UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 10-K/A
(Mark One)
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1992
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File number 0-4170
FOURTH FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Kansas 48-0761683
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 North Broadway
Wichita, Kansas 67202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (316) 261-4444
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $5
--------------------------
(Title of Class)
Depositary Shares, each representing a 1/16th interest in a share of
Class A 7% Cumulative Convertible Preferred Stock, Par Value $100 per
share, Liquidation Preference $400.00 per share (equivalent to $25.00
per Depositary Share)
(Title of Class)
Indicate by check mark whether 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.
As of March 1, 1993, the aggregate market value of the voting stock
of Registrant held by nonaffiliates of Registrant was approximately
$541,000,000. Such value was computed by reference to the reported last
sales price of such stock on March 1, 1993. At March 1, 1993,
22,359,766 shares of Common Stock, par value $5 per share, were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the April 21, 1993 Annual
Meeting of Stockholders of Registrant (the "1993 Proxy Statement") to
be filed pursuant to Regulation 14c are incorporated by reference into
Part III of this report.
PART II
Item 8. Financial Statements and Supplementary Data (as amended May 5, 1994,
to amend Report of Independent Auditors and add Reports of Other
Auditors).
Set forth below are the consolidated financial statements of
Registrant and its subsidiaries, appearing on pages A-2 through A-32 of
the attached Appendix, which are hereby incorporated by reference:
a. Consolidated Statements of Condition
b. Consolidated Statements of Income
c. Consolidated Statements of Changes in Stockholders'
Equity
d. Consolidated Statements of Cash Flows
e. Notes to Consolidated Financial Statements
f. Report of Independent Auditors
g. Reports of Other Auditors
The information required by Item 302 of Regulation S-K, contained
on pages A-58 and A-59 of the attached Appendix under the caption
"Quarterly Financial Data," is hereby incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K (as amended May 5, 1994, to amend
Exhibit 24 (now 24.01) and to add Exhibits 24.02, 24.03
and 24.04).
(a) The following documents are filed as part of this report:
(1) Financial Statements: the financial statements, notes, and
independent auditor's report described in Item 8 to which
reference is hereby made.
(2) Financial Statement Schedules: None.
(3) Exhibits: The following exhibits.
Exhibit
No. Description
3.01 - Restated Articles of Incorporation and amendments
(Exhibit 3.01 to Form 10-Q for the quarter ended June 30,
1992, previously filed by Registrant).*
3.02 - Certificate of Designation (Exhibit 3.02 to Form 10-K for
year ended December 31, 1991, previously filed by
Registrant (the "1991 10-K").*
3.03 - Form of Deposit Agreement (Exhibit 3.03 to 1991 10-K).*
3.04 - Form of Depositary Receipt (Exhibit 3.04 to 1991 10-K).*
3.05 - Bylaws (Exhibit 3.04 to Form 10-K for the year ended
December 31, 1988, previously filed by Registrant).*
10.01 - Amended and Restated Fourth Financial Corporation 1981
Incentive Stock Option Plan (Exhibit 4(a) to Post-
Effective Amendment No. 2 to Form S-8, Regis. No.
2-80907, previously filed by Registrant).*
10.02 - Amended and Restated Fourth Financial Corporation 1986
Incentive Stock Option Plan (Exhibit 10.02 to Form 10-K
for the year ended December 31, 1990, previously filed
by Registrant).*
10.03 - Revolving Credit and Term Loan Agreement, dated as of
July 1, 1987, between Chemical Bank and Registrant
(Exhibit 10.04 to Form 10-K for the year ended December
31, 1987, previously filed by Registrant).*
10.04 - First Amendment dated as of July 1, 1989, to Revolving
Credit and Term Loan Agreement (Exhibit 10.04 to Form
10-K for the year ended December 31, 1989, previously
filed by Registrant).*
10.05 - Second Amendment dated as of November 15, 1989, to
Revolving Credit and Term Loan Agreement (Exhibit 10.05
to Form 10-K for the year ended December 31, 1989,
previously filed by Registrant).*
10.06 - Third Amendment, dated as of March 29, 1991, to Revolving
Credit and Term Loan Agreement (Exhibit 10.06 to 1991
10-K).*
10.07 - Fourth Financial Corporation 1988 Employee Stock Purchase
Plan (revised January 23, 1992) (Exhibit 10.07 to 1991
10-K).*
10.08 - Stock Purchase Agreement, dated as of December 22, 1992,
between Registrant and stockholders of Bancshares of
Woodward, Inc.
10.09 - Stock Purchase Agreement, dated as of December 11, 1992,
between Registrant and stockholders of Guaranty
Bancorporation.
10.10 - Stock Purchase Agreement, dated as of January 13, 1993,
between Registrant and certain stockholders of F&M Bank
Services, Inc.
10.11 - Agreement and Plan of Reorganization, dated as of January
18, 1993, among Registrant, Nichols Hills Bancorporation,
Inc., and certain stockholders of Nichols Hills
Bancorporation, Inc.
10.12 - $35,000,000 Credit Agreement, dated as of March 22, 1991,
between Fourth Financial Corporation and Continental Bank
N.A., and amended May 28, 1991, March 13, 1992, and April
2, 1992.
10.13 - Fourth Financial Corporation Amended and Restated
Directors' Deferred Fee Plan, as of December 2, 1992.
22 - Subsidiaries of Registrant.
24.01 - Consent of Ernst & Young.
24.02 - Consent of Arthur Andersen & Co.
24.03 - Consent of Grant Thornton.
24.04 - Consent of Deloitte & Touche.
- - --------------------
*Document has been previously filed with the Securities and Exchange
Commission and is incorporated by reference and made a part thereof.
(b) Reports on Form 8-K
During the last quarter of the period covered by this report
Registrant filed a Form 8-K, dated November 12, 1992, in which it
reported under Item 5 its unaudited selected consolidated operating
results for the ten-month periods ended October 31, 1992 and 1991.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
FOURTH FINANCIAL CORPORATION
By: /s/ Darrell G. Knudson
---------------------------------
Darrell G. Knudson
Chairman of the Board
Date: May 5, 1994
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of Registrant and in the capacity and on the dates indicated
below by the following persons on behalf of Registrant and in the
capacities and on the dates indicated.
Signature Title Date
--------- ------- ------
/s/ DARRELL G. KNUDSON Chairman of the Board May 5, 1994
- - ---------------------------
Darrell G. Knudson (Principal Executive Officer)
/s/ MICHAEL J. SHONKA Senior Vice President May 5, 1994
- - ---------------------------
Michael J. Shonka (Principal Financial Officer)
/s/ BARBARA M. NOYES Vice President and Controller May 5, 1994
- - ---------------------------
Barbara M. Noyes
/s/ LIONEL D. ALFORD Director May 5, 1994
- - ---------------------------
Lionel D. Alford
/s/ THOMAS R. CLEVENGER Director May 5, 1994
- - ---------------------------
Thomas R. Clevenger
/s/ JORDAN L. HAINES Director May 5, 1994
- - ---------------------------
Jordan L. Haines
Director May 5, 1994
- - ---------------------------
Lawrence M. Jones
Director May 5, 1994
- - ---------------------------
Joseph M. Klein
/s/ DARRELL G. KNUDSON Director May 5, 1994
- - ---------------------------
Darrell G. Knudson
/s/ RUSSELL W. MEYER, JR. Director May 5, 1994
- - ---------------------------
Russell W. Meyer, Jr.
Director May 5, 1994
- - ---------------------------
Fred L. Merrill, Sr.
Director May 5, 1994
- - ---------------------------
Laird G. Noller
/s/ PATRICK E. O'SHAUGHNESSY Director May 5, 1994
- - ---------------------------
Patrick E. O'Shaughnessy
Director May 5, 1994
- - ---------------------------
Robert F. Vickers
/s/ KEN WAGNON Director May 5, 1994
- - ---------------------------
Ken Wagnon
FOURTH FINANCIAL CORPORATION
INDEX TO FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
Pages
Consolidated Statements of Condition. . . . . . . . . . . . . .
Consolidated Statements of Income . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Stockholders' Equity. . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . .
Report of Independent Auditors. . . . . . . . . . . . . . . . .
Reports of Other Auditors . . . . . . . . . . . . . . . . . . .
Report of Audit Committee . . . . . . . . . . . . . . . . . . .
Report of Management . . . . . . . . . . . . . . . . . . . . .
Selected Consolidated Financial Data . . . . . . . . . . . . .
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . .
FOURTH FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
December 31,
-------------------------
1992 1991
----------- -----------
(Dollars in thousands)
Assets:
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 352,219 $ 337,924
Interest-bearing deposits in other financial institutions . . . . . . . . . . . . 902 1,171
Investment securities (Market value-$2,396,748 and $1,919,146) . . . . . . . . . 2,355,989 1,852,148
Trading account securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,524 2,646
Federal funds sold and securities purchased under agreements to resell . . . . . 151,180 149,735
Loans and leases:
Total loans and leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,228,887 2,288,195
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . (60,498) (57,459)
---------- ----------
Net loans and leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,168,389 2,230,736
Bank premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,644 98,560
Income receivable and other assets . . . . . . . . . . . . . . . . . . . . . . . 416,466 101,638
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,124 44,831
---------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,613,437 $4,819,389
========== ==========
Liabilities And Stockholders' Equity:
Deposits:
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 882,400 $ 719,380
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,628,611 3,461,693
---------- ----------
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,511,011 4,181,073
Federal funds purchased and securities sold under agreements to repurchase . . . 318,735 134,815
Other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,731 35,443
Accrued interest, taxes, and other liabilities . . . . . . . . . . . . . . . . . 279,409 96,166
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,457 37,050
---------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,149,343 4,484,547
---------- ----------
Stockholders' Equity:
Class A cumulative convertible preferred stock, par value $100 per share
Authorized: 250,000 shares
Issued: 250,000 shares at December 31, 1992 (at liquidation preference). . . 100,000 --
Class B preferred stock, no par value
Authorized: 5,000,000 shares. . . . . . . . . . . . . . . . . . . . . . . . . -- --
Common stock, par value $5 per share
Authorized: 50,000,000 shares
Issued: 1992 - 21,894,702 shares
1991 - 21,632,238 shares . . . . . . . . . . . . . . . . . . . . . . 109,474 108,161
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,522 83,680
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,167 144,052
Less: Stock option loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,069) (1,051)
---------- ----------
Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . . . . . . 464,094 334,842
---------- ----------
Total liabilities and stockholders' equity. . . . . . . . . . . . . . . . . $5,613,437 $4,819,389
========== ==========
<FN>
The accompanying notes are an integral part of the financial statements.
FOURTH FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
----------------------------------
1992 1991 1990
-------- -------- --------
(Dollars in thousands,
except per share amounts)
Interest Income:
Interest and fees on loans and leases . . . . . . . . . . . . . . . . . $203,622 $252,953 $259,036
Interest on short-term investments . . . . . . . . . . . . . . . . . . . 2,498 12,129 26,670
Interest and dividends on investment securities:
Taxable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,583 118,758 84,703
Tax-preferred. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,856 25,234 28,033
Interest and dividends on trading account securities . . . . . . . . . . 138 200 358
-------- -------- --------
Total interest income. . . . . . . . . . . . . . . . . . . . . . . . 352,697 409,274 398,800
-------- -------- --------
Interest Expense:
Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 149,298 218,989 227,706
Interest on short-term borrowings. . . . . . . . . . . . . . . . . . . . 9,211 12,382 20,848
Interest on long-term debt . . . . . . . . . . . . . . . . . . . . . . . 2,705 3,121 1,130
-------- -------- --------
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . 161,214 234,492 249,684
-------- -------- --------
Net Interest Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 191,483 174,782 149,116
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . . 15,542 34,497 43,510
-------- -------- --------
Net Interest Income After Provision For Credit Losses. . . . . . . . . . . 175,941 140,285 105,606
-------- -------- --------
Non-Interest Income:
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,520 16,428 13,575
Service charges on deposit accounts. . . . . . . . . . . . . . . . . . . 21,173 18,369 15,739
Bank card fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,470 13,879 13,130
Investment securities gains. . . . . . . . . . . . . . . . . . . . . . . 1,521 3,216 2,541
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,872 19,494 14,390
-------- -------- --------
Total non-interest income. . . . . . . . . . . . . . . . . . . . . . 72,556 71,386 59,375
-------- -------- --------
Non-Interest Expense:
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . 82,471 78,743 70,743
Furniture and equipment. . . . . . . . . . . . . . . . . . . . . . . . . 16,598 15,811 14,432
Net occupancy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,066 11,134 10,061
FDIC insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,693 9,347 4,708
Bank card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,972 6,989 6,963
Amortization of intangible assets. . . . . . . . . . . . . . . . . . . . 5,263 4,937 3,551
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . 5,517 6,997 --
Net costs of operation of other real estate and nonperforming assets . . 1,149 4,011 8,698
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,656 40,876 38,520
-------- -------- --------
Total non-interest expense . . . . . . . . . . . . . . . . . . . . . 180,385 178,845 157,676
-------- -------- --------
Income Before Income Taxes and Extraordinary Item. . . . . . . . . . . . . 68,112 32,826 7,305
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,925 7,506 4,968
-------- -------- --------
Income Before Extraordinary Item . . . . . . . . . . . . . . . . . . . . . 53,187 25,320 2,337
Extraordinary item - gain on extinguishment of debt. . . . . . . . . . . -- -- 3,626
-------- -------- --------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,187 $ 25,320 $ 5,963
======== ======== ========
Net Income Applicable to Common Stock . . . . . . . . . . . . . . . . . . $ 47,236 $ 25,320 $ 5,963
======== ======== ========
Primary Earnings Per Common Share:
Net income applicable to common stock before extraordinary item. . . . . $2.17 $1.18 $ .12
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- .19
Net income applicable to common stock. . . . . . . . . . . . . . . . . . 2.17 1.18 .31
Fully Diluted Earnings Per Common Share:
Income before extraordinary item . . . . . . . . . . . . . . . . . . . . 2.16 1.18 .12
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- .19
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.16 1.18 .31
Dividends Per Common Share . . . . . . . . . . . . . . . . . . . . . . . . .88 .88 .88
<FN>
The accompanying notes are an integral part of the financial statements.
FOURTH FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Preferred Stock Common Stock Treasury Stock
---------------- ------------------ -------------- Stock
Capital Retained Option
Shares Amount Shares Amount Surplus Earnings Shares Amount Loans Total
------- -------- ---------- ------ ------- -------- ------- ------ ------ --------
(Dollars in thousands)
Balance, December 31,
1989
As originally
reported . . . . . . -- $ -- 17,778,875 $ 88,894 $55,292 $127,533 -- $ -- $ (655) $271,064
Adjustment for
poolings-
of-interests . . . . 34,804 6,100 1,487,641 7,438 5,927 17,767 -- -- -- 37,232
------- -------- ---------- -------- ------- -------- ------- ----- ------- --------
Adjusted balance. . 34,804 6,100 19,266,516 96,332 61,219 145,300 -- -- (655) 308,296
Net income. . . . . . -- -- -- -- -- 5,963 -- -- -- 5,963
Purchase of stock
for treasury . . . . -- -- -- -- -- -- (236,556)(4,468) -- (4,468)
Issuance of common
stock under stock
option plans . . . . -- -- 129,485 648 1,127 -- 11,462 241 -- 2,016
Issuance of common
stock for
acquisitions . . . . -- -- 734,802 3,674 10,772 -- 225,094 4,227 -- 18,673
Cash dividends:
Common stock. . . . -- -- -- -- -- (15,840) -- -- -- (15,840)
Pooled companies. . -- -- -- -- -- (175) -- -- -- (175)
Net change in stock
option loans . . . . -- -- -- -- -- -- -- -- (50) (50)
Capital transactions
of pooled companies. (34,804) (6,100) 1,354,113 6,771 9,419 -- -- -- -- 10,090
------- -------- ---------- -------- ------- -------- ------- ----- ------- --------
Balance, December 31,
1990 . . . . . . . . . -- -- 21,484,916 107,425 82,537 135,248 -- -- (705) 324,505
Net income. . . . . . -- -- -- -- -- 25,320 -- -- -- 25,320
Purchase of stock
for treasury . . . . -- -- -- -- -- -- (40,000) (697) -- (697)
Issuance of common
stock under stock
option plans . . . . -- -- 147,322 736 835 -- 40,000 697 -- 2,268
Cash dividends:
Common stock . . . -- -- -- -- -- (16,434) -- -- -- (16,434)
Pooled companies. . -- -- -- -- -- (82) -- -- -- (82)
Net change in stock
option loans . . . . -- -- -- -- -- -- -- -- (346) (346)
Capital transactions
of pooled companies. -- -- -- -- 308 -- -- -- -- 308
------- -------- ---------- -------- ------- -------- ------- ----- ------- --------
Balance, December 31,
1991 . . . . . . . . . -- -- 21,632,238 108,161 83,680 144,052 -- -- (1,051) 334,842
Net income. . . . . . -- -- -- -- -- 53,187 -- -- -- 53,187
Issuance of
preferred stock. . . 250,000 100,000 -- -- (3,080) -- -- -- -- 96,920
Issuance of common
stock under stock
option plans . . . . -- -- 162,516 813 1,657 -- -- -- -- 2,470
Cash dividends:
Preferred stock . . -- -- -- -- -- (5,951) -- -- -- (5,951)
Common stock . . . -- -- -- -- -- (16,768) -- -- -- (16,768)
Pooled companies. . -- -- -- -- -- (1,353) -- -- -- (1,353)
Net change in stock
option loans . . . . -- -- -- -- -- -- -- -- (18) (18)
Capital transactions
of pooled companies. -- -- 99,948 500 265 -- -- -- -- 765
------- -------- ---------- -------- ------- -------- ------- ----- ------- --------
Balance, December 31,
1992 . . . . . . . . . 250,000 $100,000 21,894,702 $109,474 $82,522 $173,167 -- $ -- $(1,069) $464,094
======= ======== ========== ======== ======= ======== ======= ===== ======= ========
<FN>
The accompanying notes are an integral part of the financial statements.
FOURTH FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
----------------------------------
1992 1991 1990
---------- ---------- ----------
Increase (Decrease) in Cash and Due from Banks (In thousands)
Cash Flows From Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,187 $ 25,320 $ 5,963
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . 15,542 34,497 43,510
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 17,697 16,489 13,983
Accretion of discounts on investment securities, net of
amortization of premiums. . . . . . . . . . . . . . . . . . . . . . . . 8,084 (48) (1,821)
Provision for security losses. . . . . . . . . . . . . . . . . . . . . . -- 1,491 2,461
Write-down of other real estate owned . . . . . . . . . . . . . . . . . 2,645 3,495 6,348
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . (2,030) (4,367) (3,202)
Investment securities gains . . . . . . . . . . . . . . . . . . . . . . (1,521) (3,216) (2,541)
Gain on sales of credit card loans . . . . . . . . . . . . . . . . . . . (169) (3,226) (605)
Gain on sales of other assets. . . . . . . . . . . . . . . . . . . . . . (3,093) (512) (757)
Gain on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . -- -- (3,626)
Change in assets and liabilities, net of effects from purchase of
acquired entities:
Trading account. . . . . . . . . . . . . . . . . . . . . . . . . . . . (875) 1,523 3,631
Loans held for sale. . . . . . . . . . . . . . . . . . . . . . . . . . -- (1,158) 994
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,449) 42,760 (58,936)
Accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,981 44,691 (18,844)
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . 2,751 9,972 (8,274)
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,791) (6,289) (7,231)
---------- -------- --------
Net cash provided by (used in) operating activities. . . . . . . . . 70,959 161,422 (28,947)
---------- -------- --------
Cash Flows From Investing Activities:
Purchase of banks, net of cash acquired. . . . . . . . . . . . . . . . . . (7,662) (2,280) 6,872
Purchase of consumer loans . . . . . . . . . . . . . . . . . . . . . . . . (60,751) -- --
Proceeds from sales of investment securities . . . . . . . . . . . . . . . 28,876 142,662 174,446
Proceeds from maturities and prepayments of investment securities. . . . . 881,717 1,313,063 399,777
Purchases of investment securities . . . . . . . . . . . . . . . . . . . . (1,204,929)(1,840,367) (973,864)
Purchases of mortgage servicing rights . . . . . . . . . . . . . . . . . . (1,247) (28) (4,474)
Proceeds from sale of credit card loans . . . . . . . . . . . . . . . . . 4,038 25,473 9,243
Proceeds from sales of other assets. . . . . . . . . . . . . . . . . . . . 22,378 31,624 17,104
Purchases of premises and equipment. . . . . . . . . . . . . . . . . . . . (14,034) (11,507) (19,930)
Change in assets and liabilities, net of effects from purchase of
acquired entities:
Interest-bearing deposits in other financial institutions. . . . . . . . 269 780 2,435
Federal funds sold and securities purchased under agreements to resell . 5,605 244,010 41,457
Loans and leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,477 196,167 (51,416)
---------- -------- --------
Net cash provided by (used in) investing activities. . . . . . . . . (180,263) 99,597 (398,350)
---------- -------- --------
Cash Flows From Financing Activities:
Transfers from the Resolution Trust Corporation associated with the
assumptions of savings and loan association net liabilities, less
premiums paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,413 187,461 615,795
Other transfer associated with the assumption of deposits,
net of premium paid . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,998 -- --
Transfers of net liabilities associated with the sale of savings
and loan association branches . . . . . . . . . . . . . . . . . . . . . . -- -- (53,684)
Repayment of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . (14,822) (8,837) (4,051)
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . -- 35,000 --
Acquisition of treasury stock. . . . . . . . . . . . . . . . . . . . . . . -- (697) (4,468)
Dividends on common stock. . . . . . . . . . . . . . . . . . . . . . . . . (16,768) (16,434) (15,840)
Dividends on preferred stock . . . . . . . . . . . . . . . . . . . . . . . (5,368) -- --
Proceeds from exercise of stock options. . . . . . . . . . . . . . . . . . 2,470 2,268 2,016
Net change in stock option loans . . . . . . . . . . . . . . . . . . . . . (18) (346) (50)
Proceeds from issuance of preferred stock, net of offering costs . . . . . 96,920 -- --
Capital transactions of pooled companies . . . . . . . . . . . . . . . . . (646) 226 9,855
Change in liabilities, net of effects from purchase of acquired entities:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (179,833) (353,532) (118,050)
Short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . 166,253 (131,850) 37,336
---------- -------- --------
Net cash provided by (used in) financing activities. . . . . . . . . 123,599 (286,741) 468,859
---------- -------- --------
Increase (decrease) in cash and due from banks . . . . . . . . . . . . . . . 14,295 (25,722) 41,562
Cash and due from banks at beginning of year . . . . . . . . . . . . . . . . 337,924 363,646 322,084
---------- -------- --------
Cash and due from banks at end of year . . . . . . . . . . . . . . . . . . . $ 352,219 $337,924 $363,646
========== ======== ========
Supplemental Disclosures:
Cash payments for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 167,434 $240,821 $256,990
========== ======== ========
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,281 $ 12,566 $ 7,633
========== ======== ========
<FN>
The accompanying notes are an integral part of the financial statements.
FOURTH FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 - Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of
Fourth Financial Corporation and its wholly-owned subsidiaries (the
"Company"). All significant intercompany balances and transactions
have been eliminated.
The consolidated financial statements for prior years have been
restated to reflect the poolings-of-interests of KNB Bancshares, Inc.
("KNB"), Mission Hills Bancshares, Inc. ("MHB"), United Bank of Kansas,
Inc. ("UBK"), and Fourth National Corporation ("FNC"). Certain
reclassifications of previously reported amounts have been made to
conform with current year presentation format.
Investment and Trading Account Securities
Management determines the appropriate classification of securities
at the time of purchase. Securities are classified as "Investment
securities" when management has the intent and the Company has the
ability at the time of purchase to hold the securities on a long-term
basis. Investment securities are stated at cost, adjusted for
amortization of premiums and accretion of discounts, both computed on
the constant yield method. The prepayment history of each mortgage-
backed security pool is used to recalculate the yield used to amortize
and accrete the premium and discount on these securities. The
principal purpose of the investment portfolio is to generate income
without taking undue risk. Normal operations do not require the sale
of investment securities for liquidity.
Securities that at the time of purchase are deemed to be available
for sale for the implementation of asset and liability management
strategies, anticipated liquidity needs, additional capital
requirements, and other purposes are classified as "Held for sale."
Securities in the held-for-sale category are accounted for at the lower
of cost or market value. At December 31, 1992 and 1991 there were no
securities classified as held for sale.
Securities held for sale to customers and in anticipation of
short-term market movements are classified as "Trading account
securities." Securities held in the trading account are stated at
market value.
Gains or losses on investment securities are reported as a
separate component of non-interest income. Net gains or losses on the
sale of securities held for sale and trading account securities,
including adjustments to market value, are part of normal operations
and are reflected in "Other non-interest income." The specific
identification method is used to determine the cost of securities sold.
Loans and Leases
Loans are reported at the principal amount outstanding, net of
unearned discount. Interest income on loans is accrued based on the
unpaid principal and the applicable rate. Interest on discounted loans
and leases is generally accrued on a basis approximating a level yield
over the terms of the loans or leases.
Loans held for sale are stated at market value. Net gains or
losses on the sale of these loans, including adjustments to market
value, are part of normal operations and are reflected in "Other non-
interest income." The specific identification method is used to
determine the cost of loans sold.
A loan is placed on nonaccrual status when principal or interest
is due and has remained unpaid for 90 days or more unless the loan is
both well secured and in the process of collection. A loan is also
placed on nonaccrual status when there is reasonable doubt as to the
ability of the borrower to continue to pay principal or interest. At
the time a loan is classified as nonaccrual, interest previously
recorded but not collected is reversed. Interest payments received on
such loans are generally recorded as a reduction in carrying value
unless such carrying value is deemed to be collectible. A loan is not
reclassified as accruing until all principal and interest payments are
brought current and the borrower has demonstrated the ability to
service the loan in accordance with its contractual terms.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in
estimating its fair value disclosures in accordance with Financial
Accounting Standard ("FAS") 107, "Disclosures About Fair Value of
Financial Instruments." Because there is no market for many of these
financial instruments, the Company has no basis to determine whether
these estimated fair values would be indicative of the value that could
be obtained in an arms-length sale.
Cash and due from banks: The carrying amounts reported in
the consolidated statements of condition for cash and due from
banks approximate those assets' fair values.
Interest-bearing deposits in other financial institutions:
Fair values of $957,000 for these fixed-rate certificates of
deposit were estimated using a discounted cash flow calculation
that applies interest rates currently being offered on
certificates with similar maturities. The carrying amount of
these certificates of deposit was $902,000.
Investment and trading account securities: Fair values for
investment securities were based on quoted market prices, where
available. If quoted market prices were not available, fair
values were based on quoted market prices of comparable
instruments.
Federal funds sold and securities purchased under agreements
to resell: The carrying amounts of federal funds sold and
securities purchased under agreements to resell approximate their
fair values.
Loans and leases: For variable-rate loans that reprice in
accordance with indices, fair values were estimated to be equal
to carrying values. A significant portion of a credit card
portfolio's value results from the ongoing cardholder
relationship that generates receivables and fees over time. This
relationship value is not defined as a financial instrument and
therefore not disclosed under FAS No. 107. The carrying values
of the credit card receivables approximate their fair values.
The fair values for one-to-four family fixed-rate mortgage loans
were based on quoted market prices of similar loans, adjusted for
differences in loan characteristics. The fair values for other
fixed-rate loans were estimated using discounted cash flow
analyses, using interest rates currently being offered for loans
with similar terms. Because the allowance for credit losses
provides for the credit risk inherent in the loan and lease
portfolio, neither the cash flows nor discount rates were
adjusted to reflect changes in credit risk subsequent to when
loans were originated. Nonperforming loans have not been
discounted.
Off-balance-sheet instruments: No premium or discount was
ascribed to loan commitments because virtually all funding will
be at current market rates.
Deposit liabilities: For deposits with no defined
maturities, demand deposits, interest-bearing checking deposits,
and savings deposits, FAS No. 107 defines fair value as the
amount payable on demand at the reporting date (i.e., their
carrying amounts). Included in "Intangible assets" was
$21,433,000 (net of accumulated amortization) representing the
value of core deposits assumed in deposit assumption
transactions. The value of the core deposit relationships built
by the Company over time is neither considered in the fair value
amounts nor is it recorded as an intangible asset in the
statements of condition. The carrying amounts for variable-rate
certificates of deposit approximated their fair values at the
reporting date. Fair values for fixed-rate certificates of
deposit were estimated using a discounted cash flow calculation
that applies interest rates currently being offered on
certificates with similar maturities.
Federal funds purchased, securities sold under agreements to
repurchase and other short-term borrowings: The carrying amounts
of federal funds purchased, borrowings under repurchase
agreements, and other short-term borrowings approximate their
fair values.
Long-term borrowings: The fair values of the Company's long-
term debt were estimated using discounted cash flow analyses,
based on the Company's current incremental borrowing rates for
similar types of borrowing arrangements.
Other Real Estate and Nonperforming Assets
Other real estate and nonperforming assets include assets acquired
from loan settlements and those assets considered to be substantively
repossessed. These assets are carried at the lower of the loan
carrying amount or fair value minus estimated selling costs and are
included in "Income receivable and other assets" in the consolidated
statements of condition. At the time of acquisition or repossession,
any write-down necessary to record an asset at its fair value is
charged to the allowance for credit losses. A valuation allowance for
estimated selling costs is recorded through a charge to "Net costs of
operation of other real estate and nonperforming assets." Losses and
gains on sales as well as net costs associated with these properties
are also included in "Net costs of operation of other real estate and
nonperforming assets" in the consolidated statements of income.
Allowance for Credit Losses
The allowance for credit losses is the amount deemed by management
to be reasonably necessary to provide for possible losses on loans that
may become uncollectible. Additions to the allowance are charged to
expense as the provision for credit losses. Loan losses and recoveries
are charged or credited directly to the allowance. It is the Company's
policy to charge off any loan or portion of that loan when it is deemed
to be uncollectible in the ordinary course of business.
An evaluation of the overall quality of the portfolio is performed
to determine the necessary level of the allowance for credit losses.
This evaluation takes into consideration the classification of loans
and the application of loss estimates to these classifications. It is
the responsibility of management in each of the Company's markets to
classify its loans as pass, special mention, substandard, doubtful, or
loss. The classification criteria are established by the credit
administration function of the Company, which is independent of all
lending functions, and are intended to be consistent with the criteria
applied by federal banking system examiners. These classifications
take into consideration all sources of repayment, underlying
collateral, the value of such collateral, and current and anticipated
economic conditions, trends, and uncertainties. The Company has an
independent loan review function which reviews the loans periodically.
The Company's bank subsidiaries also are subjected to periodic
examinations by the Office of the Comptroller of the Currency. Loss
factors are developed by loan type and classification using historical
loss data and statistical modeling techniques. The application of
these loss factors to the portfolio classifications combined with
analyses of general economic conditions, trends in portfolio volume,
maturity, and composition, and estimates of potential future losses on
specific large loans and those loans requiring special attention
provide management with data essential to identify and estimate the
credit risk inherent in the portfolio. The allowance for credit losses
reflects the result of these estimates and is deemed to be adequate at
each balance sheet date.
Loan and Loan Commitment Fees
The Company generally recognizes loan and loan commitment fees as
revenue when received and related costs as expenses when incurred.
Generally accepted accounting principles provides for the deferral of
such fees and direct loan origination costs and the amortization of
such fees and costs over the lives of the related loans as an
adjustment of yield. However, the Company has not adopted this method
of accounting since it would not have a material effect on operating
results.
Bank Premises and Equipment
Land is stated at cost, and buildings and equipment are stated at
cost less accumulated depreciation. For financial reporting purposes,
depreciation is included in operating expenses and is computed
principally on the straight-line method over the estimated useful lives
of the related assets. Accelerated methods are generally used for
income tax purposes with deferred income taxes provided for timing
differences. Additions, major replacements, and improvements to
buildings and equipment are added to the asset accounts at cost.
Maintenance, repairs, and minor replacements are charged directly to
operating expense.
The costs incidental to the operation and maintenance of
buildings, net of income received from tenants, are reflected as "Net
occupancy" expense in the accompanying consolidated statements of
income.
Income Taxes
The Company and its subsidiaries, except the insurance subsidiary,
file a consolidated federal income tax return. The income tax effects
of transactions are recognized in the years in which they enter into
the determination of reported income, regardless of when they are
recognized for tax return purposes. When income and expenses are
recognized in different periods for tax purposes, applicable deferred
taxes are provided in the financial statements.
In February 1992, the Financial Accounting Standards Board issued
FAS No. 109, "Accounting for Income Taxes," which becomes effective
for fiscal years beginning after December 15, 1992. FAS No. 109
requires an asset and liability approach for financial accounting and
reporting for income taxes. At the date of the financial statements,
a current tax liability or asset will be recognized for the estimated
taxes payable or refundable on tax returns for the current year, and a
deferred tax liability or asset will be recognized for the estimated
future tax effects attributable to temporary differences and
carryforwards. The measurement of current and deferred tax liabilities
and assets is to be based on provisions of enacted tax law. The
effects of future changes in tax laws or rates are not to be
anticipated. The measurement of deferred tax assets is reduced, if
necessary, by the amount of any tax benefits that, based on available
evidence, are not expected to be realized. FAS No. 109 provides for
either restating prior years' financial statements or recording the
cumulative effect of the change in the year of adoption. The Company
has not completed all of the complex analyses required to estimate the
impact of the new Statement; however, it does not believe the adoption
of the new rules will have an adverse effect on its financial
condition.
2 - Bank Acquisitions
Purchase Transactions
On January 30, 1991, the Company acquired the Citadel Bank of
Independence for a total purchase price of $3,966,000. The transaction
was accounted for as a purchase. Total assets acquired amounted to
$54,187,000. During 1992 two acquisitions accounted for as purchases
were completed. On July 31, 1992, Farmers and Merchants Bank, Colby,
Kansas, with assets totaling $66,827,000, was acquired for $8,921,000.
Southern Bancorp, Inc. ("SBI") and its bank subsidiary, Southern
National Bank, Tulsa, Oklahoma were acquired on December 11, 1992 for
a purchase price of $9,951,000. SBI's assets amounted to $64,510,000.
The following table presents supplementary information regarding
the cash paid in these purchase transactions.
1992 1991
---- ----
(In thousands)
Fair value of assets acquired . . . . . $131,337 $ 54,187
Fair value of liabilities assumed . . . (115,464) (50,632)
Cost in excess of net assets acquired . 2,999 411
-------- --------
Cash paid . . . . . . . . . . . . . . 18,872 3,966
Cash acquired . . . . . . . . . . . . 11,210 1,686
-------- --------
Net cash paid . . . . . . . . . . . . $ 7,662 $ 2,280
======== ========
For each of these transactions, the consolidated statements of
income include only the income and expenses of the acquired company
since acquisition. The purchase price has been allocated to the net
assets acquired based on their fair values with the excess allocated to
cost in excess of net assets acquired. The effect on results of
operations for 1992 and 1991, had the purchase transactions occurred at
the beginning of these years, was not material.
Poolings-Of-Interests
The following table presents the four 1992 business combinations
accounted for as poolings-of-interests. The consolidated statements
for the prior periods have been restated as if the entities had been
combined at the beginning of the periods presented. Adjustments to
conform the acquired companies' accounting policies to those of the
Company were not material.
Bank Subsidiary/ Assets Shares
Company Acquired Location Acquired Issued
- - ---------------- ---------------- -------- ------
(In Thousands)
KNB Kansas National Bank and Trust Company
Prairie Village, KS $ 99,256 267,390
MHB The Mission Hills Bank, N.A.
Mission Woods, KS 94,762 358,709
UBK The Peoples National Bank of Liberal
Liberal, KS 122,885 675,662(1)
FNC The Fourth National Bank of Tulsa
Tulsa, OK 368,325 1,639,941
-------- ---------
$685,228 2,941,702
======== =========
<FN>
________
(1) Includes 11,923 shares which were placed in escrow pending the receipt by the Company (as
successor to UBK) of settlement proceeds from certain pre-combination litigation.
The effect of pooling-of-interests accounting treatment on
previously reported selected operating results is as follows:
Nine Months
Ended Year Ended
September 30, December 31,
1992 1991 1990
------------- -------- --------
(Dollars in thousands, except per share data)
Interest income:
Company. . . . . . . . . . . . . . . . . . . . . . $237,321(1) $354,887 $335,808
Pooled companies . . . . . . . . . . . . . . . . . 29,518 54,387 62,992
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $266,839 $409,274 $398,800
======== ======== ========
Net interest income:
Company. . . . . . . . . . . . . . . . . . . . . . $124,369(1) $150,148 $124,056
Pooled companies . . . . . . . . . . . . . . . . . 16,691 24,634 25,060
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $141,060 $174,782 $149,116
======== ======== ========
Net income:
Company. . . . . . . . . . . . . . . . . . . . . . $ 33,462(1) $ 23,120 $ 17,531
Pooled companies . . . . . . . . . . . . . . . . . 7,364 2,200 (11,568)
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 40,826 $ 25,320 $ 5,963
======== ======== ========
Net income applicable to common stock:
Company. . . . . . . . . . . . . . . . . . . . . . $ 29,261(1) $ 23,120 $ 17,531
Pooled companies . . . . . . . . . . . . . . . . . 7,364 2,200 (11,568)
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 36,625 $ 25,320 $ 5,963
======== ======== ========
Primary earnings per common share, after
extraordinary item:
Company. . . . . . . . . . . . . . . . . . . . . . $ 1.53(1) $ 1.24 $ .98
Pooled companies . . . . . . . . . . . . . . . . . .16 (.06) (.67)
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 1.69 $ 1.18 $ .31
======== ======== ========
Fully diluted earnings per common share, after
extraordinary item:
Company. . . . . . . . . . . . . . . . . . . . . . $ 1.53(1) $ 1.24 $ .98
Pooled companies . . . . . . . . . . . . . . . . . .14 (.06) (.67)
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 1.67 $ 1.18 $ .31
======== ======== ========
<FN>
_________
(1) Includes KNB which was acquired prior to September 30, 1992.
On February 12, 1993, the Company issued 451,310 shares of its
common stock in exchange for all of the outstanding shares of Southgate
Banking Corporation ("SBC"). This combination will be accounted for as
a pooling-of-interests. Consolidated assets of SBC at December 31,
1992 totaled $64,632,395. The effect of this business combination on
selected operating results as if it had been consummated prior to
December 31, 1992 is as follows:
Year Ended December 31,
------------------------------------
1992 1991 1990
-------- -------- --------
(Dollars in thousands, except per share data)
Interest income:
Company. . . . . . . . . . . . . . . . . . . . . . $352,697 $409,274 $398,800
SBC. . . . . . . . . . . . . . . . . . . . . . . . 5,017 6,584 7,728
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $357,714 $415,858 $406,528
======== ======== ========
Net interest income:
Company. . . . . . . . . . . . . . . . . . . . . . $191,483 $174,782 $149,116
SBC. . . . . . . . . . . . . . . . . . . . . . . . 3,060 2,805 3,262
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $194,543 $177,587 $152,378
======== ======== ========
Net income:
Company. . . . . . . . . . . . . . . . . . . . . . $ 53,187 $ 25,320 $ 5,963
SBC. . . . . . . . . . . . . . . . . . . . . . . . 115 (1,170) 404
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 53,302 $ 24,150 $ 6,367
======== ======== ========
Net income applicable to common stock:
Company. . . . . . . . . . . . . . . . . . . . . . $ 47,236 $ 25,320 $ 5,963
SBC. . . . . . . . . . . . . . . . . . . . . . . . 115 (1,170) 404
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 47,351 $ 24,150 $ 6,367
======== ======== ========
Primary earnings per common share, after
extraordinary item:
Company. . . . . . . . . . . . . . . . . . . . . . $ 2.17 $ 1.18 $ .31
SBC. . . . . . . . . . . . . . . . . . . . . . . . (.04) (.08) .01
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 2.13 $ 1.10 $ .32
======== ======== ========
Fully diluted earnings per common share,
after extraordinary item:
Company. . . . . . . . . . . . . . . . . . . . . . $ 2.16 $ 1.18 $ .31
SBC. . . . . . . . . . . . . . . . . . . . . . . . (.04) (.08) .01
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 2.12 $ 1.10 $ .32
======== ======== ========
Pending Acquisitions
Pending acquisitions as of December 31, 1992 (excluding SBC) are
listed in the table below. The proposed transactions are subject to
approval by regulators and other contractual conditions.
Assets Number of
December 31, 1992 Cash Expected Shares Expected Accounting
Bank (Unaudited) To Be Paid To Be Issued Method
------ ----------------- ------------- --------------- ---------
Guaranty Bank & Trust Company . . . . . . $ 84,565 $ 4,116 -- Purchase
Tulsa, OK
Bank of Woodward and Cimarron Bank. . . . 136,194 16,837 -- Purchase
Woodward and Waukomis, OK
Farmers & Merchants State Bank. . . . . . 62,168 7,077 -- Purchase
Derby, KS
Nichols Hills Bank and Trust Company. . . 103,005 -- 470,000 Pooling
Oklahoma City, OK
-------- ------- --------
$385,932 $28,030 470,000
======== ======= ========
3 - Deposit Assumptions
During 1992 and 1991, the Company's Kansas bank subsidiary assumed
core deposits (principally demand, interest checking, savings, and time
deposits under $100,000) of certain Kansas failed savings and loan
associations ("S&Ls") from the Resolution Trust Corporation ("RTC").
The following table summarizes these deposit assumption transactions.
1992
-------------------------------------------------------------------
Deposits Premium
Date Location Assumed Paid
---------- ---------------------- --------- --------
(In thousands)
March 27 Hays, KS $ 45,915 $ 57
1991
-------------------------------------------------------------------
Deposits Premium
Date Location Assumed Paid
---------- ---------------------- --------- --------
(In thousands)
February 15 Wichita, KS $167,163 $1,848
February 15 Garden City, KS 44,727 --
In connection with the 1991 deposit assumption transactions, the
Company's Kansas bank subsidiary also purchased assets, primarily 1-4
family mortgage loans, totaling $23,218,000 from the RTC. No loans
were acquired in connection with the 1992 transaction.
On December 31, 1992, the Company's Oklahoma bank subsidiary
assumed the deposits and acquired the branch facilities and equipment
of nine offices from a S&L in Tulsa, Oklahoma. The following table
presents supplementary information regarding the cash paid in this
transaction.
1992
--------------
(In thousands)
Fair value of assets acquired . . . . . . . . $346,595
Fair value of liabilities assumed . . . . . . (349,355)
Cost in excess of net assets acquired . . . . 2,376
Value of core deposits assumed . . . . . . . 15,240
--------
Cash paid . . . . . . . . . . . . . . . . . 14,856
Cash acquired . . . . . . . . . . . . . . . 43,854
--------
Net cash received . . . . . . . . . . . . . $ 28,998
========
4 - Intangible Assets
Included in intangible assets are the following items:
December 31, 1992 December 31, 1991
------------------------------- -------------------------------
Accumulated Book Accumulated Book
Cost Amortization Value Cost Amortization Value
-------- ------------ ------- -------- ------------- -------
(In thousands)
Cost in excess of net assets acquired . . $49,911 $13,858 $36,053 $44,751 $11,499 $33,252
Value of core deposits assumed. . . . . . 26,768 5,335 21,433 11,462 3,464 7,998
Purchased mortgage servicing rights . . . 5,749 2,111 3,638 4,502 921 3,581
------- ------- ------- ------- ------- -------
$82,428 $21,304 $61,124 $60,715 $15,884 $44,831
======= ======= ======= ======= ======= =======
The cost of purchased entities in excess of fair value of net
assets acquired is being amortized on a straight-line basis over a
period of twenty years. The value of core deposits assumed and the
purchased mortgage servicing rights are being amortized using
accelerated methods over the estimated periods benefitted, not
exceeding ten years.
5 - Cash and Due from Banks
The subsidiary banks are required by federal law to maintain
reserves against their deposit liabilities. These reserves can be
maintained in the form of vault cash or balances at a Federal Reserve
Bank. The average cash and Federal Reserve balances maintained as
reserves were $73,821,000 for 1992 and $67,615,000 for 1991. Cash and
due from banks also includes checks in process of collection and
balances maintained at correspondent banks for services rendered.
6 - Investment Securities
The amortized cost and estimated fair value of investments in debt
securities are included in the following table. At December 31, 1992
and 1991, the entire securities portfolio was classified as "Investment
securities" since Management had the intent and the Company has the
ability to hold the securities on a long-term basis.
December 31, 1992 December 31, 1991
------------------------------------------ ------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
---------- ---------- ---------- --------- ---------- ---------- ---------- ---------
(In thousands) (In thousands)
U.S. Treasury obligations. $ 235,136 $ 3,617 $ (445) $ 238,308 $ 90,656 $ 2,777 $ -- $ 93,433
Obligations of U.S.
government agencies
and corporations:
Mortgage-backed. . . . . 1,641,159 17,063 (10,061) 1,648,161 1,260,608 33,422 (227) 1,293,803
Other. . . . . . . . . . 223,879 5,116 (389) 228,606 106,820 3,773 (2) 110,591
Obligations of states and
political subdivisions. . 209,692 25,261 (12) 234,941 241,261 25,363 (15) 266,609
Other securities:
Collateralized auto
receivables . . . . . . 28,935 594 -- 29,529 51,607 1,627 -- 53,234
Non-agency mortgage-
backed securities . . . -- -- -- -- 5,672 204 (4) 5,872
Money market mutual
funds . . . . . . . . . 219 -- -- 219 50,227 -- -- 50,227
Bankers' acceptances . . -- -- -- -- 11,950 3 -- 11,953
Commercial paper . . . . -- -- -- -- 20,194 6 -- 20,200
Nonaccrual investments . -- -- -- -- 2,529 -- -- 2,529
Other. . . . . . . . . . 16,969 19 (4) 16,984 10,624 71 -- 10,695
---------- ------- -------- ---------- ---------- ------- ------- ----------
Total. . . . . . . . . $2,355,989 $51,670 $(10,911) $2,396,748 $1,852,148 $67,246 $ (248) $1,919,146
========== ======= ======== ========== ========== ======= ======= ==========
The amortized cost and estimated fair value of debt securities at
December 31, 1992 by contractual maturity, are shown below:
December 31, 1992
-------------------------------
Estimated
Amortized Fair
Cost Value
---------- ----------
(In thousands)
Due in one year or less . . . . . . . . . . . . . . $ 77,264 $ 78,746
Due after one year through five years . . . . . . . 452,780 472,769
Due after five years through ten years. . . . . . . 138,490 145,247
Due after ten years . . . . . . . . . . . . . . . . 46,296 51,825
---------- ----------
714,830 748,587
Mortgage-backed securities. . . . . . . . . . . . . 1,641,159 1,648,161
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . $2,355,989 $2,396,748
========== ==========
Expected maturities may differ from contractual maturities because
borrowers have the right to call or prepay obligations with or without
call or prepayment penalties. The fair values of investment securities
are based upon available market data and estimates which often reflect
transactions of relatively small size and which are not necessarily
indicative of prices at which larger amounts of particular issues could
be readily sold.
The book value of investment securities pledged to secure public
deposits and for other purposes, as required or permitted by law,
aggregated $673,837,000 at December 31, 1992.
The gross proceeds, gains, and losses realized from the sale of
investment securities are detailed in the following table.
1992 1991 1990
-------- -------- --------
Proceeds from sale of investment securities . . . . . . . . $28,876,000 $142,662,000 $174,446,000
=========== ============ ============
Gross realized gains . . . . . . . . . . . . . . . . . . . $ 1,289,000 $ 3,630,000 $ 2,708,000
Gross realized losses . . . . . . . . . . . . . . . . . . . 25,000 622,000 167,000
----------- ------------ ------------
Net gains . . . . . . . . . . . . . . . . . . . . . . . $ 1,264,000 $ 3,008,000 $ 2,541,000
=========== ============ ============
Gross securities gains in 1992 include $688,000 realized by a
pooled company associated with securities which were sold due to a
deterioration in credit quality. A gain was realized because the
securities had previously been written down to 37.0% of par value.
Not included in the table above are $299,685,000 of sales of
short-term Treasury Bills related to the restructuring of the
securities portfolio obtained with the assumption of deposits from a
Tulsa, Oklahoma S&L. These securities were sold within 14 days of
maturity; thus the market risk had been substantially eliminated as a
pricing factor, and a gain of only $5,000 was realized. "Income
receivable and other assets" includes the receivable for the proceeds
from this sale, which were received January 4, 1993.
7 - Loans and Leases
The book value and estimated fair value of loans and leases are as
follows:
December 31, 1992 December 31, 1991
--------------------- --------------------
Amount Percent Amount Percent
----------- --------- ----------- ---------
(Dollars in thousands)
Commercial and industrial . . . . . . . . . . . . . . . . . . $ 522,211 23.4% $ 534,223 23.3%
Energy. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,031 2.0 52,183 2.3
Real estate, less unearned discount:
Construction. . . . . . . . . . . . . . . . . . . . . . . . 44,101 2.0 60,849 2.7
Secured by 1-4 family residences. . . . . . . . . . . . . . 586,030 26.3 541,519 23.7
Permanent commercial real estate and other. . . . . . . . . 298,237 13.4 333,065 14.6
Consumer, less unearned discount. . . . . . . . . . . . . . . 379,646 17.0 388,301 17.0
Credit card . . . . . . . . . . . . . . . . . . . . . . . . . 78,733 3.5 77,526 3.4
Educational . . . . . . . . . . . . . . . . . . . . . . . . . 41,889 1.9 34,686 1.5
Bank stock. . . . . . . . . . . . . . . . . . . . . . . . . . 41,282 1.9 48,509 2.1
Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . 128,641 5.8 140,635 6.1
Lease financing . . . . . . . . . . . . . . . . . . . . . . . 29,461 1.3 27,117 1.2
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,625 1.5 49,582 2.1
---------- ------ ---------- ------
Loans and leases - book value . . . . . . . . . . . . . . $2,228,887 100.0% $2,288,195 100.0%
========== ====== ========== ======
Loans and leases - estimated fair value . . . . . . . . . $2,244,334
==========
The Company manages exposure to credit risk through loan portfolio
diversification by customer and market, as well as by product.
Although the aggregate legal lending limits of the Company's bank
subsidiaries totaled $61,426,000 at December 31, 1992, the Company had
no single lending relationship with an aggregate loan amount
outstanding in excess of $15,000,000. The Company principally lends to
businesses and individuals in Kansas, Oklahoma, and the contiguous
states.
Nonaccrual loans and troubled debt restructurings are summarized
below:
December 31,
---------------------
1992 1991
-------- --------
(In thousands)
Nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . $23,756 $39,124
Troubled debt restructurings . . . . . . . . . . . . . . . . . . . . 1,055 3,206
------- -------
$24,811 $42,330
======= =======
The effect of nonaccrual loans and troubled debt restructurings on interest
income was:
Year Ended December 31,
---------------------------
1992 1991 1990
------ ------ ------
(In thousands)
Interest income which would have been
recorded pursuant to the original terms . . . . . . . . . . $4,007 $7,275 $10,195
====== ====== =======
Interest income recorded . . . . . . . . . . . . . . . . . . $ 921 $1,343 $ 1,929
====== ====== =======
In the ordinary course of business, the Company has made loans to
directors and executive officers of the Company and its significant
subsidiaries. Loans to these customers were transacted on the same
terms, including similar interest rates and collateral terms, as those
prevailing at the time for comparable transactions with unrelated
persons and, in management's opinion, did not involve more than normal
risk of collectibility or present other unfavorable features at the
time they were made. An analysis of aggregate loan activity with this
group, including their immediate families, companies in which they are
principal owners, and trusts in which they are involved, follows:
1992
-------
(In thousands)
Loans outstanding at December 31, 1991. . . . $ 67,694
New loans . . . . . . . . . . . . . . . . . 94,661
Repayments. . . . . . . . . . . . . . . . . (121,025)
Other changes . . . . . . . . . . . . . . . (6,486)
--------
Loans outstanding at December 31, 1992. . . . $ 34,844
========
Other changes include loans outstanding at December 31, 1991 to
directors elected or retired in 1992, loans purchased or sold during
the current year, and any other loans outstanding at December 31, 1991
to related individuals or entities not considered to be related parties
at December 31, 1992.
8 - Allowance for Credit Losses
Changes in the allowance for credit losses are as follows:
1992 1991 1990
------- ------- -------
(In thousands)
Balance at January 1, as previously reported . . . . . . . . . . . . . . $38,460 $33,108 $20,123
Adjustment for poolings-of-interests . . . . . . . . . . . . . . . . . 18,999 19,941 12,966
------- ------- -------
Balance at January 1, as restated. . . . . . . . . . . . . . . . . . . . 57,459 53,049 33,089
Allowance for credit losses of purchased banks . . . . . . . . . . . . 1,739 464 2,827
Allowance for purchased loans. . . . . . . . . . . . . . . . . . . . . 3,424 -- 2,165
------- ------- -------
62,622 53,513 38,081
Provisions charged to operating expense. . . . . . . . . . . . . . . . 15,542 34,497 43,510
Recoveries on loans and leases previously charged off. . . . . . . . . 6,081 6,066 4,265
Loans and leases charged off . . . . . . . . . . . . . . . . . . . . . (23,747) (36,617) (32,807)
------- ------- -------
Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . $60,498 $57,459 $53,049
======= ======= =======
9 - Bank Premises and Equipment
A summary of land, buildings, and equipment appears below:
December 31, 1992 December 31, 1991
------------------------------ ------------------------------
Accumulated Book Accumulated Book
Cost Depreciation Value Cost Depreciation Value
-------- ------------ ------ -------- ------------ ------
(In thousands)
Land. . . . . . . . . . . . . . . . $ 18,747 $ -- $ 18,747 $ 15,579 $ -- $15,579
Buildings and leasehold
improvements . . . . . . . . . . . 118,053 57,745 60,308 112,833 53,468 59,365
Furniture and equipment . . . . . . 76,474 51,885 24,589 67,362 43,746 23,616
-------- -------- -------- -------- ------- -------
Total . . . . . . . . . . . . . . $213,274 $109,630 $103,644 $195,774 $97,214 $98,560
======== ======== ======== ======== ======= =======
Depreciation expense amounted to $11,912,000 in 1992, $11,223,000
in 1991, and $10,388,000 in 1990.
10 - Deposits
The book value and estimated fair value of deposits are presented below:
December 31,
-----------------------------
1992 1991
------------ ------------
(In thousands)
Noninterest-bearing deposits . . . . . . . . . . . . . . . . . . . $ 882,400 $ 719,380
Interest-bearing deposits:
Interest-bearing checking deposits . . . . . . . . . . . . . . . 597,801 462,662
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . 1,121,043 984,102
Time deposits under $100,000 . . . . . . . . . . . . . . . . . . 1,631,705 1,634,130
Time deposits over $100,000 . . . . . . . . . . . . . . . . . . . 278,062 380,799
---------- ----------
Total interest-bearing deposits . . . . . . . . . . . . . . . . 3,628,611 3,461,693
---------- ----------
Deposits - book value . . . . . . . . . . . . . . . . . . . . $4,511,011 $4,181,073
========== ==========
Deposits - estimated fair value . . . . . . . . . . . . . . . $4,554,860
==========
11 - Short-Term Borrowings
The following is a summary, by category, of short-term borrowings
and their respective interest rates:
December 31, 1992 December 31, 1991
-------------------- --------------------
Amount Rate Amount Rate
-------- -------- --------- -------
(Dollars in thousands)
Federal funds purchased . . . . . . . . . . . . . . . . . . . . $253,979 2.92% $ 91,350 3.06%
Securities sold under agreements to repurchase. . . . . . . . . 64,756 3.49 43,465 4.12
Commercial paper. . . . . . . . . . . . . . . . . . . . . . . . 425 2.80 3,176 4.76
Other borrowings:
Treasury tax and loan . . . . . . . . . . . . . . . . . . . 17,306 2.67 26,051 3.84
Notes payable . . . . . . . . . . . . . . . . . . . . . . . -- -- 6,216 7.06
-------- --------
Short-term borrowings - book value. . . . . . . . . . . $336,466 3.02 $170,258 3.63
======== ========
Short-term borrowings - estimated fair value. . . . . . $336,466
========
Federal funds purchased, securities sold under agreements to
repurchase, and all other short-term borrowings except commercial paper
and notes payable generally mature daily or on demand. Commercial
paper has a maximum maturity of 270 days.
The $6,216,000 of short-term notes payable at December 31, 1991
represent debt of pooled companies. These notes were paid in full at
consummation.
The Company has a $35,000,000 committed line of credit from an
unaffiliated bank. Amounts borrowed under the agreement have
alternative fluctuating interest rates among which are the lender's
quoted fixed and floating rates and a fixed rate tied to the Eurodollar
base rate. A commitment fee of 1/8 of 1% is charged on this
commitment, which matures on March 22, 1993. There have been no
borrowings under this agreement. The Company is required to maintain
a minimum tangible net worth of greater than $225,000,000 (adjusted for
earnings and acquisitions); a double leverage ratio of not more than
130%; a ratio of funded debt to consolidated tangible net worth of not
more than 50%; a ratio of consolidated total indebtedness to
consolidated tangible net worth plus indebtedness of not more than 75%;
nonperforming loans to total loans may not exceed 3.5%; and
nonperforming assets to consolidated tangible net worth plus allowance
for credit losses may not exceed 35%. In the event of a default on any
of these covenants, the lender would have the right to deny any future
advances, as well as cause the obligations then outstanding to become
immediately due and payable. However, the Company is in compliance
with the terms of this agreement.
12 - Long-Term Debt
The book value and estimated fair value of long-term debt are presented
in the table below.
December 31, 1992 December 31, 1991
----------------- -----------------
Amount Rate Amount Rate
---------- ------ ---------- ------
(Dollars in thousands)
Term loan . . . . . . . . . . . . . . . . . . . . . . . . . $21,875 8.60% $30,625 8.60%
Mortgage indebtedness and other notes payable . . . . . . . 582 10.70 6,425 10.04
------- -------
Long-term debt - book value . . . . . . . . . . . . . . . $22,457 8.65 $37,050 8.85
======= =======
Long-term debt - estimated fair value . . . . . . . . . . $23,475
=======
In March 1991, the Company exercised the term loan feature of its
$35,000,000 revolving credit and term loan agreement with an
unaffiliated bank. This term loan will be repaid in eight equal
semiannual installments of $4,375,000, the first of which was made in
September 1991. The Company is required to maintain consolidated net
worth above an adjusted base of $402,674,000 at December 31, 1992;
maintain a ratio of consolidated equity to consolidated assets above
the level required by the Federal Reserve Board of Governors; maintain
investments in subsidiaries below 140% of consolidated equity; and
consolidated funded debt cannot exceed consolidated tangible net worth.
The Company is in compliance with all of the terms of the agreement.
Certain real estate has been pledged as collateral on a bank
subsidiary's mortgage indebtedness and other notes payable. Maturities
of this long-term debt for years subsequent to December 31, 1992, are
as follows:
Years ended December 31, (In thousands)
------------------------ --------------
1993 . . . . . . . . . . . . . $ 549
1994 . . . . . . . . . . . . . 5
1995 . . . . . . . . . . . . . 28
------
Total . . . . . . . . . . . . $ 582
======
During 1990, one of the pooled companies retired its notes payable
to a preferred stockholder. The resulting gain of $3,626,000 was
recorded as an extraordinary item. Because this pooled company was in
a net operating loss carryforward position, no income tax expense was
recorded on this extraordinary item.
13 - Preferred Stock
On February 24, 1992, the Company issued 250,000 shares of
nonvoting Class A Cumulative Convertible Preferred Stock. This
preferred stock was issued in the form of 4,000,000 depositary shares
each representing a 1/16 interest in a share of preferred stock and
each having a liquidation preference of $25.00. Dividends are payable
quarterly beginning June 1, 1992 at an annual rate of $1.75 per
depositary share. The depositary shares are not redeemable by the
Company prior to March 1, 1997. However, they may be converted at the
election of shareholders into a total of 3,448,275 shares of the
Company's common stock at a conversion price of $29.00 per common
share.
At the Company's annual meeting in April 1992, the stockholders
authorized 5,000,000 shares of a new class of preferred stock,
designated Class B Preferred Stock. The Board of Directors has been
authorized to set the dividend, voting, conversion, redemption, and
other rights of this stock when and if issued.
14 - Restructuring Charge
During 1992, a restructuring charge of $5,517,000 was recorded to
recognize the costs associated with the consolidation of the Oklahoma
data processing, operations, and staff functions. This expense also
includes a loss from the disposal of duplicate facilities and a
computer writedown.
The 1991 restructuring charge of $6,997,000 recognized the costs
of a work force reduction. This charge included $5,648,000
attributable to an early retirement incentive plan, $1,062,000 for the
cost of severance compensation, and $287,000 associated with the
closing of the five finance company subsidiary offices.
15 - Income Taxes
The consolidated expense for taxes applicable to income is as
follows:
1992 1991 1990
------ ------ ------
(In thousands)
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,643 $ 9,146 $5,246
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,312 2,727 2,924
------- ------- ------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,955 11,873 8,170
------- ------- ------
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,224) (3,468) (3,097)
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . (806) (899) (105)
------- ------- ------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,030) (4,367) (3,202)
------- ------- ------
Total income tax expense. . . . . . . . . . . . . . . . . $14,925 $ 7,506 $4,968
======= ======= ======
Federal income tax expense for 1991 and 1990 was computed using
the alternative minimum tax method ("AMT"). In 1992, federal tax
expense computed in accordance with the statutory 34% tax rate exceeded
AMT expense by $3,742,000. Accumulated AMT tax credits equal to this
amount have been recognized during 1992, reducing the tax provision to
the amount which would have been recorded using the AMT provisions.
Tax effects of investment securities transactions included in the above
amounts are $309,000 for 1992, $727,000 for 1991, and $507,000 for
1990.
The effective income tax rates differ from the federal statutory
rates for the reasons shown in the following table:
1992 1991 1990
------------------ ------------------ ------------------
Amount Rate Amount Rate Amount Rate
--------- ------- --------- ------- --------- -------
(Dollars in thousands)
Income tax expense at federal statutory rate . . . $23,158 34.0% $11,161 34.0% $ 3,716 34.0%
Tax-preferred income on obligations of states,
political subdivisions, and U.S. possessions. . . (6,784) (10.0) (8,189) (24.9) (9,265) (84.8)
Goodwill and purchase accounting amortization. . . 932 1.4 964 2.9 786 7.2
State taxes, net of federal income tax benefit . . 1,654 2.4 1,213 3.7 1,863 17.0
Alternative minimum tax. . . . . . . . . . . . . . (3,742) (5.5) 2,286 7.0 4,265 39.0
Carryforward of NOL's and AMT Credits. . . . . . . (1,390) (2.0) (360) (1.1) 3,515 32.2
Other, net . . . . . . . . . . . . . . . . . . . . 1,097 1.6 431 1.3 88 .8
------- ---- ------- ---- ------- -----
Actual income tax expense. . . . . . . . . . . $14,925 21.9% $ 7,506 22.9% $ 4,968 45.4%
======= ==== ======= ==== ======= ====
Deferred income taxes arise from timing differences in the
recognition of revenues, expenses, and tax credits for tax and
financial reporting purposes. The principal sources and tax effects of
these differences are as follows:
1992 1991 1990
-------- -------- -------
(In thousands)
Cash basis tax reporting . . . . . . . . . . . . . . . . . . . . . . $ -- $ (596) $ (249)
Bond discount accretion. . . . . . . . . . . . . . . . . . . . . . . (110) (646) 578
Depreciation expense on bank premises and equipment. . . . . . . . . (562) (1,009) (304)
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . (1,802) (1,839) (2,255)
Leasing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 142 (121)
Pension contribution . . . . . . . . . . . . . . . . . . . . . . . . (25) (478) (128)
State privilege tax. . . . . . . . . . . . . . . . . . . . . . . . . 365 339 5
Write-down of other real estate owned. . . . . . . . . . . . . . . . (156) (635) (407)
Write-down of investment securities. . . . . . . . . . . . . . . . . -- 465 --
Utilization of loss carryforwards against deferred tax liability . . -- (381) --
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 271 (321)
------- ------- -------
Total deferred income taxes. . . . . . . . . . . . . . . . . . . . $(2,030) $(4,367) $(3,202)
======= ======= =======
Cumulative timing differences have resulted in deferred income
taxes receivable of approximately $5,455,000 at December 31, 1992 and
$3,425,000 at December 31, 1991, which are included in "Income
receivable and other assets" in the consolidated statements of
condition.
As of December 31, 1992, the Company has available net operating
loss and general business credit carryforwards of approximately
$17,066,000 and $431,000, respectively which can be carried forward to
reduce future federal income taxes payable. For financial reporting
purposes, approximately $24,730,000 in net operating loss carryforwards
and $431,000 in general business credit carryforwards are available.
These losses and credits are principally related to separate return
losses and credits of subsidiaries. Utilization of the subsidiaries'
carryforwards are limited by tax law to the future earnings of the
subsidiaries and other limits on the use of tax attributes of acquired
companies. Net operating loss carryfor-wards expire in years 2000
through 2007 and general business credit carryforwards expire in years
1994 through 2005 if not utilized.
The net operating loss carryforward for financial reporting
purposes of $24,730,000 consists of the $17,066,000 tax net operating
loss carryforward plus net deductible timing differences. The most
significant timing differences are an allowance for credit losses for
financial reporting purposes greater than for tax reporting purposes of
$4,150,000 and a tax basis of other real estate owned greater than the
financial reporting basis by $2,605,000. Future-period tax expense may
also be reduced by an alternative minimum tax credit of $4,809,000.
16 - Employee Benefit Plans
The Company and its subsidiaries have two types of pension plans.
The Company's defined benefit plan covers substantially all employees.
The supplemental executive retirement plan provides for payments equal
to the benefit which would have been paid under the pension plan and
the savings and investment plan if certain Internal Revenue Code
limitations had not been imposed including Section 415, Section
401(a)(17), and the Section 401(a)(4) prohibition on deferred
compensation as eligible compensation under the pension plan.
The plans' funded status and amounts included in the consolidated
financial statements are presented below:
December 31, December 31,
------------------------- -------------------------
1992 1991
------------------------- -------------------------
Supplemental Supplemental
Defined Executive Defined Executive
Benefit Retirement Benefit Retirement
Plan Plan Plan Plan
---------- ------------ ---------- ------------
(In thousands)
Actuarial present value of benefit obligations:
Vested benefit obligation . . . . . . . . . . . . . . . . $(14,682) $(1,035) $(11,496) $(1,040)
======== ======= ======== =======
Accumulated benefit obligation. . . . . . . . . . . . . . $(15,410) $(1,050) $(12,127) $(1,051)
======== ======= ======== =======
Projected benefit obligation. . . . . . . . . . . . . . . $(20,880) $(1,107) $(17,208) $(1,161)
Plan assets, at fair value. . . . . . . . . . . . . . . . . 16,580 -- 15,496 --
-------- ------- -------- -------
Funded status . . . . . . . . . . . . . . . . . . . . . . . (4,300) (1,107) (1,712) (1,161)
Prior service cost not yet recognized in periodic
pension cost, being amortized over 10 years . . . . . . . 41 55 39 64
Unrecognized net (asset) obligation from date of
initial application, being amortized over 15 years . . . . (2,900) 119 (3,261) 134
Unrecognized net experience loss. . . . . . . . . . . . . . 5,342 258 2,634 286
-------- ------- -------- -------
Accrued pension cost included in
consolidated statements of condition . . . . . . . . . . $ (1,817) $ (675) $ (2,300) $ (677)
======== ======= ======== =======
The assets of the defined benefit plan are administered by the
trust division of a subsidiary bank and consist of a wide variety of
diversified securities including common stocks, corporate bonds, and
U.S. Treasury obligations. The trust also participates in commingled
funds for qualified employee benefit accounts, including two equity
funds and one fixed income fund. Contributions to the plan are based
upon the Projected Unit Credit Actuarial Funding method and are limited
to amounts that are currently deductible for tax reporting purposes.
Net pension cost includes the following components:
Year Ended December 31,
----------------------------------
1992 1991 1990
-------- -------- --------
(In thousands)
Service cost-benefits earned during the year. . . . . . . . . . $1,441 $1,425 $1,355
Interest cost on the projected benefit obligation . . . . . . . 1,414 1,744 1,633
Actual return on plan assets. . . . . . . . . . . . . . . . . . (1,397) (3,865) (412)
Net amortization and deferrals. . . . . . . . . . . . . . . . . (314) 1,560 (1,984)
------ ------ ------
Net periodic pension cost . . . . . . . . . . . . . . . . . . $1,144 $ 864 $ 592
====== ====== ======
Assumptions used in the accounting include:
As of December 31,
------------------------------------
1992 1991 1990
-------- -------- --------
Discount rates . . . . . . . . . . . . . . . . . . . . . . . 7.00% 7.75% 8.50%
Rates of increase in compensation levels . . . . . . . . . . 4.70% 6.00% 6.50%
Expected long-term rate of return on assets . . . . . . . . 9.25% 9.25% 9.25%
The Company and its subsidiaries also maintain a contributory
savings and investment plan for substantially all employees. The
savings and investment plan and related trust qualify under Section 401
of the Internal Revenue Code as a qualified profit-sharing plan and
trust. According to the plan, an employee may contribute from 2% to 4%
of base salary, which the employer then supplements with a contribution
of 50% of the employee's contributed amount. Non-highly-compensated
employees (those employees whose annual compensation is less than
$62,345) may contribute up to an additional 11% of base salary in pre-
tax dollars, but without further employer contributions. Vesting in
the employer contributions ranges from 20% with three years to 100%
with seven years of service. Employees may elect to invest in one or
more of four investment funds, in 25% increments. These include a
Fourth Financial Corporation common stock fund, a fixed income fund, an
equity fund, and a money market fund. Forfeitures are used to reduce
the Company's contributions. The expense for this plan was $1,578,000
in 1992, $1,005,000 in 1991, and $1,067,000 in 1990. The plan provides
for an additional matching contribution of up to an additional 2% of
the employee's eligible compensation based on achievement of
established earnings per share targets. For 1992 the expense of this
plan includes an additional matching contribution of $625,000. No
additional contribution was made for 1991 or 1990.
17 - Stock Option and Stock Purchase Plans
The Company grants options to key employees under incentive stock
option plans at prices equal to the market value on the date of grant.
Terms of the plans generally provide for the exercise of the options
for periods of up to ten years, as determined by the Board of
Directors. Under the 1981 stock option plan, 168,791 shares were
reserved for issuance, of which 103,500 shares were under option, and
22,875 were exercisable at December 31, 1992. Options may no longer be
granted under this plan. At December 31, 1992, there were 1,033,750
shares reserved for issuance under the 1986 stock option plan of which
580,839 were under option, and 124,028 were exercisable.
The following table presents information regarding stock option
transactions and prices:
Shares Under Option
-------------------------------------------------------------------------
1992 1991 1990
----------------------- ----------------------- -----------------------
Price Price Price
Number Per Share Number Per Share Number Per Share
---------- ------------ --------- ------------- ---------- ------------
Balance at January 1 . . . . . . . 518,297 $14.80-23.50 804,928 $11.30-24.70 712,009 $11.30-24.70
Granted. . . . . . . . . . . . . . 248,900 22.87-29.88 14,000 18.37-19.63 186,500 17.00
Exercised. . . . . . . . . . . . . (74,858) 14.80-23.20 (220,138) 11.30-18.20 (76,068) 11.30-18.20
Terminated or canceled . . . . . . (8,000) -- (80,493) -- (17,513) --
-------- -------- --------
Balance at December 31 . . . . . . 684,339 14.80-29.88 518,297 14.80-23.50 804,928 11.30-24.70
======== ======== ========
An optionee may pay the option exercise price by tendering stock
of the Company having a market value equal to the exercise price. The
optionee must have held the tendered stock for at least six months
before it can be used to exercise an option. Transactions under this
program are accounted for as the purchase and reissuance of treasury
stock. The following is a summary of activity:
1992 1991 1990
---------- ---------- ----------
Shares tendered . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,954 74,933 30,241
Shares issued under the stock option plans (including
reissued treasury stock) . . . . . . . . . . . . . . . . . . . . . . 37,891 108,759 49,827
An optionee also may borrow the amount of the option exercise
price from the Company. The loans under this program bear interest at
the Company's base rate adjusted quarterly and mature annually.
Although the Company reserves the right not to renew any loan at
maturity, it is the Company's present intention to allow each borrowing
to be renewed for additional annual periods. At a minimum, Company
stock valued at 125% of the loan amount must collateralize the loan.
Such loans, which amounted to $1,069,000 and $1,051,000 at December 31,
1992 and 1991, respectively are reported as a reduction of
stockholders' equity.
Under the 1988 Employee Stock Purchase Plan, employees are offered
the option to purchase shares of the Company's common stock at 85% of
the lower of the fair market value of such shares on the date granted
or one year thereafter. Options issued under the plan are exercisable
one year from the date of grant. At December 31, 1992, 280,549 shares
were reserved for issuance, including 165,078 shares under option. No
options under the plan were exercisable at December 31, 1992.
Additional data regarding the Employee Stock Purchase Plan are as
follows:
Shares Under Option
-------------------------------------------------------------------------
1992 1991 1990
----------------------- ----------------------- -----------------------
Price Price Price
Number Per Share Number Per Share Number Per Share
---------- ------------ --------- ------------- ---------- ------------
Balance at January 1. . . . . . . 214,611 $16.36 150,467 $21.89 168,383 $16.83
Granted . . . . . . . . . . . . . 178,534 23.06 263,374 16.36 153,024 21.89
Exercised . . . . . . . . . . . . (111,612) 16.36 (42,117) 16.36 (95,122) 16.83
Terminated or canceled. . . . . . (116,455) -- (157,113) -- (75,818) --
-------- -------- --------
Balance at December 31. . . . . . 165,078 23.06 214,611 16.36 150,467 21.89
======== ======== ========
18 - Earnings Per Common Share
Earnings per common share are based on the following weighted average
number of shares outstanding.
1992 1991 1990
------ ------ ------
Primary . . . . . . . . . 21,738,638 21,510,580 19,451,182
Fully diluted . . . . . . 24,668,729 21,510,580 19,451,182
Primary earnings per common share were computed by dividing net
income applicable to common stock by the weighted average common shares
outstanding during the period. Fully diluted earnings per common share
were computed by dividing net income by the weighted average shares
assumed to be outstanding if the preferred stock was converted into
common stock at $29.00 per common share. Stock options outstanding do
not have a dilutive effect and have been excluded from the
computations.
19 - Dividends Per Common Share
Dividends per common share represent the Company's historical
dividends declared without adjustment for the poolings-of-interests.
The following table presents dividends declared by KNB, MHB, UBK, and
FNC prior to combination with the Company.
1992 1991 1990
--------------------- --------------------- ---------------------
Per Per Per
Equivalent Equivalent Equivalent
Historical Share Historical Share Historical Share
---------- ---------- ---------- ---------- ---------- ----------
KNB . . . . . . . . . . . . . . . . . $ 3.06 $.22 $ -- $ -- $ -- $ --
MHB . . . . . . . . . . . . . . . . . 1.51 .44 -- -- -- --
UBK . . . . . . . . . . . . . . . . . 17.78 .61 3.50 .12 7.50 .26
FNC . . . . . . . . . . . . . . . . . .25 .44 -- -- -- --
20 - Restrictions on Intercompany Funds Transfers
Restrictions imposed by federal law limit the transfer of funds to
the Company and certain other affiliates from the subsidiary banks in
the form of loans or other extensions of credit, investments, and
purchases of assets. Transfers by the subsidiary banks to the Company
or any such single affiliate may not exceed 10% and transfers in the
aggregate may not exceed 20% of a bank's capital, surplus, and
undivided profits, after adding back the allowance for credit losses
and subtracting certain intangibles. Based on these limitations,
approximately $40,951,000 was available for transfer to the Company at
December 31, 1992. In addition, the approval of the Comptroller of the
Currency is required if dividends declared by either of the Company's
national bank subsidiaries in 1993 exceed the bank's net profits for
that year combined with its retained net profits for 1991 and 1992. In
1993, the subsidiary banks may distribute to the Company (in addition
to their 1993 net profits) an aggregate of approximately $5,200,000 in
dividends without approval from regulatory agencies.
21 - Financial Instruments with Off-Balance-Sheet Risk
In the normal course of business in meeting the financing needs of
its customers and managing its own exposure to fluctuations in interest
rates, the Company is a party to various financial instruments. These
instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the Statements
of Condition. The contract or notional amounts of these instruments
are an indicator of the Company's activities in particular classes of
financial instruments. The following schedule summarizes the contract
or notional amount of these instruments.
Contract or
Notional Amount
-----------------------
December 31,
1992 1991
---------- ----------
(In thousands)
Commitments to extend credit:
Standby letters of credit . . . . . . . . . . . . . . . . . . . . . $ 65,076 $ 78,856
Commercial letters of credit. . . . . . . . . . . . . . . . . . . . 19,576 16,481
Credit card lines . . . . . . . . . . . . . . . . . . . . . . . . . 304,776 273,296
Other loan commitments. . . . . . . . . . . . . . . . . . . . . . . 739,742 629,332
Interest rate instruments:
Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Forward foreign currency contracts:
Commitments to purchase . . . . . . . . . . . . . . . . . . . . . . 67 45
Commitments to sell . . . . . . . . . . . . . . . . . . . . . . . . -- --
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. 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 uses the same credit policies in making
commitments as it does for direct extensions of credit. The Company
evaluates each customer's creditworthiness 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 customer. Collateral held varies but may include accounts
receivable, inventory, real estate, equipment, and income-producing
commercial properties.
Standby letters of credit irrevocably obligate the issuing bank to
pay a third-party beneficiary when a customer fails to repay an
outstanding debt instrument or fails to perform some contractual non-
financial obligation. Standby letters of credit are primarily issued
to secure bonds from insurance companies, provide security for self-
insured portions of workers compensation insurance, and collateralize
guaranties or secure loans to other financial institutions. A
commercial letter of credit is issued to facilitate trade or commerce.
Under the terms of a commercial letter of credit, drafts will be drawn
when the underlying transaction is consummated as intended. The credit
risk involved in issuing letters of credit is essentially the same as
that involved in extending loans to customers. Substantially all
letters of credit mature within two years.
Interest rate swaps involve the exchange of interest payments on
an established notional amount. At December 31, 1992 and 1991, the
Company had an interest rate swap agreement to pay the three-month
LIBOR rate on a notional amount of $1,000,000. The Company is exposed
to market risk as a result of potential future increases in the LIBOR
rate. It receives payments based on a fixed rate of ten percent. The
agreement expires in 1997. The purpose of the swap agreement is to
effectively convert a portion of its fixed rate time deposit
obligations to variable rate. The net settlement amount is recorded in
interest expense on deposits.
The Company enters into forward foreign currency contracts to
assist customers with their foreign currency needs related to foreign
operations, exporting, or importing. These customer-driven contracts
are generally hedged with offsetting contracts. The market value gains
and losses relating to currency exchange contracts are recorded at
settlement in "Other non-interest income." The contracts held at
December 31, 1992 all matured in January 1993.
22 - Commitments and Contingencies
At December 31, 1992, the Company was committed to make future
rental payments under several long-term lease agreements for land,
buildings, and equipment. There were no material capital leases.
Future minimum rental payments required under operating leases that
have initial or remaining non-cancelable lease terms in excess of one
year as of December 31, 1992 are as follows:
Years ending December 31, (In thousands)
------------------------- --------------
1993 . . . . . . . . . . . . . $ 3,798
1994 . . . . . . . . . . . . . 3,406
1995 . . . . . . . . . . . . . 2,335
1996 . . . . . . . . . . . . . 2,226
1997 . . . . . . . . . . . . . 1,341
Later years . . . . . . . . . 3,541
-------
Total . . . . . . . . . . . $16,647
=======
Total rental expense (net of sublease income, which is not
material) amounted to $4,940,000, $4,290,000, and $4,240,000 for 1992,
1991, and 1990, respectively.
Single-family mortgage loans which the Company's subsidiaries
originate for sale are sold without recourse. However, the Company is
obligated under recourse provisions related to $20,751,000 of loans it
is servicing. These loans were included in the $371,000,000 mortgage
loan servicing portfolio purchased during 1990. The Company assesses
the credit risk of these and other loan commitments when evaluating the
adequacy of the allowance for credit losses.
The Company and its subsidiaries are defendants in various matters
of litigation which arose in the ordinary course of operations. Some
of the pending litigation seeks damages in substantial amounts, but
management, after consultation with legal counsel, does not anticipate
that potential liabilities, if any, arising from these claims would
have a material effect on the results of operations of the Company.
23 - Condensed Financial Information of Parent Corporation
In the following condensed financial information of Fourth
Financial Corporation (parent only), investments in subsidiaries are
recorded using the equity method of accounting.
Fourth Financial Corporation (Parent Only)
Condensed Statements Of Condition
December 31,
------------------------
1992 1991
---------- ----------
(In thousands)
Assets:
Cash in subsidiary banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 103 $ 143
Interest-bearing deposits in subsidiary banks. . . . . . . . . . . . . . . . . . . 4,665 16,218
Securities repurchase agreement with subsidiary bank . . . . . . . . . . . . . . . 55,900 --
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,215 16,119
Investments in bank subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 380,901 311,946
Investments in other subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 5,036 3,328
Other assets (including receivables from subsidiaries
of $945 in 1992 and $981 in 1991). . . . . . . . . . . . . . . . . . . . . . . . 4,072 2,968
Cost in excess of net assets acquired. . . . . . . . . . . . . . . . . . . . . . . 30,957 30,856
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $494,849 $381,578
======== ========
Liabilities And Stockholders' Equity:
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 425 $ 3,176
Notes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 6,207
Other liabilities (including amounts owed to subsidiaries
of $862 in 1992 and $130 in 1991) . . . . . . . . . . . . . . . . . . . . . . . . 7,882 6,112
Long-term debt (including notes due subsidiaries
of $573 in 1992 and $616 in 1991) . . . . . . . . . . . . . . . . . . . . . . . . 22,448 31,241
-------- --------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,755 46,736
Stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464,094 334,842
-------- --------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . $494,849 $381,578
======== ========
Fourth Financial Corporation (Parent Only)
Condensed Statements of Income
Year Ended December 31,
----------------------------------
1992 1991 1990
-------- -------- --------
(In thousands)
Dividends from subsidiaries:
Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $53,716 $46,822 $38,163
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 600 400
Fee income (principally from subsidiaries) . . . . . . . . . . . . . . . . 40,250 32,323 23,676
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,551 1,251 530
------- ------- -------
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,767 80,996 62,769
------- ------- -------
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . 21,660 19,457 14,681
Furniture and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . 8,204 8,832 7,096
Net occupancy (includes rent paid to bank subsidiaries
of $1,632 in 1992, $1,400 in 1991, and $1,200 in 1990). . . . . . . . . . 2,024 1,593 1,365
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,780 1,635 1,740
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,085 1,894 1,763
Fees paid to bank subsidiaries . . . . . . . . . . . . . . . . . . . . . . 196 307 456
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,585 4,133 3,028
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,382 1,219 --
Amortization of cost in excess of net assets acquired. . . . . . . . . . . 2,062 2,024 1,812
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,116 4,895 3,897
------- ------- -------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,094 45,989 35,838
------- ------- -------
Income before income taxes, extraordinary items, and undistributed
net income of subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 46,673 35,007 26,931
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,136 2,332 2,315
Extraordinary item -- gain on extinguishment of debt . . . . . . . . . . . -- -- 3,626
Net income of subsidiaries in excess of (less than) dividends received . . 5,378 (12,019) (26,909)
------- ------- -------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $53,187 $25,320 $ 5,963
======= ======= =======
Fourth Financial Corporation (Parent Only)
Condensed Statements of Cash Flows
Year Ended December 31,
--------------------------------
1992 1991 1990
-------- -------- --------
(In thousands)
Increase (Decrease) in Cash and Cash Equivalents
Cash Flows From Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,187 $ 25,320 $ 5,963
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . 6,314 6,649 5,599
Net income of subsidiaries (in excess of) less than
dividends received. . . . . . . . . . . . . . . . . . . . . . . . . (5,378) 12,019 26,909
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . (275) (365) (276)
(Gain) loss on sale of equipment . . . . . . . . . . . . . . . . . . 377 1 (120)
Change in assets and liabilities, net of effects
from purchase of acquired entities:
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (821) 603 4,741
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 1,263 2,084 1,456
-------- -------- --------
Net cash provided by operating activities. . . . . . . . . . . . 54,667 46,311 44,272
-------- -------- --------
Cash Flows From Investing Activities:
Purchase of banks, net of cash acquired. . . . . . . . . . . . . . . . (9,951) -- (5,602)
Purchases of premises and equipment. . . . . . . . . . . . . . . . . . (3,310) (2,842) (9,379)
Proceeds from sale of premises and equipment . . . . . . . . . . . . . 1,559 37 151
Proceeds from sales of investment securities . . . . . . . . . . . . . -- 5 --
Investments in subsidiaries. . . . . . . . . . . . . . . . . . . . . . (57,497) (1,335) (66,283)
-------- -------- --------
Net cash used in investing activities. . . . . . . . . . . . . . (69,199) (4,135) (81,113)
-------- -------- --------
Cash Flows From Financing Activities:
Net change in commercial paper . . . . . . . . . . . . . . . . . . . . (2,751) 821 1,161
Net change in other borrowings . . . . . . . . . . . . . . . . . . . . (6,207) (45,550) 45,350
Proceeds from long term borrowing. . . . . . . . . . . . . . . . . . . -- 35,000 --
Repayment of long-term debt. . . . . . . . . . . . . . . . . . . . . . (8,793) (4,408) (5,876)
Acquisition of treasury stock. . . . . . . . . . . . . . . . . . . . . -- (697) (4,468)
Dividends on common stock. . . . . . . . . . . . . . . . . . . . . . . (16,768) (16,434) (15,840)
Dividends on preferred stock . . . . . . . . . . . . . . . . . . . . . (5,368) -- --
Proceeds from issuance of preferred stock, net of offering costs . . . 96,920 -- --
Proceeds from exercise of stock options. . . . . . . . . . . . . . . . 2,470 2,268 2,016
Net change in stock option loans . . . . . . . . . . . . . . . . . . . (18) (346) (50)
Capital transactions of pooled companies . . . . . . . . . . . . . . . (646) 226 9,855
-------- -------- --------
Net cash provided by (used in) financing activities. . . . . . . 58,839 (29,120) 32,148
-------- -------- --------
Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . 44,307 13,056 (4,693)
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . 16,361 3,305 7,998
-------- -------- --------
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . $ 60,668 $ 16,361 $ 3,305
======== ======== ========
Supplemental Disclosures:
Cash and cash equivalents:
Cash in subsidiary banks . . . . . . . . . . . . . . . . . . . . . . $ 103 $ 143 $ 971
Interest-bearing deposits in subsidiary banks. . . . . . . . . . . . 4,665 16,218 2,334
Securities repurchase agreements with subsidiary bank. . . . . . . . 55,900 -- --
-------- -------- --------
Total cash and cash equivalents. . . . . . . . . . . . . . . . . $ 60,668 $ 16,361 $ 3,305
======== ======== ========
Cash payments for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,669 $ 3,786 $ 2,391
======== ======== ========
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,025 $ 9,072 $ 7,603
======== ======== ========
Detail of entities acquired:
Fair value of bank stock and other assets acquired . . . . . . . . . $ 7,784 $ -- $ 19,819
Cost in excess of net assets acquired. . . . . . . . . . . . . . . . 2,167 -- 4,456
Value of common stock issued in acquisition. . . . . . . . . . . . . -- -- (14,847)
Value of treasury stock issued in acquisition. . . . . . . . . . . . -- -- (3,826)
-------- -------- --------
Cash paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,951 $ -- $ 5,602
======== ======== ========
FOURTH FINANCIAL CORPORATION
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Fourth Financial Corporation
We have audited the accompanying consolidated statements of condition
of Fourth Financial Corporation as of December 31, 1992 and 1991 and
the related consolidated statements of income, changes in stockholders'
equity and cash flows for each of the three years in the period ended
December 31, 1992. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We did not
audit the 1991 and 1990 financial statements of Fourth National
Corporation, United Bank of Kansas, Inc. or KNB Bancshares, Inc., which
statements reflect total assets constituting 12% in 1991 and
interest income constituting 12% in 1991 and 14% in 1990 of the related
consolidated totals. Those statements were audited by other auditors
and our opinion, insofar as it relates to data included for these
companies, is based solely on the reports of the other auditors.
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 and the reports of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the reports of other auditors,
the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Fourth
Financial Corporation at December 31, 1992 and 1991, and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1992, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young
Wichita, Kansas
January 29, 1993
except for Note 2, as to which
the date is February 12, 1993
FOURTH NATIONAL CORPORATION
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Fourth National Corporation:
We have audited the consolidated balance sheets of Fourth National
Corporation (Fourth, a Delaware corporation) and subsidiaries as of
December 31, 1991 and 1990, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1991 (such financial statements
are not presented herein) prior to the pooling of Fourth with Fourth
Financial Corporation (see Note 2 to the consolidated financial
statements of Fourth Financial Corporation contained herein). These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Fourth
National Corporation and subsidiaries as of December 31, 1991 and 1990,
and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1991, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN & CO.
Tulsa, Oklahoma
February 7, 1992
UNITED BANK OF KANSAS, INC. AND SUBSIDIARY
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
United Bank of Kansas, Inc.
We have audited the consolidated balance sheet of United Bank of
Kansas, Inc. and Subsidiary as of December 31, 1991, and the related
consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the two years in the period ended December
31, 1991 (not presented herein). These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of United Bank of Kansas, Inc. and Subsidiary as of December 31, 1991,
and the consolidated results of their operations and their consolidated
cash flows for each of the two years in the period ended December 31,
1991 in conformity with generally accepted accounting principles.
As discussed in Note B to the financial statements, the Company owns
certain municipal bonds which are in default and the subject of
litigation. The Company currently reflects these bonds in their
financial statements at their estimated market value of $2,528,950.
The ultimate outcome of the litigation and the amount ultimately
recovered on these bonds cannot presently be determined.
/s/ Grant Thornton
GRANT THORNTON
Wichita, Kansas
January 23, 1992
KNB BANCSHARES, INC. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
KNB Bancshares, Inc. and Subsidiaries:
We have audited the consolidated balance sheet of KNB Bancshares, Inc.
and Subsidiaries ("Bancshares and Subsidiaries") as of December 31,
1991, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the two years in the
period then ended (none of which are presented herein). These
consolidated financial statements are the responsibility of the
management of Bancshares and Subsidiaries. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Bancshares and
Subsidiaries at December 31, 1991, and the results of their operations
and their cash flows for each of the two years in the period then ended
in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche
DELOITTE & TOUCHE
Kansas City, Missouri
February 7, 1992