Assumed discount rate 8.75% 7.50
Assumed rate of increase in compensation levels 5.00 5.00
In addition to the Company's defined benefit pension plan, the Company sponsors
a defined benefit health care plan that provides postretirement medical benefits
to full-time employees hired before January 1, 1993, who meet minimum age and
service requirements. The plan is contributory, with retiree contributions
adjusted annually, and contains other cost-sharing features such as deductibles
and coinsurance. Plan coverage is provided by self-funding or health maintenance
organizations (HMOs) options. The accounting for the plan anticipates future
cost-sharing changes to the written plan, including the Company's expressed
intent to increase the retiree contribution rate annually from 30 percent and 40
percent in 1993 for normal and early retirees, respectively, to 50 percent for
both in 1996. The Company's retiree premium contribution rate is frozen at 50
percent of 1996 dollar amounts. The Company's policy is to fund the cost of
medical benefits in amounts determined at the discretion of management.
The Company adopted Statement No. 106, "Employers'Employers' Accounting for Postretirement
Benefits Other Than Pensions," as of January 1, 1993. The effect of adopting Statement No. 106 on income before cumulative effect of
changesthis adoption was an after-tax decrease in accounting principles and net income for the year ended December 31,
1993 amounted to a decrease of $5,760,000, and $3,631,000, respectively.as reported
in 1993.
59
62
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table presents the plan's funded status reconciled with amounts
recognized in the Company's consolidated balance sheetsheets at December 31, 1994 and
1993, as follows (in thousands):
1994 1993
-------- -------
Accumulated postretirement benefit obligation:
Retirees $ 2,773$(2,693) (2,773)
Fully eligible active plan participants 1,693(1,779) (1,693)
Other active plan participants 682
---------
5,148(705) (682)
-------- -------
(5,177) (5,148)
Plan assets at fair value - ----------
-------- -------
Accumulated postretirement benefit obligation in excess of plan assets 5,148(5,177) (5,148)
Unrecognized net gain 1,122
---------(1,039) (1,122)
-------- -------
Accrued postretirement benefit cost included in other liabilities
$ 6,270
=========
$(6,216) (6,270)
======== =======
Net periodperiodic postretirement benefit cost for 1994 and 1993 includes the
following components ( in thousands):
1994 1993
-------- -------
Service cost $ 164 141
Interest cost 372 368
---------Net amortization (224) -
-------- -------
Net periodic postretirement benefit cost $ 312 509
================= =======
60
63
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992, and 1991
For measurement purposes, an annual rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) of 11.6711.55 percent and 9
percent were assumed for the self-funded and HMOs options, respectively, for
1994. The HMOs rate was assumed to decrease gradually to 5 percent by the year
2000 and remain at that level thereafter. The self-funded rate was assumed to
decrease gradually to 5.8 percent by the year 2001, and decline to 5.01 percent
over the remaining life expectancy of the participants. The health care cost
trend rate assumption does not have a significant effect on amounts reported
because the Company has capped its retiree premium contribution rates.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.58.75 and 7.50 percent, respectively, at
December 31, 1994 and 1993.
The Company has an Employee Stock Savings Plan and an Employee Investment
Savings Plan (formerly known as the Salary Reduction Arrangement Plan)
(PAYSHELTER). Under PAYSHELTER, employees select from a nontax-deferred or
tax-deferred plan and four investment alternatives. Employees can contribute
from 1 to 15 percent of compensation, which is matched 50 percent by the Company
for contributions up to 5 percent and 25 percent for contributions greater than
5 percent up to 10 percent. Contributions to the plans amounted to $1,175,000,$1,319,000,
$1,176,000, and $793,000 and $636,000 for the years ended December 31, 1994, 1993, 1992, and 1991,1992,
respectively.
During 1992, the Company formed an employee profit sharing plan. Contributions
to the plan are determined per a formula based on the Company's annual return on
equity (required minimum return of 1514 percent). Contributions to the plan
amounted to $1,096,000, $948,000, and $914,000 for the years ended December 31,
1994, 1993, and 1992, respectively.
60
63
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Financial information by quarter for the three years ended December 31, 19931994 is
as follows (in thousands, except per share amounts):
Per common share
------------------------Net
Provi- Income Incomeincome
Net sion for before before
cumulative cumulative
Income effect of effect of
Net Provision before changes in changes inper
interest for loan income accounting Net accounting Netcommon
income losses taxes principles income principles incomeshare
--------- -------- --------- ------- -------------------- ------ ---------- ------
1994:
First quarter $ 44,801 290 18,416 12,438 .87
Second quarter 48,741 467 24,743 16,418 1.12
Third quarter 51,859 440 26,789 17,665 1.20
Fourth quarter 53,205 984 24,779 17,306 1.18
-------- ------ ------- ------ -----
$198,606 2,181 94,727 63,827 4.37
======== ====== ======= ====== =====
1993:
First quarter $ 37,182 1,196 11,694 7,908 9,567 .6241,092 1,365 13,428 10,746 .75
Second quarter 40,461 263 22,538 15,180 15,180 1.18 1.1844,813 408 24,729 16,636 1.17
Third quarter 39,104 382 20,361 13,849 13,849 1.0843,795 482 22,684 15,397 1.08
Fourth quarter 40,070 457 21,505 14,443 14,443 1.13 1.13
--------- ---------44,957 738 22,953 15,426 1.08
-------- ------ -------- ------ ------
$ 156,817 2,298 76,098 51,380 53,039 4.02 4.15
========= =========-----
$174,657 2,993 83,794 58,205 4.08
======== ====== ======== ====== ===========
1992:
First quarter $ 32,675 3,945 10,331 7,646 7,646 .62 .6235,486 4,135 11,293 8,331 .61
Second quarter 34,991 2,866 14,710 9,390 9,390 .76 .7638,105 3,181 15,977 10,282 .74
Third quarter 37,180 1,933 18,224 12,009 12,009 .97 .9740,664 2,003 19,908 13,131 .95
Fourth quarter 39,186 1,507 21,337 14,357 14,357 1.16 1.16
--------- ---------43,027 1,610 22,955 15,465 1.12
-------- ------ ------- ------ ------
$ 144,032 10,251 64,602 43,402 43,402 3.52 3.52
========= =========-----
$157,282 10,929 70,133 47,209 3.42
======== ====== ======= ====== ======
1991:
First quarter $ 32,645 6,805 10,427 6,792 6,792 .56 .56
Second quarter 31,650 4,959 11,074 7,199 7,199 .60 .60
Third quarter 33,379 6,427 10,959 7,139 7,139 .58 .58
Fourth quarter 33,793 5,358 9,639 7,994 7,994 .65 .65
--------- --------- ------ ------ ------
$ 131,467 23,549 42,099 29,124 29,124 2.39 2.39
========= ========= ====== ====== ===========
61
64
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992, and 1991
14. CONCENTRATIONS OF CREDIT RISK
Credit risk represents the accounting loss that would be recognized at the
reporting date if counterparties failed completely to perform as contracted.
Concentration of credit risk (whether on or off balance sheet) that arise from
financial instruments exists for groups of customers or counterparties when they
have similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic or other
conditions. The Company does not have significant exposure to any individual
customer or counterparty.
Most of the Company's business activity is with customers located within the
states of Utah, Nevada, and Nevada.Arizona. The commercial loan portfolio is well
diversified, consisting of more than 17 industry classifications groupings. As
of December 31, 1993,1994, the largest concentration of risk in the commercial loan
and leasing portfolio is represented by the real estatemanufacturing industry grouping,
which comprises approximately 17 percent of the portfolio. The real estatemanufacturing
industry grouping is also well diversified over several subcategories. The
Company has minimal credit exposure from lending transactions with highly
leveraged entities and has no foreign loans.
61
64
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying value and estimated fair value of principal financial instruments as of
December 31, 19931994 are summarized as follows (in thousands):
Carrying Estimated
value fair value
---------------------- ----------
Financial assets:
Cash and due from banks $ 303,751 303,751316,943 316,943
Money market investments 578,771 578,771403,446 403,446
Investment securities 1,145,034 1,160,2211,663,433 1,651,212
Loans, net 2,165,403 2,161,755
------------2,324,260 2,315,516
---------- ---------
Total financial assets $ 4,192,959 4,204,498
============$4,708,082 4,687,117
========== =========
Financial liabilities:
Demand, savings, and money market deposits $ 2,415,094 2,415,094$2,934,548 2,934,548
Time and foreign deposits 609,017 606,566771,428 756,176
Federal funds purchased and security repurchase
agreements 595,200 595,200605,975 605,975
FHLB advances and other borrowings 288,249 288,249127,319 127,319
Long-term debt 55,587 62,207
------------58,182 57,587
---------- ---------
Total financial liabilities $ 3,963,147 3,967,316
============$4,497,452 4,481,605
========== =========
Financial assets and financial liabilities other than investment securities of
the Company are not traded in active markets. The above estimates of fair value
require subjective judgments, and are approximate. Changes in the following
methodologies and assumptions could significantly affect the estimates.
Financial Assets - The estimated fair value approximates the carrying value of
cash and due from banks and money market investments. For securities, the fair
value is based on quoted market prices where available. If quoted market prices
are not available, fair values are based on quoted market prices of comparable
instruments or using a discounted cash flow model based on established market
rates. The fair value of fixed rate loans is estimated by discounting future
cash flows using the London Interbank Offered Rate (LIBOR) yield curve adjusted
by a factor which reflects the credit and interest rate risk inherent in the
loan. Variable rate loans reprice with changes in market rates. As such their
carrying amounts are deemed to approximate fair value. The fair value of the
allowance for loan losses of $65,267,000$67,018,000 is the present value of estimated net
charge-offs.
Financial Liabilities - The estimated fair value of demand and savings deposits,
and federal funds purchased and security repurchase agreements approximates the
carrying value. The fair value of time and foreign deposits is estimated by
discounting future cash flows using the LIBOR yield curve. Substantially all
FHLB advances reprice with changes in market interest rates or have short terms
to maturity. The carrying value of such indebtedness is deemed to approximate
market value. Other borrowings are not significant. The estimated fair value of
the subordinated notes is based on a quoted market price. The remaining
long-term debt is not significant.
Off-Balance Sheet Financial Instruments - CommitmentsThe carrying and fair values of
off-balance sheet financial instruments represented by interest rate exchange
contracts (swaps) and caps as of December 31, 1994 is as follows (in thousands):
Carrying value Fair value
-------------- ----------
asset positive
(liability) (negative)
-------------- ----------
Swaps $ - (3,405)
Futures and options 1,158 1,158
Caps:
Purchased 367 643
Written (7,393) (10,085)
The fair value of the swaps and caps reflects the estimated amounts that the
Company would receive or pay to terminate the contracts at the reporting date
based upon pricing or valuation models applied to current market information,
thereby taking into account the current unrealized gains or losses of open
contracts.
62
65
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The fair value of commitments to extend credit and letters of credit, represent the principal categories of off-balance sheet
financial instruments. The fair value of these commitments, based on
fees currently charged for similar commitments, is not significant. See note 9
to the consolidated financial statements.
62
65
ZIONS BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992, and 1991
16. DIVIDEND RESTRICTION AND CONDENSED PARENT ONLYPARENT-ONLY FINANCIAL INFORMATION
Dividends declared by the Company's banking subsidiaries in any calendar year
may not, without the approval of the appropriate federal regulator, exceed their
net earnings for that year combined with their retained net earnings for the
preceding two years. At December 31, 1993,1994, the Company's subsidiaries had
approximately $54.6 million$112,994,000 available for the payment of dividends under the
foregoing restrictions. In addition, the banking subsidiaries must meet various
requirements and restrictions under the laws of the United States and state
laws, including requirements to maintain cash reserves against deposits and
limitations on loans and investments with affiliated companies. During 1993,1994,
cash reserve balances held with the Federal Reserve banks averaged approximately
$60.3$78.3 million.
63
66
Condensed financial information of Zions
Bancorporation (parent only) follows:
ZIONS BANCORPORATION
Condensed Balance Sheets
December 31, 19931994 and 19921993
(In thousands)
ASSETS 1994 1993 1992
-------- -------
Cash and due from banks $ 1,309 1,1381,574 2,251
Interest-bearing deposits 2,826 445 10,180
Investment securities 270 313 365
Loans, lease financing, and other receivables 2,373 3,787 5,551
Investments in subsidiaries:
Commercial banks 309,700 258,871386,853 335,137
Other 4,601 3,531 9,500
Receivables from subsidiaries:
Commercial banks 27,094 28,971
29,190
Other 563 50 15,110
Real estate held for rental purposes, at cost, less accumulated depreciation 6,169 6,824 7,460
Premises and equipment, at cost, less accumulated depreciation 132 150 120
Other real estate owned 134 386 626
Other assets 7,618 11,144
8,161
------------------- -------
$ 366,610 346,272
===========$440,207 392,989
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued liabilities $ 13,672 6,95410,247 13,850
Short-term borrowings 8,001 9,000 -
Long-term debt 53,547 96,771
-----------56,189 57,547
-------- -------
Total liabilities 76,219 103,725
-----------74,437 80,397
-------- -------
Shareholders' equity:
Preferred stock - -
Common stock 56,691 52,52679,193 66,257
Net unrealized holding gains and losses on securities available for sale 432 -available-for-sale (5,866) 415
Retained earnings 233,268 190,021
-----------292,443 245,920
-------- -------
Total shareholders' equity 290,391 242,547
-----------365,770 312,592
-------- -------
$ 366,610 346,272
===========$440,207 392,989
======== =======
64
67
ZIONS BANCORPORATION
Condensed Statements of Income
Years ended December 31, 1994, 1993, 1992, and 19911992
(In thousands)
1994 1993 1992
1991
---------- ------ -------------- ------- -------
Interest income - interest and fees on loans and securities $ 4,242 2,879 2,5703,035 4,278 2,905
Interest expense - interest on borrowed funds 7,4024,798 7,622 9,014
7,891
---------- ------ -------------- ------- -------
Net interest loss (3,160) (6,135) (5,321)
---------- ------ ------(1,763) (3,344) (6,109)
Other income: -------- ------- -------
Dividends from consolidated subsidiaries:
Commercial banks 21,528 17,766 13,982
14,007
Other - 3,224 250
1,450
Other income 2,985 2,542 2,734 2,354
---------- ------ ------2,767
-------- ------- -------
24,513 23,532 16,966 17,811
---------- ------ ------16,999
-------- ------- -------
Expenses:
Salaries and employee benefits 4,913 3,989 3,532 2,887
Loss on early extinguishment of debt - 6,022 - -
Operating expenses 844 181 (223)
---------- ------ ------
10,855 3,713 2,664
---------- ------ ------1,165 933 184
-------- ------- -------
6,078 10,944 3,716
-------- ------- -------
Income before income tax benefit and cumulative effect of changes in accounting principles 9,517 7,118 9,82616,672 9,244 7,174
Income tax benefit (4,339) (2,815) (1,673)
---------- ------ ------(1,939) (4,448) (2,792)
-------- ------- -------
Income before cumulative effect of changes in accounting principles 13,856 9,933 11,49918,611 13,692 9,966
Cumulative effect of changes in accounting principles - (378) -
-
---------- ------ -------------- ------- -------
Income before equity in undistributed income (loss) of consolidated subsidiaries 13,478 9,933 11,499
---------- ------ ------18,611 13,314 9,966
-------- ------- -------
Equity in undistributed income (loss) of consolidated subsidiaries:
Commercial banks 42,386 32,492 17,66544,133 47,716 36,266
Other 1,083 (2,825) 977
(40)
---------- ------ ------
39,561 33,469 17,625
---------- ------ -------------- ------- -------
45,216 44,891 37,243
-------- ------- -------
Net income $ 53,039 43,402 29,124
========== ====== ======$63,827 58,205 47,209
======== ======= =======
65
68
ZIONS BANCORPORATION
Condensed Statements of Cash Flows
Years ended December 31, 1994, 1993, 1992, and 19911992
(In thousands)
1994 1993 1992
1991
--------- -------- -------
--------- ---------
Cash flows from operating activities:
Net income $ 53,039 43,402 29,12463,827 58,205 47,209
Adjustments to reconcile net income to net cash provided by operating activities:
Undistributed net income of consolidated subsidiaries (39,561) (33,469) (17,625)(45,216) (44,891) (37,243)
Depreciation of premises and equipment 675 688 692 725
Amortization of excess costs of acquired businesses 349492 349 349
Other 3,758 889 1,858(3) 3,845 899
--------- -------- ---------------- ---------
Net cash provided by operating activities 18,273 11,863 14,43119,775 18,196 11,906
--------- -------- ---------------- ---------
Cash flows from investing activities:
Net decrease (increase) in interest-bearing deposits (2,381) 9,735 (787) (1,712)
Collection of advances to subsidiaries 4,939 154,272 148,466 80,234
Advances to subsidiaries (3,575) (138,993) (170,495) (79,853)
Decrease (increase) of investment in subsidiaries 376 (467) 2,538274 (2,625) (716)
Other 1,908 2,060 1,199 8631,371
--------- -------- ---------------- ---------
Net cash provided by (used in) investing activities 27,450 (22,084) 2,0701,165 24,449 (22,161)
--------- -------- ---------------- ---------
Cash flows from financing activities:
Net change in short-term funds borrowed (3,305) 9,000 - -
Proceeds from issuance of long-term debt - 4,000 50,000 -
Payments on long-term debt (1,358) (43,224) (32,317) (9,764)
Proceeds from issuance of common stock 879317 893 1,695 2,700
Dividends paid (12,207) (9,183) (8,698)(17,271) (12,692) (9,587)
--------- -------- ---------------- ---------
Net cash provided by (used in) financing activities (45,552) 10,195 (15,762)(21,617) (42,023) 9,791
--------- -------- ---------------- ---------
Net increase (decrease) in cash and due from banks 171 (26) 739(677) 622 (464)
Cash and due from banks at beginning of year 1,138 1,164 4252,251 1,629 2,093
--------- -------- ---------------- ---------
Cash and due from banks at end of year $ 1,309 1,138 1,1641,574 2,251 1,629
========= ======== ================ =========
The Parentparent company paid interest of $7,245,000, $8,577,000, $7,940,000, and $7,255,000$7,940,000 for
the years ended December 31, 1994, 1993, 1992, and 1991,1992, respectively.
66
69
ZIONS BANCORPORATION
Condensed Statements of Retained Earnings
Years ended December 31, 1994, 1993, 1992, and 19911992
(In thousands)
1994 1993 1992
1991
---------- ------- ---------------- -------- ---------
Balance at beginning of year $ 190,021 155,802 135,376$245,920 197,992 160,370
Retained earnings of acquired company - 2,428 - -
Net income 53,039 43,402 29,12463,827 58,205 47,209
Cash dividends:
Preferred, paid by subsidiary to minority shareholder (33) (13) -
-
Common (16,786) (12,207) (9,183)
(8,698)
---------- ------- -------Dividends of NBA prior to merger (485) (485) (404)
--------- -------- --------
Balance at end of year $ 233,268 190,021 155,802
========== ======= =======$292,443 245,920 197,992
========= ======== ========
67
70
The selected quarterly financial data information required by this item appears
on pages 2224 and 61 under the caption "QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item, to the extent not included under the
caption "Executive officers of the registrant" in Part I of this report, will
appear on pages 1 through 6 of the definitive Proxy Statement. Information
relating to the directors and executive officers on pages 1 through 6, and
information required by Item 405 of Regulation S-K as set forth beginning in the
last paragraph on page 7 of the definitive Proxy Statement relating to the 19941995
Annual Meeting of Shareholders to be held April 29, 1994,28, 1995, is incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appearing on pages 8 through 1621 of the
definitive Proxy Statement relating to the 19941995 Annual Meeting of Shareholders
to be held April 29, 1994,28, 1995, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item appearing on pages 6 and 7 of the
definitive Proxy Statement relating to the 19941995 Annual Meeting of Shareholders
to be held April 29, 1994,28, 1995, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appearing on page 1621 of the definitive
Proxy Statement relating to the 19941995 Annual Meeting of Shareholders to be held
April 29, 1994,28, 1995, is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are part of this report and appear on the pages
indicated:
Page
(1) Financial Statements:
Page
Independent Auditors' Report 3941
Consolidated Balance Sheets - December 31, 1994 and 1993 and 1992 4042
Consolidated Statements of Income - Years ended December 31, 1994, 1993, and 1992 and 1991 4143
Consolidated Statements of Cash Flows - Years ended December 31, 1994, 1993, and 1992 and 1991 4244
Consolidated Statements of Retained Earnings Years ended December 31, 1994, 1993, and 1992 and 1991 4345
Notes to Consolidated Financial Statements 4446
(2) Financial Statement Schedules:
Schedules are omitted because the information is either not required,
not applicable, or is included in Part II, Items 6-8 of this report.
(3) Exhibits:
68
71
(3) Exhibits:
The exhibits listed on the Exhibit Index on page 71 of this
report are filed or are incorporated herein by reference.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
December 31, 1993.1994.
For the purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1993, the undersigned
Registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into Registrant's Registration Statements on Form S-8 Nos. 33-52878
(filed on October 2, 1992) and 33-52796 (filed on October 2, 1992).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
69
72
SIGNATURES
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.
March 18, 199421, 1995 ZIONS BANCORPORATION
By /s/ Harris H. Simmons
------------------------------------
Harris-------------------------------
HARRIS H. Simmons,SIMMONS, President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
March 18, 1994
March 21, 1995
/s/ Harris H. Simmons /s/ Gary L. Anderson
- --------------------------------------------------- ---------------------------------------------------------------------------------------- -------------------------------------
HARRIS H. SIMMONS, President, Chief Executive GARY L. ANDERSON, Secretary, Senior Vice
Officer and Director President, and Chief Financial Officer
/s/ Roy W. Simmons /s/ Walter E. Kelly
- --------------------------------------------------- ---------------------------------------------------------------------------------------- -------------------------------------
ROY W. SIMMONS, Chairman and Director WALTER E. KELLY, Controller
/s/ Jerry C. Atkin /s/ Robert N. Sears
- --------------------------------------------------- ---------------------------------------------------------------------------------------- -------------------------------------
JERRY C. ATKIN, Director ROBERT N. SEARS,G. SARVER, Director
/s/ Grant R. Caldwell
/s/ L. E. Simmons
- --------------------------------------------------- ---------------------------------------------------------------------------------------- -------------------------------------
GRANT R. CALDWELL, Director L.E. SIMMONS, Director
/s/ R.D. Cash /s/ I. J. Wagner
- --------------------------------------------------- ---------------------------------------------------------------------------------------- -------------------------------------
R. D. CASH, Director I. J. WAGNER, Director
/s/ Roger B. Porter /s/ Dale W. Westergard
- --------------------------------------------------- ----------------------------------------------------
ROGER B. PORTER,------------------------------------ -------------------------------------
RICHARD H. MADSEN, Director DALE W. WESTERGARD, Director
/s/ Robert G. Sarver
- ---------------------------------------------------------------------------------------
ROBERT G. SARVER,B. PORTER, Director
70
73
EXHIBIT INDEX
FILED AS PART OF THIS REPORT ON FORM 10-K
(Pursuant to Item 601 of Regulations S-K)
Page number in
sequential
numbering
Exhibit system of filed
no. Description and method of filing
Form 10-K
- ------- ---------------------------------------------------------------------------------------------------- ----------------------- --------------------------------
3.1 Restated Articles of Incorporation of Zions Bancorporation dated November 8, 1993, and
filed with the Department of Business Regulation, Division of Corporations of the state
of Utah on November 9, 1993 (incorporated by reference to Exhibit 3.1 to the *
Registrant's Form S-4 Registration Statement, File No. 33-51145, filed on November 22,
1993) *
3.2 Restated Bylaws of Zions Bancorporation, dated November 8, 1993 (incorporated by
reference to Exhibit 3.2 to the Registrant's Form S-4 Registration Statement, File No. *
33-51145, filed November 22, 1993) *
9 Voting Trust Agreement, dated December 31, 1991 (incorporated by reference to Exhibit 9
of Zions Bancorporation's Annual Report on Form 10-K for the year ended December 31, *
1991)
*
10.1 Amended and Restated Zions Utah Bancorporation Pension Plan (incorporated by reference to Exhibit 10.2 of Zions Utah
Bancorporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 1985) *(filed)
10.2 Amendment to Zions Bancorporation (formerly Zions Utah Bancorporation) Pension Plan dated July 17,
1987 (incorporated by reference to Exhibit 10.2 of Zions Bancorporation's Annual Report on Form
10-K for the year endedeffective December 31, 1987) *1, 1994 (filed)
10.3 Zions Utah Bancorporation Supplemental Retirement Plan Form (incorporated by reference
to Exhibit 19.4 of Zions Utah Bancorporation's Quarterly Report on Form 10-Q for the *
quarter ended September 30, 1985) *
10.4 Amendment to Zions Bancorporation (formerly Zions Utah Bancorporation) Key Employee
Incentive Stock Option Plan approved by the shareholders of the Company on April 27,
1990 (incorporated by reference to Exhibit 19 of Zions Bancorporation's Quarterly Report *
on Form 10-Q for the quarter ended June 30, 1990) *
10.5 Zions Bancorporation Deferred Compensation Plan for Directors, as amended May 1, 1991
(incorporated by reference to Exhibit 19 of Zions Bancorporation's Annual Report on Form *
10-K for the year ended December 31, 1991)
10.6 Zions Bancorporation Senior Management Value Sharing Plan, Award Period 1991-1994
(incorporated by reference to Exhibit 19 of Zion Bancorporation's Annual Report on Form *
10.610-K for the year ended December 31, 1992)
10.7 Zions Bancorporation Senior Management Value Sharing Plan, Award Period 1992-1995
(incorporated by reference to Exhibit 10.6 of ZionZions Bancorporation's Annual Report on *
Form 10-K for the year ended December 31, 1992)
*
10.710.8 Zions Bancorporation Senior Management Value Sharing Plan, Award Period 1991-19941993-1996
(incorporated by reference to Exhibit 1910.8 of Zions Bancorporation's Annual Report on
Form 10-K for the year endedend December 31, 1992)1993) *
10.810.9 Zions Bancorporation Senior Management Value-SharingValue Sharing Plan, Award Period 1993-19961994-1997 (filed)
75
21 List of subsidiaries of10.10 Zions Bancorporation Executive Management Pension Plan (filed) 79
71
74
EXHIBIT INDEX
FILED AS PART OF THIS REPORT ON FORM 10-K (continued)
(Pursuant to Item 601 of Regulations S-K)
Page number in
sequential
numbering
Exhibit system of filed no. Description and method of filing
Form 10-K
- ------- ---------------------------------------------------------------------------------------------------- -------------------------- --------------------------------
21 List of subsidiaries of Zions Bancorporation (filed)
23 Consent of KPMG Peat Marwick, LLP independent certified public accountants (filed)
8027 Article 9 Financial Data Schedule for Form 10-K (filed)
99.1 Form 11-K Annual Report of Zions Bancorporation Employee Stock Savings Plan (filed)
81
99.2 Form 11-K Annual Report of Zions Bancorporation Employee Investment Savings Plan (filed) 89
* incorporated by reference.
72
75
EXHIBIT 10.8
ZIONS BANCORPORATION
SENIOR MANAGEMENT VALUE SHARING PLAN
AWARD PERIOD: 1993 - 1996
Objective:
To provide an ongoing multi-year incentive for the senior managers of Zions
Bancorporation and its subsidiaries which:
A. Focuses managers' attention on the creation of long-term shareholder value;
B. Creates an incentive that promotes teamwork across departments and
subsidiaries, and which encourages managers to balance profit center
accountability with Company-wide goals; and,
C. Complements the short-range annual bonuses which reflect the achievement of
annual objectives and the Company's short-term profitability.
Eligibility:
Participants in the Plan shall consist of the senior management group (and
certain other key managers) of the Company and its major subsidiaries.
Participants for each Award Period shall be specifically identified by the
Company's Board of Directors (the "Board") or its Executive Compensation
Committee (the "Committee").
Allocation of Awards:
It is anticipated that during the first quarter of each year in which the Plan
operates, the Board of Directors shall approve the establishment of a pool of
Award Funds to be generated during the Award Period, according to the general
formula outlined below. Participants shall be designated by the Board or the
Committee. Claims against the pool of Award Funds for each Award Period shall
be represented by Participation Units ("PU's), and each Participant shall be
allocated a specific number of PU's by the Committee. The PU's shall represent
a pro-rata claim, in proportion to the total PU's designated for that Award
Period, on any Award Funds generated by the Plan during the Award Period.
Term:
Each Award Period shall consist of a continuous four-calendar-year period. The
Plan is intended to constitute a "moving four-year-average" incentive plan,
with the anticipation that a new Award Period would be designated each year,
with multiple Award Periods overlapping one another. Nevertheless, the
establishment of a new Award Period each year is subject to the Board's
discretion.
Determination of Award Funds:
The amount of Award Funds in the pool for each Award Period shall be a function
of the mathematical average return on shareholders' equity ("AROE") for each of
the four years in the Award Period, together with the aggregate earnings per
share ("AEPS") during the Award Period.
Each year, the Committee shall establish minimum targets for AROE and AEPS for
the Award Period. These minimum targets would both be required to be reached
in order for any Award Funds to be earned. Additionally, the Committee may
designate Award Fund AROE, with upward adjustments possible if higher levels of
AEPS are achieved. The Committee may also designate other conditions and
adjustment factors to ensure the Plan's integrity and consistency with
shareholder and depositor interests.
73
76
The 1993 - 1996 Award Period formula for the determination of total Award Funds
is as follows:
* Minimum AROE: 14.00%
* Minimum AEPS: $15.55
Funding of 1993 - 1996 Award Fund Pool:
AROE Cumulative Award Funds
---- ------------------------
14% $ 0
15% 217,000
16% 503,000
17% 855,000
18% 1,075,000
19% 1,513,000
20% 1,992,000
21% 2,507,000
22% 3,047,000
Interim amounts shall be calculated by interpolation.
The basic Award Fund amount would be further modified by multiplying the
cumulative Award Funds by 1+ [(AEPS - $15.55)/21.6], with a maximum AEPS figure
of $22.67 (resulting in a 33% maximum upward adjustment in the Award Funds.
For the 1993 - 96 Award Period, the following parameters shall be established,
and adjustments made to the Company's earnings calculations, for purposed of
determining Award Funds available under the Plan:
1). The Plan is intended to create an incentive for increasing shareholder
value. However, this is not to be accomplished by reducing capital
levels or assuming extraordinary or unwarranted risks. Accordingly, it
is expected that total risk-based capital levels shall be maintained at a
level at least 125% of regulatory requirements.
2). The Company's reserve levels are to be conservatively maintained. To the
extent that the consolidated Allowance for Loan and Lease Losses is less
than 120% of the peer group level, as expressed in terms of
reserves/noncurrent loans as reported in the most current Uniform Bank
Performance Report available at January 31, 1996, an appropriate
adjustment shall be made to after-tax earnings (for purposes of
calculating Award Funds only) to compensate for any deficit relative to
the 120% minimum target level. Actual reserve levels are, of course,
subject to Board and/or regulatory decisions. No upward adjustments
shall be made in "pro forma" earnings in the event actual reserve levels
exceed 120% of the peer group target.
3). Unless determined otherwise by the Board, in the event of any merger
involving an acquisition by Zions for the exchange of Zions' shares in a
pooling-of-interests transaction, earnings per share prior to the
acquisition date shall, for the purpose of calculating AEPS during the
Award Period, be determined using Zions' unrestated numbers.
Other Terms and Conditions:
The Plan is to be governed and interpreted by the Committee, whose decisions
shall be final. The terms of the Plan are subject to change or termination at
their sole discretion.
The Company shall retain the right to withhold payment of Award Funds to
participants in the event of a significant deterioration in the Company's
financial condition, or if so required by regulatory authorities, or for any
other reason considered valid by the Board in its sole discretion.
74
77
Participants shall not vest in any benefits available under the Plan until the
conclusion of each Award Period. Nevertheless, upon death, permanent
disability, or normal or early retirement, participants (or their estates)
shall be eligible to receive a proportionate share of Award Funds based upon
the number of PU's granted, and the number of full calendar quarters the
participant was engaged as an officer of the Company or its subsidiaries prior
to death, disability, or retirement.
The PU's shall not be transferable without the express approval of the
Committee.
In the event of the merger or acquisition of the Company, the Plan shall be
terminated as of the end of the fiscal quarter preceding the first full quarter
before the transaction is consummated. The Board may make any reasonable
estimates or adjustments possible in calculating Award Funds for any Award
Period, and may, in its sole discretion, distribute benefits to the
participants.
Earnings per share calculations shall be adjusted to reflect any stock splits,
stock dividends, or other such changes in capitalization, at the discretion of
the Committee.
The award of PU's to any participant shall not confer any right with respect to
continuance of employment with the Company or its subsidiaries, nor limit in
any way the right of the Company to terminate his or her employment at any
time, with or without cause.
75
78
APPENDIX
ZIONS BANCORPORATION VALUE-SHARING PLAN: 1993-96
Calculation of Participation Unit Value
Average Annual ROE ("AROE")
If the AROE is:
Over - But not over - The Basic value of a Participation Unit is -
- ------------------------------------------------------------------------------------------------------------
14.00% 15.99% $0 + $.0280 per basis point of the amount over
14.00%.
16.00% 16.99% $5.59 + $.0391 per basis point of the amount over
16.00%.
17.00% 17.99% $9.50 + $.0244 per basis point of the amount over
17.00%.
18.00% 18.99% $11.94 + $.0487 per basis point of the amount over
18.00%.
19.00% 19.99% $16.81 + $.0532 per basis point of the amount over
19.00%.
20.00% 20.99% $22.13 + $.0573 per basis point of the amount over
20.00%.
21.00% 21.99% $27.86 + $.0600 per basis point of the amount over
21.00%.
22.00% $33.86
Aggregate E.P. S. ("AEPS") Modifier:
The basis Participation Unit value determined above shall be adjusted as
follows:
If AEPS for 1993-96 is less than $15.55, the Participation Units shall have no
value.
If AEPS is greater than $15.55, the basic amount determined based on AROE shall
be multiplied by a factor of: 1+[(AEPS-$15.55)/21.6] (with a maximum factor
of 1.33) to arrive at a final total value of each Participation Unit.
******************
Example: If AROE is 18.23% and AEPS is $17.76, each Participation Unit would
be worth $16.69.
76
79
ZIONS BANCORPORATION AND SUBSIDIARIES
AT DECEMBER 31, 1993
SUBSIDIARY STATE
---------- -----
Zions First National Bank Federally chartered doing business in Utah
Nevada State Bank Nevada
Zions First National Bank of Arizona Federally chartered doing business in Arizona
Lockhart Realty Company Utah
Great Western Financial Corporation Utah
Zions Credit Corporation Utah
Zions Data Service Company Utah
Zions Insurance Agency, Inc. Utah
Zions Life Insurance Company Arizona
77
80
CONSENT OF INDEPENDENT AUDITORS
Zions Bancorporation:
We consent to the incorporation by reference in Zions Bancorporation's (i)
Registration Statement (Form S-3 No. 33-52586) and related Prospectus
pertaining to the Zions Bancorporation Dividend Reinvestment and Common Stock
Purchase Plan, (ii) Registration Statement (Form S-8 No. 33-52878) and related
Prospectus pertaining to Zions Bancorporation Employee Stock Savings Plan, and
(iii) Registration Statement (Form S-8 No. 33-52796) and related Prospectus
pertaining to Zions Bancorporation Employee Investment Savings Plan, of our
report dated January 25, 1994, relating to the consolidated balance sheets of
Zions Bancorporation and subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of income, retained earnings, and cash flows
for each of the years in the three-year period ended December 31, 1993, which
report appears in this annual report on Form 10-K for the year ended December
31, 1993. Our report refers to changes in accounting principles relating to
the adoption of the Financial Accounting Standards Board's Statements of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions", No. 109, "Accounting for Income
Taxes", and No. 115, "Accounting for Certain Investments in Debt and Equity
Securities".
The audit referred to in the above-mentioned report also included the related
financial schedule entitled Short-term Borrowings, for each of the years in the
three-year period ended December 31, 1993, included in Part II, Item 7 on page
36. In our opinion, such financial schedule presents fairly the information
required to be set forth therein for each of the years in the three-year period
ended December 31, 1993.
We also consent to the incorporation by reference in Zions Bancorporation's
Registration Statement (Form S-8 No. 33-52878) of Zions Bancorporation Employee
Stock Savings of our report dated March 16, 1994, relating to the net assets
available for benefits of Zions Bancorporation Employee Stock Savings Plan as
of December 31, 1993 and 1992, and the related statements of changes in net
assets available for benefits for each of the years in the three-year period
ended December 31, 1993, which report appears in this annual report on Form
11-K for the year ended December 31, 1993.
We also consent to the incorporation by reference in Zions Bancorporation's
Registration Statement (Form S-8 No. 33-52796) of Zions Bancorporation Employee
Investment Savings of our report dated March 16, 1994, relating to the net
assets available for benefits of Zions Bancorporation Employee Investment
Savings as of December 31, 1993 and 1992, and the related statements of changes
in net assets available for benefits for each of the years in the three-year
period ended December 31, 1993, which report appears in this annual report on
Form 11-K for the year ended December 31, 1993.
KPMG Peat Marwick
Salt Lake City, Utah
March 29, 1994
78
81
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 11-K
----------------------------
ANNUAL REPORT
Pursuant to Section 15(d) Of The
Securities Exchange Act Of 1934
For The Year Ended December 31, 1993
ZIONS BANCORPORATION
EMPLOYEE STOCK SAVINGS PLAN
ZIONS BANCORPORATION
1380 Kennecott Building
Salt Lake City, Utah 84133
79
82
ITEM 1. CHANGES IN THE PLAN
The Plan was completely amended and restated as of October 1, 1992. No changes
were made in the Plan during the year 1993.
ITEM 2. CHANGES IN INVESTMENT POLICY
No material changes were made during the fiscal year in the policy with
respect to the kind of securities and other investments in which funds held
under the plan may be invested.
ITEM 3. CONTRIBUTIONS UNDER THE PLAN
The Company's contributions are measured by reference to employee contributions
and are not discretionary.
ITEM 4. PARTICIPATING EMPLOYEES
There were 1,524 participating employees in the Plan on December 31, 1993.
ITEM 5. ADMINISTRATION OF THE PLAN
(a) Zions Bancorporation is the Plan administrator. The Company's Board of
Directors has appointed an Administrative Committee consisting of six
persons. The Committee has full power and authority to administer the
Plan and to interpret its provisions. The present members of the
Committee and their positions held are:
Member Position - Company
----------------- --------------------------------------------------------------
Harris H. Simmons President and Chief Executive Officer of Zions Bancorporation
Gary L. Anderson Senior Vice President of Zions Bancorporation
Peter K. Ellison Executive Vice President of Zions First National Bank
W. David Hemingway Executive Vice President of Zions First National Bank
Richard G. Crandall Vice President of Zions First National Bank
Russell W. Miller President of Zions Insurance Agency, Inc.
The address of each fiduciary listed above is 1380 Kennecott Building,
Salt Lake City, Utah 84133.
(b) No compensation is paid to the Committee members by the Plan. All
expenses of the Plan and its administration are paid by the Company.
ITEM 6. CUSTODIAN OF INVESTMENTS
(a) Zions First National Bank, One South Main Street, Salt Lake City, Utah
84133 is the custodian and trustee.
(b) The custodian and trustee receive no compensation from the Plan.
80
83
ITEM 7. REPORTS TO PARTICIPATING EMPLOYEES
Participating employees are furnished an annual statement reflecting the status
of their accounts as of the end of the fiscal year.
ITEM 8. INVESTMENT OF FUNDS
Substantially all of the assets of the Plan are invested in securities of the
Company.
ITEM 9. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Page
Report of Independent Auditors 82
Statements of Net Assets Available for Benefits - December 31, 1993 and 1992 83
Statements of Changes in Net Assets Available for Benefits - Years ended
December 31, 1993, 1992, and 1991 84
Notes to Financial Statements 85
Schedules - Schedules I, II, and III have been omitted for the reasons that
they are not required or are not applicable, or the required information is
shown in the financial statements or notes thereto.
(b) Exhibits - None
81
84
Independent Auditors' Report
The Trust Committee
Zions Bancorporation
Employee Stock Savings Plan:
We have audited the accompanying statements of net assets available for
benefits of Zions Bancorporation Employee Stock Savings Plan as of December
31, 1993 and 1992, and the related statements of changes in net assets
available for benefits for each of the years in the three-year period ended
December 31, 1993. These financial statements are the responsibility of the
plan's administrators. 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 the plan's administrators, 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 net assets available for benefits of Zions
Bancorporation Employee Stock Savings Plan as of December 31, 1993 and
1992, and the changes in net assets available for benefits for each of the
years in the three-year period ended December 31, 1993, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick
Salt Lake City, Utah
March 16, 1994
82
85
ZIONS BANCORPORATION
EMPLOYEE STOCK SAVINGS PLAN
Statements of Net Assets Available for Benefits
December 31, 1993 and 1992
1993 1992
---------- ----------
Assets:
Investments, at market value:
Zions Bancorporation common stock (approximate cost of
$5,366,000 in 1993 and $2,811,000 in 1992) $7,943,160 6,247,232
Short-term investment fund 61,243 9,992
---------- ---------
8,004,403 6,257,224
Contributions receivable:
Employees 114,948 40,416
Zions Bancorporation 57,475 20,209
Dividends receivable 60,243 34,917
Cash - 258
---------- ---------
Total assets 8,237,069 6,353,024
---------- ---------
Liabilities:
Accounts payable 6,805 -
Excess contribution refunds 7,073 -
---------- ---------
Total liabilities 13,878 -
---------- ---------
Net assets available for benefits $8,223,191 6,353,024
========== =========
See accompanying notes to financial statements.
83
86
ZIONS BANCORPORATION
EMPLOYEE STOCK SAVINGS PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 1993, 1992, and 1991
1993 1992 1991
------------- ------------ ----------
Additions (deductions) to net assets attributed to:
Net appreciation (depreciation) in market value of
investment in Zions Bancorporation common stock $ (516,233) 2,333,081 694,360
Dividends 200,330 106,606 87,004
Interest 1,543 269 314
---------- --------- --------
(314,360) 2,439,956 781,678
---------- --------- --------
Contributions:
Employees 1,806,956 400,265 126,136
Zions Bancorporation 903,477 200,133 62,933
---------- --------- --------
2,710,433 600,398 189,069
---------- --------- --------
Transfer of assets from Zions Bancorporation Employee Investment Savings Plan - 1,390,989 -
---------- --------- --------
Total additions 2,396,073 4,431,343 970,747
Deductions from net assets attributed to benefits paid
directly to participants 525,906 706,422 314,626
---------- --------- --------
Net increase 1,870,167 3,724,921 656,121
Net assets available for benefits:
Beginning of year 6,353,024 2,628,103 1,971,982
---------- --------- ---------
End of year $8,223,191 6,353,024 2,628,103
========== ========= =========(filed)
See accompanying notes to financial statements.
84
87
ZIONS BANCORPORATION
EMPLOYEE STOCK SAVINGS PLAN
Notes to Financial Statements
December 31, 1993, 1992, and 1991
(1) Description of the Plan
Zions Bancorporation Employee Stock Savings Plan (the Plan) is a single
employer contributory plan that is designed to provide retirement benefits
for eligible employees under an after tax salary reduction arrangement* incorporated by offering employees an opportunity to acquire stock ownership in Zions
Bancorporation (the Company).
(2) Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
followed by the Plan in the preparation of its financial statements.
(a) Basis of Presentation
The Plan's financial statements are presented on the accrual basis of
accounting.
(b) Investments
The investment in common stock of the Company is carried at market
value in the accompanying financial statements. The investment in
the short-term investment fund represents a cash equivalent.
Purchases and sales of investments are recorded on a trade-date
basis.
(c) Costs of Administration
All costs of administration are absorbed by the Company.
(3) Eligibility
Participation in the Plan is voluntary. An employee is eligible to
participate on January 1, or July 1, whichever coincides with, or
immediately follows, the latter of the date on which the employee
completes at least 1,000 hours of service during 12 continuous months and
attains the age of 21. As of December 31, 1993 and 1992, there were
1,524 participants and 1,260 participants, respectively, in the Plan.
(4) Employee and Company Contributions
Each eligible employee who elects to participate makes contributions
ranging from one to five percent of their total compensation.
Company contributions are equal to 50 percent of the amount contributed by
the employee.
85
88
ZIONS BANCORPORATION
EMPLOYEE STOCK SAVINGS PLAN
Notes to Financial Statements
(5) Allocation of Income or Loss
Net appreciation (depreciation) in market value of investments,
dividends, and interest income are allocated to each participant's
account in proportion to the investment shares held in that
participant's account to the total of investment shares held in the
Plan.
(6) Vesting and Payment of Benefits
Employee contributions and the employees' share of the Company
contributions are 100 percent vested at all times. Benefits are paid upon
death, disability, retirement, or earlier subject to certain restrictions.
Benefits are paid in shares of stock.
(7) Income Taxes
The Plan obtained its latest determination letter on November 5, 1985,
in which the Internal Revenue Service stated that the Plan, as then
designed, was in compliance with the applicable requirements of the
Internal Revenue Code. The Plan has been amended since receiving the
determination letter. The Company is in the process of obtaining a
new letter for the Plan. However, the plan administrator and the Plan's
tax counsel believe that the Plan is currently designed and being
operated in compliance with the applicable requirements of the Internal
Revenue Code. Therefore, they believe that the Plan was qualified and
the related trust was tax-exempt as of the financial statement date.
(8) Investment
At December 31, 1993 and 1992, investment in common stock of the Company
consisted of 214,680 and 164,401 shares, respectively.
(9) Plan Amendments
The Plan became effective on January 1, 1978, and has been amended and
restated at various times thereafter. The Plan was completely amended
and restated as of October 1, 1992. The following summarizes the Plan's
amended areas:
(a) Participant Contributions
Participants can elect for either a pretax reduction or post-tax
salary reduction of one to a maximum of five percent of total
compensation as a participant contribution.
(b) Company Contributions
Matching contributions are made by the Company on behalf of each
participant in the amount of fifty percent of the participant's
contributions.
86
89
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1993
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
ZIONS BANCORPORATION
1380 KENNECOTT BUILDING
SALT LAKE CITY, UTAH 84133
87
90
ITEM 1.CHANGES IN THE PLAN
The Plan was completely amended and restated as of October 1, 1992. No changes
were made in the Plan during the year 1993.
ITEM 2. CHANGES IN INVESTMENT POLICY
The Plan maintains four separate types of investment funds: (i) company
securities, which consists of Company stock and short-term investments pending
the acquisition of Company securities; (ii) Fidelity mutual fund, which invests
primarily in a diversified portfolio of U.S. common stocks, which are invested
to track closely with the Standard and Poors 500 index; (iii) money market
fund, which consists of, but is not limited to, certificates of deposit,
commercial paper, and U.S. treasury bills; and (iv) fixed income fund, which
invests primarily in government, mortgage, and corporate bonds. No material
changes were made during the year 1993 in the policy with respect to the kind
of securities and other investments in which funds held under the Plan may be
invested.
ITEM 3. CONTRIBUTIONS UNDER THE PLAN
The Company's contributions are measured by reference to employee contributions
and are not discretionary.
ITEM 4. PARTICIPATING EMPLOYEES
There were 1,405 participating employees in the Plan on December 31, 1993.
ITEM 5. ADMINISTRATION OF THE PLAN
(a) Zions Bancorporation is the Plan administrator. The Company's Board of
Directors has appointed an Administrative Committee consisting of six
persons. The Committee has full power and authority to administer the
Plan and to interpret its provisions. The present members of the
Committee and their positions held are:
Member Position - Company
- -------------------- -------------------------------------------------------------
Harris H. Simmons President and Chief Executive Officer of Zions Bancorporation
Gary L. Anderson Senior Vice President of Zions Bancorporation
Peter K. Ellison Executive Vice President of Zions First National Bank
W. David Hemingway Executive Vice President of Zions First National Bank
Richard G. Crandall Vice President of Zions First National Bank
Russell W. Miller President of Zions Insurance Agency, Inc.
The address of each fiduciary listed above is 1380 Kennecott Building,
Salt Lake City, Utah 84133.
(b) No compensation is paid to the Committee members by the Plan. All
expenses of the Plan and its administration are paid by the Company.
88
91
ITEM 6. CUSTODIAN OF INVESTMENTS
(a) Zions First National Bank, One South Main Street, Salt Lake City, Utah
84133 is the custodian and trustee.
(b) The custodian and trustee receive no compensation from the Plan.
ITEM 7. REPORTS TO PARTICIPATING EMPLOYEES
Participating employees are furnished an annual statement reflecting the status
of their accounts as of the end of the fiscal year.
ITEM 8. INVESTMENT OF FUNDS
As elected by participants, approximately seventy-two percent of the assets of
the Plan are invested in securities of the Company, approximately thirteen
percent in the Fidelity mutual fund, approximately thirteen percent in the
money market fund, and approximately two percent invested in the fixed income
fund.
ITEM 9. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements Page
----
Report of Independent Auditors 90
Statements of Net Assets Available for Benefits - December 31, 1993 and 1992 91
Statements of Changes in Net Assets Available for Benefits - Years ended
December 31, 1993, 1992, and 1991 92
Notes to Financial Statements 93
Schedules - Schedules I, II, and III have been omitted for the reasons that
they are not required or are not applicable, or the required information is
shown in the financial statements or notes thereto.
(b) Exhibits - None
89
92
Independent Auditors' Report
The Trust Committee
Zions Bancorporation Employee
Investment Savings Plan:
We have audited the accompanying statements of net assets available for
benefits of Zions Bancorporation Employee Investment Savings Plan as of
December 31, 1993 and 1992, and the related statements of changes in net assets
available for benefits for each of the years in the three-year period ended
December 31, 1993. These financial statements are the responsibility of the
Plan's administrators. 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 the plan's administrators, 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 net assets available for benefits of Zions
Bancorporation Employee Investment Savings Plan as of December 31, 1993 and
1992, and the changes in net assets available for benefits for each of the
years in the three-year period ended December 31, 1993, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick
Salt Lake City, Utah
March 16, 1994
90
93
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Statements of Net Assets Available for Benefits
December 31, 1993 and 1992
1993 1992
---- ----
Assets:
Investments, at market value:
Zions Bancorporation common stock (approximate cost of $9,689,000 in 1993 and
$9,755,000 in 1992) $18,828,375 22,720,320
Fidelity mutual fund (approximate cost of $3,229,000 in 1993 and $1,318,000
in 1992) 3,525,534 1,432,841
Money market fund 3,477,123 1,591,280
Fixed income fund (approximate cost of $515,000 in 1993) 526,295 -
Short-term investment fund 3,207 2,432
----------- -----------
26,360,534 25,746,873
Contributions receivable:
Employees 69,556 29,044
Zions Bancorporation 15,782 6,170
Participant loans receivable 1,341,223 775,238
Dividends receivable 142,484 129,345
Interest receivable 5,187 4,435
Due from Zions Bancorporation 4,095 1,956
----------- -----------
Total assets 27,938,861 26,693,061
Liabilities:
Accounts payable 3,656 8,700
Excess contribution refunds 90,183 -
----------- -----------
Total liabilities 93,839 8,700
----------- -----------
Net assets available for benefits $27,845,022 26,684,361
=========== ===========
See accompanying notes to financial statements.
91
94
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 1993, 1992, and 1991
1993 1992 1991
----------- ----------- -----------
Additions to net assets attributed to:
Investment income:
Net appreciation (depreciation) in market value of
investments $ (118,055) 10,477,861 3,606,687
Dividends 564,557 508,484 479,798
Capital gain distributions 198,053 83,830 62,501
Interest 169,448 58,427 67,736
----------- ----------- ----------
814,003 11,128,602 4,216,722
----------- ----------- ----------
Contributions:
Employees 1,326,267 1,683,313 1,551,756
Zions Bancorporation 271,519 592,491 572,619
Plan rollovers 196,725 - -
----------- ----------- ----------
1,794,511 2,275,804 2,124,375
----------- ----------- ----------
Total additions 2,608,514 13,404,406 6,341,097
Deductions from net assets attributed to:
Benefits paid directly to participants (1,447,853) (1,706,335) (1,457,874)
Transfer of assets to Zions Bancorporation Employee
Stock Savings Plan - (1,390,989) -
----------- ----------- ----------
Total deductions (1,447,853) (3,097,324) (1,457,874)
----------- ----------- ----------
Net increase 1,160,661 10,307,082 4,883,223
Net assets available for benefits:
Beginning of year 26,684,361 16,377,279 11,494,056
----------- ----------- ----------
End of year $27,845,022 26,684,361 16,377,279
=========== =========== ==========
See accompanying notes to financial statements.
92
95
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 1993, 1992, and 1991
(1) Description of the Plan
Zions Bancorporation Employee Investment Savings Plan (the Plan) is a
single employer contributory plan that is designed to provide retirement
benefits for eligible employees under a pretax salary reduction (deferral)
arrangement and, if employees so elect, an opportunity to acquire stock
ownership in Zions Bancorporation (the Company).
(2) Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Plan in the preparation of its financial statements.
(a) Basis of Presentation
The Plan's financial statements are presented on the accrual basis of
accounting.
(b) Investments
Investments in common stock of Zions Bancorporation, Fidelity mutual
fund, and fixed income fund shares are carried at market value in the
accompanying financial statements. The investments in the money
market fund and short-term investment fund represent cash equivalents.
Purchases and sales of investments are recorded on a trade-date basis.
(c) Cost of Administration
All costs of administration are absorbed by the Company.
(3) Eligibility
Participation in the Plan is voluntary. An employee is eligible to become
a participant on January 1 or July 1, whichever coincides with, or
immediately follows, the latter of the date on which the employee completes
at least 1,000 hours of service during 12 continuous months and attains the
age of 21. At December 31, 1993 and 1992, there were 1,405 participants
and 1,266 participants, respectively, in the Plan.
93
96
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
(4) Employee and Company Contributions
Participants may elect to contribute one to fifteen percent of their
compensation to the Employee Investment Savings Plan, limited by
participant contributions made to Zions Bancorporation Employee Stock
Savings Plan. The contributions are invested in one or more of the
following investment options: (i) the Company's stock, (ii) the Fidelity
mutual fund, (iii) a money market fund, and (iv) a fixed income fund. The
Company contributes an amount equal to 25 percent of the contribution made
by each participant up to ten percent of their compensation with no match
made on contributions in excess thereof. The maximum amount a participant
may contribute to the Plan in a calendar year is the lesser of fifteen
percent of their compensation, or $8,994, for 1993.
(5) Allocation of Income or Loss
Net appreciation (depreciation) in market value of investments, dividends,
interest income, and capital gains are allocated to each participant's
account in proportion to the investment shares held in that participant's
account to the total investment shares held in the Plan.
(6) Vesting and Payment of Benefits
Employee contributions and the employees' share of the Company
contributions are 100 percent vested at all times. Benefits are paid upon
death, disability, retirement, or earlier subject to certain restrictions.
Benefits are paid in shares of stock and/or cash pursuant to the nature of
the investment vehicle selected by the participant.
(7) Income Taxes
The Plan obtained its latest determination letter on November 5, 1985, in
which the Internal Revenue Service stated that the Plan, as then designed,
was in compliance with the applicable requirements of the Internal Revenue
Code. The Plan has been amended since receiving the determination letter.
The Company is in the process of obtaining a new letter for the Plan.
However, the plan administrator and the Plan's tax counsel believe that the
Plan is currently designed and being operated in compliance with the
applicable requirements of the Internal Revenue Code. Therefore, they
believe that the Plan was qualified and the related trust was tax-exempt as
of the financial statement date.
94
97
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
(8) Investments
The investments in common stock of the Company and the Fidelity mutual
fund, consists of 508,875 and 597,903 shares, and 193,923 and 57,336
shares, respectively, at December 31, 1993 and 1992. The investment in the
fixed income fund consists of 24,207 shares at December 31, 1993.
The net unrealized appreciation (depreciation) in market value for each of
the years in the three-year period ended December 31, 1993, in comparison
to the market value at the beginning of each year is as follows:
Investment 1993 1992 1991
---------- ---- ---- ----
Zions Bancorporation common stock $(222,329) 10,477,363 3,453,584
Fidelity mutual fund 122,428 498 153,103
Fixed income fund (18,154) - -
--------- ---------- ---------
Net appreciation (depreciation)
in market value $(118,055) 10,477,861 3,606,687
========= ========== =========
(9) Plan Amendments
The Plan became effective on January 1, 1984, and has been amended and
restated at various times thereafter. The Plan was completely amended and
restated as of October 1, 1992. Amendment provisions include the
following:
(a) Participant Contributions
Participants can elect a pretax reduction from one percent to a
maximum of fifteen percent of total compensation as a participant
contribution, depending in part on the extent to which the participant
contributes to the Zions Bancorporation Employee Stock Savings Plan.
(b) Company Contributions
Matching contributions are made by the Company on behalf of each
participant in the amount of twenty-five percent of participant
contributions (note 4), but not in excess of ten percent of
compensation.
(c) Participant Elections
Participants may change quarterly investment elections for funds
already invested in their accounts.
95
98
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
(d) Investment Options
The Plan maintains four separate types of investment funds: (i)
company securities, which consists of Company stock and short-term
investments pending the acquisition of Company securities; (ii)
Fidelity mutual fund, which invests primarily in a diversified
portfolio of U.S. common stocks, which are invested to track closely
with the Standard and Poors 500 index; (iii) money market fund, which
consists of, but is not limited to, certificates of deposit,
commercial paper, and U.S. treasury bills; and (iv) fixed income
fund, which invests primarily in government, mortgage, and corporate
bonds.
(e) Participant Loans
Beginning October 1, 1992, a participant who is an active employee may
apply for and obtain a loan of up to fifty percent of the eligible
amounts in their account. Loans may not exceed five years and must be
secured by the participants account. Loan repayment is made through
payroll deduction.
(10) Financial Information by Fund Type
Financial information by fund type as of, and for the year ended December
31, 1993, are as follows:
Statement of Net Assets Available for Benefits by Fund Type
December 31, 1993
Zions
Bancorp-
oration Fidelity
common mutual Money Fixed
stock fund market income Loans Total
----- -------- ------ ------ ----- -----
Assets:
Investments, at
market value:
Zions
Bancorporation
common stock $ 18,828,375 - - - - 18,828,375
Fidelity mutual
fund - 3,525,534 - - - 3,525,534
Money market
fund - - 3,477,123 - - 3,477,123
Fixed income
fund - - - 526,295 - 526,295
Short-term
investment
fund 3,207 - - - - 3,207
------------ ------------ ------------ ------------ ----------- ------------
18,831,582 3,525,534 3,477,123 526,295 - 26,360,534
96
99
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
(10) Financial Information by Fund Type (continued)
Zions
Bancorp-
oration Fidelity
common mutual Money Fixed
stock fund market income Loans Total
------- -------- ------ ------ ----- -----
Contributions
receivable:
Employees $ 21,395 28,533 17,416 2,212 - 69,556
Zions
Bancorporation 4,692 6,554 4,192 344 - 15,782
Participant loans
receivable - - - - 1,341,223 1,341,223
Dividends receivable 142,484 - - - - 142,484
Interest receivable - - 5,187 - - 5,187
Due from Zions
Bancorporation - 2,624 - 1,471 - 4,095
----------- --------- --------- ------- --------- ----------
Total assets 19,000,153 3,563,245 3,503,918 530,322 1,341,223 27,938,861
Liabilities:
Accounts payable 2,774 - - 882 - 3,656
Excess contribution
refunds 28,807 37,652 19,478 4,246 - 90,183
----------- --------- --------- ------- --------- ----------
Total
liabilities 31,581 37,652 19,478 5,128 - 93,839
----------- --------- --------- ------- --------- ----------
Net assets available
for benefits $18,968,572 3,525,593 3,484,440 525,194 1,341,223 27,845,022
=========== ========= ========= ======= ========= ==========
97
100
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
(10) Financial Information by Fund Type (continued)
Statement of Changes in Net Assets Available for Benefits by Fund Type
Year ended December 31, 1993
Zions
Bancorp-
oration Fidelity
common mutual Money Fixed
stock fund market income Loans Total
----- ---- ------ ------ ----- -----
Additions to net assets
attributed to:
Investment income:
Net appreciation
(depreciation) in
market value of
investments $ (222,329) 122,428 - (18,154) - (118,055)
Dividends 500,811 36,822 - 26,924 - 564,557
Capital gain
distributions - 184,807 - 13,246 - 198,053
Interest 62,156 8,654 98,475 163 - 169,448
----------- -------- -------- ------- -------- ----------
340,638 352,711 98,475 22,179 - 814,003
----------- -------- -------- ------- -------- ----------
Contributions:
Employees 444,853 535,485 303,659 42,270 - 1,326,267
Zions
Bancorporation 73,559 120,059 71,756 6,145 - 271,519
Plan rollovers 97,314 23,002 61,671 14,738 - 196,725
----------- -------- -------- ------- -------- ----------
615,726 678,546 437,086 63,153 - 1,794,511
----------- -------- -------- ------- -------- ----------
Principal loan
payments 181,877 23,474 24,383 480 (230,214) -
----------- -------- -------- ------- -------- ----------
Total additions 1,138,241 1,054,731 559,944 85,812 (230,214) 2,608,514
Deductions from net
assets attributed to:
Benefits paid
directly to
participants (954,245) (127,202) (351,331) (28) (15,047) (1,447,853)
Loans disbursed (583,465) (81,030) (143,291) (3,460) 811,246 -
----------- -------- -------- ------- -------- ----------
Total
deductions (1,537,710) (208,232) (494,622) (3,488) 796,199 (1,447,853)
----------- -------- -------- ------- -------- ----------
98
101
ZIONS BANCORPORATION
EMPLOYEE INVESTMENT SAVINGS PLAN
Notes to Financial Statements
(10) Financial Information by Fund Type (continued)
Zions
Bancorp-
oration Fidelity
common mutual Money Fixed
stock fund market income Loans Total
------- ------ ------ ------ ----- -----
Interfund transfers $(3,504,699) 1,251,016 1,810,813 442,870 - -
----------- --------- --------- ------- --------- ----------
Net increase
(decrease) (3,904,168) 2,097,515 1,876,135 525,194 565,985 1,160,661
Net assets available
for benefits:
Beginning of year 22,872,740 1,428,078 1,608,305 - 775,238 26,684,361
----------- ---------- --------- ------- --------- ----------
End of year $18,968,572 3,525,593 3,484,440 525,194 1,341,223 27,845,022
=========== ========== ========= ======= ========= ==========
99reference.