1
FINANCIAL COMMENTARY
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ACQUISITION OVERVIEW
Over the last several years the Corporation has made numerous sizeable
acquisitions establishing dominant positions in Missouri and New Mexico,
and significant presences in southern Illinois, western Tennessee,
Oklahoma, Arkansas and northern Texas. In 1993 and through the first
quarter of 1994 the Corporation completed six acquisitions in four states
aggregating $2.9 billion in total assets. The Corporation's operations
currently span nine states, with services delivered from approximately 425
branch locations and 350 off-premise ATM's. A summary of the acquisitions
consummated in 1993 and 1994 is provided below.
Oklahoma and Arkansas Acquisitions
On May 26, 1993, the Corporation, through its Oklahoma and Arkansas
subsidiaries, acquired 20 branches of the former Cimarron Federal Savings
Association (Cimarron), in an RTC assisted transaction for $13.1 million in
cash. Assets purchased, consisting primarily of cash and investment
securities, and deposits assumed totaled approximately $430 million. Two
locations, with deposits of approximately $60 million, became branches of
the Corporation's Oklahoma bank, and the other 18 locations, primarily
located in eastern Oklahoma, became branches of the Corporation's Arkansas
thrift subsidiary, Superior Federal Bank (Superior), which is headquartered
in Fort Smith, Arkansas. Superior, with assets of $1.2 billion, is the
third largest financial institution in the state, providing services from
57 locations in two states, 39 of which are located in central and
northwestern Arkansas and 18 locations in eastern Oklahoma.
On March 31, 1994, the Corporation acquired Woodland Bancorp, Inc.
(Woodland), a retail banking organization with assets of approximately $65
million, in a pooling transaction resulting in the issuance of .4 million
shares of common stock. Woodland is located in Tulsa, Oklahoma and was
merged into the Corporation's Oklahoma bank with total assets now
approximating $1.6 billion with services provided from 19 locations
primarily within the Oklahoma City and Tulsa metropolitan areas.
Texas Acquisitions
On March 5, 1993, the Corporation, through its subsidiary bank, Sunwest
Bank of El Paso, acquired First City's former bank in El Paso under an FDIC
assisted transaction for $14 million in cash. This bank, with assets of
approximately $340 million, was merged into the Sunwest Bank of El Paso
providing intramarket operating efficiencies. As a result of this
transaction, the Corporation's El Paso bank increased its asset size to
approximately $510 million and has attained a significant market share in
the El Paso metropolitan area.
On November 30, 1993, the Corporation acquired First Amarillo
Bancorporation, Inc. (Amarillo), in a transaction accounted for as a
pooling of interests. Under terms of the agreement, the Corporation
exchanged .912 shares of its common stock for each share of Amarillo,
resulting in the issuance of approximately 5.9 million shares of common
stock. Amarillo, with assets at March 31, 1994, of approximately $1.0
billion, is located in Amarillo, Texas and has the leading market share in
this north Texas market.
In the first quarter of 1994, the Corporation announced an agreement to
acquire Eagle Management and Trust Company, an investment advisory firm
located in Houston, which has more than $1.4 billion in assets under
management. This acquisition is expected to be completed in the second
quarter of this year and will not have a material impact on near-term
financial results.
Missouri Acquisition
On April 23, 1993, the Corporation, through its Kansas City bank, acquired
Missouri Bridge Bank, N.A., the former Metro North State Bank and Merchants
Bank under an assisted transaction with the FDIC. Boatmen's First National
Bank of Kansas City acquired $1.1 billion of certain assets and assumed the
same amount of deposit liabilities for a premium of $15.8 million. As a
result of this transaction, the Corporation increased its assets in the
Kansas City metropolitan area to $3.7 billion, further solidifying its
leading position in this market. Assets purchased included loans of
approximately $960 million and other assets totaling $180 million,
consisting primarily of investment securities, cash and short-term
investments. The Corporation
- ---------------------------------------------------------------------------------------------------------------------------------
Table 1: Acquisitions--1994 and 1993 Accounting
Date State Assets Price Shares issued(1) method
- ---------------------------------------------------------------------------------------------------------------------------------
FDIC assisted--First City-El Paso 3/93 Texas $ .3 billion $ 14 million cash -- Purchase
FDIC assisted--Missouri Bridge Bank 4/93 Missouri 1.1 billion 16 million cash -- Purchase
RTC assisted--Cimarron Federal Savings 5/93 Oklahoma .4 billion 13 million cash -- Purchase
FCB Bancshares, Inc. 8/93 Kansas .2 billion 25 million cash -- Purchase
First Amarillo Bancorporation, Inc. 11/93 Texas .8 billion 192 million stock 5.9 million Pooling
Woodland Bancorp, Inc. 3/94 Oklahoma .1 billion 12 million stock .4 million Pooling
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $2.9 billion
=================================================================================================================================
<FN>
(1) Previously reported share data have been restated to reflect the two-for-one stock split which was declared on August 10,
1993 and paid on October 1, 1993.
2 Boatmen's Bancshares, Inc.
2
FINANCIAL COMMENTARY
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retained eight of the bank's 15 branches and purchased the premises and
equipment at fair market value.
As part of the transaction, the Corporation entered into a five-year
loss-sharing arrangement with the FDIC with respect to approximately $950
million in multi-family residential, commercial real estate, construction
and commercial and industrial loans. For a more complete description of the
loss-sharing arrangement, refer to the Segregated Assets section of this
report.
Kansas Acquisition
On August 2, 1993, the Corporation consummated the acquisition of FCB
Bancshares, Inc., a one-bank holding company located in Overland Park,
Kansas with assets of approximately $185 million, for $25 million in cash.
This acquisition represents the Corporation's initial entry into Kansas and
is a natural extension of the Corporation's Kansas City franchise.
A summary of the Corporation's asset distribution by state is provided in
Table 2.
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Table 2: Asset Distribution
March 31, 1994 (in billions) Assets % of total
- -----------------------------------------------------------
Missouri $16.6 61.3%
New Mexico 3.2 11.8
Oklahoma 1.9 7.0
Texas 1.5 5.5
Iowa 1.1 4.1
Illinois 1.0 3.7
Arkansas .9 3.3
Tennessee .7 2.6
Kansas .2 .7
- -----------------------------------------------------------
Total $27.1 100.0%
===========================================================
EARNINGS OVERVIEW
Net income increased to $85.6 million, up 8.0% from the same period of last
year, and net income per share was $.82, an increase of 6.5%. The earnings
growth reflected higher net interest income and noninterest income and
continued improvement in asset quality. This resulted in a lower provision
for loan losses, which was offset in part by higher noninterest and tax
expense. Four purchase acquisitions were consummated during the period from
March 1, 1993, through March 31, 1994; therefore, the results of operations
of these companies are included in the consolidated financial statements
only subsequent to the dates of acquisition and must be considered when
reviewing the trended financial information. In addition, the results of
operations of Woodland, which qualified for accounting as a pooling of
interests, are not included in the consolidated financial statements prior
to January 1, 1994, due to the immaterial effect on the Corporation's
financial results.
For the first quarter, the return on average assets was 1.29% and the
return on equity was 15.92%, both of which approached the Corporation's
near-term goals of 1.3% and 16%, respectively. These returns were slightly
below the year-earlier levels because of a one-time $6 million gain in the
first quarter of 1993 from an income tax accounting change at the
Corporation's Amarillo subsidiary, which was acquired in the fourth quarter
of 1993.
Net interest income, on a fully-taxable equivalent basis, increased
5.7% over the first quarter of 1993 principally due to an increase in
average earning assets, which was partially offset by a narrower net
interest margin. The net interest margin was 4.34% for the first quarter, a
decrease of 22 basis points from the first quarter of last year and a seven
basis point drop from the fourth quarter of 1993. The decrease in the net
interest margin reflected both prepayment of mortgage-backed securities
and other maturing investment securities with subsequent reinvestment into
securities with lower yields.
Noninterest income increased 17.3% over the first quarter of 1993.
Excluding acquisitions and securities gains, noninterest income increased
9.3%, as most core noninterest income categories increased from the prior
year level.
Noninterest expense was up 12.6% from the first quarter of last year.
Excluding acquisitions, noninterest expense increased 7.3%.
The provision for loan losses for the first quarter of 1994 declined to
$5.6 million, representing a decrease of 70.9% from the first quarter of
last year, and a decline of 52.4% from the fourth quarter of 1993. The
lower loan loss provision reflected continued improvement in asset quality
as evidenced by lower levels of actual loan losses and further declines in
nonperforming and criticized loans. For the first quarter, net loan charge-
offs declined to $2.3 million, a decrease of 65.7% from the same period
last year, and included a recovery of $3.7 million pertaining to one
credit. Net charge-offs as a percentage of average loans dropped to .06%
compared to .21% for the first quarter of last year and .24% for all of
1993.
Presented in Table 3 is an income statement analysis expressed on a per
share basis for the quarter ended March 31, 1994, compared to the same
period last year and the three months ended December 31, 1993. A more
detailed discussion and analysis of the major factors impacting the
comparability between periods is provided throughout this report.
- --------------------------------------------------------
Table 3: Earnings Per Share Analysis
1ST QTR. '94 1st Qtr. '94
Per share VS. 1ST QTR. '93 vs. 4th Qtr. '93
- --------------------------------------------------------
Net income
per share
prior quarter $.77 $.75
- --------------------------------------------------------
Net interest income .14 .02
Provision for
loan losses .13 .06
Noninterest income .18 (.04)
Noninterest expense (.26) .11
Income tax expense (.13) (.07)
Impact of additional
shares of
common stock (.01) (.01)
- --------------------------------------------------------
Net increase .05 .07
- --------------------------------------------------------
Net income
per share
current quarter $.82 $.82
========================================================
NET INTEREST INCOME
Measured on a fully-taxable equivalent basis, net interest income increased
5.7% over the first quarter of 1993. This increase was primarily due to
growth in average earning assets which was partially offset by a
lower net interest margin. Average earning assets increased 11.2% over the
first quarter of last year primarily due to purchase acquisitions and
increased loan production.
Loans, the highest yielding earning asset, increased 13.9% over the
first quarter of l993 and as a percentage of average earning assets was
63.1% compared to 61.6% for the same period last year. Held to maturity
and available for sale securities increased 16.0%, representing 35.5% of
average earning assets, up from 34.0% for the first quarter of 1993. This
increase reflects redeployment of short-term money market instruments and
funds received from regulatory assisted transactions to the investment
1994 Quarterly Report 3
3
FINANCIAL COMMENTARY
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portfolio, coupled with a planned expansion of the securities portfolio at
the Corporation's Amarillo subsidiary which was acquired in the fourth
quarter of 1993.
After several periods of steady improvement in the net interest margin, the
Corporation experienced an anticipated contraction in the margin over the
second half of l993 which continued into the first quarter of this year.
The net interest margin for the first quarter of 1994 was 4.34% compared to
4.56% for the same period last year and 4.41% for the fourth quarter of
l993. The decline in the net interest margin was primarily due to
prepayments of mortgage-backed securities and other maturing securities
with the subsequent reinvestment into securities with lower yields,
resulting in a repricing of assets at a faster pace than interest-bearing
deposits. The average yield on earning assets for the first quarter of l994
declined 49 basis points from the same period last year compared to a 36
basis point decline in the rate paid on deposits. During this same period,
lending spreads narrowed as the surface spread between the prime rate and
Federal funds dropped from 300 basis points to 280 basis points.
The impact of the narrower spreads was offset to some extent by an
increased contribution from the interest rate swap portfolio. An integral
component of the Corporation's overall asset/liability management
strategies is the management of interest rate risk through the prudent use
of derivative products such as interest rate swaps. During the first
quarter of 1994, the Corporation added new swap transactions with a
notional amount of $1.0 billion and $250 million of swaps matured, such
that at March 31, 1994, the swap portfolio totaled $2.5 billion. The
interest rate swap portfolio has been used to modify the interest rate
sensitivity of subordinated debt, alter the balance sheet sensitivity of
acquired companies and modify the interest sensitivity of selected loan
portfolio components. These swaps increased net interest income by
approximately $7.3 million in the first quarter of 1994, adding 12 basis
points to the net interest margin, compared to $4.1 million or eight basis
points in the same period last year. Any future utilization of off-balance
sheet financing techniques will be determined based upon the Corporation's
overall interest rate sensitivity position and asset/liability management
strategies, which are designed to limit interest rate risk exposure to no
more than 5% of projected annual net income.
Based on the current interest rate outlook and a reduction in mortgage-
backed securities prepayments, the Corporation anticipates stability in the
net interest margin in the near term.
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Table 4: Summary of Net Interest Income
Three months ended March 31 (in millions) 1994 1993 % change
- --------------------------------------------------------------------------------------------------
Average loans $14,956.3 $13,127.9 13.9%
Average earning assets 23,690.3 21,306.9 11.2
Average core deposits 18,074.3 16,681.9 8.3
Average purchased funds 3,832.1 2,955.7 29.7
Net interest income (FTE) 257.0 243.1 5.7
Net interest margin 4.34% 4.56%
==================================================================================================
NONINTEREST INCOME
Noninterest income increased 17.3% over the first quarter of 1993
reflecting continued growth in core fee income sources such as trust fees,
service charge income, and credit card fees. Excluding the effect of
acquisitions and securities gains, noninterest income increased 9.3%.
Strategic initiatives have emphasized the expansion of fee-based services
as a means to stabilize the earnings stream and reduce the Corporation's
exposure to interest rate and credit risk. As such, the Corporation has
focused on increasing noninterest revenues, principally through expansion
of its trust and retail lines of business. Noninterest income as a
percentage of operating revenues was 33.5% for the first quarter of 1994
compared to 31.3% for the same period of 1993.
Trust fees increased 11.9% over the first quarter of 1993 primarily due to
successful marketing programs aimed at generating new personal and
institutional business relationships. Excluding acquisitions, trust fees
increased 9.4%. Trust assets under management totaled $32.9 billion at
March 31, 1994, compared to $33.3 billion at March 31, 1993, and $34.1
billion at December 31, 1993, with the decrease being attributable to
declines in equity and bond markets.
Service charge income increased 14.4% over the first quarter of 1993. This
increase reflects growth through recent acquisitions, increased penetration
of the retail market and higher fees on corporate customer accounts.
Excluding acquisitions, service charge income increased 9.2%. Investment
banking profits and fees decreased 6.8% from the first quarter of 1993 as
lower levels of foreign exchange gains and bond trading profits more than
offset increases in retail brokerage business. For the first quarter of
1994, retail brokerage fees increased $.5 million or 12% over the first
quarter of last year.
Credit card income totaled $15.0 million in the first quarter of 1994, an
increase of 29.5%. Much of this increase reflects growth in transaction
volume of merchant business, which is also reflected in the increase in
credit card expense.
Gains of $2.6 million were recognized in the first quarter of 1994 on sales
of approximately $50 million of available for sale securities. Other
noninterest income increased $4.5 million or 25.7% over the first quarter
of 1993 including $3.3 million of segregated assets income.
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Table 5: Summary of Noninterest Income
Three months ended March 31 (in millions) 1994 1993 % change
- -----------------------------------------------------------------------------------------
Trust fees $ 39.2 $ 35.0 11.9%
Service charges 40.0 35.0 14.4
Credit card 15.0 11.6 29.5
Investment banking profits and fees 7.9 8.5 (6.8)
Securities gains, net 2.6 .1
Mortgage banking operations 3.0 2.9 3.4
Other 22.0 17.5 25.7
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Total noninterest income $129.7 $110.6 17.3%
=========================================================================================
As % of operating income 33.5% 31.3%
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Revenue per full-time equivalent employee
(in thousands) $108.1 $106.3
=========================================================================================
4 Boatmen's Bancshares, Inc.
4
FINANCIAL COMMENTARY
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NONINTEREST EXPENSE
Noninterest expense totaled $242.5 million, an increase of 12.6% from 1993,
but was down moderately from the third and fourth quarter 1993 levels of
$248.3 million and $253.8 million, respectively. To a large extent, most
categories of noninterest expense have been influenced by acquisitions
consummated subsequent to March 1, 1993. Excluding the effect of these
acquisitions, noninterest expense increased 7.3%, due primarily to
increased staff expense, higher depreciation expense on equipment
enhancements, increased credit card expense and advertising costs. The
efficiency ratio was 62.7% for the first quarter of 1994 compared to 60.9%
for the same period of last year. The temporary increase in the efficiency
ratio reflects the impact of acquisitions, expansion within the retail line
of business and slower growth in net interest income.
Staff expense, which represents 51% of total noninterest expense, increased
10.7% from the first quarter of 1993. The number of full-time equivalent
employees (FTE's) increased from 13,403 at March 31, 1993, to 14,330 at
March 31, 1994, principally due to acquisitions. Excluding the effect of
acquisitions, staff expense increased 8.4%, reflecting a planned expansion
of the retail sales force, normal merit adjustments and increased costs of
incentive and other employee benefit programs. While FTE's were added in
the retail expansion, the additional compensation expense is largely
commission-based and bears a direct relationship to increased revenue.
Equipment expense increased 10.7% over the first quarter of 1993, primarily
due to the acquisitions and higher depreciation expense associated with
investments in capital expenditures for upgraded computer systems and
software mainly to support trust and retail business expansion. The higher
level of advertising expense reflects increased promotional activity
associated with recent credit card and other retail initiatives.
Foreclosed property costs reflected gains on sales of foreclosed property
of $2.8 million and $4.1 million in the first quarters of 1994 and 1993,
respectively, which more than offset operating expenses and writedowns to
other parcels of property. Much of the gains during both periods was
recognized at the Corporation's New Mexico subsidiary.
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Table 6: Summary of Noninterest Expense
Three months ended March 31 (in millions) 1994 1993 % change
- -----------------------------------------------------------------------------------------
Staff expense $123.1 $111.2 10.7%
Occupancy 16.6 16.3 1.9
Equipment 20.0 18.1 10.7
FDIC insurance 11.5 11.0 4.5
Credit card 9.0 7.1 26.8
Printing, postage, paper 9.5 8.7 9.2
Intangible amortization 8.3 5.1 62.7
Professional fees 5.6 5.4 3.7
Federal Reserve processing charges 2.3 2.5 (.1)
Advertising 6.1 4.6 32.6
Communications 4.9 4.1 19.5
Foreclosed property costs, net (1.1) (1.6) 29.9
Other 26.7 22.9 16.6
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Total noninterest expense $242.5 $215.4 12.6%
=========================================================================================
Efficiency ratio 62.7% 60.9%
Number of full-time equivalent employees 14,330 13,403
=========================================================================================
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Table 7: Summary of Noninterest Income and Noninterest Expense
Excluding Effect of Acquisitions
Three months ended March 31 (in millions) 1994 1993 % change
- -----------------------------------------------------------------------------------------
Noninterest income:
Trust fees $ 38.3 $ 35.0 9.4%
Service charges 38.1 34.9 9.2
Other 46.7 40.5 15.3
- -----------------------------------------------------------------------------------------
Total noninterest income $123.1 $110.4 11.5%
=========================================================================================
Noninterest expense:
Staff $120.3 $111.0 8.4%
Occupancy and equipment 35.5 34.4 3.2
Other 74.6 69.3 7.6
- -----------------------------------------------------------------------------------------
Total noninterest expense $230.4 $214.7 7.3%
=========================================================================================
Goodwill and core deposit premium amortization totaled $8.3 million for the
first quarter of 1994, an increase of 62.7% from the prior year, reflective
of aforementioned purchase acquisitions consummated subsequent to March 1,
1993.
In the first quarter of 1994, the Corporation adopted Statement of
Financial Accounting Standards No. 112 (SFAS No. 112), "Employers'
Accounting for Postemployment Benefits," which requires recognition of the
cost to provide postemployment benefits on an accrual basis. The
Corporation's existing accounting policies were in general compliance with
the requirements of SFAS No. 112. Accordingly, adoption of this standard
had no material impact on the level of postemployment expense.
A summary of noninterest income and expense categories excluding the impact
of acquisitions is provided in Table 7.
TAXES
The Corporation's effective tax rate rose to 34.3% for the first quarter of
1994 compared to 28.2% for the same period of last year. The effective tax
rate in 1993 was unusually low due to a one-time, $6.0 million reduction in
income tax expense from adoption of SFAS 109, "Accounting for Income Taxes"
at the Corporation's Amarillo, Texas subsidiary, which was acquired in
November 1993. On a prospective basis, the effective tax rate should
continue to approximate the statutory rate, adjusted for normal operating
items such as tax-exempt interest, goodwill amortization and other
nondeductible expenses.
1994 Quarterly Report 5
5
FINANCIAL COMMENTARY
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PROVISION FOR LOAN LOSSES
The provision for loan losses declined to $5.6 million in the first quarter
of 1994, a decrease of 70.9% from the first quarter of last year and a
decline of 52.4% from the fourth quarter of 1993 when the provision totaled
$11.9 million. This decline reflects continued improvement in asset quality
as evidenced by lower levels of actual loan losses, further declines in
nonperforming loans and a continued downward trend in criticized loans
identified through the Corporation's internal risk rating system. Excluding
a one-time merger-related provision to conform loan reserve methods in the
fourth quarter of 1992, the provision for loan losses declined for the
tenth consecutive quarter. At March 31, 1994, the reserve for loan losses
represented 240% of nonperforming loans compared to 195% at December 31,
1993, and 141% at March 31, 1993. The reserve for loan losses as a
percentage of net loans was 2.28% compared to 2.38% at March 31, 1993, and
2.30% at year-end 1993. Consistent with the decrease in nonperforming and
criticized loans, net loan charge-offs declined to a record low $2.3
million, a decrease of $4.5 million or 65.7% from the same period of 1993,
and included a $3.7 million recovery pertaining to one credit. Annualized
net charge-offs as a percentage of average loans dropped to .06% compared
to .21% for the same period of last year and .24% for all of 1993.
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Table 8: Summary of Reserve
for Loan Losses
March 31 (in millions) 1994 1993
- ----------------------------------------------------------------
Balance, beginning
of year $341.1 $302.0
- ----------------------------------------------------------------
Loans charged off (14.8) (16.8)
Recoveries on loans
previously charged off 12.5 10.0
- ----------------------------------------------------------------
Net charge-offs (2.3) (6.8)
Provision charged
to expense 5.6 19.4
Reserves of acquired
subsidiaries .9 4.6
- ----------------------------------------------------------------
Balance, end of period $345.3 $319.2
================================================================
At end of period:
Loan reserve as %
of net loans 2.28% 2.38%
Loan reserve as %
of nonperforming
loans 239.96 140.93
Net charge-offs as
% of average loans .06 .21
================================================================
NONPERFORMING ASSETS
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Table 9: Summary of Nonperforming Assets
(in millions) MARCH 31, 1994 December 31, 1993 March 31, 1993
- --------------------------------------------------------------------------------------------------
Nonaccrual $120.7 $142.9 $197.0
Restructured 7.2 14.8 12.7
Past due 90 days or more 16.0 17.2 16.8
- --------------------------------------------------------------------------------------------------
Total nonperforming loans 143.9 174.9 226.5
- --------------------------------------------------------------------------------------------------
Foreclosed property 109.1 110.6 136.3
- --------------------------------------------------------------------------------------------------
Total nonperforming assets $253.0 $285.5 $362.8
==================================================================================================
Nonperforming loans as % of total loans .95% 1.17% 1.68%
Nonperforming assets as % of total loans
and foreclosed property 1.65 1.90 2.66
Nonperforming assets as % of total assets .93 1.07 1.52
Loan reserve as % of nonperforming loans 239.96 195.03 140.93
==================================================================================================
- ----------------------------------------------------------------------------------------------
Table 10: Loans Designated as Criticized Loans by Internal Risk Rating System
Criticized Loans
- ----------------------------------------------------------------------------------------------
(in millions) Nonperforming Performing Total
- ----------------------------------------------------------------------------------------------
1993
- ----------------------------------------------------------------------------------------------
March 31 $226.5 $653.6 $880.1
June 30 190.6 610.2 800.8
September 30 187.2 608.2 795.4
December 31 174.9 587.7 762.6
==============================================================================================
1994
- ----------------------------------------------------------------------------------------------
March 31 143.9 534.4 678.3
==============================================================================================
As % of loans at March 31, 1994 .95% 3.51% 4.46%
==============================================================================================
Nonperforming assets, which include nonperforming loans and foreclosed
property, declined $109.8 million or 30.3% from March 31, 1993, and $32.5
million or 11.4% from year-end 1993. As a percent of total loans and
foreclosed property, nonperforming assets declined to 1.65% compared to
2.66% at March 31, 1993, and 1.90% at December 31, 1993. The steady decline
in nonperforming asset levels over the last several quarterly periods
largely resulted from loan payments and loans returned to accrual status,
together with a reduction in loans migrating to nonaccrual status. This
trend reflects a stronger economy and the effectiveness of the
Corporation's comprehensive loan administration and workout procedures. As
a percentage of total assets, nonperforming assets fell below the 1.0%
level to .93%. Nonperforming loans at March 31, 1994, declined to $143.9
million or .95% of total loans, the lowest levels in several years compared
to 1.17% at December 31, 1993, and 1.68% at March 31, 1993. Table 11
summarizes the nonperforming assets by major banking unit/geographic
location and illustrates the broad-based improvement achieved.
6 Boatmen's Bancshares, Inc.
6
FINANCIAL COMMENTARY
- -------------------------------------------------------------------------------
As part of management's overall portfolio analysis, ongoing credit quality
reviews are performed to evaluate risk inherent in the portfolio and
potential risk that may develop in the future. A critical element in
assessing portfolio risk is the level of criticized loans. The
Corporation's internal risk rating system designates specific credits as
criticized loans, which include all nonperforming loans and other loans
which contain features presenting more that the normal risk of
collectibility. Criticized and classified assets from regulatory
examinations are an integral component of the risk rating system. As
displayed in Table 10, criticized loans totaled $678.3 million or 4.46% of
loans at March 31, 1994, a decline of over $200 million from March 31,
1993, when criticized loans were 6.51%. Management carefully analyzes
changes and trends in both nonperforming and criticized loans in assessing
the risk characteristics of the loan portfolio. Given the current risk
characteristics of the loan portfolio, the Corporation does not expect any
significant change in criticized loans in the near term.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114 (SFAS No. 114), "Accounting by
Creditors for Impairment of a Loan." This statement will require that
certain impaired loans be measured based on either the present value of
expected future cash flows discounted at the loan's effective rate, the
market price of the loan, or fair value of the underlying collateral if the
loan is collateral dependent. Adoption of this pronouncement is required in
1995 and, at present, is not expected to have a material effect on the
Corporation's reported financial results.
- -------------------------------------------------------------------
Table 11: Nonperforming Assets
by Banking Unit
MARCH December March
(in millions) 31, 1994 31, 1993 31, 1993
- -------------------------------------------------------------------
Missouri $153.9 $171.4 $221.5
New Mexico 46.6 53.4 76.1
Oklahoma 10.9 14.3 17.3
Texas 9.1 13.7 21.2
Iowa 6.9 7.2 10.1
Illinois 7.8 7.1 9.1
Arkansas 4.5 4.0 3.6
Tennessee 6.3 6.8 3.9
Kansas 7.0 7.6
- -------------------------------------------------------------------
Total $253.0 $285.5 $362.8
===================================================================
SEGREGATED ASSETS
As part of the regulatory-assisted acquisition of Missouri Bridge Bank,
N.A. on April 23, 1993, the Corporation entered into a five-year loss-
sharing arrangement with the FDIC with respect to approximately $950
million in multi-family residential, commercial real estate, construction,
and commercial and industrial loans. During the five-year period, the FDIC
will reimburse the Corporation for 80 percent of the first $92.0 million of
net charge-offs on these loans, after which the FDIC will increase its
reimbursement coverage to 95 percent of additional charge-offs. During this
period and for two years thereafter, the Corporation is obligated to pay
the FDIC 80 percent of all recoveries on charged-off loans.
The Corporation has designated certain loans covered under the loss-sharing
arrangement which possess more than the normal risk of collectibility as
segregated assets. At March 31, 1994, segregated assets totaled $245.0
million, net of a $17.0 million credit valuation allowance, and are
classified as other assets for reporting purposes. At March 31, 1994,
segregated assets consisted of $64.4 million of commercial loans, $30.4
million of industrial revenue bond loans and $166.0 million of commercial
real estate related loans. All other loans covered under the loss-sharing
arrangement are included in the loan portfolio and totaled $386.5 million
at March 31, 1994. Net charge-offs of $1.4 million, representing the
Corporation's share of losses on the segregated asset pool, were recognized
in the first quarter of 1994. The valuation allowance represents the
Corporation's share of estimated losses upon ultimate liquidation of the
portfolio. The Corporation's primary purpose in managing a portfolio of
this nature is to provide ongoing collection and control activities on
behalf of the FDIC. Accordingly, these assets do not represent loans made
in the ordinary course of business and, due to the underlying nature of
this liquidating asset pool, are excluded from the Corporation's
nonperforming asset statistics. At March 31, 1994, $222.0 million of
segregated assets were accorded classification treatment consistent with
nonaccrual reporting, $1.2 million represented foreclosed property, and the
balance of $38.8 million was past due 90 days or more. The Corporation's
operating results and cash flow position are not expected to be materially
affected by the ongoing collection activities associated with managing the
loans subject to the loss-sharing arrangement. Segregated assets income
totaled $3.3 million in the first quarter of 1994.
A summary of activity regarding segregated assets is provided in Table 12.
- -----------------------------------------------------------------------------------
Table 12: Segregated Assets
Principal Allowance Principal
March 31, 1994 (in millions) balance for losses balance, net
- -----------------------------------------------------------------------------------
Balance, beginning of year $266.6 $18.4 $248.2
Charge-offs (8.7) (1.7)
Recoveries 1.6 .3
Transfers to segregated assets 16.3
Payments on segregated assets (13.8)
- -----------------------------------------------------------------------------------
Segregated assets, end of period $262.0 $17.0 $245.0
===================================================================================
1994 Quarterly Report 7
7
FINANCIAL COMMENTARY
- -------------------------------------------------------------------------------
LOAN PORTFOLIO
The majority of the Corporation's loans are made within its natural trade
territory, and the portfolio is highly diversified. There are no
concentrations of credit to any borrower or industry in excess of 5% of
total loans, and the portfolio is well balanced between wholesale and
consumer lending.
At March 31, 1994, loans totaled $15.1 billion, an increase of 12.7% over
the same period of last year. Based on average balances, loans increased
13.9%, principally the result of 1993 purchase acquisitions and meaningful
internal loan growth within the consumer and middle-market commercial
portfolios. Excluding acquisitions, loans increased 9% from March 31, 1993,
and were led by a 20% increase in consumer loans coupled with an increase
of approximately 5% in commercial loans. Consumer loan growth stepped up
over the second half of last year, largely the result of increased retail
penetration of consumer products, primarily auto loans and credit cards.
The increase in commercial loans was primarily due to middle-market loan
growth.
The portfolio mix has undergone a favorable shift in that business
development efforts have focused on expanding the middle-market commercial
and consumer sectors, which has been complemented by acquisitions of
retail-oriented institutions. At March 31, 1994, middle-market commercial
and consumer loans represented approximately 49% of the loan portfolio
compared to 47% at March 31, 1993. Commercial real estate and real estate
construction loans represented 20.5% of total loans at March 31, 1994,
compared to 19.6% at March 31, 1993. The Corporation closely monitors the
composition and quality of the real estate portfolio through established
credit review procedures to ensure that significant credit concentrations
do not exist within this portfolio. The portfolio is geographically
dispersed, primarily in areas where the Corporation has a direct banking
presence, and is widely diversified between residential construction,
office and retail properties, and land acquisition and development loans.
The Corporation has limited foreign loan exposure and its portfolio of
highly leveraged transaction loans (HLT's) is minimal, at .5% of total
loans at March 31, 1994.
Table 13 displays the components of the loan portfolio under standard
financial reporting definitions. Management also reviews the
diversification of the portfolio using internally developed standards and
definitions as summarized in Table 14.
- -----------------------------------------------------------------------------------------------------
Table 13: Summary of Loan Portfolio
(in millions) MARCH 31, 1994 December 31, 1993 March 31, 1993
- -----------------------------------------------------------------------------------------------------
Commercial $ 7,616.2 $ 7,490.7 $ 6,933.9
Real estate mortgage 2,957.2 2,988.5 2,752.6
Real estate construction 579.6 558.0 436.6
Consumer 3,935.6 3,742.8 3,294.4
Lease financing 92.5 95.2 78.2
- -----------------------------------------------------------------------------------------------------
Total domestic loans 15,181.1 14,875.2 13,495.7
Foreign loans 18.2 18.0 18.9
- -----------------------------------------------------------------------------------------------------
Total loans, before deduction of
unearned income 15,199.3 14,893.2 13,514.6
Less unearned income 59.9 67.3 83.8
- -----------------------------------------------------------------------------------------------------
Total loans, net of unearned income $15,139.4 $14,825.9 $13,430.8
=====================================================================================================
- --------------------------------------------------------------------------------------------------
Table 14: Composition of Loan Portfolio
MARCH 31, 1994 December 31, 1993 March 31, 1993
- --------------------------------------------------------------------------------------------------
% OF % Of % Of
TOTAL Total Total
(in millions) AMOUNT LOANS Amount Loans Amount Loans
- --------------------------------------------------------------------------------------------------
Real estate:
1-4 family residential $ 2,946.9 19.4% $ 2,970.6 20.0% $ 2,732.4 20.2%
Land acquisition 148.8 1.0 168.8 1.1 107.8 .8
Residential construction 191.0 1.2 181.2 1.2 136.3 1.0
Commercial construction 239.8 1.6 208.0 1.4 192.5 1.4
Commercial real estate 2,444.9(1) 16.1 2,446.6(1) 16.4 2,070.6 15.3
Mini-perms 88.7 .6 107.2 .7 146.1 1.1
- --------------------------------------------------------------------------------------------------
Total real estate 6,060.1 39.9 6,082.4 40.8 5,385.7 39.8
Commercial loans to Fortune
1,000 companies and other
large corporate borrowers 740.4 4.9 662.5 4.5 749.2 5.6
Middle-market commercial 3,451.5 22.7 3,359.9 22.6 3,106.8 23.0
Highly leveraged
transactions (HLT's) 84.4 .5 91.0 .6 80.0 .6
Bank stock loans 210.5 1.4 226.4 1.5 246.2 1.8
Agriculture 606.1 4.0 615.0 4.1 555.2 4.1
Consumer:
Home equity 366.9 2.4 363.1 2.4 356.5 2.6
Credit card 450.4 3.0 457.3 3.1 356.9 2.7
Installment 3,118.3 20.5 2,922.4 19.6 2,581.0 19.1
- --------------------------------------------------------------------------------------------------
Total consumer 3,935.6 25.9 3,742.8 25.1 3,294.4 24.4
Lease financing 92.5 .6 95.2 .7 78.2 .6
Foreign 18.2 .1 18.0 .1 18.9 .1
- --------------------------------------------------------------------------------------------------
Total loans $15,199.3 100.0% $14,893.2 100.0% $13,514.6 100.0%
==================================================================================================
<FN>
(1) Includes approximately $220 million and $240 million of commercial real
estate loans covered by the FDIC loss-sharing agreement related to the
acquisition of Missouri Bridge Bank, N.A. at March 31, 1994, and December
31, 1993, respectively.
8 Boatmen's Bancshares, Inc.
8
FINANCIAL COMMENTARY
- -------------------------------------------------------------------------------
FINANCIAL POSITION AND LIQUIDITY
The basic financial structure of the Corporation's average and period-end
balance sheet changed only moderately from the fourth quarter and first
quarter of last year primarily due to purchase acquisitions and higher
levels of purchased funds. At March 31, 1994, assets totaled $27.1 billion
compared to $23.9 billion at March 31, 1993, and $26.7 billion at December
31, 1993.
Assets acquired in purchase acquisitions subsequent to March 31, 1993,
totaled approximately $1.3 billion, consisting primarily of loans
aggregating $.5 billion, investment securities of $.5 million and
segregated assets of $245 million. Core deposits received from these
acquisitions approximated $1.0 billion.
Liquidity represents the availability of funding to meet the obligations to
depositors, borrowers, and creditors at a reasonable cost without adverse
consequences. Accordingly, the Corporation's liquidity position is greatly
influenced by its funding base and asset mix. Core deposits, which consist
of investable checking account deposits and certain interest-bearing
accounts, represent the Corporation's largest and most important funding
source, as these deposits represent a more stable, lower cost source of
funds.
The core deposit base is supplemented by the Corporation's wholesale and
correspondent banking activities which provide a natural access to short-
term purchased funds, such as negotiable certificates of deposit and
overnight surplus funds. These funds can be acquired when needed,
principally from existing customers within the Corporation's natural trade
territory and through access to national money markets.
Average core deposits totaled $18.1 billion for the first quarter of 1994,
an increase of $1.4 billion or 8.3% from the same period last year. Average
earning asset growth during this period exceeded core deposit growth by
approximately $1.0 billion; accordingly, the additional earning asset
volume has been funded by higher levels of purchased funds. Average core
deposits supported 76.3% of earning assets for the first quarter of 1994
compared to 78.3% during the same period last year. Purchased funds, which
increased approximately $.9 billion from the prior year, supported 16.2% of
average earning assets compared to 13.9% for the first quarter of last
year. The Corporation expects earning asset growth will continue to exceed
core deposit growth in the near term resulting in a continued use of
purchased funds at or slightly above the present levels.
The Corporation also manages its liquidity position by maintaining adequate
levels of liquid assets such as money market investments and available for
sale securities. At March 31, 1994, the available for sale portfolio
totaled $4.7 billion compared to $5.2 billion at December 31, 1993. These
securities, comprised mainly of adjustable-rate mortgage-backed securities,
U.S. Treasury securities, pass-through mortgage-backed securities, and
short-term CMO's, may be sold to meet liquidity needs or in response to
significant changes in interest rates or prepayment risks. At March 31,
1994, unrealized appreciation in the available for sale portfolio was
approximately $3.5 million compared to $69 million at December 31, 1993.
This decline was primarily due to the recent run-up in market interest
rates.
Maintaining favorable debt ratings is also critical to liquidity because it
can affect the availability and cost of funds to the Corporation. The
Parent Company's ability to access the capital markets on a cost-effective
basis is reflected by its debt ratings, summarized on page 16. There were
no commitments for capital expenditures at March 31, 1994, which would
materially impact the Corporation's liquidity position.
CAPITAL STRUCTURE
The Corporation continues to rank among the most strongly capitalized bank
holding companies in the country. This strong capital position and overall
financial strength provide a good base for future expansion when profitable
investment opportunities arise. The cornerstone of the Corporation's
capital structure is its common equity, totaling $2.2 billion or
approximately 81% of total capitalization at March 31, 1994, an increase of
11.5% from March 31,1993. The equity to asset ratio was 7.94% at March 31,
1994, compared to 8.07% at March 31, 1993, and 8.00% at December 31, 1993.
The equity base has been strengthened in recent years through earnings
retention, the conversion of debt to equity and the issuance of common
stock through various employee and stockholder investment plans. On April
14, 1994, the Corporation filed a shelf registration statement with the
Securities and Exchange Commission providing for the issuance of up to $500
million of debt, preferred stock or common stock. This represents the only
currently existing shelf filing and there are no plans to issue securities
pursuant to this filing in the near term. In the first quarter of 1993, the
Corporation issued $100 million of 6.75% subordinated notes due March 15,
2003, under the final tranche of a $200 million debt registration. The
Corporation also exercised its option to prepay approxi-
- ---------------------------------------------------------------------------------------------
Table 15: Capital Structure
(in millions) MARCH 31, 1994 December 31, 1993 March 31, 1993
- ---------------------------------------------------------------------------------------------
Long-term debt $ 514.8 $ 486.3 $ 476.4
Stockholders' equity 2,153.9 2,133.3 1,931.2
- ---------------------------------------------------------------------------------------------
Total capitalization $2,668.7 $2,619.6 $2,407.6
=============================================================================================
Tangible equity $1,886.8 $1,858.0 $1,704.9
=============================================================================================
Ratios
- ---------------------------------------------------------------------------------------------
Equity/assets 7.94% 8.00% 8.07%
Tangible equity/assets 7.02 7.04 7.19
Long-term debt as % of total capitalization 19.29 18.56 19.79
Double leverage 108.93 110.37 111.11
Dividends paid
(for the period, in thousands):
Preferred $ 20 $ 86 $ 22
Common 32,225 112,129 27,020
Total dividends as % of net income 37.7% 35.4% 34.1%
=============================================================================================
1994 Quarterly Report 9
9
FINANCIAL COMMENTARY
- -------------------------------------------------------------------------------
mately $14 million of convertible subordinated debt at its Iowa subsidiary
during the first quarter of last year, resulting in the issuance of
approximately 1.0 million shares of common stock as noteholders elected to
convert debt to equity prior to the prepayment date.
An important measure of capital adequacy of a banking institution is its
risk-based capital ratios, which represents the primary capital standard
for regulatory purposes. The Corporation's risk-based capital ratios of
10.61% for Tier I and 14.25% for total capital substantially exceed the
regulatory required minimums. An additional measure of capital, referred to
as the Tier I leverage ratio, places a constraint on the degree to which a
banking institution can leverage its equity capital base. At March 31,
1994, the Corporation's Tier I leverage ratio was 7.05%, well in excess of
required minimums.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA),
established rating categories for all FDIC-insured institutions ranging
from "well capitalized" to "critically undercapitalized." The ratings
combine capital measures in addition to the level of regulatory supervision
received by an individual financial institution. At March 31, 1994, all of
the Corporation's banking subsidiaries met the capital criteria required by
the well capitalized definition. FDICIA mandated other changes to risk-
based capital rules that may become effective in 1994, notably the
requirement to incorporate interest rate risk into the risk-based capital
computation. As proposed, this change is not expected to have a material
effect on the Corporation's capital requirements. The Federal Reserve Board
and other regulatory agencies are proposing other amendments to existing
risk-based capital guidelines to include the unrealized
appreciation/depreciation on available for sale securities in Tier I
capital. The Corporation believes it would be more appropriate to exclude
the unrealized appreciation/depreciation from Tier I as inclusion could
introduce volatility in capital levels which is inconsistent with the
managerial concept of longer-term capital planning.
- -----------------------------------------------------------------------------------------------
Table 16: Intangible Assets
(in millions) MARCH 31, 1994 December 31, 1993 March 31, 1993
- -----------------------------------------------------------------------------------------------
Goodwill--Parent Company $ 94.0 $ 95.3 $ 99.4
- -----------------------------------------------------------------------------------------------
Subsidiaries:
Goodwill 114.3 118.3 77.5
Core deposit premium 50.5 53.3 42.7
Credit card premium 3.4 3.5 1.4
Purchased mortgage servicing rights 4.9 4.9 5.3
- -----------------------------------------------------------------------------------------------
173.1 180.0 126.9
- -----------------------------------------------------------------------------------------------
Total intangible assets $267.1 $275.3 $226.3
===============================================================================================
- -----------------------------------------------------------------------------------------------
Table 17: Risk-Based Capital
(in millions) MARCH 31, 1994 December 31, 1993 March 31, 1993
- -----------------------------------------------------------------------------------------------
Tier I capital:
Stockholders' equity $ 2,153.9 $ 2,133.3 $ 1,931.2
Minority interest .7 .7 1.0
Intangible assets:
Goodwill (208.3) (213.6) (176.9)
Core deposit premium (50.5) (53.3) (42.7)
Unrealized net appreciation,
available for sale securities (2.2) (42.3)
- -----------------------------------------------------------------------------------------------
Total Tier I 1,893.6 1,824.8 1,712.6
- -----------------------------------------------------------------------------------------------
Tier II capital:
Allowable reserve for loan losses 224.6 215.3 199.4
Qualifying long-term debt 425.0 425.2 437.1
- -----------------------------------------------------------------------------------------------
Total Tier II 649.6 640.5 636.5
- -----------------------------------------------------------------------------------------------
Total capital $ 2,543.2 $ 2,465.3 $ 2,349.1
===============================================================================================
Risk-adjusted assets $17,851.3 $17,098.0 $15,952.6
===============================================================================================
Risk-based capital ratios:
Tier I 10.61% 10.67% 10.74%
===============================================================================================
Total 14.25% 14.42% 14.73%
===============================================================================================
Tier I Leverage ratio 7.05% 6.93% 7.23%
===============================================================================================
10 Boatmen's Bancshares, Inc.
10
CONSOLIDATED QUARTERLY EARNINGS TREND
- -----------------------------------------------------------------------------------------------------
1994 1993
- -----------------------------------------------------------------------------------------------------
(in thousands) FIRST Fourth Third Second First
- -----------------------------------------------------------------------------------------------------
Interest income
Interest and fees on loans $289,634 $287,592 $287,251 $279,297 $265,662
Interest on short-term investments 560 257 405 509 826
Interest on Federal funds sold and securities
purchased under resale agreements 1,593 2,380 1,936 3,161 5,884
Interest on held to maturity securities
Taxable 41,025 92,383 96,537 97,569 94,789
Tax-exempt 13,744 13,907 14,366 14,745 15,363
- -----------------------------------------------------------------------------------------------------
Total interest on held to maturity securities 54,769 106,290 110,903 112,314 110,152
Interest on available for sale securities 59,091 7,169 7,258 7,360 7,270
Interest on trading securities 840 1,063 429 493 585
- -----------------------------------------------------------------------------------------------------
Total interest income 406,487 404,751 408,182 403,134 390,379
- -----------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits 124,050 128,331 133,406 135,096 132,011
Interest on Federal funds purchased
and other short-term borrowings 23,135 19,126 16,014 12,688 14,539
Interest on capital lease obligation 945 965 964 965 964
Interest on long-term debt 9,714 9,704 9,542 9,391 8,268
- -----------------------------------------------------------------------------------------------------
Total interest expense 157,844 158,126 159,926 158,140 155,782
- -----------------------------------------------------------------------------------------------------
Net interest income 248,643 246,625 248,256 244,994 234,597
Provision for loan losses 5,640 11,853 13,040 15,918 19,373
- -----------------------------------------------------------------------------------------------------
Net interest income after provision for loan
losses 243,003 234,772 235,216 229,076 215,224
- -----------------------------------------------------------------------------------------------------
Noninterest income
Trust fees 39,190 37,895 38,723 37,952 35,010
Service charges 40,047 41,250 39,173 37,770 35,008
Credit card 15,045 14,934 14,561 13,276 11,618
Investment banking profits and fees 7,926 8,657 9,546 8,895 8,502
Securities gains, net 2,554 1,753 250 736 68
Other 24,961 29,481 29,540 25,416 20,345
- -----------------------------------------------------------------------------------------------------
Total noninterest income 129,723 133,970 131,793 124,045 110,551
- -----------------------------------------------------------------------------------------------------
Noninterest expense
Staff 123,097 119,147 120,336 115,763 111,234
Net occupancy 16,608 17,140 19,072 16,913 16,304
Equipment 20,038 21,132 19,704 18,589 18,102
FDIC insurance 11,462 11,381 11,232 10,803 10,969
Credit card 9,031 9,981 9,400 8,700 7,124
Foreclosed property costs, net (1,114) (1,235) 83 (2,048) (1,590)
Other 63,403 76,255 68,475 64,185 53,270
- -----------------------------------------------------------------------------------------------------
Total noninterest expense 242,525 253,801 248,302 232,905 215,413
- -----------------------------------------------------------------------------------------------------
Income before income tax expense 130,201 114,941 118,707 120,216 110,362
Income tax expense 44,617 37,819 37,379 40,493 31,116
- -----------------------------------------------------------------------------------------------------
Net income $ 85,584 $ 77,122 $ 81,328 $ 79,723 $ 79,246
=====================================================================================================
Net income per share $.82 $.75 $.78 $.77 $.77
=====================================================================================================
Dividends declared per share $.31 $.31 $.31 $.28 $.28
=====================================================================================================
Returns
Return on assets 1.29% 1.18% 1.28% 1.29% 1.34%
Return on equity 15.92 14.91 16.15 16.26 16.75
=====================================================================================================
1994 Quarterly Report 11
11
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
- ----------------------------------------------------------------------------------------------------
(dollars in millions) 1994
- ----------------------------------------------------------------------------------------------------
FIRST QUARTER
- ----------------------------------------------------------------------------------------------------
INCOME/ YIELDS/
Assets BALANCE EXPENSE RATES
- ----------------------------------------------------------------------------------------------------
Loans, net of unearned income $14,956.3 $291.0 7.78%
Short-term investments 60.0 .6 3.73
Federal funds sold and securities purchased
under resale agreements 193.2 1.6 3.30
Held to maturity securities:
Taxable 2,890.3 41.0 5.68
Tax-exempt 808.4 20.7 10.22
- ----------------------------------------------------------------------------------------------------
Total held to maturity securities 3,698.7 61.7 6.67
Available for sale securities 4,712.6 59.1 5.02
Trading securities 69.5 .8 4.94
- ----------------------------------------------------------------------------------------------------
Total earning assets 23,690.3 414.8 7.00
Less reserve for loan losses (346.0)
Cash and due from banks 1,661.2
All other assets 1,587.0
- ----------------------------------------------------------------------------------------------------
Total assets $26,592.5
====================================================================================================
Liabilities and Stockholders' Equity
- ----------------------------------------------------------------------------------------------------
Retail savings deposits and
interest-bearing transaction accounts $ 8,803.2 $ 50.1 2.28%
Time deposits 7,330.2 74.0 4.04
- ----------------------------------------------------------------------------------------------------
Total interest-bearing deposits 16,133.4 124.1 3.08
Federal funds purchased and
other short-term borrowings 3,008.5 23.1 3.08
Capital lease obligation 39.1 .9 9.72
Long-term debt 514.0 9.7 7.56
- ----------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 19,695.0 157.8 3.21
Demand deposits 4,425.8
All other liabilities 320.7
- ----------------------------------------------------------------------------------------------------
Total liabilities 24,441.5
Redeemable preferred stock 1.2
Total stockholders' equity 2,149.8
- ----------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $26,592.5
====================================================================================================
Interest rate spread 3.79%
Effect of noninterest-bearing funds .55
- ----------------------------------------------------------------------------------------------------
Net interest income/margin $257.0 4.34%
====================================================================================================
Nonaccrual loans are included in average
balances and income on such loans is recog-
nized on a cash basis. Interest income and
yields are presented on a fully-taxable equiv-
alent basis using the Federal statutory
income tax rate, net of nondeductible inter-
est expense. Such adjustments by earning
asset category are as follows:
Loans $1.4
Tax-exempt held to maturity securities 6.9
Trading securities
- ----------------------------------------------------------------------------------------------------
Total $8.3
====================================================================================================
12 Boatmen's Bancshares, Inc.
12
- --------------------------------------------------------------------------------------------------------------------------------
1993
- --------------------------------------------------------------------------------------------------------------------------------
Fourth Quarter Third Quarter
- --------------------------------------------------------------------------------------------------------------------------------
Income/ Yields/ Income/ Yields/
Balance Expense Rates Balance Expense Rates
- --------------------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income $14,666.2 $289.5 7.90% $14,373.7 $288.6 8.03%
Short-term investments 31.2 .2 3.29 48.7 .4 3.33
Federal funds sold and securities purchased
under resale agreements 297.9 2.4 3.20 245.3 1.9 3.16
Held to maturity securities:
Taxable 6,799.5 92.4 5.43 6,652.5 96.5 5.80
Tax-exempt 841.0 21.0 10.00 844.5 22.3 10.55
- --------------------------------------------------------------------------------------------------------------------------------
Total held to maturity securities 7,640.5 113.4 5.94 7,497.0 118.8 6.34
Available for sale securities 469.2 7.2 6.11 479.9 7.3 6.05
Trading securities 85.7 1.1 5.13 35.9 .5 5.30
- --------------------------------------------------------------------------------------------------------------------------------
Total earning assets 23,190.7 413.8 7.14 22,680.5 417.5 7.36
Less reserve for loan losses (344.9) (339.3)
Cash and due from banks 1,720.4 1,619.6
All other assets 1,554.5 1,587.5
- --------------------------------------------------------------------------------------------------------------------------------
Total assets $26,120.7 $25,548.3
================================================================================================================================
Liabilities and Stockholders' Equity
- --------------------------------------------------------------------------------------------------------------------------------
Retail savings deposits and
interest-bearing transaction accounts $ 8,601.0 $ 51.3 2.38% $ 8,470.3 $ 52.3 2.47%
Time deposits 7,538.8 77.0 4.09 7,827.3 81.1 4.15
- --------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 16,139.8 128.3 3.18 16,297.6 133.4 3.27
Federal funds purchased and
other short-term borrowings 2,579.6 19.1 2.97 2,148.3 16.0 2.98
Capital lease obligation 39.3 1.0 9.72 39.5 1.0 9.72
Long-term debt 487.8 9.7 7.96 471.4 9.5 8.10
- --------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 19,246.5 158.1 3.29 18,956.8 159.9 3.37
Demand deposits 4,560.9 4,298.5
All other liabilities 242.5 277.9
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities 24,049.9 23,533.2
Redeemable preferred stock 1.2 1.2
Total stockholders' equity 2,069.6 2,013.9
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $26,120.7 $25,548.3
================================================================================================================================
Interest rate spread 3.85% 3.99%
Effect of noninterest-bearing funds .56 .55
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income/margin $255.7 4.41% $257.6 4.54%
================================================================================================================================
Nonaccrual loans are included in average
balances and income on such loans is recog-
nized on a cash basis. Interest income and
yields are presented on a fully-taxable equiv-
alent basis using the Federal statutory
income tax rate, net of nondeductible inter-
est expense. Such adjustments by earning
asset category are as follows:
Loans $1.9 $1.4
Tax-exempt held to maturity securities 7.1 7.9
Trading securities .1
- --------------------------------------------------------------------------------------------------------------------------------
Total $9.1 $9.3
================================================================================================================================
- --------------------------------------------------------------------------------------------------------------------------------
1993
- --------------------------------------------------------------------------------------------------------------------------------
Second Quarter First Quarter
- --------------------------------------------------------------------------------------------------------------------------------
Income/ Yields/ Income/ Yields/
Balance Expense Rates Balance Expense Rates
- --------------------------------------------------------------------------------------------------------------------------------
Loans, net of unearned income $13,958.8 $280.8 8.05% $13,127.9 $266.8 8.13%
Short-term investments 60.7 .5 3.36 100.4 .8 3.29
Federal funds sold and securities purchased
under resale agreements 407.6 3.2 3.10 776.1 5.9 3.03
Held to maturity securities:
Taxable 6,256.2 97.6 6.24 5,865.4 94.8 6.46
Tax-exempt 865.0 21.8 10.10 890.7 22.7 10.20
- --------------------------------------------------------------------------------------------------------------------------------
Total held to maturity securities 7,121.2 119.4 6.71 6,756.1 117.5 6.96
Available for sale securities 489.3 7.3 6.02 497.0 7.3 5.85
Trading securities 42.9 .6 5.03 49.4 .6 5.09
- --------------------------------------------------------------------------------------------------------------------------------
Total earning assets 22,080.5 411.8 7.46 21,306.9 398.9 7.49
Less reserve for loan losses (329.2) (310.0)
Cash and due from banks 1,613.5 1,547.3
All other assets 1,416.6 1,167.4
- --------------------------------------------------------------------------------------------------------------------------------
Total assets $24,781.4 $23,711.6
================================================================================================================================
Liabilities and Stockholders' Equity
- --------------------------------------------------------------------------------------------------------------------------------
Retail savings deposits and
interest-bearing transaction accounts $ 8,226.1 $ 50.9 2.48% $ 7,808.2 $ 49.7 2.55%
Time deposits 7,922.8 84.2 4.25 7,550.9 82.3 4.36
- --------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 16,148.9 135.1 3.35 15,359.1 132.0 3.44
Federal funds purchased and
other short-term borrowings 1,740.7 12.7 2.92 1,902.0 14.5 3.06
Capital lease obligation 39.7 .9 9.72 39.9 1.0 9.72
Long-term debt 475.2 9.4 7.90 389.9 8.3 8.48
- --------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 18,404.5 158.1 3.44 17,690.9 155.8 3.52
Demand deposits 4,142.0 3,923.7
All other liabilities 272.1 203.5
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities 22,818.6 21,818.1
Redeemable preferred stock 1.2 1.2
Total stockholders' equity 1,961.6 1,892.3
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $24,781.4 $23,711.6
================================================================================================================================
Interest rate spread 4.02% 3.97%
Effect of noninterest-bearing funds .58 .59
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income/margin $253.7 4.60% $243.1 4.56%
================================================================================================================================
Nonaccrual loans are included in average
balances and income on such loans is recog-
nized on a cash basis. Interest income and
yields are presented on a fully-taxable equiv-
alent basis using the Federal statutory
income tax rate, net of nondeductible inter-
est expense. Such adjustments by earning
asset category are as follows:
Loans $1.5 $1.1
Tax-exempt held to maturity securities 7.1 7.4
Trading securities .1
- --------------------------------------------------------------------------------------------------------------------------------
Total $8.7 $8.5
================================================================================================================================
1994 Quarterly Report 13
13
CONSOLIDATED BALANCE SHEET
- ---------------------------------------------------------------------------------------------------------------------
(dollars in thousands) MARCH 31, 1994 March 31, 1993 December 31, 1993
- ---------------------------------------------------------------------------------------------------------------------
Assets
- ---------------------------------------------------------------------------------------------------------------------
Cash and due from banks $ 1,713,937 $ 1,528,882 $ 1,608,051
Short-term investments 99,650 95,873 24,748
Securities:
Held to maturity 3,982,985 6,958,517 3,324,847
Available for sale 4,701,187 502,722 5,176,966
Trading 33,845 42,239 48,081
Federal funds sold and securities purchased under
resale agreements 112,326 468,152 407,672
Loans 15,139,352 13,430,841 14,825,922
Less reserve for loan losses 345,272 319,220 341,099
- ---------------------------------------------------------------------------------------------------------------------
Loans, net 14,794,080 13,111,621 14,484,823
- ---------------------------------------------------------------------------------------------------------------------
Property and equipment 515,096 436,282 480,586
Other assets 1,178,924 777,797 1,098,275
- ---------------------------------------------------------------------------------------------------------------------
Total assets $27,132,030 $23,922,085 $26,654,049
=====================================================================================================================
Liabilities and Stockholders' Equity
- ---------------------------------------------------------------------------------------------------------------------
Liabilities:
Demand deposits $ 4,517,453 $ 3,948,258 $ 4,769,947
Retail savings deposits and interest-bearing
transaction accounts 8,815,903 7,914,652 8,773,058
Time deposits 7,363,068 7,544,465 7,365,997
- ---------------------------------------------------------------------------------------------------------------------
Total deposits 20,696,424 19,407,375 20,909,002
- ---------------------------------------------------------------------------------------------------------------------
Federal funds purchased and securities sold under
repurchase agreements 2,983,790 1,494,561 1,996,022
Short-term borrowings 429,935 274,444 815,971
Capital lease obligation 39,008 39,815 39,224
Long-term debt 514,759 476,399 486,253
Other liabilities 313,119 297,039 273,168
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities 24,977,035 21,989,633 24,519,640
- ---------------------------------------------------------------------------------------------------------------------
Redeemable preferred stock 1,142 1,248 1,155
- ---------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common stock ($1 par value; 125,000,000 shares authorized) 104,625 51,727 104,126
Surplus 793,743 827,427 786,840
Retained earnings 1,253,301 1,052,050 1,200,036
Unrealized net appreciation, available for sale securities 2,184 42,252
- ---------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 2,153,853 1,931,204 2,133,254
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $27,132,030 $23,922,085 $26,654,049
=====================================================================================================================
Held to maturity securities, market value $ 3,964,874 $ 7,160,598 $ 3,408,119
Available for sale securities, market value 4,701,187 525,593 5,176,966
Common stock, shares outstanding 104,625,057 51,727,199 104,125,546
=====================================================================================================================
14 Boatmen's Bancshares, Inc.
14
CONSOLIDATED STATEMENT OF INCOME
- ---------------------------------------------------------------------------------------
Three months ended March 31 (in thousands) 1994 1993
- ---------------------------------------------------------------------------------------
Interest income
Interest and fees on loans $289,634 $265,662
Interest on short-term investments 560 826
Interest on Federal funds sold and securities purchased
under resale agreements 1,593 5,884
Interest on held to maturity securities
Taxable 41,025 94,789
Tax-exempt 13,744 15,363
- ---------------------------------------------------------------------------------------
Total interest on held to maturity securities 54,769 110,152
Interest on available for sale securities 59,091 7,270
Interest on trading securities 840 585
- ---------------------------------------------------------------------------------------
Total interest income 406,487 390,379
- ---------------------------------------------------------------------------------------
Interest expense
Interest on deposits 124,050 132,011
Interest on Federal funds purchased and other short-term
borrowings 23,135 14,539
Interest on capital lease obligation 945 964
Interest on long-term debt 9,714 8,268
- ---------------------------------------------------------------------------------------
Total interest expense 157,844 155,782
- ---------------------------------------------------------------------------------------
Net interest income 248,643 234,597
Provision for loan losses 5,640 19,373
- ---------------------------------------------------------------------------------------
Net interest income after provision for loan losses 243,003 215,224
- ---------------------------------------------------------------------------------------
Noninterest income
Trust fees 39,190 35,010
Service charges 40,047 35,008
Credit card 15,045 11,618
Investment banking profits and fees 7,926 8,502
Securities gains, net 2,554 68
Other 24,961 20,345
- ---------------------------------------------------------------------------------------
Total noninterest income 129,723 110,551
Noninterest expense
Staff 123,097 111,234
Net occupancy 16,608 16,304
Equipment 20,038 18,102
FDIC insurance 11,462 10,969
Credit card 9,031 7,124
Foreclosed property costs, net (1,114) (1,590)
Other 63,403 53,270
- ---------------------------------------------------------------------------------------
Total noninterest expense 242,525 215,413
- ---------------------------------------------------------------------------------------
Income before income tax expense 130,201 110,362
Income tax expense 44,617 31,116
- ---------------------------------------------------------------------------------------
Net income $ 85,584 $ 79,246
=======================================================================================
Net income per share $.82 $.77
=======================================================================================
Dividends declared per share $.31 $.28
=======================================================================================
Earnings per share amounts are based on weighted average shares outstanding
after adjusting net income for dividends on preferred stock.
For the first quarter, average shares outstanding were 104,581,944 in 1994
and 102,954,100 in 1993. Preferred dividends declared
totaled $20 in 1994 and $22 in 1993.
1994 Quarterly Report 15
15
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------------------------------------
Unrealized Net
Common Stock Appreciation,
---------------- Retained Available for
(in thousands) Shares Amount Surplus Earnings Sale Securities Total
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE, JANUARY 1, 1993 51,131 $ 51,131 $809,923 $1,000,166 -- $1,861,220
Net income -- -- -- 79,246 -- 79,246
Cash dividends declared:
Common ($.28 per share)(1) -- -- -- (27,342) -- (27,342)
Redeemable preferred -- -- -- (22) -- (22)
Common stock issued pursuant to various
employee and shareholder stock issuance plans 121 121 5,007 -- -- 5,128
Common stock issued upon conversion
of convertible subordinated debt 475 475 12,497 -- -- 12,972
Adjustment of investments in
equity securities to market value -- -- -- 2 -- 2
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1993 51,727 $ 51,727 $827,427 $1,052,050 -- $1,931,204
===========================================================================================================================
BALANCE, JANUARY 1, 1994 104,126 $104,126 $786,840 $1,200,036 $42,252 $2,133,254
Net income -- -- -- 85,584 -- 85,584
Cash dividends declared:
Common ($.31 per share) -- -- -- (32,299) -- (32,299)
Redeemable preferred -- -- -- (20) -- (20)
Common stock issued pursuant to various
employee and shareholder stock issuance plans 87 87 1,185 -- -- 1,272
Common stock issued upon acquisition of
Woodland Bancorp, Inc. 411 411 5,700 -- -- 6,111
Common stock issued upon conversion
of convertible subordinated debt 1 1 18 -- -- 19
Adjustment of available for sale securities
to market value -- -- -- -- (40,068) (40,068)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1994 104,625 $104,625 $793,743 $1,253,301 $ 2,184 $2,153,853
===========================================================================================================================
<FN>
(1) Amount adjusted for the two-for-one stock split which was declared on August 10, 1993 and paid on October 1, 1993.
CORPORATE INFORMATION
- --------------------------------------------------------------------------------------------------
Standard Thomson
Agency Ratings Moody's & Poor's Bankwatch
- --------------------------------------------------------------------------------------------------
Boatmen's Bancshares, Inc.: B
6 3/4% Subordinated notes due 2003 A-3 A- A
7 5/8% Subordinated notes due 2004 A-3 A- A
8 5/8% Subordinated notes due 2003 A-3 A- A
9 1/4% Subordinated notes due 2001 A-3 A- A
6 1/4% Convertible subordinated debentures due 2011 A-3 A- A
Commercial paper P-1 A-1 TBW-1
The Boatmen's National Bank of St. Louis: B
Short-term/long-term deposits P-1/Aa3 A-1/A+ TBW-1
Boatmen's First National Bank of Kansas City: B
Short-term/long-term deposits A-1/A+ TBW-1
- --------------------------------------------------------------------------------------------------
A Dividend Reinvestment and Stock Purchase Plan is available to shareholders
of the Corporation. The key features of this Plan are:
. Dividends on common stock may be automatically reinvested;
. Option to invest up to $10,000 cash per quarter;
. No brokerage commissions or service charges on reinvested dividends or
cash investments.
A Direct Deposit of Dividends program is also available to shareholders of
the Corporation. This program, which is offered at no charge, provides for
the deposit of quarterly dividends directly to a checking or savings
account.
Please direct inquiries regarding these programs and requests for the
Reinvestment Plan Prospectus and Direct Deposit Authorization Form to:
Boatmen's Trust Company, P.O. Box 14768, St. Louis, MO 63178, (314)
466-1357 or (800) 456-9852.
Corporate Headquarters
One Boatmen's Plaza
800 Market Street
St. Louis, MO 63101
Stock Listing
NASDAQ-NMS symbol: BOAT
CBOE symbol: BTQ
Transfer Agent
Boatmen's Trust Company
510 Locust Street
St. Louis, MO 63101
(314) 466-1357 or (800) 456-9852
Investor Relations Contact
Kevin R. Stitt
Director of Investor Relations
(314) 466-7662
(314) 466-5645 (FAX)
16 Boatmen's Bancshares, Inc.