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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 10-K
(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, 1994
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 Identification No.)
incorporation or organization)
100 North Broadway
Wichita, Kansas 67202
(Address of principal executive (Zip Code)
offices)
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 $5.00 per share
(Title of Class)
Depositary Shares, each representing a 1/16th interest in a share of Class A
7% Cumulative Convertible Preferred Stock, Par Value $100.00 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. _X_
As of March 1, 1995, the aggregate market value of the voting stock of
Registrant held by nonaffiliates of Registrant was approximately $747,615,000.
Such value was computed by reference to the reported last sales price of such
stock on March 1, 1995. At March 1, 1995, 27,602,896 shares of Common Stock, par
value $5 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the April 20, 1995 Annual Meeting of
Stockholders of Registrant (the "1995 Proxy Statement") to be filed pursuant to
Regulation 14A are incorporated by reference into Part III of this report.
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TABLE OF CONTENTS
Item Page
PART I
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . .
4. Submission of Matters to a Vote of Security Holders. . . . . . . .
PART II
5. Market for Registrant's Common Equity and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . . .
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . .
8. Financial Statements and Supplementary Data. . . . . . . . . . . .
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure. . . . . . . . . . . . . . . . . . . . . . .
PART III
10. Directors and Executive Officers of the Registrant . . . . . . . .
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . .
12. Security Ownership of Certain Beneficial Owners and Management . .
13. Certain Relationships and Related Transactions . . . . . . . . . .
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Information. . . . . . . . . . . . . . . . . . . . . . . .. Appendix A
PART I
Item 1. Business.
General
Fourth Financial Corporation ("Registrant" or the "Company") is
a bank holding company headquartered in Wichita, Kansas, which offers
a broad range of bank and bank-related services through its
subsidiaries, BANK IV Kansas, National Association ("BANK IV Kansas"),
BANK IV Oklahoma, National Association ("BANK IV Oklahoma"), and BANK
IV Missouri, National Association ("BANK IV Missouri"). At September
30, 1994, the Company was the 71st largest, as measured by total
assets, among bank holding companies in the United States. The Company
is the largest bank holding company headquartered in Kansas and, at
December 31, 1994, had total consolidated assets of $7.73 billion,
total deposits of $5.65 billion, and stockholders' equity of
$602.1 million. BANK IV Kansas, whose predecessor was originally
organized in 1887, is the largest commercial bank in Kansas and, at
December 31, 1994, had approximately 12.0% of all insured deposits in
Kansas. BANK IV Kansas, the only major statewide bank in Kansas, has 87
offices in 36 communities. BANK IV Oklahoma has 56 offices in 23
communities. BANK IV Missouri, acquired in January, 1995, has three
offices in Independence, Missouri.
The three BANK IV banks provide a wide range of commercial and
retail banking services. Each separate BANK IV market-based unit is
under the management of a local president. Trust and customer
investments, mortgage banking, commercial finance and leasing, and bank
card services are each managed on a line-of-business basis. At
December 31, 1994, the BANK IV banks held total assets of $6.71 billion
in various fiduciary capacities and exercised investment authority over
$2.39 billion of these assets. Also on that date, the BANK IV banks
serviced a $1.46-billion residential mortgage loan portfolio, of which
$682.7 million was serviced for others. The BANK IV banks operate the
VIA system, a network of 340 automated teller machines located in
Kansas, Oklahoma, and Missouri at which approximately 12.7 million
electronic banking transactions were initiated during 1994.
In addition, Registrant owns several other subsidiaries which
perform various financially-related services. These subsidiaries
include a community development corporation, which makes loans and
investments to promote redevelopment in low- and moderate-income
neighborhoods of the communities served by the BANK IV banks and to
finance small and minority-owned businesses; a subsidiary of BANK IV
Kansas which offers non-deposit investment products and services at
offices of the BANK IV banks; and a company which reinsures credit life
and health insurance policies. Such subsidiaries in the aggregate do
not account for a material portion of the Company's revenues or
profits.
Recent Acquisitions
During 1994, the Company acquired two banks located in Kansas and
a bank and a federal savings bank located in Oklahoma. The Kansas banks
acquired were Emprise Bank, National Association, Hutchinson, Kansas
("Emprise"), and First National Bank and Trust Company in Dodge City,
Dodge City, Kansas ("Dodge"). The Oklahoma acquisitions included Equity
Bank for Savings, F.A., Oklahoma City, Oklahoma ("Equity"), and Metro
Bank of Broken Arrow, Broken Arrow, Oklahoma ("Metro").
The following table sets forth for each 1994 acquisition the
amount of assets of the acquired financial institution at the date of
acquisition, the amount paid by the Company, the number of shares of
common stock of the Company issued, and the accounting method used to
account for the acquisition.
Accounting
Bank Assets Cash Paid No. of Shares Method
---- ------ -------- ------------ ---------
(In thousands)
Equity $491,506 $90,720 - Purchase
Emprise 258,731 31,206 - Purchase
Dodge and Metro 144,999 - 590,710 Pooling
36(1) 70,300(1) Purchase
--------
(1) To acquire minority interests in Dodge and Metro.
During January and February 1995 three acquisitions were completed.
In Oklahoma, the Company acquired Stillwater Federal Savings Bank,
Stillwater, Oklahoma ("Stillwater"), and Security Bank and Trust
Company, Blackwell, Oklahoma ("Security"). The Missouri bank acquired
was Standard Bank & Trust Company, Independence, Missouri ("Standard").
For the 1995 acquisitions, the following table sets forth the amount
of assets of the acquired financial institution at December 31, 1994,
the amount paid by the Company, the number of shares of common stock of
the Company issued, and the accounting method used to account for the
acquisition.
Accounting
Bank Assets Cash Paid No. of Shares Method
----- ------ ---------- ----------- -----------
(In thousands)
Stillwater . . . . . . . . . . . . . . . $95,503 $ - 368,981 Purchase
Standard . . . . . . . . . . . . . . . . 85,190 - 315,000 Pooling
Security . . . . . . . . . . . . . . . . 46,851 8,197 - Purchase
As of March 1, 1995, the Company has no binding commitments,
agreements, or understandings to acquire any additional financial
institutions, but additional acquisition agreements may be negotiated
or entered into at any time. Though the Company considers strategic
acquisitions which can be made on favorable terms, the Company's focus
has now shifted from growth by acquisition to internal growth,
enhancement of revenues, and greater efficiency.
Competition
BANK IV Kansas is the largest of approximately 460 commercial
banks in Kansas, and as of June 30, 1994 (the latest date for which
statewide information is available), held approximately 15.5% of the
total bank deposits in Kansas. As of June 30, 1994, BANK IV Kansas
ranked 120th largest, as measured by total assets, out of approximately
10,600 commercial banks in the United States. BANK IV Oklahoma is the
second-largest of approximately 350 banks in Oklahoma. BANK IV Missouri
is one of approximately 475 commercial banks in Missouri and is one of
over 30 commercial banks headquartered in the Missouri portion of the
metropolitan Kansas City market.
There are one or more other commercial banks located in each
BANK IV community, resulting in strong competition in all areas of bank
services. The principal methods of competition in the commercial
banking industry are price, service, and interest rates paid to
depositors and charged to credit customers. In addition, banks compete
for loans and deposits with other types of financial institutions such
as savings and loan associations, credit unions, money market mutual
funds, and finance companies. Increasingly, banks also compete for both
consumer and commercial loans and for deposits with large retail and
commercial enterprises. Among other things, this increased competition
has resulted in banks being required to accept lower interest rates on
loans and to pay interest on a larger percentage of their deposits.
Lines of Business and Reportable Segments
Registrant and its subsidiaries engage primarily in commercial
banking. Registrant and its subsidiaries, therefore, did not engage in
material operations in separate reportable industry segments for the
last three fiscal years.
Employees
As of March 1, 1995, Registrant and its subsidiaries had a total
of 3,520 full-time-equivalent employees. Registrant had 985
full-time-equivalent employees. BANK IV Kansas had 1,632, BANK IV
Oklahoma had 876, BANK IV Missouri had 25, and Fourth Financial
Insurance Company and BANK IV Community Development Corporation each
had one.
Regulation and Supervision
Federal Regulation. The Company is subject to the Bank Holding
Company Act of 1956, as amended (the "Act"), and to regulation by the
Board of Governors of the Federal Reserve System (the "Board"). The Act
limits the nonbanking activities which may be engaged in by the Company
and its subsidiaries to those so closely related to banking or managing
or controlling banks as to be a proper incident thereto. In determining
whether a particular activity is a proper incident to banking or
managing or controlling banks, the Board must consider whether
performance of an activity by an affiliate of a bank holding company
can reasonably be expected to produce benefits to the public, such as
greater convenience, increased competition, or gains in efficiency. The
benefits of the activity must also outweigh possible adverse effects,
such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices.
The Act also prohibits bank holding companies from acquiring
substantially all the assets of, or owning more than 5% of the voting
shares of, any bank which is not already majority-owned, or of any
nonbanking company, without the prior approval of the Board. The Board
may not approve an application to acquire before September 29, 1995,
shares or assets of a bank located outside the state in which the
operations of the applicant's banking subsidiaries are principally
conducted unless such acquisition is specifically authorized by a
statute of the state in which the bank whose shares or assets are to be
acquired is located. For a description of recently enacted changes in
federal law, see the section below captioned Recently Enacted Federal
Legislation.
The Company, its nonbanking subsidiaries, BANK IV Kansas, BANK IV
Oklahoma, and BANK IV Missouri are all affiliates of each other within
the meaning of the Federal Reserve Act. As such, they are subject to
certain restrictions on loans by the BANK IV banks to the Company or
such nonbanking subsidiaries and on investments in and loans secured by
their stock or other securities. The Company and its subsidiaries,
including the BANK IV banks, are also subject to certain restrictions
on the issuance, underwriting, and distribution of securities. In
addition, the Board may examine the Company or any of its subsidiaries.
As a bank holding company, the Company is a legal entity separate
and distinct from its subsidiaries. The principal sources of funds
available for dividends on the Company's common stock and its preferred
stock are dividends from the BANK IV banks and cash and other
investments held by the Company. The approval of the Comptroller of the
Currency (the "Comptroller") is required if total dividends declared by
a national bank in any one year exceed the bank's net profits for that
year plus the profits for the two preceding years retained by the bank.
In 1995, the BANK IV banks may pay an aggregate of approximately $39.9
million (in addition to their 1995 net profits) in dividends to the
Company without obtaining regulatory approval.
The Comptroller's approval was required and obtained for
dividends paid by BANK IV Oklahoma in 1994 and for some of the
dividends paid by BANK IV Kansas in 1994. Because of the financial
strength of Registrant and the banks' anticipated earnings capacity,
the BANK IV banks expect to be able to obtain permission, if required,
from the Comptroller to pay dividends in 1995 to the extent justified
by their respective financial conditions and subject to the capital
requirements described below.
Recently Enacted Federal Legislation. The recently enacted
federal Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 will increase the ability of Registrant and other bank holding
companies to make interstate acquisitions and to operate their
subsidiary banks. Commencing on September 29, 1995, adequately
capitalized and adequately managed bank holding companies will be
permitted to acquire banks located anywhere in the United States
without regard to the provisions of any state laws prohibiting such
acquisitions. Interstate acquisitions will not be permitted, however,
if the potential acquirer would control more than ten percent of the
insured deposits in the United States or more than 30 percent of
insured deposits in the home state of the bank to be acquired or in any
state in which such bank has a branch. States may enact statutes
increasing the 30 percent limit and may also lower such limit if they
do so on a non-discriminatory basis. States will also be permitted to
prohibit acquisitions of banks that have been established for fewer
than five years. The Board of Governors of the Federal Reserve System
is required to consider the applicant's record under the federal
Community Reinvestment Act in determining whether to approve an
interstate banking acquisition.
The new statute also permits, after June 1, 1997, interstate
branch banking in all states by adequately capitalized and adequately
managed banks, but a state may enact specific legislation before June
1, 1997 prohibiting interstate branch banking in that state, in which
event banks headquartered in the state will not be permitted to branch
into other states. A state may also enact legislation permitting non-
discriminatory interstate branch banking in such state before June 1,
1997. Applications for interstate branching authority will be subjected
to regulatory scrutiny of compliance with both federal and state
community reinvestment statutes with respect to all of the banks
involved in the proposed transaction.
Registrant is unable to predict the effect, if any, of such new
legislation on it.
Capital Guidelines. Bank holding companies, such as the
Company, and their bank subsidiaries are required to maintain three
capital ratios which measure capital adequacy. Capital is separated
into "Tier I capital" (as applied to the Company, common stockholders'
equity and Preferred Stock, less certain intangible assets) and
"Tier II capital" (as applied to the Company, the allowance for credit
losses limited to 1.25% of risk-weighted assets).
The first two ratios, which are based on the degree of credit
risk in the company's assets, provide for weighting assets based on
assigned risk factors and include off-balance-sheet items such as loan
commitments and stand-by letters of credit. The ratio of total capital
(Tier I capital plus Tier II capital) to risk-weighted assets and
off-balance-sheet commitments and contingencies must be at least 8.0%
and the ratio of Tier I capital to risk-weighted assets and
off-balance-sheet commitments must be at least 4.0%.
The capital leverage ratio supplements the risk-based capital
guidelines. Banks and bank holding companies are to maintain a minimum
ratio of Tier I capital to average adjusted total assets of 3.0%.
These ratio requirements are minimums. Any institution operating
at or near those levels would be expected by the regulators to have
well-diversified risk, including no undue interest rate risk exposures,
excellent asset quality, high liquidity, and good earnings and, in
general, would have to be considered a strong banking organization. All
other organizations and any institutions experiencing or anticipating
significant growth are expected to maintain capital ratios at least one
to two percent above the minimum levels, and higher capital ratios can
be required if warranted by particular circumstances or risk profile.
A bank's deposit insurance premium is based, in part, on the
bank's capital levels. The Federal Deposit Insurance Corporation is the
single insurer of deposits in financial institutions. Deposit insurance
premium rates range from 0.23% to 0.31% of a bank's assessment base (as
defined), depending on the bank's supervisory rating by the bank's
primary regulator and its capital level. (The Federal Deposit
Insurance Corporation has proposed, but not adopted, a reduction in
premium rates.) A bank is typically defined to be "well capitalized" if
it maintains a Tier I capital ratio of at least 6.0%, a total
risk-based capital ratio of at least 10.0%, and a leverage ratio of at
least 5.0%. It is the Company's intention to maintain sufficient
capital in each of its bank subsidiaries to permit them to maintain a
"well capitalized" designation. The capital ratios for both of the
Company's subsidiary banks exceeded the "well capitalized" regulatory
capital requirements at December 31, 1994.
Pending and Proposed Federal Legislation. There are various
pending and proposed bills in Congress that would restructure the
federal supervision of financial institutions. The Company is unable to
predict with any certainty the effect any such legislation would have
on the Company and its subsidiaries.
State Regulation. Each of the three states in which the Company's
banking subsidiaries are located has laws (described below) limiting
interstate acquisitions of banks headquartered in such state. Such
state laws will be for the most part pre-empted by the recent federal
legislation described above. One or more of such states may amend their
laws in response to the federal legislation before it takes effect, but
the Company is unable to predict the likelihood or nature of any such
amendments.
Kansas. A Kansas bank holding company is prohibited from
acquiring, directly or indirectly, any voting shares in any Kansas bank
if, after such acquisition, all of the Kansas banks in which such bank
holding company or any subsidiary of such bank holding company has
ownership or control of any voting shares would have, in the aggregate,
more than 15% of the total deposits of all banks domiciled in Kansas
plus the total deposits, savings deposits, shares and other accounts in
savings and loan associations, federal savings banks, and building and
loan associations in Kansas as determined by the Kansas bank
commissioner on the basis of the most recent reports to supervisory
authorities which are available at the time of the acquisition. The
statute contains an exception from the 15%-of-statewide-deposits
limitation in the case of an acquisition that the Kansas bank
commissioner determines would be in the public interest to prevent the
failure or probable failure of the acquired bank. As of December 31,
1994, BANK IV Kansas had approximately 12.0% of the total deposits of
all Kansas banks, savings and loan associations, federal savings banks,
and building and loan associations according to the most recent
information available to the Company.
Bank holding companies located in Nebraska, Missouri, Colorado,
Oklahoma, and Arkansas are permitted to acquire banks and bank holding
companies located in Kansas upon obtaining the approval of the Kansas
State Banking Board. Among the factors to be considered in granting
such approval are whether existing subsidiaries of the applicant are
operated in a safe, sound, and prudent manner, the adequacy of services
being provided by existing subsidiaries of the applicant, whether the
applicant proposes to provide adequate and appropriate services in the
communities served by the Kansas banks to be acquired, whether the
proposed acquisition will result in a Kansas bank or bank holding
company located in Kansas that has adequate capital and good earnings
prospects, and whether the proposed acquisition is in the interests of
the depositors and creditors of the bank or bank holding company which
is the subject of the proposed acquisition and in the public interest
generally. Such acquisitions are also subject to the deposits
limitation described above. No application can be approved unless the
state banking board finds that the laws of the state or jurisdiction in
which the applicant bank holding company is located permit a Kansas
bank holding company to acquire a bank located in that state or
jurisdiction on terms that are substantially no more restrictive than
those established under the Kansas statute. The Kansas statute would
also permit Iowa banks or bank holding companies to acquire Kansas
banks and bank holding companies if Iowa were to adopt appropriate
reciprocal legislation.
Oklahoma. The Company is permitted under Oklahoma law to acquire
additional banks, but such banks must have been in existence and
continuous operation for at least five years. Oklahoma prohibits a
multi-bank holding company from acquiring any additional banks if such
acquisition would result in the bank holding company having direct or
indirect ownership of banks located in Oklahoma that would have in
excess of 11% of the aggregate deposits of all financial institutions
located in Oklahoma which have deposits insured by the Federal Deposit
Insurance Corporation or National Credit Union Administration. As of
December 31, 1994, BANK IV Oklahoma had approximately 5.4% (5.6% on a
pro forma basis) of the total deposits of insured Oklahoma savings and
loans, credit unions, and banks. This restriction is not expected to
affect the Oklahoma acquisition activities of the Company in the near
future.
Missouri. The Company is also permitted under Missouri law to
acquire additional banks. Missouri law prohibits an adjoining-state
bank holding company from obtaining control of any bank if the total
deposits in that bank together with the total deposits in all banks
controlled by the adjoining-state bank holding company exceed 13% of
the total deposits in all depository financial institutions in Missouri
which have deposits insured by an agency of the federal government. As
of December 31, 1994, Standard Bank & Trust Company, the predecessor of
BANK IV Missouri, had only approximately 0.1% of the total deposits of
federally insured depository financial institutions in Missouri as of
June 30, 1994, the latest date for which information concerning
deposits in Missouri financial institutions is available to the
Company, so Missouri's 13% restriction is not expected to affect the
Missouri acquisition activities of the Company in the near future.
Government Monetary Policy and Economic Controls
The earnings of Registrant and the BANK IV banks are affected by
the policies of regulatory authorities. An important function of the
Federal Reserve System is to regulate the national supply of bank
credit in order to affect the level of economic activity. Among the
instruments used to implement these objectives are open market
operations in U.S. Government securities, changes in the discount rate
on member bank borrowings, and changes in reserve requirements. These
instruments are used in varying combinations to influence overall
growth and distribution of bank loans, investments and deposits, and
their use may also affect interest rates charged on loans or paid for
deposits.
Statistical Disclosure
The information required by Guide 3, "Statistical Disclosure by
Bank Holding Companies," has been integrated throughout the attached
Appendix under the captions "Selected Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations," and such information is hereby incorporated
herein by reference.
Executive Officers of the Registrant
Listed below are the names and ages of all executive officers of
Registrant and offices held by them with Registrant (and, in the cases
of Mr. Knudson, Mr. Greer, and Mr. Keller, with the BANK IV banks).
Name Age Positions and Offices
-------- ----- ----------------------
Darrell G. Knudson 57 Chairman of the Board, President, and Chief Executive
Officer of Registrant and Director of BANK IV Kansas and
BANK IV Oklahoma
K. Gordon Greer 58 Chairman of the Board, President, and Chief Executive
Officer of BANK IV Kansas
Edward F. Keller 54 Chairman of the Board, President, and Chief Executive
Officer of BANK IV Oklahoma
Michael R. Ritchey 55 President, Trust and Asset Management, and Senior Trust
Officer of Registrant
James J. Gartner 53 Executive Vice President, Risk Control Group, of
Registrant
John F. Guettler 49 Executive Vice President and Director of Human Resources
of Registrant
Clayton D. Pledger 49 Executive Vice President, Operations and Technology, of
Registrant
William J. Rainey 48 Executive Vice President, Secretary, and General Counsel
of Registrant
Michael J. Shonka 47 Executive Vice President and Chief Financial Officer of
Registrant
David L. Strohm 43 Executive Vice President and Treasurer of Registrant
Mr. Knudson is a member of the Executive Committee of Registrant.
There is no family relationship between any of the executive
officers of Registrant.
Mr. Knudson was elected Vice Chairman of Registrant effective
December 31, 1990, Chairman of the Board on July 1, 1991, and President
on March 16, 1992. Mr. Knudson was Vice Chairman of First Bank
System, Inc., a Minnesota-based multi-bank holding company, from 1982
until his resignation in 1990 to join Registrant.
Mr. Greer has been Chairman of the Board of BANK IV Kansas since
December, 1992, and President of BANK IV Kansas (or its predecessor
BANK IV Wichita) since March, 1989. He was a director and President of
the Company from September, 1990 through March, 1992 and was also
Chairman of the Board of BANK IV Kansas (or its predecessor BANK IV
Wichita) from January, 1991 through December, 1991.
Mr. Keller has been Chairman of the Board of BANK IV Oklahoma
since December 31, 1992, and President of BANK IV Oklahoma since July,
1994. He was Chairman of the Board and Chief Executive Officer of The
Fourth National Bank of Tulsa prior to its acquisition by the Company
in December, 1992.
Mr. Ritchey has been the Senior Trust Officer of the Company and
its subsidiary banks and responsible for their trust operations for
more than five years. He was elected Executive Vice President of
Registrant in February, 1990, and was elected to his present position
in January, 1993.
Mr. Gartner was Senior Vice President and Senior Credit Officer
of First Bank South Dakota, N.A. (from July 1987) and Senior Credit
Officer of First Bank North Dakota, N.A. and First Bank East Grand
Forks, N.A. (from 1990) until he became employed by Registrant in
February, 1992.
Mr. Guettler was elected Senior Vice President of Registrant in
December, 1988, and Executive Vice President in January, 1995.
Mr. Pledger supervises the Registrant's operations and technology
functions. Mr. Pledger was Senior Vice President of NCNB Corporation
(and predecessor companies) with responsibilities in various operating
divisions (cash management, item processing, deposit operations,
electronic payments, corporate trust, commercial loan and depository
services) from 1981 until he was employed by Registrant in his present
capacity in June, 1991.
Mr. Rainey was Senior Vice President, General Counsel, and
Secretary of Valley National Corporation (Arizona bank holding company)
from 1987 to 1991 and Vice President and General Counsel of Cabot
Corporation, Boston, Massachusetts (specialty chemicals and energy)
from 1991 to 1993. He has been employed by Registrant in his present
position since February, 1994.
Mr. Shonka, Registrant's Chief Financial Officer, was elected
Senior Vice President of Registrant in January, 1988, and Executive
Vice President in December, 1994.
Mr. Strohm was elected Executive Vice President of Registrant in
September, 1990 and Treasurer in 1986. Mr. Strohm has been responsible
for supervising Registrant's funds management, treasury, and asset and
liability management functions since 1983, and mortgage, commercial
finance and leasing, and finance and accounting since 1993.
Directors of the Registrant
Listed below are the names and principal occupations of
Registrant's directors.
Name Principal Occupation
----- -----------------------
Lionel D. Alford President, Alford, Inc. (investments and consulting)
Thomas R. Clevenger Investments
Jordan L. Haines Chairman of the Board of Registrant until his retirement in
1991
Joseph M. Klein President, CCI Corporation (truck parts distributor)
Lawrence M. Jones Chairman and Chief Executive Officer, The Coleman
Company, Inc. (manufacturer of outdoor recreational
products) until his retirement in December, 1993
Darrell G. Knudson Chairman of the Board of Registrant
Fred L. Merrill, Sr. Chief Executive Officer, Cereal Food Processors, Inc. (flour
mills)
Russell W. Meyer, Jr. Chairman and Chief Executive Officer, The Cessna Aircraft
Company (general aviation aircraft manufacturer)
Laird G. Noller President, Noller Enterprises (automobile dealerships)
Patrick E. O'Shaughnessy Chairman and Chief Executive Officer, Lario Oil & Gas
Company (oil exploration)
Robert F. Vickers Trustee and Administrator, The Vickers Trusts
Ken Wagnon Owner, franchise restaurants and other investments, and
President, Capital Enterprises, Inc. (accounting and
management services)
Item 2. Properties.
Kansas
The only significant real property owned by Registrant is a
building located in Wichita, Kansas, acquired in January, 1994 to be
remodeled for use as a data processing and operations facility. BANK IV
Kansas owns substantially all of its banking facilities, but the land
on which some of such facilities are located is leased and 13 branch
facilities, including five branches located in supermarkets, are leased
entirely. Registrant believes that all of such properties are well
maintained and suitable for their intended purposes. Described below
are the principal buildings operated by BANK IV Kansas.
Wichita
Registrant and BANK IV Kansas occupy a four-building complex
located in downtown Wichita, Kansas. The Fourth Financial Center is a
ten-level office building located at 100 North Broadway. The building
is located on an 88,450-square-foot tract of land and contains
approximately 396,000 square feet of gross area, which includes a
25,000-square-foot enclosed courtyard. The building contains
approximately 312,000 rentable square feet, of which BANK IV Kansas and
Registrant utilize approximately 170,000 square feet with the balance
being leased to tenants. The Operations Center is a five-level office
building located adjacent to Fourth Financial Center and connected by
an enclosed pedestrian walkway. The 63,000-square-foot building is
located on a 13,020-square-foot tract of land and houses operating
functions of Registrant and its subsidiaries. A 450-car, six-level
parking garage and walk-in bank facility is located just west of Fourth
Financial Center and is connected to it by an enclosed pedestrian
walkway.
Another building, Exchange Place, is located one block west of
the Fourth Financial Center. Exchange Place is located on five tracts
of land, two of which are owned by BANK IV Kansas and three of which
are leased. The leases on the three leased tracts expire on August 31,
2003, and on December 31, 2009. The building, constructed prior to 1903
with various additions to the basic structure being completed through
1957, is an eight-level structure plus a full basement, a mezzanine
floor, and an eighth floor mechanical area. The building contains
approximately 147,000 square feet of rentable space of which BANK IV
Kansas and Registrant are currently occupying approximately 123,500
square feet and the remaining 23,500 square feet are leased.
Topeka
BANK IV Kansas owns the BANK IV Tower, a 16-story office building
in downtown Topeka, Kansas containing 230,000 rentable square feet. At
February 1, 1995, BANK IV Kansas occupied approximately 83,000 square
feet of the building and approximately 121,500 of the remaining 147,000
square feet was leased. A 260-car, ten-level parking garage is attached
to the building.
Townsite Plaza Development, Inc., a subsidiary of BANK IV Kansas,
owns and operates three buildings located immediately east of the
BANK IV Tower above a municipal subsurface garage. The three buildings,
constructed between 1976 and 1981, contain an aggregate of
approximately 138,000 square feet of rentable space, of which a total
of approximately 116,000 square feet was leased as of February 1, 1995.
Oklahoma
BANK IV Oklahoma does not own any major building facilities.
Under a lease which expires in 2004, it leases 61,000 square feet in
the BANK IV Center Building in downtown Tulsa which is used as the
BANK IV Oklahoma headquarters. Under a lease which expires in 2004, it
also leases 33,000 square feet in the BANK IV Tower in Oklahoma City as
headquarters for its Oklahoma City activities. BANK IV Oklahoma owns 41
of its 60 banking facilities and leases the rest. BANK IV Oklahoma
believes its facilities are substantially all well-maintained and
generally suitable for their intended purposes.
Missouri
BANK IV Missouri owns all three of its banking facilities in
Independence, Missouri, which contain an aggregate of 20,000 square
feet, all of which is occupied by the bank.
Item 3. Legal Proceedings.
The Registrant and its subsidiaries are defendants in various
legal proceedings that arise in the ordinary course of business.
Claims in various amounts of up to approximately $20,000,000 have been
asserted in some of these proceedings. However, after consultation
with legal counsel, management believes that potential liabilities, if
any, arising from these claims would not have a material adverse effect
on the Registrant's business or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders.
No information is required in response to this Item as no matters
were submitted to a vote of Registrant's security holders during the
fourth quarter of the fiscal year covered by this report.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
(a) Market Information. The Common Stock of Registrant is traded in
the national over-the-counter market. The NASDAQ symbol for the Common
Stock is FRTH.
Information concerning the high and low bid prices for the
Registrant's Common Stock for each full quarterly period within the two
most recent fiscal years is contained in the attached Appendix under
the caption "Quarterly Financial Data" and is hereby incorporated by
reference.
(b) Holders. There were approximately 6,056 holders of record of
Registrant's Common Stock at March 1, 1995.
(c) Dividends. The information concerning the payment of dividends
by Registrant during the past two fiscal years contained in the
attached Appendix under the caption "Quarterly Financial Data" is
hereby incorporated herein by reference. The information concerning
restrictions on the ability of Registrant's subsidiaries to transfer
funds to Registrant contained in Item 1 under the caption "Regulation
and Supervision," in Note 19 -- Restrictions on Intercompany Funds
Transfers of the Notes to Consolidated Financial Statements contained
in the attached Appendix, and under the caption "Parent Company Funding
Sources and Dividends" in the attached Appendix is hereby incorporated
by reference.
Item 6. Selected Financial Data.
The information required by Item 301 of Regulation S-K,
contained in the attached Appendix under the caption "Selected
Consolidated Financial Data," is hereby incorporated by reference.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The information required by Item 303 of Regulation S-K, contained
in the attached Appendix under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations," is hereby
incorporated by reference.
Item 8. Financial Statements and Supplementary Data.
Set forth below are the consolidated financial statements of
Registrant and its subsidiaries, appearing in 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
in the attached Appendix under the caption "Quarterly Financial Data,"
is hereby incorporated by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
No information is required in response to this Item.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required by Item 401 of Regulation S-K will be
contained in the 1995 Proxy Statement under the caption "Election of
Directors" and is hereby incorporated by reference. The information
required by Item 405 of Regulation S-K will be contained in the 1995
Proxy Statement under the caption "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" and is hereby incorporated by
reference.
Information concerning the executive officers of Registrant is
contained in Item 1 of this report under the caption "Executive
Officers of the Registrant."
Item 11. Executive Compensation.
The information required by Item 402 of Regulation S-K will be
contained in the 1995 Proxy Statement under the captions "Compensation
of Directors and Executive Officers," "Compensation Committee
Interlocks and Insider Participation," "Report of Compensation
Committee on Executive Compensation," and "Company Performance" and is
hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information required by Item 403 of Regulation S-K will be
contained in the 1995 Proxy Statement under the caption "Stock
Ownership" and is hereby incorporated by reference.
Item 13. Certain Relationships and Related Transactions.
The information required by Item 404 of Regulation S-K will
appear under the caption "Transactions with Management" in the 1995
Proxy Statement and is hereby incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.
(a) The following documents are filed as part of this report:
(1) Financial statements: the financial statements,
notes, and independent auditors' reports described
in Item 8 to which reference is hereby made.
(2) Financial statement schedules: none.
(3) 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.
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 1993 Employee Stock Purchase Plan (Exhibit
10.07 to Form 10-K for year ended December 31, 1993, previously filed
by Registrant (the "1993 10-K")).*
10.08 - Fourth Financial Corporation 1993 Incentive Stock Option Plan (Exhibit
10.08 to 1993 10-K).*
10.09 - Fourth Financial Corporation Amended and Restated Non-Employee
Directors Deferred Fee Plan (Exhibit 10.09 to 1993 10-K).*
10.10 - Fourth Financial Corporation Non-Employee Directors Stock Option Plan
(Exhibit 10.10 to 1993 10-K).*
10.11 - Credit Agreement dated as of July 1, 1994, between Registrant and
Continental Bank N.A. (Exhibit 10.01 to Form 10-Q for the quarter ended
June 30, 1994).*
10.12 - Credit Agreement dated as of January 3, 1995, between Registrant and
Bank of America Illinois.
10.13 - Credit Agreement dated as of January 3, 1995, between Registrant and
NationsBank of Texas, N.A.
10.14 - Form of Severance Agreement.
10.15 - Fourth Financial Corporation Amended and Restated Executive Employees'
Deferred Compensation Plan (Exhibit 4(a) to Form S-8, Regis. No. 33-
55364, previously filed by Registrant).*
21 - Subsidiaries of Registrant.
23.01 - Consent of Ernst & Young LLP.
23.02 - Consent of Arthur Andersen LLP.
23.03 - Consent of Sartain Fischbein & Co.
23.04 - Consent of GRA, Thompson, White & Co., P.A.
27 - Article 9 of Regulation S-X Financial Data Schedule for the December
31, 1994 Form 10-K.
[Exhibits 10.01, 10.02, 10.07, 10.08, 10.09, 10.10, 10.14, and 10.15 are
compensation plans required to be filed as exhibits pursuant to Item 14(c).]
<FN>
___________
* Document has been previously filed with the Securities and Exchange Commission and
is incorporated by reference and made a part hereof.
(b) Reports on Form 8-K
None.
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: March 13, 1995
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 capacities and on the dates indicated.
Signature Title Date
---------- ------ ----
/s/ Darrell G. Knudson Chairman of the Board March 13, 1995
------------------
Darrell G. Knudson (Principal Executive Officer)
/s/ Michael J. Shonka Executive Vice President March 13, 1995
-----------------
Michael J. Shonka (Principal Financial Officer)
/s/ Barbara M. Noyes Vice President and Controller March 13, 1995
----------------
Barbara M. Noyes (Principal Accounting Officer)
/s/ Lionel D. Alford Director March 13, 1995
----------------
Lionel D. Alford
/s/ Thomas R. Clevenger Director March 13, 1995
-------------------
Thomas R. Clevenger
/s/ Jordan L. Haines Director March 13, 1995
----------------
Jordan L. Haines
/s/ Lawrence M. Jones Director March 13, 1995
-----------------
Lawrence M. Jones
/s/ Joseph M. Klein Director March 13, 1995
---------------
Joseph M. Klein
/s/ Darrell G. Knudson Director March 13, 1995
------------------
Darrell G. Knudson
/s/ Russell W. Meyer, Jr. Director March 13, 1995
--------------------
Russell W. Meyer, Jr.
/s/ Fred L. Merrill, Sr. Director March 13, 1995
-------------------
Fred L. Merrill, Sr.
/s/ Laird G. Noller Director March 13, 1995
---------------
Laird G. Noller
/s/ Patrick E. O'Shaughnessy Director March 13, 1995
------------------------
Patrick E. O'Shaughnessy
/s/ Robert F. Vickers Director March 13, 1995
-----------------
Robert F. Vickers
/s/ Ken Wagnon Director March 13, 1995
-----------
Ken Wagnon
FOURTH FINANCIAL CORPORATION
INDEX TO FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
Pages
-----
Management's Statement of Responsibility for
Financial Reporting . . . . . . . . . . . . . . . . . . . . . A-
Consolidated Statements of Condition. . . . . . . . . . . . . . A-
Consolidated Statements of Income . . . . . . . . . . . . . . . A-
Consolidated Statements of Changes in Stockholders' Equity. . . A-
Consolidated Statements of Cash Flows . . . . . . . . . . . . . A-
Notes to Consolidated Financial Statements . . . . . . . . . . A- - A-
Report of Independent Auditors. . . . . . . . . . . . . . . . . A-
Reports of Other Auditors . . . . . . . . . . . . . . . . . . . A- - A-
Selected Consolidated Financial Data . . . . . . . . . . . . . A-
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . A- - A-
FOURTH FINANCIAL CORPORATION
MANAGEMENT'S STATEMENT OF RESPONSIBILITY FOR
FINANCIAL REPORTING
FINANCIAL STATEMENTS
Management of Fourth Financial Corporation is responsible for the
preparation, integrity and fair presentation of the accompanying
consolidated financial statements. The consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles and, as such, include some amounts that are based
on judgements and estimates of management. The financial information
appearing elsewhere in this annual report on Form 10-K is consistent
with the information in the consolidated financial statements unless
otherwise stated.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining an
effective internal control system over financial reporting. The system
contains monitoring mechanisms, and actions are taken to correct
deficiencies identified.
There are inherent limitations in the effectiveness of any system
of internal control, including the possibility of human error and the
circumvention or overriding of controls. Accordingly, even an
effective internal control system can provide only reasonable assurance
with respect to financial statement preparation. Further, because of
changes in conditions, the effectiveness of an internal control system
may vary over time.
Management assessed the Company's internal control system
over financial reporting as of December 31, 1994. This assessment was
based on criteria for effective internal control over financial
reporting described in "Internal Control-Integrated Framework" issued
by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this assessment, management believes that, in all
material respects, Fourth Financial Corporation maintained an effective
internal control system over financial reporting as of December 31,
1994.
The Audit and Examination Committee of the Board of Directors is
comprised entirely of outside directors. The committee, among other
responsibilities, meets periodically with management, the independent
auditors, and the general auditor to ensure that they are carrying out
their respective responsibilities related to internal control systems,
auditing procedures and financial reporting matters. The independent
auditors and the general auditor have access to the committee, without
the presence of management, to discuss the adequacy of the internal
control system over financial reporting and any other auditing or
financial reporting matters which they believe should be brought to the
attention of the committee.
FOURTH FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
December 31,
-------------------------
1994 1993
----------- -----------
(Dollars in thousands)
Assets:
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 435,879 $ 320,660
Interest-bearing deposits in other financial institutions . . . . . . . . . . . . 499 3,025
Federal funds sold and securities purchased under agreements to resell . . . . . 4,670 6,063
Securities:
Held-to-maturity (market value-$1,834,900 and $1,807,580, respectively) . . . . 1,944,614 1,805,819
Available-for-sale (at market value). . . . . . . . . . . . . . . . . . . . . . 939,080 1,117,776
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,436 39,107
Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 719 474
Loans and leases:
Total loans and leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,005,667 3,351,912
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . (71,874) (67,617)
---------- ----------
Net loans and leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,933,793 3,284,295
Bank premises and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . 156,318 145,719
Income receivable and other assets . . . . . . . . . . . . . . . . . . . . . . . 164,726 96,165
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,606 66,960
---------- ----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,729,340 $6,886,063
========== ==========
Liabilities And Stockholders' Equity:
Deposits:
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,032,913 $ 977,944
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,614,235 4,458,619
---------- ----------
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,647,148 5,436,563
Federal funds purchased and securities sold under agreements to repurchase . . . 933,706 491,627
Federal Home Loan Bank borrowings . . . . . . . . . . . . . . . . . . . . . . . . 441,097 250,000
Other borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,001 23,002
Accrued interest, taxes, and other liabilities . . . . . . . . . . . . . . . . . 57,636 56,603
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,685 20,283
---------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,127,273 6,278,078
---------- ----------
Minority interest in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . -- 1,135
Stockholders' Equity:
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 100,000
Common stock, par value $5 per share
Authorized: 50,000,000 shares
Issued: 27,251,225 and 27,165,962 shares . . . . . . . . . . . . . . . . . . 136,256 135,830
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,201 106,102
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292,962 244,810
Treasury stock at cost (355,466 and 111,518 shares) . . . . . . . . . . . . . . (10,018) (3,245)
Stock option loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,894) (1,795)
---------- ----------
Stockholders' equity before net unrealized gains (losses) on
available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . 624,507 581,702
Net unrealized gains (losses) on available-for-sale securities. . . . . . . . . (22,440) 25,148
---------- ----------
Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . . . . . . 602,067 606,850
---------- ----------
Total liabilities and stockholders' equity. . . . . . . . . . . . . . . . . . $7,729,340 $6,886,063
========== ==========
The accompanying notes are an integral part of the financial statements.
FOURTH FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
-----------------------------------
1994 1993 1992
--------- --------- ---------
(Dollars in thousands,
except per share amounts)
Interest Income:
Interest and fees on loans and leases . . . . . . . . . . . . . . . . . $304,609 $262,865 $269,259
Interest on short-term investments . . . . . . . . . . . . . . . . . . . 921 2,098 4,730
Interest and dividends on investment securities:
Taxable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161,370 159,476 143,350
Tax-preferred. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,469 19,338 21,329
Interest and dividends on trading securities . . . . . . . . . . . . . . 105 136 220
-------- -------- --------
Total interest income. . . . . . . . . . . . . . . . . . . . . . . . 483,474 443,913 438,888
-------- -------- --------
Interest Expense:
Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 157,524 158,079 183,460
Interest on borrowings . . . . . . . . . . . . . . . . . . . . . . . . . 48,032 19,150 10,396
Interest on long-term debt . . . . . . . . . . . . . . . . . . . . . . . 998 2,273 3,675
-------- -------- --------
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . 206,554 179,502 197,531
-------- -------- --------
Net Interest Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 276,920 264,411 241,357
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . . 275 6,965 21,358
-------- -------- --------
Net Interest Income After Provision For Credit Losses. . . . . . . . . . . 276,645 257,446 219,999
-------- -------- --------
Noninterest Income:
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,041 18,577 17,828
Service charges on deposit accounts. . . . . . . . . . . . . . . . . . . 38,306 33,575 27,628
Bank card fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,173 10,385 9,740
Investment securities gains. . . . . . . . . . . . . . . . . . . . . . . 3,632 1,486 2,904
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,683 22,259 22,694
-------- -------- --------
Total noninterest income . . . . . . . . . . . . . . . . . . . . . . 97,835 86,282 80,794
-------- -------- --------
Noninterest Expense:
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . 126,279 117,291 103,008
Furniture and equipment. . . . . . . . . . . . . . . . . . . . . . . . . 22,529 23,534 19,611
Net occupancy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,729 16,699 15,444
FDIC insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,598 13,117 12,124
Bank card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,273 3,295 1,224
Amortization of intangible assets. . . . . . . . . . . . . . . . . . . . 10,154 12,549 5,821
Merger and integration costs . . . . . . . . . . . . . . . . . . . . . . 2,847 7,634 4,798
Net costs of operation of other real estate and nonperforming assets . . (1,064) 3,339 2,497
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,090 56,884 54,022
-------- -------- --------
Total noninterest expense. . . . . . . . . . . . . . . . . . . . . . 250,435 254,342 218,549
-------- -------- --------
Income Before Income Taxes, Extraordinary Item and Cumulative
Effect of a Change in Accounting Principle . . . . . . . . . . . . . . . 124,045 89,386 82,244
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,923 22,676 19,548
-------- -------- --------
Income Before Extraordinary Item and Cumulative Effect of a Change
in Accounting Principle. . . . . . . . . . . . . . . . . . . . . . . . . 83,122 66,710 62,696
Extraordinary item -- tax benefit from utilization of net operating
loss carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 130
Cumulative effect of a change in accounting for income taxes . . . . . . -- 10,582 2,373
-------- -------- --------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 83,122 $ 77,292 $ 65,199
======== ======== ========
Net Income Applicable to Common and Common-Equivalent Shares . . . . . . . $ 76,122 $ 70,292 $ 59,248
======== ======== ========
Primary Earnings Per Common Share:
Income applicable to common and common-equivalent shares before
extraordinary item and cumulative effect of a change in
accounting principle . . . . . . . . . . . . . . . . . . . . . . . . . $2.83 $2.27 $2.18
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- .02
Cumulative effect of a change in accounting for income taxes . . . . . . -- .40 .09
----- ----- -----
Net income applicable to common and common-equivalent shares . . . . . . $2.83 $2.67 $2.29
===== ===== =====
Fully Diluted Earnings Per Common Share:
Income before extraordinary item and cumulative effect
of a change in accounting principle. . . . . . . . . . . . . . . . . . $2.74 $2.20 $2.12
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- .01
Cumulative effect of a change in accounting for income taxes . . . . . . -- .35 .08
----- ----- -----
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2.74 $2.55 $2.21
===== ===== =====
Dividends Per Common Share . . . . . . . . . . . . . . . . . . . . . . . . $1.04 $ .98 $ .88
===== ===== =====
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 Net Unrealized
--------------- --------------- --------------
Capital Retained Option Gains (Losses)
Shares Amount Shares Amount Surplus Earnings Shares Amount Loans on Securities Total
------ -------- ------ -------- -------- -------- ------ ------- ------ ------------- -------
(In thousands)
Balance, December 31,
1991
As previously
reported . . . . . . 882 $ 3,087 24,903 $124,515 $101,603 $156,332 -- $ -- $(1,226) $ -- $384,311
Adjustment for
pooling of interests -- -- 591 2,954 197 3,373 -- -- -- -- 6,524
------ -------- ------ -------- -------- -------- ---- ------- ------- ------- --------
Adjusted balance. . 882 3,087 25,494 127,469 101,800 159,705 -- -- (1,226) -- 390,835
Net income. . . . . . -- -- -- -- -- 65,199 -- -- -- -- 65,199
Issuance of
preferred stock. . . 250 100,000 -- -- (3,080) -- -- -- -- -- 96,920
Issuance of common
stock under stock
option plans . . . . -- -- 163 813 1,657 -- -- -- -- -- 2,470
Cash dividends:
Preferred stock . . -- -- -- -- -- (5,951) -- -- -- -- (5,951)
Common stock. . . . -- -- -- -- -- (16,768) -- -- -- -- (16,768)
Pooled companies. . -- -- -- -- -- (2,305) -- -- -- -- (2,305)
Net change in stock
option loans . . . . -- -- -- -- -- -- -- -- (18) -- (18)
Capital transactions
of pooled companies. 90 554 152 763 1,537 -- -- -- 175 -- 3,029
------ -------- ------ -------- -------- -------- ---- ------- ------- -------- --------
Balance, December 31,
1992 . . . . . . . . . 1,222 103,641 25,809 129,045 101,914 199,880 -- -- (1,069) -- 533,411
Net income. . . . . . -- -- -- -- -- 77,292 -- -- -- -- 77,292
Purchase of stock
for treasury . . . . -- -- -- -- -- -- (112) (3,245) -- -- (3,245)
Issuance of common
stock:
Stock option plans. -- -- 199 993 2,414 -- -- -- -- -- 3,407
Acquisition . . . . -- -- 109 544 2,555 -- -- -- -- -- 3,099
Cash dividends:
Preferred stock . . -- -- -- -- -- (7,000) -- -- -- -- (7,000)
Common stock . . . -- -- -- -- -- (22,705) -- -- -- -- (22,705)
Pooled companies. . -- -- -- -- -- (2,657) -- -- -- -- (2,657)
Net change in stock
option loans . . . . -- -- -- -- -- -- -- -- (726) -- (726)
Capital transactions
of pooled companies. (972) (3,641) 1,049 5,248 (781) -- -- -- -- -- 826
Adjustment for
unrealized gains on
available-for-sale
securities . . . . . -- -- -- -- -- -- -- -- -- 25,148 25,148
------ -------- ------ -------- -------- -------- ---- ------- ------- -------- --------
Balance, December 31,
1993 . . . . . . . . . 250 100,000 27,166 135,830 106,102 244,810 (112) (3,245) (1,795) 25,148 606,850
Net income. . . . . . -- -- -- -- -- 83,122 -- -- -- -- 83,122
Purchase of stock
for treasury . . . . -- -- -- -- -- -- (355) (10,018) -- -- (10,018)
Issuance of common
stock:
Stock option plans. -- -- 81 407 968 -- 40 1,169 -- -- 2,544
Directors deferred
compensation plan. -- -- 4 19 90 -- 2 35 -- -- 144
Acquisition . . . . -- -- -- -- 41 -- 70 2,041 -- -- 2,082
Cash dividends:
Preferred stock . . -- -- -- -- -- (7,000) -- -- -- -- (7,000)
Common stock . . . -- -- -- -- -- (27,662) -- -- -- -- (27,662)
Pooled company. . . -- -- -- -- -- (308) -- -- -- -- (308)
Net change in stock
option loans . . . . -- -- -- -- -- -- -- -- (99) -- (99)
Capital transactions
of pooled company. . -- -- -- -- -- -- -- -- -- (198) (198)
Net change in
unrealized gains
(losses) on
available-for-sale
securities . . . . . -- -- -- -- -- -- -- -- -- (47,390) (47,390)
------ -------- ------ -------- -------- -------- ---- -------- ------- -------- --------
Balance, December 31,
1994 . . . . . . . . . 250 $100,000 27,251 $136,256 $107,201 $292,962 (355)$(10,018) $(1,894) $(22,440) $602,067
====== ======== ====== ======== ======== ======== ==== ======== ======= ======== ========
The accompanying notes are an integral part of the financial statements.
FOURTH FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------------------
1994 1993 1992
----------- ----------- -----------
(In thousands)
Increase (Decrease) in Cash and Due from Banks
Cash Flows From Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 83,122 $ 77,292 $ 65,199
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 84 355 426
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . 275 6,965 21,358
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . 27,552 29,075 20,065
Accretion of discounts on investment securities,
net of amortization of premiums . . . . . . . . . . . . . . . . . . . 12,577 15,901 9,447
Write-down of other real estate owned. . . . . . . . . . . . . . . . . 409 4,392 2,875
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . 6,473 (5,625) (958)
Investment securities gains. . . . . . . . . . . . . . . . . . . . . . (3,632) (1,486) (2,904)
Write-down of goodwill, core deposit intangibles, and premises
and equipment associated with pooling transactions, and other
asset write-downs . . . . . . . . . . . . . . . . . . . . . . . . . . 1,148 2,228 --
Gains on sales of premises and equipment, other real estate
owned, and other assets . . . . . . . . . . . . . . . . . . . . . . . (2,861) (2,587) (3,399)
Gain on sale of credit card loans. . . . . . . . . . . . . . . . . . . -- -- (169)
Provision for losses on other real estate owned. . . . . . . . . . . . -- -- 328
Change in assets and liabilities,
net of effects from purchase of acquired entities and branch sales:
Trading account. . . . . . . . . . . . . . . . . . . . . . . . . . . 28 3,062 4,125
Loans held for sale. . . . . . . . . . . . . . . . . . . . . . . . . 109,926 (109,631) 2,087
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,775 317,242 (30,371)
Accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,408) (10,996) 14,704
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . (6,738) 3,737 4,092
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . 306 (3,014) (7,933)
---------- ---------- ----------
Net cash provided by operating activities . . . . . . . . . . . . 291,036 326,910 98,972
---------- ---------- ----------
Cash Flows From Investing Activities:
Purchase of banks, net of cash acquired . . . . . . . . . . . . . . . . (87,818) (2,468) (7,662)
Branch sales, including cash and cash equivalents sold . . . . . . . . . (36,271) -- --
Proceeds from settlement of sales of available-for-sale
investment securities . . . . . . . . . . . . . . . . . . . . . . . . . 603,458 -- --
Proceeds from maturities and prepayments of
available-for-sale investment securities. . . . . . . . . . . . . . . . 212,311 -- --
Purchases of available-for-sale investment securities. . . . . . . . . . (546,451) -- --
Proceeds from settlement of sales of held-to-maturity
investment securities . . . . . . . . . . . . . . . . . . . . . . . . . -- 14,443 81,680
Proceeds from maturities and prepayments
of held-to-maturity investment securities . . . . . . . . . . . . . . . 529,559 1,058,235 954,181
Purchases of held-to-maturity investment securities. . . . . . . . . . . (593,395) (1,503,082) (1,348,678)
Proceeds from sales of premises and equipment,
other real estate owned, and other assets . . . . . . . . . . . . . . . 14,335 16,495 29,227
Purchases of premises and equipment. . . . . . . . . . . . . . . . . . . (19,157) (35,039) (19,115)
Purchase of mortgage servicing rights. . . . . . . . . . . . . . . . . . (355) -- (1,247)
Purchase of consumer loans . . . . . . . . . . . . . . . . . . . . . . . -- -- (60,751)
Proceeds from sale of credit card loans. . . . . . . . . . . . . . . . . -- -- 4,038
Change in assets and liabilities, net of effects
from purchase of acquired entities and branch sales:
Interest-bearing deposits in other financial institutions. . . . . . . 2,538 4,321 5,579
Federal funds sold and securities purchased under
agreements to resell. . . . . . . . . . . . . . . . . . . . . . . . . 18,308 200,715 9,025
Loans and leases . . . . . . . . . . . . . . . . . . . . . . . . . . . (465,129) (213,109) 132,075
---------- ---------- ----------
Net cash used in investing activities. . . . . . . . . . . . . . . (368,067) (459,489) (221,648)
---------- ---------- ----------
Cash Flows From Financing Activities:
Transfer associated with the assumption of deposits and
other liabilities, net of premium paid. . . . . . . . . . . . . . . . . $ -- $ 91,832 $ 75,411
Repayment of long-term debt. . . . . . . . . . . . . . . . . . . . . . . (15,598) (15,125) (17,560)
Purchase of minority stockholder interest. . . . . . . . . . . . . . . . (36) -- --
Acquisition of treasury stock. . . . . . . . . . . . . . . . . . . . . . (10,018) (3,245) --
Dividends on common stock. . . . . . . . . . . . . . . . . . . . . . . . (27,662) (22,705) (16,768)
Dividends on preferred stock . . . . . . . . . . . . . . . . . . . . . . (7,000) (7,000) (5,368)
Proceeds from exercise of stock options. . . . . . . . . . . . . . . . . 2,544 3,407 2,470
Net change in stock option loans . . . . . . . . . . . . . . . . . . . . (99) (726) (18)
Proceeds from issuance of preferred stock, net of offering costs . . . . -- -- 96,920
Capital transactions of pooled companies . . . . . . . . . . . . . . . . (364) (2,405) (2,398)
Change in liabilities, net of effects from purchase of
acquired entities and branch sales:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (297,239) (414,665) (155,176)
Federal funds purchased and securities sold under
agreements to repurchase. . . . . . . . . . . . . . . . . . . . . . . 395,095 166,033 171,364
Federal Home Loan Bank borrowings. . . . . . . . . . . . . . . . . . . 132,800 250,000 --
Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,827 (5,457) (18,471)
---------- ---------- ----------
Net cash provided by financing activities. . . . . . . . . . . . . 192,250 39,944 130,406
---------- ---------- ----------
Increase (decrease) in cash and due from banks . . . . . . . . . . . . . . 115,219 (92,635) 7,730
Cash and due from banks at beginning of period . . . . . . . . . . . . . . 320,660 413,295 399,871
Adjustment for pooling of interests. . . . . . . . . . . . . . . . . . . . -- -- 5,694
---------- ---------- ----------
Cash and due from banks at end of period . . . . . . . . . . . . . . . . . $ 435,879 $ 320,660 $ 413,295
========== ========== ==========
Supplemental Disclosures:
Cash payments for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 206,248 $ 182,162 $ 204,081
========== ========== ==========
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,392 $ 32,317 $ 21,404
========== ========== ==========
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 detailed in Footnote 2 -
Acquisitions. Certain reclassifications of previously reported amounts
have been made to conform with current year presentation format.
Securities
The Company adopted Financial Accounting Standard ("FAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities"
on December 31, 1993. Management reviewed the December 31, 1993 debt
securities portfolio and classified the debt securities as either held-
to-maturity or available-for-sale. Debt securities acquired subsequent
to December 31, 1993 were similarly classified.
Debt securities are classified as "Held-to-maturity" when
management has the positive intent and the Company has the ability to
hold the debt securities to maturity. Held-to-maturity 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 for amortizing and accreting the premium and discount on
these securities. Amortization, accretion, and interest on held-to-
maturity securities are included in "Interest and dividends on
investment securities."
Marketable equity securities and debt securities that are deemed
to be available-for-sale for the implementation of asset and liability
management strategies, possible liquidity needs, and other purposes are
classified as "Available-for-sale." Available-for-sale securities are
carried at fair value, with the unrealized gains and losses, net of
tax, reported in a separate component of stockholders' equity. The
amortized cost of debt securities in this category is adjusted for
amortization of premiums and accretion of discounts to maturity.
Amortization, accretion, and interest and dividends on securities
classified as available-for-sale are included in "Interest and
dividends on investment securities." Realized gains and losses and
declines in value judged to be other-than-temporary on available-for-
sale securities are included in "Investment securities gains." The
cost of securities sold is based on the specific identification method.
Securities held for sale to customers and in anticipation of
short-term market movements are classified as "Trading securities."
Securities held for trading are stated at market value. Gains and
losses, both realized and unrealized, are reflected in "Other
noninterest income." The specific identification method is used to
determine the cost of securities sold.
"Other securities" include equity securities for which there is
no readily determinable fair value, and are carried at cost. Dividends
on these equity securities are included in "Interest and dividends on
investment securities."
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. The net investment in direct
financing leases consists of the sum of all minimum lease payments and
estimated residual values, less unearned income. Unearned income on
discounted loans and leases is accreted and included in "Interest and
fees on loans and leases" on a basis approximating a level yield on the
net investment in the loans or leases.
Residential mortgage loans and educational loans held for sale
are stated at the lower of cost or market value. These loans are
analyzed on an aggregate basis to determine the lower of cost or 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 noninterest 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.
Other Real Estate and Nonperforming Assets
Other real estate and nonperforming assets include assets
acquired from loan settlements and foreclosures. 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 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 or leases that may become uncollectible. Additions to the
allowance are charged to expense as the provision for credit losses.
Loan and lease 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. FAS
No. 91, "Accounting for Nonrefundable Fees and Costs Associated with
Originating Loans," 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
adoption of FAS No. 91 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
Effective January 1, 1993, the Company adopted FAS No. 109,
"Accounting for Income Taxes." There are two components of the income
tax provision, current and deferred. The current income tax provisions
approximate taxes to be paid or refunded for the applicable period.
Deferred tax expense or benefit is recognized for the change in
deferred tax liabilities or assets between periods.
Deferred tax liabilities or assets are recognized on the
temporary differences between the bases of assets and liabilities as
measured by the tax laws and their bases as reported in the financial
statements. Recognition of deferred tax assets is based on
management's belief that it is more likely than not that the tax
benefit associated with certain temporary differences, operating loss
carryforwards, and tax credits will be realized. A valuation allowance
is recorded for those deferred tax items for which it is more likely
than not that realization will not occur.
Prior to January 1, 1993, the Company accounted for income taxes
in accordance with Accounting Principles Board Opinion (APB) No. 11,
"Accounting For Income Taxes." Under APB 11, the income tax effects of
transactions were recognized in the years in which they entered into
the determination of reported income, regardless of when they were
recognized for tax return purposes. When income and expenses were
recognized in different periods for tax purposes, applicable deferred
taxes were provided in the financial statements.
Interest, Currency, and Financial Futures Contracts
In the normal course of business in meeting the investment and
financing needs of its customers and managing its own exposure to
fluctuations in interest rates, the Company is a party to various
interest rate, foreign currency, and financial futures contracts.
From time to time, interest rate swaps are used to modify the
interest sensitivity position inherent in the repricing characteristics
of specific assets or liabilities. The net interest received or paid
on the interest rate swaps is accounted for as an adjustment to the
interest income or interest expense on the assets or liabilities,
respectively, that the swap was intended to modify.
The Company enters into forward foreign currency contracts to
assist customers with their foreign currency needs related to foreign
manufacturing 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 noninterest income." Gains and
losses associated with futures contracts, entered into as trading
positions, are marked to market and recognized currently in "Other
noninterest income."
2 - Acquisitions
Purchase Transactions
During 1994 and 1993, a total of five business combinations
accounted for as purchases were completed. The following table
presents information regarding these purchase transactions.
Acquisition Company Acquired Company Assets
Date Location Abbreviation Acquired Cash Paid
- ----------- --------------------------------------- --------------- ------------ -------------
(In thousands)
1994
- ----
May 26 Equity Bank for Savings, F.A.
Oklahoma City, OK . . . . . . . . . . "Equity" $ 491,506 $ 90,720
May 31 Emprise Bank, National Association
Hutchinson, KS. . . . . . . . . . . . "Emprise" 258,731 31,206
---------- --------
750,237 121,926
---------- --------
1993
- ----
May 14 Guaranty Bancorporation
Tulsa, OK . . . . . . . . . . . . . . "GB" 82,606 4,386
May 28 Bancshares of Woodward, Inc.
Woodward and Waukomis, OK . . . . . . "BOW" 130,192 17,859
May 28 F&M Bank Services, Inc.
Derby, KS . . . . . . . . . . . . . . "FBS" 61,565 8,068
---------- --------
274,363 30,313
---------- --------
$1,024,600 $152,239
========== ========
Supplementary information regarding the cash paid in these
purchase transactions is presented in the following table.
1994 1993
-------- --------
(In thousands)
Fair value of assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . $750,237 $274,363
Fair value of liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . (660,742) (253,378)
Cost in excess of net assets acquired . . . . . . . . . . . . . . . . . . . . . 32,431 9,328
-------- --------
Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,926 30,313
Cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,108 27,845
-------- --------
Net cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 87,818 $ 2,468
======== ========
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
identifiable 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 1994 and 1993, had the purchase transactions
occurred at the beginning of these years, was not material.
On November 10, 1994 the Company completed the sale of three
Equity branches which were identified at the time of acquisition as
potential sale targets. In these transactions the Company transferred
deposit liabilities and sold loans secured by these deposit liabilities
and bank premises. The sales price of these branches was utilized in
determining the fair value of assets and liabilities acquired in the
Equity business combination. The following table presents information
regarding these sales.
1994
------------
(In thousands)
Fair value of assets sold . . . . . . . . . . . . . $ (485)
Fair value of liabilities transferred . . . . . . . 38,048
Reduction of cost in excess of net assets acquired. (1,292)
--------
Net cash paid . . . . . . . . . . . . . . . . . . . $ 36,271
========
A fourth Equity branch was sold on January 6, 1995. The
following table presents information regarding this sale.
1995
------------
(In thousands)
Fair value of assets sold . . . . . . . . . . . . . . . $ (81)
Fair value of liabilities transferred . . . . . . . . . 6,629
Reduction of cost in excess of net assets acquired. . . . (132)
--------
Net cash paid . . . . . . . . . . . . . . . . . . . . . . $ 6,416
========
Poolings of Interests
On June 30, 1994, the Company issued 590,710 shares to acquire
First Dodge City Bancshares, Inc. ("First Dodge") in a business
combination accounted for as a pooling of interests. Total assets
acquired amounted to $144,999,000. The consolidated statements for the
prior periods have been restated as if the entities had been combined
at the beginning of the periods presented. Included in "Merger and
integration costs" for 1994 is a charge of $1,124,000 to conform the
amortization of intangible assets of First Dodge to the Company's
accounting policies. Other adjustments to conform the accounting
policies of First Dodge to the accounting policies of the Company were
immaterial. Also on June 30, 1994, the Company issued 70,300 shares
and paid $36,000 in cash to acquire the minority interests of two of
First Dodge's subsidiaries. As prescribed by APB 16, the acquisitions
of the minority interests were accounted for as purchases. The fair
market value of shares issued and cash paid totaled $2,118,000, which
exceeded the net assets acquired by $951,000.
The effect of the 1994 pooling of interests on previously
reported selected operating results is as follows:
Three Months Ended Year Ended
March 31, December 31,
----------------------
1994 1993 1992
------------------ -------- --------
(Dollars in thousands, except per share data)
Interest income:
Company. . . . . . . . . . . . . . . . . . . . . . $104,424 $433,467 $427,119
Pooled company . . . . . . . . . . . . . . . . . . 2,531 10,446 11,769
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $106,955 $443,913 $438,888
======== ======== ========
Net interest income:
Company. . . . . . . . . . . . . . . . . . . . . . $ 62,797 $257,966 $234,722
Pooled company . . . . . . . . . . . . . . . . . . 1,576 6,445 6,635
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 64,373 $264,411 $241,357
======== ======== ========
Net income:
Company. . . . . . . . . . . . . . . . . . . . . . $ 20,201 $ 75,691 $ 63,306
Pooled company . . . . . . . . . . . . . . . . . . (1,672) 1,601 1,893
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 18,529 $ 77,292 $ 65,199
======== ======== ========
Net income applicable to common and
common-equivalent shares:
Company. . . . . . . . . . . . . . . . . . . . . . $ 18,451 $ 68,691 $ 57,355
Pooled company . . . . . . . . . . . . . . . . . . (1,672) 1,601 1,893
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 16,779 $ 70,292 $ 59,248
======== ======== ========
Primary earnings per common share:
Company. . . . . . . . . . . . . . . . . . . . . . $ .70 $ 2.67 $ 2.27
Pooled company . . . . . . . . . . . . . . . . . . (.08) -- .02
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ .62 $ 2.67 $ 2.29
======== ======== ========
Fully diluted earnings per common share:
Company. . . . . . . . . . . . . . . . . . . . . . $ .68 $ 2.54 $ 2.19
Pooled company . . . . . . . . . . . . . . . . . . (.08) .01 .02
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ .60 $ 2.55 $ 2.21
======== ======== ========
The following table presents the five 1993 business combinations
accounted for as poolings of interests.
Company Acquired/ Company Assets Shares
Date Location Abbreviation Acquired Issued
- ------------------ ------------------------------------- ------------ ------------ --------
(In thousands)
February 12, 1993 Southgate Banking Corporation, "SBC" $ 62,628 451,310
Prairie Village, KS
May 28, 1993 Nichols Hills Bancorporation, Inc., "NHB" 97,869 469,906
Nichols Hills (Oklahoma City), OK
September 17, 1993 Commercial Landmark Corporation, "CLC" 465,060 1,874,812
Muskogee, OK
December 3, 1993 Western National Bancorporation, Inc., "WNB" 206,288 1,110,695
Tulsa, OK
December 10, 1993 Ponca Bancshares, Inc., "PBI" 117,275 478,395
-------- ---------
Ponca City, OK
$949,120 4,385,118
======== =========
In connection with the WNB transaction, the Company issued an
additional 108,748 shares to acquire the minority interest of Western
National Bank of Tulsa. This acquisition of a minority interest was
accounted for as a purchase as prescribed by APB 16. The fair market
value of shares issued totaled $3,099,000, which exceeded the net
assets acquired by $1,673,000.
Pending Acquisitions
Pending acquisitions as of December 31, 1994 are summarized in
the table below.
Assets of Bank
Anticipated Subsidiary at Number of
Closing Company Acquired/ Company December 31, 1994 Cash Shares Accounting
Date Location Abbreviation (Unaudited) Paid Issued Method
- ---------- ---------------------------------- ------------ ----------------- ---------- --------- ----------
(In thousands)
1995
- ----
January 6 Oklahoma Savings, Inc.
Stillwater, OK . . . . . . . . . . "OSI" $ 95,503 $ -- 368,981 Purchase
January 27 Standard Bancorporation, Inc.
Independence, MO . . . . . . . . . "SBI" 85,190 -- 315,000 Pooling
February 3 Blackwell Security Bancshares, Inc.
Blackwell, OK. . . . . . . . . . . "BSB" 46,851 8,197 -- Purchase
-------- ------ -------
$227,544 $8,197 683,981
======== ====== =======
The effect of the pending SBI acquisition on selected operating
results if it had been consummated prior to December 31, 1994 is as
follows:
Year Ended December 31,
------------------------------------------
1994 1993 1992
-------- -------- --------
(Dollars in thousands, except per share amounts)
Interest income:
Company. . . . . . . . . . . . . . . . . . . . . . $483,474 $443,913 $438,888
SBI. . . . . . . . . . . . . . . . . . . . . . . . 5,789 5,552 5,807
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $489,263 $449,465 $444,695
======== ======== ========
Net interest income:
Company. . . . . . . . . . . . . . . . . . . . . . $276,920 $264,411 $241,357
SBI. . . . . . . . . . . . . . . . . . . . . . . . 3,733 3,649 3,485
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $280,653 $268,060 $244,842
======== ======== ========
Net income:
Company. . . . . . . . . . . . . . . . . . . . . . $ 83,122 $ 77,292 $ 65,199
SBI. . . . . . . . . . . . . . . . . . . . . . . . 2 817 717
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 83,124 $ 78,109 $ 65,916
======== ======== ========
Net income applicable to common and
common-equivalent shares:
Company. . . . . . . . . . . . . . . . . . . . . . $ 76,122 $ 70,292 $ 59,248
SBI. . . . . . . . . . . . . . . . . . . . . . . . 2 817 717
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 76,124 $ 71,109 $ 59,965
======== ======== ========
Primary earnings per common share:
Company. . . . . . . . . . . . . . . . . . . . . . $ 2.83 $ 2.67 $ 2.29
SBI. . . . . . . . . . . . . . . . . . . . . . . . (.03) -- --
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 2.80 $ 2.67 $ 2.29
======== ======== ========
Fully diluted earnings per common share:
Company. . . . . . . . . . . . . . . . . . . . . . $ 2.74 $ 2.55 $ 2.21
SBI. . . . . . . . . . . . . . . . . . . . . . . . (.03) -- --
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 2.71 $ 2.55 $ 2.21
======== ======== ========
3 - Assumption of Deposits
On April 2, 1993, $99,399,000 of deposits and other liabilities
were assumed by the Kansas bank subsidiary from a failed bank in
Mission, Kansas. A premium of $1,141,000 was paid to the Federal
Deposit Insurance Corporation ("FDIC") to assume these deposits.
4 - 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 $145,158,000 for 1994 and $118,485,000 for 1993. Cash
and due from banks also includes checks in process of collection and
balances maintained at correspondent banks for services rendered.
5 - Securities
Debt securities classified as held-to-maturity are those
securities management has the positive intent and the Company has the
ability to hold until maturity. The available-for-sale securities
include marketable equity securities and those debt securities deemed
to be available-for-sale for the implementation of asset and liability
management strategies, possible liquidity needs, and other purposes.
The following table presents the amortized cost and estimated
fair value of debt securities classified as held-to-maturity and
carried at amortized cost.
Held-to-maturity
December 31, 1994 December 31, 1993
------------------------------------------ ------------------------------------------
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. $ 98,971 $ 2 $ (5,996) $ 92,977 $ 16,329 $ 155 $ (6) $ 16,478
Obligations of U.S.
government agencies
and corporations:
Mortgage-backed. . . . . 1,577,095 339 (89,622) 1,487,812 1,753,662 13,449 (12,239) 1,754,872
Other. . . . . . . . . . 262,469 33 (14,261) 248,241 4,259 106 (1) 4,364
Obligations of states and
political subdivisions. . 3,834 -- (207) 3,627 16,838 280 (76) 17,042
Other securities:
Collateralized auto
receivables . . . . . . -- -- -- -- 12,364 88 -- 12,452
Foreign debt securities. 2,050 -- (2) 2,048 2,155 5 -- 2,160
Money market mutual
funds . . . . . . . . . 195 -- -- 195 212 -- -- 212
---------- ------- --------- ---------- ---------- ------- -------- ----------
Total. . . . . . . . . $1,944,614 $ 374 $(110,088) $1,834,900 $1,805,819 $14,083 $(12,322) $1,807,580
========== ======= ========= ========== ========== ======= ======== ==========
The amortized cost and estimated fair value of the held-to-
maturity debt securities at December 31, 1994 are shown below by
contractual maturity.
December 31, 1994
-------------------------------
Estimated
Amortized Fair
Cost Value
---------- ----------
(In thousands)
Due in one year or less . . . . . . . . . . . . . . $ 1,961 $ 1,891
Due after one year through five years . . . . . . . 363,533 343,173
Due after five years through ten years. . . . . . . 2,025 2,024
---------- ----------
367,519 347,088
Mortgage-backed securities. . . . . . . . . . . . . 1,577,095 1,487,812
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . $1,944,614 $1,834,900
========== ==========
The following table presents the amortized cost and estimated
fair value of securities classified as available-for-sale and carried
at estimated fair value.
Available-for-sale
December 31, 1994 December 31, 1993
------------------------------------------ ------------------------------------------
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. $283,759 $ 102 $(16,869) $266,992 $ 297,891 $10,518 $ (78) $ 308,331
Obligations of U.S.
government agencies
and corporations:
Mortgage-backed. . . . . 136,482 1,190 (7,634) 130,038 215,889 4,530 (1,571) 218,848
Other. . . . . . . . . . 282,737 25 (13,890) 268,872 299,900 7,179 (803) 306,276
Obligations of states and
political subdivisions. . 167,811 7,883 (888) 174,806 222,130 21,266 (463) 242,933
Collateralized credit
card receivables. . . . . 62,579 -- (4,061) 58,518 -- -- -- --
Corporate notes and bonds. 41,208 19 (2,567) 38,660 39,567 710 (40) 40,237
-------- ------- -------- -------- ---------- ------- -------- ----------
Total debt securities. . 974,576 9,219 (45,909) 937,886 1,075,377 44,203 (2,955) 1,116,625
Equity securities. . . . . 1,290 68 (164) 1,194 1,172 -- (21) 1,151
-------- ------- -------- -------- ---------- ------- -------- ----------
Total. . . . . . . . . $975,866 $ 9,287 $(46,073) $939,080 $1,076,549 $44,203 $ (2,976) $1,117,776
======== ======= ======== ======== ========== ======= ======== ==========
The amortized cost and estimated fair value of the available-for-
sale debt securities at December 31, 1994 are shown below by
contractual maturity.
December 31, 1994
-------------------------------
Estimated
Amortized Fair
Cost Value
---------- ----------
(In thousands)
Due in one year or less . . . . . . . . . . . . . . $ 89,189 $ 90,036
Due after one year through five years . . . . . . . 636,866 606,205
Due after five years through ten years. . . . . . . 94,837 93,582
Due after ten years . . . . . . . . . . . . . . . . 17,202 18,025
-------- --------
838,094 807,848
Mortgage-backed securities. . . . . . . . . . . . . 136,482 130,038
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . $974,576 $937,886
======== ========
The fair values of 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. 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 following table presents equity securities which do not have
a readily determinable fair value and are carried at cost.
Other securities
December 31,
-------------------------------
1994 1993
---------- ----------
(In thousands)
Federal Home Loan Bank stock. . . . . . . . . . . . $ 37,645 $ 24,911
Federal Reserve Bank stock. . . . . . . . . . . . . 14,242 12,637
Other equity securities . . . . . . . . . . . . . . 1,549 1,559
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . $ 53,436 $ 39,107
======== ========
The book value of securities pledged to secure public deposits
and for other purposes, as required or permitted by law, aggregated
$1,622,605,000 at December 31, 1994.
The sales price, gains, and losses realized from the sale of
available-for-sale investment securities are detailed in the following
table. This table does not include proceeds from nor realized gains
and losses attributable to prepayments of available-for-sale
securities.
1994
-----------
(In thousands)
Sales price of available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . $603,458
========
Gross realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,485
Gross realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,931
--------
Net gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,554
========
The following table presents the sales price, gains, and losses
realized from the sale of securities, prior to the adoption of FAS 115
on December 31, 1993. This table does not include proceeds from nor
realized gains and losses attributable to prepayments of securities.
1993 1992
------------ ------------
(In thousands)
Sales price of securities . . . . . . . . . . . . . . . . . . . . . . . . $ 14,443 $ 81,680
======== ========
Gross realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . $ 230 $ 2,695
Gross realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . 43 49
-------- --------
Net gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 187 $ 2,646
======== ========
Not included in the table above are $299,685,000 of 1992 sales of
short-term Treasury Bills related to the restructuring of the
securities portfolio obtained with the assumption of deposits from a
Tulsa, Oklahoma savings and loan association ("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.
On February 23, 1995, the Company sold approximately $424,000,000
of fixed-rate debt securities classified as available-for-sale,
resulting in a gross realized loss of $22,400,000. An income tax
benefit of approximately $8,000,000 will be recorded in connection with
these securities transactions. The debt securities sold consisted
primarily of U.S. Treasury obligations and obligations of U.S.
government agencies.
6 - Loans and Leases
The composition of the loan and lease portfolio was as follows:
December 31, 1994 December 31, 1993
--------------------- ---------------------
Amount Percent Amount Percent
----------- --------- ----------- ---------
(Dollars in thousands)
Commercial:
Commercial and industrial . . . . . . . . . . . . . . . . . . $1,018,753 25.4% $ 889,024 26.5%
Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . 227,300 5.7 196,029 5.8
Energy. . . . . . . . . . . . . . . . . . . . . . . . . . . . 129,742 3.2 77,962 2.3
Bank stock. . . . . . . . . . . . . . . . . . . . . . . . . . 25,173 .6 46,453 1.4
Real estate:
Construction. . . . . . . . . . . . . . . . . . . . . . . . 133,853 3.3 92,636 2.8
Permanent commercial real estate and other. . . . . . . . . 688,779 17.2 513,270 15.3
Lease financing . . . . . . . . . . . . . . . . . . . . . . . 86,098 2.2 40,195 1.2
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,546 .7 35,964 1.1
---------- ------ ---------- ------
Total commercial loans. . . . . . . . . . . . . . . . . . . 2,337,244 58.3 1,891,533 56.4
---------- ------ ---------- ------
Consumer:
Secured by 1-4 family residences, less unearned discount. . . 979,847 24.4 786,637 23.5
Residential mortgage loans held for sale. . . . . . . . . . . 206 -- 110,132 3.3
Consumer, less unearned discount. . . . . . . . . . . . . . . 476,034 11.9 414,635 12.4
Credit card . . . . . . . . . . . . . . . . . . . . . . . . . 130,098 3.3 93,007 2.8
Educational . . . . . . . . . . . . . . . . . . . . . . . . . 82,238 2.1 55,968 1.6
---------- ------ ---------- ------
Total consumer loans. . . . . . . . . . . . . . . . . . . . 1,668,423 41.7 1,460,379 43.6
---------- ------ ---------- ------
Total loans and leases. . . . . . . . . . . . . . . . . . $4,005,667 100.0% $3,351,912 100.0%
========== ====== ========== ======
The Company manages exposure to credit risk through loan
portfolio diversification by customer and market, as well as by type.
Although the aggregate legal lending limits of the Company's bank
subsidiaries totaled $84,958,000 at December 31, 1994, the Company had
no single lending relationship with an aggregate loan amount
outstanding in excess of $20,000,000. The Company principally lends to
businesses and individuals in Kansas, Oklahoma, and the contiguous
states and to Kansas and Oklahoma based customers that do business in
other states.
Nonaccrual loans and troubled debt restructurings are summarized
below:
December 31,
---------------------
1994 1993
-------- --------
(In thousands)
Nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . $29,097 $34,040
Troubled debt restructurings . . . . . . . . . . . . . . . . . . . . 503 290
------- -------
$29,600 $34,330
======= =======
The effect of nonaccrual loans and troubled debt restructurings
on interest income was:
Year Ended December 31,
----------------------------
1994 1993 1992
------ ------ ------
(In thousands)
Interest income which would have been
recorded pursuant to the original terms . . . . . . . . . . $5,098 $4,060 $4,588
====== ====== ======
Interest income recorded . . . . . . . . . . . . . . . . . . $1,384 $1,504 $1,176
====== ====== ======
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 a
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:
1994
--------------
(In thousands)
Loans outstanding at December 31, 1993. . . . . . . . . . . . . . . . . . . $ 78,815
New loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,092
Repayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (123,700)
Other changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,182)
--------
Loans outstanding at December 31, 1994. . . . . . . . . . . . . . . . . . . $ 74,025
========
Other changes include loans outstanding at December 31, 1993 to
directors elected or retired in 1994, loans purchased or sold during
the current year, and any other loans outstanding at December 31, 1993
to related individuals or entities not considered to be related parties
at December 31, 1994.
7 - Allowance for Credit Losses
Changes in the allowance for credit losses are as follows:
1994 1993 1992
------- ------- -------
(In thousands)
Balance at January 1, as previously reported . . . . . . . . . . . . . . . . $66,368 $73,055 $70,669
Adjustment for pooling of interests. . . . . . . . . . . . . . . . . . . . 1,249 1,340 1,334
------- ------- -------
Balance at January 1, as restated. . . . . . . . . . . . . . . . . . . . . . 67,617 74,395 72,003
Allowance for credit losses of purchased banks . . . . . . . . . . . . . . 5,449 3,266 1,739
Allowance for purchased loans. . . . . . . . . . . . . . . . . . . . . . . -- -- 3,424
------- ------- -------
73,066 77,661 77,166
Provisions charged to operating expense. . . . . . . . . . . . . . . . . . 275 6,965 21,358
Recoveries on loans and leases previously charged off. . . . . . . . . . . 12,550 9,864 7,313
Loans and leases charged off . . . . . . . . . . . . . . . . . . . . . . . (14,017) (26,873) (31,442)
------- ------- -------
Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . $71,874 $67,617 $74,395
======= ======= =======
8 - Bank Premises and Equipment
A summary of land, buildings, and equipment appears below:
December 31, 1994 December 31, 1993
------------------------------- --------------------------------
Accumulated Book Accumulated Book
Cost Depreciation Value Cost Depreciation Value
-------- ------------ ------- -------- ------------ --------
(In thousands)
Land . . . . . . . . . . . . . . . . . . $ 25,892 $ -- $ 25,892 $ 23,313 $ -- $ 23,313
Buildings and leasehold improvements . . 171,159 77,588 93,571 156,795 72,724 84,071
Furniture and equipment. . . . . . . . . 120,406 83,551 36,855 112,807 74,472 38,335
-------- -------- -------- -------- -------- --------
Total. . . . . . . . . . . . . . . . $317,457 $161,139 $156,318 $292,915 $147,196 $145,719
======== ======== ======== ======== ======== ========
Depreciation expense amounted to $17,634,000 in 1994, $16,029,000
in 1993, and $14,803,000 in 1992.
9 - Intangible Assets
Included in intangible assets are the following items:
December 31, 1994 December 31, 1993
------------------------------- --------------------------------
Accumulated Book Accumulated Book
Cost Amortization Value Cost Amortization Value
-------- ------------ ------- -------- ------------- -------
(In thousands)
Cost in excess of net assets acquired . . $ 96,795 $24,813 $71,982 $ 68,250 $19,249 $49,001
Value of core deposits assumed. . . . . . 29,180 16,453 12,727 29,184 12,726 16,458
Purchased credit card relationships . . . 9,300 1,049 8,251 -- -- --
Purchased mortgage servicing rights . . . 7,886 5,240 2,646 5,749 4,248 1,501
-------- ------- ------- -------- ------- -------
$143,161 $47,555 $95,606 $103,183 $36,223 $66,960
======== ======= ======= ======== ======= =======
The cost of purchased entities in excess of the 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, purchased
credit card relationships, and the purchased mortgage servicing rights
are being amortized using accelerated methods over the estimated
periods benefitted, not exceeding ten years.
10 - Deposits
The book values of deposits are presented below:
December 31,
-----------------------------
1994 1993
------------ ------------
(In thousands)
Noninterest-bearing deposits . . . . . . . . . . . . . . . . . . . . . $1,032,913 $ 977,944
Interest-bearing deposits:
Interest-bearing checking deposits . . . . . . . . . . . . . . . . . 959,755 937,937
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 1,123,208 1,261,008
Time deposits under $100,000 . . . . . . . . . . . . . . . . . . . . 2,127,815 1,896,743
Time deposits of $100,000 or more . . . . . . . . . . . . . . . . . . 403,457 362,931
---------- ----------
Total interest-bearing deposits . . . . . . . . . . . . . . . . . . 4,614,235 4,458,619
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,647,148 $5,436,563
========== ==========
11 - Purchased Funds, Borrowings, and Long-Term Debt
The following schedules summarize, by category, purchased funds,
borrowings, and long-term debt.
Federal funds purchased and securities sold
under agreements to repurchase
December 31, 1994 December 31, 1993
-------------------- ---------------------
Amount Rate Amount Rate
-------- -------- --------- --------
(Dollars in thousands)
Federal funds purchased . . . . . . . . . . . . . . . . . . . . $391,970 5.85% $367,726 2.96%
Securities sold under agreements to repurchase. . . . . . . . . 541,736 5.66 123,901 3.27
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $933,706 5.74 $491,627 3.04
======== ========
Federal funds purchased and securities sold under agreements to
repurchase generally mature daily or on demand.
Federal Home Loan Bank borrowings
December 31, 1994 December 31, 1993
-------------------- ---------------------
Amount Rate Amount Rate
-------- -------- --------- --------
(Dollars in thousands)
Federal Home Loan Bank borrowings . . . . . . . . . . . . . . . $441,097 5.72% $250,000 4.01%
======== ========
At December 31, 1994, Federal Home Loan Bank ("FHLB") borrowings
included $291,800,000 with an average rate of 5.88% that matures in
1995. The remaining balance matures in 1996 ($100,000,000), 1997
($24,297,000) and 1998 ($25,000,000).
Other borrowings
December 31, 1994 December 31, 1993
-------------------- ---------------------
Amount Rate Amount Rate
-------- -------- --------- --------
(Dollars in thousands)
Treasury tax and loan . . . . . . . . . . . . . . . . . . . . . $23,001 5.20% $23,002 2.75%
Note payable. . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 6.19 -- --
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $43,001 5.66 $23,002 2.75
======= =======
Treasury tax and loan borrowings generally mature daily or on
demand.
The $20,000,000 note payable at December 31, 1994 was borrowed
under the Company's committed line of credit from a correspondent bank.
Pursuant to this line of credit, the Company was required to maintain
capital ratios above the regulatory "Well Capitalized" standard and the
ratio of nonperforming assets to total loans plus other real estate
owned could not exceed 4.0%. At December 31, 1994 the Company was in
compliance with these covenants. This committed line of credit was
replaced by two new Credit Agreements, entered into on January 3, 1995.
The prior note was paid off and $20,000,000 was borrowed under the new
agreements. Under the new Credit Agreements, the Company may borrow up
to $100,000,000 on a revolving basis at any time prior to January 3,
1996.
Amounts borrowed under the Credit Agreements may have maturities
not to exceed 90 days. Interest rates based on, at the Company's
option, the lenders' published "reference rate" or rates tied to the
London Interbank Offered Rate exist. A facility fee is charged on
these commitments. The Company is required to maintain consolidated
stockholders' equity at a certain level and maintain specific ratios
related to leverage, risk-based capital, and nonperforming assets.
Long-term debt
December 31, 1994 December 31, 1993
----------------- -----------------
Amount Rate Amount Rate
---------- ------ ---------- ------
(Dollars in thousands)
Term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,375 8.60% $13,125 8.60%
Mortgage indebtedness and other notes payable . . . . . . . . . . 310 10.85 6,926 5.83
Subordinated debentures . . . . . . . . . . . . . . . . . . . . . -- -- 232 6.38
------ -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,685 8.75 $20,283 7.63
====== =======
The parent company's term loan with an unaffiliated bank requires
semiannual installments of $4,375,000, due the last day of March and
September through March 1995. The Company is required to 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
maintain a level of consolidated tangible net worth exceeding
consolidated funded debt. At December 31, 1994 the Company was in
compliance with all of the terms of the agreement.
The mortgage indebtedness and other notes payable of $6,926,000
in 1993 includes $6,063,000 from the current year pooling-of-interests
acquisition. The acquired balance was paid off at the acquisition
date. Certain buildings and real estate have been pledged as
collateral on mortgage indebtedness and other notes payable.
Maturities of this long-term debt for years subsequent to December 31,
1994, are as follows:
Years ended December 31, (In thousands)
------------------------ --------------
1995 . . . . . . . . . . . . . $ 75
1996 . . . . . . . . . . . . . 29
1997 . . . . . . . . . . . . . 32
1998 . . . . . . . . . . . . . 14
1999 . . . . . . . . . . . . . 2
Thereafter . . . . . . . . . . 158
----
Total . . . . . . . . . . . . $310
====
The subordinated debentures were also obligations of a pooled
company. A variable interest rate based on the base rate per annum of
Commerce Bank, Kansas City, MO was required on the $188,000 of
debentures due July 31, 1994. The remaining $44,000 of debentures bore
a fixed interest rate of 8% and were due April 28, 1997. These
debentures were redeemed by the Company in 1994.
12 - Preferred Stock
December 31,
-----------------------------
1994 1993
------------- -------------
(Dollars in thousands)
Class A cumulative convertible preferred stock,
par value $100 per share
Authorized: 250,000 shares
Issued: 250,000 shares (at liquidation preference) . . . . . . . $100,000 $100,000
Class B preferred stock, no par value
Authorized: 5,000,000 shares . . . . . . . . . . . . . . . . . . -- --
-------- --------
$100,000 $100,000
======== ========
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.
13 - Merger and Integration Costs
The components of merger and integration costs related to the
1994, 1993, and 1992 pooling-of-interests transactions are detailed in
the following schedule.
Year Ended December 31,
----------------------------------
1994 1993 1992
-------- -------- --------
(In thousands)
Premises and equipment writedowns . . . . . . . . . . . . . . . $ 177 $1,252 $ 696
Severance and other compensation. . . . . . . . . . . . . . . . 821 2,970 886
Systems conversion costs. . . . . . . . . . . . . . . . . . . . 269 1,579 1,940
Legal, accounting, and other transaction costs. . . . . . . . . 306 829 522
Conform intangible asset amortization policies. . . . . . . . . 1,124 -- --
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 1,004 754
------ ------ ------
$2,847 $7,634 $4,798
====== ====== ======
14 - Income Taxes
Effective January 1, 1993, the Company changed its method of
accounting for income taxes from the deferred method to the liability
method required by FAS No. 109, "Accounting for Income Taxes." Shown
separately in the 1993 Statement of Income is the cumulative effect of
adopting FAS No. 109 as of January 1, 1993 which increased net income
by $10,582,000. Two pooled companies elected early adoption of FAS No.
109 effective January 1, 1992, resulting in a $2,373,000 increase in
1992 earnings.
At December 31, 1994, the Company had net operating loss and
general business credit carryforwards of $61,446,000 and $330,000,
respectively, which can be carried forward to reduce future federal
income taxes payable. These carryforwards are principally related to
previous tax losses of banks and S&Ls acquired in 1994, 1993, and 1992.
Utilization of the carryforwards is limited by tax law to the future
earnings of and other limits on the use of tax attributes of acquired
companies. Net operating loss carryforwards expire in years 2000
through 2007 and general business credit carryforwards expire in years
1995 through 2002 if not utilized. For financial reporting purposes,
a valuation allowance of $12,608,000 has been recognized to offset the
deferred tax assets related to these carryforwards and other deferred
tax assets whose realization is uncertain. If realized, the tax
benefit of $11,794,000 associated with certain net operating loss
carryforwards to which this valuation allowance relates will be applied
to reduce "cost in excess of net assets acquired" recorded in
connection with acquisitions accounted for as purchases. The net
change in the valuation allowance for deferred tax assets for 1994 was
a decrease of $603,000.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax
liabilities and assets as of December 31, 1994 and December 31, 1993
are as follows:
December 31,
-----------------------------
1994 1993
------------ ------------
(In thousands)
Deferred tax assets:
Net operating loss carryforwards. . . . . . . . . . . . . . . . . . . $29,575 $ 8,159
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . 22,518 18,954
Securities fair value adjustment. . . . . . . . . . . . . . . . . . . 14,346 --
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . 2,584 2,043
Core deposit amortization . . . . . . . . . . . . . . . . . . . . . . 2,163 1,857
Write-down of other real estate owned . . . . . . . . . . . . . . . . 1,808 5,446
Merger and integration costs accrual. . . . . . . . . . . . . . . . . 1,175 1,132
Pension contribution. . . . . . . . . . . . . . . . . . . . . . . . . 1,093 1,018
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 345
------- -------
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . 75,262 38,954
Valuation allowance for deferred tax assets . . . . . . . . . . . . . (12,608) (13,211)
------- -------
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . 62,654 25,743
------- -------
Deferred tax liabilities:
Securities fair value adjustment. . . . . . . . . . . . . . . . . . . -- (16,078)
Purchase accounting adjustment. . . . . . . . . . . . . . . . . . . . (6,492) (4,173)
Discount accretion. . . . . . . . . . . . . . . . . . . . . . . . . . (4,518) (3,145)
Leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,798) (2,121)
State taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,184) (2,343)
Depreciation expense. . . . . . . . . . . . . . . . . . . . . . . . . (2,535) (1,825)
Loan origination fees . . . . . . . . . . . . . . . . . . . . . . . . (1,226) --
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (735) --
------- -------
Total deferred tax liabilities. . . . . . . . . . . . . . . . . . . (22,488) (29,685)
------- -------
Net deferred tax asset (liability). . . . . . . . . . . . . . . . . $40,166 $(3,942)
======= =======
Significant components of the provision for income taxes are as
follows:
Liability Liability Deferred
Method Method Method
------------ ------------ ------------
December 31, December 31, December 31,
1994 1993 1992
------------ ------------ ------------
(In thousands)
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . $29,535 $24,297 $17,099
State . . . . . . . . . . . . . . . . . . . . . . . . . . 4,915 4,004 3,447
------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . 34,450 28,301 20,546
------- ------- -------
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . 7,123 (5,850) (239)
State . . . . . . . . . . . . . . . . . . . . . . . . . . (650) 225 (759)
------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . 6,473 (5,625) (998)
------- ------- -------
Total income tax expense. . . . . . . . . . . . . . . $40,923 $22,676 $19,548
======= ======= =======
Tax effects of investment securities transactions included in the
above amounts are $1,271,000 in 1994, $520,000 in 1993, and $581,000 in
1992.
The components of the provision for deferred income taxes for the
period ended December 31, 1992 are as follows:
December 31,
1992
------------
(In thousands)
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,547)
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (944)
Write-down of other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . . . . 932
Bond discount accretion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Leasing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (385)
State taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318
-------
Provision for deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (998)
=======
The effective income tax rates differ from the federal statutory
rates for the reasons shown in the following table.
Liability Method Liability Method Deferred Method
------------------- ------------------- -------------------
December 31, 1994 December 31, 1993 December 31, 1992
------------------- ------------------- -------------------
Amount Rate Amount Rate Amount Rate
--------- -------- --------- -------- --------- --------
(Dollars in thousands)
Income tax expense at federal statutory rate . . . $43,416 35.0% $31,326 35.0% $28,031 34.0%
Tax-preferred income on obligations of states,
political subdivisions, and U.S. possessions. . . (5,695) (4.6) (6,552) (7.3) (7,080) (8.6)
Goodwill and purchase accounting amortization. . . 1,027 .8 1,271 1.4 986 1.2
State taxes, net of federal income tax benefit . . 2,697 2.2 2,737 3.1 1,693 2.1
General business credit. . . . . . . . . . . . . . -- -- -- -- (232) (.3)
Benefit of net operating losses and
alternative minimum tax credits . . . . . . . . . (927) (.7) (4,090) (4.6) (5,208) (6.3)
Other, net . . . . . . . . . . . . . . . . . . . . 405 .3 (2,016) (2.3) 1,358 1.6
------- ---- ------- ---- ------- -----
Actual income tax expense. . . . . . . . . . . $40,923 33.0% $22,676 25.3% $19,548 23.7%
======= ==== ======= ==== ======= ====
15 - 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, 1994 December 31, 1993
------------------------- -------------------------
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 . . . . . . . . . . . . . . . . $(19,360) $ (838) $(20,425) $ (737)
======== ======= ======== =======
Accumulated benefit obligation. . . . . . . . . . . . . . $(20,765) $ (915) $(21,695) $ (799)
======== ======= ======== =======
Projected benefit obligation. . . . . . . . . . . . . . . $(27,223) $(1,120) $(28,234) $(1,169)
Plan assets, at fair value. . . . . . . . . . . . . . . . . 20,375 -- 20,086 --
-------- ------- -------- -------
Funded status . . . . . . . . . . . . . . . . . . . . . . . (6,848) (1,120) (8,148) (1,169)
Prior service benefit not yet recognized in periodic
pension cost, being amortized over 10 years. . . . . . . . (1,311) (7) (1,641) (1)
Unrecognized net (asset) obligation from date of
initial application, being amortized over 15 years . . . . (2,181) 89 (2,541) 104
Unrecognized net loss from past experience different
from that assumed and effects of changes in assumptions. . 8,525 201 10,499 378
-------- ------- -------- -------
Accrued pension cost included in
consolidated statements of condition . . . . . . . . . . $ (1,815) $ (837) $ (1,831) $ (688)
======== ======= ======== =======
Effective January 1, 1994, the pension plan was amended to reduce
the pension benefits by approximately 10%. Both the projected benefit
obligation and the prior service benefit reflected this change at
December 31, 1993. The accumulated benefit obligation at December 31,
1993 was not affected by this plan amendment.
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. During 1994, the trust's investments in
commingled funds for qualified employee benefit accounts were converted
to the Funds IV equity and bond mutual funds. 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,
----------------------------------
1994 1993 1992
-------- -------- --------
(In thousands)
Service cost-benefits earned during the year. . . . . . . . . . $2,968 $2,329 $1,441
Interest cost on the projected benefit obligation . . . . . . . 1,891 1,579 1,414
Actual (return) loss on plan assets . . . . . . . . . . . . . . 419 (2,119) (1,397)
Net amortization and deferrals. . . . . . . . . . . . . . . . . (2,167) 691 (314)
------ ------ ------
Net periodic pension cost . . . . . . . . . . . . . . . . . . $3,111 $2,480 $1,144
====== ====== ======
Assumptions used in the accounting include:
As of December 31,
------------------------------------
1994 1993 1992
-------- -------- --------
Discount rates. . . . . . . . . . . . . . . . . . . . . . . . . 8.00% 7.00% 7.00%
Average rates of increase in compensation levels. . . . . . . . 4.70% 4.70% 4.70%
Expected long-term rate of return on assets . . . . . . . . . . 8.75% 8.75% 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. Employees may contribute
up to an additional 11% of base salary in pre-tax dollars, but without
further employer contributions. The plan also provides for an
additional matching contribution of up to an additional 2% of the
employee's eligible compensation based on the Company's achievement of
established earnings-per-share targets. Vesting in the employer
contributions ranges from 20% with three years to 100% with seven years
of service. During 1994, employees could elect to invest in one or
more of five investment funds, in 10% increments. These funds included
a Fourth Financial Corporation common stock fund, a fixed-income fund,
an equity fund, an international equity fund, and a money market fund.
Forfeitures are used to reduce the Company's contributions. The
expense for this plan plus similar plans of pooled companies which were
merged with this plan was $2,383,000 in 1994, $1,996,000 in 1993, and
$2,111,000 in 1992. This expense includes additional matching
contributions of $1,026,000, $629,000, and $625,000 for 1994, 1993, and
1992, respectively, attributable to the achievement of performance
goals.
The restatement of prior period financial statements for the
poolings of interests resulted in the inclusion of SBC's contributory
Employee Stock Ownership Plan ("ESOP") and PBI's noncontributory ESOP.
Both plans covered substantially all employees with one year of
service. Contributions to these plans were determined by the
respective Boards of Directors of SBC and PBI. In 1993 and 1992,
expense of the plans totaled $230,000 and $247,000, respectively. The
SBC ESOP was terminated February 12, 1993 and all stock was allocated
to the participants. The effective termination date of the PBI ESOP
was January 4, 1994.
The Company does not provide medical coverage for employees
subsequent to retirement. Approximately 67 employees who retired prior
to January 1, 1995, who were between age 55 and age 65 ("Early
retirees") at retirement and who had at least ten years' service have
continued participation in the Company's health plan until age 65, but
the plan requires that the full cost of providing coverage under the
plan be paid by the covered retirees. FAS No. 106, which establishes
accounting standards for "Employers' Accounting for Postretirement
Benefits Other Than Pensions," was not adopted as it would not have a
material effect on the Company's statement of condition and operating
results.
16 - 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.
The following schedule details the shares reserved for issuance
at December 31, 1994 under each of the plans, as well as the number of
shares under option and exercisable, both also at December 31, 1994.
December 31, 1994
-----------------------------------------------------
Shares Shares
Reserved for Under Shares
Issuance Option Exercisable
------------ ------------ ------------
1981 Stock Option Plan (1) . . . . . . . . . . . . . . 148,091 80,925 62,486
1986 Stock Option Plan . . . . . . . . . . . . . . . . 800,398 766,969 158,169
1993 Stock Option Plan . . . . . . . . . . . . . . . . 996,000 523,000 5,332
--------- --------- -------
1,944,489 1,370,894 225,987
========= ========= =======
____________
(1) Options may no longer be granted under this plan.
The following table presents information regarding stock option
transactions and prices:
Shares Under Option
-------------------------------------------------------------------------
1994 1993 1992
----------------------- ----------------------- -----------------------
Price Price Price
Number Per Share Number Per Share Number Per Share
---------- ------------ --------- ------------- ---------- ------------
Balance at January 1 . . . . . . . 798,038 $17.00-30.38 684,339 $14.80-29.88 518,297 $14.80-23.50
Granted. . . . . . . . . . . . . . 685,000 26.75-31.06 299,100 27.50-30.38 248,900 22.87-29.88
Exercised. . . . . . . . . . . . . (85,305) 17.00-28.75 (172,747) 14.80-23.20 (74,858) 14.80-23.20
Terminated or canceled . . . . . . (26,839) -- (12,654) -- (8,000) --
--------- -------- --------
Balance at December 31 . . . . . . 1,370,894 17.00-31.06 798,038 17.00-30.38 684,339 14.80-29.88
========= ======== ========
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:
1994 1993 1992
---------- ---------- ----------
Shares tendered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,899 45,399 23,954
Shares issued under the stock option plans (including
reissued treasury stock). . . . . . . . . . . . . . . . . . . . . . . . 22,785 75,720 37,891
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
for employees 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 $1,894,000 and
$1,795,000 at December 31, 1994 and 1993, respectively, are reported as
a reduction of stockholders' equity.
The Fourth Financial Corporation 1993 Non-Employee Directors
Stock Option Plan (the "Directors Option Plan") was approved by
stockholders and adopted in 1993. The plan will terminate, for the
purposes of granting options, in ten years unless the plan is earlier
terminated by the Board of Directors.
The Directors Option Plan provides that each year, on the first
Monday following the Company's annual meeting of stockholders, each
non-employee director of the Company will automatically receive an
option to acquire 2,000 shares of the Company's common stock and each
non-employee director of the Company's subsidiaries will automatically
receive an option to acquire 1,000 shares of the Company's common
stock. Options issued under the plan are immediately exercisable and
will expire ten years from the date of grant. At December 31, 1994,
there were 499,700 shares reserved for issuance under the plan of which
81,700 were under option.
The following table presents information regarding stock option
transactions and prices under the Directors Option Plan:
Shares Under Option
------------------------------------------------
1994 1993
----------------------- -----------------------
Price Price
Number Per Share Number Per Share
---------- ------------ ---------- ------------
Balance at January 1. . . . . . . . . . . . . . . . . . . 43,000 $29.50 -- $ --
Granted . . . . . . . . . . . . . . . . . . . . . . . . . 44,000 27.50 44,000 29.50
Exercised . . . . . . . . . . . . . . . . . . . . . . . . (300) 27.50 -- --
Terminated or canceled. . . . . . . . . . . . . . . . . . (5,000) -- (1,000) --
------- -------
Balance at December 31. . . . . . . . . . . . . . . . . . 81,700 27.50-29.50 43,000 29.50
======= =======
Under the 1988 Employee Stock Purchase Plan, which expired in
April, 1993, and the 1993 Employee Stock Purchase Plan which replaced
it, 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, 1994, 696,247 shares were reserved for issuance, including
242,694 shares under option. No options under the plan were
exercisable at December 31, 1994. Additional data regarding the
Employee Stock Purchase Plan are as follows:
Shares Under Option
-------------------------------------------------------------------------
1994 1993 1992
----------------------- ----------------------- -----------------------
Price Price Price
Number Per Share Number Per Share Number Per Share
---------- ------------ ---------- ------------ ---------- ------------
Balance at January 1. . . . . . . 180,597 $24.81 165,078 $23.06 214,611 $16.36
Granted . . . . . . . . . . . . . 268,384 23.74 192,109 24.81 178,534 23.06
Exercised . . . . . . . . . . . . (53,753) 23.74 (71,259) 23.06 (111,612) 16.36
Terminated or canceled. . . . . . (152,534) -- (105,331) -- (116,455) --
-------- -------- --------
Balance at December 31. . . . . . 242,694 23.74 180,597 24.81 165,078 23.06
======== ======== ========
17 - Earnings Per Common Share
Earnings per common share are based on the following weighted
average numbers of shares outstanding.
1994 1993 1992
---------- ---------- ----------
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . 26,914,657 26,324,549 25,901,186
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . 30,362,932 30,355,263 29,488,679
Primary earnings per common share were computed by dividing net
income applicable to common and common-equivalent shares by the
weighted average common and common-equivalent shares outstanding during
the period (common share equivalents include the preferred stock of
pooled companies). Fully diluted earnings per common share were
computed by adjusting net income for interest expense (net of income
taxes) associated with pooled companies' convertible debt. The
adjusted net income was then divided by the weighted average of common
and common-equivalent shares outstanding plus the number of shares
which would have been outstanding during the year had the Class A
convertible preferred stock and the pooled companies' convertible debt
and preferred stock been converted in accordance with their respective
governing instruments. Stock options outstanding have been excluded
from the computations as they were not materially dilutive.
The adjustment of net income for the pooled companies'
convertible debt interest expense (net of income taxes) was as follows:
1994 1993 1992
------ ------ ------
(In thousands)
Interest expense adjustment . . . . . . . . . . . . . . . . . . . $-- $4 $85
18 - 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 entities pooled
during 1994, 1993, and 1992 prior to their combinations with the
Company.
1994 1993 1992
--------------------- --------------------- ---------------------
Per Per Per
Equivalent Equivalent Equivalent
Pooled Entity Historical Share Historical Share Historical Share
- --------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
First Dodge City Bancshares, Inc. . . . $58.46 $ .52 $132.00 $1.17 $142.73 $1.27
Southgate Banking Corporation . . . . . n/a n/a -- -- -- --
Nichols Hills Bancorporation, Inc. . . n/a n/a .43 .48 -- --
Commercial Landmark Corporation . . . . n/a n/a .93 .72 -- --
Western National Bancorporation, Inc. . n/a n/a -- -- -- --
Ponca Bancshares, Inc. . . . . . . . . n/a n/a .99 .81 .15 .12
KNB Bancshares, Inc. . . . . . . . . . n/a n/a n/a n/a 3.06 .22
Mission Hills Bancshares, Inc. . . . . n/a n/a n/a n/a 1.51 .44
United Bank of Kansas, Inc. . . . . . . n/a n/a n/a n/a 17.78 .61
Fourth National Corporation . . . . . . n/a n/a n/a n/a .25 .44
19 - Restrictions on Intercompany Funds Transfers
Restrictions imposed by federal law limit the transfer of funds
to the Company and certain other affiliates from a subsidiary bank in
the form of loans or other extensions of credit, investments, and
purchases of assets. Transfers by a subsidiary bank to the Company or
any such single affiliate may not exceed 10% and transfers in the
aggregate may not exceed 20% of the bank's capital, surplus, and
undivided profits, after adding back the allowance for credit losses
and subtracting certain intangibles. Based on these limitations,
approximately $56,638,000 was available for transfer to the Company at
December 31, 1994. In addition, the approval of the Comptroller of the
Currency is required if dividends declared by any of the Company's
national bank subsidiaries in 1995 exceed the bank's net profits for
that year combined with its retained net profits for 1993 and 1994. In
1995, the subsidiary banks may distribute to the Company (in addition
to their 1995 net profits) an aggregate of approximately $39,944,000 in
dividends without approval from regulatory agencies.
20 - Derivatives and Other Financial Instruments with Off-Balance-Sheet
Risk
In the normal course of business in meeting the investment and
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.
Derivative financial instruments held for trading purposes:
The Company enters into forward foreign currency contracts to
primarily assist customers with their foreign currency needs related to
foreign manufacturing operations, exporting, or importing. These
customer-driven contracts are generally hedged with offsetting
contracts. The Company's net position in forward foreign currency
contracts plus due from bank accounts denominated in foreign currencies
cannot exceed $2,500,000 on a daily basis. The market value gains and
losses relating to forward foreign currency contracts are recorded at
settlement in "Other noninterest income." The contracts held at
December 31, 1993 all matured in January 1994. The contracts
outstanding at December 31, 1994 will all mature by March 15, 1995.
The Company maintains a trading account in which it takes
positions in the interest-rate futures markets based on expectations of
future market conditions. Interest rate futures contracts are
commitments to either purchase or sell designated financial instruments
at a future date for a specified price and may be settled in cash or
through delivery. Initial margin requirements are met in cash or other
instruments and changes in the contract value are settled daily and the
gains or losses recorded in "Other noninterest income." The interest
rate futures generally have contractual terms of up to six months,
although the instruments are rarely held that long. It is the
Company's policy to limit the contracts outstanding to $5,000,000.
The contract amounts of derivative financial instruments held for
trading purposes at December 31, 1994 and 1993 were as follows:
Contract Amount
-------------------------
December 31,
-------------------------
1994 1993
---------- ----------
(In thousands)
Forward foreign currency contracts
Commitments to purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $390 $1,506
Commitments to sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461 211
Interest rate futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
The following table presents the fair value of derivatives held
for trading purposes at December 31, 1994 and on average for 1994. As
permitted by FAS No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments," comparable
disclosures for December 31, 1993 and on average for 1993 have not been
presented.
1994
--------------------
Fair Value
--------------------
Average
Year-end for year
--------- --------
(In thousands)
Forward foreign currency contracts
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 464 $ 1,989
Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394 1,991
Interest rate futures contracts
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ --
Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- *
____________
* Less than $1,000.
The fair values of forward foreign currency and interest rate
futures contracts represent an estimate of the accounting loss the
Company would incur if any party to the financial instrument failed
completely to perform and any collateral proved to be of no value to
the Company. The net trading revenues arising from the Company's
derivative trading activities for 1994 were not significant.
Derivative financial instruments held for purposes other than trading:
From time to time, interest rate swaps are used to modify the
interest sensitivity position inherent in the repricing characteristics
of specific assets or liabilities. Interest rate swaps involve the
contractual exchange of fixed and floating rate interest payments based
on established notional amounts. The notional amounts do not represent
direct credit exposure. Credit exposure is limited to the net
difference between the calculated pay and receive amounts on each
transaction which is accrued as interest receivable or payable and
generally netted and settled quarterly. The net interest accrued and
received or paid on the interest rate swaps is accounted for as an
adjustment to the interest income or interest expense on the assets or
liabilities, respectively, that the swap was intended to modify. Net
interest income for 1994 includes $1,544,000 attributable to interest
rate swaps. The effect of interest rate swaps on 1993 was to increase
net interest income by $19,000.
At December 31, 1994 and 1993 interest rate swaps were as
follows:
December 31, 1994
-----------------------------------------------------------------
Weighted
Notional Average Weighted Average Rate
--------------------------
Amount Term Received Paid
---------- -------- ---------- ----------
(In thousands)
Receive fixed rate . . . . . . . . . . . . $151,000 18 months (1) 6.05% 5.90%
Pay fixed rate . . . . . . . . . . . . . . 100,000 4 months 5.79% 4.25%
December 31, 1993
-----------------------------------------------------------------
Weighted
Notional Average Weighted Average Rate
--------------------------
Amount Term Received Paid
---------- -------- ---------- ----------
(In thousands)
Receive fixed rate . . . . . . . . . . . . $ 51,000 29 months (1) 5.89% 3.47%
Pay fixed rate . . . . . . . . . . . . . . 200,000 10 months 3.44% 3.94%
<FN>
- -------------
(1) The term of $50.0 million of these swaps may extend up to an additional 48 months after the initial term
depending on the variable rate index at the end of the initial term and each quarter thereafter as compared to
that same index when the swaps were initiated.
Activity in interest rate swaps is summarized below:
Receive Pay
Fixed Rate Fixed Rate
---------- ----------
(Notional amounts, in thousands)
Balance, January 1, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000 $ --
Additions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 200,000
-------- --------
Balance, December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,000 200,000
Additions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 --
Maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (100,000)
-------- --------
Balance, December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . $151,000 $100,000
======== ========
At December 31, 1994, the Company was committed under agreements
with the Federal National Mortgage Association and Federal Home Loan
Mortgage Corporation to sell $4,080,000 of 10- to 30-year fixed-rate
residential mortgage loans with coupons ranging from 8.59% to 9.39%.
Residential mortgage loans held for sale included $206,000 of such
loans at December 31, 1994. These commitments were all met in January
1995.
Other financial instruments with off-balance-sheet risk:
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 $39,873,000 of loans
associated with its purchased mortgage servicing. The Company assesses
the credit risk of these and other loan commitments when evaluating the
adequacy of the allowance for credit losses.
Commitments to extend credit are agreements to lend to a customer
as long as the customer is in compliance with the conditions
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. The following table summarizes the contract amount of the
Company's commitments to extend credit.
Contract Amount
-------------------------
December 31,
-------------------------
1994 1993
---------- ----------
(In thousands)
Commitments to extend credit:
Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 101,440 $ 91,810
Commercial letters of credit. . . . . . . . . . . . . . . . . . . . . . . . . . . 24,181 13,728
Credit card lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480,809 329,183
Funding of 1-4 family residential mortgage loans. . . . . . . . . . . . . . . . . 51,192 117,151
Other loan commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,328,674 1,015,098
21 - Fair Values of Financial Instruments
The following table presents the carrying amounts and fair values
of the Company's financial instruments at December 31, 1994 and 1993.
1994 1993
------------------------ ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
(In thousands)
Trading instruments:
Debt securities . . . . . . . . . . . . . . . . . . $ 463 $ 463 $ 474 $ 474
Equity securities . . . . . . . . . . . . . . . . . 256 256 -- --
Foreign exchange contracts
Assets. . . . . . . . . . . . . . . . . . . . . . -- 464 -- 208
Liabilities . . . . . . . . . . . . . . . . . . . -- (394) -- (1,505)
Nontrading instruments:
Cash and due from banks . . . . . . . . . . . . . . 435,879 435,879 320,660 320,660
Interest-bearing deposits in other
financial institutions . . . . . . . . . . . . . . 499 501 3,025 3,072
Federal funds sold and securities purchased
under agreements to resell . . . . . . . . . . . . 4,670 4,670 6,063 6,063
Securities. . . . . . . . . . . . . . . . . . . . . 2,937,130 2,827,416 2,962,702 2,964,463
Loans and leases. . . . . . . . . . . . . . . . . . 4,005,667 3,944,021 3,351,912 3,376,884
Deposits. . . . . . . . . . . . . . . . . . . . . . (5,647,148) (5,643,023) (5,436,563) (5,479,009)
Federal funds purchased, securities sold under
agreements to repurchase, and other borrowings . . (976,707) (976,707) (514,629) (514,629)
Federal Home Loan Bank borrowings . . . . . . . . . (441,097) (440,268) (250,000) (251,402)
Long-term debt. . . . . . . . . . . . . . . . . . . (4,685) (4,729) (20,283) (20,646)
Interest-rate swaps relating to:
Securities
Assets. . . . . . . . . . . . . . . . . . . . . -- -- -- 26
Liabilities . . . . . . . . . . . . . . . . . . -- (5,045) -- (24)
Loans
Liabilities . . . . . . . . . . . . . . . . . . -- (1,571) -- --
Deposits
Assets. . . . . . . . . . . . . . . . . . . . . -- 824 -- 154
Liabilities . . . . . . . . . . . . . . . . . . -- -- -- (721)
The carrying amounts in the table are included in the Statements
of Condition under the indicated captions.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures in accordance with FAS No. 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 arm's-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 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.
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.
Securities: Fair values for debt and equity 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.
Loans and leases: Except for variable-rate one-to-four-family
mortgage loans, the fair values of variable-rate loans that
reprice in accordance with indices 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 variable-rate and fixed-
rate mortgage loans were based on quoted market prices of similar
loans, adjusted for differences in loan characteristics. The
fair values of 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.
Deposits: 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" at December 31, 1994 was
$12,727,000 (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 was neither considered in the fair value
amounts nor 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 borrowings: The carrying amounts of
federal funds purchased, borrowings under repurchase agreements,
and other short-term borrowings approximate their fair values.
Federal Home Loan Bank borrowings: The carrying amounts of the
variable-rate FHLB borrowings approximate their fair values. A
discounted cash flow analysis, using the current rates on FHLB
borrowings of similar maturities, was used to estimate the fair
values of the fixed-rate borrowings.
Long-term debt: The fair value of the Company's long-term debt
was estimated using discounted cash flow analyses, based on the
Company's current incremental borrowing rates for similar types
of borrowing arrangements.
Off-balance-sheet instruments: No premium or discount was
ascribed to loan commitments because virtually all funding will
be at current market rates. The estimated fair values of the
interest rate swaps generally represent an estimate of the amount
the Company would receive or pay to terminate the agreement at
the reporting date. These values were based on dealer quotes
with respect to the amortizing swaps. For swaps with fixed
maturities, the estimated values represent the present value of
the cash flow stream discounted at current interest rate spreads.
Fair values of forward foreign currency and interest rate futures
contracts were based on quoted market prices.
22 - Commitments and Contingencies
At December 31, 1994, 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, 1994 are as follows:
Years ending December 31, (In thousands)
------------------------- --------------
1995 . . . . . . . . . . . . . $ 4,491
1996 . . . . . . . . . . . . . 4,021
1997 . . . . . . . . . . . . . 3,583
1998 . . . . . . . . . . . . . 3,392
1999 . . . . . . . . . . . . . 2,697
Later years . . . . . . . . . 13,089
-------
Total . . . . . . . . . . . $31,273
=======
Total rental expense (net of sublease income, which is not
material) amounted to $5,214,000, $5,676,000, and $7,005,000 for 1994,
1993, and 1992, respectively.
The Company and its subsidiaries are defendants in various legal
proceedings that arise in the ordinary course of business. Claims in
various amounts of up to approximately $20,000,000 have been asserted
in some of these proceedings. However, after consultation with legal
counsel, management believes that potential liabilities, if any,
arising from these claims would not have a material adverse effect on
the Company's business or financial condition.
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,
------------------------
1994 1993
---------- ----------
(In thousands)
Assets:
Cash in subsidiary banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,954 $ 862
Interest-bearing deposits in subsidiary banks. . . . . . . . . . . . . . . . . . . 12,543 1,856
Securities repurchase agreement with subsidiary bank . . . . . . . . . . . . . . . 16,600 23,100
Investment securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,111 893
Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256 252
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,983 18,281
Investments in bank subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 490,688 492,195
Investments in other subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 31,544 46,615
Other assets (including receivables from subsidiaries
of $4,964 in 1994 and $4,718 in 1993) . . . . . . . . . . . . . . . . . . . . . . 11,789 9,803
Cost in excess of net assets acquired. . . . . . . . . . . . . . . . . . . . . . . 48,240 42,157
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $634,708 $636,014
======== ========
Liabilities And Stockholders' Equity:
Notes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,000 $ --
Other liabilities (including amounts owed to subsidiaries
of $46 in 1994 and $314 in 1993). . . . . . . . . . . . . . . . . . . . . . . . . 8,266 9,744
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,375 19,420
-------- --------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,641 29,164
Stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 602,067 606,850
-------- --------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . $634,708 $636,014
======== ========
Fourth Financial Corporation (Parent Only)
Condensed Statements of Income
Year Ended December 31,
----------------------------------
1994 1993 1992
-------- -------- --------
(In thousands)
Dividends from subsidiaries:
Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $126,245 $ 76,449 $ 57,580
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000 470 250
Fee income (principally from subsidiaries) . . . . . . . . . . . . . . . . 59,636 57,382 39,370
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,587 1,775 3,555
Investment securities gains (losses) . . . . . . . . . . . . . . . . . . . (5) 161 --
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 315 --
-------- -------- --------
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205,463 136,552 100,755
-------- -------- --------
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . 36,987 33,023 21,660
Furniture and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . 9,699 11,532 8,204
Net occupancy (includes rent paid to bank subsidiaries
of $2,515 in 1994, $2,371 in 1993, and $1,632 in 1992). . . . . . . . . . 3,399 3,039 2,024
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,225 2,482 2,407
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,209 2,279 3,593
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,187 2,180 1,780
Fees paid to bank subsidiaries . . . . . . . . . . . . . . . . . . . . . . 404 42 196
Amortization of cost in excess of net assets acquired. . . . . . . . . . . 3,300 2,765 2,713
Merger and integration costs . . . . . . . . . . . . . . . . . . . . . . . 1,886 1,936 2,386
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,205 12,655 6,766
-------- -------- --------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,501 71,933 51,729
-------- -------- --------
Income before income taxes, cumulative effect of a change in
accounting principle, and undistributed net income of subsidiaries. . . . 128,962 64,619 49,026
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,018 4,030 1,573
Cumulative effect of a change in accounting for income taxes . . . . . . . -- 681 384
Net income of subsidiaries in excess of (less than) dividends received . . (50,858) 7,962 14,216
-------- -------- -------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 83,122 $ 77,292 $65,199
======== ======== =======
Fourth Financial Corporation (Parent Only)
Condensed Statements of Cash Flows
Year Ended December 31,
--------------------------------
1994 1993 1992
-------- -------- --------
Increase (Decrease) in Cash and Cash Equivalents (In thousands)
Cash Flows From Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 83,122 $ 77,292 $ 65,199
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . 8,454 7,728 6,400
Write-down of goodwill associated with a
pooling transaction and other asset write-downs . . . . . . . . . . 1,061 1,250 --
Net income of subsidiaries (in excess of) less than
dividends received. . . . . . . . . . . . . . . . . . . . . . . . . 50,858 (7,962) (14,216)
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . (108) (889) (275)
Investment securities (gains) losses . . . . . . . . . . . . . . . . 5 (161) --
(Gain) loss on sale of equipment . . . . . . . . . . . . . . . . . . 25 (8) 377
Change in assets and liabilities, net of effects
from purchases of acquired entities:
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,308) (4,561) (707)
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . (1,299) 1,411 1,218
-------- -------- --------
Net cash provided by operating activities. . . . . . . . . . . . 140,810 74,100 57,996
--------- -------- --------
Cash Flows From Investing Activities:
Purchase of banks, net of cash acquired. . . . . . . . . . . . . . . . (90,720) (30,043) (9,951)
Purchases of premises and equipment. . . . . . . . . . . . . . . . . . (6,971) (11,001) (3,310)
Proceeds from sales of premises and equipment. . . . . . . . . . . . . 10 25 1,559
Purchase of available-for-sale securities. . . . . . . . . . . . . . . (368) (901) --
Proceeds from sales of available-for-sale securities . . . . . . . . . 5 -- --
Investments in subsidiaries. . . . . . . . . . . . . . . . . . . . . . (500) (15,290) (57,520)
Liquidation of subsidiaries. . . . . . . . . . . . . . . . . . . . . . 637 -- --
-------- -------- --------
Net cash used in investing activities. . . . . . . . . . . . . . (97,907) (57,210) (69,222)
-------- -------- --------
Cash Flows From Financing Activities:
Net change in commercial paper . . . . . . . . . . . . . . . . . . . . -- (425) (2,751)
Net change in other borrowings . . . . . . . . . . . . . . . . . . . . 20,000 (5,850) (7,256)
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . -- -- 1,028
Repayment of long-term debt. . . . . . . . . . . . . . . . . . . . . . (15,045) (14,065) (10,502)
Acquisition of treasury stock. . . . . . . . . . . . . . . . . . . . . (10,018) (3,245) --
Dividends on common stock. . . . . . . . . . . . . . . . . . . . . . . (27,662) (22,705) (16,768)
Dividends on preferred stock . . . . . . . . . . . . . . . . . . . . . (7,000) (7,000) (5,368)
Proceeds from issuance of preferred stock, net of offering costs . . . -- -- 96,920
Proceeds from exercise of stock options. . . . . . . . . . . . . . . . 2,544 3,407 2,470
Purchase of minority stockholder interest. . . . . . . . . . . . . . . (36) -- --
Net change in stock option loans . . . . . . . . . . . . . . . . . . . (99) (726) (18)
Capital transactions of pooled companies . . . . . . . . . . . . . . . (308) (1,670) (2,263)
-------- -------- --------
Net cash provided by (used in) financing activities. . . . . . . (37,624) (52,279) 55,492
-------- -------- --------
Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . 5,279 (35,389) 44,266
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . 25,818 61,207 16,941
-------- -------- --------
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . $ 31,097 $ 25,818 $ 61,207
======== ======== ========
Supplemental Disclosures:
Cash and cash equivalents:
Cash in subsidiary banks . . . . . . . . . . . . . . . . . . . . . . $ 1,954 $ 862 $ 642
Interest-bearing deposits in subsidiary banks. . . . . . . . . . . . 12,543 1,856 4,665
Securities repurchase agreements with subsidiary bank. . . . . . . . 16,600 23,100 55,900
-------- -------- --------
Total cash and cash equivalents. . . . . . . . . . . . . . . . . $ 31,097 $ 25,818 $ 61,207
======== ======== ========
Cash payments for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,165 $ 2,306 $ 3,786
======== ======== ========
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,455 $ 21,689 $ 16,094
======== ======== ========
Detail of entities acquired:
Fair value of bank stock and other assets acquired . . . . . . . . . $ 77,629 $ 20,986 $ 7,784
Cost in excess of net assets acquired. . . . . . . . . . . . . . . . 13,091 9,328 2,167
-------- -------- --------
Cash paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 90,720 $ 30,314 $ 9,951
======== ======== ========
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, 1994 and
1993 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, 1994. 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 1992 financial statements of Commercial Landmark
Corporation, Western National Bancorporation, Inc. or Ponca Bancshares,
Inc., which statements reflect interest income constituting 14% of
consolidated interest income. 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 consolidated
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, 1994 and 1993, and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
As discussed in Notes 1, 5 and 14 to the consolidated financial
statements, in 1993 the Company changed its method of accounting for
income taxes and investment securities.
/s/ Ernst & Young LLP
Ernst & Young LLP
Wichita, Kansas
January 17, 1995,
except for the last paragraph
of Note 5, as to which the
date is February 23, 1995
WESTERN NATIONAL BANCORPORATION, INC.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Western National Bancorporation, Inc.:
We have audited the consolidated balance sheets of Western National
Bancorporation, Inc. (Western, an Oklahoma corporation) and subsidiary
as of December 31, 1992 and 1991, and the related consolidated
statements of income, stockholders' equity and cash flows for each of
the three years in the period ended December 31, 1992 (such financial
statements are not presented herein) prior to the pooling of Western
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 Western
National Bancorporation, Inc. and subsidiary as of December 31, 1992
and 1991, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1992, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
March 11, 1993
COMMERCIAL LANDMARK CORPORATION AND SUBSIDIARIES
Independent Auditors' Report
The Board of Directors and Stockholders
Commercial Landmark Corporation and
Subsidiaries
Muskogee, Oklahoma
We have audited the accompanying consolidated balance sheets of
Commercial Landmark Corporation and Subsidiaries as of December 31,
1992 and 1991, and the related consolidated statements of income,
changes in stockholders' equity, and cash flows for the years then
ended. 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 consolidated financial position
of Commercial Landmark Corporation and Subsidiaries as of December 31,
1992 and 1991, and the results of their operations and their cash
flows, for the years then ended, in conformity with generally accepted
accounting principles.
/s/ Sartain Fischbein & Co.
February 19, 1993 SARTAIN FISCHBEIN & CO.
PONCA BANCSHARES, INC.
Independent Auditors' Report
The Board of Directors
Ponca Bancshares, Inc.
Ponca City, Oklahoma
We have audited the accompanying consolidated balance sheet of Ponca
Bancshares, Inc. and Subsidiary as of December 31, 1992 and the related
consolidated statements of earnings, stockholders' equity and cash
flows for the period from inception (February 4, 1992) to December 31,
1992. These financial statements are the responsibility of management.
Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 provides 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 Ponca Bancshares, Inc. and Subsidiary as of December 31, 1992, and
the consolidated results of their operations and their cash flows for
the period then ended in conformity with generally accepted accounting
principles.
/S/ GRA, Thompson, White & Co., P.A.
GRA, THOMPSON, WHITE & CO., P.A.
September 16, 1993
SELECTED CONSOLIDATED FINANCIAL DATA
Year Ended December 31,
----------------------------------------------------------
1994 1993(1) 1992(1) 1991(1) 1990(1)
---------- ---------- ---------- ---------- ----------
(Dollars in thousands, except per share data)
Summary Income Statement Information:
Interest income . . . . . . . . . . . . . . . . . . $ 483,474 $ 443,913 $ 438,888 $ 492,036 $ 482,193
Interest expense. . . . . . . . . . . . . . . . . . 206,554 179,502 197,531 278,281 299,070
Net interest income . . . . . . . . . . . . . . . . 276,920 264,411 241,357 213,755 183,123
Net interest income (fully tax-equivalent)(2) . . . 285,706 274,630 252,664 226,929 198,123
Provision for credit losses . . . . . . . . . . . . 275 6,965 21,358 43,926 49,527
Noninterest income. . . . . . . . . . . . . . . . . 97,835 86,282 80,794 83,542 65,960
Noninterest expense(3). . . . . . . . . . . . . . . 250,435 254,342 218,549 211,376 188,258
Net income before extraordinary item and cumula-
tive effect of a change in accounting principle. . 83,122 66,710 62,696 31,766 5,304
Net income. . . . . . . . . . . . . . . . . . . . . 83,122 77,292 65,199 33,163 9,204
Net income applicable to common and common-
equivalent shares. . . . . . . . . . . . . . . . . 76,122 70,292 59,248 33,163 9,204
Per Common Share Data(4):
Earnings per common and common-equivalent share:
Primary . . . . . . . . . . . . . . . . . . . . . $ 2.83 $ 2.67 $ 2.29 $ 1.33 $ .40
Fully diluted . . . . . . . . . . . . . . . . . . 2.74 2.55 2.21 1.30 .40
Fully diluted as originally reported(1) . . . . . 2.74 2.54 2.16 1.24 .98
Common dividend(5). . . . . . . . . . . . . . . . . 1.04 .98 .88 .88 .88
Book value(6) . . . . . . . . . . . . . . . . . . . 18.67 18.73 16.65 15.29 14.68
Average common and common-equivalent
shares outstanding (000s). . . . . . . . . . . . . 26,915 26,325 25,901 25,008 22,814
Year-end common shares outstanding (000s) . . . . . 26,896 27,054 25,809 25,016 24,795
Year-end common shares outstanding
assuming full dilution (000s). . . . . . . . . . . 30,344 30,503 30,169 26,032 25,453
Earnings Performance Ratios(7):
Return on assets. . . . . . . . . . . . . . . . . . 1.13% 1.16% 1.10% .57% .17%
Return on total stockholders' equity. . . . . . . . 13.94 13.72 13.06 8.78 2.61
Return on common stockholders' equity . . . . . . . 15.34 15.25 14.39 8.84 2.63
Summary Statement of Condition Information:
Year-end assets . . . . . . . . . . . . . . . . . . $7,729,340 $6,886,063 $6,712,696 $5,790,555 $5,899,188
Year-end loans and leases . . . . . . . . . . . . . 4,005,667 3,351,912 2,922,576 2,881,931 3,065,193
Year-end allowance for credit losses. . . . . . . . 71,874 67,617 74,395 70,814 64,065
Year-end long-term debt . . . . . . . . . . . . . . 4,685 20,283 35,935 53,348 23,887
Year-end common stockholders' equity. . . . . . . . 502,067 506,850 429,770 382,522 363,942
Year-end stockholders' equity . . . . . . . . . . . 602,067 606,850 533,411 385,609 366,453
Average assets. . . . . . . . . . . . . . . . . . . 7,331,210 6,681,439 5,917,051 5,780,064 5,329,309
Average loans and leases. . . . . . . . . . . . . . 3,584,022 3,038,112 2,899,130 2,996,076 2,904,427
Average investment securities . . . . . . . . . . . 3,035,350 2,937,396 2,308,543 1,952,698 1,452,593
Average deposits. . . . . . . . . . . . . . . . . . 5,564,070 5,443,857 5,026,398 5,061,336 4,616,020
Average common stockholders' equity . . . . . . . . 496,206 460,979 411,758 375,346 349,698
Average stockholders' equity. . . . . . . . . . . . 596,206 563,291 499,242 377,857 352,209
Asset Quality Ratios:
Allowance for credit losses/year-end loans
and leases . . . . . . . . . . . . . . . . . . . . 1.79% 2.02% 2.55% 2.46% 2.09%
Nonperforming assets/year-end loans plus other
real estate and nonperforming assets . . . . . . . .88 1.31 2.01 3.44 4.45
Allowance for credit losses/year-end
nonperforming loans. . . . . . . . . . . . . . . . 242.82 196.96 190.39 116.72 75.20
Net charge-offs/average loans and leases. . . . . . .04 .56 .83 1.26 1.17
Capital Ratios:
Stockholders' equity/assets(7). . . . . . . . . . . 8.13% 8.43% 8.44% 6.54% 6.61%
Leverage ratio(8)(9). . . . . . . . . . . . . . . . 7.16 7.52
Tier I risk-based capital(9)(10). . . . . . . . . . 11.05 12.68
Total risk-based capital(9)(10) . . . . . . . . . . 12.30 13.93
Common dividend payout ratio(11). . . . . . . . . . 36.75 36.70 38.43 66.17 220.00
<FN>
____________
(1) Prior year financial statements have been restated to reflect poolings of interests, refer to Notes 2 and 3 of the
Notes to Consolidated Financial Statements. Fully diluted earnings per share as originally reported represent
historical earnings per share as reported in the Company's annual report for the year indicated.
(2) Stated on a tax-equivalent basis assuming a marginal tax rate of 35% in 1994 and 1993 and 34% in the previous years.
(3) Noninterest expense included nonoperating charges of $2.8 million, $7.6 million, and $4.8 million for 1994, 1993,
and 1992, respectively.
(4) Adjusted for the five-for-four stock split effected as a 25% stock dividend on March 1, 1990.
(5) Dividends per common share represent historical dividends declared without adjustment for the poolings of interests.
(6) Refer to Note 1 of the Notes to Consolidated Financial Statements regarding the adoption of FAS No. 115 as of
December 31, 1993.
(7) Based on daily averages for all statement of condition items.
(8) Tier I capital/fourth quarter average assets less certain intangibles.
(9) Not computed for 1992, 1991, and 1990 to reflect poolings of interests.
(10) Tier I capital is composed of common stockholders' equity less certain intangibles plus preferred stockholders'
equity. Tier I capital does not include any unrealized gain or loss on securities available for sale. Total capital
is Tier I capital plus the allowance for credit losses (limited to 1.25% of risk-weighted assets). Both capital
amounts are divided by risk-weighted assets.
(11) Common dividend per share divided by primary earnings per share.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Performance Summary
Net income for 1994 was $83.1 million compared to $77.3 million
for 1993 and $65.2 million for 1992. Fully diluted earnings per share
were $2.74, $2.55, and $2.21 for 1994, 1993, and 1992, respectively.
For 1994, return on assets and return on common equity were 1.13% and
15.34%, respectively. Return on assets was 1.16% for 1993 and 1.10%
for 1992; return on common equity was 15.25% and 14.39% for the
respective prior periods.
These financial results reflect acquisitions accounted for as
poolings of interests for the entire three-year period, as prior
periods have been restated. However, acquisitions accounted for using
the purchase method of accounting are only included in the results of
operations for the periods subsequent to acquisition. The following
schedule details the acquisitions completed during 1992, 1993, and
1994.
Number of
Acquisition Company Accounting Assets Cash Shares
Date Company Acquired/Location Abbreviation Method Acquired Paid Issued
- ------------- ------------------------------------ ------------ ---------- ---------- ---------- --------
(In thousands)
1992 -
- -------
July 31 Farmers and Merchants Bank, "FMB" Purchase $ 66,827 $ 8,921 --
Colby, KS
September 9 KNB Bancshares, Inc., "KNB" Pooling 99,256 -- 267,390
Prairie Village, KS
October 30 Mission Hills Bancshares, Inc., "MHB" Pooling 94,762 -- 358,709
Mission Woods, KS
December 11 Southern Bancorp, Inc., "SBI" Purchase 64,510 9,951 --
Tulsa, OK
December 30 United Bank of Kansas, Inc., "UBK" Pooling 122,885 -- 663,739
Liberal, KS
December 31 Fourth National Corporation, "FNC" Pooling 368,325 -- 1,639,941
Tulsa, OK
1993 -
- -------
February 12 Southgate Banking Corporation, "SBC" Pooling 62,628 -- 451,310
Prairie Village, KS
May 14 Guaranty Bancorporation, "GB" Purchase 82,606 4,386 --
Tulsa, OK
May 28 Bancshares of Woodward, Inc., "BOW" Purchase 130,192 17,859 --
Woodward and Waukomis, OK
May 28 F&M Bank Services, Inc., "FBS" Purchase 61,565 8,068 --
Derby, KS
May 28 Nichols Hills Bancorporation, Inc., "NHB" Pooling 97,869 -- 469,906
Nichols Hills, OK
September 17 Commercial Landmark Corporation, "CLC" Pooling 465,060 -- 1,874,812
Muskogee, OK
December 3 Western National Bancorporation, Inc., "WNB" Pooling 206,288 -- 1,110,695(1)
Tulsa, OK
December 10 Ponca Bancshares, Inc., "PBI" Pooling 117,275 -- 478,395
Ponca City, OK
1994 -
- --------
May 26 Equity Bank for Savings, F.A. "Equity" Purchase 491,506 90,720 --
Oklahoma City, OK
May 31 Emprise Bank, National Association "Emprise" Purchase 258,731 31,206 --
Hutchinson, KS
June 30 First Dodge City Bancshares, Inc. "First Dodge" Pooling 144,999 -- 590,710(2)
---------- -------- ---------
Dodge City, KS
$2,935,284 $171,111 7,905,607
========== ======== =========
<FN>
____________
(1) An additional 108,748 shares were issued on December 3, 1993 to acquire the minority interest of WNB's bank
subsidiary.
(2) An additional 70,300 shares were issued and $36,000 cash paid on June 30, 1994 to acquire the minority interest
of First Dodge's two bank subsidiaries.
Three deposit assumption transactions also were completed during
the three-year period ended December 31, 1994.
Transaction Liabilities Cash
Date Location Assumed Paid
--------------- --------------------------- ------------- ------------
(In thousands)
March 27, 1992 Hays, KS $ 46,484 $ 57
December 31, 1992 Tulsa, OK 349,355 14,856
April 2, 1993 Mission, KS 99,399 1,141
-------- -------
$495,238 $16,054
======== =======
Net income for both 1993 and 1992 included cumulative effects of
a change in accounting principle or an extraordinary gain. A new
accounting standard, Financial Accounting Standard ("FAS") No. 109 -
Accounting for Income Taxes, was implemented effective January 1, 1993
and resulted in an addition to 1993 income of $10.6 million ($.35 per
fully diluted share). Two of the companies acquired in pooling-of-
interests transactions in 1993 had elected to adopt FAS No. 109 early,
resulting in the $2.4-million ($.08 per fully diluted share) income
item in 1992. An extraordinary item of $130,000 ($.01 per fully
diluted share) in 1992 reflects the utilization of a net operating loss
carryforward by First Dodge, a pooled company. Income before the
extraordinary item and the cumulative effect of the change in
accounting principle was $83.1 million, $66.7 million, and $62.7
million for 1994, 1993, and 1992, respectively.
Net interest income increased by $12.5 million to total $276.9
million for 1994 as compared to $264.4 million for 1993. The increase
in net interest income was principally related to the increased volume
of interest-earning assets from purchase acquisitions and internal loan
growth. Total average interest-earning assets were $6.6 billion for
1994, a $598.8-million, or 9.9%, increase over the prior year.
Comparing 1994 and 1993, average loans and leases increased $545.9
million. The increase in net interest income attributable to the
increased volume of interest-earning assets was partially offset by a
decrease in the net yield on earning assets to 4.30% in 1994 from 4.54%
in 1993. The decline in net yield reflects the impact that the
cyclical increase in interest rates has had on the Company's cost of
funds.
The provision for credit losses totaled $275,000 and $7.0 million
for 1994 and 1993, respectively. Pooled companies accounted for $4.6
million of the provision for 1993. The lower 1994 provision reflects
the strong allowance for credit losses and continued improvement in
credit quality as demonstrated by a lower level of nonperforming assets
and fewer net charge-offs.
Noninterest income was $97.8 million in 1994, a $11.5-million
increase over the 1993 noninterest income of $86.3 million. Investment
securities gains recognized during 1994 totaled $3.6 million compared
to $1.5 million for 1993. Fees collected in the normal course of
business increased $9.0 million or 10.7% to total $93.7 million for
1994 from $84.7 million for 1993. Approximately 63% of the increase in
fee income was attributable to business combinations accounted for as
purchases. Increases in trust fees, service charges on deposit
accounts, and bank card fees were also due to business development, the
larger customer base, and price changes.
Noninterest expense totaled $250.4 million in 1994, down $3.9
million as compared to 1993. For 1994 the gains on the sales of other
real estate and nonperforming assets exceeded the costs of operation of
such assets by $1.1 million. In 1993 the $3.3 million of net costs of
operations of other real estate and nonperforming assets was primarily
attributable to a pooled company. Merger and integration costs
associated with poolings of interests totaled $2.8 million and $7.6
million for 1994 and 1993, respectively.
Operating expenses (noninterest expense less merger and
integration costs and net costs of operations of other real estate and
nonperforming assets) increased 2.4% to total $248.6 million in 1994.
The Company's efficiency ratio (operating expense/fee income plus tax-
equivalent net interest income) was 65.51% for the current year
compared to 67.54% for the prior year. Operating expense in 1993
included $5.9 million of accelerated core deposit and purchased
mortgage servicing amortization, data processing hardware depreciation,
software amortization, and other unusual items.
Between 1993 and 1992 income before the extraordinary item and
the cumulative effect of the change in accounting for income taxes
increased $4.0 million to total $66.7 million for 1993 from $62.7
million for 1992. The $23.1-million increase in net interest income
was related to the increased volume of interest-earning assets
principally attributable to acquisitions. The larger customer base
plus aggressive sales efforts resulted in a larger volume of service
charge transactions, expanded brokerage and annuity sales activities,
and additional merchant and credit cardholder sales volumes which
contributed to the $5.5-million increase in noninterest income. The
$14.4-million decrease in the provision for credit losses between 1993
and 1992 reflected a strong allowance for credit losses and improvement
in credit quality as demonstrated by a lower level of nonperforming
assets and fewer net charge-offs in 1993 as compared to 1992. The
$35.8-million increase in noninterest expense principally reflects the
Company's substantial acquisition activity in 1993 and 1992.
Net Interest Income
For 1994, net interest income amounted to $276.9 million,
representing an increase of $12.5 million or 4.7% over the $264.4
million earned during 1993. On a fully tax-equivalent basis, net
interest income increased 4.0% to total $285.7 million in 1994 from
$274.6 million in 1993. The increase in net interest income was
attributable to the increase in earning assets associated with
acquisitions and loan growth. Total average interest-earning assets
were $6.6 billion for 1994, a $598.8-million or 9.9% increase over
1993. Purchase acquisitions completed in 1994 and 1993 account for
most of this increase. Comparing 1994 and 1993, average loans and
leases increased $545.9 million or 18.0%. Approximately 59% of the
increase was attributable to internal loan growth with the remainder
due to purchase acquisitions. Average investment securities only
increased $98.0 million or 3.3% as the proceeds from maturities and
prepayments were used to fund loan growth. Average deposits did not
increase significantly. The increased deposits from acquisitions were
offset by attrition, a reflection of increased bank and nonbank
competition. As a result, the increased earning assets were
principally funded by increases in federal funds purchased and
securities sold under agreements to repurchase of $242.7 million and
Federal Home Loan Bank borrowings of $251.1 million.
Average interest-earning assets of $6.0 billion in 1993 were
$704.7 million larger than the 1992 average interest-earning assets of
$5.3 billion. This increase, principally due to acquisitions, resulted
in the $23.1-million increase in net interest income for 1993 as
compared to 1992.
During both 1994 and 1993, the increase in net interest income
attributable to the increased volume of interest-earning assets was
partially offset by a decrease in the net yield on earning assets. The
1994 net yield of 4.30% declined from 4.54% for 1993 and 4.73% for
1992. The declining net yield reflects the difference in repricing
characteristics of the Company's assets and liabilities. Its deposits
and borrowed funds have a shorter duration than its loans and
securities. Consequently, as interest rates decreased in 1992,
interest-bearing liabilities repriced faster than interest-earning
assets resulting in a higher net yield during that period. However,
during 1993, as the proceeds from investment security maturities and
prepayments were reinvested at the lower rates which prevailed through
1993, the net yield declined. During 1994, the Board of Governors of
the Federal Reserve System increased the discount rate 175 basis
points. The resulting higher market interest rates were reflected in
the increasing cost of interest-bearing liabilities and a lower net
yield.
Loan fees included in net interest income amounted to $11.2
million, $11.5 million, and $8.5 million for 1994, 1993, and 1992,
respectively. The increase in loan fees between 1993 and 1992
reflected an increase in the volume of residential mortgage loan
originations associated with home purchases and the refinancing of
existing mortgages, both of which were stimulated by the relatively low
mortgage interest rates. The pace of residential mortgage loan
originations decreased during 1994 as mortgage interest rates
increased. Also during 1994, origination fees were waived on $47.8
million of loans (1,321 loans) originated under the Company's new
program for low-to-moderate income borrowers.
The following table provides the dollar volume and the number of
residential mortgage loan originations during each of the last three
years.
Year Ended December 31,
--------------------------------------------
1994 1993 1992
---------- ---------- ----------
(Dollars in thousands)
Residential mortgage loan originations:
Dollar volume . . . . . . . . . . . . . . . . . . . . . . . $385,337 $451,966 $288,921
Number of loans . . . . . . . . . . . . . . . . . . . . . . 5,887 6,789 4,190
The following table summarizes the changes in net interest income
on a fully tax-equivalent basis, by major category of interest-earning
assets and interest-bearing liabilities, identifying changes related to
volumes, to rates, and to both volumes and rates. Nonaccrual loans are
included in the loan volumes used to calculate the following analysis
of net interest income; however, interest collected on such loans is
usually recorded as a reduction in loans outstanding and is excluded
from interest income.
1994 vs 1993
---------------------------------------------
Change
Total Attributable to
---------------------------------
Change Volume Yield/Rate Combination
-------- -------- ---------- -----------
(In thousands)
Increase (decrease) in:
Interest income:
Loans and leases(1) . . . . . . . . . . . . . . . . . $ 41,758 $ 47,276 $ (4,557) $ (961)
Interest-bearing deposits in other
financial institutions . . . . . . . . . . . . . . . (136) (157) 62 (41)
Federal funds sold and securities
purchased under agreements to resell . . . . . . . . (1,041) (1,255) 648 (434)
Taxable investment securities . . . . . . . . . . . . 1,894 6,917 (4,881) (142)
Tax-preferred investment securities(1). . . . . . . . (4,294) (2,545) (1,920) 171
Trading account securities(1) . . . . . . . . . . . . (53) (60) 9 (2)
-------- -------- -------- --------
Total interest income change. . . . . . . . . . . . 38,128 50,176 (10,639) (1,409)
-------- -------- -------- --------
Interest expense:
Savings and interest checking . . . . . . . . . . . . (1,543) 1,564 (2,964) (143)
Time deposits . . . . . . . . . . . . . . . . . . . . 988 944 44 --
Federal funds purchased and securities
sold under agreements to repurchase. . . . . . . . . 15,311 7,329 4,941 3,041
Federal Home Loan Bank borrowings . . . . . . . . . . 12,357 9,920 959 1,478
Other borrowings. . . . . . . . . . . . . . . . . . . 1,214 748 241 225
Long-term debt. . . . . . . . . . . . . . . . . . . . (1,275) (1,104) (335) 164
-------- -------- -------- --------
Total interest expense change . . . . . . . . . . . 27,052 19,401 2,886 4,765
-------- -------- -------- --------
Increase (decrease) in net interest
income on a taxable equivalent basis(1) . . . . . . . 11,076 $ 30,775 $(13,525) $ (6,174)
-------- ======== ======== ========
Decrease in taxable equivalent adjustment. . . . . . . 1,433
--------
Net interest income change . . . . . . . . . . . . . . $ 12,509
========
1993 vs 1992
---------------------------------------------
Change
Total Attributable to
---------------------------------
Change Volume Yield/Rate Combination
-------- -------- ---------- -----------
(In thousands)
Increase (decrease) in:
Interest income:
Loans and leases(1) . . . . . . . . . . . . . . . . . $ (6,450) $ 12,925 $(18,554) $ (821)
Interest-bearing deposits in other
financial institutions . . . . . . . . . . . . . . . (197) (156) (65) 24
Federal funds sold and securities
purchased under agreements to resell . . . . . . . . (2,435) (2,141) (586) 292
Taxable investment securities . . . . . . . . . . . . 16,126 43,940 (21,380) (6,434)
Tax-preferred investment securities(1). . . . . . . . (3,026) (973) (2,119) 66
Trading account securities(1) . . . . . . . . . . . . (81) (45) (48) 12
-------- -------- -------- --------
Total interest income change. . . . . . . . . . . . 3,937 53,550 (42,752) (6,861)
-------- -------- -------- --------
Interest expense:
Savings and interest checking . . . . . . . . . . . . (5,979) 8,462 (12,810) (1,631)
Time deposits . . . . . . . . . . . . . . . . . . . . (19,402) 3,780 (22,492) (690)
Federal funds purchased and securities
sold under agreements to repurchase. . . . . . . . . 3,019 4,614 (1,041) (554)
Federal Home Loan Bank borrowings . . . . . . . . . . 6,415 6,415 -- --
Other borrowings. . . . . . . . . . . . . . . . . . . (680) (350) (431) 101
Long-term debt. . . . . . . . . . . . . . . . . . . . (1,402) (1,530) 220 (92)
-------- -------- -------- --------
Total interest expense change . . . . . . . . . . . (18,029) 21,391 (36,554) (2,866)
-------- -------- -------- --------
Increase (decrease) in net interest
income on a taxable equivalent basis(1) . . . . . . . 21,966 $ 32,159 $ (6,198) $ (3,995)
-------- ======== ======== ========
Decrease in taxable equivalent adjustment. . . . . . . 1,088
--------
Net interest income change . . . . . . . . . . . . . . $ 23,054
========
<FN>
____________
(1) Computed on a tax-equivalent basis assuming a marginal tax rate of 35% in 1994 and 1993 and 34% in 1992.
The following table presents average balances, income and
expense, and yields and rates for 1994, 1993 and 1992.
1994 1993 1992
-------------------------- -------------------------- --------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
---------- -------- ------ ---------- -------- ------ ---------- -------- ------
(Dollars in thousands)
Assets:
Interest-Earning Assets:
Loans and leases(1)(2). . . $3,584,022 $304,938 8.51% $3,038,112 $263,180 8.66% $2,899,130 $269,630 9.30%
Interest-bearing deposits
in other financial
institutions . . . . . . . 1,715 97 5.63 5,249 233 4.44 8,233 430 5.23
Federal funds sold and
securities purchased under
agreements to resell . . . 19,663 824 4.19 60,025 1,865 3.11 119,501 4,300 3.60
Investment securities:
Taxable . . . . . . . . . 2,829,210 161,370 5.70 2,711,570 159,476 5.88 2,075,687 143,350 6.91
Tax-preferred(1). . . . . 206,140 24,905 12.08 225,826 29,199 12.93 232,856 32,225 13.84
Trading securities(1) . . . 2,227 126 5.58 3,348 179 5.31 4,048 260 6.49
---------- -------- ---------- -------- --------- --------
Total interest-earning
assets(1). . . . . . . 6,642,977 492,260 7.41 6,044,130 454,132 7.51 5,339,455 450,195 8.43
Cash and due from banks . . . 382,247 346,361 311,646
Bank premises and
equipment, net . . . . . . . 153,245 134,400 115,932
Income receivable and
other assets . . . . . . . . 138,580 167,781 179,591
Intangible assets, net. . . . 85,194 63,086 44,498
Allowance for credit losses . (71,033) (74,319) (74,071)
---------- ---------- ----------
Total assets. . . . . . $7,331,210 $6,681,439 $5,917,051
========== ========== ==========
Liabilities And Stockholders'
Equity:
Interest-Bearing Liabilities:
Interest-bearing deposits:
Savings and interest
checking . . . . . . . . $2,178,052 $ 52,755 2.42% $2,116,957 $ 54,298 2.56% $1,856,594 $ 60,277 3.25%
Time under $100,000 . . . 2,014,562 87,907 4.36 1,986,635 89,796 4.52 1,874,455 106,945 5.71
Time of $100,000 or more. 386,044 16,862 4.37 392,341 13,985 3.56 433,702 16,238 3.74
---------- -------- ---------- -------- ---------- --------
Total interest-bearing
deposits . . . . . . . 4,578,658 157,524 3.44 4,495,933 158,079 3.52 4,164,751 183,460 4.41
Federal funds purchased
and securities sold under
agreements to repurchase . 637,956 27,245 4.27 395,290 11,934 3.02 260,364 8,915 3.42
Federal Home Loan Bank
borrowings . . . . . . . . 413,741 18,772 4.54 162,603 6,415 3.95 -- -- --
Other borrowings. . . . . . 42,433 2,015 4.75 21,946 801 3.65 28,737 1,481 5.15
Long-term debt. . . . . . . 9,427 998 10.58 18,320 2,273 12.41 31,390 3,675 11.71
---------- -------- ---------- -------- ---------- --------
Total interest-bearing
liabilities. . . . . . 5,682,215 206,554 3.64 5,094,092 179,502 3.52 4,485,242 197,531 4.40
-------- -------- --------
Noninterest-bearing deposits. 985,412 947,924 861,647
Other liabilities and
minority interest in
subsidiaries . . . . . . . . 67,377 76,132 70,920
---------- ---------- ----------
Total liabilities . . . 6,735,004 6,118,148 5,417,809
Preferred stockholders'
equity . . . . . . . . . . . 100,000 102,312 87,484
Common stockholders' equity . 496,206 460,979 411,758
---------- ---------- ----------
Total stockholders'
equity . . . . . . . . 596,206 563,291 499,242
---------- ---------- ----------
Total liabilities and
stockholders' equity . $7,331,210 $6,681,439 $5,917,051
========== ========== ==========
Net interest income(1). . . . . $285,706 $274,630 $252,664
======== ======== ========
Rate Analysis:
Interest income/
interest-earning assets(1). 7.41% 7.51% 8.43%
Interest expense/
interest-earning assets . . 3.11 2.97 3.70
----- ----- -----
Net yield on earning
assets(1) . . . . . . 4.30% 4.54% 4.73%
===== ===== =====
<FN>
___________
(1) Income and rates are stated on a tax-equivalent basis assuming a marginal tax rate of 35% in 1994 and 1993
and 34% in 1992.
(2) Nonaccrual loans are included in loans and leases.
Provision for Credit Losses
The provisions for credit losses were $275,000, $7.0 million, and
$21.4 million for 1994, 1993, and 1992, respectively. The provisions
for 1993 and 1992 include $4.6 million and $5.8 million, respectively,
associated with the current and prior year poolings of interests. The
lower provision for credit losses in 1994 reflects the strong allowance
for credit losses and continued improvement in credit quality as
demonstrated by fewer net charge-offs and a lower level of
nonperforming assets. Net charge-offs for 1994 totaled $1.5 million or
.04% of average loans as compared to net charge-offs of $17.0 million
or .56% of average loans for 1993 and $24.1 million or .83% of average
loans for 1992. Nonperforming loans at December 31, 1994 were $29.6
million, down from $34.3 million at year-end 1993 and $39.1 million at
year-end 1992. The ratio of allowance for credit losses to
nonperforming loans increased to 242.82% at December 31, 1994, compared
with 196.96% at December 31, 1993 and 190.39% at December 31, 1992.
Noninterest Income
Total noninterest income was $97.8 million for 1994, representing
an increase of $11.5 million or 13.4% over the $86.3 million recorded
for 1993. Investment securities gains and unusual revenues increased
$2.5 million and fees collected in the normal course of business
increased $9.0 million or 10.7% to total $93.7 million for 1994 from
$84.7 million for 1993. Approximately 63% of the increase in fees
collected in the normal course of business was attributable to business
combinations accounted for as purchases.
Investment securities gains realized during 1994 totaled $3.6
million compared to $1.5 million in 1993. Substantially all of the
securities gains recognized in 1994 were recorded in the first quarter
when, in anticipation of rising interest rates, the Company elected to
sell $448.7 million of its available-for-sale securities. In addition
$151.2 million of investment securities principally acquired in the
Equity acquisition were sold with no gain or loss recognized. The $1.5
million of investment securities gains recognized in 1993 were due
principally to called bonds. During the second quarter of 1994 a gain
of $471,000 was realized on the sale of the Company's investment in a
data processing company which had been accumulated through various bank
acquisitions.
The most significant changes in fee income between 1994 and 1993
occurred in trust fees, service charges on deposit accounts, and bank
card fees. Trust fees increased $2.5 million or 13.3%, service charges
on deposit accounts increased $4.7 million or 14.1%, and bank card fees
increased $3.8 million or 36.5%. Exclusive of purchase transactions,
1994 trust fees, service charges, and bank card fees each increased
approximately 10% over the amounts earned in 1993. The increase in
trust fees was the result of increased sales efforts and the
introduction of Funds IV, a family of seven publicly traded no-load
mutual funds managed by the trust division. The increase in service
charges was attributable to both consumer and commercial customers.
These increased revenues were due to commercial and retail account
pricing changes, a reduction in waived fees, and a larger volume of
fee-based transactions. The increased bank card fees reflect internal
growth plus the acquisition of Equity, including its credit card
division that serviced approximately 77,000 customer accounts.
Brokerage and annuity sales commissions were $3.6 million for
1994 compared to $5.4 million for 1993. The $1.8-million decrease in
brokerage and annuity sales commissions reflects a reduced volume of
brokerage transactions associated with uncertain market conditions and
the impact of an internal reorganization on this business. Foreign
currency trading profits and foreign transaction fees increased 45.9%
to total $1.1 million for 1994. The Company enters into foreign
currency contracts primarily to assist customers with their foreign
currency needs related to their foreign manufacturing operations,
exporting, or importing.
Other fee income for 1994 included an $82,000 loss on the sale of
residential mortgage loans held for sale as compared with mortgage-
loan-sales gains of $584,000 realized for 1993. Also included in other
fee income were fees for providing data processing services to
correspondent banks of $120,000 and $666,000 for the years ended
December 31, 1994 and 1993, respectively. These services have been
substantially discontinued.
Total noninterest income was $86.3 million for 1993, as compared
to $80.8 million for 1992. Investment securities gains were $1.5
million in 1993 and $2.9 million in 1992. The 1992 lawsuit settlement
gain of $1.5 million was attributable to a pooled company. Fees
collected in the normal course of business increased 11.2% to $84.7
million for 1993 from $76.2 million for 1992. The increased fees were
principally due to increased service charges on deposit accounts and
brokerage and annuity sales fees. Real estate loan service fees
declined $883,000 between 1993 and 1992 due to accelerated prepayments
on serviced loans in 1993 caused by the high volume of mortgage loan
refinancings which was stimulated by low interest rates.
The following table provides an analysis of noninterest income
segregated between fees collected in the normal course of business and
other revenues for the past three years.
Percent Change
---------------
Year Ended December 31, 1993- 1992-
--------------------------------
1994 1993 1992 1994 1993
-------- -------- -------- ------ ------
(Dollars in thousands)
Fee income:
Trust fees . . . . . . . . . . . . . . . . . . . . . $21,041 $18,577 $17,828 13.3% 4.2%
Service charges on deposit accounts . . . . . . . . . 38,306 33,575 27,628 14.1 21.5
Bank card fees . . . . . . . . . . . . . . . . . . . 14,173 10,385 9,740 36.5 6.6
Brokerage and annuity sales commissions . . . . . . . 3,620 5,355 3,530 (32.4) 51.7
Trading account profits and commissions . . . . . . . 921 770 840 19.6 (8.3)
Real estate loan service fees . . . . . . . . . . . . 2,654 2,399 3,282 10.6 (26.9)
Safe deposit rent . . . . . . . . . . . . . . . . . . 1,611 1,443 1,273 11.6 13.4
Travelers and official check
fees and item handling charges . . . . . . . . . . . 2,442 2,205 2,335 10.7 (5.6)
Foreign currency trading profits and foreign
transaction fees . . . . . . . . . . . . . . . . . . 1,100 754 526 45.9 43.3
Insurance premiums. . . . . . . . . . . . . . . . . . 1,967 1,564 1,369 25.8 14.2
Other . . . . . . . . . . . . . . . . . . . . . . . . 5,897 7,662 7,802 (23.0) (1.8)
------- ------- -------
Total fee income . . . . . . . . . . . . . . . . . 93,732 84,689 76,153 10.7 11.2
Other revenues:
Investment securities gains . . . . . . . . . . . . . 3,632 1,486 2,904 1.4X (.5)
Gain on sale of credit card loans . . . . . . . . . . -- -- 169
Gain on sale of acquired stock. . . . . . . . . . . . 471 -- --
RTC reimbursements . . . . . . . . . . . . . . . . . -- 107 68 57.4
Lawsuit settlement. . . . . . . . . . . . . . . . . . -- -- 1,500
------- ------- -------
Total noninterest income. . . . . . . . . . . . . . $97,835 $86,282 $80,794 13.4 6.8
======= ======= =======
Fee income/average assets . . . . . . . . . . . . . . 1.28% 1.27% 1.29%
Noninterest income/average assets . . . . . . . . . . 1.33% 1.29% 1.37%
Noninterest Expense
Noninterest expense amounted to $250.4 million, $254.3 million,
and $218.5 million for 1994, 1993, and 1992, respectively. Noninterest
expense for each of these years includes certain nonoperating items
such as net costs of operation of other real estate and nonperforming
assets, merger and integration costs, and other unusual items.
Gains from sales of other real estate and nonperforming assets
exceeded the costs of operation of such assets, resulting in a net gain
of $1.1 million in 1994 as compared to the net costs recorded in 1993
and 1992 of $3.3 million and $2.5 million, respectively. The costs of
nonperforming assets in 1993 were principally attributable to a pooled
company. As detailed in Note 13 of the Notes to Consolidated Financial
Statements, merger and integration costs for each of the years included
write-downs of excess facilities and equipment, severance and other
compensation, system conversion costs, legal, accounting, and other
costs all associated with the merger and integration of pooling-of-
interests acquisitions.
Operating expense amounted to $248.6 million and $242.7 million
for 1994 and 1993, respectively. The 1993 operating expense included
several unusual items: $1.2 million accelerated data processing
hardware depreciation and software amortization related to the
Company's commitment to improve its technology and systems; $2.8
million of additional core deposit intangibles amortization and
$768,000 of FDIC exit/entrance fee amortization both associated with
disintermediation of acquired deposits; and an acceleration of
purchased mortgage servicing rights amortization associated with a more
rapid pay-off of mortgage loans serviced for other investors.
Amortization of purchased mortgage servicing rights was $993,000 in
1994 as compared to $2.1 million for 1993. Exclusive of these unusual
items, operating expense increased $11.9 million, which was
attributable to business combinations accounted for as purchases. The
Company's efficiency ratio (operating expense/fee income plus tax-
equivalent net interest income) was 65.51% for 1994 as compared to
67.54% for 1993.
Operating expense increased $31.9 million or 15.1% to total
$242.7 million for 1993 from $210.8 million for 1992. The Company's
efficiency ratio was 67.54% for 1993 as compared to 64.12% for 1992.
In addition to the unusual 1993 expense items, the increased operating
expenses and efficiency ratio reflect operating expenses of purchased
business combinations subsequent to consummation (including intangible
asset amortization) and normal inflation-related and other cost
increases. The large number of acquisitions completed in 1992 and 1993
required a substantial commitment of resources for thorough assessment
of credit and other business risks; software systems conversion and
operations consolidation; and advertising, training, and other costs
associated with changing to the BANK IV sales and credit culture,
products, and services.
The following table presents an analysis of noninterest expense
for the past three years.
Percent Change
---------------
Year Ended December 31, 1993- 1992-
--------------------------------
1994 1993 1992 1994 1993
-------- -------- -------- ------ ------
(Dollars in thousands)
Salaries and employee benefits . . . . . . . . . . . . $126,279 $117,291 $103,008 7.7% 13.9%
Furniture and equipment. . . . . . . . . . . . . . . . 22,529 23,534 19,611 (4.3) 20.0
Net occupancy. . . . . . . . . . . . . . . . . . . . . 17,729 16,699 15,444 6.2 8.1
FDIC insurance . . . . . . . . . . . . . . . . . . . . 12,598 13,117 12,124 (4.0) 8.2
Bank card. . . . . . . . . . . . . . . . . . . . . . . 3,273 3,295 1,224 (.7) 1.7X
Advertising and public relations . . . . . . . . . . . 9,436 8,481 6,429 11.3 31.9
Communication. . . . . . . . . . . . . . . . . . . . . 4,269 3,778 2,681 13.0 40.9
Postage and freight. . . . . . . . . . . . . . . . . . 6,764 6,259 5,474 8.1 14.3
Supplies, printed materials and forms. . . . . . . . . 4,906 5,241 5,371 (6.4) (2.4)
Federal Reserve service fees . . . . . . . . . . . . . 1,729 1,510 1,103 14.5 36.9
Loan acquisition and maintenance . . . . . . . . . . . 3,003 2,425 2,518 23.8 (3.7)
Outside service fees . . . . . . . . . . . . . . . . . 3,222 4,642 6,127 (30.6) (24.2)
Consulting fees. . . . . . . . . . . . . . . . . . . . 1,575 1,670 1,703 (5.7) (1.9)
Other professional fees and examinations . . . . . . . 5,111 5,725 6,159 (10.7) (7.0)
Amortization of intangible assets. . . . . . . . . . . 10,154 12,549 5,821 (19.1) 1.2X
Other . . . . . . . . . . . . . . . . . . . . . . . . 15,991 16,485 16,031 (3.0) 2.8
-------- -------- --------
Total operating expense . . . . . . . . . . . . . 248,568 242,701 210,828 2.4 15.1
Net costs of operation of other real
estate and nonperforming assets . . . . . . . . . . . (1,064) 3,339 2,497 33.7
Merger and integration costs . . . . . . . . . . . . . 2,847 7,634 4,798 (62.7) 59.1
Minority interest. . . . . . . . . . . . . . . . . . . 84 355 426 (76.3) (16.7)
Lawsuit settlement . . . . . . . . . . . . . . . . . . -- 313 --
-------- -------- --------
Total noninterest expense. . . . . . . . . . . . . $250,435 $254,342 $218,549 (1.5) 16.4
======== ======== ========
Noninterest expense/average assets . . . . . . . . . . 3.42% 3.81% 3.69%
Noninterest expense less noninterest
income/average assets . . . . . . . . . . . . . . . . 2.08% 2.52% 2.33%
Operating expense less fee
income/average assets . . . . . . . . . . . . . . . . 2.11% 2.36% 2.28%
Operating expense/fee income plus
tax-equivalent net interest income. . . . . . . . . . 65.51% 67.54% 64.12%
Income Taxes
Effective January 1, 1993, the Company changed its method of
accounting for income taxes from the deferred method to the liability
method required by FAS No. 109, "Accounting for Income Taxes." Shown
separately in the 1993 Statement of Income is the $10.6 million
cumulative effect of adopting FAS No. 109 as of January 1, 1993. Two
pooled companies elected early adoption of FAS No. 109, resulting in a
$2.4-million increase in 1992 earnings.
Income tax expense amounted to $40.9 million, $22.7 million, and
$19.5 million for 1994, 1993, and 1992, respectively. The higher tax
expense in 1994 was attributable to a higher level of income before
taxes. Income tax expense for 1993 was reduced by changes in the
valuation allowance for deferred tax assets principally associated with
net operating losses of pooled entities. In 1992, alternative minimum
tax ("AMT") credits were recognized, reducing the tax provision to the
amount which would have been recorded using the AMT provisions of the
tax law.
At December 31, 1994, the Company had net operating loss and
general business credit carryforwards of $61.4 million and $330,000,
respectively, which can be carried forward to reduce future federal
income taxes payable. These carryforwards are principally related to
previous tax losses of banks and S&Ls acquired in 1994, 1993, and 1992.
Utilization of the carryforwards is limited by tax law to the future
earnings of and other limits on the use of tax attributes of acquired
companies. Net operating loss carryforwards expire in years 2000
through 2007 and general business credit carryforwards expire in years
1995 through 2002 if not utilized. At December 31, 1994, for financial
reporting purposes, a valuation allowance of $12.6 million offset the
deferred tax assets related to these carryforwards and other deferred
tax assets whose realization is uncertain. If realized, the tax
benefit of $11.8 million associated with certain net operating loss
carryforwards to which this valuation allowance relates will be applied
to reduce "cost in excess of net assets acquired" recorded in
connection with acquisitions accounted for as purchases.
Statements of Condition
Total assets amounted to $7.7 billion, $6.9 billion, and $6.7
billion at December 31, 1994, 1993, and 1992, respectively. During
1994 and 1993, the Company completed five bank and S&L acquisitions
accounted for as purchases and one bank deposit assumption transaction.
Assets acquired in these six transactions totaled $1.1 billion. The
statements of condition for all of the periods presented include six
business combinations accounted for as poolings of interests. In
aggregate the pooled companies had assets of $1.1 billion. The
following sections describe the changes in the major Statement of
Condition categories.
Loans and Leases
Period-end loans and leases increased $653.8 million or 19.5% to
total $4.0 billion at December 31, 1994. Loans added through bank and
S&L purchase transactions totaled $296.5 million and net internal loan
growth was $357.3 million. Increases were realized in both commercial
and retail categories.
The commercial loan categories increased an aggregate of $445.7
million or 23.6% to total $2.3 billion at December 31, 1994. Retail
loan categories increased $208.0 million or 14.2% to total $1.7
billion. In addition to the effect of acquisitions, these increases
were attributable to a continued emphasis on business development
efforts and increasing credit demands associated with the strengthening
of the economy in Kansas and Oklahoma.
Total loans also increased between December 31, 1993 and 1992.
Loans added through bank purchase transactions totaled $121.7 million.
Net internal loan growth was $307.6 million.
During 1992 and 1991, both commercial and retail loan demand were
affected by an uncertain economic environment, and except for the
origination and refinancing activity in loans secured by 1-4 family
mortgages, most loan categories showed little change. Total loans
decreased $183.3 million or 6.0% to $2.9 billion at December 31, 1991
from $3.1 billion at year-end 1990. The decreases, which were realized
in almost all categories, were attributable to the lack of loan demand
and the effect of implementing enhanced underwriting standards which
emphasize cash flow rather than collateral-based lending. Credit card
loans decreased $16.3 million, or 16.9%, between year-ends 1991 and
1990 as an affinity group exercised its option to purchase its
portfolio from the Company.
The Company makes most of its loans within Kansas, Oklahoma, and
the contiguous states and to Kansas- and Oklahoma-based customers that
do business in other states. The Company's commercial and industrial
loans principally are made to middle market and small businesses. At
December 31, 1994, the Company had 15 lending relationships in which
the aggregate loan amount was $10.0 million or more. The Company had
no single lending relationship with an aggregate loan amount
outstanding in excess of $20 million. The Company had no industry
concentrations greater than 10.0% of total loans outstanding and no
foreign loans at December 31, 1994.
The following table shows the composition of loans and leases for
the past five years.
December 31,
----------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
(In thousands)
Commercial:
Commercial and industrial . . . . . . . . . . . $1,018,753 $ 889,024 $ 752,956 $ 744,281 $ 846,321
Agriculture . . . . . . . . . . . . . . . . . . 227,300 196,029 169,742 176,812 162,392
Energy. . . . . . . . . . . . . . . . . . . . . 129,742 77,962 55,754 60,053 69,091
Bank stock. . . . . . . . . . . . . . . . . . . 25,173 46,453 51,967 52,994 65,076
Real estate:
Construction . . . . . . . . . . . . . . . . . 133,853 92,636 67,036 94,610 113,279
Permanent commercial real estate and other . . 688,779 513,270 450,494 438,571 453,539
Lease financing . . . . . . . . . . . . . . . . 86,098 40,195 29,490 27,166 25,235
Other . . . . . . . . . . . . . . . . . . . . . 27,546 35,964 40,685 62,526 80,760
---------- ---------- ---------- ---------- ----------
Total commercial loans. . . . . . . . . . . . 2,337,244 1,891,533 1,618,124 1,657,013 1,815,693
---------- ---------- ---------- ---------- ----------
Consumer:
Secured by 1-4 family residences,
less unearned discount . . . . . . . . . . . . 979,847 786,637 701,917 644,318 661,580
Residential mortgage loans held for sale. . . . 206 110,132 501 2,588 923
Consumer, less unearned discount. . . . . . . . 476,034 414,635 477,791 463,200 458,550
Credit card . . . . . . . . . . . . . . . . . . 130,098 93,007 82,354 80,126 96,405
Educational . . . . . . . . . . . . . . . . . . 82,238 55,968 41,889 34,686 32,042
---------- ---------- ---------- ---------- ----------
Total consumer loans. . . . . . . . . . . . . 1,668,423 1,460,379 1,304,452 1,224,918 1,249,500
---------- ---------- ---------- ---------- ----------
Total loans and leases. . . . . . . . . . . $4,005,667 $3,351,912 $2,922,576 $2,881,931 $3,065,193
========== ========== ========== ========== ==========
Commercial and Industrial: The Company's commercial and
industrial portfolio includes loans to businesses engaged in services,
manufacturing, wholesaling, retailing, financial services, public
utilities, construction, mining, and agribusiness. The largest
industry concentrations are service businesses and manufacturing, each
representing approximately 5% of total loans.
Agriculture: Loans secured by feeder cattle and other livestock
accounted for approximately 65% of the agriculture portfolio at
December 31, 1994. The remainder of the agriculture portfolio is
secured by equipment, farm assets and accounts receivable and
inventory, none of which represent a significant concentration.
Energy: Loans secured by proven oil and gas reserves constitute
substantially all of the energy loan portfolio. Generally, the Company
will loan no more than 60% of the discounted value of such proven
reserves. Annual engineering reports are required on all production
loans of $250,000 or more. These reports include cash flow analyses on
all properties and provide estimates of remaining recoverable reserves,
rates of recovery, operating expenses, and taxes. There are no oil rig
acquisition loans, and loans to well-servicing companies and suppliers
are not material.
Bank Stock: Loans for the purpose of purchasing or holding a
material interest in a bank make up this portfolio.
Commercial Real Estate: At December 31, 1994, approximately 49%
of the portfolio was in the Kansas markets of Wichita, Topeka and
Kansas City. The Tulsa and Oklahoma City markets represented an
additional 34% of this portfolio.
Permanent commercial real estate loans include loans in the
Company's market for small office buildings/parks; neighborhood strip
shopping centers; small manufacturing machine shop buildings; office
warehouse properties; medical offices; apartment buildings; and loans
secured by farm land. Also included in this portfolio are loans for
purposes other than funding the acquisition of the collateral
properties and in which cash flows from the properties are not the
principal source of repayment. Approximately 68% of the loans in the
permanent commercial real estate portfolio are floating rate loans.
Most of the remainder of this portfolio are "mini-perms" with five-year
maturities.
Secured by 1-4 Family Residences: The 1-4 family residence
portfolio consists of loans secured by residences located primarily in
Kansas and Oklahoma. The majority of the loans are permanent first
mortgage loans with the remainder consisting of home equity credit
lines and other loans secured by second mortgages.
Residential Mortgage Loans Held For Sale: Residential mortgage
loans held for sale are carried at the lower of cost or market value
determined on an aggregate basis.
Maturity Distribution and Interest Sensitivity of Loans
The maturity distribution of loans outstanding as of December 31,
1994 (excluding real estate-secured by 1-4 family residences, consumer,
credit card, educational, and lease financing) by type and sensitivity
to changes in interest rates is as follows:
Remaining Maturity
--------------------------------------------------
Over One
Year
One Year Through Over Five
or Less Five Years Years Total
---------- ---------- ---------- -----------
(In thousands)
Commercial and industrial . . . . . . . . . . . . . . . $ 616,210 $328,479 $ 74,064 $1,018,753
Agriculture . . . . . . . . . . . . . . . . . . . . . . 194,422 29,407 3,471 227,300
Energy . . . . . . . . . . . . . . . . . . . . . . . . 79,892 36,227 13,623 129,742
Bank stock . . . . . . . . . . . . . . . . . . . . . . 25,058 50 65 25,173
Real estate-construction . . . . . . . . . . . . . . . 97,349 32,427 4,077 133,853
Real estate-permanent commercial and other . . . . . . 135,578 372,376 180,825 688,779
Other . . . . . . . . . . . . . . . . . . . . . . . . . 19,451 7,826 269 27,546
---------- -------- -------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . $1,167,960 $806,792 $276,394 $2,251,146
========== ======== ======== ==========
Loans with fixed interest rates . . . . . . . . . . . . $ 328,624 $306,275 $ 58,291 $ 693,190
Loans with floating interest rates . . . . . . . . . . 839,336 500,517 218,103 1,557,956
---------- -------- -------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . $1,167,960 $806,792 $276,394 $2,251,146
========== ======== ======== ==========
Nonperforming Assets
Nonperforming assets consist of nonaccrual loans, troubled debt
restructurings, and other real estate and nonperforming assets.
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
currently performing loan also may be placed on nonaccrual
status when there is reasonable doubt as to the ability of the
borrower to continue to pay principal or interest. Nonaccrual
loans at December 31, 1994 included $7.9 million of these
"performing/nonperforming" loans. Troubled debt restructurings
are those loans for which the original contractual terms have
been modified to provide a concession because of a deterioration
in the borrower's financial condition. Other real estate and
nonperforming assets include assets acquired from loan settlements and
foreclosures.
Generally, principal and interest payments received on nonaccrual
loans are applied as reductions of principal. For this reason
and because of charge-offs, the book value of such loans
understates the remaining contractual obligation of the borrowers.
As of December 31, 1994, the carrying value of nonaccrual
loans had been charged down to 77.52% of the customers' contractual
principal obligations. Also, the carrying values of other real
estate and nonperforming assets have been written down to current
estimates of their fair values less a reserve for the estimated
costs to sell the properties.
Interest income of $1.4 million has been included in income
for the year ended December 31, 1994 on loans which at
year-end were considered nonaccrual loans or troubled debt
restructurings. Interest of $5.1 million would have been
recorded for the year if these loans had
been current in accordance with their original terms.
The following table presents nonperforming assets and those loans
which are contractually past due 90 days or more as to principal or
interest payments at December 31 for the past five years.
December 31,
--------------------------------------------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
(Dollars in thousands)
Nonaccrual loans . . . . . . . . . . . . . . . . . $29,097 $34,040 $37,169 $ 55,751 $ 80,613
Troubled debt restructurings . . . . . . . . . . . 503 290 1,906 4,918 4,576
------- ------- ------- -------- --------
Total nonperforming loans . . . . . . . . . . 29,600 34,330 39,075 60,669 85,189
Other real estate and nonperforming assets . . . . 5,679 9,787 20,097 39,963 53,695
------- ------- ------- -------- --------
Total nonperforming assets . . . . . . . . . . $35,279 $44,117 $59,172 $100,632 $138,884
======= ======= ======= ======== ========
Past due loans (90 days or more) . . . . . . . . . $13,194 $ 9,108 $10,863 $ 6,007 $ 7,547
======= ======= ======= ======== ========
Nonperforming assets/year-end loans plus
other real estate and nonperforming assets. . . . .88% 1.31% 2.01% 3.44% 4.45%
==== ==== ==== ==== ====
Nonperforming assets/year-end assets . . . . . . . .46% .64% .88% 1.74% 2.35%
==== ==== ==== ==== ====
Nonperforming assets decreased $8.8 million or 20.0% between
December 31, 1994 and 1993. At December 31, 1994, total nonperforming
assets represented .88% of total loans plus other real estate owned and
nonperforming assets and .46% of total assets as compared to 1.31% of
total loans plus other real estate owned and nonperforming assets and
.64% of total assets at December 31, 1993. Banks and S&Ls purchased
during 1994 added $652,000 to the 1994 nonperforming asset total. The
1994, 1993, and 1992 pooling-of-interests combinations accounted for
$21.6 million, $34.4 million, $62.3 million, and $89.0 million of
nonperforming assets at year-end 1993, 1992, 1991, and 1990,
respectively.
Management continues to focus on asset quality. An emphasis is
placed on pro-active management of problem credits, early detection of
potential problems, and timely charge-offs. A due diligence team is
responsible for assessing potential problem loans in banks to be
acquired prior to the execution of a definitive agreement. A separate
work-out department is responsible for the resolution and collection of
problem assets. An analysis of nonperforming loans by type is provided
in the following table. There are no significant concentrations of
nonperforming assets in any one market or industry.
December 31,
-------------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
(Dollars in thousands)
Commercial:
Commercial and industrial. . . . . . $14,674 $14,789 $13,330 $23,330 $38,088
Agriculture. . . . . . . . . . . . . 1,283 1,526 1,449 1,250 766
Energy . . . . . . . . . . . . . . . 1,221 510 184 402 2,508
Bank stock . . . . . . . . . . . . . -- -- -- 41 --
Real estate:
Construction . . . . . . . . . . . 905 1,343 1,883 7,029 5,756
Permanent commercial
real estate and other . . . . . . 8,422 11,741 16,316 22,246 30,391
Lease financing. . . . . . . . . . . 208 107 188 384 495
------- ------- ------- ------- -------
Total commercial loans . . . . . . 26,713 30,016 33,350 54,682 78,004
------- ------- ------- ------- -------
Consumer:
Secured by 1-4 family residences,
less unearned discount. . . . . . . 1,334 2,384 3,861 3,752 4,454
Consumer, less unearned discount . . 1,553 1,930 1,864 2,235 2,731
------- ------- ------- ------- -------
Total consumer loans . . . . . . . 2,887 4,314 5,725 5,987 7,185
------- ------- ------- ------- -------
Total nonperforming loans. . . . $29,600 $34,330 $39,075 $60,669 $85,189
======= ======= ======= ======= =======
Nonaccrual loans/nonaccrual
loans and prior charge-offs . . . . . 77.52%
======
Potential Problem Loans
Certain loans classified for regulatory purposes as doubtful,
substandard, or special mention are included in the nonperforming loan
table. Also included in the classified loans are certain other loans
which are deemed to be potential problems.
Potential problem loans are those loans which are currently
performing but where known information about trends or uncertainties or
possible credit problems of the borrowers causes management to have
concerns as to the ability of such borrowers to comply with present
repayment terms, possibly resulting in the transfer of such loans to
nonperforming status. These loans totaled $12.2 million at
December 31, 1994.
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 periodically reviews the loans
and the classifications. 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.
As of December 31, 1994, the allowance for credit losses equaled
$71.9 million or 242.82% of nonperforming loans. Comparatively, the
allowance for credit losses amounted to $67.6 million or 196.96% of
nonperforming loans at December 31, 1993. The strong coverage ratio of
the allowance for credit losses to nonperforming loans at December 31,
1994 reflected the continuing emphasis management is placing on
resolving problem loans, managing the risk profile of the Company, and
prudently reserving for identifiable risks.
The following table summarizes the changes in the allowance for
credit losses for the past five years and presents selected related
ratios.
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
(Dollars in thousands)
Balance at January 1, as previously reported . . . $ 66,368 $ 73,055 $ 70,669 $ 62,721 $ 42,395
Adjustment for pooling of interests. . . . . . . . 1,249 1,340 1,334 1,344 1,363
---------- ---------- ---------- ---------- ----------
Balance at January 1, as restated . . . . . . . . 67,617 74,395 72,003 64,065 43,758
Allowance for credit losses of purchased banks . . 5,449 3,266 1,739 464 2,827
Allowance for purchased loans . . . . . . . . . . -- -- 3,424 -- 2,165
---------- ---------- ---------- ---------- ----------
73,066 77,661 77,166 64,529 48,750
Charge-offs:
Commercial and industrial . . . . . . . . . . . 3,921 15,465 16,379 22,578 15,814
Agriculture . . . . . . . . . . . . . . . . . . 68 214 121 215 503
Energy . . . . . . . . . . . . . . . . . . . . . 314 371 254 1,690 1,127
Bank stock . . . . . . . . . . . . . . . . . . . -- -- -- 852 250
Real estate construction . . . . . . . . . . . . 98 269 881 2,492 4,628
Permanent commercial real estate and other . . . 852 3,954 4,655 6,199 8,952
Lease financing . . . . . . . . . . . . . . . . 249 246 258 477 728
Other. . . . . . . . . . . . . . . . . . . . . . 87 71 293 420 741
Secured by 1-4 family residences . . . . . . . . 702 701 1,082 1,547 1,262
Consumer . . . . . . . . . . . . . . . . . . . . 3,915 3,971 5,255 5,918 3,375
Credit card . . . . . . . . . . . . . . . . . . 3,811 1,611 2,264 2,472 2,046
---------- ---------- ---------- ---------- ----------
Total charge-offs. . . . . . . . . . . . . . . 14,017 26,873 31,442 44,860 39,426
---------- ---------- ---------- ---------- ----------
Recoveries:
Commercial and industrial . . . . . . . . . . . 5,371 4,628 3,554 3,355 2,136
Agriculture . . . . . . . . . . . . . . . . . . 458 272 309 155 252
Energy . . . . . . . . . . . . . . . . . . . . . 74 206 230 936 1,319
Bank stock . . . . . . . . . . . . . . . . . . . 88 148 38 -- --
Real estate construction . . . . . . . . . . . . 872 220 112 132 388
Permanent commercial real estate and other . . . 2,072 1,377 409 463 296
Lease financing . . . . . . . . . . . . . . . . 59 91 232 87 34
Other. . . . . . . . . . . . . . . . . . . . . . 283 425 37 245 175
Secured by 1-4 family residences . . . . . . . . 547 304 179 243 48
Consumer . . . . . . . . . . . . . . . . . . . . 1,888 1,696 1,608 1,185 470
Credit card . . . . . . . . . . . . . . . . . . 838 497 605 418 300
---------- ---------- ---------- ---------- ----------
Total recoveries . . . . . . . . . . . . . . . 12,550 9,864 7,313 7,219 5,418
---------- ---------- ---------- ---------- ----------
Net loans and leases charged off . . . . . . . . . 1,467 17,009 24,129 37,641 34,008
Provision for credit losses . . . . . . . . . . . 275 6,965 21,358 43,926 49,323
---------- ---------- ---------- ---------- ----------
Balance at December 31 . . . . . . . . . . . . . . $ 71,874 $ 67,617 $ 74,395 $ 70,814 $ 64,065
========== ========== ========== ========== ==========
Loans and leases at year-end . . . . . . . . . . . $4,005,667 $3,351,912 $2,922,577 $2,881,931 $3,065,193
Average loans and leases . . . . . . . . . . . . . $3,584,022 $3,038,112 $2,899,130 $2,996,076 $2,904,427
Net charge-offs/average loans and leases . . . . . .04% .56% .83% 1.26% 1.17%
Allowance for credit losses/year-end
nonperforming loans . . . . . . . . . . . . . . . 242.82% 196.96% 190.39% 116.72% 75.20%
Allowance for credit losses/year-end
nonperforming assets. . . . . . . . . . . . . . . 203.73% 153.27% 125.73% 70.37% 46.13%
Allowance for credit losses/year-end
loans and leases. . . . . . . . . . . . . . . . . 1.79% 2.02% 2.55% 2.46% 2.09%
The allowance for credit losses has been allocated by loan
category. It should be recognized that such allocations are not
necessarily indicative of future loan losses and that all of such
allowance, except for the $1.3-million allowance for purchased loans
included in the secured by 1-4 family residences and $3.3- million
allowance for purchased loans included in consumer, is available to
absorb losses on loans for any category. The allocation of the
allowance for credit losses by loan type is as follows:
December 31,
--------------------------------------------------------------------
1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------
(In thousands)
Commercial:
Commercial and industrial. . . . . . $23,178 $25,058 $29,499 $30,087 $21,850
Agriculture. . . . . . . . . . . . . 808 1,618 3,242 3,000 2,594
Energy . . . . . . . . . . . . . . . 1,232 973 1,105 1,386 2,490
Bank stock . . . . . . . . . . . . . 172 446 968 820 497
Real estate:
Construction . . . . . . . . . . . 2,923 1,409 1,929 2,189 5,289
Permanent commercial real estate
and other . . . . . . . . . . . . 16,311 17,680 17,602 17,760 15,436
Lease financing. . . . . . . . . . . 395 393 933 315 381
------- ------- ------- ------- -------
Total commercial . . . . . . . . . 45,019 47,577 55,278 55,557 48,537
------- ------- ------- ------- -------
Consumer:
Secured by 1-4 family residences . . 2,633 3,863 4,974 5,743 6,302
Consumer . . . . . . . . . . . . . . 10,589 9,376 7,768 5,281 4,668
Credit card. . . . . . . . . . . . . 4,596 2,479 3,699 2,243 2,517
Educational. . . . . . . . . . . . . -- -- -- -- --
------- ------- ------- ------- -------
Total consumer . . . . . . . . . . 17,818 15,718 16,441 13,267 13,487
------- ------- ------- ------- -------
Unallocated. . . . . . . . . . . . . . 9,037 4,322 2,676 1,990 2,041
------- ------- ------- ------- -------
Total. . . . . . . . . . . . . . $71,874 $67,617 $74,395 $70,814 $64,065
======= ======= ======= ======= =======
The following table compares the allocation of the allowance for
credit losses by loan type expressed as a percentage of the total
allowance for credit losses to the percentage of loans in each loan
type to total loans:
December 31,
----------------------------------------------------------------------------------
1994 1993 1992 1991 1990
-------------- -------------- -------------- -------------- --------------
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Commercial:
Commercial and industrial. 32.2% 25.4% 37.4% 26.5% 39.7% 25.8% 42.5% 25.8% 34.1% 27.5%
Agriculture . . . . . . . 1.1 5.7 1.8 5.8 4.4 5.8 4.2 6.1 4.0 5.3
Energy . . . . . . . . . . 1.7 3.2 1.5 2.3 1.5 1.9 2.0 2.1 3.9 2.3
Bank stock . . . . . . . . .2 .6 .7 1.4 1.3 1.8 1.2 1.8 .8 2.1
Real estate:
Construction . . . . . . 4.1 3.3 2.1 2.8 2.6 2.3 3.1 3.3 8.3 3.7
Permanent commercial
real estate and other . 22.8 17.2 26.4 15.3 23.7 15.4 25.1 15.2 24.1 14.8
Lease financing . . . . . .5 2.2 .6 1.2 1.3 1.0 .4 .9 .6 .8
Other . . . . . . . . . . -- .7 -- 1.1 -- 1.4 -- 2.2 -- 2.6
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total commercial . . . . 62.6 58.3 70.5 56.4 74.5 55.4 78.5 57.4 75.8 59.1
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Consumer:
Secured by 1-4 family
residences. . . . . . . . 3.7 24.4 5.5 26.8 6.7 24.0 8.1 22.5 9.8 21.6
Consumer . . . . . . . . . 14.7 11.9 13.8 12.4 10.4 16.4 7.5 16.1 7.3 15.0
Credit card . . . . . . . 6.4 3.3 3.7 2.8 4.8 2.8 3.1 2.8 3.9 3.2
Educational . . . . . . . -- 2.1 -- 1.6 -- 1.4 -- 1.2 -- 1.1
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total consumer . . . . . 24.8 41.7 23.0 43.6 21.9 44.6 18.7 42.6 21.0 40.9
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Unallocated. . . . . . . . . 12.6 -- 6.5 -- 3.6 -- 2.8 -- 3.2 --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total. . . . . . . . . 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
<FN>
____________
(1) Allocation of allowance for credit losses by loan type as a percent of total allowance.
(2) Loans by type as a percent of total loans.
Investment Portfolio
The year-end book values of investment securities for each of the
last three years is presented in the tables below.
Held-to-maturity
December 31,
----------------------------------------
1994 1993 1992
---------- ---------- ----------
(In thousands)
U.S. Treasury obligations . . . . . . . . . . . . . . . . . . . . . $ 98,971 $ 16,329 $ 300,707
Obligations of U.S. government agencies and corporations:
Mortgage-backed . . . . . . . . . . . . . . . . . . . . . . . . . 1,577,095 1,753,662 1,738,379
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262,469 4,259 293,626
Obligations of states and political subdivisions. . . . . . . . . . 3,834 16,838 222,335
Other securities:
Collateralized auto receivables . . . . . . . . . . . . . . . . . -- 12,364 28,935
Corporate notes and bonds . . . . . . . . . . . . . . . . . . . . -- -- 10,580
Foreign debt securities . . . . . . . . . . . . . . . . . . . . . 2,050 2,155 --
Money market mutual funds . . . . . . . . . . . . . . . . . . . . 195 212 220
---------- ---------- ----------
Total debt securities, at amortized cost. . . . . . . . . . . . $1,944,614 $1,805,819 $2,594,782
========== ========== ==========
Market value in excess of (less than) book value. . . . . . . . . . $ (109,714) $ 1,761 $ 45,842
========== ========== ==========
Available-for-sale
December 31,
-------------------------
1994 1993
----------- -----------
(In thousands)
U.S. Treasury obligations . . . . . . . . . . . . . . . . . . . . . $266,992 $ 308,331
Obligations of U.S. government agencies and corporations:
Mortgage-backed . . . . . . . . . . . . . . . . . . . . . . . . . 130,038 218,848
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268,872 306,276
Obligations of states and political subdivisions . . . . . . . . . 174,806 242,933
Other securities:
Collateralized credit card receivables. . . . . . . . . . . . . . 58,518 --
Corporate notes and bonds . . . . . . . . . . . . . . . . . . . . 38,660 40,237
-------- ----------
Total debt securities . . . . . . . . . . . . . . . . . . . . . 937,886 1,116,625
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . 1,194 1,151
-------- ----------
Total debt and equity securities, at estimated fair value . . $939,080 $1,117,776
======== ==========
Other securities(1)
December 31,
----------------------------------------
1994 1993 1992
---------- ---------- ----------
(In thousands)
Federal Home Loan Bank stock. . . . . . . . . . . . . . . . . . . . $37,645 $24,911 $ 1,166
Federal Reserve Bank stock. . . . . . . . . . . . . . . . . . . . . 14,242 12,637 8,500
Other equity securities . . . . . . . . . . . . . . . . . . . . . . 1,549 1,559 3,665
------- ------- -------
Total other equity securities, at cost. . . . . . . . . . . . . $53,436 $39,107 $13,331
======= ======= =======
<FN>
____________
(1) Equity securities that do not have a readily determinable fair value.
At December 31, 1993, the Company elected to adopt FAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." In
accordance with FAS No. 115, prior period financial statements were not
restated to reflect the change in accounting principle. Pursuant to
FAS No. 115 the securities classified as available-for-sale are carried
at fair value. The total carrying value of the available-for-sale
securities portfolio included unrealized losses of $36.8 million at
December 31, 1994 and unrealized gains of $41.2 million at December 31,
1993.
Exclusive of the adjustment to fair value for the available-for-
sale portfolio, total investment securities increased $52.4 million
between December 31, 1994 and 1993. Acquisition transactions accounted
for as purchases added $269.3 million of investment securities.
However, offsetting this increase was the use of the proceeds of
maturities and prepayments for loan growth. Between December 31, 1993
and 1992 the investment securities portfolio increased $313.4 million,
exclusive of the adjustment to fair value for the available-for-sale
portfolio. Acquisition transactions accounted for as purchases added
$112.0 million. The remainder of the increase was attributable to the
Company becoming more fully invested.
Excluding U.S. Treasury obligations and obligations of U.S.
government agencies and corporations, there were no security holdings
of any one issuer at December 31, 1994 that exceeded 10% of
consolidated stockholders' equity.
The tables below summarize the maturity and yield distribution of
debt securities in the investment portfolio at December 31, 1994.
Held-to-maturity
Maturing
------------------------------------------------------------------------------------------
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years Total
---------------- ---------------- ---------------- ---------------- ------------------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
-------- ------ -------- ------ -------- ------ -------- ------ ---------- ------
(Dollars in thousands)
U.S. Treasury
obligations . . . . $ 645 4.79% $ 98,326 5.95% $ -- --% $ -- --% $ 98,971 5.95%
Obligations of
U.S. government
agencies and
corporations:
Mortgage-backed(1) 237 6.76 291,742 6.47 85,051 5.56 1,200,065 5.75 1,577,095 5.87
Other. . . . . . . 122 4.50 262,347 6.08 -- -- -- -- 262,469 6.08
Obligations of
states and
political
subdivisions(2) . . 999 5.89 2,835 6.06 -- -- -- -- 3,834 6.02
Other securities:
Foreign debt
securities. . . . -- -- 25 8.45 2,025 11.54 -- -- 2,050 11.50
Money market
mutual funds. . . 195 5.00 -- -- -- -- -- -- 195 5.00
------ -------- -------- ---------- ----------
Total. . . . . . $2,198 5.50 $655,275 6.23 $ 87,076 5.70 $1,200,065 5.75 $1,944,614 5.91
====== ======== ======== ========== ==========
<FN>
____________
(1) Mortgage-backed securities have been included in the maturity tables based on their final maturities.
(2) Yields on tax-preferred securities are shown on a fully tax-equivalent basis assuming a marginal
tax rate of 35%.
Available-for-sale
Maturing
------------------------------------------------------------------------------------------
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years Total
---------------- ---------------- ---------------- ---------------- ------------------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
-------- ------ -------- ------ -------- ------ -------- ------ ---------- ------
(Dollars in thousands)
U.S. Treasury
obligations . . . . $27,789 5.33% $255,970 5.51% $ -- --% $ -- --% $283,759 5.49%
Obligations of
U.S. government
agencies and
corporations:
Mortgage-backed(1) -- -- 638 7.02 18,697 6.91 117,147 7.68 136,482 7.57
Other. . . . . . . 4,383 7.09 269,341 5.57 9,013 8.03 -- -- 282,737 5.67
Obligations of
states and
political
subdivisions(2) . . 56,517 13.00 61,348 12.82 32,744 12.66 17,202 14.16 167,811 12.99
Collateralized
credit card
receivables . . . . -- -- 9,713 6.39 52,866 6.09 -- -- 62,579 6.14
Corporate notes
and bonds . . . . . 500 7.35 40,494 6.49 214 9.13 -- -- 41,208 6.51
------- -------- -------- -------- --------
Total. . . . . . $89,189 10.28 $637,504 6.32 $113,534 8.28 $134,349 8.51 $974,576 7.21
======= ======== ======== ======== ========
<FN>
____________
(1) Mortgage-backed securities have been included in the maturity tables based on their final maturities.
(2) Yields on tax-preferred securities are shown on a fully tax-equivalent basis assuming a marginal
tax rate of 35%.
At December 31, 1994 the held-to-maturity portfolio included
$637.9 million of floating-rate mortgage-backed securities guaranteed
by U.S. government agencies or corporations. The yields on these
securities float with various indices, principally the Federal Home
Loan Bank ("FHLB") Board 11th District average cost of funds index,
which reduces the interest rate risk associated with these investments
as the changes in these indices have historically correlated with the
changes in the Company's cost of funds. Also included in the held-to-
maturity portfolio at December 31, 1994 were $663.0 million of
collateralized mortgage obligations ("CMO"). These investments are
secured by mortgage-backed securities guaranteed by agencies or
corporations of the U.S. government. Of this CMO portfolio, $140.6
million also float on a monthly basis, most with the FHLB 11th District
average cost of funds. The remaining $522.4 million of fixed-rate CMOs
in the held-to-maturity portfolio are comprised of classes with an
anticipated average duration of two to three years.
The December 31, 1994 available-for-sale mortgage-backed
securities portfolio was comprised principally of securities issued by
U.S. government agencies and corporations with an estimated average
duration of up to three years.
In February 1995, the Company sold $424.0 million of fixed-rate
debt securities classified as available-for-sale, resulting in a gross
realized loss of $22.4 million. The debt securities sold consisted
primarily of U.S. treasury obligations and obligations of U.S.
government agencies.
Deposits
Total deposits increased $210.6 million or 3.9% between December
31, 1994 and 1993. During the second quarter of 1994, the Company
acquired $548.0 million of deposits through acquisitions accounted for
as purchases. The increased deposits from acquisitions were partially
offset by attrition associated with increased bank and nonbank
competition and the sale of three branches with deposits totaling $37.9
million. In response to the increased bank and nonbank competition,
time deposit products have been offered which provide the customer with
the opportunity to reprice the instruments during their term. At
December 31, 1994, $207.5 million of these adjustable-rate time
deposits were outstanding. In late December 1994, the Company
initiated a special time deposit promotion for deposits with 7-month
and 13-month maturities, and in January 1995, the Company introduced a
new money market savings product which has a rate that is tied to a
money market fund index. Core deposits (demand, interest checking,
savings, and time deposits under $100,000) represented 91.3% of total
deposits at December 31, 1994 compared to 92.8% at December 31, 1993.
The following table sets forth, by time remaining to maturity,
certificates and other time deposits of $100,000 or more:
December 31, 1994
-----------------
(In thousands)
Under three months . . . . . . . . . . . . . . . . . . . . . . . . . . $128,481
Over three through six months . . . . . . . . . . . . . . . . . . . . 58,259
Over six through twelve months . . . . . . . . . . . . . . . . . . . . 97,504
Over twelve months . . . . . . . . . . . . . . . . . . . . . . . . . . 119,213
--------
$403,457
========
Brokered deposits were immaterial at December 31, 1994.
The following table provides a breakdown of average deposits and
average rates paid, by type, for the past three years.
1994 1993 1992
-------------------- -------------------- --------------------
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
---------- -------- ---------- -------- ---------- --------
(Dollars in thousands)
Noninterest-bearing deposits. . . . . . . . $ 985,412 -- $ 947,924 -- $ 861,647 --
Interest-bearing deposits:
Interest-bearing checking deposits. . . . 967,119 2.20% 900,333 2.47% 730,577 3.07%
Savings deposits . . . . . . . . . . . . 1,210,933 2.60 1,216,624 2.63 1,126,017 3.36
Time deposits under $100,000. . . . . . . 2,014,562 4.36 1,986,635 4.52 1,874,455 5.71
Time deposits of $100,000 or more . . . . 386,044 4.37 392,341 3.56 433,702 3.74
---------- ---------- ----------
Total interest-bearing deposits . . . . 4,578,658 3.44 4,495,933 3.52 4,164,751 4.41
---------- ---------- ----------
Total deposits . . . . . . . . . . . $5,564,070 $5,443,857 $5,026,398
========== ========== ==========
Short-term Borrowings
Short-term borrowings include federal funds purchased, securities
sold under agreements to repurchase, Federal Home Loan Bank borrowings
with a maturity of less than one year, commercial paper, notes payable,
treasury tax and loan accounts and other borrowings. Amounts and
interest rates related to short-term borrowings for the last three
years were as follows:
1994 1993 1992
-------- -------- --------
(Dollars in thousands)
Federal funds purchased:
Outstanding at year-end . . . . . . . . . . . . . . . . . . . . . . $391,970 $367,726 $260,505
Average interest rate at year-end . . . . . . . . . . . . . . . . . 5.85% 2.96% 2.92%
Average outstanding during the year . . . . . . . . . . . . . . . . $471,437 $328,758 $199,433
Weighted average interest rate . . . . . . . . . . . . . . . . . . 4.21% 3.00% 3.38%
Highest outstanding balance at any month-end . . . . . . . . . . . $545,495 $474,856 $339,511
Securities sold under agreements to repurchase:
Outstanding at year-end . . . . . . . . . . . . . . . . . . . . . . $541,736 $123,901 $ 65,089
Average interest rate at year-end . . . . . . . . . . . . . . . . . 5.66% 3.27% 3.49%
Average outstanding during the year . . . . . . . . . . . . . . . . $166,519 $ 66,532 $ 60,931
Weighted average interest rate . . . . . . . . . . . . . . . . . . 4.46% 3.10% 3.58%
Highest outstanding balance at any month-end . . . . . . . . . . . $541,736 $129,208 $112,345
Federal Home Loan Bank borrowings:
Outstanding at year-end . . . . . . . . . . . . . . . . . . . . . . $291,800 $175,000 $ --
Average interest rate at year-end . . . . . . . . . . . . . . . . . 5.88% 3.76% --%
Average outstanding during the year . . . . . . . . . . . . . . . . $268,548 $ 77,534 $ --
Weighted average interest rate . . . . . . . . . . . . . . . . . . 5.63% 5.05% --%
Highest outstanding balance at any month-end . . . . . . . . . . . $341,800 $175,000 $ --
Commercial paper:
Outstanding at year-end . . . . . . . . . . . . . . . . . . . . . . $ -- $ -- $ 425
Average interest rate at year-end . . . . . . . . . . . . . . . . . --% --% 2.80%
Average outstanding during the year . . . . . . . . . . . . . . . . $ -- $ 184 $ 1,118
Weighted average interest rate . . . . . . . . . . . . . . . . . . --% 2.85% 3.85%
Highest outstanding balance at any month-end . . . . . . . . . . . $ -- $ 625 $ 3,528
Notes payable:
Outstanding at year-end . . . . . . . . . . . . . . . . . . . . . . $ 20,000 $ -- $ 5,961
Average interest rate at year-end . . . . . . . . . . . . . . . . . 6.19% --% 6.57%
Average outstanding during the year . . . . . . . . . . . . . . . . $ 22,965 $ 3,156 $ 10,276
Weighted average interest rate . . . . . . . . . . . . . . . . . . 5.44% 7.93% 8.06%
Highest outstanding balance at any month-end . . . . . . . . . . . $ 60,000 $ 5,884 $ 13,360
Treasury tax and loan and other borrowings:
Outstanding at year-end . . . . . . . . . . . . . . . . . . . . . . $ 23,001 $ 23,002 $ 17,306
Average interest rate at year-end . . . . . . . . . . . . . . . . . 5.20% 2.75% 2.67%
Average outstanding during the year . . . . . . . . . . . . . . . . $ 19,501 $ 18,361 $ 17,325
Weighted average interest rate . . . . . . . . . . . . . . . . . . 3.92% 2.97% 3.51%
Highest outstanding balance at any month-end . . . . . . . . . . . $ 23,344 $ 26,768 $ 25,397
The increased volume of securities sold under agreements to
repurchase includes the effect of the Company's emphasis on a cash-
management service which sweeps customers' investable deposits into
over-night securities repurchase agreements. Some portion of these
funds were new funds for the Company and the remainder were previously
in interest-bearing deposit accounts with the Company.
Asset and Liability Management
Interest Rate Risk: The Company evaluates its interest rate risk
using various tools, including interest sensitivity simulation and gap
analysis. From time to time, interest rate swaps are used to modify
the interest sensitivity position inherent in the repricing
characteristics of specific assets or liabilities. The net interest
received or paid on the interest rate swaps is accounted for as an
adjustment to the interest income or interest expense on the assets or
liabilities, respectively, that the swap was intended to modify.
Additional information about the Company's interest rate swaps is
included in Note 20 of the Notes to Consolidated Financial Statements.
The following table presents the Company's interest sensitivity
gap position as of December 31, 1994. Most assets and liabilities have
been included in the table based on the timing of their contractual
maturities or repricing characteristics. Fixed-rate mortgage-backed
securities are included in repricing-maturity categories based upon
estimates of prepayments provided by a third-party market information
service. These estimates may vary depending upon both the volatility
and the level of market interest rates in relationship to the coupon
rates of the underlying mortgages. Interest-bearing checking and
savings deposits are included in the under-three-months category. This
table does not indicate the effect the repricing of assets and
liabilities would have on net interest income. Also, it does not
reflect interest rate exposures, such as basis risk (the changing
relationships between asset rates and liability rates of similar
maturity), prepayment risk, intra-period sensitivity, and the effect of
interest rate floors and ceilings.
Repricing Maturity
----------------------------------------------------------------------------------
Over Three Over Six Over One
Under Through Through Through Over
Three Six Twelve Five Five Noninterest-
Months Months Months Years Years bearing Total
---------- ---------- ---------- --------- ---------- ----------- ----------
(Dollars in thousands)
Assets:
Loans and leases. . . . . . $2,054,228 $ 186,492 $ 333,239 $ 929,612 $463,008 $ 39,088 $4,005,667
Investment and
trading securities . . . . 712,211 158,854 242,679 1,574,368 249,737 -- 2,937,849
Other earning assets . . . 4,670 -- 100 399 -- -- 5,169
Nonearning assets . . . . . -- -- -- -- -- 780,655 780,655
---------- ---------- ---------- ---------- -------- ---------- ----------
Total assets . . . . . . $2,771,109 $ 345,346 $ 576,018 $2,504,379 $712,745 $ 819,743 $7,729,340
========== ========== ========== ========== ======== ========== ==========
Liabilities and
stockholders' equity:
Deposits. . . . . . . . . . $2,832,084 $ 346,542 $ 420,075 $1,011,139 $ 4,395 $1,032,913 $5,647,148
Federal funds purchased
and securities sold under
agreements to repurchase . 933,706 -- -- -- -- -- 933,706
Federal Home Loan Bank
borrowings . . . . . . . . 324,297 91,800 -- 25,000 -- -- 441,097
Other borrowings. . . . . . 43,001 -- -- -- -- -- 43,001
Long-term debt . . . . . . 4,412 12 26 204 31 -- 4,685
Other liabilities . . . . . -- -- -- -- -- 57,636 57,636
Stockholders' equity . . . -- -- -- -- -- 602,067 602,067
---------- ---------- ---------- ---------- -------- ---------- ----------
Total liabilities and
stockholders' equity . . $4,137,500 $ 438,354 $ 420,101 $1,036,343 $ 4,426 $1,692,616 $7,729,340
========== ========== ========== ========== ======== ========== ==========
Interest rate swaps . . . . . $ (51,000) $ (86,000) $ 14,000 $ 123,000 $ -- $ -- $ --
Repricing gap adjusted
for interest rate swaps. . . (1,417,311) (178,632) 168,482 1,620,067 717,053 (909,659) --
Cumulative adjusted
repricing gap. . . . . . . . (1,417,311) (1,595,943) (1,427,461) 192,606 909,659 -- --
Cumulative adjusted rate-
sensitive assets/
rate-sensitive liabilities . .67 .68 .74 (*) (*) (*)
<FN>
___________
(*) Not meaningful.
The Company has a negative cumulative repricing gap in the one-
year horizon. Consequently, a rising rate environment would adversely
impact the net interest margin. Simulation modeling has demonstrated
that a sudden and large increase in rates or a dramatic narrowing in
the spread between asset yields and liability costs could result in a
significant adverse impact on the net interest margin; however, the
adverse impact is more moderate if interest rates increase gradually.
The adverse impact of rising rates could also be mitigated by loan
growth. As described in Note 5 of the Notes to Consolidated Financial
Statements, the Company sold $424.0 million of low-yielding, fixed-rate
securities in February 1995 to reposition its statement of condition to
reduce the Company's interest rate sensitivity. The proceeds of the
sale are being used to reduce short-term borrowings and reinvest in
variable rate or short-term instruments.
Liquidity: The Company's consolidated statements of cash flows
are presented elsewhere in this report. These statements distinguish
cash flows as operating, investing, and financing. They provide a
historical accounting of the Company's ability to generate cash
required to meet its customers' and creditors' demands. Certain
statement-of-condition items and ratios are indicative of the Company's
liquidity position at December 31, 1994. The loans-to-deposits and
loans-to-assets ratios averaged 64.4% and 48.9%, respectively, during
1994. Also during 1994, average core deposits (demand, interest
checking, savings, and time deposits under $100,000) represented 92.1%
of total deposits and 69.9% of average assets.
At December 31, 1994, federal funds purchased, securities sold
under agreements to repurchase, Federal Home Loan Bank borrowings, and
other borrowings totaled $1.4 billion. At that same date, additional
borrowing liquidity was available in the form of $763.6 million of
unpledged investment securities classified as either held-to-maturity
or available-for-sale which could secure short-term borrowing
requirements. In addition, the available-for-sale securities could be
sold. Regular maturities and prepayments of investment securities,
particularly the mortgage-backed securities, also generate significant
liquidity. Scheduled principal reductions and prepayments on the
mortgage-backed securities approximated $76.0 million during the fourth
quarter of 1994.
As disclosed in Note 20 of the Notes to Consolidated Financial
Statements, the Company had commitments to extend credit at December
31, 1994, including standby letters of credit of $101.4 million,
commercial letters of credit of $24.2 million, unused credit card lines
of $480.8 million, commitments to fund 1-4 family residential mortgage
loans of $51.2 million, and other loan commitments of $1.3 billion.
Some of these commitments will not be fully utilized, others will
expire without being drawn upon, and the commitments will not all be
used at the same time. Accordingly, management anticipates that the
Company has ample liquidity to meet these and other demands.
Capital Resources
At December 31, 1994, total stockholders' equity was $602.1
million or 7.79% of total assets compared to $606.9 million or 8.81% of
total assets at December 31, 1993. Exclusive of the net unrealized
gains or losses on available-for-sale securities, stockholders' equity
was $624.5 million and $581.7 million at December 31, 1994 and 1993,
respectively. For 1994, total stockholders' equity averaged $596.2
million or 8.13% of average assets. The prior year average equity was
$563.3 million or 8.43% of average assets.
Banking system regulators apply two measures of capital adequacy
to banking companies: the risk-based capital and leverage ratios. The
risk-based capital rules provide for the weighting of assets and
off-balance-sheet commitments and contingencies according to prescribed
risk categories ranging from 0 to 100%. Regulatory capital is then
divided by risk-weighted assets to determine the risk-adjusted capital
ratios. The leverage ratio supplements the risk-based capital
guidelines by placing a constraint on the degree to which a banking
company can leverage its equity capital, regardless of the balance
sheet composition. The leverage ratio is computed by dividing Tier I
capital by quarter-to-date average assets less certain intangibles.
The following table presents the Company's risk-based capital and
leverage ratios together with the required minimums. The ratios
exclude the net unrealized gains or losses on available-for-sale
securities as prescribed by the regulators.
December 31,
-------------------------------
1994 1993
------------ ------------
(Dollars in thousands)
Tier I capital:
Common stockholders' equity . . . . . . . . . . . . . . . . . . . . . . $ 527,529 $ 484,782
Preferred stockholders' equity. . . . . . . . . . . . . . . . . . . . . 96,920 96,920
Less intangible assets (1) . . . . . . . . . . . . . . . . . . . . . . (84,709) (65,458)
---------- ----------
Total Tier I capital . . . . . . . . . . . . . . . . . . . . . . . . 539,740 516,244
---------- ----------
Tier II capital:
Allowance for credit losses (2) . . . . . . . . . . . . . . . . . . . . 61,041 50,879
---------- ----------
Total regulatory capital. . . . . . . . . . . . . . . . . . . . . . $ 600,781 $ 567,123
========== ==========
Risk-weighted assets and off-balance-sheet
commitments and contingencies . . . . . . . . . . . . . . . . . . . . . $4,883,179 $4,070,170
========== ==========
Adjusted average assets (3) . . . . . . . . . . . . . . . . . . . . . . . $7,539,414 $6,860,492
========== ==========
Regulatory
Minimums
----------
Risk-based capital ratios:
Tier I . . . . . . . . . . . . . . . . . . . . . . . . 4.00% 11.05% 12.68%
Total . . . . . . . . . . . . . . . . . . . . . . . . . 8.00 12.30 13.93
Leverage ratio . . . . . . . . . . . . . . . . . . . . . 3.00 7.16 7.52
<FN>
____________
(1) All intangible assets except purchased mortgage servicing rights of $2.6 million and purchased credit card
relationships of $8.3 million are subtracted from capital.
(2) The allowance for credit losses is limited to 1.25% of risk-weighted assets.
(3) Quarter-to-date average assets excluding the net unrealized gains or losses on available-for-sale securities
and all intangibles except purchased mortgage servicing rights and purchased credit card relationships.
Subsequent to December 31, 1994 the banking system regulators
amended the regulatory capital rules to limit the amount of deferred
tax assets that are allowable in computing the regulatory capital
ratios. If the amendment to the regulatory capital rules limiting net
deferred tax assets included in Tier I capital had been effective at
December 31, 1994, the Company's risk-based and leverage ratios would
have been as follows:
December 31, 1994
-----------------
Risk-based capital ratios:
Tier I . . . . . . . . . . . . . . . . . . . . . . . . . 10.90
Total. . . . . . . . . . . . . . . . . . . . . . . . . . 12.15
Leverage ratio . . . . . . . . . . . . . . . . . . . . . . 7.06
As indicated in the preceding tables, the Company's risk-based
and leverage capital ratios substantially exceed the minimums required
by banking system regulators.
Under regulations adopted by the Federal Deposit Insurance
Corporation, a bank is typically defined to be "well capitalized" if it
maintains a Tier I capital ratio of at least 6.0%, a total risk-based
capital ratio of at least 10.0% and a leverage ratio of at least 5.0%.
It is the Company's intention to maintain sufficient capital in each of
its bank subsidiaries to permit them to maintain a "well capitalized"
designation. The capital ratios for both of the Company's subsidiary
banks exceeded the "well capitalized" regulatory capital requirements
at December 31, 1994.
For 1993, the Company's board of directors had authorized the
purchase of up to 500,000 shares of the Company's common stock to be
used for general corporate purposes. A separate board of directors
action in December 1993 authorized the purchase of an additional 71,518
shares to be used to acquire the minority interests of the subsidiaries
of First Dodge City Bancshares, Inc., a 1994 acquisition. A total of
111,518 shares were purchased in 1993, 40,000 shares for general
corporate purposes and 71,518 shares specifically for the pending
acquisition. The purchase of up to 500,000 common shares, or the
equivalent in depositary shares representing interests in the Company's
Class A Cumulative Preferred Stock, or a combination of the two was
authorized for 1994. A board of directors action in April 1994
specifically reserved a portion of this previous authorization to be
used for the acquisition of Oklahoma Savings, Inc. ("OSI"). At
December 31, 1994, 355,466 shares of the Company's common stock had
been purchased to be used in the OSI acquisition, which was consummated
on January 6, 1995 and the shares were reissued. For 1995 the
Company's board of directors has authorized the purchase of up to
500,000 common shares, or the equivalent in depositary shares, or a
combination of the two.
Pending Acquisitions
A discussion of acquisitions pending at December 31, 1994 is
included in Item 1, "Business," of PART I of this Annual Report on Form
10-K. Shares of the Company's common stock will be used to consummate
the OSI and Standard Bancorporation, Inc. acquisitions. Funding for
the pending cash purchase acquisition will be provided by available
funds.
Parent Company Funding Sources and Dividends
The ability of the parent company to fund various operating
expenses and dividend requirements is dependent in part on its ability
to obtain funds from its bank subsidiaries. Historically, these funds
have been primarily provided by intercompany dividends. Intercompany
dividends amounted to $144.2 million, $76.9 million, and $57.8 million
for 1994, 1993, and 1992, respectively. The approval of the
Comptroller of the Currency ("Comptroller") is required if total
dividends declared by a national bank in any one year exceed the bank's
net profits for that year plus the profits for the two preceding years
retained by the bank. In 1995, the subsidiary banks may distribute to
the parent company (in addition to their 1995 net profits) an aggregate
of approximately $39.9 million in dividends without approval from
regulatory agencies.
Because of the financial strength of the parent company and the
anticipated earnings capacity of both the BANK IV banks, it is
anticipated that the banks will be able to obtain permission from the
Comptroller to pay additional dividends in 1995 to the extent justified
by their respective financial condition.
At December 31, 1994, the parent company had approximately $31.1
million of cash and short-term investments. The parent company's
borrowings at the same date totaled $24.4 million, composed of a $4.4-
million term loan which bears interest at 8.6% and matures in March
1995 and $20.0 million borrowed under its line of credit. On January
3, 1995 this line of credit was replaced by two new credit agreements.
These credit agreements provide the Company with a combined $100.0-
million line of credit for a one-year period. The credit agreements
subject the Company to certain restrictions and covenants related to,
among others, consolidated stockholders' equity and the maintenance of
specific ratios related to leverage, risk-based capital, and
nonperforming assets. The parent company is currently in compliance
with all restrictions and covenants under these agreements.
Recently Issued Accounting Standards
In May 1993, the Financial Accounting Standards Board issued FAS
No. 114, which addresses the accounting by creditors for impairment of
certain loans. It is applicable to all creditors and to all loans,
uncollateralized as well as collateralized, except large groups of
smaller-balance homogeneous loans that are collectively evaluated for
impairment, loans that are measured at fair value or at the lower of
cost or fair value, leases, and debt securities. It applies to all
loans that are restructured in a troubled debt restructuring involving
a modification of terms. The Statement requires that, when evaluating
the need for an allowance for credit losses on impaired loans that are
within the scope of this Statement, the loss accrual be measured based
on the present value of expected future cash flows discounted at the
loan's effective interest rate or, as a practical expedient, at the
loan's observable market price or the fair value of the collateral if
the loan is collateral-dependent.
FAS No. 114 was amended by FAS No. 118 in October of 1994 to
allow a creditor to use existing methods for recognizing interest
income on an impaired loan. It also amended the disclosure
requirements of FAS No. 114 to require information about the recorded
investment in certain impaired loans and about how a creditor
recognizes interest income related to those impaired loans. FAS No.
114, as amended by FAS No. 118, is effective for fiscal years beginning
after December 15, 1994. The Company has not completed the analyses
required to estimate the impact of FAS 114; however, the Company does
not believe the adoption of the new rules will have a material adverse
effect on its financial condition.
Effects of Inflation and Changing Prices
Virtually all assets and liabilities of a banking organization
are monetary in nature. As such, they represent obligations to pay or
receive fixed and determinable amounts of money which are not affected
by future changes in prices. Changes in interest rates are the
greatest determinant of bank earnings. However, interest rates do not
necessarily move in the same direction or with the same magnitude as
prices of other goods and services. A financial institution can manage
the risk of changes in interest rates by matching the maturities of its
liabilities against the maturities of its interest-earning assets. How
well the institution copes with changing interest rates may then be
determined by examining its net yield on earning assets and analyzing
its asset and liability structure. Accordingly, reference to the
various supplementary schedules shown elsewhere in this report will
assist in the understanding of how the Company is positioned to react
to changing interest rates.
Quarterly Financial Data (Unaudited)
1994
----------------------------------------------
4th 3rd 2nd 1st
------- ------- ------- -------
(Dollars in thousands, except per share data)
Summary Income Statement Information:
Interest income . . . . . . . . . . . . . . . . . . . . . $131,317 $127,336 $117,866 $106,955
Interest expense. . . . . . . . . . . . . . . . . . . . . 60,853 54,923 48,196 42,582
-------- -------- -------- --------
Net interest income . . . . . . . . . . . . . . . . . . . 70,464 72,413 69,670 64,373
Provision for credit losses . . . . . . . . . . . . . . . -- -- -- 275
-------- -------- -------- --------
Net interest income after provision for credit losses . . 70,464 72,413 69,670 64,098
Investment securities gains (losses). . . . . . . . . . . (50) 56 62 3,564
Other noninterest income. . . . . . . . . . . . . . . . . 24,911 24,107 22,508 22,677
Noninterest expense . . . . . . . . . . . . . . . . . . . (63,534) (64,163) (60,606) (62,132)
-------- -------- -------- --------
Income before income taxes. . . . . . . . . . . . . . . . 31,791 32,413 31,634 28,207
Income tax expense. . . . . . . . . . . . . . . . . . . . 9,735 10,691 10,819 9,678
-------- -------- -------- --------
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 22,056 $ 21,722 $ 20,815 $ 18,529
======== ======== ======== ========
Net income applicable to common
and common-equivalent shares . . . . . . . . . . . . . . $ 20,306 $ 19,972 $ 19,065 $ 16,779
======== ======== ======== ========
Per Common Share Data:
Earnings per common and common-equivalent share:
Primary . . . . . . . . . . . . . . . . . . . . . . . . $ .76 $ .74 $ .71 $ .62
Fully diluted . . . . . . . . . . . . . . . . . . . . . .73 .72 .69 .60
Common dividend . . . . . . . . . . . . . . . . . . . . . .26 .26 .26 .26
Book value (period-end) . . . . . . . . . . . . . . . . . 18.67 18.51 18.36 18.50
Market value (period-end) bid . . . . . . . . . . . . . . 30 1/2 29 3/4 28 3/4 25 1/2
Market value (bid):
High . . . . . . . . . . . . . . . . . . . . . . . . . $ 32 1/2 $ 30 $ 31 1/4 $ 28 3/4
Low . . . . . . . . . . . . . . . . . . . . . . . . . . 29 1/4 27 3/4 26 25 1/4
As Previously Reported:
Net interest income . . . . . . . . . . . . . . . . . . . $ 70,464 $ 72,413 $ 69,670 $ 62,797
Net income. . . . . . . . . . . . . . . . . . . . . . . . 22,056 21,722 20,815 20,201
Net income applicable to common
and common-equivalent shares . . . . . . . . . . . . . . 20,306 19,972 19,065 18,451
Fully diluted earnings per common share . . . . . . . . . .73 .72 .69 .68
1993
----------------------------------------------
4th 3rd 2nd 1st
------- ------- ------- -------
(Dollars in thousands, except per share data)
Summary Income Statement Information:
Interest income . . . . . . . . . . . . . . . . . . . . . $112,614 $114,050 $110,678 $106,571
Interest expense. . . . . . . . . . . . . . . . . . . . . 44,662 46,835 45,222 42,783
-------- -------- -------- --------
Net interest income . . . . . . . . . . . . . . . . . . . 67,952 67,215 65,456 63,788
Provision for credit losses . . . . . . . . . . . . . . . 639 205 2,895 3,226
-------- -------- -------- --------
Net interest income after provision for credit losses . . 67,313 67,010 62,561 60,562
Investment securities gains . . . . . . . . . . . . . . . 355 168 208 755
Other noninterest income. . . . . . . . . . . . . . . . . 22,478 21,032 20,174 21,112
Noninterest expense . . . . . . . . . . . . . . . . . . . (61,353) (66,511) (62,920) (63,558)
-------- -------- -------- --------
Income before income taxes and cumulative
effect of a change in accounting principle . . . . . . . 28,793 21,699 20,023 18,871
Income tax expense. . . . . . . . . . . . . . . . . . . . 8,165 4,997 4,615 4,899
-------- -------- -------- --------
Income before cumulative effect
of a change in accounting principle. . . . . . . . . . . 20,628 16,702 15,408 13,972
Cumulative effect of a change in accounting principle . . -- -- (5) 10,587
-------- -------- -------- --------
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 20,628 $ 16,702 $ 15,403 $ 24,559
======== ======== ======== ========
Net income applicable to common
and common-equivalent shares . . . . . . . . . . . . . . $ 18,878 $ 14,952 $ 13,653 $ 22,809
======== ======== ======== ========
Per Common Share Data:
Earnings per common and common-equivalent share:
Primary . . . . . . . . . . . . . . . . . . . . . . . . $ .71 $ .57 $ .52 $ .87
Fully diluted . . . . . . . . . . . . . . . . . . . . . .68 .55 .51 .81
Common dividend . . . . . . . . . . . . . . . . . . . . . .26 .24 .24 .24
Book value (period-end) . . . . . . . . . . . . . . . . . 18.73 17.82 17.61 17.28
Market value (period-end) bid . . . . . . . . . . . . . . 28 3/4 29 3/4 30 1/4 30 3/4
Market value (bid):
High. . . . . . . . . . . . . . . . . . . . . . . . . . $ 30 $ 31 $ 30 3/4 $ 31
Low . . . . . . . . . . . . . . . . . . . . . . . . . . 25 3/4 28 1/2 26 3/4 28 1/2
As Previously Reported:
Net interest income . . . . . . . . . . . . . . . . . . . $ 66,267 $ 67,215 $ 65,456 $ 62,262
Net income. . . . . . . . . . . . . . . . . . . . . . . . 20,182 16,702 15,403 24,196
Net income applicable to common
and common-equivalent shares . . . . . . . . . . . . . . 18,432 14,952 13,653 22,446
Fully diluted earnings per common share . . . . . . . . . .68 .55 .51 .81
The quarterly price range of the Company's common stock is the
closing bid price, as reported by the NASDAQ national market system.
Such over-the-counter market quotations reflect inter-dealer prices
without retail markup, markdown, or commission and may not necessarily
represent actual transactions.
Information for previously reported quarters has been restated to
reflect acquisitions accounted for as poolings of interests.