UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 10-Q
(Mark One)
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For quarter ended March 31, 1995
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from ____________________ to ____________________
Commission File number 0-4170
Fourth Financial Corporation
(Exact name of Registrant as specified in its charter)
Kansas 48-0761683
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 North Broadway
Wichita, Kansas 67202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (316) 261-4444
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 such shorter
period that Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes __X__ No ___
There were 27,547,617 shares of common stock, par value $5 per
share, of the registrant outstanding as of April 28, 1995.
FOURTH FINANCIAL CORPORATION
TABLE OF CONTENTS
PART I
Item in
Form 10-Q Page
- --------- ----
1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . .
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . .
PART II
1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . .
4. Submission of Matters to a Vote of Security Holdings. . . . . . .
6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . .
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART I
Item 1. Financial Statements.
Set forth below are the consolidated financial statements of Fourth
Financial Corporation.
Consolidated Statements of Condition as of March 31, 1995,
December 31, 1994 and March 31, 1994
Consolidated Statements of Income for the three-month periods
ended March 31, 1995 and 1994
Consolidated Statements of Changes in Stockholders' Equity for
the three-month periods ended March 31, 1995 and 1994
Consolidated Statements of Cash Flows for the three-month
periods ended March 31, 1995 and 1994
Notes to Consolidated Financial Statements
FOURTH FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
(Unaudited)
March 31, December 31, March 31,
1995 1994 1994
------------ ------------ ------------
(Dollars in thousands)
Assets:
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . $ 384,924 $ 438,930 $ 319,594
Interest-bearing deposits in other financial institutions . . . . . 1,267 499 2,151
Federal funds sold and securities purchased under
agreements to resell . . . . . . . . . . . . . . . . . . . . . . . 100,850 8,470 27,108
Securities:
Held-to-maturity (market value-$1,832,050, $1,847,767,
and $1,949,667, respectively). . . . . . . . . . . . . . . . . . 1,898,070 1,958,190 1,971,101
Available-for-sale (at market value). . . . . . . . . . . . . . . 552,256 943,970 1,097,549
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,227 53,677 44,064
Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,414 719 2,972
Loans and leases:
Total loans and leases. . . . . . . . . . . . . . . . . . . . . . 4,250,426 4,062,051 3,310,641
Allowance for credit losses . . . . . . . . . . . . . . . . . . . (73,647) (72,867) (68,617)
---------- ---------- ----------
Net loans and leases. . . . . . . . . . . . . . . . . . . . . . 4,176,779 3,989,184 3,242,024
Bank premises and equipment, net. . . . . . . . . . . . . . . . . . 158,457 158,885 151,358
Income receivable and other assets. . . . . . . . . . . . . . . . . 128,455 166,309 151,734
Intangible assets, net. . . . . . . . . . . . . . . . . . . . . . . 98,101 95,606 64,917
---------- ---------- ----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . $7,555,800 $7,814,439 $7,074,572
========== ========== ==========
Liabilities And Stockholders' Equity:
Deposits:
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . $ 938,622 $1,049,118 $ 958,434
Interest-bearing. . . . . . . . . . . . . . . . . . . . . . . . . 5,117,547 4,675,478 4,448,202
---------- ---------- ----------
Total deposits. . . . . . . . . . . . . . . . . . . . . . . . . 6,056,169 5,724,596 5,406,636
Federal funds purchased and securities sold under
agreements to repurchase . . . . . . . . . . . . . . . . . . . . . 409,149 933,706 502,661
Federal Home Loan Bank borrowings . . . . . . . . . . . . . . . . . 360,072 441,097 400,000
Other borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . 38,479 43,001 22,943
Accrued interest, taxes, and other liabilities. . . . . . . . . . . 58,057 58,976 118,194
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . 390 7,762 18,872
---------- ---------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 6,922,316 7,209,138 6,469,306
---------- ---------- ----------
Minority interest in subsidiaries . . . . . . . . . . . . . . . . . -- -- 1,139
Stockholders' Equity:
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . 99,969 100,000 100,000
Common stock, par value $5 per share
Authorized: 50,000,000 shares
Issued: 27,606,881, 27,566,225, and 27,480,962 shares. . . . . 138,034 137,831 137,405
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . 108,619 107,576 106,477
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 290,061 294,532 256,286
Treasury stock at cost (62,139, 355,466 and 111,518 shares) . . . (2,062) (10,018) (3,245)
Stock option loans. . . . . . . . . . . . . . . . . . . . . . . . (1,661) (1,894) (1,784)
---------- ---------- ----------
Stockholders' equity before net unrealized
gains (losses) on available-for-sale securities. . . . . . . . 632,960 628,027 595,139
Net unrealized gains (losses) on available-for-sale securities. . 524 (22,726) 8,988
---------- ---------- ----------
Total stockholders' equity. . . . . . . . . . . . . . . . . . . 633,484 605,301 604,127
---------- ---------- ----------
Total liabilities and stockholders' equity. . . . . . . . . . . $7,555,800 $7,814,439 $7,074,572
========== ========== ==========
See accompanying notes.
FOURTH FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
------------------------------------
March 31, March 31, Percent
1995 1994 Change
---------- ---------- ----------
(Dollars in thousands,
except per share amounts)
Interest Income:
Interest and fees on loans and leases . . . . . . . . . . . . . . . . . $ 92,593 $ 67,483 37.2 %
Interest on short-term investments . . . . . . . . . . . . . . . . . . . 974 251 2.9 x
Interest and dividends on investment securities:
Taxable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,256 35,977 9.1
Tax-preferred. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,501 4,558 (23.2)
Interest and dividends on trading account securities . . . . . . . . . . 14 38 (63.2)
-------- --------
Total interest income. . . . . . . . . . . . . . . . . . . . . . . . 136,338 108,307 25.9
-------- --------
Interest Expense:
Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 53,374 35,688 49.6
Interest on borrowings . . . . . . . . . . . . . . . . . . . . . . . . . 15,493 6,955 1.2 x
Interest on long-term debt . . . . . . . . . . . . . . . . . . . . . . . 122 429 (71.6)
-------- --------
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . 68,989 43,072 60.2
-------- --------
Net Interest Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,349 65,235 3.2
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . . 1,033 312 2.3 x
-------- --------
Net Interest Income After Provision For Credit Losses. . . . . . . . . . . 66,316 64,923 2.1
-------- --------
Noninterest Income:
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,250 5,468 (4.0)
Service charges on deposit accounts. . . . . . . . . . . . . . . . . . . 9,535 9,157 4.1
Bank card fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,224 2,578 63.8
Investment securities (losses) gains . . . . . . . . . . . . . . . . . . (22,063) 3,564
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,084 5,634 8.0
-------- --------
Total noninterest income . . . . . . . . . . . . . . . . . . . . . . 3,030 26,401 (88.5)
-------- --------
Noninterest Expense:
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . 30,829 30,545 .9
Furniture and equipment. . . . . . . . . . . . . . . . . . . . . . . . . 5,622 5,683 (1.1)
Net occupancy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,814 4,274 12.6
FDIC insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,278 3,107 5.5
Bank card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,074 790 35.9
Amortization of intangible assets. . . . . . . . . . . . . . . . . . . . 2,880 2,039 41.2
Merger and integration costs . . . . . . . . . . . . . . . . . . . . . . 28 2,651 (98.9)
Net costs of operation of other real estate and nonperforming assets . . (2) (133) (98.5)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,880 13,920 6.9
-------- --------
Total noninterest expense. . . . . . . . . . . . . . . . . . . . . . 63,403 62,876 .8
-------- --------
Income Before Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . 5,943 28,448 (79.1)
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,489 9,754 (84.7)
-------- --------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,454 $ 18,694 (76.2)
======== ========
Net Income Applicable to Common Shares . . . . . . . . . . . . . . . . . . $ 2,705 $ 16,944 (84.0)
======== ========
Earnings Per Common Share:
Primary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.10 $0.62 (83.9)%
Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.10 0.61 (83.6)
Dividends Per Common Share . . . . . . . . . . . . . . . . . . . . . . . . 0.26 0.26 --
See accompanying notes.
FOURTH FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
Net
Preferred Stock Common Stock Treasury Stock Unrealized
--------------- --------------- -------------- Stock Gains
Capital Retained Option (Losses) on
Shares Amount Shares Amount Surplus Earnings Shares Amount Loans Securities Total
------ -------- ------ -------- -------- -------- ------ ------- ------ ---------- -------
(In thousands)
Balance, January 1,
1994
As previously
reported . . . . . . 250 $100,000 27,166 $135,830 $106,102 $244,810 (112)$ (3,245) $(1,795) $25,148 $606,850
Adjustment for pool-
ing of interests . . -- -- 315 1,575 375 1,567 -- -- -- -- 3,517
----- -------- ------ -------- -------- -------- --- -------- ------- ------- --------
Adjusted balance. . 250 100,000 27,481 137,405 106,477 246,377 (112) (3,245) (1,795) 25,148 610,367
Net income. . . . . . -- -- -- -- -- 18,694 -- -- -- -- 18,694
Cash dividends:
Preferred stock . . -- -- -- -- -- (1,750) -- -- -- -- (1,750)
Common stock. . . . -- -- -- -- -- (6,881) -- -- -- -- (6,881)
Pooled companies. . -- -- -- -- -- (154) -- -- -- -- (154)
Net change in stock
option loans . . . . -- -- -- -- -- -- -- -- 11 -- 11
Adoption of Financial
Accounting Standard
No. 115 by pooled
companies. . . . . . -- -- -- -- -- -- -- -- -- (102) (102)
Net change in
unrealized gains
(losses) on
available-for-sale
securities . . . . . -- -- -- -- -- -- -- -- -- (16,058) (16,058)
------ -------- ------ -------- -------- -------- ---- -------- ------- -------- --------
Balance, March 31,
1994 . . . . . . . . . 250 $100,000 27,481 $137,405 $106,477 $256,286 (112)$ (3,245) $(1,784) $ 8,988 $604,127
====== ======== ====== ======== ======== ======== ==== ======== ======= ======== ========
Balance, January 1,
1995
As previously
reported . . . . . . 250 $100,000 27,251 $136,256 $107,201 $292,962 (355)$(10,018) $(1,894) $(22,440) $602,067
Adjustment for pool-
ing of interests . . -- -- 315 1,575 375 1,570 -- -- -- (286) 3,234
----- -------- ------ -------- -------- -------- ---- -------- ------- -------- --------
Adjusted balance. . 250 100,000 27,566 137,831 107,576 294,532 (355) (10,018) (1,894) (22,726) 605,301
Net income. . . . . . -- -- -- -- -- 4,454 -- -- -- -- 4,454
Cash dividends:
Preferred stock . . -- -- -- -- -- (1,749) -- -- -- -- (1,749)
Common stock. . . . -- -- -- -- -- (7,176) -- -- -- -- (7,176)
Purchase of stock
for treasury . . . . -- -- -- -- -- -- (62) (2,062) -- -- (2,062)
Conversion of pre-
ferred stock into
common. . . . . . . -- (31) 1 5 26 -- -- -- -- -- --
Issuance of common
stock:
Acquisition . . . . -- -- 14 67 569 -- 355 10,018 -- -- 10,654
Stock option plans. -- -- 24 119 385 -- -- -- -- -- 504
Directors deferred
fee plan . . . . . -- -- 2 12 63 -- -- -- -- -- 75
Net change in stock
option loans . . . . -- -- -- -- -- -- -- -- 233 -- 233
Net change in
unrealized gains
(losses) on
available-for-sale
securities . . . . . -- -- -- -- -- -- -- -- -- 23,250 23,214
------ -------- ------ -------- -------- -------- ---- -------- ------- -------- --------
Balance, March 31,
1995 . . . . . . . . . 250 $ 99,969 27,607 $138,034 $108,619 $290,061 (62)$ (2,062) $(1,661) $ 524 $633,484
====== ======== ====== ======== ======== ======== ==== ======== ======= ======== ========
See accompanying notes.
FOURTH FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
--------------------------
March 31, March 31,
1995 1994
------------ ------------
Increase (Decrease) in Cash and Due from Banks (In thousands)
Cash Flows From Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,454 $ 18,694
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 23
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,033 312
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,374 6,327
Accretion of discounts on investment securities, net of amortization of premiums . . . . 1,565 6,152
Write-down of other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . . 75 70
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,006 418
Investment securities loss (gain). . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,063 (3,564)
Loss (gain) on sales of premises and equipment, other real estate
owned, and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 519 (633)
Change in assets and liabilities, net of effects from purchases of acquired
entities and branch sales:
Trading account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (692) (2,238)
Loans held for sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (39) 98,062
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,994 694
Accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,424) 11,088
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,383 (1,378)
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,414 302
---------- ----------
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . 56,725 134,329
---------- ----------
Cash Flows From Investing Activities:
Purchases of banks, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . (4,087) --
Branch sales, including cash and cash equivalents sold . . . . . . . . . . . . . . . . . . (6,428) --
Activity in available-for-sale investment securities:
Sales proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431,467 403,355
Maturities, prepayments, and calls . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,813 71,747
Purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,082) (498,782)
Activity in held-to-maturity investment securities:
Maturities, prepayments, and calls . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,308 166,056
Purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,054) (297,127)
Proceeds from sales of premises and equipment, other real estate owned, and other assets . 1,666 2,685
Purchases of premises and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,284) (7,477)
Purchases of credit card loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (460) --
Change in assets, net of effects from purchases of acquired
entities and branch sales:
Interest-bearing deposits in other financial institutions. . . . . . . . . . . . . . . . 193 877
Federal funds sold and securities purchased under agreements to resell . . . . . . . . . (86,199) (16,945)
Loans and leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (94,599) (7,865)
---------- ----------
Net cash provided by (used in) investing activities. . . . . . . . . . . . . . . . . 308,254 (183,476)
---------- ----------
Cash Flows From Financing Activities:
Repayment of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,490) (4,488)
Acquisition of treasury stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,062) --
Dividends on common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,176) (6,881)
Dividends on preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,749) (1,750)
Proceeds from exercise of stock options. . . . . . . . . . . . . . . . . . . . . . . . . . 504 --
Net change in stock option loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233 11
Capital transactions of pooled companies . . . . . . . . . . . . . . . . . . . . . . . . . -- (173)
Change in liabilities, net of effects from purchases of acquired
entities and branch sales:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208,934 (102,619)
Federal funds purchased and securities sold under agreements to repurchase . . . . . . . (524,557) 11,034
Federal Home Loan Bank borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . (81,100) 150,000
Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,522) (59)
---------- ----------
Net cash provided by (used in) financing activities. . . . . . . . . . . . . . . . . (418,985) 45,075
---------- ----------
Decrease in cash and due from banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (54,006) (4,072)
Cash and due from banks at beginning of period . . . . . . . . . . . . . . . . . . . . . . . 438,930 323,666
---------- ----------
Cash and due from banks at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . $ 384,924 $ 319,594
========== ==========
Supplemental Disclosures:
Cash payments for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 61,574 $ 42,692
========== ==========
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 306 $ 130
========== ==========
See accompanying notes.
FOURTH FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
The consolidated financial statements include the accounts of Fourth
Financial Corporation and its wholly-owned subsidiaries (the "Company").
They have been prepared in accordance with the instructions to Form 10-Q and
do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. All significant
intercompany balances and transactions have been eliminated. In the opinion
of management, the consolidated financial statements contain the adjustments
(all of which are normal and recurring in nature) necessary to present fairly
the financial position and results of operations for the periods presented.
Results of operations for the interim periods presented are not necessarily
indicative of results which may be expected for any other interim period or
for the year as a whole. These statements should be read in conjunction with
the financial statements and notes thereto included in the Company's Form 10-
K for the year ended December 31, 1994.
The consolidated financial statements for prior periods have been
restated to reflect the pooling of interests detailed in Footnote 2 -
Acquisitions. Certain reclassifications of previously reported amounts also
have been made to conform with current year presentation format.
Note 2 - Acquisitions and Branch Sales
Purchase Transactions
The following table presents information regarding the two purchase
transactions completed in the first quarter of 1995.
Acquisition Company Acquired/ Company Assets Cash Number of
Date Location Abbreviation Acquired Paid Shares Issued
- ----------- ----------------------------------- ------------ ------------ ---------- -------------
(In thousands)
1995
- ----
January 6 Oklahoma Savings, Inc.
Stillwater, OK . . . . . . . . . . "OSI" $ 95,082 $ 93 368,981
February 3 Blackwell Security Bancshares, Inc.
Blackwell, OK. . . . . . . . . . . "BSB" 50,254 8,256 --
-------- ------ -------
$145,336 $8,349 368,981
======== ====== =======
Additional information regarding the cash paid in these purchase
transactions is summarized in the following table.
1995
--------------
(In thousands)
Fair value of assets acquired . . . . . . . . . . . . . . . . . . . . . $145,336
Fair value of liabilities assumed . . . . . . . . . . . . . . . . . . . (131,797)
Cost in excess of net assets acquired . . . . . . . . . . . . . . . . . 5,464
--------
Consideration given . . . . . . . . . . . . . . . . . . . . . . . . . 19,003
Less: Fair market value of stock issued. . . . . . . . . . . . . . . 10,654
--------
Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,349
Cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,262
--------
Net cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,087
========
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 was allocated to the net assets acquired
based on their fair values with the excess allocated to cost in excess of net
assets acquired. The effect on results of operations for 1995, had the
purchase transactions occurred at the beginning of the year, was not
material.
Pooling Of Interests
On January 27, 1995, the Company issued 315,000 shares to acquire
Standard Bancorporation, Inc. ("SBI") in a business combination accounted for
as a pooling of interests. Total assets acquired amounted to $89,548,000.
The consolidated statements for the prior periods have been restated as if
the entities had been combined at the beginning of the periods presented.
Adjustments to conform the accounting policies of SBI to the accounting
policies of the Company were immaterial.
Branch Sales
At the time Equity Bank for Savings, F.A. ("Equity") was acquired in
May 1994 four branches were identified for sale. Three of the branches were
sold in 1994. On January 6, 1995, the Company completed the final sale. In
the sale transactions, the Company transferred deposit liabilities and sold
loans and bank premises. The combined sales price of these branches was
equal to the fair value of assets and liabilities acquired in the Equity
business combination. Accordingly, no gain or loss was recognized on the
branch sales. The following table presents information regarding the branch
sold in 1995.
1995
--------------
(In thousands)
Fair value of assets sold . . . . . . . . . . . . . . . . . . . . . . . $ (69)
Fair value of liabilities transferred . . . . . . . . . . . . . . . . . 6,629
Reduction of cost in excess of net assets acquired. . . . . . . . . . . (132)
-------
Net cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,428
=======
On April 14, 1995, the Company entered into an agreement to sell its
branch located in Meade, Kansas. This sale is expected to be completed in
the third quarter and will involve the transfer of deposit liabilities and
the sale of loans and bank premises.
Note 3 - Securities
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 investment securities.
Three Months Ended
March 31,
----------------------
1995 1994
-------- --------
(In thousands)
Sales price of available-for-sale investment securities . . . . . . . . . . . . $431,467 $452,151
======== ========
Gross realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,077 $ 4,830
Gross realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,183 1,413
-------- --------
Net gains (losses). . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(22,106) $ 3,417
======== ========
During the three months ended March 31, 1995, "Other noninterest
income" included a net unrealized holding gain on trading securities of
$17,000. For the three months ended March 31, 1994, a net unrealized holding
loss of $35,000 associated with trading account securities was included in
income.
Note 4 - Allowance for Credit Losses
Changes in the allowance for credit losses were as follows:
Three Months Ended
March 31,
----------------------
1995 1994
-------- --------
(In thousands)
Balance at January 1, as previously reported. . . . . . . . . . . . . . . . . . $ 71,874 $ 67,617
Adjustment for pooling of interests . . . . . . . . . . . . . . . . . . . . . 993 610
-------- --------
Balance at January 1, as restated . . . . . . . . . . . . . . . . . . . . . . . 72,867 $ 68,227
Allowance for credit losses of purchased banks. . . . . . . . . . . . . . . . 1,633 --
-------- --------
74,500 68,227
Provisions charged to operating expense . . . . . . . . . . . . . . . . . . . 1,033 312
Recoveries on loans and leases previously charged off . . . . . . . . . . . . 2,491 2,789
Loans and leases charged off. . . . . . . . . . . . . . . . . . . . . . . . . (4,377) (2,711)
-------- --------
Balance at December 31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 73,647 $ 68,617
======== ========
Effective January 1, 1995, the Company adopted Financial Accounting
Standard ("FAS") FAS No. 114, "Accounting by Creditors for Impairment of a
Loan." Under the new standard, the amount of the allowance for credit losses
related to individual loans that are identified for evaluation in accordance
with FAS No. 114 is determined based on estimates of expected cash flows on
each such loan which are then discounted using that loan's effective interest
rate. Alternatively, the fair value of the collateral is used to determine
the allowance for credit losses related to identified collateral dependent
loans. The determination of the allowance for credit losses for the
remainder of the loan portfolio takes into consideration the risk
classification of loans and the application of loss estimates to these
classifications.
At March 31, 1995, the recorded investment in loans that are considered
to be impaired under FAS No. 114 was $18,217,000 (all of which were being
accounted for on a nonaccrual basis). Included in this amount was
$17,261,000 of impaired loans for which the related allowance for credit
losses was $4,838,000. The remaining $956,000 of impaired loans did not have
a related allowance for credit losses as prior charge-offs or interest
payments applied to the recorded investment resulted in the recorded
investment in these loans being less than the current estimate of discounted
future cash flows. The average recorded investment in impaired loans during
the three-month period ended March 31, 1995 was approximately $17,286,000.
For the three-month period ended March 31, 1995 the Company recognized
interest income on these impaired loans of $78,000, using the cash basis
method of income recognition.
Note 5 - Preferred Stock
March 31, December 31, March 31,
1995 1994 1994
------------- ------------- -------------
(Dollars in thousands)
Class A cumulative convertible preferred stock,
par value $100 per share
Authorized: 250,000 shares
Issued: 249,922, 250,000 and 250,000
shares (at liquidation preference). . . . . . . . . . . . $ 99,969 $100,000 $100,000
Class B preferred stock, no par value
Authorized: 5,000,000 shares . . . . . . . . . . . . . . . -- -- --
-------- -------- --------
$ 99,969 $100,000 $100,000
======== ======== ========
Note 6 - Merger and Integration Costs
The components of merger and integration costs related to the 1995
and 1994 pooling-of-interests transactions are detailed in the following
schedule.
Three Months Ended
March 31,
-------------------
1995 1994
-------- -------
(In thousands)
Premises and equipment writedowns . . . . . . . . . . . . . . . . . . . . . . . $ -- $ 177
Severance and other compensation. . . . . . . . . . . . . . . . . . . . . . . . -- 821
Systems conversion costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 269
Legal, accounting, and other transaction costs. . . . . . . . . . . . . . . . . 28 110
Conform intangible asset amortization policies. . . . . . . . . . . . . . . . . -- 1,124
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 150
------ ------
$ 28 $2,651
====== ======
Note 7 - Earnings and Dividends Per Common Share
Earnings per common share are based on the following weighted average
numbers of shares outstanding.
Three Months Ended
March 31,
-------------------------
1995 1994
---------- ----------
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,557,545 27,369,444
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,004,743 30,817,719
Primary earnings per common share were computed by dividing net income
applicable to common shares by the weighted average common shares outstanding
during the period. Fully diluted earnings per common share were computed by
dividing net income by the weighted average number of shares which would have
been outstanding during the period if the Class A convertible preferred stock
had been converted into common stock. For the first quarter of 1995, fully
diluted earnings per common share were the same as primary earnings per
common share since the effect of the convertible preferred stock was
antidilutive. Stock options outstanding have been excluded from the
computations as they were not materially dilutive.
Dividends per common share represent the Company's historical dividends
declared without adjustment for the poolings of interests.
FOURTH FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
Three Months Ended
-----------------------------------
March 31, March 31, Percent
1995 1994(1) Change
------------ ------------ -------
(Dollars in thousands
Summary Income Statement Information: except per share data)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 136,338 $ 108,307 25.9 %
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . 67,349 65,235 3.2
Net interest income (fully tax-equivalent)(2) . . . . . . . . . . . . . 69,423 67,779 2.4
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . 1,033 312 2.3x
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,454 18,694 (76.2)
Net income applicable to common shares. . . . . . . . . . . . . . . . . 2,705 16,944 (84.0)
Per Common Share Data:
Earnings per common share:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .10 $ .62 (83.9)%
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 .61 (83.6)
Fully diluted as originally reported(1) . . . . . . . . . . . . . . . .10 .68 (85.3)
Common dividends(1) . . . . . . . . . . . . . . . . . . . . . . . . . . .26 .26 --
Book value at period-end . . . . . . . . . . . . . . . . . . . . . . . 19.37 18.42 5.2
Book value exclusive of net unrealized gains (losses)
on available-for-sale securities at period-end . . . . . . . . . . . . 19.35 18.09 7.0
Tangible book value . . . . . . . . . . . . . . . . . . . . . . . . . . 16.18 16.10 .5
Market value(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33-29 1/2 28 3/4-25 1/4
Average common shares outstanding (000s) . . . . . . . . . . . . . . . 27,558 27,369 .7
Period-end common shares outstanding (000s) . . . . . . . . . . . . . . 27,545 27,369 .6
Period-end common shares outstanding assuming full dilution (000s). . . 30,992 30,818 .6
Summary Statement of Condition Information:
Period-end assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,555,800 $7,074,572 6.8 %
Period-end loans and leases . . . . . . . . . . . . . . . . . . . . . . 4,250,426 3,310,641 28.4
Period-end allowance for credit losses. . . . . . . . . . . . . . . . . 73,647 68,617 7.3
Period-end long-term debt . . . . . . . . . . . . . . . . . . . . . . . 390 18,872 (97.9)
Period-end common stockholders' equity . . . . . . . . . . . . . . . . 533,515 504,127 5.8
Period-end stockholders' equity . . . . . . . . . . . . . . . . . . . . 633,484 604,127 4.9
Average assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,757,990 6,971,337 11.3
Average common stockholders' equity . . . . . . . . . . . . . . . . . . 518,127 515,426 .5
Average stockholders' equity . . . . . . . . . . . . . . . . . . . . . 618,099 615,426 .4
Earnings Performance Ratios(4):
Return on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .23% 1.09 %
Return on total stockholders' equity . . . . . . . . . . . . . . . . . 2.92 12.32
Return on common stockholders' equity . . . . . . . . . . . . . . . . . 2.12 13.33
Net yield on earning assets (fully tax-equivalent)(2) . . . . . . . . . 3.97 4.31
Asset Quality Ratios:
Net charge-offs (annualized)/average loans and leases . . . . . . . . . .18% (.01)%
Nonperforming assets/period-end loans plus other
real estate and nonperforming assets . . . . . . . . . . . . . . . . . .89 1.15
Allowance for credit losses/period-end nonperforming loans. . . . . . . 229.18 242.03
Allowance for credit losses/period-end loans and leases . . . . . . . . 1.73 2.07
Capital Ratios:
Stockholders' equity/assets . . . . . . . . . . . . . . . . . . . . . . 8.38% 8.54%
Double leverage ratio(5). . . . . . . . . . . . . . . . . . . . . . . . 95.20 91.29
Leverage ratio(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06 7.72
Tier I risk-based capital(7). . . . . . . . . . . . . . . . . . . . . . 10.79 12.66
Total risk-based capital(7) . . . . . . . . . . . . . . . . . . . . . . 12.04 13.91
Common dividend payout ratio(8) . . . . . . . . . . . . . . . . . . . . 260.00 41.94
<FN>
__________
(1) Prior year financial statements have been restated to reflect poolings of interests. Fully diluted earnings
per share as originally reported represent historical earnings per share as reported in the quarterly report
for the period indicated. Dividends per common share represent historical dividends declared without
adjustment for the poolings of interests.
(2) Stated on a tax-equivalent basis assuming a marginal tax rate of 35%.
(3) Range of the high and low bid prices for the period.
(4) Financial ratios are based on daily averages for all statement of condition items. Earnings have been
annualized where appropriate.
(5) Investments in subsidiaries divided by period-end stockholders' equity.
(6) Tier I capital divided by first quarter average assets less certain intangibles.
(7) Tier I capital is composed of common plus preferred stockholders' equity less certain intangibles. 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.
(8) 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 the first three months of 1995 was $4.5 million compared
to $18.7 million for the first three months of 1994. Fully diluted earnings
per share were $.10 and $.61 for the comparable periods. Current quarter net
income includes securities losses from the company's first quarter balance
sheet repositioning which amounted to $22.1 million before tax and $13.4
million after tax. Exclusive of the securities losses, first quarter 1995
operating earnings were $17.9 million, or $.58 per share. For the first three
months of 1995, return on assets and return on common equity were .23% and
2.12%, respectively. Return on assets was 1.09% and return on common equity
was 13.33% for the first three months of 1994.
The financial statements for both periods reflect the effect of current
and prior year acquisitions which were accounted for as poolings of
interests. 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 1995 and 1994.
Number of
Acquisition Company Accounting Assets Cash Shares
Date Company Acquired/Location Abbreviation Method Acquired Paid Issued
- ------------- ------------------------------------ ------------ ---------- ---------- ---------- ---------
(In thousands)
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(1)
Dodge City, KS
1995 -
- --------
January 6 Oklahoma Savings, Inc. "OSI" Purchase 95,082 93(2) 368,981
Stillwater, OK
January 27 Standard Bancorporation, Inc. "SBI" Pooling 89,548 -- 315,000
Independence, MO
February 3 Blackwell Security Bancshares, Inc. "BSB" Purchase 50,254 8,256 --
Blackwell, OK
---------- -------- ---------
$1,130,120 $130,275 1,274,691
========== ======== =========
<FN>
- --------
(1) An additional 70,300 shares were issued and $36,000 cash paid on June 30, 1994 to acquire the minority interest of two
of First Dodge's subsidiaries.
(2) Represents additional capitalized costs and fractional shares.
Net interest income increased by $2.1 million to total $67.3 million for
the first three months of 1995 as compared to $65.2 million for the first
three months of last year. The increase in net interest income was
principally related to the increased volume of interest-earning assets from
acquisitions and internal loan growth. Total average interest-earning assets
were $7.0 billion for the first three months of 1995, a $702.6 million, or
11.1%, increase over the comparable period of 1994. For the same comparative
periods, average loans and leases increased $837.2 million or 25.1%. 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 3.97% in the first three months of 1995 from 4.31% in
the comparable period of 1994.
The provisions for credit losses totaled $1.0 million and $312,000 for the
first three months of 1995 and 1994, respectively. Although the allowance
for credit losses continues to be strong, the increased provision reflects
the significant loan growth. Net charge-offs totaled $1.9 million or .18%
(computed on an annualized basis) of average loans and leases for the current
period. The comparable period of the prior year resulted in $78,000 of net
recoveries.
Noninterest income was $3.0 million in the first quarter of 1995 compared
to $26.4 million in the first quarter of 1994. The current quarter
noninterest income includes $22.1 million of securities losses from the
Company's first quarter balance sheet repositioning. By comparison, the
first quarter of 1994 included $3.6 million of securities gains. Fees
collected in the normal course of business increased $2.3 million or 9.9% to
total $25.1 million for the first three months of 1995 from $22.8 million in
the same period of 1994. The increase in fee income was principally
attributable to business combinations accounted for as purchases.
Noninterest expense totaled $63.4 million in the first three months of
1995 compared to $62.9 million for the same period of 1994. Merger and
integration costs associated with poolings of interests totaled $28,000 and
$2.7 million for the first three months of 1995 and 1994, respectively.
Operating expense (noninterest expense less merger and integration costs
and net costs of operations of other real estate and nonperforming assets)
increased 5.0% to total $63.4 million in the first three months of 1995.
This increase in operating expense was principally attributable to business
combinations accounted for as purchases. The Company's efficiency ratio
(operating expense/fee income plus tax-equivalent net interest income) was
67.05% for the current-year three-month period compared to 66.58% for the
first three months of the prior year. The increased efficiency ratio
principally reflects the compression of the net yield on earning assets.
The following table presents average balances, income and expense, and
yields and rates on a fully tax-equivalent basis for the three-month periods
ended March 31, 1995 and 1994.
Three Months Ended
-----------------------------------------------------------
March 31, 1995 March 31, 1994
---------------------------- ----------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
---------- -------- ------ ---------- -------- ------
(Dollars in thousands)
Assets:
Interest-Earning Assets:
Loans and leases(1)(2) . . . . . . . . . . . . $4,178,028 $ 92,883 8.99% $3,340,832 $ 67,679 8.19%
Interest-bearing deposits in other
financial institutions . . . . . . . . . . . . 1,299 19 5.72 2,700 34 5.08
Federal funds sold and securities purchased
under agreements to resell . . . . . . . . . . 63,852 955 6.07 29,795 217 2.95
Investment securities:
Taxable . . . . . . . . . . . . . . . . . . . 2,603,308 39,256 6.04 2,709,862 35,977 5.32
Tax-preferred(1) . . . . . . . . . . . . . . 176,212 5,284 11.99 235,024 6,900 11.74
Trading account securities(1) . . . . . . . . . 1,290 15 4.66 3,134 44 5.63
---------- -------- ---------- --------
Total interest-earning assets(1). . . . . . 7,023,989 138,412 7.95 6,321,347 110,851 7.07
Cash and due from banks . . . . . . . . . . . . . 379,775 367,737
Bank premises and equipment, net. . . . . . . . . 160,024 150,615
Income receivable and other assets . . . . . . . 169,341 136,903
Intangible assets, net . . . . . . . . . . . . . 98,491 63,458
Allowance for credit losses . . . . . . . . . . . (73,630) (68,723)
---------- ----------
Total assets . . . . . . . . . . . . . . . $7,757,990 $6,971,337
========== ==========
Liabilities And Stockholders' Equity:
Interest-Bearing Liabilities:
Interest-bearing deposits:
Savings and interest checking . . . . . . . . $2,223,419 $ 17,137 3.13% $2,206,237 $ 12,374 2.27%
Time under $100,000 . . . . . . . . . . . . . 2,310,938 29,419 5.16 1,890,659 19,650 4.21
Time of $100,000 or more. . . . . . . . . . . 488,091 6,818 5.66 371,783 3,664 4.00
---------- -------- ---------- --------
Total interest-bearing deposits . . . . . . 5,022,448 53,374 4.31 4,468,679 35,688 3.24
Federal funds purchased and securities
sold under agreements to repurchase. . . . . . 605,852 8,567 5.73 551,193 4,282 3.15
Federal Home Loan Bank borrowings . . . . . . . 441,411 6,303 5.79 256,389 2,511 3.97
Other borrowings. . . . . . . . . . . . . . . . 40,665 623 6.21 20,488 162 3.21
Long-term debt . . . . . . . . . . . . . . . . 4,717 122 10.35 13,852 429 12.38
---------- -------- ---------- --------
Total interest-bearing liabilities . . . . 6,115,093 68,989 4.58 5,310,601 43,072 3.29
-------- --------
Noninterest-bearing deposits. . . . . . . . . . . 944,987 977,368
Other liabilities and minority interest in
subsidiaries . . . . . . . . . . . . . . . . . . 79,811 67,942
---------- ----------
Total liabilities . . . . . . . . . . . . . 7,139,891 6,355,911
Preferred stockholders' equity . . . . . . . . . 99,972 100,000
Common stockholders' equity . . . . . . . . . . . 518,127 515,426
---------- ----------
Total stockholders' equity . . . . . . . . 618,099 615,426
---------- ----------
Total liabilities and stockholders' equity. $7,757,990 $6,971,337
========== ==========
Net interest income(1). . . . . . . . . . . . . . . $ 69,423 $ 67,779
======== ========
Rate Analysis:
Interest income/interest-earning assets(1). . . . 7.95% 7.07%
Interest expense/interest-earning assets. . . . . 3.98 2.76
----- -----
Net yield on earning assets(1). . . . . . . 3.97% 4.31%
===== =====
<FN>
_________
(1) Income and rates are stated on a tax-equivalent basis assuming a marginal tax rate of 35%.
(2) Nonaccrual loans are included in loans and leases.
Net Interest Income
For the first three months of 1995, net interest income amounted to $67.3
million, representing an increase of $2.1 million over the $65.2 million
earned during the comparable period of 1994. On a fully tax-equivalent
basis, net interest income increased $1.6 million to total $69.4 million for
the first three months of 1995 from $67.8 million for the same period of
1994. The increase in net interest income was attributable to an increased
level of interest-earning assets, principally due to acquisitions, and a
change in the mix of interest-earning assets due to loan growth. Total
average interest-earning assets were $7.0 billion for the first three months
of 1995, a $702.6 million increase over the comparable period of 1994.
Comparing the first three-month periods of 1995 and 1994, average loans and
leases increased $837.2 million or 25.1%. Approximately 55% of the increase
in loans was attributable to internal loan growth with the remainder due to
purchase acquisitions. Average investment securities decreased $165.4
million due to the first quarter 1995 securities sale the proceeds of which,
along with maturities and prepayments were used to fund
loan growth. For the first quarter of 1995,
investment securities averaged 39.6% of interest-earning assets whereas for
the first quarter of 1994 investment securities were 46.6%. Average deposits
increased $521.4 million, principally all attributable to acquisitions. The
increased average assets were also funded by increases from the prior year in
federal funds purchased and securities sold under agreements to repurchase of
$54.7 million and Federal Home Loan Bank borrowings of $185.0 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 3.97% for the first three-month period of 1995
compared to 4.31% for the same period of 1994. 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, the rising market interest
rates during 1994 and the first quarter 1995,
triggered by the 225-basis-point increase in the discount
rate implemented by the Board of Governors of the Federal Reserve System,
were reflected in the increasing cost of interest bearing liabilities and a
lower net yield. In addition, vigorous competition for loans and deposits in
the first quarter of 1995 contributed to the decrease in the spread between
interest-earning asset yields and interest-bearing liability rates. On an
annualized basis, the spread between interest-bearing asset yields and
liability rates was 3.37% for 1995 compared to 3.78% for 1994.
Loan fees included in net interest income amounted to $2.2 million and
$2.6 million for the first three months of 1995 and 1994, respectively. The
decrease in loan fees was principally attributable to decreases in the volume
of residential mortgage loan originations.
The dollar volume of residential mortgage loan originations and
refinancings decreased $54.4 million or 50.0% between the first three months
of 1995 and 1994. Also included in the 1995 dollar volume and number of
residential mortgage loan originations are $5.0 million of loans (142 loans)
originated under the Company's program for low-to-moderate income borrowers
on which the origination fees are waived.
The following table provides the dollar volume and the number of
residential mortgage loan originations and refinancings during the first
three months of 1995 and 1994.
Three Months Ended
March 31,
--------------------
1995 1994
-------- --------
(Dollars in thousands)
Residential mortgage loan originations and refinancings:
Dollar volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,393 $108,756
Number of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692 1,762
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.
Comparison of Three-Month Periods Ended
March 31, 1995 to 1994
---------------------------------------------
Total Change Attributable to
---------------------------------
Change Volume Yield/Rate Combination
-------- -------- ---------- -----------
(In thousands)
Increase (decrease) in:
Interest income:
Loans and leases(1) . . . . . . . . . . . . . . . . . $25,204 $16,907 $ 6,590 $ 1,707
Interest-bearing deposits in other
financial institutions . . . . . . . . . . . . . . . (15) (18) 4 (1)
Federal funds sold and securities
purchased under agreements to resell . . . . . . . . 738 248 229 261
Taxable investment securities . . . . . . . . . . . . 3,279 (1,417) 4,878 (182)
Tax-preferred investment securities(1). . . . . . . . (1,616) (1,726) 147 (37)
Trading account securities(1) . . . . . . . . . . . . (29) (26) (8) 5
------- ------- -------- --------
Total interest income change. . . . . . . . . . . . 27,561 13,968 11,840 1,753
------- ------- -------- --------
Interest expense:
Savings and interest checking . . . . . . . . . . . . 4,763 96 4,678 (11)
Time deposits . . . . . . . . . . . . . . . . . . . . 12,923 5,530 5,975 1,418
Federal funds purchased and securities
sold under agreements to repurchase. . . . . . . . . 4,285 425 3,506 354
Federal Home Loan Bank borrowings . . . . . . . . . . 3,792 1,811 1,151 830
Other borrowings. . . . . . . . . . . . . . . . . . . 461 160 152 149
Long-term debt. . . . . . . . . . . . . . . . . . . . (307) (279) (69) 41
------- ------- -------- --------
Total interest expense change . . . . . . . . . . . 25,917 7,743 15,393 2,781
------- ------- -------- --------
Increase (decrease) in net interest
income on a taxable equivalent basis(1) . . . . . . . 1,644 $ 6,225 $ (3,553) $ (1,028)
------- ======= ======== ========
Decrease in taxable equivalent adjustment. . . . . . . 470
-------
Net interest income change on a nominal basis. . . . . $ 2,114
=======
<FN>
__________
(1) Computed on a tax-equivalent basis assuming a marginal tax rate of 35%.
Provision for Credit Losses
The provisions for credit losses were $1.0 million and $312,000 for the
first three months of 1995 and 1994, respectively. Although the allowance
for credit losses continues to be strong, as evidenced by the ratio of the
allowance to nonperforming loans, the increased provision reflects the
significant loan growth. The March 31, 1995 allowance for credit losses of
$73.6 million was 229.18% of nonperforming loans at that date, compared to a
March 31, 1994 allowance of $68.6 million and a ratio of 242.03%. Net
charge-offs totaled $1.9 million or .18% (computed on an annualized basis) of
average loans and leases for the current period. The comparable period of
the prior year resulted in $78,000 of net recoveries.
Noninterest Income
Total noninterest income was $3.0 million for the first three months of
1995 compared to $26.4 million for the same period of the previous year.
Included in 1995 noninterest income were $22.1 million of investment
securities losses from the Company's first quarter balance sheet
repositioning, compared to $3.6 million of securities gains realized in 1994.
Fees collected in the normal course of business increased $2.3 million or
9.9% to total $25.1 million for the first three months of 1995 from $22.8
million in the same period of 1994. The increase in fees collected
in the normal course of business was principally attributable to business
combinations accounted for as purchases.
The following table provides an analysis of noninterest income segregated
between fees collected in the normal course of business and other revenues
for the three-month period ended March 31, 1995 and 1994.
Three Months Ended
------------------------------
March 31, Percent
--------------------
1995 1994 Change
-------- -------- -------
(Dollars in thousands)
Fee income:
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,250 $ 5,468 (4.0)%
Service charges on deposit accounts. . . . . . . . . . . . . . . . . . . . . . 9,535 9,157 4.1
Bank card fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,224 2,578 63.8
Brokerage and annuity sales commissions. . . . . . . . . . . . . . . . . . . . 993 1,122 (11.5)
Trading account profits and commissions. . . . . . . . . . . . . . . . . . . . 274 127 1.2 x
Real estate loan service fees. . . . . . . . . . . . . . . . . . . . . . . . . 645 589 9.5
Safe deposit rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 533 493 8.1
Travelers and official check fees and item handling charges. . . . . . . . . . 515 608 (15.3)
Foreign currency trading profits and foreign transaction fees. . . . . . . . . 292 290 .7
Insurance premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 560 427 31.1
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,272 1,978 14.9
------- -------
Total fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,093 22,837 9.9
Other revenues:
Investment securities (losses) gains . . . . . . . . . . . . . . . . . . . . . (22,063) 3,564 (7.2)x
-------- -------
Total noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,030 $26,401 (88.5)
======= =======
Fee income (annualized)/average assets . . . . . . . . . . . . . . . . . . . . 1.31% 1.33%
Noninterest income (annualized)/average assets . . . . . . . . . . . . . . . . .16% 1.54%
Noninterest Expense
Noninterest expense amounted to $63.4 million and $62.9 million for the
first three months of 1995 and 1994, respectively. Although purchase
acquisitions increased assets by $895.6 million since March 31, 1994,
noninterest expense did not change materially between years. Noninterest
expense (annualized) as a percent of average assets were 3.31% and 3.66% for
1995 and 1994, respectively. Noninterest expense for both periods includes
certain nonoperating items.
Merger and integration costs associated with poolings of interests totaled
$28,000 and $2.7 million for the first three months of 1995 and 1994,
respectively. Net costs of operation of other real estate and nonperforming
assets were not material for either period.
Operating expense amounted to $63.4 million and $60.3 million for the
first three months of 1995 and 1994, respectively. Operating expense
increased $3.1 million, primarily due to business combinations accounted for
as purchases. The Company's efficiency ratio (operating expense/fee income
plus tax-equivalent net interest income) was 67.05% for the first three
months of 1995 as compared to 66.58% for the same period of 1994. The
increased efficiency ratio principally reflects the compression of the net
yield on earning assets. Operating expense less fee income (annualized) as
a percent of average assets were 2.00% and 2.18% for 1995 and 1994,
respectively.
The following table presents an analysis of noninterest expense for the
three-month periods ended March 31, 1995 and 1994, respectively.
Three Months Ended
-------------------------------
March 31, Percent
--------------------
1995 1994 Change
-------- -------- -------
(Dollars in thousands)
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,829 $ 30,545 .9%
Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,622 5,683 (1.1)
Net occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,814 4,274 12.6
FDIC insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,278 3,107 5.5
Bank card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,074 790 35.9
Advertising and public relations . . . . . . . . . . . . . . . . . . . . . . . . . 2,413 2,129 13.3
Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,249 983 27.1
Postage and freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,029 1,649 23.0
Supplies, printed materials and forms. . . . . . . . . . . . . . . . . . . . . . . 1,242 1,213 2.4
Federal Reserve service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 405 407 (.5)
Loan acquisition and maintenance . . . . . . . . . . . . . . . . . . . . . . . . . 704 703 .1
Outside service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 691 845 (18.2)
Consulting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249 601 (58.6)
Other professional fees and examinations . . . . . . . . . . . . . . . . . . . . . 1,258 1,149 9.5
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . 2,880 2,039 41.2
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,640 4,218 10.0
-------- --------
Total operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,377 60,335 5.0
Net costs of operation of other real estate and nonperforming assets . . . . . . . (2) (133) (98.5)
Merger and integration costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 2,651 (98.9)
Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 23 --
-------- --------
Total noninterest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,403 $ 62,876 .8
======== ========
Noninterest expense (annualized)/average assets. . . . . . . . . . . . . . . . . . 3.31% 3.66%
Noninterest expense less noninterest income (annualized)/average assets. . . . . . 3.16% 2.12%
Operating expense less fee income (annualized)/average assets. . . . . . . . . . . 2.00% 2.18%
Operating expense/fee income plus tax-equivalent net interest income . . . . . . . 67.05% 66.58%
Income Taxes
Income tax expense amounted to $1.5 million and $9.8 million for the first
three months of 1995 and 1994, respectively. The lower income tax expense is
principally attributable to the lower level of income before taxes.
Statements of Condition
Total assets amounted to $7.6 billion, $7.8 billion, and $7.1 billion at
March 31, 1995, December 31, 1994, and March 31, 1994, respectively. Between
March 31, 1995 and 1994, the Company completed four bank acquisitions
accounted for as purchases. Assets acquired in these four transactions
totaled $895.6 million. The statements of condition for all the periods
presented include the two business combinations accounted for as poolings of
interests which were completed since March 31, 1994. In aggregate these
pooled companies had assets of $234.5 million. The decrease in total assets
between March 31, 1995 and December 31, 1994 reflects the sale of $423.9
million of securities. The following sections describe the changes in the
major Statement of Condition categories.
Loans and Leases
Between March 31, 1995 and 1994, loans and leases increased $939.8 million
or 28.4% to total $4.3 billion at March 31, 1995. Loans added through bank
purchase transactions totaled $391.8 million and net internal loan growth was
$548.0 million. Increases were realized in various commercial and retail
categories.
The commercial loan categories increased an aggregate of $533.6 million
or 27.4% to total $2.5 billion at March 31, 1995. Retail loan categories
totaling $1.8 billion increased $406.2 million or 29.8%. In addition to the
effect of acquisitions, these increases were attributable to a continued
emphasis on business development and increasing credit demands associated
with the strengthening of the economy in Kansas and Oklahoma.
The Company makes most of its loans within Kansas, Oklahoma, Missouri and
the contiguous states and to Kansas-, Oklahoma-, and Missouri-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 March
31, 1995, the Company had 15 lending relationships in which the aggregate
loan amount was $10 million or more. The Company had one 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 March 31, 1995. The
following table shows the composition of loans and leases at the dates
indicated.
March 31, December 31, March 31,
1995 1994 1994
------------ ------------ ------------
(In thousands)
Commercial:
Commercial and industrial . . . . . . . . . . . . . . . . . . $1,071,678 $1,028,034 $ 899,710
Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . 231,147 227,367 195,380
Energy. . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,623 129,742 88,872
Bank stock. . . . . . . . . . . . . . . . . . . . . . . . . . 27,128 25,173 42,848
Real estate:
Construction. . . . . . . . . . . . . . . . . . . . . . . . 141,578 135,558 104,399
Permanent commercial real estate and other. . . . . . . . . 756,716 705,625 540,947
Lease financing . . . . . . . . . . . . . . . . . . . . . . . 94,995 87,109 49,946
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,051 27,557 26,236
---------- ---------- ----------
Total commercial loans. . . . . . . . . . . . . . . . . . 2,481,916 2,366,165 1,948,338
---------- ---------- ----------
Consumer:
Secured by 1-4 family residences, less unearned discount. . . 1,070,956 991,446 785,202
Residential mortgage loans held for sale. . . . . . . . . . . 245 206 12,070
Consumer, less unearned discount. . . . . . . . . . . . . . . 494,007 491,898 424,323
Credit card . . . . . . . . . . . . . . . . . . . . . . . . . 122,820 130,098 87,385
Educational . . . . . . . . . . . . . . . . . . . . . . . . . 80,482 82,238 53,323
---------- ---------- ----------
Total consumer loans. . . . . . . . . . . . . . . . . . . 1,768,510 1,695,886 1,362,303
---------- ---------- ----------
Total loans and leases. . . . . . . . . . . . . . . . . $4,250,426 $4,062,051 $3,310,641
========== ========== ==========
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 67% of the agriculture portfolio at March 31, 1995. 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 March 31, 1995, approximately 51% of the
construction loan portfolio was in the Wichita, Topeka and Kansas City
markets. The Tulsa and Oklahoma City markets represented an additional 33%
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 farmland. 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.
Secured by 1-4 Family Residences: The 1-4 family residence portfolio
consists of loans secured by residences located primarily in Kansas,
Oklahoma, and Missouri. 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.
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 March
31, 1995 included $5.9 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 March 31, 1995, the carrying
value of nonaccrual loans had been charged down to 79.81% 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.
The following table presents nonperforming assets and those loans which
are contractually past due 90 days or more as to principal or interest
payments.
March 31, December 31, March 31,
1995 1994 1994
------------ ------------ ------------
(Dollars in thousands)
Nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . $31,742 $29,301 $28,060
Troubled debt restructurings . . . . . . . . . . . . . . . . . . . 393 503 291
------- ------- -------
Total nonperforming loans. . . . . . . . . . . . . . . . . . . . . 32,135 29,804 28,351
Other real estate and nonperforming assets . . . . . . . . . . . . 5,704 5,757 9,747
------- ------- -------
Total nonperforming assets . . . . . . . . . . . . . . . . . . . $37,839 $35,561 $38,098
======= ======= =======
Past due loans (90 days or more) . . . . . . . . . . . . . . . . . $10,023 $13,250 $ 8,020
======= ======= =======
Nonperforming assets/period-end loans plus
other real estate and nonperforming assets. . . . . . . . . . . . .89% .87% 1.15%
==== ==== ======
Nonperforming assets/period-end assets . . . . . . . . . . . . . . .50% .46% .54%
==== ==== ======
Nonperforming assets decreased $259,000 from March 31, 1994 to total $37.8
million at March 31, 1995. At March 31, 1995, total nonperforming assets
represented .89% of total loans plus other real estate owned and
nonperforming assets as compared to 1.15% of total loans plus other real
estate owned and nonperforming assets at March 31, 1994. Between December
31, 1994 and March 31, 1995 nonperforming assets increased $2.3 million.
This increase was concentrated in three individual loans.
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 loans in any one market or
industry.
March 31, December 31, March 31,
1995 1994 1994
------------ ------------ ------------
(Dollars in thousands)
Commercial:
Commercial and industrial. . . . . . . . . . . . . . . . . . . . $16,510 $14,862 $12,576
Agriculture. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,135 1,283 1,226
Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,185 1,221 501
Real Estate:
Real estate construction . . . . . . . . . . . . . . . . . . . 1,048 905 528
Permanent commercial real estate and other . . . . . . . . . . 9,355 8,422 10,166
Lease financing. . . . . . . . . . . . . . . . . . . . . . . . . 685 208 83
------- ------- -------
Total commercial loans . . . . . . . . . . . . . . . . . . . 29,918 26,901 25,080
------- ------- -------
Consumer:
Secured by 1-4 family residences . . . . . . . . . . . . . . . . 982 1,350 1,661
Consumer less unearned discount. . . . . . . . . . . . . . . . . 1,235 1,553 1,610
------- ------- -------
Total consumer loans . . . . . . . . . . . . . . . . . . . . 2,217 2,903 3,271
------- ------- -------
Total nonperforming loans. . . . . . . . . . . . . . . . . $32,135 $29,804 $28,351
======= ======= =======
Nonaccrual loans/nonaccrual loans and prior charge-offs. . . . . . 79.81%
=====
Potential Problem Loans
Certain loans that are risk classified 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 $10.8 million at March 31, 1995.
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. Effective
January 1, 1995, the Company adopted Financial Accounting Standard ("FAS")
No. 114, "Accounting by Creditors for Impairment of a Loan." Under the new
standard, the amount of the allowance for credit losses related to individual
loans that are identified for evaluation in accordance with FAS No. 114 is
determined based on estimates of expected cash flows on each such loan which
are then discounted using that loan's effective interest rate.
Alternatively, the fair value of the collateral is used to determine the
allowance for credit losses related to identified collateral dependent loans.
For the remainder of the loan portfolio, the determination of the allowance
for credit losses takes into consideration the risk 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 risk 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 risk classification using
historical loss data, statistical modeling techniques, and analyses of
general economic conditions, trends in portfolio volume, maturity, and
composition. The application of these loss factors to the portfolio
classifications combined with estimates of potential future losses on
specific large loans (based on either the discounted present value of the
expected cash flows or collateral values) provide management with data
essential to identify and estimate the credit risk inherent in the loan
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 March 31, 1995, the allowance for credit losses equaled $73.6
million or 229.18% of nonperforming loans. Comparatively, the allowance for
credit losses at March 31, 1994 amounted to $68.6 million or 242.03% of
nonperforming loans. The strong coverage ratio of the allowance for credit
losses to nonperforming loans at March 31, 1995 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 three-month periods ended March 31 and presents selected
related ratios.
1995 1994
---------- ----------
(Dollars in thousands)
Balance at January 1, as previously reported . . . . . . . . . . . . . . $ 71,874 $ 67,617
Adjustment for pooling of interest . . . . . . . . . . . . . . . . . . 993 610
---------- ----------
Balance at January 1, as restated. . . . . . . . . . . . . . . . . . . 72,867 68,227
Allowance for credit losses of purchased banks . . . . . . . . . . . . 1,633 --
---------- ----------
74,500 68,227
Charge-offs:
Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . 1,142 905
Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 3
Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 1
Bank stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Real estate construction . . . . . . . . . . . . . . . . . . . . . . . 42 --
Permanent commercial real estate and other . . . . . . . . . . . . . . 97 139
Lease financing . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 46
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 --
Secured by 1-4 family residences . . . . . . . . . . . . . . . . . . . 105 213
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,448 934
Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,392 470
---------- ----------
Total charge-offs . . . . . . . . . . . . . . . . . . . . . . . . 4,377 2,711
---------- ----------
Recoveries:
Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . 561 1,397
Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 113
Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 39
Bank stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 38
Real estate construction . . . . . . . . . . . . . . . . . . . . . . . 34 43
Permanent commercial real estate and other . . . . . . . . . . . . . . 327 299
Lease financing . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 13
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 105
Secured by 1-4 family residences . . . . . . . . . . . . . . . . . . . 238 32
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 808 624
Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305 86
---------- ----------
Total recoveries . . . . . . . . . . . . . . . . . . . . . . . . . 2,491 2,789
---------- ----------
Net loans and leases charged off . . . . . . . . . . . . . . . . . . . . 1,886 (78)
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . 1,033 312
---------- ----------
Balance at March 31. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 73,647 $ 68,617
========== ==========
Loans and leases at period-end . . . . . . . . . . . . . . . . . . . . . $4,250,426 $3,310,641
Average loans and leases . . . . . . . . . . . . . . . . . . . . . . . . $4,178,028 $3,340,832
Net charge-offs (recoveries) (annualized)/average loans and leases . . . .18% (.01)%
Allowance for credit losses/period-end nonperforming loans . . . . . . . 229.18% 242.03 %
Allowance for credit losses/period-end nonperforming assets. . . . . . . 194.63% 180.11 %
Allowance for credit losses/period-end loans and leases. . . . . . . . . 1.73% 2.07 %
Investment Securities Portfolio
The following table presents the book values of investment securities
at the dates indicated.
Held-to-maturity
March 31, December 31, March 31,
1995 1994 1994
---------- ------------ ----------
(In thousands)
U.S. Treasury obligations . . . . . . . . . . . . . . . . . . . . . $ 99,319 $ 98,971 $ 97,984
Obligations of U.S. government agencies and corporations:
Mortgage-backed . . . . . . . . . . . . . . . . . . . . . . . . . 1,529,605 1,582,938 1,596,644
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262,600 265,170 242,780
Obligations of states and political subdivisions. . . . . . . . . . 4,263 8,866 21,928
Other securities:
Collateralized auto receivables . . . . . . . . . . . . . . . . . -- -- 9,409
Foreign debt securities . . . . . . . . . . . . . . . . . . . . . 2,050 2,050 2,150
Money market mutual funds . . . . . . . . . . . . . . . . . . . . 233 195 206
---------- ---------- ----------
Total debt securities, at amortized cost. . . . . . . . . . . . $1,898,070 $1,958,190 $1,971,101
========== ========== ==========
Market value in excess of (less than) book value. . . . . . . . . . $ (66,020) $ (110,423) $ (21,434)
========== ========== ==========
Available-for-sale
March 31, December 31, March 31,
1995 1994 1994
---------- ------------ ----------
(In thousands)
U.S. Treasury obligations . . . . . . . . . . . . . . . . . . . . . $ 63,533 $ 269,442 $ 311,357
Obligations of U.S. government agencies and corporations:
Mortgage-backed . . . . . . . . . . . . . . . . . . . . . . . . . 127,958 131,979 172,545
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,405 269,371 304,448
Obligations of states and political subdivisions. . . . . . . . . . 166,202 174,806 203,546
Other securities:
Bankers acceptances . . . . . . . . . . . . . . . . . . . . . . . 12,179 -- --
Collateralized credit card receivables. . . . . . . . . . . . . . 51,025 58,518 62,224
Corporate notes and bonds . . . . . . . . . . . . . . . . . . . . 39,674 38,660 42,544
---------- ---------- ----------
Total debt securities . . . . . . . . . . . . . . . . . . . . . 550,976 942,776 1,096,664
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . 1,280 1,194 885
---------- ---------- ----------
Total debt and equity securities, at estimated fair value . . $ 552,256 $ 943,970 $1,097,549
========== ========== ==========
Other securities(1)
March 31, December 31, March 31,
1995 1994 1994
---------- ------------ ----------
(In thousands)
Federal Home Loan Bank stock. . . . . . . . . . . . . . . . . . . . $39,273 $37,886 $29,682
Federal Reserve Bank stock. . . . . . . . . . . . . . . . . . . . . 14,405 14,242 12,844
Other equity securities . . . . . . . . . . . . . . . . . . . . . . 1,549 1,549 1,538
------- ------- -------
Total other equity securities, at cost. . . . . . . . . . . . . . $55,227 $53,677 $44,064
======= ======= =======
<FN>
___________
(1) Equity securities that do not have a readily determinable fair value.
Total investment securities were $2.5 billion, $3.0 billion, and $3.1
billion at March 31, 1995, December 31, 1994, and March 31, 1994,
respectively. The decrease in the investment securities portfolio reflects
maturities and prepayments and the February 1995 sale of $423.9 million of
fixed-rate debt securities classified as available-for-sale. The proceeds of
maturities, prepayment and the sale were used to fund loan growth and to
reduce borrowed funds. The debt securities sold consisted primarily of U.S.
treasury obligations and obligations of U.S. government agencies.
Acquisition transactions accounted for as purchases added $305.9 million of
investment securities since March 31, 1994.
Excluding U.S. Treasury obligations and obligations of U.S. government
agencies and corporations, there were no security holdings of any one issuer
at March 31, 1995 that exceeded 10% of consolidated stockholders' equity.
At March 31, 1995 the held-to-maturity portfolio included $625.0 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. Also included in the held-to-maturity portfolio
at March 31, 1995 were $632.2 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, $139.7 million also float on a monthly basis, most with the FHLB
11th District average cost of funds. The remaining $492.5 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 March 31, 1995 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.
Deposits
Total deposits increased $649.5 million or 12.0% between March 31, 1995
and 1994. Since March 31, 1994, the Company acquired $677.5 million of
deposits through acquisitions accounted for as purchases. The increased
deposits from acquisitions were partially offset by the effect of vigorous
bank and nonbank competition and the sale of four branches with deposits
totaling $44.5 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 March 31, 1995, $138.3 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 (non-
public demand, interest checking, savings, and time deposits under $100,000)
represented 90.8% of total deposits at March 31, 1995 compared to 92.4% at
March 31, 1994. Brokered deposits were immaterial at March 31, 1995,
December 31, 1994, and March 31, 1994.
Asset and Liability Management
Interest Rate Risk: The Company evaluates its interest rate risk using
various tools, including interest sensitivity gap and simulation analysis.
The following table presents the Company's estimated asset and liability
repricing intervals and repricing gap position as of March 31, 1995. 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 prepayments estimates as provided by a third-party market
information service. These estimates may vary from period to period
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.
Repricing or Maturity Interval
---------------------------------------------------------------------------------
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. . . . . . $2,221,796 $ 232,827 $ 347,314 $ 951,743 $458,715 $ 38,031 $4,250,426
Investments and trading
account securities . . . . 742,189 115,723 201,026 1,171,309 276,720 -- 2,506,967
Other earning assets . . . 100,850 195 191 881 -- -- 102,117
Nonearning assets . . . . . -- -- -- -- -- 696,290 696,290
---------- --------- --------- ---------- -------- ---------- ----------
Total assets . . . . . . $3,064,835 $ 348,745 $ 548,531 $2,123,933 $735,435 $ 734,321 $7,555,800
========== ========= ========= ========== ======== ========== ==========
Liabilities and
stockholders' equity:
Deposits. . . . . . . . . . $2,973,350 $ 509,560 $ 698,980 $ 930,506 $ 5,151 $ 938,622 $6,056,169
Federal funds purchased
and securities sold under
agreements to repurchase . 409,149 -- -- -- -- -- 409,149
Federal Home Loan Bank
borrowings . . . . . . . . 335,072 -- -- 25,000 -- -- 360,072
Other borrowings. . . . . . 38,479 -- -- -- -- -- 38,479
Long-term debt . . . . . . 130 12 26 212 10 -- 390
Other liabilities . . . . . -- -- -- -- -- 58,057 58,057
Stockholders' equity . . . -- -- -- -- -- 633,484 633,484
---------- --------- --------- ---------- -------- ---------- ----------
Total liabilities and
stockholders' equity . . $3,756,180 $ 509,572 $ 699,006 $ 955,718 $ 5,161 $1,630,163 $7,555,800
========== ========= ========= ========== ======== ========== ==========
Interest rate swaps . . . . . $ (136,000) $ (1,000) $ 14,000 $ 123,000 $ -- $ -- $ --
Repricing gap adjusted
for interest rate swaps. . . (827,345) (161,827) (136,475) 1,291,215 730,274 (895,842) --
Cumulative adjusted
repricing gap. . . . . . . . (827,345) (989,172)(1,125,647) 165,568 895,842 -- --
Cumulative adjusted rate-
sensitive assets/
rate-sensitive liabilities . .82 .80 .80 (*) (*) (*)
<FN>
- ---------
(*) Not meaningful.
The table indicates that the Company has a negative repricing gap for
intervals of less than one year, which means that it is liability sensitive
since the interest-bearing liabilities would typically reprice faster than
interest-earning assets. Consequently, rising interest rates would adversely
impact net interest income. Conversely, declining interest rates would
improve net interest income. This table, however, does not indicate the
magnitude of the effect that 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 similiar maturity), loan prepayment risk, intra-period
sensitivity, the effect of interest rate floors and ceilings, and the effect
of competition on loan and deposit pricing. Also, this analysis is static
and does not reflect loan growth or other subsequent asset and liability
changes. While this interest sensitivity gap analysis is a widely used
measure of interest rate risk, it provides an incomplete picture.
Simulation modeling also is used to manage the Company's interest rate
risk. Simulation modeling can incorporate changes in asset and liability
volumes and changes in interest rates, as well as the associated timing of
the rate of change in interest rates of various categories of assets and
liabilities. On a regular basis, the Company simulates the potential effect
on net interest income of a gradual change in rates of 200 basis points up or
down over a 12-month period. Also, the potential effect of an instantaneous
change in rates of 200 basis points up or down is modeled. It is the
Company's policy to limit the maximum adverse impact on net interest income
from a gradual change in interest rates of 200 basis points over 12 months to
5.0%. As of March 31, 1995, the Company's interest rate risk position was
well within the policy guideline.
Between the first quarters of 1995 and 1994, net interest income was
adversely affected by the increase in interest rates reflecting both the
Company's liability sensitive position and vigorous loan and deposit pricing
competition. In February 1995, the Company sold $423.9 million of low-
yielding, fixed-rate securities to reposition its balance sheet to
reduce the Company's liability sensitive position. In addition, the adverse
effect from a potential rise in rates would also be mitigated by future loan
growth.
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. Net interest income included $486,000 and $92,000,
for the three months ended March 31, 1995 and 1994, respectively.
At March 31, 1995 and 1994 interest rate swaps were as follows:
March 31, 1995
-----------------------------------------------------------------
Weighted
Notional Average Weighted Average Rate
--------------------------
Amount Term Received Paid
---------- -------- ---------- ----------
(In thousands)
Receive fixed rate . . . . . . . . . . . . $151,000 15 months (1) 6.05% 6.22%
Pay fixed rate . . . . . . . . . . . . . . 100,000 1 months 6.32% 4.25%
March 31, 1994
----------------------------------------------------------------
Weighted
Notional Average Weighted Average Rate
------------------------
Amount Term Received Paid
---------- --------- --------- --------
(In thousands)
Receive fixed rate . . . . . . . . . . . . $ 51,000 26 months (1) 5.89% 3.48%
Pay fixed rate . . . . . . . . . . . . . . 200,000 7 months 3.56% 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, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 51,000 $200,000
Additions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
-------- --------
Balance, March 31, 1994. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 51,000 $200,000
======== ========
Balance, January 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $151,000 $100,000
Additions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
-------- --------
Balance, March 31, 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $151,000 $100,000
======== ========
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 March 31, 1995. The loans-
to-deposits and loans-to-assets ratios averaged 70.0% and 53.9%,
respectively, during the first three months of 1995. Average core deposits
(non-public demand, interest checking, savings, and time deposits under
$100,000) represented 90.9% of average total deposits and 69.9% of average
assets during the three-month period.
At March 31, 1995, federal funds purchased, securities sold under
agreements to repurchase, Federal Home Loan Bank borrowings, and other
borrowings totaled $807.7 million. At that same date, additional borrowing
liquidity was available in the form of $592.5 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 $57.5 million
during the first quarter of 1995.
The Company had commitments to extend credit at March 31, 1995, including
standby letters of credit of $107.3 million, commercial letters of credit of
$17.8 million, unused credit card lines of $477.6 million, commitments to
fund 1-4 family residential mortgage loans of $60.0 million, and other loan
commitments of $1.4 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 March 31, 1995, total stockholders' equity was $633.5 million or 8.38%
of total assets compared to $604.1 million or 8.54% of total assets at March
31, 1994. Exclusive of the net unrealized gains or losses on available-for-
sale securities, stockholders' equity was $633.0 million and $595.1 million
at March 31, 1995 and 1994, respectively. For the first three months of
1995, total stockholders' equity averaged $618.1 million or 7.97% of average
assets. The prior year-to-date average equity was $615.4 million or 8.83% 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.
March 31,
-------------------------------
1995 1994
------------ ------------
(Dollars in thousands)
Tier I capital:
Common stockholders' equity . . . . . . . . . . . . . . . . . . . . . . $ 536,564 $ 507,207
Preferred stockholders' equity. . . . . . . . . . . . . . . . . . . . . 96,920 96,920
Less: Intangible assets (1). . . . . . . . . . . . . . . . . . . . . . (87,887) (63,611)
Net unrealized gain on available for sale securities . . . . . . (524) (8,989)
Limitation on deferred tax assets (2). . . . . . . . . . . . . . (2,482) --
---------- ----------
Total Tier I capital . . . . . . . . . . . . . . . . . . . . . 542,591 531,527
---------- ----------
Tier II capital:
Allowance for credit losses (3) . . . . . . . . . . . . . . . . . . . . 62,871 52,484
---------- ----------
Total regulatory capital . . . . . . . . . . . . . . . . . . . $ 605,462 $ 584,011
========== ==========
Risk-weighted assets and off-balance-sheet commitments and contingencies. $5,029,581 $4,198,605
========== ==========
Adjusted average assets (4) . . . . . . . . . . . . . . . . . . . . . . . $7,685,282 $6,883,686
========== ==========
Regulatory
Minimums
----------
Risk-based capital ratios:
Tier I . . . . . . . . . . . . . . . . . . . . . . . . 4.00% 10.79% 12.66%
Total . . . . . . . . . . . . . . . . . . . . . . . . . 8.00 12.04 13.91
Leverage ratio . . . . . . . . . . . . . . . . . . . . . 3.00 7.06 7.72
<FN>
___________
(1) All intangible assets except purchased mortgage servicing rights of $2.4 million and purchased credit card
relationships of $7.9 million are subtracted from capital.
(2) During the first quarter of 1995, 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.
(3) The allowance for credit losses is limited to 1.25% of risk-weighted assets.
(4) Quarter-to-date average assets excluding the net unrealized gain or loss on available-for-sale securities and
all intangibles except purchased mortgage servicing rights and purchased credit card relationships.
As indicated in the preceding table, the Company's risk-based and leverage
capital ratios substantially exceed the minimums required by banking system
regulators.
Under regulations adopted by the 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 each of the Company's subsidiary banks exceeded the
"well capitalized" regulatory capital requirements at March 31, 1995.
For 1994, the Company's board of directors authorized 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. 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"). During 1994, 355,466
shares of the Company's common stock was 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 again authorized the
purchase of up to 500,000 common shares, or the equivalent in depositary
shares, or a combination of the two. At March 31, 1995, 62,139 common shares
had been acquired pursuant to this authorization.
Acquisitions
The Company has no binding commitments, agreements, or understandings to
acquire any additional financial institutions. Though the Company would
consider strategic and fill-in acquisitions that could be made on favorable
terms, its principal focus has shifted from growth by acquisition to internal
growth, enhancement of revenues, and greater efficiency.
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 $20.0
million and $41.4 million for the three-month periods ended March 31, 1995,
and 1994, 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. At March 31, 1995, the
subsidiary banks could distribute approximately $25.3 million in dividends
to the parent company without the approval from regulatory agencies.
Because of the financial strength of the parent company and the
anticipated earnings capacity of 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 March 31, 1995, the parent company had approximately $25.8 million of
cash and short-term investments. The parent company's borrowings under its
two credit agreements at the same date totaled $20.0 million. 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, risked-based capital, and nonperforming assets. The parent company
is currently in compliance with all restrictions and covenants under these
agreements.
PART II
Item 1. 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.
At the Company's annual meeting of stockholders held on April 20, 1995 the
results of the matters voted upon were as follows:
(1) Each of the following nominees for election as director was
elected.
Affirmative Votes
Director Votes Withheld
------------------------- ----------- --------
Thomas R. Clevenger 22,612,432 12,031
Jordan L. Haines 22,606,207 18,256
Patrick E. O'Shaughnessy 22,621,291 3,172
(2) An affirmative vote of the stockholders was obtained to approve
the appointment of Ernst & Young LLP as auditors for the current fiscal
year.
Affirmative Votes Negative Votes Abstentions
----------------- -------------- -----------
22,487,772 23,054 161,196
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
The following exhibits are filed herewith:
27.01 Article 9 of Regulation S-X Financial Data Schedule for
the March 31, 1995 Form 10-Q.
27.02 Restated Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter ended
March 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
FOURTH FINANCIAL CORPORATION
Date May 15, 1995 /s/ Darrell G. Knudson
------------------------- ---------------------------------
Darrell G. Knudson
Chairman of the Board
(Chief Executive Officer)
Date May 15, 1995 /s/ Michael J. Shonka
------------------------- ----------------------------------
Michael J. Shonka
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)